Annual Report 2015

Bulgaria 2

FINLAN D

NO RWAY

Helsinki Oslo Stockholm Tallinn BALT IC SEA ESTO NIA SWEDEN Riga LATVIA DENMAR K Moscow NORTH SEA Co penhagen LITHUANIA RUSSIA Vilnius

Minsk RUSSIA Dublin IRELAND BELARUS UNITED KINGDOM Amsterdam Berlin POLAN D Warsaw Lo ndon NETHERLANDS G ERMA NY BELG IUM Brussels Frankfurt Kiev Prague LUXEMBOURG UKRAINE CZECH RE PUBLIC

Paris SLOVAKIA KA ZAKHSTAN Vienna Bratislava MOLDOVA SWITZERLAN D AUSTRIA Budapest Chisinau FRANCE Bern LIECHTEN - STEIN Ma ribor HUNGARY SLOVENIA ROMA NIA Zagreb CR OA TI A ARAL Belgrade SEA BOSNIA AND SERBIA Bucha rest HERZ EGOWINA Sarajevo

Pristina C UZBEKISTAN ITALY MONTEN EGRO So a BLACK SEA ASPIAN KOSOVO Co rsica Podgorica BULG ARI A Skopje GEORGIA Rome Tbilisi Tirana MACEDONIA Istanbul PORTUGAL Madrid ALBANIA ARME NIA Baku Sardinia Yerevan ASERBAIJAN SE

Lisbon GREECE Ankara A TURKMENISTA N SPAIN Athens TURKE Y Asgabat MEDITERRANEAN SEA Sicily

Tunis Algiers IRAN SYRI A IRAQ Tehran ALGERIA TUNISIA MOROCCO CYPRUS Nico sia www.rbinternational.com HEAD OFFICE AND NE TW ORK BANKS BRANCHES, REPRESENTATIVE OFFICES AN D OTHER UNITS 3

FINLAN D

NO RWAY

Helsinki Oslo Stockholm Tallinn BALT IC SEA ESTO NIA SWEDEN Riga LATVIA DENMAR K Moscow NORTH SEA Co penhagen LITHUANIA RUSSIA Vilnius

Minsk RUSSIA Dublin IRELAND BELARUS UNITED KINGDOM Amsterdam Berlin POLAN D Warsaw Lo ndon NETHERLANDS G ERMA NY BELG IUM Brussels Frankfurt Kiev Prague LUXEMBOURG UKRAINE CZECH RE PUBLIC

Lisbon GREECE Ankara A TURKMENISTA N SPAIN Athens TURKE Y Asgabat MEDITERRANEAN SEA Sicily

Tunis Algiers IRAN SYRI A IRAQ Tehran ALGERIA TUNISIA MOROCCO CYPRUS Nico sia www.rbinternational.com HEAD OFFICE AND NE TW ORK BANKS BRANCHES, REPRESENTATIVE OFFICES AN D OTHER UNITS 4

Financial Highlights

Monetary values in BGN Thousand 2015 Change 2014 2013 Income Statement Net interest income after provisioning for possible loan losses 152,193 15% 132,761 52,954 Net commission income 68,475 7% 64,195 59,785 Trading profit (loss) 14,538 (15)% 17,088 15,637 Administrative and other operating expenses (174,432) 1% (172,244) (184,292) Profit / (loss) before income tax 67,799 33% 51,118 (49,105) Profit / (loss) for the period 61,615 32% 46,553 (43,814) Balance Sheet Loans and advances to banks 782,315 99% 392,937 447,735 Loans and advances to customers 3,555,168 (2%) 3,611,798 4,187,509 Deposits from banks 50,519 (2%) 51,446 54,104 Deposits from customers 4,759,901 12% 4,235,399 4,174,110 Equity 910,327 0% 909,630 863,053 Balance-sheet total 6,459,550 8% 5,981,352 5,959,680 Regulatory own funds

Total own funds 1,181,061 3% 1,143,628 783,833 Own funds requirement / According to Local Regulations 258,597 3% 250,530 494,968 Excess cover 922,463 3% 893,098 288,865 Core capital ratio (Tire 1) 25.43% (2)% 25.87% 16.80% Own funds ratio 36.54% 92% 36.52% 19.00% Performance Return of equity (ROE) before tax 7.9% 36% 5.9% - Cost/income ratio 57.2% 8% 53.2% 59.6% Return on assets (ROA) before tax 1.1% 39% 0.8% - Provisions for possible loan losses /risk-weighted assets/ According to Local Regulations 278,960 (7)% 300,833 462,681 Resources

Number of staff on balance-sheet date 2,767 -5% 2,917 3,133 Banking outlets on balance-sheet date 147 -5% 154 166 Official Exchange Rate (BNB) 1 EUR BGN BGN BGN 1.95583 1.95583 1.95583

Source: Audited Separate Financial Statements of Raiffeisenbank (Bulgaria) EAD as at 31 December 2015. 5

Contents

General Information 6 The Bank’s Management 8 Statement by the Chairman of the Supervisory Board 9 Statement by the Chairman of the Management Board 10 Vision and Mission 11 Corporate Social Responsibility 12 Raiffeisen Bank International at a glance 13 Economic growth 14 Activity of Raiffeisen Group in Bulgaria in 2015 17 Corporate Banking 19 Retail Banking 20 Branch Network and Alternative Distribution Channels 21 Capital Market 22 Group Custody Services 22 Financial Institutions and Sovereigns 22 Operations 24 Human resources 25 Raiffeisen Leasing Bulgaria OOD 27 Raiffeisen Asset Management (Bulgaria) EAD 28 Raiffeisen Insurance Broker 30 Notes to the Financial Statements 41 Addresses 100 6

General Information

Establishment of the Bank

Raiffeisenbank (Bulgaria) EAD is the first green-field foreign investment in the Bulgarian banking sector made in 1994.

Main Shareholder

Raiffeisenbank (Bulgaria) EAD is indirectly a 100 per cent subsidiary of Raiffeisen Bank International AG, Vienna. In this regard, there is no transferred and acquired own shares in 2015.

Banking License

Raiffeisenbank (Bulgaria) EAD has a full banking license for domestic and overseas banking and financial operations.

Profile

Raiffeisenbank (Bulgaria) EAD is a universal commercial bank, providing services to large corporate customers, small and medium-sized enterprises, retail clients, financial institutions and institutional clients. The Bank also performs bonds and securities trading on the local and the international money and capital markets, asset management, global security services, etc. 7

The Credit Rating of Raiffeisenbank (Bulgaria) EAD

Assigned by Fitch Ratings is as follows:

• Long Term Issuer Default Rating: BBB-

• Short Term Issuer Default Rating: F3

• Outlook Negative

Correspondent Relations

Raiffeisenbank (Bulgaria) EAD has established correspondent banking relations with over 1,100 banks world-wide and maintains accounts in major currencies with first-class foreign banks.

Branch Network

As at the end of 2015 the network of Raiffeisenbank (Bulgaria) EAD totalled 147 branches. 8

The Bank’s Management

Shareholders

Raiffeisen SEE Region Holding GmbH, Austria – 100 per cent

Supervisory Board

Chairman: Helmut Breit

SB Members: Kurt Bruckner

Ferenc Berszan

Herbert Stepic

Management Board

Chairman: Oliver Roegl

Members of the Board: Tzenka Petkova

Ani Angelova

Martin Pytlik

Evelina Miltenova

Dobromir Dobrev 9

Statement by the Chairman of the Supervisory Board

Ladies and Gentlemen,

At the beginning of 2015, Raiffeisen Bank International announced a review of the corporate strategy which the market received very positively. An emphasis on markets in which RBI can generate sustainable returns due to a strong position is also being welcomed, as was the action taken so far to achieve these goals. The plan to become a more focused universal bank with strong customer relationships by reducing complexity and risk as well as through bolstering the capital buffer is well on track and valued by market participants.

More than ever before, a bank today needs a focus – and RBI’s is on CEE and Austria. RBI, therefore, needed to look at all operations unrelated to that focus, even when, in some cases, they had been highly successful in the past. The footprint in CEE was also reviewed at this time. All of this took place against the backdrop of higher regulatory capital ratio requirements, which were taken into account while determining the target CET1 and total capital ratios.

In 2015, RBI significantly strengthened its capital base, with the fully loaded CET1 ratio standing at 11.5 per cent at year- end, and also achieved a consolidated profit of € 379 million. The primary reason for the result being so positive was lower net provisioning for impairment losses. Furthermore, general administrative expenses were reduced by 4 per cent compared to 2014, in line with RBI’s cost cutting initiative.

2015 was a relatively successful year for Bulgaria. The country registered positive economic growth, a phenomenon unseen in Helmut Breit Chairman of the Supervisory Board of the past few years. This economic revival was supported by the Raiffeisenbank (Bulgaria) EAD local banking sector. A key theme was the preparation for Asset Quality Review which took place in 2016. This procedure was important to run in an honest and transparent manner so that we to be sure that Bulgaria's banking system is stable and highly trustworthy.

Within this environment, Raiffeisenbank (Bulgaria) EAD performs very well by continually improving their parameters. In 2015, the Bank celebrated the 20-Year Anniversary of its operations. Throughout this period, Raiffeisenbank evolved from a small bank servicing primarily corporate and multinational clients into a market leader. This anniversary was also the time to declare our long-term intent for Bulgaria's development.

I would like to take the opportunity to thank the management and all Raiffeisenbank employees for their hard work and their constant efforts to serve our customers and bring benefits to the entire Raiffeisen Group. I also thank our clients for choosing us as a partner.

On behalf of the Supervisory Board

Helmut Breit Chairman of the Supervisory Board 10

Statement by the Chairman of the Management Board

Dear Ladies and Gentlemen,

2015 was successful for Raiffeisenbank (Bulgaria) EAD despite the challenging environment due to geopolitical tensions near Bulgaria's borders and low interest rates.

As at 31 December 2015, we registered after-tax profit of BGN 61.6 million as against BGN 46.6 million a year before. Our assets were up to BGN 6.46 billion as compared to BGN 5.98 billion at end-2014 whereas our deposit base reached BGN 4.76 billion as compared to BGN 4.23 billion reported at 31 December 2014. Our loan portfolio totalled BGN 3.83 billion (BGN 3.91 billion as at the end of 2014).

Our sustainable profit growth was on the background of decreasing provisions for impairment losses and a level of non-performing loans which is much lower than the average for Bulgaria’s banking system. This is a result of our efforts in the past few years to make the bank ever more efficient and profitable, and to clean our loan portfolio, which we had done in 2013 and 2014.

In 2015, the bank moved to a new head office and also celebrated its 20-Year Anniversary from the start of its Bulgarian operations with events for customers and employees, as well as with many more activities where we clearly stated our intent to become one of Bulgaria’s leading banks.

On the other hand, the domestic banking sector remained stable enjoying high capital adequacy and liquidity which allowed local banks to be very active on the market and to support development. Oliver Roegl One of the main topics was the preparation for the asset quality CEO, Chairman of the Management Board review to be held in 2016.

As part of our corporate social responsibility policy, Raiffeisenbank carried out the seventh consecutive donation campaign “Choose to Help”. A total of 1828 employees of Raiffeisen Group in Bulgaria and external donors joined the fund-raising initiative for sustainable projects in the healthcare, social, cultural, educational and environmental protection spheres. The funds raised totalled BGN 251,339. Since the start of the campaign in 2009, “Choose to Help” was raised BGN 2.2 million in support of 189 causes of public significance.

On behalf of the Management Board, I thank our clients and business partners for the trust they vest in us. I also thank the employees of Raiffeisenbank (Bulgaria) EAD and the companies of Raiffeisen Group in Bulgaria for their work and contribution to our development.

Oliver Roegl Chairman of the MB, Chief Executive Officer 11

Vision and Mission

Vision

Raiffeisenbank (Bulgaria) EAD to be one of the top-three banks in all target customer segments across the country.

Mission mission and CSR Vision,

• We seek long-term customer relationships and are a friendly, flexible and constructive partner for our customers.

• We are proactive and quick in delivering top-quality products.

• Raiffeisenbank (Bulgaria) EAD is an efficient and lean organization. We exploit synergies within the bank and with all our subsidiaries to the fullest extent possible. International

• Prudent risk management is a key pillar throughout our organization and processes. Raiffeisen Bank

• We adhere to the highest corporate culture and standarts.

• We empower our employees to be entrepreneurial, to show initiative, and we foster their development. We are the employer of first choice, and we put special focus on the promotion of key staff and best talent.

• As part of the RBI Network, we contribute to the achievement of the overall Group objectives and generate sustainable and above-average return on equity. Management report Management Segment reports Segment

in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 12

Corporate Social Responsibility

Year 2015 was the seventh consecutive year when Raiffeisenbank (Bulgaria) EAD implemented its donation initiative “Choose to Help” and continued to develop its social responsibility policy by yet again supporting projects of public importance in Vision, mission and CSR the sphere of healthcare, social services, environment, culture and education.

“CHOOSE TO HELP” 2015: causes related to volunteering

The seventh edition of the initiative “Choose to Help” supported sustainable projects at national and local level where each of the sphere had the following highlights: Healthcare: preventive treatment of the population; Social sphere: support of socially disadvantaged children and adults and prevention of domestic violence; Education, culture, sports: integration of marginalised groups; Protection of historical heritage; Encouraging a sports culture among youngsters; Environment – Protection of Bulgarian nature: supporting the ecosystems and the environmental balance of flora and fauna. The donation initiative was again supported by media partners who disseminated information to the wide public. Raiffeisen BankRaiffeisen International In 2015, 1,828 Raiffeisenbank employees supported the projects. Their collective donations, along with that of the bank which added BGN 100 to each employee donation, together with the external donations, amounted to BGN 251,339. The project “Do Not Be Indifferent, Rather Different” of the Autism Association collected BGN 52,941 from 438 bank employees, this being the fund-raising initiative winning the highest support. Next comes the initiative “Breast Cancer Can Be Healed!” of the Centre for the Healthcare Rights Protection with BGN 25,357, and “Do Good!” of Alexandrovska Hospital is third with BGN 23,139.

Management report Among the supported projects are: “Bulgarian Christmas”, an initiative of the Administration of the President of the Republic of Bulgaria; “Screening Groups at Risk of Developing a Chronic Renal Disease” of the Bulgarian Nephrology Society; “Preventive Treatment of Gynaecological Diseases Aimed at Preventing Sterility” at Sheinovo Hospital; “Win Protection and Comfort to Women and Children Being Victims of Violence” of the Bulgarian Women's Fund; “Change a Life, Support an Adult” of Caritas; “Restoration of Zahari Zograf Murals” in the Samokov Monastery; “Save a Life in the Mountains” of the Mountain Rescue Service, as well as the projects of Herbert Stepic Foundation which the bank employees support on an regular basis. In 2015, two volunteer initiatives took place. Clothes, toys, shoes and books were donated for the children at four daycare centres in Sofia, village of Banya, Kuklen and Malko Tarnovo; Bank employees read Christmas carols to children at the Sofia Daycare Centre and made Christmas an unforgettable experience for them. Volunteering initiatives will continue in partnership with some of the beneficiaries and will encompass other regions in the country. Segment reports In evidence of the high public import and in recognition of “Choose to Help 2015”, Raiffeisenbank (Bulgaria) EAD was awarded the accolade “The Best Donation Campaign” at the 10th edition of the Largest Corporate Donor Awards of the Bulgarian Donors’ Forum, and was second in the “Investor in the Community” contest organised by the Bulgarian Business Leaders Forum

Support of Bulgarian-Austrian Cultural Projects

Raiffeisen GroupRaiffeisen For the seventh subsequent year, Raiffeisenbank was the main sponsor of the Austrian Music Weeks in Bulgaria. Within in Bulgaria a month, in spring 2015, the 19th Austrian Music Weeks were held in a number of Bulgarian cities. Sofia, Ruse, Veliko Tarnovo, Plovdiv, Pazardzhik, Burgas, Varna and Gabrovo hosted events organised by the Wiener Club – Sofia on behalf of the Embassy of Austria in Bulgaria. Yet again this year, a cultural event themed “Chances and Roads” fascinated Bulgarian audience with both renown musical pieces of the Classical and Romantic periods and such created of late. Cultural exchange between the two European countries allows not only to preserve old friendships in the cultural field but also to create new

contacts in the field of education, economy and politics.

The Austrian Music Weeks in Bulgaria were held under the aegis of Mrs. Margarita Popova, Vice-President of the Republic of Bulgaria, and Mr. Gerhard Reiweger, Ambassador of the Republic of Austria. auditors` report Independent Addresses 13

Raiffeisen Bank International at a Glance

Raiffeisen Bank International AG regards Central and Eastern Europe (including Austria) as its home market. For over 25 years, RBI has been operating in Central and Eastern Europe (CEE), where today it maintains a closely knit network of subsidiary banks, leasing companies and numerous specialized financial service providers. As a universal bank, RBI ranks among the top five banks in several countries. This role is supported by the Raiffeisen brand, which is one of the most widely recognized brands in the region. RBI has positioned itself in CEE as a fully integrated corporate and retail banking group with a comprehensive product offering. In CEE, at the end of 2015, around 48,000 RBI employees served some 14.9 million customers in around 2,700 business outlets. In Austria, RBI is one of the top corporate and investment banks. It primarily serves Austrian customers, but also international customers and major multinational clients operating in CEE. All in all, RBI mission and CSR Vision, employs about 51,000 employees and has total assets of approximately € 114 billion.

RZB was founded in 1927 as “Genossenschaftliche Zentralbank”. The RZB founded its first subsidiary bank in CEE back in 1987. Since then, further own subsidiaries have been established. From 2000 onward, Raiffeisen’s expansion into CEE countries has mainly been achieved by acquiring existing banks. These were subsequently combined into a holding company that operated under the name Raiffeisen International from 2003. In April 2005, Raiffeisen International was listed on the Vienna Stock Exchange in order to finance its future growth efficiently. Today’s RBI was established in 2010 through the International

merger of Raiffeisen International with the principal business areas of RZB. At year-end 2015, RZB – which functions as Raiffeisen Bank the central institution of the Austrian Raiffeisen Banking Group – held approximately 60.7 per cent of RBI’s stock, with the remaining shares in free float. Management report Management Segment reports Segment

in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 14

Management Report Vision, mission and CSR The Bulgarian economy in 2015

Raiffeisen BankRaiffeisen Economic growth International

Bulgaria's economic growth exceeded expectations in 2015, as the real GDP reached 3.0 per cent yoy, significantly improving the result of 2014 (1.5 per cent yoy). The growth was a result of a relatively strong external and somewhat weaker domestic demand. As anticipated, the domestic demand was driven by the weak euro, which stimulated national export. On the other hand, the low oil prices had a downward influence on imports, as oil represents a significant part of Bulgarian imports. Domestic demand was stimulated by low interest rates on deposits and by investments in the country, supported by higher public spending and European funds and programs, absorbed during the year. Management report

Labour market

Segment reports At the end of 2015, the unemployment rate was 7.9 per cent (9.2 per cent average rate), which is 2.7 pp lower than the level at year end 2014. In turn, the employment rate grew by 1.5 pp to 49.7 per cent. Bulgarian uunemployment compares favourably with the average euro area rate which was 10.4 per cent in December 2015. To provide further perspective, the lowest unemployment in the EU was in the Czech Republic and Germany (both 4.5 per cent) and the highest in Greece (24.5 per cent) and Spain (20.8 per cent).

Raiffeisen GroupRaiffeisen Inflation in Bulgaria

After 2014, 2015 also developed as a year of deflation. The average annual inflation contracted to minus 0.1 per cent, while December to December inflation was minus 0.4 per cent. Transport and healthcare prices went down during the year,

while food, hotel and restaurant prices increased. The ECB’s policy of Quantitative Easing influenced the price level in the country in the direction of pushing the deflation to values close to zero. auditors` report Independent Fiscal sector

During 2015 revenues of the consolidated state budget were BGN 32.2 bn, or BGN 2.8 bn more than in 2014. On the other hand, expenditures reached BGN 34.7 bn, as they increased by BGN 2.2 bn yoy. The deficit was expected to be close to

Addresses BGN 2.5 bn (2.9 per cent of projected GDP). The total of tax revenues was BGN 24.9 bn, as the biggest annual increase was registered by indirect taxes (excise 12.0 per cent yoy, VAT 6.5 per cent yoy) and social security contributions (7.7 per cent yoy). Revenues from direct taxes also increased, by 7.4 per cent compared to the previous year. Revenues from financial aid 15

(mainly through EU programs) were BGN 3.6 bn, which is 110.2 per cent of the expected value. On the expenses side, the most significant increase was realized by capital expenditures, growing by BGN 1.9 bn yoy, as they reflected the investment activity of the government during the year.

Public finance

In March 2015 EUR 3.1 bn new debt was issued for financing the budget deficit and old debt in line with the medium term issuance program of EUR 8 bn. As of year’s end 2015 public debt amounted to BGN 22.7 bn or 26.4 per cent of GDP, one of the lowest in the EU. During the year public debt grew by 2.8 per cent or BGN 611.8 mn. Vision, mission and CSR Vision, Balance of payments International Тhe current account registered a surplus again in 2015 (EUR 541.1 mn), which was higher than the one in 2014 (EUR 495.2 mn). Raiffeisen Bank Тhe trade balance was expectedly negative (EUR minus 1.9 but it was overcompensated by the positive balance of services (EUR 2.6 bn). The capital account also recorded a surplus (EUR 1.4 bn) due to positive net capital transfers. The financial account was positive as well (EUR 2.8 bn) on the basis of positive net foreign direct investments (EUR 1.5 bn) and net portfolio investments of EUR 961.4 mn (mainly government Eurobonds).

Change Selected macroeconomic indicators 2012 2013 2014 2015 2015/2014 Nominal GDP (EUR mln) 40,926.0 41,047.3 42,750.3 44,303.1 3.6%

Real GDP growth (%) 0.50% 1.30% 1.50% 3.0% 1.5 pp report Management GDP per capita (EUR) 5,620.2 5,671.1 5,833.1 6,151.3 5.5% Unemployment rate (annual average, %) 12.30% 12.90% 11.40% 9.20% (-2.2) pp Inflation (end-of-year, %) 4.20% (1.60%) (0.90%) (0.40%) 0.5 pp Inflation (annual average, %) 3.00% 0.90% (1.40%) (0.10%) (-1.3) pp Current account (% of GDP) (1.1)% 1.0% 1.2% 1.2% 0.0 pp Segment reports Segment Trade balance (EUR mln) (3,460.1) (2,429.8) (2,945.3) (1,885.0) 36.0%

Foreign direct investment (net, EUR mln) 871.6 1,265.5 836.0 1,510.2 80.6% FDI/Current account balance (%) (190.3%) 308.3% 169.0% 278.8% 109.8 pp FX reserves (EUR mln) 15,552.5 14,425.9 16,534.1 20,285.4 22.7% in Bulgaria Source:

National Statistical Institute, Bulgarian National Bank, Raiffeisen RESEARCH Raiffeisen Group

Foreign direct investments Independent Independent

The Netherlands ranked first on the foreign investors’ list in 2015 with net direct investments of EUR 696 mn, followed by report auditors` Germany (EUR 181 mn), Switzerland (EUR 114.1 mn) and Norway (EUR 111.5 mn). Cyprus (EUR 83.9 mn) and Russia (EUR 71 mn) took the fifth and sixth place. Addresses Addresses 16

Bulgarian Banking Sector

Vision, mission and CSR Overview

In 2015, the banking sector in Bulgaria succeeded in strengthening the confidence in the system, bolstered by the stable macroeconomic environment in the country. The Central Bank implemented a series of regulatory and organizational changes and appointed the new Governor of the institution before the mandate of his predecessor had expired. Bulgarian banks continued to carry out daily activities as usual and managed to generate high profit in an environment of declining interest rates and increasing deposit base.

With the implementation of regulatory changes, the Central Bank reinforced the preventive role of bank supervision and regulated the bank restructuring process. The Central Bank’s conservative approach over the years, along with the measures

Raiffeisen BankRaiffeisen taken during 2015, helped to preserve the good levels of capitalization and the high liquidity in the sector. Further International amendments have been made in the Law on Credit Institutions and the Bank Insolvency Law. The Parliament adopted entirely new Law on Deposit Insurance in Banks in compliance with the EU regulatory requirements. An exception was introduced for certain categories of deposits for which the guaranteed amount increased to BGN 250,000. A Law on Recovery and Resolution of Banks and Financial Intermediaries was passed, which required the establishment of a new fund and implements structural changes in the Central Bank.

As at December 2015, the market share of domestic credit institutions dropped to 23.58 per cent at year-end compared to 23.7 per cent at the end of 2014, while 76.42 per cent of the system was owned by foreign financial institutions, mainly Management report European Banking Groups.

At the year-end banking system’s balance sheet assets reached BGN 87.5 bn or by 2.81 per cent more, compared to the same period in 2014 (BGN 85.13 bn). The strong competition between banks and lower costs of borrowed funds did not manage to loosen banks’ credit policy and at the end of 2015 credit institutions continued to tighten lending standards for granting financial resources due to apprehensions related to credit and collateral risks as well as the macroeconomic environment. As a result loans, extended to corporate clients decreased by 4.0 per cent or with BGN 1.5 bn year on year basis to BGN 35.8 bn. Retail segment suffered lighter impact and recorded an increase of 0.12 per cent to BGN 18.3 bn as of 31.12.2015. Thus, banks’ credit portfolio decreased 2.6 per cent to BGN 54.1 bn, representing 61.8 per cent of the system’s total assets. BNB’s bank supervision statistics recorded 20.36 per cent share of NPL as at December 2016. Segment reports

In 2015, the most significant increase was reported in terms of deposit indicators, which was an indicator for the restored confidence in the banking system. Corporate deposits which in 2014 deteriorated by 1.2 per cent, within one year plan turned the negative trend around and in 2015 marked an increase by 9.5 per cent yoy to BGN 24.9 bn, being the major source of foundation for the deposit base. Deposits from private individuals went up by BGN 3.4 bn (8.3 per cent yoy) to BGN 44 bn. Hence in 2015, total deposits recorded 8.7 per cent (BGN 5.6 bn) growth up to BGN 69.2 bn.

Liquidity ratio, showing the ability of banks to repay their debts, further improved to 36.71 per cent at the end of 2015 compared to 30.12 per cent a year earlier. At the year end, the registered net profit of the banking system was BGN 898.43 mn

Raiffeisen GroupRaiffeisen which is BGN 152 mn higher, compared to the previous year. Profitability was influenced by the increased financial income

in Bulgaria due to decrease in interest expenses, whereas impairment costs slightly increased. Indicators for the good profitability of the banking sector at the end of 2015 were the higher levels of Return on Assets - ROA: 1.05 per cent and Return on Equity - ROE: 8.11 per cent compared to ROA: 0.89 per cent and ROE: 6.87 per cent at the end of 2014.

In 2016 Asset Quality Review will be carried out in the Bulgarian financial system, which is expected to strengthen the trust in

the sector and encourage the consolidation process. Such trend was also observed in 2015, when Eurobank Bulgaria closed a deal for the acquisition of the branch network of Alpha Bank Bulgarian Branch. Meanwhile, as soon as the first quarter, the negative interest rates on excess reserves in BNB, introduced in the beginning of the year, are expected to reflect in near zero interest rates on deposits and higher taxes. auditors` report Independent Addresses 17

Activity of Raiffeisen Group in Bulgaria in 2015

Key Financial Figures mission and CSR Vision,

The increase in total assets compared to last year was mainly due to the increased attracted funds from retail as well as non-retail customers. International

Total Assets Loans and advances to customers Raiffeisen Bank

in BGN Thousand in BGN Thousand

6,448,269 6,459,550 6,171, 818 5,959,680 5,981,352

5,057,629 4,998,604 4,650,190

3,912,631

3,834,128 report Management Segment reports Segment

Source: Audited Separate Financial Statements of Raiffeisenbank (Bulgaria) EAD

The gross loans and advances to customers decreased throughout the year, since in an environment of slow recovery from the economic crisis the amortization of the portfolio outweighed the generated new business. In 2015 the Bank wrote off from its balance sheet against loan loss provisions exposures classified as “loss” in the amount of BGN 98 mn. in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 18

Deposits from Customers Equity

in BGN Thousand in BGN Thousand

4,367,639 4,759,901 947,435

Vision, mission and CSR 4,361,724 910,327 4,235,399 908,985 909,630 4,174,110 863,053

2011 2012 2013 2014 2015 2011 2012 2013 2014 2015 Raiffeisen BankRaiffeisen International Source: Audited Separate Financial Statements of Raiffeisenbank (Bulgaria) EAD

Customer deposits increased in 2015 mainly on the back of deposits from retail customers.

The equity includes also the net profit for the year. In 2015 the Bank paid out dividend to the sole shareholder in the amount of BGN 70 mn.

Management report Net Profit

in BGN Thousand

61,615

50,800 46,553 Segment reports

4,667 (43,814)

2011 2012 2014 2015

2013

Raiffeisen GroupRaiffeisen Source: Audited Separate Financial Statements of Raiffeisenbank (Bulgaria) EAD in Bulgaria The increase in net profit compared to 2014 was driven by the significantly lower impairment loss on loans and advances. auditors` report Independent Addresses 19

Segment Report

Corporate Banking

In 2015, Raiffeisenbank (Bulgaria) EAD continued to support its corporate clients adding 3 per cent more new companies to its large customer base. The Bank has a well diversified customer portfolio comprising leading representatives from all growing and export oriented sectors of the economy: commerce, agrobusiness, manufacturing, pharmacy, IT, Telecommunications, etc. Raiffeisenbank (Bulgaria) EAD is a reliable partner for many multinational companies and participates in several syndicated Vision, mission and CSR Vision, loans.

The specialists of Raiffeisenbank, following the bank’s strategy of maximum focus to the customers and their needs and using in depth awareness of the client’s business, pro- actively consult the customers and offer them business solutions in all areas of the financial services.

As a universal Bank, Raiffeisenbank (Bulgaria) EAD offers and constantly improves its range of banking products including

lending, import and export factoring, cash management, documentary operations, foreign exchange, derivatives, etc. to International small, medium and large companies. The Bank further develops its image of supplier of innovative services, offering large Raiffeisen Bank scope of digital solutions via its Online and Mobile banking and FX Exchange Web based platform. An example of an innovative solution introduced in 2015 is the option of online application of bank guarantees and letters of credit.

Traditionally Raiffeisenbank (Bulgaria) EAD is a key partner of national and supranational financial institutions, being a sustainable mediator between the EU programs and the Bulgarian entrepreneurs and procuring the improvement of the competitiveness of the Bulgarian economy. In 2015, the Bank allocated, successfully guarantee facilities from the European Investment Fund (under the JEREMIE program) and signed new guarantee agreement with the National Guarantee Fund.

Following the requirements from the Voice of the Customer Survey, Raiffeisenbank (Bulgaria) EAD runs internal projects for lean internal processes and human resources excellence. The results are shorter terms and more effective and approval process for utilizing of credit limits and relieving documents related to credit relationships. report Management

In 2015, we broadened our direct contacts with corporate clients and our emphasis was increasingly on the development of fruitful relations. As a part of this initiative we conducted series of business breakfasts with clients in the cities where the Bank has regional corporate centers. The feedback from the corporate clients is very positive. In addition, it was held several successful structure campaigns in existing clients’ base to increase the use of credit and noncredit products.

Traditionally the bank is one of the leaders in financing corporate clients, who realize projects under the Operational programs. As a natural continuation Raiffeisenbank supports its clients to participate in The Investment Plan for Europe, including the program Horizon 2020. reports Segment

As of 31 December 2015, Raiffeisenbank (Bulgaria) EAD was the fourth largest lender to legal entities with a market share of 6.58 per cent. The Bank is ranked third in terms of attracted funds from legal entities with a market share of 8.47 per cent. in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 20

Retail Banking Vision, mission and CSR Private Individuals

In 2015, Raiffeisenbank (Bulgaria) EAD continued its strategy to focus on delivering high quality of customer service, enhancing its digital capabilities and product range as well as strengthening primary relationships with the clients.

Raiffeisenbank’s customer base of individual clients grew to over 696,000 as of the end of 2015, the total attracted funds from private individuals reached BGN 2,65 bn and the total loans amounted to BGN 1,45 bn. The number of primary customers exceeded 240,000 and their penetration reached 34 per cent of active customer base.

The Bank strengthen its position in consumer lending, ranked among the Top 3 banks in Bulgaria, improving its new volume Raiffeisen BankRaiffeisen

International market share to 11 per cent from 10.1 per cent a year ago. Aiming to draw the attention of the most demanding customers, the Bank continued to launch attractive promotional conditions and interesting communications. New consumer loan product with decreasing interest rate was introduced in 2015 to meet the needs of customers who would like their monthly installments to decrease and at the same time to have certain fixed interest rate during the whole loan period.

In terms of Housing lending, the new business marked a significant increase of 46 per cent year over year mostly due to the continuous efforts to offer to customers’ transparent and flexible mortgage products with option for floating as well as fixed interest rate for 5 year-period. Management report The users of Rаiffeisenbank’s on-line banking continued to grow and as of year-end exceeded 350,000. The share of electronic payments is steadily increasing and reached 84 per cent at the end of 2015. 100 per cent growth has been registered in the electronic payments via mobile banking. The downloads of the mobile application have increased two times compared to 2014 due to the new improved interface of the application. In order to respond to changing customer behavior and ensure fast and convenient online access, the Bank offered to its customers the option for self-service in managing the parameters of the contactless debit and credit cards in Raiffeisen ONLINE. During the year lead generation for lending products have been launched, enabling existing and potential customers to get professional advice via the phone for an appropriate loan product.

Segment reports To respond to market environment, the Bank continued to offer a variety of Bancassurance and investment products allowing customers to diversify their savings and at the same time to gain additional benefits from product features. Bancassurance business marked a growth of over 30 per cent in 2015 impacted by the increasing consumer awareness as well as attractive and innovative insurance coverage. Endowment insurances were preferred by a number of customers due to the unique combination of life insurance, guaranteed saving and additional tax preferences.

In regard to the customers of the Premium banking segment, unique brand-new Premium Direct service was introduced and adopted to over 20 per cent of existing Premium customers to ensure the better quality of the remote consultancy.

In 2015 Raiffeisenbank (Bulgaria) EAD started a gradual migration of the whole card portfolio to contactless cards. Two Raiffeisen GroupRaiffeisen new credit card products were launched: RaiCard Fix with specific repayment scheme – fix monthly instalment and Visa in Bulgaria Platinum with additional value added services such as Priority Pass card, insurance package and attractive welcome pack. Furthermore, the Bank introduced new innovative and user-friendly card functionalities that facilitate daily use of card products and providing the highest level of security. As of the end of 2015 the total number of debit and credit cards issued by Raiffeisenbank (Bulgaria) EAD exceeded 470,000. Various initiatives to stimulate the activity of cardholders have been undertaken, resulting in 10 per cent growth in the number of card transactions YoY. The Bank continued to develop

an infrastructure for card payments, marking an increase of over 30 per cent of card transactions on POS of the Bank and the number of installed POS terminals at the end of the year, totaling more than 9,300. The number of ATMs of the Bank exceeded 570. auditors` report Independent Micro Business

In 2015, Raiffeisenbank (Bulgaria) EAD continued to expand its leading position in the Micro segment mainly by: adding new attractive services to its broad lending and non-lending product portfolios, introducing a specialized personal customer approach and continuing to provide personal offerings for the companies’ owners. Addresses In 2015 twelve Micro Business Centers situated in the main cities aimed to service the clients in the segment successfully were established. Each client could benefit from full financial consulting, clear and flexible products and services. 21

The focus of activities in 2015 was on:

• increasing customer satisfaction by providing extensive and competent service, constant improvement of service quality, development of customer-tailored products;

• providing micro customers with access to local and EU guarantee and credit lines European Investment Bank, European Investment Fund, KfW, National Guarantee Fund and State Fund "Agriculture";

• further expanding the Bank’s presence in the agricultural sector through actively financing the needs of agricultural producers;

• conducting attractive CRM and promotional campaigns, focused on clients in the segment and improved presence in alternative channels.

A special focus was put on facilitating the direct interaction and exchange of information with micro customers through mission and CSR Vision, organizing 5 regional business forums and more than 50 business breakfasts throughout the country. Individual financial solutions, information concerning new Programming period and the latest news in financing companies’ development were introduced.

The strong emphasis on personnel development continued to contribute for the more efficient performance of the segment. International Branch Network and Alternative Distribution Channels Raiffeisen Bank

Raiffeisenbank (Bulgaria) EAD has a national branch distribution network with 147 branches as of the end of 2015 located in more than 65 cities in the country. In 2015 the Bank continued to invest in the footprint in order to be more flexible and convenient for its customers. Several branches were newly established and relocated and more than 30 branches were renovated with focus in customer experience. As meeting customer expectations for quality, service, and convenience is of greatest importance for the Bank, 19 branches work with extended working time during the weekdays and some of them operated during the weekends as well. Especially for the small business companies (annual turnover up to BGN 2 mn).

Raiffeisenbank (Bulgaria) EAD continued to develop its Agent network with direct sales agents and external partners. In 2015 the direct sales agent Network continued to be an important distribution channel for retail products and services contributing Management report Management to more than 15 per cent of the key retail product sales. The service called “Mobile banker” include free of charge personal professional consultation at place and time convenient for the customers and it was provided by more than 60 agents and more than 150 subagents in 6 Bulgarian cities. The external partners’ network was also substantial alternative channel, with some 500 partners in more than 45 Bulgarian cities as of the end of 2015. In the end of 2015, along with Raiffeisen Leasing (Bulgaria), a dedicated Leasing Agent network was started to provide leasing product and services to new and existing clients.

Raiffeisenbank (Bulgaria) has its own Call Center “Raiffeisen Direct” which is an alternative channel for 24/7 client servicing, facilitating both existing and potential customers in their day-to-day communication with the Bank. The Call Center handles Segment reports Segment a wide variety of customer enquiries and consults customers about bank products through various communication channels – Phone, E-mail, Voicemail, Chat, and Skype. The professional Call Center agents actively conduct outbound x-sell, loyalty and customer satisfaction programs and initiatives to existing and prospect customers. To further meet clients’ expectations in

2015 a dedicated line for servicing Premium clients of the bank was launched. Premium Direct provides of personal remote advisory and transactional services. in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 22

Capital Market Vision, mission and CSR In 2015 Raiffeisenbank (Bulgaria) EAD reaffirmed its leading position on the local foreign exchange and debt capital markets.

Throughout 2015, the Capital Markets unit concentrated its efforts on further strengthening the quality cooperation with its customers and counterparties, with a focus on enhancing the offered service and overall customer experience.

The increased customer penetration and the improved service led to an improvement in financial results, generated by traditionally strong product areas and complimented by more complex products such as foreign exchange and interest rate derivatives.

Raiffeisenbank (Bulgaria) EAD is a respected and preferred primary dealer and supports the Ministry of Finance by bidding regularly on the government debt auctions, and by pro-active participations in discussions and working groups, organized Raiffeisen BankRaiffeisen

International by the Ministry or the Bulgarian national bank. The Bank maintains a sustainable market share on the primary market and is an active market-maker on the secondary market. Raiffeisenbank (Bulgaria) EAD offers to its customers a wide scope of government debt instruments for trading and investment and aims at a professional and affordable service.

In December 2015 Raiffeisenbank (Bulgaria) EAD was once again appointed a primary dealer for the follouing calendar year.

Being an integral part of an international banking group, Raiffeisenbank (Bulgaria) EAD successfully employs the experience Management report of its sister network banks and proposes alternative solutions based on а wide range of products, thus providing comprehensive services and treasury products to its demanding retail, corporate and institutional clients.

Group Custody Services

After successful wide-scoping modernization of the Custody Services business line within Raiffeisen Bank International Group, Raiffeisenbank (Bulgaria) EAD strengthened its market position by offering an upgraded Group Securities Services to institutional clients - global custodians, international and local banks, broker-dealers, pension funds, insurance companies, Segment reports collective investment schemes, special purpose vehicles. The Bank was chosen as a reliable business partner by key international and local companies which reinforced its position amongst the leading financial institutions in Bulgaria.

The Bank has been recognized for its high quality services by leading industry ratings such as the Global Custodian Survey on Agent Banks where the Bank continues to receive excellent results for many years. These industry surveys are of utmost importance as they reflect the feedback obtained directly from the Bank’s clients. In 2015 the Bank received the Innovation Award in Securities Services by Global Custodian. This prestigious award is a recognition of the innovative approach linking directly the Bank’s Operations Center to the local Central Securities Depositories in 8 EU markets of CEE, incl. Bulgaria. It allows for economies of scale through one system platform and the clients will therefore benefit from a harmonization in standards, lower operational risk and competitive prices while enjoying extended cut-off times. This new operational model Raiffeisen GroupRaiffeisen is highly appreciated by all the Bank’s clients and outlines the strong commitment of the Bank in developing premium custody in Bulgaria services.

Financial Institutions and Sovereigns

Relationship with Banks, Non – Bank Financial Institutions and Sovereigns auditors` report

Independent Raiffeisenbank (Bulgaria) EAD develops its relations with first-class international and local financial institutions as well as with International Organisations and Central Government Organisations. As of the end of 2015, the Bank has established correspondent relations with more than 1,100 banks while the number of accounts in different currencies maintained by the bank was 21. The Bank offers a full range of services to approximately 200 non–bank financial institutions and 150 Central Government Organizations and International Organisations.

Based on the excellent quality of tailor-made services provided to Financial Institutions and the confidence of the international financial community in Raiffeisenbank (Bulgaria) EAD, almost 40 foreign banks – mainly from Europe, North America – and Addresses more than 20 international non -banking financial institutions and international organizations maintain accounts with the Bank in local and foreign currencies. 23

The Bank continues to be among the preferred partners servicing some of the largest local Insurance companies, Pension insurance companies, Fund management companies, Investment intermediaries, Leasing and Factoring companies, exchange houses etc. Raiffeisenbank (Bulgaria) maintained its leading position in servicing Central Government Authorities, Sovereigns, Non-Commercial Undertakings – Sovereigns and International Organizations by providing a complex bank service and full range of bank products.

Relationship with International Financial Institutions

Raiffeisenbank (Bulgaria) is one of the leaders on the Bulgarian market in attracting mid-term and long-term funding from International Financial Institutions. As of 31 December 2015, the total amount of agreements negotiated under Credit Line and Risk Sharing Facilities (signed with institutions such as the European Bank for Reconstruction and Development, the European Investment Bank, the European Investment Fund, KfW, the European Fund for Southeast Europe, the Council of Europe Development Bank etc.) reached EUR 660 mn. Vision, mission and CSR Vision, International Raiffeisen Bank Raiffeisen Bank Management report Management Segment reports Segment

in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 24

Operations and process

Vision, mission and CSR management

Operations

Throughout 2015 the main focus was on quality and the continuous improvement of process effectiveness, cost optimisation, and the implementation of regulatory and strategic projects. Raiffeisen BankRaiffeisen International Payments and documentary operations

The introduction of Lean and BPMS into the restraints, and foreign/local currency payments processes has led to improved efficiency, higher level of automation, optimisation of costs, and development of stronger partnerships with internal clients.

The total number of customer foreign currency payments has increased by 11 per cent for inbound payments, and 2 per cent Management report for outbound and intrabank transfers. The share of electronic transfers reached 82 per cent. Customer payments in local currency (outbound and intrabank) increased by 8 per cent. The share of electronic local transfers continued to increase, reaching an over 84 per cent share.

A high priory was placed on consulting services in the area of trade finance, offered to corporate clients, which resulted in the building of long-term relationships and a high level of trust. The number of operations in trade finance remains stable.

Segment reports Process Management

Raiffeisenbank (Bulgaria) EAD is a Lean oriented organisation, for which the leading principles of development are the continual goals of meeting customer requirements, employee satisfaction, and the optimal use of resources in the quest for maximum possible returns.

In 2015, the strategic priorities of the Bank included the introduction of Lean and the concept of process management (BPMS) into the spheres of retail and corporate lending. Focus was also placed on processes related to payments, service quality, and premium banking. Significant results were achieved, reflected in a 20 per cent reduction of the duration for credit approval and disbursement, contributing to an increase in customer satisfaction by 40 per cent. Over 50 per cent of the staff were

Raiffeisen GroupRaiffeisen trained in, and applied lean principles in their work day-to-day. in Bulgaria As a progressively improving organisation, Raiffeisenbank (Bulgaria) EAD encourages initiative and pro-active thinking in its employees, especially with regard to the generation of ideas for the improvement of processes and the work environment. In 2015 the infrastructure for generating and managing ideas was established.

Internal Control System auditors` report

Independent Along with process efficiency, another priority for the Management of Raiffeisenbank (Bulgaria) EAD is the adequate management of risks inherent in the Bank’s activities. In this regard, an internal control system covering the key activities of the organisation has been in place for many years. The system is based on RBI Group internal laws, as well as the internal regulations of Raiffeisenbank (Bulgaria) EAD, which govern all significant and strategically relevant topics. It is a process- oriented system which provides reasonable assurance regarding the reliability of financial reporting, compliance with applicable legislation and internal regulations, the implementation of strategic objectives, and the effectiveness of operations.

The Internal control system evaluates the inherent risks in the key activities, and has been designed to identify and monitor Addresses the effectiveness of all necessary controls. 25

Information technology

Throughout 2015 the main priority of Raiffeisenbank (Bulgaria) EAD in the area of Information Technologies continued to be the IT Transformation Program aimed at fulfilling the business needs of the Bank through appropriate information systems as well as optimising and simplifying the overall IT architecture. The program consists of two streams: the first being Customer Experience, which covers the implementation of systems for integrating client, product and pricing data as well as providing for extended working hours for the branch network, and customer facing applications. The second Transformation program stream focused on the unification and optimisation of the Bank’s reporting applications. Preliminary analysis was conducted, and the scope and timeframes were defined for both transformation program streams.

Extensive research of existing specialised systems for clients, products and pricing data integration functionalities was carried out, and tender procedures for the selection of system vendors were executed. The second stream began with an upgrade mission and CSR Vision, to the latest software version for the Bank’s data warehouse, used for management and regulatory reporting. The successful completion of the Transformation program will continue to be among the highest priority tasks in the IT area for the next couple of years.

Over 2015 the Bank completed a number of business and regulatory projects including the implementation of a new Collateral Management System, a Customer Information File incorporating 360 degree customer views, and migration to a new Card Management System along with optimisation and automation of card maintenance processes, among others. The International

Bank also carried out infrastructure optimisation projects and initiatives such as migration of the core network equipment Raiffeisen Bank to new generation hardware, and a redesign of the network architecture to ensure higher flexibility and improved disaster recovery, and business continuity capabilities.

In addition, the Bank continued to work on information security related initiatives including the implementation of USB device protection for all workstations, further security enhancements of online and mobile banking in response to new types of cyber-crime, the launch of a fraud prevention solution to protect Bank customers from cyber-attacks, and other fraud aimed directly at them.

Human Resources report Management

As at the end at 2015 the staff of Raiffeisenbank (Bulgaria) EAD totaled 2767 employees, 52 per cent of which were employed in the branch network. 83 per cent of the employees are university graduates while the average age is 38 years.

In 2015 the main focus in human resources management was the optimization of core HR process through software optimization - automation was implemented for Performance Management, Training Management and Recruitment and reports Segment selection processes. The automation will lead in the future to more efficient process management, paper-less and faster communication with stakeholders, the opportunity to produce variety of reports and will allow monitoring of key HR KPIs.

In 2015 one of the main HR priorities was the effective implementation and execution of the structured Leadership and change management programs for all managerial levels. New internal and external professional and soft skills trainings were offered to the whole staff – not only in Sofia, but also in the other big cities in Bulgaria. After implementing the first Engagement

survey, the results were discussed with the managers and an action plan was approved and implemented in 2015. Further in Bulgaria efforts were invested in new HR approaches as Mentorship programs and coaching workshops and consultations, 360-degree Raiffeisen Group feedback for managers, structured career paths for mass positions, rotations. Investments in work-life balance programs, sport and teambuilding events were made in 2015. RBBG participated in various HR international programs – Development centers for Managers, International young potential program, etc.

The progress in modernizing the HR management in the company was properly acknowleged and in 2015 Raiffeisenbank (Bulgaria) won the annual HR award of the Bulgarian Association for People Management in the category "Best HR Project in a big company".

Internal Customer Satisfaction Survey was performed for the second time in 2015 where a significant improvement of the Independent auditors` report auditors` scores was noticed. Judging by the employees' feedback, the survey was perceived very well and significant improvement of the communication and cooperation within the entire organization is now visible. Addresses Addresses 26

Group members

This consolidated management report includes the 2015 activity of the Bank and its subsidiaries and associates (the Group). Vision, mission and CSR Subsidiaries

Subsidiaries are these entities, which are controlled by the Bank.

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

In order that the consolidated financial statements present financial information about the Group as that of a single economic entity, income and expenses of a subsidiary are included in the consolidated Raiffeisen BankRaiffeisen

International statements from the date of acquisition until the Group ceases to exercise control over the entity.

The subsidiaries controlled by the Bank as at December 31, 2015 are Raiffeisen Service EOOD, Raiffeisen Asset Management (Bulgaria) EAD, Raiffeisen Insurance Broker EOOD, Raiffeisen Real Estate EOOD.

Management report Associates

The investments in associates are consolidated in the Group’s financial statements by using the equity method. Under the equity method, the investment in an associate is initially recognised at cost and the carrying amount is increased or decreased to recognise the investor's share of the profit or loss Segment reports of the investee after the date of acquisition. The investor's share of the profit or loss of the investee is recognised in the investor's profit or loss.

Distributions received from an investee reduce the carrying amount of the investment.

Raiffeisen Group in Bulgaria includes the following companies:

Company Percentage of participation Raiffeisen GroupRaiffeisen Raiffeisenbank (Bulgaria) EAD 100% ownership of Raiffeisen SEE Region in Bulgaria Holding GmbH, Austria

Raiffeisen Services EOOD 100% ownership of Raiffeisenbank (Bulgaria) EAD

Raiffeisen Leasing Bulgaria OOD 24.5% ownership of Raiffeisenbank (Bulgaria) EAD;

75.5% ownership of Raiffeisenbank Leasing International GmBH, Austria

Raiffeisen Asset Management (Bulgaria) EAD 100% ownership of Raiffeisenbank (Bulgaria) EAD auditors` report

Independent Raiffeisen Insurance Broker EOOD 100% ownership of Raiffeisenbank (Bulgaria) EAD

Raiffeisen Real Estate EOOD 100% ownership of Raiffeisenbank (Bulgaria) EAD

Company for cash services AD 20% ownership of Raiffeisenbank (Bulgaria) EAD Addresses 27

Raiffeisen Leasing Bulgaria OOD

Raiffeisen Leasing Bulgaria OOD was established in 2004 with shareholders Raiffeisenbank (Bulgaria) EAD, holding 24.5 per cent of its shares, and Raiffeisen Leasing International GmbH, holding 75.5 per cent.

Raiffeisen Leasing Bulgaria OOD has already been an active player on the leasing market for 11 years. The main leased assets offered to the customers are new and used vehicles, construction and agricultural machinery, light and heavy trucks, trailers and forklifts, machines and equipment as well as real estate leasing.

The market share of Raiffeisen Leasing Bulgaria OOD as of 31 December 2015 was 9.62 per cent, based on the leasing portfolio (BNB statistics). The total volume of the leasing market as of 31 December 2015 amounted to BGN 3,089 mn which Vision, mission and CSR Vision, was a decrease of BGN 35 mn compared to 31 December 2014.

As of 31 December 2015 the total assets of Raiffeisen Leasing Bulgaria OOD amounted to BGN 300 mn.

At the end of 2015 the net lease receivables of Raiffeisen Leasing Bulgaria OOD and granted loans amounted to BGN 285 mn. The leased assets were distributed as follows: vehicles – 75.2 per cent, equipment – 7.9 per cent and real estate – 16.9 per cent.

In 2015 Raiffeisen Leasing Bulgaria OOD concluded 2,833 lease contracts for vehicles amounting to BGN 152 mn at International purchase price. For comparison, 2,443 transactions were concluded in 2014 amounting to BGN 133 mn, which makes an Raiffeisen Bank increase of 14 per cent in 2015 in terms of acquisition price.

Leasing of equipment decreased in comparison with 2014. In 2015, 69 lease contracts for equipment were concluded, amounting to BGN 9 mn at purchase price, as compared to 67 transactions in 2014 amounting to a total of BGN 13 mn.

The customers of Raiffeisen Leasing Bulgaria OOD are Corporates representing 80.0 per cent of the total portfolio, followed by small and medium enterprises – 14.1 per cent and private individuals – 5.9 per cent. In 2014, the attracted and utilized medium and long-term financing reached BGN 281 mn, out of which BGN 21 mn from international financial institutions.

Raiffeisen Leasing Bulgaria OOD has registered 9 branches in the regional cities throughout the country. report Management

Due to Raiffeisen Leasing Bulgaria OOD's ambition to offer its services throughout the country, in addition to its own branch offices, leasing products are available also in the branch network of Raiffeisen Bank (Bulgaria).

The Company pays particular attention to HR management, given its importance for the institution's development and for the achievement of its business objectives. As of December 2015 the Company's employees are 90, 23 of whom work in the branch network in the country. Segment reports Segment

in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 28

Raiffeisen Asset Management

Vision, mission and CSR (Bulgaria) EAD

Market Share/Asset under management

2015 was a challenge for the asset managers as market routs and volatility across practically all markets dragged down the performance of most mutual funds leading to an increase in net outflows. Large redemption orders from institutional and corporate investors, resulted in a decrease of the market share of Raiffeisen Asset Management from 23.90 per cent to 16.80 per cent in 4Q 2015. At the same time Raiffeisen Asset Management (Bulgaria) EAD (RAM) succeed to increase

Raiffeisen BankRaiffeisen the number of the retail investors in the funds and was awarded for a third consecutive year (2013, 2014 and 2015) as International managing company of the year.

RAM manages and distributes three local funds, covering conservative and high-risk spectrum. As of 31 December 2015, the assets managed by the company in the three local funds amounted to BGN 141.91 mn, which represented 16.80 per cent market share. Slumping stock markets worldwide and heightened market volatility were the focus of 2015 and caused anxiety with investors leading to an increase in redemption orders. A number of measures have been taken in order to limit the outflows including changes in the investment policies of the funds in order to improve absolute return performance as well as undertaking a number of marketing and sales campaigns. Management report

New products and initiatives/Client base

In the course of 2015 RAM initiated the transformation of two of its funds under management, changed the investment policy of its biggest conservative fund and filed with the Financial Supervision Commission (FSC) an application for the launch of a completely new fund – MF Raiffeisen (Bulgaria) Global Mix. These initiatives had the purpose of enriching the product mix and adjusting it to the current market conditions, optimizing the funds’ performance and attracting new investments while at the same time limiting withdrawals.

Segment reports Following the approval of the FSC, on 23.04.2015 Raiffeisen (Bulgaria) Global Growth Fund was transformed into a Feeder collective investment scheme. The transformation of the fund gave investors, access to the Austrian MF “Raiffeisen Global Equities” – an equity fund targeting less risk averse investors, looking for higher returns.

On 26.11.2015 MF Raiffeisen (Bulgaria) Protected Investment in Euro was transformed into a Feeder collective investment scheme. By investing at least 85 per cent of its assets in the Master scheme - Raiffeisen Euro-Click Fund, the new Raiffeisen Active Protection Fund, offered access to a completely new product for the local market - a mutual fund adopting the so called click mechanism.

At the end of 2015, a decision was made by the executive body and the sole owner of the company to change the investment Raiffeisen GroupRaiffeisen strategy of Raiffeisen (Bulgaria) Liquidity Fund (new name Raiifeisen Conservative Fund Bulgaria) and to shift its focus and in Bulgaria invest up to 100 per cent of its assets in Bulgarian government debt after the receipt of an approval by the FSC.

In 2015 Raiffeisen Asset Management also filed with the FSC an application for the launch of a new Feeder Fund to be named MF Raiffeisen (Bulgaria) Global Mix and to invest at least 85 per cent of its assets in the Austrian MF Raiffeisenfonds-

Sicherheit, managed by RCM.

During 2015 RAM decided to close its discretionary portfolio management business and to focus on the sales of mutual funds with an focus on the Retail segment, as the total assets under discretionary management as of 31.12.2015 amounted auditors` report to BGN 42.32 mn. Independent

At the end at 2015 the number of company’s clients reached 4,847, compared to the previous year’s number of 4 486, which is an increase of more than 8 per cent, as the total amount of the assets managed in the local funds and in discretionary portfolios has reached BGN 184.23 mn.

RCM Funds Addresses In 2015 the assets of RCM funds distributed by RAM registered an increase of 3.34 per cent (EUR 9.27 mn compared to EUR 8.97 mn in 2014. 29

Investment approach and achieved return

Raiffeisen Asset Management (Bulgaria) EAD applied analytical and professional expertise, working in close collaboration with Raiffeisen Group in investment decision making, construction and management of local funds portfolios.

The divergence in the monetary policies of the FED and ECB was the main factor influencing the financial market indexes. In 2015 the European STOXX 600 registered an increase of 6.79 per cent while the STOXX 50 was up by 3.85 per cent. In the U.S. the S&P 500 declined by 0.73 per cent

The Bulgarian SOFIX ended the year with a decline of 11.27 per cent. Trading volumes continued to decrease throughout the year.

During the past year Raiffeisen (Bulgaria) Global Growth Fund was transformed into the first local market feeder scheme,

as its performance is closely related to and depends mainly on the performance of the MF Global Equities managed by the mission and CSR Vision, Raiffeisen Capital Management Austria.

In November 2015 Raiffeisen (Bulgaria) Protected Investment in Euro Fund was also transformed into a feeder scheme. The fund changed its name to Raiffeisen Active Protection and invests at least 85 per cent of its assets in Raiffeisen Euro Click (Austria).

Raiffeisen (Bulgaria) Liquidity Fund is currently the only low-risk, conservative fund under management by RAM. During 2015

the fund kept increasing its exposure to fixed income instruments and reduced the portion of bank deposits. International Raiffeisen Bank Raiffeisen Bank Management report Management Segment reports Segment

in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 30

Raiffeisen Insurance Broker EOOD Vision, mission and CSR Raiffeisen Insurance Broker EOOD, a company founded in 2006, is 100 per cent owned by Raiffeisenbank (Bulgaria) EAD. On 30 March 2006 the Financial Supervision Commission listed Raiffeisen Insurance Broker EOOD in the Register of the insurance brokers under Registration No 250-3B, thus marking up the launch of its activities of insurance intermediation.

In fulfillment of the highest customer service standards, Raiffeisen Insurance Broker performs various activities, some of which are related to studying and analyzing the insurance market trends, preparing detailed analysis, modeling specific insurance products, administrating insurance contracts and last but not least – prouding assistance in cases of insurance events. Raiffeisen Insurance Broker provides high-quality insurance intermediation services to individuals and legal entities. The company‘s clients are borrowers of Raiffeisenbank (Bulgaria) EAD, lease holders of Raiffeisen Leasing Bulgaria OOD and other customers outside the Raiffeisen Group.

A new property insurance product for Retail customers was introduced in July 2015 – “Property Certificate”. The individual Raiffeisen BankRaiffeisen

International certificates are issued on the spot. The new product is flexible, it optimized the work process and increased the customer satisfaction.

In 2015 insurance zones in some of the Bank`s offices were set up. Insurance experts are able to provide specific insurance expertise to Bank customers since December 2015. Insurance consultants at the Insurance zones offer wide range of insurance products and advice.

In 2015 Raiffeisen Insurance Broker realized BGN 21 mn premium income. Management report Segment reports Raiffeisen GroupRaiffeisen in Bulgaria auditors` report Independent Addresses 31

Future outlook

In 2016 the Bank will focus on:

• Steady loan portfolio growth and good risk profile of the new business;

• Business development through the already established infrastructure at optimal employment of existing ressources, improvement of efficiency and cost optimization;

• Sale of non-credit products and cross-selling within the Raiffeisen group;

• Further attracting loyal customers, who will use the Bank’s full range of offered products; mission and CSR Vision,

• Further improving the sales opportunities in the Retail segment through attractive offers for consumer and mortgage financing, different deposit proucts, rich scale of card products – debit, credit and co-branded cards, product packages and endowment products, tailored with special customer care;

• Further exploring alternative sales channels;

• Stay within the leading banks in offering foreign exchange products to customers and banks, trading with bonds International at the primary and secondary market, underwriting corporate and euro bonds. Raiffeisen Bank Management report Management Segment reports Segment

in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 32 Vision, mission and CSR Raiffeisen BankRaiffeisen International Management report

Segment reports Independent Auditors’ Report Raiffeisen GroupRaiffeisen in Bulgaria auditors` report Independent Addresses 33 Vision, mission and CSR Vision, International Raiffeisen Bank Raiffeisen Bank Management report Management Notes to the Financial Statements 41 Segment reports Segment

in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 34RAIFFEISENBANK (BULGARIA) EAD Consolidated financial statements as at 31 December 2015

1 RAIFFEISENBANK (BULGARIA) EAD 35 Consolidated financial statements as at 31 December 2015

2 RAIFFEISENBANK36 (BULGARIA) EAD Consolidated financial statements as at 31 December 2015

3 RAIFFEISENBANK (BULGARIA) EAD 37 Consolidated financial statements as at 31 December 2015

4 RAIFFEISENBANK38 (BULGARIA) EAD Consolidated financial statements as at 31 December 2015

5 RAIFFEISENBANK (BULGARIA) EAD 39 Consolidated financial statements as at 31 December 2015

6 RAIFFEISENBANK40 (BULGARIA) EAD Consolidated financial statements as at 31 December 2015

7 41

Notes to the Financial Statements

1. Basis of Preparation

(а) Reporting entity mission and CSR Vision,

Raiffeisenbank (Bulgaria) EAD (the Bank) is indirectly 100 per cent owned by Raiffeisen Bank International, Austria.

The Bank has a general banking license issued by the Bulgarian National Bank (BNB) according to which it is allowed to conduct all banking transactions permitted by the Bulgarian legislation in the country and abroad, as well as to conduct all deals and services in its capacity of investment intermediary according to the Public offering of securities Act and the the regulations related to it. International Raiffeisen Bank Raiffeisen Bank The consolidated financial statements of the Bank for 2015 represent the financial statements of the Bank and its subsidiaries and associated companies as described in note 35, referred to as the Group.

(b) Basis of accounting

These consolidated financial statements have been prepared in accordance with the International Financial Reporting Standards (IFRS), as adopted by the European Union.

The consolidated financial statements have been prepared by the Bank in accordance with the Bulgarian Accountancy Act. Management report Management (c) Basis of measurement

These financial statements have been prepared on the historical cost basis except for the following:

–– financial assets and liabilities at fair value through profit or loss, which are measured at fair value;

–– available-for-sale financial instruments, which are measured at fair value;

–– defined benefit retirement obligations to employees, which are accounted at their net present value, adjusted for reports Segment any actuarial gains/losses.

(d) Functional and presentation currency

These consolidated financial statements are presented in Bulgarian leva (BGN) rounded to the nearest thousand, which is the Group’s functional currency. in Bulgaria Raiffeisen Group 2. Significant Accounting Policies

These consolidated financial statements are prepared by applying one and the same accounting policy by the Group and its subsidiaries.

(a) Basis of consolidation Independent auditors` report auditors` These consolidated financial statements are prepared in accordance with IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in associates and joint ventures”, whereby participations with more than 50 per cent of the voting rights are fully consolidated and all participations with more than 20 per cent of the voting rights are consolidated using the equity method. Addresses Addresses 42

(b) Income and expense recognition

Interest income and expense

Vision, mission and CSR Interest income and expense are recognized in profit or loss for all interest bearing instruments on an accrual basis.

Interest income and expense presented in profit or loss include:

–– interest on financial assets and liabilities at amortized cost;

–– interest on investment securities designated as at fair value through profit or loss, which excludes trading assets;

–– interest on available for sale securities carried at fair value through other comprehensive income.

Interest income and expense on all trading assets and liabilities are considered to be incidental to the Group’s trading operations and are presented together with all other changes in the fair value of trading assets and liabilities in net trading income. Raiffeisen BankRaiffeisen International Fair value changes

Fair value changes on derivatives are presented in net result from derivatives in profit or loss. Fair value changes in trading assets are included in net trading income Fair value changes of investments securities carried at fair value through profit or loss, are presented in net income from investments in profit or loss, which also includes gains and losses on the realization of available-for-sale financial assets, and impairment losses on available-for-sale financial assets and investments in associates.

Management report Fees and commission

Fees and commission are generally recognized on an accrual basis when the service has been provided.

Fees and commission income and expenses that are integral to the effective interest on a financial asset or liability are included in the measurement of the effective interest income/expense. Loan commitment fees for credit lines that are likely to be drawn down, are deferred and are recognized as an adjustment to the effective interest income on the loan. Loan syndication fees are recognized as revenue when the syndication has been completed and the Group has recognized in its statement of financial position the respective part of the syndication. Commission and fees arising from negotiating, or

Segment reports participating in the negotiation of, a transaction for a third party – such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses – are recognized on completion of the underlying transaction. Portfolio and other management advisory and service fees are recognized based on the applicable service contracts, usually on a time-apportionate basis.

Other fees and commission income, including account servicing fees, sales commission, payments transfer fees, cash transaction fees, card payment commissions are recognized as the related services are performed.

Other fees and commission expense, which is not part of the effective interest expense, represents mainly transaction and service fees, which are expensed as the services are received. Raiffeisen GroupRaiffeisen in Bulgaria Dividends

Dividend income is recognized in profit or loss when the Group’s right to receive payment is established.

Net trading income

Net trading income comprises gains less losses related to trading assets and liabilities, and includes all realized and unrealized fair value changes, interest, dividends and foreign exchange differences. auditors` report Independent (c) Leasing

Lease payments – Lessee

Assets held by the Group under leases that transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. The leased asset is initially measured at an amount equal to the lower of its fair value and the

Addresses present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset. 43

Assets held under leases where substantially all the risk and rewards of ownership are not transferred are not recognised in the Group’s statement of financial position.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease.

(d) Foreign currency transactions

All transactions in foreign currencies are translated to the functional currency of the Group at exchange rates fixed by the Bulgarian Central Bank at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at

the reporting date are retranslated to the functional currency at the exchange rate fixed by the Bulgarian Central Bank at mission and CSR Vision, that date.

(e) Financial assets and financial liabilities

The Group classifies its financial instruments in the following categories: financial assets at fair value through profit or loss including trading assets and liabilities and derivatives; loans and receivables; held-to-maturity investments; available-for-sale financial assets and other financial liabilities. The Group determines the classification of financial assets and liabilities at International their initial recognition. Raiffeisen Bank

The Group initially recognizes loans and advances, deposits, debt securities, borrowings and subordinated liabilities on the date they are originated. All other financial instruments (including regular-way purchases and sales of financial assets) are recognized on the trade date on which the Bank becomes a party to the contractual provisions of the instrument.

(i) Financial assets at fair value through profit or loss - recognition and measurement

The Group designates financial assets and liabilities at fair value through profit or loss when:

–– the financial assets or liabilities are managed, evaluated and reported on a fair value basis; Management report Management –– the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise; or

–– the financial asset or liability contains an embedded derivative that significantly modifies the cash flows that would otherwise be required under the contract.

(ii) Trading assets and liabilities – recognition and measurement

Trading assets and liabilities are those assets and liabilities that the Group acquires or incurs principally for the purpose of selling or repurchasing in the near term, or holds as part of a portfolio that is managed together for short-term profit or reports Segment position taking. Trading assets and liabilities are initially recognized and subsequently measured at fair value in the statement of financial position with transaction costs taken directly to profit or loss. All changes in fair value are recognized as part of net trading income in profit or loss. Trading assets and liabilities are not reclassified subsequent to their initial recognition.

(iii) Derivatives – recognition and measurement

Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and are in Bulgaria

subsequently re-measured accordingly to the quoted market prices obtained from active financial markets. If no information Raiffeisen Group on the market price is available, valuation techniques such as discounted cash flow models are used as appropriate. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.

(iv) Loans and receivables – recognition and measurement

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Group does not intend to sell immediately or in the near term. Independent Independent

Loans and advances to banks are classified as loans and receivables. report auditors`

Loans and receivables are initially measured at fair value plus incremental direct transaction costs, and subsequently measured at their amortised cost using the effective interest method less any impairment losses. Addresses Addresses 44

(v) Held-to-maturity – recognition and measurement

Held-to-maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the Group has the positive intent and ability to hold to maturity. Vision, mission and CSR Held-to-maturity investments are initially measured at fair value plus incremental direct transaction costs and subsrequently measured at amortised cost using the effective interest method. A sale or reclassification of a more than insignificant amount of held-to-maturity investments would result in the reclassification of all held-to-maturity investments as available-for-sale. However, sales and reclassifications in any of the following circumstances would not trigger a reclassification:

–– sales or reclassifications that are so close to maturity that changes in the market rate of interest would not have a significant effect on the financial asset’s fair value;

–– sales or reclassifications after the Group has collected substantially all of the asset’s original principal; and

–– sales or reclassifications that are attributable to non-recurring isolated events beyond the Group’s control that could not have been reasonably anticipated. Raiffeisen BankRaiffeisen International (vi) Available-for-sale – recognition and measurement

Available-for-sale investments are those intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices and which are not classified as at fair value through profit or loss or held to maturity. Available-for-sale financial assets are initially recognized at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on debt instruments, are recognized in other comprehensive

Management report income and accumulated in the fair value reserve. When these assets are derecognized, the gain or loss accumulated in equity is reclassified to profit or loss.

Interest income is recognised in profit or loss using the effective interest method.

(vii) Other financial liabilities – recognition and measurement

Other non-derivative financial liabilities are initially measured at fair value less any directly attributable transaction costs. Subsequent to initial recognition, these liabilities are measured at amortized cost using the effective interest method.

Segment reports Deposits, borrowings from banks, debt securities issued and subordinated liabilities are the Group’s main funding sources and are classified as other financial liabilities, carried at amortized cost.

(viii) Fair values of financial assets and liabilities

“Fair value” is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the Group has access at that date. The fair value of a liability reflects its non-performance risk.

Raiffeisen GroupRaiffeisen When available, the Group measures the fair value of an instrument using the quoted price in an active market for that

in Bulgaria instrument. A market is regarded as active if transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.

If there is no quoted price in an active market, then the Group uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors

that market participants would take into account in pricing a transaction.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the fair value of the consideration given or received. If the Group determines that the fair value at initial recognition differs from the auditors` report

Independent transaction price and the fair value is evidenced neither by a quoted price in an active market for an identical asset or liability nor based on a valuation technique that uses only data from observable markets, then the financial instrument is initially measured at fair value, adjusted to defer the difference between the fair value at initial recognition and the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis over the life of the instrument but no later than when the valuation is wholly supported by observable market data or the transaction is closed out.

If an asset or a liability measured at fair value has a bid price and a ask price, then the Group measures assets and long positions at a bid price and liabilities and short positions at an ask price. Addresses

The fair value of a demand deposit is not less than the amount payable on demand, discounted from the first date on which the amount could be required to be paid. 45

The Group recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred.

(ix) Derecognition

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognized as a separate asset or liability.

The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled, or expire.

The Group enters into transactions whereby it transfers assets recognized on its statement of financial position, but retains either all risks and rewards of the transferred assets or a portion of them. If all or substantially all risks and rewards are Vision, mission and CSR Vision, retained, then the transferred assets are not derecognized from the statement of financial position. Transfers of assets with retention of all or substantially all risks and rewards include, for example, securities lending and repurchase transactions. Upon transfer of a financial asset on which the Group retains control, the asset continues to be recognized in the statement of financial position, the Group assesses the extent to which it is exposed to changes in the fair value of the asset.

In certain transactions the Group retains rights to service a transferred financial asset for a fee. The transferred asset is derecognized in its entirety if it meets the derecognition criteria. An asset or liability is recognized for the servicing rights, depending on whether the servicing fee is more than adequate to cover servicing expenses (asset) or is less than adequate International for performing the servicing (liability). Raiffeisen Bank

(f) Cash and cash equivalents

Cash and cash equivalents comprise cash balances on hand and in current accounts in other banks, unrestricted cash deposited with the Central bank and placements with banks with original maturity of less than 3 months.

Cash at banks is classified as loans and receivables and is carried at amortized cost in the statement of financial position.

(g) Deals with securities Management report Management

Securities borrowing and lending and repurchase agreements.

(i) Securities borrowing and lending

Investments lent under securities lending arrangements are recognized in the statement of financial position and are measured in accordance with the accounting policy for financial assets designated at fair value through profit or loss, available for sale or held to maturity. Cash collaterals received in respect of securities lent are recognized as liabilities to either banks or customers. Investments borrowed under securities borrowing agreements are not recognized as assets of the Group. reports Segment Cash collateral placements in respect of securities borrowed are recognized under loans and advances to either banks or customers. Income and expenses arising from the securities borrowing and lending business are recognized on an accrual basis over the period of the transactions and are included in interest income or expense.

(ii) Repurchase agreements

The Group enters into purchases (sales) of investments under agreements to resell (repurchase) substantially identical in Bulgaria investments at a certain date in the future at a fixed price. Investments purchased subject to commitments to resell them at Raiffeisen Group future dates are not recognized.

The amounts paid are recognized as receivables under repurchase agreements. The receivables are shown as collateralized by the underlying security. Investments sold under repurchase agreements continue to be recognized in the statement of financial position and are measured in accordance with the accounting policy for either assets held for trading or at fair value through profit or loss as appropriate. The proceeds from the sale of the investments are reported in the statement of financial position as liabilities on repurchase agreements.

The difference between the sale and repurchase considerations is recognized on an accrual basis over the period of the Independent transaction and is included in interest income or expense. report auditors` Addresses Addresses 46

(h) Offsetting

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financial position when the Group has a legally enforceable right to set off the recognized amounts and the transactions are intended to be settled on a net basis. Vision, mission and CSR

Income and expenses are presented on a net basis only if permitted under IFRS, as adopted by the EU, or for gains and losses arising from group of similar transactions such as in the Group’s trading activities.

(i) Impairment

Impairment of financial assets

At each reporting date the Group assesses whether there is objective evidence that financial assets not carried at fair value through profit or loss are impaired. In case such evidence exists, recoverable amount of the assets is defined. Raiffeisen BankRaiffeisen

International Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the asset, and that the loss event has an impact on the future cash flows on the asset that can be estimated reliably. Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a borrower, 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, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the group, or economic conditions that correlate with defaults in the group. Loans and advances are measured and classified based on their credit risk grade, delinquency, financial difficulty of the borrower and his cash flow generating ability. If the Group has more than

Management report one credit exposure against a group of borrowers with common risk characteristics, all exposures are classified according to the grade of the borrower bearing the highest credit risk.

The Group considers evidence of impairment at both an individual and collective level. Exposures which are past due more than 90 days or for which some or all of the default indicators mention above have been identified, are assessed for individual impairment. All significant assets found not to be individually impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are then collectively assessed for impairment by grouping together financial assets (carried at amortized cost) with similar risk characteristics.

In assessing collective impairment the Group uses statistical modeling of historical trends of the default rates, timing of

Segment reports recoveries and the amount of loss incurred, adjusted for management’s judgments as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical modeling. Default rates, loss rates and the expected timing of future recoveries are regularly benchmarked against actual outcomes to ensure that they remain appropriate.

Individual impairment losses on individually identified assets are measured as the difference between the carrying amount of the financial assets and the present value of estimated cash flows, considering the risk grade of the borrower, discounted at the assets’ original effective interest rate. Short-term balances are not discounted.

When a loan (or part of a loan) is uncollectible, it is written off against the related allowance for loan impairment. Such loans Raiffeisen GroupRaiffeisen are written off after all the necessary procedures have been completed and the amount of the loss has been determined. in Bulgaria

When a subsequent event causes the amount of impairment loss to decrease and that decrease can be objectively related to an event after the impairment recognition, the impairment loss is reversed through profit or loss.

Loans and advances are presented net of impairment losses. The increase of the impairment losses is recognized in profit or

loss. The Group reintegrates in its current year income impairment losses, which are released as a result of a partial or the total collection of the provisioned exposure, as well as in case of reclassifying the exposure into a lower credit risk group.

auditors` report Allowances for impairment losses on a collective basis are allocated against exposures to cover existing losses, which could Independent not be identified for each individual loan according to the Group’s provisioning policy. The Group’s policy for allocation of portfolio based allowances for impairment losses determines the principles for reducing the statement of financial position amount of a portfolio of loans with similar credit risk characteristics to their recoverable amount as at the reporting date.

The The recoverable amount of purchased loans re-measured to fair value is calculated as the present value of expected future cash flows discounted at the current market interest rate. Addresses 47

Impairment on non-financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.

For impairment testing, assets are grouped together into the smallest group of assets that generates cash inflows from continuing use that is largely independent of the cash inflows of other assets or CGUs.

The ‘recoverable amount’ of an asset or CGU is the greater of its value in use and its fair value less costs to sell. ‘Value in use’ is based on the estimated future cash flows, 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 or CGU.

An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Vision, mission and CSR Vision, Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, an impairment loss is reversed only 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. International

(j) Investments in associates Raiffeisen Bank

The Group accounts for its investments in associates at cost. Dividends from associates are recognized in profit or loss when the Group's right to receive the dividend is established. The Group assesses at the end of each reporting period whether there is any indication that an investment in associate may be impaired. If any such indication exists, the Group estimates the recoverable amount of the investment based on the ability of the entity to continue to generate income and to pay out dividends to the Group.

(k) Property, plant and equipment

Recognition and measurement report Management

Items of property, plant and equipment are measured at cost less accumulated depreciation. Cost includes expenditures that are directly attributable to the acquisition of the asset. Purchased software that is integral to the functionality of the related equipment is capitalized as part of that equipment.

When parts of an item of property or equipment have significant part in the total cost of the asset, or have different useful lives, then they are accounted and depreciated as separate items (major components) of property and equipment.

Subsequent costs reports Segment

The cost of replacing part of an item of property, plant or equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Bank and its cost can be measured reliably.

Depreciation in Bulgaria

Property, plant and equipment are depreciated on a straight-line basis over the estimated useful lives. Leased assets are Raiffeisen Group depreciated over the shorter of the lease term and their useful lives. Land is not depreciated.

The estimated depreciation rates are as follows:

Assets % Buildings 4

Equipment 15 – 50 Independent auditors` report auditors` Fixtures and fittings and reconstructions 15 Vehicles 20 – 25

Assets are not depreciated until they are brought into use and transferred from assets in the course of construction into the relevant asset category. Addresses Addresses 48

(l) Intangible assets

Recognition and measurement

Vision, mission and CSR Intangible assets, which are acquired by the Group, are stated at cost less accumulated amortization and any impairment losses.

Subsequent costs

Subsequent expenditure on intangible assets is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure is expensed when incurred.

Amortization

Amortization is calculated on a straight-line basis over the expected useful life of the asset. The annual rates of amortization are as follows: Raiffeisen BankRaiffeisen International Assets % Licences 15 – 33 Computer software 20 – 50

(m) Repossessed assets Management report Repossessed assets are measured at the lower of carrying amount and the net realizable value. Carrying amount includes acquisition expenses, state fees for court executors, etc.

Net realizable value is the estimated selling price reduced by approximately evaluated costs for sale realization.

(n) Provisions for liabilities and charges

A provision is recognized in the statement of financial position when the Group has a legal or constructive obligation as

Segment reports a result of a past event, and it is probable that an outflow of economic benefits will be required to settle the obligation. 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. Short-term provisions are usually not discounted.

(o) Employee benefits

(i) Short-term employee benefits

Raiffeisen GroupRaiffeisen Short-term employee benefits include salaries, bonuses and benefits in kind and are expensed as the related service is in Bulgaria provided. A liability is recognized for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.

(ii) Defined contribution plans

Obligations for contributions to defined contribution plans comprise contributions to state-owned institutions and to obligatory pension funds managed by privately-owned management companies, in accordance with legal requirements or individual auditors` report choice. Obligations for contributions to defined contribution plans are expensed as the related service is provided. Independent (iii) Defined benefits

The Group’s obligation in respect of defined benefits is calculated separately for each plan and the amount of future benefits that employees have earned in the current and prior periods is estimated and that amount is discounted at an appropriate discount rate.

Addresses The calculation is performed annually by a qualified actuary using the projected unit credit method. The Group determines the net interest expense on the net defined benefit liability for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability. 49

Remeasurements of net defined benefit liability which comprise actuarial gains and losses and are recognized in other comprehensive income. Net interest expense and other expenses related to defined benefits, including costs for past service, are recognized in profit or loss.

(p) Financial guarantees and loan commitments

“Financial guarantees” are contracts that require the Group to make specified payments to reimburse the holder for a loss that it incurs because a specified debtor fails to make payment when it is due in accordance with the terms of a debt instrument. “Loan commitments” are firm commitments to provide credit under pre-specified terms and conditions.

(q) Income tax

Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in OCI. mission and CSR Vision,

(i) Current tax

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable or receivable in respect of previous years. Current tax also includes any tax arising from dividends. International (ii) Deferred tax Raiffeisen Bank

Deferred tax is recognized 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 recognized for:

–– temporary differences on the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit or loss;

–– temporary differences related to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not reverse in the foreseeable future; and

–– taxable temporary differences arising on the initial recognition of goodwill. report Management

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to the extent that Segment reports Segment it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Group to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact tax expense in the period that

such a determination is made. in Bulgaria Raiffeisen Group (r) Segment reporting

The Group applies IFRS 8 “Operating segments” which requires the Bank to present operating segments based on the information that is internally provided to the Management.

(s) New standards and interpretations not yet adopted Independent Independent

A number of new standards, amendments to standards and interpretations, endorsed by the EC, are available for early report auditors` adoption in the annual period ended 31 December 2015, although they are not yet mandatory until a later period. These changes to IFRS have not been applied in preparing these financial statements. The Bank does not plan to adopt these standards early. Addresses Addresses 50

Standards, Interpretations and amendments to published Standards that have not been early adopted – endorsed by the EC:

• Amendments to IAS 1: Disclosure initiative. It is clarified when non-significant information need not be disclosed and when significant information may not be omitted from the financial statements. The entity does not expect the Amendments to have a significant impact on the financial statements; Vision, mission and CSR • Annual improvements to IFRSs 2012-2014 Cycle. The improvements introduce some non-significant amendments to a number of standards and consequential amendments to other standards and interpretations. None of these amendments are expected to have a significant impact on the financial statements of the Group;

• Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation: The entity does not expect the Amendments to have any impact on the financial statements since its currently used methods of depreciation and amortization will continue to be acceptable;

• Amendments to IAS 27: Equity method in separate financial statements. Entities will have a choice to voluntarily apply equity method in their separate financial statements. The entity does not expect the Amendments to have any impact on the Group‘s financial statements. Raiffeisen BankRaiffeisen International 3. Financial Risk Management

Introduction and overview

The Group is exposed to the following risks from its use of financial instruments: Management report A. Credit risk

B. Liquidity risk

C. Market risks

D. Capital management

Segment reports Risk management framework

The Management Board has overall responsibility for the establishment and oversight of the Group’s risk management framework.

Risk management is been overseen by the Supervisory Board Risk Committee established following the requirements of art. 6 of the Bulgarian national bank Ordinance 7 on organization and risk management of banks. The SB Risk Committee shall advise the Management Board and the Supervisory Board on the Group’s overall current and future risk appetite and strategy and assist the Management Board and the Supervisory Board in overseeing the implementation of that strategy by senior management. Raiffeisen GroupRaiffeisen in Bulgaria The Board has established in addition the Group’s Asset and Liability Committee (ALCO), Credit Committee, Problem Loans Committee, Operational Risk Management Committee and Portfolio Committees of the Group, which are responsible for developing and monitoring Group risk management policies in their specified areas.

The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate

risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Group, through its training programs and management standards and procedures, aims to develop a disciplined and constructive control environment, in which all

auditors` report employees understand their roles and obligations. Independent

By its nature the Group’s activities are principally related to the use of financial instruments. The Bank accepts deposits from customers at both fixed and floating rates and for various periods and seeks to invest these funds in high quality assets.

A. Credit risk

The Group is permanently exposed to credit risk, arising from the probability that counterparties might default on their Addresses contractual obligation under loans and advances when due or in full. Credit risk is the most important risk for the Group’s business; management therefore carefully manages its exposure to credit risk. The Group has a set of policies and procedures in relation to credit approval and credit exposures management. In addition, the Group is exposed to off-balance sheet credit risk through commitments under unutilized extended credit lines and issued guarantees. 51

Concentrations of credit risk (whether on or off-balance sheet) might arise from risk exposures to one borrower or group of borrowers, with similar economic characteristics, that might be affected in equal terms by changes in economic or other circumstances in meeting their contractual obligations.

The Group is exposed to credit risk also in result of its trading and investment activities, as well as in result of its activities as an investment intermediary for its customers or for third parties. The credit risk arising on trading and investment activities is managed through the management of market risk.

The risk that counterparts to financial instruments might default on their obligations is monitored on an ongoing basis by the Group. In monitoring credit risk exposures related to trading instruments, consideration is given to instruments with a positive fair value and to the volatility of the fair value of trading instruments.

Management of credit risk Vision, mission and CSR Vision, The Supervisory Board has delegated responsibility for the management of credit risk to the Group’s Management Board. The Management Board defines the credit policy based on analysis of the business situation and the assessment of the risk associated with credit business. The scope of the Corporate Lending Policy is to present a clear picture in which direction the Group’s corporate credit portfolio shall develop within the next year. The approval of the Corporate Lending Policy by Supervisory Board ensures, that the steps proposed by the Group with regards to targeted industries, products, etc. and the subsequent impacts of those steps on the corporate credit portfolio are in line with the plans of the Supervisory Board and therefore in line with the basic strategy of RBI Group. International

The credit risk management is performed by the organizational units reporting to the Chief Risk Officer. The main Raiffeisen Bank responsibilities of these units are:

• Recommend and manage portfolio concentration limits based on approved limits for proactive steering of the concentrations on GCC (Group of Connected Customers) level;

• Provide independent review of limit applications and credit risk assessment based on internal models;

• Perform proactive risk management of transactional and portfolio activities;

• Ensure that risk management standards, policies, practices and tools of the RBI Group are adhered to by all

business units in the credit process; report Management

• Assist the Risk Originating Units/Account Managers in establishing business-specific risk management practices (not contradicting standard tools introduced by RBI Group) for the approval, measurement, reporting, monitoring, limiting and analysis of credit risk of corporate customers;

• Assist in the identification, classification and management of problematic exposures;

• Ensure that “early warning signs” reported by the Risk Originating Units are considered properly and internal actions (e.g. downgrading of Customer Rating, Review and establishment of action plans for potential problematic exposures) are initiated quickly; reports Segment

• Cooperate with the Risk Originating Unit in establishing the Credit Policy, review the final Credit Policy paper and recommend amendments whenever necessary as well as monitor the compliance with the approved Credit Policy.

Risk limit control and mitigation policies

The Group manages limits and controls concentrations of credit risk wherever they are identified – in particular, to individual in Bulgaria

counterparties and groups, and to industries and countries. Raiffeisen Group

The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower, or group of borrowers, and to geographical and industry segments. Such risks are monitored on a revolving basis and subject to regular reviews, when considered necessary.

Exposure to credit risk is also managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and capital repayment obligations. Independent Independent

Credit risk measurement report auditors`

In measuring credit risk of loans and advances to customers and to banks at a counterparty level, the Group reflects three components (i) the probability of default by the client or counterparty on its contractual obligations; (ii) current exposures to the counterparty and its likely future development, from which the Group derives the “exposure at default”; (iii) the likely recovery ratio on the defaulted obligations (the loss given default), and (iv) loss identification period which is the probability of default horizon. Addresses Addresses 52

These credit risk components, which reflect expected loss are compliant with the regulatory requirements of Bulgarian National Bank and the European Directive for capital adequacy and are embedded in the Group’s daily operational management. However, when determining the impairment losses to reduce the carrying amount of the exposure, the requirements of IAS 39 are applied, which are based on losses that have been incurred at the reporting date.

Vision, mission and CSR The Group assesses the probability of default of individual counterparties using internal rating tools tailored to the various categories of exposures and counterparty. They have been developed internally and combine statistical analysis with judgment and are validated, where appropriate, by comparison with externally available data. Clients of the Group are segmented into rating classes, reflecting the range of default probabilities defined for each rating class. This means, that in principle, exposures migrate between classes as the assessment of their probability of default changes. The rating tools are kept under review and upgraded as necessary. The Group regularly validates the performance of the rating and their predictive power with regard to default events. The Bank uses the assessments of recognized external credit assessment institutions where available to benchmark the internal credit risk assessment.

Since 1 November 2014 Raiffeisenbank (Bulgaria) EAD has received an approval to apply internal ratings based approach for the assessment and management of the credit risk according to the requirements of the current bank regulations, namely Regulation (EC) 575/2013. Raiffeisen BankRaiffeisen International Exposure at default is based on the amounts the Group expects to be owed at the time of default. For example, for a loan this is the outstanding principal. For a commitment, the Group includes any amount already drawn plus the further amount that may have been drawn by the time of default, should it occur.

Loss given default represents the Group’s expectation of the extent of loss on a claim should default occur. It varies by type of counterparty, type of seniority of claim and availability of collateral or other credit mitigation.

Management report For debt securities or other bills, both internal and external ratings are used for managing of the credit risk exposures. The investments in those securities and bills are viewed as a way to gain a better credit quality mapping and maintain a readily available source to meet the funding requirement at the same time, hence ensuring also compliance with the respective regulatory requirements and ratios.

Collateral

The Group employs a range of policies and practices to mitigate credit risk. The most traditional of these is taking security for funds advances. The Group implements guidelines on the acceptability of specific classes of collateral or credit risk mitigation. The principal collateral types used by the Group are: Segment reports –– mortgages over residential properties;

–– cash deposits;

–– pledge of business assets such as premises, inventory and accounts receivable;

–– bank guarantees;

–– portfolio guarantees issued by first-class international or national institutions; Raiffeisen GroupRaiffeisen

in Bulgaria –– pledge of financial instruments such as debt securities and equities.

Long-term finance and lending to corporate entities are generally secured; consumer loans for individual persons are generally unsecured. In addition, in order to minimize the credit loss the Group might seek additional collateral from the counterparty when impairment indicators are noticed for the relevant individual loans and advances.

Derivatives

auditors` report The Group maintains strict credit risk limits towards its counterparties which have derivative deals (exposures) having in mind

Independent the deal structure in terms of currencies, term and notional amount. They can be split into two categories as follows:

–– Settlement Limit: limits the maximum payments due on each single day;

–– FX-Derivatives Limit: limits the replacement cost of all OTC Derivative products in case the counterparty defaults.

At any time, the amount subject to credit risk is limited to the current fair value of instruments that are favorable to the Group (i.e. assets, where their fair value is positive), which in relation to derivatives is only a small fraction of the contract, or Addresses notional values used to express the volume of instruments outstanding. The credit risk exposure is managed as part of the overall lending limits with customers, together with potential exposures from market movements. Collateral or other security is not usually obtained for credit risk exposures on these instruments. 53

Settlement risk arises in any situation where a payment in cash, securities or equities is made in the expectation of a corresponding receipt in cash, securities or equities. Daily settlement limits are established for each counterparty to cover the aggregate of all settlement risk arising from the Bank’s market transactions on any single day.

Credit-related commitments

The primary purpose of these instruments is to ensure that funds are available to a customer as required. Guarantees and standby letters of credit carry the same credit risk as loans. Documentary and commercial letters of credit – which are written undertakings by the Group on behalf of a customer authorizing a third party to draw drafts on the Bank up to a stipulated amount under specific terms and conditions – are collateralized by the underlying shipments of goods to which they relate and therefore carry less risk than a direct loan.

Commitments to extend credit represent unused portions of authorizations to extend credit in the form of loans, guarantees or letters of credit. With respect to credit risk on commitments to extend credit, the Group is potentially exposed to loss in an amount equal to the total unused commitments. However, the likely amount of loss is less than the total unused commitments, as mission and CSR Vision, most commitments to extend credit are contingent upon customers maintaining specific credit standards. The Group monitors the term to maturity of credit commitments because long-term commitments generally have a greater degree of credit risk than short-term commitments. However, any commitments that are unconditionally cancelable at any time by the Group without prior notice, or that effectively provide for automatic cancellation due to deterioration in the borrower’s creditworthiness, are considered by the Group to bear no risk.

Policy for risk exposures assessment and allocation of impairment allowances for credit risk International Raiffeisen Bank Raiffeisen Bank The internal and external rating systems focus more on credit quality mapping from the inception of the lending and investment activities. In contrast, impairment allowances are recognized for financial reporting purposes only for losses that have been incurred at the reporting date based on objective evidence of impairment.

The Group applies different approaches with regard to assessment of impairment and determination of the credit loss, depending on the customer segment and product type.

Individual impairment allowance is set aside for defaulted customers in all segments:

–– exposure is past due more than 90 days; Management report Management –– exposure is identified as unlikely to be paid on the basis of default indicators.

Allowances for impairment of retail customers’ secured exposures are measured at 100 per cent after considering the collateral value if it is mortgage. For unsecured products for private individuals individual impairment is defined based on time since default, accounting for the observed discounted historical recovery after default until the ultimate collection period is reached.

Exposures of retail customers, for which no individual impairment has been identified, are grouped together in pools according to their internal rating. The collective impairment of each pool is measured according to the historic default rate reports Segment and loss upon default for the respective rating class. The historic default rate represents the number of defaulted exposures during the observation period as percentage from total number of exposures in the respective pool. The observation period is 12 months and the average is calculated on historically available consecutive 12-month periods and considers only existing non-defaulted exposures at the beginning of the period. The collective impairment is determined by multiplying the exposure by the historic default rate, which corresponds to the rating class of the customer and by the level of Loss Given Default (LGD). LGD values are also based on historical data spanning more than 5 years, as defined for IRB parameter estimation. LGD is defined as 100 per cent less the average historically observed recovery rate. in Bulgaria Raiffeisen Group For certain retail products with non-significant exposure that are not covered by IRB models, individual allowances are calculated after 180 days past due and in case of other unlikely to pay indicators. Accounts that are individually assessed for impairment and identified as impaired are excluded from a collective assessment of impairment, but they may enter into the model, which determines loss factors used for collective allowances for impairment.

In December 2015 Raiffeisenbank (Bulgaria) EAD has introduced internal-rating based model in the calculation of allowance for impairment losses for loans to private individuals and micro entities. Estimates of specific parametres (Historic Default Rate, Loss Given Default and Credit Conversion Factor) are subject to annual recalculation, following the established internal processes of the Bank for internal-rating models. With this change being in default is the main criteria for the calculation of Independent impairment allowance on collective and individual level. report auditors`

Exposures to non-retail customers are evaluated and classified based on the credit risk level, the period of delay of amounts due, the assessment of the debtor’s financial state and the main sources for repayment of the debtor’s obligations. Addresses Addresses 54

The Group applies a policy for determining allowance for collective impairment of exposures to corporate customers. Exposures to large, middle and small corporate customers, as well as financial institutions for which no individual impairment has been identified, are grouped together in pools according to their internal rating. The collective impairment of each pool is measured according to the historic default rate for the respective rating class. The historic default rate represents the number of defaulted customers within the observation period as percentage from total number of customers in the respective pool. Vision, mission and CSR The observation period is 12 months and the average is calculated on 5 consecutive 12-month periods and considers only customers with existing exposures at the beginning and the end of the period. The collective impairment is determined by multiplying the net exposure after deduction of the highly liquid collateral by the historic default rate, which corresponds to the rating class of the customer and by the level of loss on the unsecured part of the exposure (Loss Given Default, LGD). Due to the limited historical data for recovered amounts on defaulted exposures, the Group applies the Group benchmark for LGD according to the respective rating models.

Except for trading assets and derivatives (considered later), the Group’s maximum credit risk exposure is split as follows:

Loans and advances Loans and advances Investment securities Contingent to customers to banks (excluding equity liabilities investments) Raiffeisen BankRaiffeisen International As at 31 December 2015 2014 2015 2014 2015 2014 2015 2014

Carrying amount 3,555,359 3,612,111 782,718 393,936 706,658 834,574 - - Commitment 1,172,180 1,111,804 14,906 13,938 - - 262,002 313,511 Management report Segment reports Raiffeisen GroupRaiffeisen in Bulgaria auditors` report Independent Addresses 55

Credit risk exposures

Loans and Contingent Unutilized As at 31 December 2015 advances liabilities loan in BGN Thousand to customers commitments Individually impaired: Minimal risk - - - Very good credit standing - - - Good credit standing - - - Sound credit standing - - - Acceptable credit standing - - - Vision, mission and CSR Vision, Marginal credit standing 3 - - Weak credit standing / sub-standard 1 - - Very weak credit standing / doubtful 1 - - Default 269,561 12,546 - Unrated 16 - -

Retail 151,475 - - International Raiffeisen Bank Raiffeisen Bank Gross amount 421,057 12,546 -

Allowance for impairment (248,088) (1,247) -

Carrying amount 172,969 11,299 -

Including accounts with renegotiated terms 372,409 2,033 -

Collectively impaired subject to IBNR: Minimal risk - - -

Very good credit standing 960 4,441 - report Management Good credit standing 196,744 26,529 - Sound credit standing 443,612 38,797 - Acceptable credit standing 399,327 69,013 - Marginal credit standing 104,244 3,148 - Weak credit standing / sub-standard 16,113 273 - Very weak credit standing / doubtful 24,953 2,600 - Segment reports Segment Unrated 709 30 - Retail 1,682,124 5,553 -

Gross amount 2,868,786 150,384 -

Allowance for impairment (30,872) (274) -

Carrying amount 2,837,914 150,110 - in Bulgaria

Including accounts with renegotiated terms 935,845 102,270 - Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 56

Loans and Contingent Unutilized As at 31 December 2015 advances liabilities loan in BGN Thousand to customers commitments Past due, but not impaired: Vision, mission and CSR Good credit standing 247 - - Sound credit standing 370 - - Acceptable credit standing 1,354 - - Marginal credit standing 559 - - Weak credit standing / sub-standard 130 - - Very weak credit standing / doubtful 1,478 - - Retail 770 - -

Gross amount 4,908 - - Raiffeisen BankRaiffeisen

International Including accounts with renegotiated terms 4,239 - -

Past due comprises:

1-30 days 4,484 - - 30-60 days 303 - - 60-90 days 39 - - 90-180 days 68 - - Management report 180 days + 14 - -

Gross amount 4,908 - -

Including accounts with renegotiated terms 4,239 - -

Neither past due, nor impaired: Excellent credit standing 6 59 4,923 Very good credit standing 144,946 55,708 125,559 Segment reports Good credit standing 47,415 9,158 227,383 Sound credit standing 114,338 9,154 390,313 Acceptable credit standing 98,833 14,475 182,085 Marginal credit standing 38,719 3,268 37,684 Weak credit standing / sub-standard 9,778 768 3,327 Very weak credit standing / doubtful 20,045 175 4,733 Default - - 20 Raiffeisen GroupRaiffeisen Unrated 5 6 189 in Bulgaria Retail 65,483 250 195,964

Gross amount 539,568 93,021 1,172,180

Including accounts with renegotiated terms 227,206 55,150 -

Total portfolio 3,834,319 255,951 1,172,180

Allowance for impairment (278,960) (1,521) - auditors` report

Independent Carrying amount 3,555,359 254,430 1,172,180

Including accounts with renegotiated terms 1,539,458 159,453 - Addresses 57

Loans and Contingent Unutilized As at 31 December 2014 advances liabilities loan in BGN Thousand to customers commitments Individually impaired: Minimal risk - - - Very good credit standing - - - Good credit standing - - - Sound credit standing 1 - - Acceptable credit standing 3 - - Marginal credit standing 3 - -

Weak credit standing / sub-standard 4 - - mission and CSR Vision, Very weak credit standing / doubtful 2 - - Default 365,786 10,452 - Unrated 11 - - Retail 155,313 - - Gross amount 521,123 10,452 - International Raiffeisen Bank Raiffeisen Bank Allowance for impairment (289,159) (3,613) -

Carrying amount 231,964 6,839 -

Including accounts with renegotiated terms 443,202 2,847 -

Collectively impaired subject to IBNR: Minimal risk - - - Very good credit standing 5,753 13,870 - Good credit standing 144,065 10,413 - Management report Management Sound credit standing 415,141 112,371 - Acceptable credit standing 351,764 26,705 - Marginal credit standing 185,978 15,367 - Weak credit standing / sub-standard 24,395 1,378 - Very weak credit standing / doubtful 18,462 39 - Unrated 1,097 - -

Retail 1,665,005 122 - reports Segment Gross amount 2,811,660 180,265 -

Allowance for impairment (11,674) (187) -

Carrying amount 2,799,986 180,078 -

Including accounts with renegotiated terms 914,920 139,087 - in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 58

Loans and Contingent Unutilized As at 31 December 2014 advances liabilities loan in BGN Thousand to customers commitments Past due, but not impaired: Vision, mission and CSR Good credit standing - - - Sound credit standing - - - Acceptable credit standing - - - Marginal credit standing - - - Weak credit standing / sub-standard 400 - - Very weak credit standing / doubtful 3,194 147 - Default 13,464 874 - Unrated - - -

Raiffeisen BankRaiffeisen Retail 14,942 - - International Gross amount 32,001 1,021 -

Including accounts with renegotiated terms 26,017 1,021 -

Past due comprises: - 30-60 days 9,133 110 - 60-90 days 3,679 147 - Management report 90-180 days 2,208 - - 180 days + 16,981 764 -

Gross amount 32,001 1,021 -

Including accounts with renegotiated terms 26,017 1,021 -

Neither past due, nor impaired: Excellent credit standing - 141 5,137

Segment reports Very good credit standing 24,178 51,757 123,131 Good credit standing 48,744 8,898 179,607 Sound credit standing 158,192 21,142 354,386 Acceptable credit standing 122,059 15,854 180,965 Marginal credit standing 58,119 1,441 71,314 Weak credit standing / sub-standard 25,049 593 5,196 Very weak credit standing / doubtful 14,418 12,218 358

Raiffeisen GroupRaiffeisen Default 11,664 73 670 in Bulgaria Unrated 1,266 - 1,746 Retail 84,471 6,743 189,294

Gross amount 548,160 118,860 1,111,804

Including accounts with renegotiated terms 286,741 56,134

Total portfolio 3,912,944 310,598 1,111,804 auditors` report Allowance for impairment (300,833) (3,800) - Independent Carrying amount 3,612,111 306,798 1,111,804

Including accounts with renegotiated terms 1,670,880 199,089 - Addresses 59

TIndividually impaired

Individually impaired are those exposures with criteria for individual impairment as described above in the “Policy for risk exposures assessment and allocation of impairment allowances for credit risk”.

Collectively impaired

Collectively impaired exposures are those without indicatons for need of individual impairment.

Past due, but not impaired

Past due, but not impaired are past due exposure which are subject to collective impairment, however it is 0.

Due to a change in the assumptions used in the disclosures for 2015, 100 per cent impaired exposures with gross value mission and CSR Vision, BGN 23,103 thousand, which have been presented as past due, but not impaired in 2014, are presented as individually impaired in 2015.

Neither past due, nor impaired

Neither past due, nor impaired are exposures that are not past due and are subject to collective impairment, however it is 0. International

Risk Categories Raiffeisen Bank

Risk categories are defined according to the rating and the correspondent limits of the estimated probability of default in the corporate segments as follows:

Lower limit Upper limit Risk categories of probability of probability of default of default

Minimal risk >0.0000% ≤0.0300% Management report Management Excellent credit standing >0.0300% ≤0.0751% Very good credit standing >0.0751% ≤0.1878% Good credit standing >0.1878% ≤0.4694% Sound credit standing >0.4694% ≤1.1735% Acceptable credit standing >1.1735% ≤2.9338% Mrginal credit standing >2.9338% ≤7.3344%

Weak credit standing/ sub-standing >7.3344% ≤18.3360% reports Segment Very weak credit standing/ doubtful >18.3360% <100%

Default 100% n.a.

Renegotiated exposures

Renegotiated are all exposures in the corporate segment where there is an annex to the original credit agreement. In the retail in Bulgaria segment renegotiated are those exposures where there is a renegotioation of the repayment schedule without indications for Raiffeisen Group re-structuring.

Investment securities are treated as neither past due, nor impaired with good/very good credit standing. Independent Independent auditors` report auditors` Addresses Addresses 60

Set out below is an analysis of the gross and net (of allowances for impairment) amounts of individually impaired assets by risk grade:

in BGN Thousand Gross amount Net amount Vision, mission and CSR As at 31 December 2015 Minimal risk - - Very good credit standing - - Good credit standing - - Sound credit standing - - Acceptable credit standing - - Marginal credit standing 3 - Weak credit standing / sub-standard 1 -

Raiffeisen BankRaiffeisen Very weak credit standing / doubtful 1 - International Default 269,561 112,700 Unrated 16 - Retail 151,475 60,269 Total 421,057 172,969 Management report in BGN Thousand Gross amount Net amount

As at 31 December 2014 Minimal risk - - Very good credit standing - - Good credit standing - - Sound credit standing 1 -

Segment reports Acceptable credit standing 3 - Marginal credit standing 3 - Weak credit standing / sub-standard 4 - Very weak credit standing / doubtful 2 - Default 365,786 170,943 Unrated 11 - Retail 155,313 61,021

Raiffeisen GroupRaiffeisen Total 521,123 231,964 in Bulgaria

Upon initial recognition of loans and advances, the fair value of collateral is based on valuation techniques commonly used for the corresponding assets. In subsequent periods, the fair value is updated by reference to market price or indexes of similar assets where the update frequency depends on the asset type and the market conditions.

The table below stratifies credit exposures from mortgage loans and advances to retail customers by ranges of loan-to-value (LTV) ratio. LTV is calculated as the ratio of the gross amount of the loan to the value of the collateral. The gross amounts exclude any impairment allowances. The valuation of the collateral excludes any adjustments for obtaining and selling the auditors` report collateral. The value of the collateral for residential mortgage loans is based on the collateral value at origination updated Independent based on changes in house prices indices or individual review where applicable. Addresses 61

in BGN Thousand 2015 2014

Loan to value (LTV) ratio: Less than 50% 272,304 160,153 51% to 70% 10,140 190,869 71% to 90% 29,831 227,496 91% to 100% 29,947 58,572 More than 100% 398,894 133,895 Total 741,116 770,985

Concentration of risks of loans and advances by industry sector mission and CSR Vision,

The following table breaks down the Group’s main credit exposures at their gross carrying amounts, as categorized by the industry sectors:

in BGN Thousand 2015 % 2014 % Manufacturing 864,144 22% 925,260 24% International

Constructionand real estate 212,624 6% 275,002 7% Raiffeisen Bank Transport 86,499 2% 90,182 2% Trade 771,883 20% 815,635 21% Other 406,693 11% 323,019 8% Individuals 1,492,476 39% 1,483,846 38% hereof mortgages 741,116 19% 770,985 20% Total 3,834,319 3,912,944

Trading assets report Management

An analysis of the credit quality of the maximum credit exposure for trading assets, based on ratings assigned by rating agencies where applicable, is as follows:

in BGN Thousand 2015 2014 Bulgarian government securities

BB+/Ba1 54,292 80,935 reports Segment Bulgarian corporate bonds

BB+/Ba1 - 1,434 Unrated 820 3,948 Foreign government securities AAA/Aaa - 12,453 in Bulgaria

Total 55,112 98,770 Raiffeisen Group

B. Liquidity risk

Liquidity risk may be defined as the potential inability of the Group to fund the increases in assets or meet its payment obligations associated with its financial liabilities when they fall due, without incurring unacceptable losses.

With view of conducting effective management and control, the Group distinguishes two dimensions of the liquidity risk - Independent short-term liquidity risk and funding liquidity risk. report auditors`

Organizational structure for liquidity risk management

By virtue of the liquidity risk management framework, established on Group level, the Assets and Liabilities Committee (ALCO) shall oversee the Group’s liquidity position in light of the risk limits set in place and approve the Funding plans (an annual plan Addresses Addresses 62

for meeting the funding needs as well as a strategic plan for the next three calendar years). In addition, the Committee strives to ensure compliance with liquidity risk standards and policies, as well as with relevant legal and regulatory requirements.

Liquidity management process and strategy Vision, mission and CSR The Liquidity position of the Group is managed on day-to-day basis and the figures are being reported regularly at ALCO.

The Group’s liquidity management strategy revolves around the aim to timely deliver liquidity resources that are sufficient in amount, quality and structure for meeting obligations, when due, in both normal and stressed conditions without incurring unacceptable losses or risking damage to the Group’s reputation.

The Group does not maintain liquid assets for covering the total amount of all outflows, as historical experience has shown that part of the deposits would not be withdrawn but rolled over. In light of the above, cash inflows and outflows are analyzed under both “go ing concern” and “stress-test” scenarios, taking into consideration contractual features and behavioral peculiarities. Liquidity gaps are viewed under the perspective of different time horizons and currencies. If a liquidity gap reaches an unacceptable level, relevant escalation procedures are activated and countermeasures are put in place depending on the gap significance and time bucket. Raiffeisen BankRaiffeisen International The key elements of the Bank’s Liquidity Strategy are as follows:

–– Maintaining a diversified funding base with an adequate proportion of customer deposits (both retail and corporate) and wholesale funding;

–– Carrying a portfolio of liquid assets, diversified by currency and maturity;

Management report –– Applying an adequate system of tools for measuring and monitoring the Group’s liquidity situation with respect to the internally imposed limitations and regulatory requirements; monitoring of liquidity ratios, maturity mismatches, behavioral characteristics of the Bank’s financial assets and liabilities;

–– Dynamic process for carrying out stress tests of the Group’s liquidity position. The latter are subject to continuous redevelopment and improvement in line with the regulatory requirements on both local and European level. They are supplemented by a system of early warning indicators designed to timely identify the emergence of liquidity risk, as well as by action plans to be activated in case of a crisis situation;

–– Adequate reporting framework enabling a continuous evaluation of the liquidity profile and application of relevant corrective actions, if needed. Segment reports

Liquidity Stress Tests

The Group performs three types of stress tests with view of capturing its capacity to withstand negative circumstances: market specific, reputational and a combination of the two. The results are reviewed/analyzed on an on-going basis and also are reported to the Managing Board for further countermeasures, if needed.

The stress-testing framework involves monitoring of a system of limits imposed on the Group’s liquidity position. They designate a survival period of at least one month, the latter being translated by a requirement for positive liquidity mismatches

Raiffeisen GroupRaiffeisen over the first 30 days. The liquidity limits are defined on both total currency level as well as for each material currency (BGN, in Bulgaria EUR, USD and joint BGN/EUR basis). The stress test results over the first 30 days for BGN and USD have to be positive; the EUR result may be negative up to EUR -100 mn. but given that the joint BGN/EUR is positive.

In accordance with a recommendation issued by the European Central Bank (ECB) towards RBI Vienna, the 30-day focus would be extended over a 90-day horizon. The latter would capture the additional countermeasures on top of the CBC – potentially ones of the corrective actions stated in the Raiffeisenbank Recovery Plan.

Liquidity buffer auditors` report Independent The Group maintains a Liquidity Buffer composed of cash and core liquid assets to ensure, to the maximum extent possible, an extended survival period. Therefore the Group constantly strives for optimization of the Net liquid assets to the total Group’s liabilities ratio.

For this purpose net liquid assets are considered as including cash and cash equivalents, balances with the Bulgarian national bank, nostro accounts and placements with banks with a remaining maturity up to 7 days, tradeble debt securities, issued by central governments and central banks, treasury bills and bonds of the Government of Republic of Bulgaria, tradeble debt

Addresses securities, issued by institutions with first-class credit rating, tradable debt securities, issued by international development banks and international organizations. Liquid assets do not include pledged assets. The amount of the pledged assets as at 31 December 2015 and 31 December 2014 is BGN 304 mln and BGN 397 mln respectively. 63

The table below illustrates the ratio for the past two years.

Net liquid assets to total Group’s liabilities ratio

2015 2014 Average for the period 34.1% 29.9% Maximum for the period 35.8% 35.6% Minimum for the period 31.5% 24.9% As at 31 December 35.4% 35.6%

Monitoring and reporting take the form of cash flow measurement and projections for the next day, week and month respectively, as these are key periods for liquidity management. The starting point for those projections is an analysis of the

contractual maturity of the financial liabilities and the expected collection date of the financial assets. mission and CSR Vision,

Unmatched medium term assets, the level and type of undrawn lending commitments, the usage of overdraft facilities and the impact of contingent liabilities such as standby letters of credit and guarantees are also monitored and analyzed.

Funding approach

Sources of liquidity are regularly reviewed by Treasury/ALM Department to maintain a wide diversification by currency, International

geography, provider, product type and term. Raiffeisen Bank

The diversification of wholesale funding is controlled/limited by a special Group-wide concept named “Counterparty Funding Concentration Risk”. It impacts the Stress Test results and de-incentives the attraction of significant funding from single counterparty.

Early warning system

The Group periodically monitors certain liquidity ratios considered to be representative when first signals of liquidity deficiencies occur. The ratios observed cover the following areas - quality of receivables, liabilities dependability, liquid assets tradability, market environment and other qualitative and quantitative ratios. Management report Management Cash flows from non-derivative liabilities

The maturity of non-derivative liabilities is expressed as the cash flows payable by the Group under financial liabilities by remaining contractual maturities at the reporting date. The amounts disclosed in the table are the contractual undiscounted cash flows, whereas the Group manages the inherent liquidity risk based on expected undiscounted cash inflows.

Cash flows from derivative liabilities Segment reports Segment The Group’s derivatives will be settled on a gross basis and include:

–– Foreign exchange derivatives – currency forwards, currency swaps;

–– Interest rate derivatives – single currency interest rate swaps, cross currency interest rate swaps.

The tables below set out the remaining contractual maturities of the Gropus’s financial liabilities: in Bulgaria Raiffeisen Group As at 31 December 2015 Less than 1-3 3 months 1-5 years More than Total inflow/ Carrying In BGN Thousand 1 month months to 1 year 5 years outflow amount

Non derivative liabilities

Deposits from banks (50,519) - - - - (50,519) 50,519 Deposits from customers (3,694,652) (515,523) (521,939) (21,946) - (4,754,060) 4,752,846 Borrowings from banks (3,714) (12,080) (50,112) (188,873) (48,357) (303,136) 298,181 Independent Independent Subordinated liabilities (2,159) (944) (9,253) (49,323) (395,331) (457,010) 365,457 report auditors` Other liabilities (13,110) (25,547) (15,000) (19,289) (1,339) (74,285) 74,285 Loan commitments (23,056) (64,032) (456,566) (439,058) (204,374) (1,187,086)

Total non-derivative instruments (3,787,210) (618,126) (1,052,870) (718,489) (649,401) (6,826,096) 5,541,288 Addresses Addresses 64

As at 31 December 2015 Less than 1-3 3 months 1-5 years More than Total inflow/ Carrying In BGN Thousand 1 month months to 1 year 5 years outflow amount

Derivative liabilities Vision, mission and CSR - Foreign exchange derivatives 2,413 - Outflow (8,210) (28,418) (51,038) - - (87,666) - Inflow 7,997 27,730 49,262 - - 84,989 - Interest rate derivatives 186 - Outflow (20) (40) (181) (925) (1,166) - Inflow 19 38 170 882 1,109

Total derivative liabilities (214) (690) (1,787) (43) - (2,734) 2,599 Raiffeisen BankRaiffeisen International As at 31 December 2014 Less than 1-3 3 months 1-5 years More than Total inflow/ Carrying in BGN Thousand 1 month months to 1 year 5 years outflow amount

Non derivative liabilities

Deposits from banks (51,446) - - - - (51,446) 51,446 Deposits from customers (2,963,594) (633,148) (570,816) (75,041) (4,242,599) 4,229,954 Borrowings from banks (107) (8,610) (39,488) (215,736) (87,431) (351,372) 342,285 Management report Subordinated liabilities (2,270) (946) (9,640) (51,458) (406,075) (470,389) 365,532 Other liabilities (8,327) (28,844) (25,643) (10,054) (897) (73,765) 73,765 Loan commitments (40,202) (41,167) (433,623) (445,720) (165,030) (1,125,742)

Total non-derivative instruments (3,065,946) (712,715) (1,079,210) (798,009) (659,433) (6,315,313) 5,062,982

Derivative liabilities

Segment reports - Foreign exchange derivatives 3,801 - Outflow (180,696) (15,325) (13,264) - - (209,285) - Inflow 178,438 14,614 12,390 - - 205,442 -- Interest rate derivatives 127 - Outflow (2) (5) (241) (115) (611) (974) - Inflow 187 375 1,906 8,992 9,119 20,579

Total derivative liabilities (2,073) (341) 791 8,877 8,508 15,762 3,928 Raiffeisen GroupRaiffeisen in Bulgaria The next table illustrates the carrying amounts of the financial assets and financial liabilities that are expected to be received or paid after more than 12 months.

in BGN Thousand 2015 2014

Financial assets

Loans and advances to customers 2,252,701 2,381,381

auditors` report Investment securities 649,293 630,182 Independent Financial liabilities Deposits from customers 25,229 74,431 Borrowings from banks 239,687 297,229 Subordinated liabilities 365,457 365,532 Addresses 65

In the table below is presented the analysis of the financial assets comprising the liquidity reserve that is available to the Group in order to cover outgoing cash-flows on its financial liabilities in case of liquidity crisis:

in BGN Thousand 2015 2014

Liquid assets Cash and balances with the Central bank 1,275,552 928,947 Government treasury bills and investment grade debt securities 426,626 529,844 Nostro accounts and placements with banks with a remaining maturity up to 7 days 240,157 324,661 Total liquid assets 1,942,335 1,783,452

C. Market risk mission and CSR Vision,

In general market risk is the risk from experiencing loss due to unexpected changes in the market factors (interest rates, foreign currency rates, prices etc.) which are influencing in a negative way the value of the assets and/or the entire portfolio.

The Group takes on exposure to market risks, which is the risk that the fair value or future cash flows of a financial instrument or the bank’s assets in the portfolio will fluctuate because of changes in market prices. Market risks arise from open positions in interest rate, currency and equity products, all of which are exposed to unexpected and unfavorable market movements International and volatility changes of the market factors (interest rates, credit spreads, foreign exchange rates, etc.) and changes in indices Raiffeisen Bank and equity prices. The Group separates exposures to market risk into either trading or non-trading portfolios.

All marked-to-market instruments are recognized at fair value in the statement of financial position based on quoted bid prices, and all changes in market conditions directly affect net trading income (through trading instruments) or equity value (through available for sale instruments).

The Group manages its trading portfolios in accordance with the changes in market conditions, as well as through setting by the management of respective limits for the relative instruments.

Management of Market risk Management report Management

Exposure to market risk is formally managed in accordance with risk limits set by senior management for buying or selling of financial instruments.

Overall authority for market risk is vested in ALCO. Market Risk Management responsible departments on Bank and Group Level are developing detailed risk management policies (subject to review and approval by ALCO) and for the day-to-day review of their implementation.

The table below sets out the allocation of assets and liabilities subject to market risk between trading and non-trading reports Segment portfolios.

As at 31 December 2015 Non-trading in BGN Thousand Carrying amount Trading portfolios portfolios

Assets subject to market risk Cash and balances with the Central bank 1,275,552 - 1,275,552 in Bulgaria Raiffeisen Group Trading assets 55,112 55,112 - Derivatives 2,747 2,747 - Loans and advances to banks 782,718 - 782,718 Loans and advances to customers 3,555,359 - 3,555,359 Investment securities 718,844 - 718,844 Independent Independent auditors` report auditors` Addresses Addresses 66

As at 31 December 2015 Non-trading in BGN Thousand Carrying amount Trading portfolios portfolios

Liabilities subject to market risk Vision, mission and CSR Derivatives 2,599 2,599 - Deposits from banks 50,519 - 50,519 Deposits from customers 4,752,846 - 4,752,846 Borrowings from banks 298,181 - 298,181 Subordinated liabilities 365,457 - 365,457

As at 31 December 2014 Non-trading in BGN Thousand Carrying amount Trading portfolios portfolios Raiffeisen BankRaiffeisen

International Assets subject to market risk Cash and balances with the Central bank 928,947 - 928,947 Trading assets 98,770 98,770 - Derivatives 3,737 3,737 - Loans and advances to banks 393,936 - 393,936 Loans and advances to customers 3,612,111 - 3,612,111 Management report Investment securities 836,861 - 836,861 Liabilities subject to market risk Derivatives 3,928 3,928 - Deposits from banks 51,446 - 51,446 Deposits from customers 4,229,954 - 4,229,954 Borrowings from banks 342,285 - 342,285 Subordinated liabilities 365,532 - 365,532 Segment reports

Market risk measurement techniques

Market risk is the risk from experiencing loss or negative effect that unexpected and unfavorable changes in market prices, such as interest rates, equity prices, foreign exchange rates and credit spreads (not relating to changes in the obligor’s/ issuer’s credit standing) will affect the Group’s income or the value of its holdings of financial instruments. The objective of the Group’s market risk management is to manage and control market risk exposures within acceptable parameters in connection with the risk appetite and the entire Group’s strategy. Raiffeisen GroupRaiffeisen

in Bulgaria Value at risk

The Group applies a “value at risk” methodology (VAR) to its trading and non-trading portfolios to estimate the market risk of positions held and the potential losses expected, through appropriate analytical method, supported by empirical conditions and documented analyses. This method is applied consecutively and with a certain level of conservatism, which is usually

higher if there is only limited data available.

The Group uses VaR Limits for market risk on both total and split by the following risk factors levels: foreign exchange (FX), interest rate risk (IR), basis risk (Bs) and spread risk (SP). The overall structure of VaR Limits is subject to review and approval auditors` report

Independent by ALCO. VaR Limits are allocated to both trading and non-trading portfolios but also on total Bank level as well.

VAR is a statistically based estimate of the potential loss on the current portfolio from adverse market movements. It expresses the maximum amount the Group might lose, but only to a certain level of confidence (99 per cent). There is therefore a specified statistical probability (1 per cent) that actual loss could be greater that the VAR estimate. The VAR model assumes a certain “holding period” until positions can be closed (1 day). It also assumes that market moves occurring over this holding period will follow a similar pattern to those that have occurred in the past. The VAR approach used in the Group since the beginning of 2010 is a hybrid one, i.e. both aspects of historical simulation and of a parametric approach are combined

Addresses and extreme events resulting from a period of stressed risk factors are added.

Volatility regimes are taken into consideration via rescaling of historic returns (used volatility is a weighted average of 80 per cent of the recent 20 business days and 20 per cent of the past two years) giving significant stress on the recent market conditions. 67

Actual outcomes are monitored regularly to test the validity of the assumptions and parameters/factors used in the VAR calculation.

The use of this approach does not prevent losses outside of these limits, but to a certain extent the application of the hybrid model takes into consideration extreme events of significant market movements.

The quality of the VAR model is continuously monitored by back-testing the VAR results on the trading portfolio of the Group. All back-testing exceptions and any exceptional revenues on the profit side of the VAR distribution are investigated, and all back-testing results are reported to the Management board.

VAR summary

in BGN Thousand (1d, 99 %) As at 31 December 2015 As at 31 December 2014 Vision, mission and CSR Vision, Trading portfolio VAR Diversified 116 247 Hereof interest rate risk 113 96 Hereof spread risk 62 212

Non-trading portfolio VAR

Diversified 955 2,726 International Raiffeisen Bank Raiffeisen Bank Hereof interest rate risk 882 1,793 Hereof spread risk 935 2,223

Total VaR Diversified 987 2,834 Hereof interest rate risk 847 1,744 Hereof spread risk 966 2,437

VaR development during 2015 by risk type Management report Management

in BGN Thousand (1d, 99 %) Average Maximum Minimum Trading portfolio VAR Diversified 193 1,244 48 Hereof interest rate risk 131 445 1 Hereof spread risk 47 223 1

Non-trading portfolio VAR reports Segment Diversified 1,595 2,565 916

Hereof interest rate risk 1,349 2,487 710 Hereof spread risk 789 2,471 181

Total VaR Diversified 1,637 2,685 930

Hereof interest rate risk 1,365 2,593 705 in Bulgaria

Hereof spread risk 818 2,697 202 Raiffeisen Group

The limitations of the VaR methodology are recognized by supplementing VaR Limits with other position and sensitivity limit structures. In addition the Group uses a wide range of stress tests to model the financial impact of a variety of market scenarios on the trading and non-trading portfolios. The output of the respective simulations and their impact on Group level are reported regularly at ALCO meetings.

Stress tests Independent Independent Stress tests provide an indication of the potential size of losses that could arise in extreme conditions. The stress tests include report auditors` risk factor stress testing, where the worst case scenario stress movements are applied to each risk category; emerging market stress testing, where emerging market portfolios are subject to stress movements; and ad hoc stress testing, which includes applying possible stress events to specific position or regions.

The results of the stress tests are presented and reviewed on ALCO meetings by the Management Board on an on-going basis.

The stress testing is tailored to the business and typically uses scenario analysis. Addresses 68

Interest rate risk

Interest rate risk is the probable negative influence of the market interest rates on the net interest income, which forms main part of the Group’s financial result. Vision, mission and CSR In comparison to the other risks the interest rate risk could be minimized trough the mutual management of assets and liabilities.

The policy of the Group to minimize interest rate risk is to grant floating rate loans against the received floating rate external financings. Interest rate risk is also managed through the balanced use of different funding sources (borrowings from other local banks, long-term borrowings from foreign banks, customer deposits etc.), as well as through purposeful credit policy, providing for increasing return.

In the current low and negative interest rates’ market environment the Group continues its policy for optimization and willingness to minimize its interest rate risk by introducing possible strategies which will allow it to grant loans with fixed interest rate for a mid-term period having in mind the expectations for keeping the low interest rate market environment in Europe within this period. Raiffeisen BankRaiffeisen International It is of crucial importance for the Management of the Group to control the interest rate sensitivity of assets and liabilities. Due to the nature of banking an absolute matching in maturities or in periods of re-pricing of contracted interests on financial assets and liabilities is not possible.

The Group’s interest rate exposures are monitored and managed by generating interest rate sensitivity reports. The majority of the Group 's interest bearing assets and liabilities are structured to match either short-term assets and short-term liabilities, or long-term assets and liabilities with re-pricing opportunities within one year, or long-term assets and corresponding liabilities

Management report whereby re-pricing is performed simultaneously.

For most interest-bearing assets and liabilities exists a possibility of re-pricing at a relatively short notice and any interest rate sensitivity gaps are considered immaterial.

The following table indicates the periods in which interest bearing financial assets and liabilities re-price as at 31 December 2015.

Up to 3 months From 3 From 1 More than Total in BGN Thousand months to year to 5 years Segment reports As at 31 December 2015 1 year 5 years Assets Loans and advances to banks 606,280 176,438 - - 782,718 Loans and advances to customers 3,086,759 315,482 108,606 44,512 3,555,359 Investment securities 47,430 9,936 558,566 90,726 706,658 Total assets 3,740,469 501,856 667,172 135,238 5,044,735

Raiffeisen GroupRaiffeisen Liabilities in Bulgaria Deposits from banks 50,519 - - - 50,519 Deposits from customers 4,245,400 505,116 2,330 - 4,752,846 Borrowings from banks 101,873 173,503 - 22,805 298,181 Subordinated liabilities 365,457 - - - 365,457

Total liabilities 4,763,249 678,619 2,330 22,805 5,467,003 Net position (1,022,780) (176,763) 664,842 112,433 (422,268) auditors` report Independent Addresses 69

The following table indicates the periods in which interest bearing financial assets and liabilities re-price as at 31 December 2014.

Up to 3 months From 3 From 1 More than Total in BGN Thousand months to year to 5 years As at 31 December 2014 1 year 5 years Assets Loans and advances to banks 389,870 4,066 - - 393,936 Loans and advances to customers 3,160,167 291,471 124,215 36,258 3,612,111 Investment securities 135,797 89,192 535,146 74,439 834,574

Total assets 3,685,834 384,729 659,361 110,697 4,840,621

Liabilities mission and CSR Vision, Deposits from banks 51,446 - - - 51,446 Deposits from customers 3,659,201 535,830 34,923 - 4,229,954 Borrowings from banks 148,604 174,113 - 19,568 342,285 Subordinated liabilities 365,532 - - - 365,532

Total liabilities 4,224,783 709,943 34,923 19,568 4,989,217 International Raiffeisen Bank Raiffeisen Bank Net position (538,949) (325,214) 624,438 91,129 (148,596)

The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group’s financial assets and liabilities to various standard and non-standard interest rate scenarios. Standard scenarios that are considered on a monthly basis include a 100 basis point (bp) parallel fall or rise in all yield curves worldwide and a 50 bp rise or fall in the greater than 12-month portion of all yield curves. This analysis is presented in the table below for the year 2015, respectively 2014.

Sensitivity of the expected net interest income (Banking book). Management report Management plus 100 bp minus 100 bp plus 50 bp minus 50 bp 2015 parallel parallel parallel parallel in BGN Thousand increase decrease increase decrease after 1 year after 1 year as at 31 December (33,271) 33,271 (13,892) 13,892 Average for the period (30,661) 30,661 (12,661) 12,661 Maximum for the period (33,793) 33,793 (14,180) 14,180

Minimum for the period (24,511) 24,511 (9,474) 9,474 reports Segment

plus 100 bp minus 100 bp plus 50 bp minus 50 bp 2014 parallel parallel parallel parallel in BGN Thousand increase decrease increase decrease after 1 year after 1 year as at 31 December (33,160) 33,160 (13,582) 13,582 in Bulgaria Average for the period (27,266) 27,266 (10,370) 10,370 Raiffeisen Group Maximum for the period (33,160) 33,160 (7,561) 7,561 Minimum for the period (22,323) 22,323 (13,582) 13,582

Early warning limits

To support the operative steering of risk-based limits and structural limits, different boundary values for the limit utilization are defined. Such “early warning limits” serve as a warning signal when risk exposures approach the limit in certain business Independent Independent

areas or risk types (usually 70 per cent of the limit) and giving signal to the management of the Group for the situation and report auditors` discussion of the possible decisions aiming at preventing and/or mitigating the negative effect in order to prevent stop loss limit breach. A violation of these early warning limits leads to intensified monitoring and closer supervision of the respective exposure. Hence these limits are not considered as a separate and independent type of limit but rather serve the purpose of supporting operative approved limits management. Addresses Addresses 70

Stop-loss limits

All Risks (including interest rate risk) are limited effectively through stop loss processes which lead to an automatic reduction in exposure if the portfolio loss exceeds a predefined amount. Such a stop loss limit figuratively truncates the loss distribution at the stop loss level (plus a loss amount for transaction costs for closing open positions). Stop loss limits typically are used Vision, mission and CSR in trading book operations but can be employed for banking book positions as well if a fairly liquid market for these assets exists or if hedging instruments are available.

The potential loss will not materialize with its whole amount, as stop loss limits are effectively in place.

The Group applies a High Watermark YTD S/L limit with immediate effect has been introduced, which locks the negative effect out of the trading and the daily Mark-to-Market revaluation in certain amount from the highest achieved YTD result for the Trading Portfolio.

Currency risk

Raiffeisen BankRaiffeisen The Group is exposed to currency risk through transactions in foreign currencies. The Group operates in the main currencies: International US dollars, Euro, GB pounds, Swiss francs and others. As a result of the currency Board in place in Bulgaria, the Bulgarian currency (BGN) is pegged to the Euro, therefore currency risk arises mainly from exchange rate Euro/US dollar fluctuations. The Group is not exposed to substantial currency risk due to the fact that it monitors and maintains the proportion between amounts and terms of its US dollar assets and liabilities.

The Group’s transactional exposures give rise to foreign currency gains and losses that are recognized in profit or loss. These exposures comprise the monetary assets and monetary liabilities of the Group that are not denominated in Bulgarian leva. Management report Foreign currency position as at 31 December 2015:

In BGN € Other foreign Total in BGN Thousand currency

Assets Cash and balances with the Central bank 1,192,511 70,973 12,068 1,275,552 Trading assets 25,721 29,391 55,112 Segment reports Derivatives 222 2,525 2,747 Loans and advances to banks 10,477 440,984 331,257 782,718 Loans and advances to customers 1,717,486 1,791,052 46,821 3,555,359 Investment securities 334,181 384,663 718,844

Other assets 4,086 1,368 31 5,485

Total assets 3,284,462 2,718,653 392,702 6,395,817

Raiffeisen GroupRaiffeisen Liabilities in Bulgaria Derivatives - 2,568 31 2,599 Deposits from banks 42,957 2,447 5,115 50,519 Deposits from customers 2,608,459 1,732,166 412,221 4,752,846

Borrwings from banks - 298,181 - 298,181 Subordinated liabilities - 365,457 - 365,457 Other liabilities 1,403 16,980 3,221 21,604 auditors` report

Independent Total liabilities 2,652,819 2,417,799 420,588 5,491,206

Net position 631,643 300,854 (27,886) 905,611 Addresses 71

Foreign currency position as at 31 December 2014:

In BGN € Other foreign Total in BGN Thousand currency

Assets

Cash and balances with the Central bank 891,148 25,408 12,391 928,947 Trading assets 39,964 56,298 2,508 98,770 Derivatives - 17 3,720 3,737 Loans and advances to banks 24,935 204,103 164,898 393,936 Loans and advances to customers 1,495,654 2,062,408 54,049 3,612,111

Receivables under repurchased agreements 46,391 - - 46,391 mission and CSR Vision, Investment securities 211,220 506,722 118,919 836,861 Other assets 3,992 4,322 53 8,367

Total assets 2,713,304 2,859,278 356,538 5,929,120

Liabilities

Derivatives - 3,787 141 3,928 International Raiffeisen Bank Raiffeisen Bank Deposits from banks 45,461 1,241 4,744 51,446 Deposits from customers 2,226,874 1,661,901 341,179 4,229,954 Borrwings from banks - 342,285 - 342,285 Subordinated liabilities - 365,532 - 365,532 Other liabilities 655 15,636 6,924 23,215

Total liabilities 2,272,990 2,390,382 352,988 5,016,360

Net position 440,314 468,896 3,550 912,760 Management report Management

D. Capital management

The Group’s objective when managing capital, which is broader concept than the equity on the face of the statement of financial position are:

–– To comply with the capital requirements set by the local banking regulator;

–– To safeguard the Group’s ability to continue as a going concern so that it can continue to provide returns for reports Segment shareholders;

–– To maintain a strong capital base to support the development of Group’s business.

The Bulgarian central bank is the competent authority in the Republic of Bulgaria that is exercising prudential supervision over credit institutions according to Regulation (ЕС) № 575/2013 of the European parliament and of the Council on prudential requirements for credit institutions and investment firms (Basel III), effective from 01 January 2014. in Bulgaria Raiffeisen Group Following the requirements on capital buffers according to Directive 2013/36/ЕС (CRD IV), the management board of the Bulgarian national bank adopted a capital conservation buffer and a systemic risk buffer to be maintained by all local banks as a percentage of their risk weighted assets, as laid down in Ordinance № 8 of the Bulgarian national bank from 24 April 2014 regarding Banks’ capital buffers.

Capital conservation buffer

• Purpose of the buffer – the establishment of a capital conservation buffer is aiming at avoiding future situations, Independent Independent

in which failed banks will need government support, i.e. taxpayers’ money. This buffer shall provide additional report auditors` funds in case of recovery and resolution of credit institutions in crisis conditions;

• Level of the buffer – credit institutions shall maintain a capital conservation buffer from their common equity Tier I capital at the amount of 2.5 per cent of their total risk exposure amount;

• Entry into force – the capital conservation buffer shall be effective with the entry into force of Ordinance №8 from

24 April 2014 of the Bulgarian central bank on the capital buffers of credit institutions. Addresses 72

Systemic risk buffer

• Purpose of the buffer – preservation of the year to date accumulated capital reserves in the Bulgarian banking system, as well as to prevent and mitigate the effect of lon-term non-cyclical systemic or macroprudential risks, which could cause disruption in the financial system and serious negative consequences to it; Vision, mission and CSR

• Level of the buffer –the buffer shall be at the amount of 3 per cent from the total risk exposure amount of exposures in the Republic of Bulgaria, and in the exercise of the supervisory judgment by the BNB, it shall apply to expo¬sures in third countries;

• Entry into force – the systemic risk buffer shall be effective as of 31 December 2014 and shall apply to all Bulgarian credit institutions.

Basel III introduces the requirement of total capital ratio, core equity tier I capital ratio and tier I capital ratio, as well as the capital requirements for credit, market and operational risks. It defines the minimum required amount, the elements and the structure of own funds of credit institutions and the minimum capital requirements for the risks they undertake.

Raiffeisen BankRaiffeisen The capital ratios as percentage of the total risk exposures of credit institutions are defined as follows: International

• Core equity tier I ratio – 4.5 per cent;

• Tier I ratio – 6 per cent and

• Total capital ratio – 8 per cent

The capital adequacy and the adherence to the regulatory capital requirements are monitored by the Bank’s management. Management report

The Group’s regulatory capital consists of:

–– Core tier I capital – ordinary share capital and retained earnings (incl. statutory reserve fund)

–– Tier II capital – qualified subordinated debt

The following items are deducted from the capital:

–– Accumulated other comprehensive income Segment reports

–– Intangible assets

–– IRB shortfall of credit risk adjustments to expected losses

As at 31 December 2015 the Capital base of the Group comprises as follows (unaudited):

in BGN Thousand

Raiffeisen GroupRaiffeisen Common equity Tier I items: in Bulgaria - Paid in capital instruments 603,448 - Retained earnings 253,492 - Total deductions from Tier I (26,921)

Tier II capital: - Subordinated debt eligible for Tier II capital 363,002 - Total deductions from Tier II (3,877) auditors` report

Independent TOTAL OWN FUNDS 1,189,144

In compliance with Basel III requirements the Bank is calculating its total risk exposure as a sum of:

–– the risk weighted exposure amounts for credit, counterparty credit and dilution risks for its total exposures excluding the risk weighted exposures from its trading portfolios;

–– the capital requirement for position, foreign exchange and commodities risk, multiplied by 12.5; Addresses

–– the capital requirement for operational risk, multiplied by 12.5; 73

–– the amount of capital requirement in respect of the risk associated with credit valuation adjustment for OTC derivative instruments other than credit derivatives recognized to reduce risk-weighted exposure amounts for credit risk, multiplied by 12.5.

Effectively as at 1 November 2014 the Raiffeisenbank (Bulgaria) EAD has been granted the official permission to apply IRB model in managing and measuring credit risk, according to the requirements of the most contemporary banking regulations, namely the Regulation (ЕС) № 575/2013 of the European parliament and of the Council.

The Group applies the Standardized Approach (TSA) for calculating Operational Risk regulatory capital requirements.

During the financial year the Bank complied with all requirements of regulatory capital and capital buffers and maintained its capital ratios above the required regulatory minimum.

The table below illustrates the Bank’s total risk exposure and capital ratios as at 31 December 2015 (unaudited). Vision, mission and CSR Vision,

in BGN Thousand

TOTAL RISK EXPOSURE AMOUNT 3,233,231

RISK WEIGHTED EXPOSURE AMOUNTS FOR CREDIT, COUNTERPARTY CREDIT AND DILUTION RISKS AND FREE DELIVERIES 2,741,475

Standardised approach 63,180 International Raiffeisen Bank Raiffeisen Bank SA exposure classes excluding securitisation positions 63,180 Corporates 3,285 Retail 12,131 Secured by mortgages on immovable property 828 Exposures in default 559 Other items 46,377

Internal ratings based Approach (IRB) 2,678,295

IRB approaches when neither own estimates of LGD nor Conversion Factors are used 1,770,396 report Management Institutions 383,438 Corporates - SME 809,844 Corporates - Specialised Lending 29,735 Corporates - Other 547,379 IRB approaches when own estimates of LGD and/or Conversion Factors are used 886,660

Retail - Secured by real estate SME 131,331 reports Segment Retail - Secured by real estate non-SME 279,391

Retail - Qualifying revolving 43,013 Retail - Other SME 60,061 Retail - Other non-SME 372,864 Equity IRB 21,239 in Bulgaria

TOTAL RISK EXPOSURE AMOUNT FOR POSITION, FOREIGN Raiffeisen Group EXCHANGE AND COMMODITIES RISKS 16,750 Risk exposure amount for position, foreign exchange and commodities risks under standardised approaches (SA) 16,750 Traded debt instruments 16,750 Independent Independent auditors` report auditors` Addresses Addresses 74

in BGN Thousand TOTAL RISK EXPOSURE AMOUNT FOR OPERATIONAL RISK (OpR ) 474,943 OpR Standardised (STA) / Alternative Standardised (ASA) approaches 474,943 Vision, mission and CSR TOTAL RISK EXPOSURE AMOUNT FOR CREDIT VALUATION ADJUSTMENT 63 Standardised approach 63

CET1 Capital ratio 25.67%

Surplus(+)/Deficit(-) of CET1 capital 684,524

T1 Capital ratio 25.67%

Surplus(+)/Deficit(-) of T1 capital 636,025

Total capital ratio 36.78%

Raiffeisen BankRaiffeisen Surplus(+)/Deficit(-) of total capital 930,486 International

4. Use of Estimates and Judgements

The preparation of these separate financial statements requires management to exercise its judgment in the process of applying the Bank’s accounting policies and the reported value of assets, liabilities, income and expense. Actual results may

Management report differ from these estimates and judgments.

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 and in any future periods affected.

Impairment of financial assets

Financial assets accounted for at amortised cost are evaluated for impairment on a basis described in the accounting policy. At each reporting date financial assets are reviewed for the presence of indications of impairment. Segment reports The specific counterparty component of the total allowances for impairment applies to financial assets evaluated individually for impairment and is based upon management’s best estimate of the present value of the cash flows that are expected to be received. In estimating these cash flows, management makes judgments about the counterparty’s financial situation and the net realizable value of any underlying collateral. Financial assets carried at amortized cost, are presented in the statement of financial position net of allowances for impairment losses.

Collectively assessed impairment allowances cover credit losses inherent in portfolios of loans and advances with similar credit risk characteristics when there is objective evidence to suggest that they contain impaired loans and advances, but the individually impaired items cannot yet be identified. The Bank’s policy for allocation of collective allowances for impairment

Raiffeisen GroupRaiffeisen losses determines the principles for reducing the statement of financial position amount of a portfolio of loans with similar in Bulgaria credit risk characteristics to their recoverable amount as at the reporting date. In assessing the need for collective loss allowances, management considers factors such as credit quality, portfolio size, concentrations and economic factors. In order to estimate the required allowance, assumptions are made to define the way inherent losses are modeled and to determine the required input parameters, based on historical experience and current economic conditions.

The accuracy of the allowances depends on the estimates of future cash flows for specific counterparty allowances and the model assumptions and parameters used in determining collective allowances.

auditors` report In December 2015 Raiffeisenbank (Bulgaria) EAD has introduced internal-rating based model in the calculation of allowance

Independent for impairment losses for loans to private individuals and micro entities. Estimates of specific parametres (Historic Default Rate, Loss Given Default and Credit Conversion Factor) are subject to annual recalculation, following the established internal processes of the Bank for internal-rating models. With this change being in default is the main criteria for the calculation of impairment allowance on collective and individual level.

Determining fair values

Addresses Valuation of financial instruments

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Group discloses information on the fair values of those financial assets 75

and financial liabilities, for which there is available market information and the fair value of which significantly differs from their carrying amount.

If there is no active market for a certain financial instrument, then the Group determines fair values by using valuation techniques. The valuation techniques consider recent direct deals between knowledgeable, willing market participants (if such exist), information about current fair values of similar financial instruments, analysis of discounted cash flows, as well as models with option prices. The chosen valuation technique maximises the use of observable market data, relies as less as possible on specific for the Group valuations, includes factors that market participants would take into account when determining the price. The valuation technique is compatible with the accepted methodology for pricing of financial instruments. The information used by the valuation technique adequately represents the market expectations and valuations of the risk factors and the yield inherent for the financial instrument. The Group verifies the valuation techniques and tests their validity by using prices from observable current market transactions with the same financial instrument or based on other observable market data.

The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price – i.e. the mission and CSR Vision, fair value of the consideration given or received, except for transactions, where the fair value of the financial instrument is evident from the comparison with other similar observable market transactions with the same financial instrument, or could be based on valuation techniques that uses only data from observable markets. When the transaction price is the best evidence of the fair value of the financial instrument at initial recognition, then the financial instrument is initially recognised at its transaction price and each difference between that price and the value derived from a valuation technique is recognised subsequently in profit or loss on an appropriate basis over the life of the instrument but not later than when the valuation is wholly supported by observable market data or the transaction is closed out. International Raiffeisen Bank Raiffeisen Bank Assets and long positions are measured at a bid price and liabilities and short positions at an ask price. Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group 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 Bank believes that a third party market participant would take them into account in pricing a transaction.

The Group measures fair values using the following fair value hierarchy, which reflects the significance of the inputs used in making the measurement:

• Level 1: inputs that are quoted market price (unadjusted) in active markets for identical financial instruments. Management report Management • Level 2: inputs other than quoted prices included within Level 1 that are observable 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 in which all significant inputs are directly or indirectly observable from market data.

• Level 3: inputs that are unobservable. This category includes all instruments for which the valuation technique includes inputs not based on observable data and the unobservable inputs have a significant effect on the instrument’s valuation. This category includes instruments that are valued based on quoted prices for similar instruments for which significant unobservable adjustments or assumptions are required to reflect differences reports Segment between the instruments.

The Group uses widely recognized valuation models for determining the fair value of common and simpler financial instruments, like interest rate and currency swaps that use only observable market data. For these financial instruments market conditions enable the use of valuation models.

For more complex instruments, the Bank uses proprietary valuation models, which usually are developed from recognized in Bulgaria valuation models. Some or all of the significant inputs into these models may not be observable in the market, and are derived Raiffeisen Group from market prices or rates or are estimated based on assumptions. When entering into a transaction, the financial instrument is recognized initially at the transaction price, which is the best indicator of fair value, although the value obtained from the valuation model may differ from the transaction price. This initial difference, usually an increase, in fair value indicated by valuation techniques is recognized in profit or loss depending upon the individual facts and circumstances of each transaction and not later than when the market data becomes observable.

The value produced by a model or other valuation technique is adjusted to allow for a number of factors as appropriate, because valuation techniques cannot appropriately reflect all factors market participants take into account when entering into a transaction. Valuation adjustments are recorded to allow for model risks, bid-ask spreads, liquidity risks, as well as Independent other factors. Management believes that these valuation adjustments are necessary and appropriate to fairly state financial report auditors` instruments carried at fair value on the Bank’s statement of financial position, so that they are as close as possible to a market price, which would be determined on an arms length principle between not related parties.

The determination of fair values is monitored by the Group’s “Risk controlling Division” and is independent of trading and investment operations. Specific controls include: verification of observable pricing inputs and re-performance of model

valuations; a review and approval process for new models and changes to models. Addresses 76

The tables below analyse financial instruments measured at fair value by the level in the fair value hierarchy into which the fair value measurement is categorised:

31 December 2015 in BGN Thousand Level 1 Level 2 Level 3 Total Vision, mission and CSR

Assets

Trading assets 54,292 820 - 55,112 Derivatives - 2,747 - 2,747 Investment securities 175,675 13,073 2,215 190,963 Liabilities Derivatives - 2,599 - 2,599

31 December 2014

Raiffeisen BankRaiffeisen in BGN Thousand Level 1 Level 2 Level 3 Total International

Assets Trading assets 93,388 5,382 - 98,770 Derivatives - 3,737 - 3,737 Investment securities 249,270 20,597 2,215 272,082 Liabilities Management report Derivatives - 3,928 - 3,928

The following tables set out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorized:

31 December 2015 Level 1 Level 2 Level 3 Total Total in BGN Thousand fair carrying values amount

Segment reports Assets Cash and balances with central banks - - 1,275,552 1,275,552 1,275,552 Loans and advances to banks - - 782,827 782,827 782,718 Loans and advances to customers - - 3,286,515 3,286,515 3,555,359 Investment securities 512,511 27,408 - 539,919 527,882

Liabilities Deposits from banks - - 50,519 50,519 50,519 Raiffeisen GroupRaiffeisen

in Bulgaria Deposits from customers - - 4,754,073 4,754,073 4,752,846 Borrowings from banks - - 303,175 303,175 298,181 Subordinated liabilities - - 363,002 363,002 365,457 auditors` report Independent Addresses 77

31 December 2014 Level 1 Level 2 Level 3 Total Total in BGN Thousand fair carrying values amount Assets Cash and balances with central banks - - 928,947 928,947 928,947 Loans and advances to banks - - 393,887 393,887 393,936 Loans and advances to customers - - 3,551,988 3,551,988 3,612,111 Receivables under repurchase agreements - - 46,374 46,374 46,391 Investment securities 541,208 31,976 - 573,184 564,779

Liabilities mission and CSR Vision, Deposits from banks - - 51,446 51,446 51,446 Deposits from customers - - 4,233,768 4,233,768 4,229,954 Borrowings from banks - - 334,994 334,994 342,285 Subordinated liabilities - - 363,002 363,002 365,532 International Raiffeisen Bank Raiffeisen Bank Loans and advances to banks represent short-term money market placements of free liquidity, thus their carrying amount reliably approximates their fair value.

The fair value of loans and advances to customers that are not in default is obtained by valuation techniques based on discounted expected cash flows. The discount factor used is the rate of return of a risk free investment, adjusted for the probability of default and the expected loss. For exposures in default, as well as for short-term receivables and overdrafts the Group assumes that their fair value corresponds to their carrying amount.

The fair value of liabilities measured at amortized cost, is also obtained from valuation technique based on discounted expected cash flows. The discount factor used for fixed interest rate liabilities is the rate of return of a risk free investment, increased with the liquidity premium for the respective maturity band. The discount factor for floating rate liabilities is only report Management the liquidity premium. The liquidity premium is based on the CDS of Bulgaria for the respective maturity band.

5. Classification of Financial Assets and Liabilities

The following tables illustrate the categories of financial assets and financial liabilities that are recognized in the statement of financial position of the Group. Segment reports Segment

Held At fair Available Held to Loans At Total for value for sale maturity and amortized carrying 31 December 2015 trading through advances cost amount in BGN Thousand profit or loss Assets

Cash and balances with in Bulgaria

the Central bank - - - - 1,275,552 - 1,275,552 Raiffeisen Group Trading assets 55,112 - - - - - 55,112 Derivatives 2,747 - - - - - 2,747 Loans and advances to banks - - - - 782,718 - 782,718 Loans and advances to customers - - - - 3,555,359 - 3,555,359 Investment securities: Independent Independent At fair value through profit report auditors` or loss - 5,404 - - - - 5,404 At fair value through OCI - - 185,559 - - - 185,559 At amortized cost - - - 527,881 - - 527,881

Total Assets 57,859 5,404 185,559 527,881 5,613,629 - 6,390,332 Addresses Addresses 78

Held At fair Available Held to Loans At Total 31 December 2015 for value for sale maturity and amortized carrying trading through advances cost amount in BGN Thousand profit or loss Vision, mission and CSR Liabilities Derivatives 2,599 - - - - 2,599 Deposits from banks - - - - - 50,519 50,519 Deposits from customers - - - - - 4,752,846 4,752,846 Borrowings from banks - - - - - 298,181 298,181 Subordinated liabilities - - - - - 365,457 365,457

Total Liabilities 2,599 - - - 5,467,003 5,469,602

Raiffeisen BankRaiffeisen Held At fair Available Held to Loans At Total International 31 December 2014 for value for sale maturity and amortized carrying trading through advances cost amount in BGN Thousand profit or loss Assets Cash and balances with the Central bank - - - - 928,947 - 928,947 Management report Trading assets 98,770 - - - - - 98,770 Derivatives 3,737 - - - - - 3,737 Loans and advances to banks - - - - 393,936 - 393,936 Loans and advances to customers - - - - 3,612,111 - 3,612,111 Receivables under repurchase agreements - - - - 46,391 - 46,391 Investment securities: Segment reports At fair value through profit or loss - 272,082 - - - - 272,082 At amortized cost - - - 564,779 - - 564,779

Total Assets 102,507 272,082 - 564,779 4,981,385 - 5,920,753

Liabilities Derivatives 3,928 - - - - - 3,928 Deposits from banks - - - - - 51,446 51,446 Raiffeisen GroupRaiffeisen

in Bulgaria Deposits from customers - - - - - 4,229,954 4,229,954 Borrowings from banks - - - - - 342,285 342,285 Subordinated liabilities - - - - - 365,532 365,532

Total Liabilities 3,928 - - - - 4,989,217 4,993,145 auditors` report

Independent 6. Segment Analysis

The Group operates in the following main segments:

–– Retail customers – incorporating private banking services, private customer current accounts, savings, deposits, credit and debit cards, consumer loans and mortgages;

–– Large corporate – incorporating current accounts, deposits, overdraft facilities, loan and other credit facilities, real

Addresses estate financing, foreign currency and derivative products;

–– SMEs – incorporating current accounts, deposits, overdraft facilities, loan and other credit facilities, micro lending, foreign currency and derivative products; 79

–– Proprietary business – incorporating business transactions conducted on own account and risk of the Bank that are originated from managing market risk positions like FX-dealing, securities and derivatives trading, money market trading, liquidity management and funding, strategic positioning (investment portfolio), interest rate gapping (maturity transformation).

–– Segment “Other” includes cash, capital and reserves, dividends received and other assets and liabilities and corresponding results reflected in segment profit or loss, which cannot be distributed in the other segments.

–– Segment results incorporate internal funds transfer pricing.

Retail Làrge SMEs Proprietary Other Total As at 31 December 2015 customers corporates business and budgetary in BGN Thousand companies

Segment operating income 136,285 73,531 88,877 3,330 5,293 307,316 mission and CSR Vision, Segment assets 1,360,512 1,462,559 732,288 2,676,153 231,925 6,463,437 Segment liabilities 2,652,515 1,238,271 862,179 535,931 255,013 5,543,909 Impairment charge (36,002) (14,067) (10,780) (4) - (60,853) Administrative expenses and other operating expenses (81,950) (33,478) (48,032) (3,705) (9,858) (177,023)

Profit before tax 18,333 25,986 30,065 (379) (4,565) 69,440 International Raiffeisen Bank Raiffeisen Bank

Retail Làrge SMEs Proprietary Other Total As at 31 December 2014 customers corporates business and budgetary in BGN Thousand companies Segment operating income 150,002 79,204 95,756 (6,401) 11,466 330,027 Segment assets 1,412,695 1,466,508 779,300 2,089,154 237,583 5,985,240 Segment liabilities 2,366,250 1,210,526 656,977 584,697 248,936 5,067,386 Impairment charge (17,126) (70,454) (15,820) - - (103,400) Management report Management Administrative expenses and other operating expenses (84,899) (33,611) (50,849) (4,138) (1,068) (174,565) Profit before tax 47,977 (24,861) 29,087 (10,539) 10,398 52,062

7. Net Interest Income Segment reports Segment

in BGN Thousand 2015 2014

Interest income Loans and advances to banks 1,502 588 Loans and advances to customers 229,286 277,531

Investment securities 14,496 20,515 in Bulgaria

Negative interest from financial assets (225) - Raiffeisen Group

Total interest income 245,059 298,634

Interest expense Deposits from banks (306) (718) Deposits from customers (16,880) (43,494) Debt securities issued - (58) Independent Independent

Long-term borrowings (2,236) (6,265) report auditors` Subordinated liabilities (12,571) (11,862)

Total interest expense (31,993) (62,397)

Net interest income 213,066 236,237 Addresses Addresses 80

8. Net Fee and Commission Income

in BGN Thousand 2015 2014 Vision, mission and CSR Fee and commission income Payment transactions 25,690 24,615 Card transactions 29,329 25,472 Cash transactions 7,617 7,235 Opening and maintenance of accounts 11,810 10,575 Other loan fees 2,877 2,156 Documentary transactions 3,827 4,687 Securities business 1,017 1,039 Raiffeisen BankRaiffeisen

International Asset management 1,841 2,466 Other 2,273 1,697

Total fee and commission income 86,281 79,942

Fee and commission expense Payment transactions (2,597) (1,757) Card operations (domestic and foreign card operators) (12,187) (9,998) Management report Guarantees and loans (955) (1,120) Securities business (103) (192) Other (40) (40)

Total fee and commission expense (15,882) (13,107)

Net fee and commission income 70,399 66,835 Segment reports 9. Net Trading Result

in BGN Thousand 2015 2014 Debt securities 90 3,504 Foreign exchange 14,447 13,584

Raiffeisen GroupRaiffeisen Net trading income 14,537 17,088 in Bulgaria

Fixed income trading comprises of realized and unrealized dealers margins from changes in market prices of Government treasury bills and corporate bonds.

Trading result from foreign exchange represents the net result arising from purchases and sales of foreign currencies, gains arising from the translation of assets and liabilities, denominated in foreign currencies into Bulgarian leva, as well as the revaluation result of precious metals. auditors` report Independent Addresses 81

10. Net Result from Derivatives

in BGN Thousand 2015 2014 Foreign exchange instruments 104 (22) Interest rate instruments 6 (339) Net result from derivatives 110 (361)

Foreign exchange instruments represent FX forwards and cross currency swaps. Interest rate derivative instruments are interest rate swaps. Vision, mission and CSR Vision, 11. Net Result from Investments

in BGN Thousand 2015 2014 Net valuation result 70 (368) International

Net gains/(losses) on realization of investments (914) 778 Raiffeisen Bank Net result from investments (844) 410

12. Administrative Expenses

in BGN Thousand 2015 2014

Personnel expenses (70,905) (69,492) report Management Materials and services (63,913) (66,801) Depreciation and amortization charge (11,333) (15,531) Annual contribution to the Bulgarian Resolution Fund (7,099) - Annual contribution in Bulgarian Deposit Insurance Fund (20,121) (20,111) Total administrative expenses (173,371) (171,935) Segment reports Segment Personnel expenses include salaries, social and health security contributions under the requirements of the local legislation.

In 2015 the cost for audit, legal and advisory services amounts to BGN 162 thousand (2014: BGN 480 thousand).

13. Other Operating Expenses in Bulgaria Raiffeisen Group

in BGN Thousand 2015 2014 Impairment of assets acquired from collateral (121) (918) Other (3,531) (1,712) Total (3,652) (2,630) Independent Independent auditors` report auditors` Addresses Addresses 82

14. Net Impairment Loss on Loans and Advances

Impairment Allowance 2015 2014 Vision, mission and CSR in BGN Thousand Balance as àt January 1 300,833 462,681 Additional allowances for impairment losses 117,423 157,980 Reversals (40,967) (38,359) Written off receivables (98,329) (281,469) Balance as at December 31 278,960 300,833

in BGN Thousand 2015 2014

Raiffeisen BankRaiffeisen Additional allowances for impairment (118,562) (158,364) International Reversal of write downs 41,828 38,762 Recoveries from non performing loans previously written off 15,881 16,202 Net impairment loss on loans and advances (60,853) (103,400)

The net impairment loss on loans and advances includes also the impairment losses for credit risk stemming from the Group’s irrevocable commitments on contingent liabilities. Management report The following tables illustrate the breakdown of impairment losses into individual and collective allowances for impairment.

Individual allowances for impairment 2015 2014 in BGN Thousand Balance as àt January 1 289,167 444,280 Charge for the period 91,396 151,723 Reversals (34,117) (25,367) Segment reports Writte-offs (98,329) (281,469) Balance as at December 31 248,117 289,167

Collective allowances for impairment 2015 2014 In BGN Thousand Balance as àt January 1 11,666 18,401 Charge for the period 26,027 6,257

Raiffeisen GroupRaiffeisen Reversals (6,850) (12,992) in Bulgaria Balance as at December 31 30,843 11,666 Total 278,960 300,833

15. Tax auditors` report Independent

In BGN Thousand 2015 2014 Current tax (expense) (6,816) (1,278) Deferred tax (expense)/income related to origination and reversal of temporary differences (30) (3,842) Total tax (expense)/income (6,846) (5,120) Addresses

Current income tax expense represents the amount of corporate tax due under Bulgarian law. Deferred tax income or expense results from the change in the carrying amounts of deferred tax assets and deferred tax liabilities. 83

The relationship between tax expense and accounting profit is as follows:

in BGN Thousand 2015 2014 Accounting profit 69,440 52,062 Tax at the applicable tax rate (10% for 2015, 10% for 2016) (6,944) (5,206) Tax effect on permanent differences 98 86 Total tax expense (6,846) (5,120) Effective tax rate 9.86% 9.84%

in BGN Thousand 2015 2014 Vision, mission and CSR Vision, Other coprehensive income 10,206 - Tax at the applicable tax rate (10% for 2015, 10% for 2016) (1,021) - Tax expense in OCI (1,021) -

Reported deferred tax liabilities at 31 December 2015 and 2014 comprise the following: International

Assets Liabilities Net (Assets)/Liabilities Raiffeisen Bank

in BGN Thousand 2015 2014 2015 2014 2015 2014 Fixed assets - - 822 669 822 669 Unused leave of personnel (411) (396) - - (411) (396) Provisions for employee remuneration (864) (915) - (864) (915) Other provisions (571) (303) - (571) (303) Investments - - 162 162 162 162 Impairment of assets acquired from collateral (295) (401) - - (295) (401) report Management Tax loss (108) (111) - - (108) (111) Net (Assets)/Liabilities (2,249) (2,126) 984 831 (1,265) (1,295)

Deferred taxes are calculated on all temporary differences using a principal tax rate of 10 per cent.

Movements in temporary differences during the year are recognized in statement of comprehensive income on the following

items: reports Segment

Movements during the year

Net tax (assets) / liabilities 2014 Changes 2015 in BGN Thousand comprehensive income – loss/(profit)

Fixed assets, net 669 153 822 in Bulgaria

Unused leave of personnel (396) (15) (411) Raiffeisen Group Provisions for employee remuneration (915) 51 (864) Other provisions (303) (268) (571) Investments 162 - 162 Impairment of assets acquired from collateral (401) 106 (295) Tax loss (111) 3 (108) Independent Independent

(1,295) 30 (1,265) report auditors` Addresses Addresses 84

16. Other Comprehensive Income

in BGN Thousand 2015 2014 Vision, mission and CSR Items that will never be reclassified to profit or loss Remeasurements of defined benefit plans (275) 23 Items that will be reclassified to profit or loss Changes in fair value of financial assets availabe for sale 10,206 - Tax effect on other comprehensive income (1,021) - Other comprehensive income 8,910 23

The changes in fair value of assets available for sale represent mainly the expected cash proceeds from the forthcoming sale of 100 per cent of the issued and outstanding share capital of Visa Europe Limited (“Visa Europe”) to Visa Inc. The Bank

Raiffeisen BankRaiffeisen is a principal member of Visa Europe and its share of the up-front consideration relating to the proposed sale of the issued International and outstanding share capital of Visa Europe to Visa Inc is calculated based on its contribution to Visa Europe’s business.

Subject to regulatory approvals, the transaction is due to close in the second calendar quarter of 2016.

The deal values Visa Europe at €16.5 billion, which is payable as €11.5 billion in cash and €5 billion in Visa Inc. preferred stock. Management report 17. Cash and Balances with Central Banks

in BGN Thousand 2015 2014 Cash on hand 101,427 123,662 ATM cash 55,371 48,436 Segment reports Balances with Central Banks 1,118,754 756,849 Total 1,275,552 928,947

Balances with Central Banks include the current account with the Bulgarian national bank, used for direct participation in the money and treasury bills markets and for settlement purposes, as well as the accounts for holding the obligatory minimum reserves. The current account balances are also eligible to cover the required by the Bulgarian national bank minimum reserves. Raiffeisen GroupRaiffeisen in Bulgaria 18. Trading Assets

in BGN Thousand 2015 2014

Bulgarian government securities 54,292 80,935 Bulgarian corporate bonds 820 5,382 Foreign government securities - 12,453 auditors` report Independent Total trading assets 55,112 98,770

19. Derivatives

The Group uses the following derivative instruments for both hedging and non-hedging purposes. Addresses Currency forwards represent commitments to purchase-sale of foreign and domestic currency, including undelivered spot transactions. 85

Currency and interest rate swaps are commitments to exchange one set of cash flows for another. Swaps result in an economic exchange of currencies or interest rates (for example fixed interest for floating rate) or a combination of all these (i.e. cross currency interest rate swaps). Usually for such deals no exchange of principal takes place. The Group’s credit risk represents the potential cost to replace the swap contracts if counterparties fail to fulfill their obligations. The risk is monitored on an ongoing basis with reference to the current fair value, a proportion of the notional amount of the contracts and the liquidity of the market. To control the level of credit risk taken, the Group assesses counterparties using the same techniques as for its lending activities.

The following table indicates all derivative instruments held by the Group.

in BGN Thousand Contract /notional amount Fair values

Assets Liabilities

As at 31 December 2015 mission and CSR Vision, Currency forwards 191,845 2,545 2,413 Forex swaps 30,967 16 - Interest rate swaps 25,329 186 186

248,141 2,747 2,599

As at 31 December 2014 International Raiffeisen Bank Raiffeisen Bank Currency forwards 48,008 2,112 2,219 Forex swaps 353,175 1,609 1,582 Interest rate swaps 6,089 16 127 407,272 3,737 3,928

20. Loans and Advances to Banks Management report Management

in BGN Thousand 2015 2014 Money market deposits Domestic commercial banks 64,488 105,094 Foreign commercial banks 603,887 179,876

668,375 284,970 Segment reports Segment Loans to banks Foreign commercial banks 58,778 -

58,778 -

Nostro accounts Domestic commercial banks 2,885 3,366 in Bulgaria

Foreign commercial banks 52,680 105,600 Raiffeisen Group

55,565 108,966

Total 782,718 393,936 Independent Independent auditors` report auditors` Addresses Addresses 86

21. Loans and Advances to Customers

in BGN Thousand 2015 2014 Vision, mission and CSR Individual (retail customers): - Overdrafts 4,042 4,902 - Credit cards 59,478 67,395 - Consumer loans 641,337 640,564 - Mortgages 741,116 770,985

1,445,973 1,483,846 Corporate entities: - Large corporates 1,582,760 1,566,643

Raiffeisen BankRaiffeisen - SMEs 805,586 862,455 International 2,388,346 2,492,098

Gross loans and advances 3,834,319 3,912,944 Less: allowance for impairment (278,960) (300,833) Net 3,555,359 3,612,111 Management report 22. Investment Securities

A. Securities at fair value trough profit or loss

in BGN Thousand 2015 2014 Bulgarian government bonds - 152,728

Segment reports Bulgarian corporate bonds 3,145 20,597 Bulgarian corporate shares 2,259 2,287 Foreign government bonds - 16,049 Foreign corporate bonds 80,421 5,404 272,082

B. Securities available for sale Raiffeisen GroupRaiffeisen in Bulgaria in BGN Thousand 2015 2014 Bulgarian government bonds 147,529 - Foreign government bonds 28,103 -

Foreign corporate shares 9,927 - 185,559 - auditors` report Independent C. Securities held to maturity

in BGN Thousand 2015 2014 Bulgarian government bonds 451,488 482,395 Bulgarian municipal bonds 27,408 31,976

Addresses Foreign government bonds 48,985 50,408 527,881 564,779 Total Investment securities 718,844 836,861 87

23. Property, Plant and Equipment

in BGN Thousand Total Premises Computer Office Motor Office equipment furniture vehicles reconsructions Cost 1 January 2015 134,735 6,498 41,046 51,348 166 35,677 Additions 13,200 - 3,733 5,101 1,133 3,233 Write offs (14,657) (441) (1,883) (6,980) (97) (5,256) 31 December 2015 133,278 6,057 42,896 49,469 1,202 33,654 Accumulated Depreciation Vision, mission and CSR Vision, 1 January 2015 116,996 2,037 35,833 45,886 150 33,090 Charge for the period 6,715 259 2,121 2,640 127 1,568 Depreciation of write offs (14,311) (100) (1,885) (6,973) (97) (5,256) 31 December 2015 109,400 2,196 36,069 41,553 180 29,402

Net Book Value International

31 December 2015 23,878 3,861 6,827 7,916 1,022 4,252 Raiffeisen Bank

Cost 1 January 2014 141,494 6,498 39,691 52,903 846 41,556 Additions 4,490 - 2,479 1,578 15 418 Write offs (11,249) - (1,124) (3,133) (695) (6,297) 31 December 2014 134,735 6,498 41,046 51,348 166 35,677 Accumulated Depreciation

1 January 2014 117,615 1,775 34,392 45,339 845 35,264 report Management Charge for the period 10,602 262 2,565 3,652 - 4,123 Depreciation of write offs (11,221) - (1,124) (3,105) (695) (6,297) 31 December 2014 116,996 2,037 35,833 45,886 150 33,090

31 December 2014 17,739 4,461 5,213 5,462 16 2,587

Net Book Value

1 January 2014 23,879 4,723 5,299 7,564 1 6,292 reports Segment

in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 88

24. Intangible Assets

Vision, mission and CSR in BGN Thousand Total Software Licences

Cost 1 January 2015 50,287 49,932 355 Additions 13,412 13,412 - Write offs (69) (69) - 31 December 2015 63,630 63,275 355 Accumulated amortization 1 January 2015 40,785 40,430 355 Charge for the period 4,618 4,618 - Raiffeisen BankRaiffeisen International Amortization of write offs (65) (65) - 31 December 2015 45,338 44,983 355

Net Book Value 31 December 2015 18,292 18,292 - Cost

Management report 1 January 2014 47,187 46,832 355 Additions 3,100 3,100 - Write offs - - - 31 December 2014 50,287 49,932 355 Accumulated amortization 1 January 2014 35,856 35,501 355 Charge for the period 4,929 4,929 -

Segment reports Amortization of write offs - - - 31 December 2014 40,785 40,430 355 Net Book Value 31 December 2014 9,502 9,502 -

Net Book Value 1 January 2014 11,331 11,331 - Raiffeisen GroupRaiffeisen in Bulgaria 25. Other Assets

in BGN Thousand 2015 2014

Prepayments and other deferrals 12,028 17,085 Repossessed collateral 3,793 4,015 auditors` report Other 5,485 8,367 Independent Total 21,306 29,467 Addresses 89

The table below indicates the movement of assets acquired from collateral.

in BGN Thousand 2015 2014 Balance as at 1 January 4,015 6,568 Acquisitions 1,022 2,630 Disposals (1,123) (4,265) Write-down (121) (918) Balance as at 31 December 3,793 4,015

26. Deposits from Banks mission and CSR Vision,

in BGN Thousand 2015 2014 Current accounts Domestic commercial banks 8,640 5,055

Foreign commercial banks 41,879 46,391 International Raiffeisen Bank Raiffeisen Bank Total 50,519 51,446

27. Deposits from Customers

in BGN Thousand 2015 2014 Large corporate customers and budget entities Management report Management - Current accounts 1,141,200 973,795 - Term deposits 96,950 233,014 1,238,150 1,206,809 SMEs

- Current accounts 802,072 598,066 - Term deposits 60,108 58,825 Segment reports Segment 862,180 656,891

Retail customers

- Current accounts 1,080,389 775,053 - Term deposits 1,572,127 1,591,201

2,652,516 2,366,254 in Bulgaria

Total 4,752,846 4,229,954 Raiffeisen Group

28. Borrowings from Banks

Borrowings from banks include long-term loans attracted from international financial institutions for financing small- and medium-sized companies in the field of environmental protection, energy savings, industry, services and tourism as well as Independent Independent

municipalities and private individuals. report auditors`

To finance its credit activities, the Group also attracts syndicated and other loans from foreign credit institutions. Addresses Addresses 90

in BGN Thousand 2015 2014 Credit lines from International financial institutions 245,183 299,033 Other borrowings from foreign banks 52,998 43,252

Vision, mission and CSR Total 298,181 342,285

29. Subordinated Liabilities

As at 31 December 2015 the subordinated liabilities comprise:

a) Debt-capital hybrid instrument in the amount of BGN 177,981 thousand (carrying amount BGN 178,454 thousand), attracted by the Bank in 2001. The repayment of the debt is not bound by any maturity. Management believes that the use of this instrument will be for a term of over 5 years. Raiffeisen BankRaiffeisen

International b) Subordinated debt in the amount of BGN 185,022 thousand (carrying amount BGN 187,003 thousand), attracted by the Bank in 2013 and 2014 with an original maturity of 10 years.

The Bank received the permission of the Bulgarian Central Bank to treat these funds as supplementary capital reserve and to increase its capital base for regulatory purposes.

Management report 30. Other Liabilities

in BGN Thousand 2015 2014 Transfers in process 21,604 23,215 Provisions for employees’ remuneration 8,656 9,160 Provisions for unused paid leave 4,085 3,873 Provisions for defined contribution plans 1,356 923 Segment reports Impairment losses on credit commitments 1,521 3,799 Other payables 37,063 32,795 Total 74,285 73,765

Transfers in process represent customers’ money transfer orders with value date after 31 December 2015.

The Group recognizes a provision for unused paid leave, which is the undiscounted amount of the expected short-term income of its employees for the work performed during the current period. Raiffeisen GroupRaiffeisen in Bulgaria Provision is recognized also for other liabilities to its employees, such as accrued but not paid remuneration related to performance, according to Managemnt’s assessment for the achieved results and goals during the financial year.

Obligations under defined benefit plans

The provision for retirement compensation as at 31 December 2015 amounts to BGN 1,356 thousand. The estimated amount of the liability is based on an actuarial report, which was prepared based on the following actuarial assumptions:

auditors` report • Discount rate: 2.8 per cent; Independent

• Retirement date: in accordance with regulations on length of service and age. Addresses 91

Movement in the present value of the defined benefit obligations

in BGN Thousand 2015 2014 Defined benefit obligations at 1 January 923 888 Benefits paid by the plan (37) (57) Current service cost 154 74 Interest expense 41 40 Actuarial (gains) losses for the period 275 (22) Defined benefit obligations at 31 December 1,356 923

The current service costs and interest expense are recognized in personnel expenses in profit or loss. Actuarial (gains) losses mission and CSR Vision, for the period are recognized in other.

31. Equity

Share capital International Raiffeisen Bank Raiffeisen Bank As at 31 December 2015 the registered and fully paid-in capital of the Group comprised of 603,447,952 registered shares with a par value of BGN 1 each.

Statutory reserve

Statutory reserves comprise amounts appropriated for purposes defined by the local legislation. Under the Bulgarian Commercial code, the Group is required to set aside one tenth of its profit in a statutory reserve until it reaches at least 10 per cent of its equity.

Retained earnings report Management

The Group presents under retained earnings section all distributable reserves in excess of the statutory reserves.

Fair value reserve

The fair value reserve comprises the cumulative net change in the fair value of available-for-sale financial assets, until the assets are derecognized or impaired. Segment reports Segment

32. Commitments and Contingent Liabilities

The Group provides financial guarantees and letters of credit to guarantee the performance of customers to third parties. They represent off-balance financial instruments, being by nature credit substitutes, which engage the Group and expose it to credit risk. in Bulgaria Raiffeisen Group The contractual amounts of commitments and contingent liabilities are set out in the following table by category. 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.

in BGN Thousand 2015 2014 Letters of guarantee and letters of credit issued 262,002 313,511

hereof to banks 7,572 2,914 Independent auditors` report auditors` Unused credit lines 1,187,086 1,125,742 hereof to banks 14,906 13,938 Total 1,449,088 1,439,253 Addresses Addresses 92

The Group allocates provisions to cover its credit risk from commitments and contingent liabilities, where its engagement is irrevocable. The provisions for credit risk from commitments and contingent liabilities represent the valuation of the potential loss, which the Group would realize, considering the probability that the customer utilizes the commitment. In order to determine this loss, the Group converts the net off-balance sheet exposure (after deducting liquid collaterals) into a balance sheet exposure, by applying respective credit conversion factors. Vision, mission and CSR

For the converted off-balance sheet commitments the same calculation methods for impairment are applied as for the balance sheet exposures.

33. Investments in Associates

The investments in associates are consolidated in the Group’s financial statements by using the equity method. Raiffeisen BankRaiffeisen International • As at 31 December 2015 the Group’s participations are as follows:

• Raiffeisen Leasing Bulgaria OOD – 24.5 per cent

• Cash Collection Company AD – 20 per cent

The activity of these entities is described in note 35. Management report 34. Cash and Cash Equivalents

For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less than 3 months original maturity:

in BGN Thousand 2015 2014

Segment reports Cash on hand and nostro accounts 212,363 281,064 Current account with the Central Bank 1,118,754 756,849 Placements with banks with original maturity of less than 3 months 226,315 221,216 Total 1,557,432 1,259,129

35. Group Members Raiffeisen GroupRaiffeisen in Bulgaria Subsidiaries

Subsidiaries are these entities, which are controlled by the Bank.

Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities.

In order that the consolidated financial statements present financial information about the group as that of a single economic entity, income and expenses of a subsidiary are included in the consolidated statements from the date of acquisition until the auditors` report Group ceises to exercise control over the entity. Independent

Intragroup balances and transactions, including income, expenses and dividends, are eliminated in full. Profits and losses resulting from intragroup transactions that are recognised in assets, such as inventory and fixed assets, are eliminated in full.

The subsidiaries controlled by the Bank as at 31 December 2015 are:

Raiffeisen Service EOOD – 100 per cent ownership Addresses

In 2015 the Bank’s subsidiaries Raiffeisen Services EAD and Trade Centre Pleven EOOD merged into one entity Raiffeisen Service EAD with a registered capital of BGN 4,220 thousand. The merger aims at optimizing the activities of the two entities. 93

Raiffeisen Asset Management (Bulgaria) EAD – 100 per cent ownership

Raifeisen Asset Management (Bulgaria) EAD has been granted a permission for its activities by the Financial Supervision Commission in 2005. The entity is licensed to exercise the activities per art. 202, (1), pp. 1, 2, 3 of the Law on public offering of securities and treasury bonds, namely managing of mutual funds and investment companies, management of individual portfolios in its own name, advisory services on investments in securities. As at 31 December 2015 the company’s registered capital amounts to BGN 250 thousand and its net assets BGN 836 thousand.

Raiffeisen Insurance Broker EOOD – 100 per cent ownership

Raiffeisen Insurance Broker EOOD has been established in 2006 with 100 per cent ownership of Raiffeisenbank (Bulgaria) EAD. The company has been entered in the register of the insurance brokers on 30, March 2006 with decision №250-ЗB of the Financial Supervision Commission. Vision, mission and CSR Vision, The company’s activity is related to intermediation between its customers and the insurance companies.

Raiffeisen Insurance Broker EOOD analyses and researches the insurance market, offers insurance products, which meet the individual requirements of its customers, administers the insurance contracts and lends support in case of insurance events.

Customers of Raiffeisen Insurance Broker EOOD are the borrowers of Raiffeisenbank (Bulgaria) EAD, the lessees of Raiffeisen Leasing Bulgaria OOD and Raiffeisen Real Estate EOOD, as well as customers outside the Group. As at 31 December 2015

the company’s registered capital amounts to BGN 5 thousand and its net assets BGN 5,050 thousand. International Raiffeisen Bank Raiffeisen Bank Raiffeisen Real Estate EOOD – 100 per cent ownership

Raiffeisen Real Estate EOOD has been registered in 2007 as a real estate intermediary fully owned by Raiffeisenbank (Bulgaria) EAD. Raiffeisen Real Estate EOOD offers intermediary and consulting services to private individuals and companies for home, as well as business property – office and commercial building plots, land and terrains.

Besides its intermediary in sales, purchase and rent of property, the company also offers investment consultations, market research and analyses, as well as marketing services for its strategic partners. As at 31 December 2015 the company’s registered capital amounts to BGN 550 thousand and its net assets BGN 156 thousand. Management report Management As at 31 December 2015 there were indications for impairment of this investment and an impairment loss of BGN 550 thousand was recognized in the profit or loss, and net assets BGN 180 thousand.

Associates

An associate is an entity, including an unincorporated entity such as a partnership, over which the investor has significant influence, but not the control, and that is neither a subsidiary nor an interest in a joint venture. Segment reports Segment The investments in associates are consolidated in the Group’s financial statements by using the equity method. Under the equity method, the investment in an associate is initially recognised at cost and the carrying amount is increased or decreased

to recognise the investor's share of the profit or loss of the investee after the date of acquisition. The investor's share of the profit or loss of the investee is recognised in the investor's profit or loss. Distributions received from an investee reduce the carrying amount of the investment. Adjustments to the carrying amount may also be necessary for changes in the investor's proportionate interest in the investee arising from changes in the investee's equity that have not been recognised in the investee's profit or loss. Such changes include those arising from the revaluation of property, plant and equipment and from

foreign exchange translation differences. The investor's share of those changes is recognised directly in equity of the investor. in Bulgaria Raiffeisen Group Raiffeisen Leasing Bulgaria OOD – 24.5 per cent share

The Group owns 24.5 per cent of the share capital of Raiffeisen Leasing Bulgaria OOD and the company has been included in these consolidated financial statements with the equity method.

Raiffeisen Leasing Bulgaria OOD actively participates in the Bulgarian leasing business and the main products offered to its customers are: leasing of new and used motor vehicles, building and agricultural machines, light and heavy-freight trucks, trailers and motor trucks, leasing of machines and equipment, property and yachts. Independent Independent auditors` report auditors` The Bank’s participation in the capital of Raiffeisen Leasing Bulgaria OOD is 24,5 per cent and it is consolidated by using the equity method.

As at 31 December 2015 the company’s registered capital amounts to BGN 5,900 thousand and its net assets BGN 299,618 thousand. Addresses Addresses 94

Cash Collection Company – 20 per cent share

In 2009 the Bank became shareholder in the Cash collection company, with 20 per cent participation, amounting to BGN 2,500 thousand. Vision, mission and CSR The table below illustrates the consolidation methods by entities:

35. Related Party Transactions

Participation Participation Consolidation Consolidation as at as at method 2015 method 2014 31 December 31 December 2015 2014

Raiffeisen BankRaiffeisen Raiffeisen Services EAD - 100% - Full International consolidation Raiffeisen Services EAD 100% - Full - consolidation Raifeisen Asset Management (Bulgaria) EAD 100% 100% Full Full consolidation consolidation Raiffeisen Insurance broker EOOD 100% 100% Full Full consolidation consolidation Management report Raiffeisen Real Estate EOOD 100% 100% Full Full consolidation consolidation Trade Centre Pleven EOOD 100% 100% Full Full consolidation consolidation Raiffeisen Leasing Bulgaria OOD 24.5% 24.5% Equity Equity method method Cash Collection Company 20% 20% Equity Equity

Segment reports method method

Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party on making financial or operational decisions, or the parties are under common control with the Bank.

A number of banking transactions are entered into with related parties in the normal course of business. These include loans, deposits and other transactions.

Parent and ultimate controlling party Raiffeisen GroupRaiffeisen in Bulgaria The Bank’s immediate parent is Raiffeisen SEE Region Holding GmbH in which Raiffeisen Bank International AG, Austria ultimately holds a 100 per cent interest. The Bank therefore considers that it has a related-party relationship, in accordance with International Accounting Standard 24 Related Party Disclosures (“IAS 24”) with the following:

–– Shareholders and parties related to shareholders;

–– Key management personnel and parties related to key management personnel. auditors` report Independent Addresses 95

Shareholders and parties related to shareholders:

Related party Type of transaction Value of the Balance transactions for as at 31 December in BGN Thousand the year ended 2015 2014 2015 2014

Sole owner and other companies Loans and advances to banks 672,114 260,013 within the Group Sole owner and other companies Loans and advances to customers 58,676 - within the Group Sole owner and other companies Positive fair value of derivatives 1,250 696 within the Group

Sole owner and other companies Tangible and intangible assets 6,881 2,196 mission and CSR Vision, within the Group Sole owner and other companies Other assets 1,260 5,479 within the Group Sole owner and other companies Deposits from banks 25,362 8,195 within the Group Sole owner and other companies Deposits from customers 4,497

within the Group International Raiffeisen Bank Raiffeisen Bank Sole owner and other companies Negative fair value of derivatives 1,250 2,356 within the Group Sole owner and other companies Subordinated liabilities 365,457 365,532 within the Group Sole owner and other companies Subordinated liabilities 251 204 within the Group Sole owner and other companies Interest income 1,597 483 within the Group Sole owner and other companies Interest expense (12,571) (13,543) within the Group report Management Sole owner and other companies Fee and commission income 217 164 within the Group Sole owner and other companies Fee and commission expense (1,707) (2,374) within the Group Sole owner and other companies Net result from derivatives (158) 17 within the Group

Sole owner and other companies Administrative expenses (11,915) (10,035) reports Segment within the Group Sole owner and other companies Other operating expenses (107) (176) within the Group Sole owner and other companies Other operating income 4 within the Group Associated companies Loans and advances to customers 68,029 5,974 in Bulgaria Associated companies Positive fair value of derivatives 16 16 Raiffeisen Group Associated companies Deposits from customers 3,564 14,157 Associated companies Finance lease liabilities 764 - Associated companies Gurantees 84 84 Associated companies Interest income 558 296 Associated companies Interest expense (28) (18) Associated companies Fee and commission income 369 Independent Independent

Associated companies Net result from derivatives 7 17 report auditors` Associated companies Administrative expenses (433) (511) Associated companies Other operating income 415 519 Associated companies Contingent liabilities (guarantees issued) 11,294 17,505

Associated companies Dividend income 966 381 Addresses 96

Key management personnel and parties related to key management personnel

Supervisory Board members, Management Board members and other key management personnel defined as persons having authority and responsibility for planning, directing and controlling the activities of the Bank, directly or indirectly, including any director (whether executive or otherwise) of the Bank, collectively “key management personnel”, close family members of Vision, mission and CSR key management personnel, and companies and unincorporated businesses controlled by key management personnel and/or their close family members. During the year 4 persons served as Supervisory Board members and 6 served as Management Board members. Except the Supervisory and Management Board members, the Bank does not consider any other persons at the reporting date, to be key management personnel.

The table below shows the key management personnel compensation:

in BGN Thousand 2015 2014 Short-term employee benefits 3,606 3,193 Total 3,606 3,193 Raiffeisen BankRaiffeisen International

Related party transactions are summarized below.

Banking services

The Bank provides current accounts to related parties, and takes deposits from them, on which it incurs interest expense, and provides loans to them, on which it earns interest income. The Bank also earns fee and commission income on banking Management report services provided to related parties.

Other transactions

Other related party transactions includes rent receivable from and payable to related parties for property occupancy, and costs for other services.

Key management personnel Segment reports

Type of transaction Value of the transactions End balances in BGN Thousand for the year ended as of 31 December 2015 2014 2015 2014 Current accounts and deposits 3,532 3,436 Interest expense (52) (65) Interest income 10 12

Raiffeisen GroupRaiffeisen Fee and commission income 4 - in Bulgaria Remuneration 3,606 3,193 Loans and credit commitments 364 369

As at 31 December 2015 loans and credit commitments to key management personnel are with remaining maturity above

5 years. The interest rate varies between 3 per cent and 4 per cent. Loans and credit commitments in general are secured. Deposits and current accounts are unsecured and the transactions are settled in cash. Deposits are with remaining maturity up to 1 year. The interest rate on deposits varies between 0,1 per cent and 3 per cent. auditors` report Independent 37. Subsequent Events

There are no events after the statement of financial position that would require either adjustments or additional disclosures in these consolidated financial statements. Addresses 97 Vision, mission and CSR Vision, International Raiffeisen Bank Raiffeisen Bank Management report Management Segment reports Segment

in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 98 Vision, mission and CSR Raiffeisen BankRaiffeisen International Management report Segment reports

Raiffeisen GroupRaiffeisen Adresses in Bulgaria auditors` report Independent Addresses 99 Vision, mission and CSR Vision, International Raiffeisen Bank Raiffeisen Bank Management report Management

Adresses 100 Segment reports Segment

in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 100

Addresses and Contacts

Vision, mission and CSR Branch Network in Bulgaria

Head Office Sofia 9 Sofia 19 1407 Sofia 1330 Sofia 1000 Sofia 55, N. Vaptsarov Blvd. Krasna Polyana Compl. 93A, Vasil Levski Blvd. EXPO 2000, Phase 3 N. Mushanov Blvd., bl. 31 Tel.: (+359 2) 9 396 011/12

Raiffeisen BankRaiffeisen Tel.: (+359 2) 91 985 101 Tel.: (+359 2) 8 126 053 Fax: (+359 2) 9 802 377 International Fax: (+359 2) 9 434 528 Fax: (+359 2) 9 201 134 Sofia 20 Sofia 10 1612 Sofia Raiffeisenbank (Bulgaria) EAD 1220 Sofia 7, Tsar Boris III Blvd., entr. A-B Offices in Sofia: Nadezhda Compl. Tel.: (+359 2) 8 051 612/613 Lomsko Shose Blvd., bl. 171 Fax: (+359 2) 9 523 878 Sofia Main Branch Tel.: (+359 2) 8 134 013 1504 Sofia Sofia 22 Fax: (+359 2) 9 361 193 18/20, Gogol Str. 1750 Sofia Management report Tel.: (+359 2) 91 985 702 Sofia 11 Mladost 1 Compl. Fax: (+359 2) 91 985 139 1463 Sofia Saharov Market 3, Hristo Stambolski Str. Tel.: (+359 2) 9 764 911/912 Sofia 2 Tel.: (+359 2) 9 178 113/114 Fax. (+359 2) 9 745 030 1000 Sofia Fax: (+359 2) 9 549 386 135, G.S. Rakovski Str. Sofia 23 Tel.: (+359 2) 8 155 712 Sofia 12 1712 Sofia Fax: (+359 2) 9 803 042 1202 Sofia Mladost 3 Compl., bl. 304 65, Maria Luiza Blvd. Tel.: (+359 2) 8 175 011/12 Sofia 3 Tel.: (+359 2) 9 264 043 Fax: (+359 2) 9 744 479 1750 Sofia

Segment reports Fax: (+359 2) 9 800 781 Mladost 1 Compl, bl.30, entr. V Sofia 24 Tel.:(+359 2) 9 760 960/967/968 Sofia 14 1504 Sofia Fax: (+359 2) 9 753 158 1111 Sofia 10, Yanko Sakazov Blvd. 43, Shipchenski Prohod Blvd. Tel.: (+359 2) 8 192 711/712/713 Sofia 4 Tel.: (+359 2) 8 171 863/864 Fax: (+359 2) 9 434 074 1303 Sofia Fax: (+359 2) 9 712 008 132, Todor Alexandrov Blvd. Sofia 26 Tel: (+359 2) 9 159 921/922 Sofia 15 1612 Sofia Fax: (+359 2) 9 811 921 1407 Sofia 124A, Tsar Boris III Blvd. 55, N. Vaptsarov Blvd. Tel.: (+359 2) 8 081 752 Sofia 5 Raiffeisen GroupRaiffeisen Business Centre EXPO 2000 Fax: (+359 2) 9 559 632 1606 Sofia in Bulgaria Tel.: (+359 2) 8 190 061/062 5, Gen. Totleben Blvd. Sofia 29 Fax: (+359 2) 8 682 080 Tel: (+359 2) 9 157 913/14/15 1574 Sofia Fax: (+359 2) 9 532 880 Sofia 16 3, Temenuga Str. 1303 Sofia Tel.: (+359 2) 8 924 013 Sofia 6 79, Hristo Botev Blvd. Fax: (+359 2) 8 701 086 1421 Sofia Tel.: (+359 2) 8 138 061/062 49, Bulgaria Blvd. Sofia 30 Fax: (+359 2) 9 311 038 Business Center Vitosha 1000 Sofia Tel.: (+359 2) 8 181 914/915 Sofia 17 111, G.S. Rakovski Blvd. auditors` report

Independent Fax: (+359 2) 9 589 961 1700 Sofia Tel.: (+359 2) 9 234 411/412 1, Universitetski Park Str. Fax: (+359 2) 9 802 372 Sofia 7 Tel.: (+359 2) 8 190 432 1324 Sofia Sofia 31 Fax: (+359 2) 9 625 042 Lyulin 6 Compl. 1421 Sofia 29, Dzhavaharlal Neru Blvd. Sofia 18 32A, Cherni Vrah Blvd. Tel.: (+359 2) 9 216 913/914 1517 Sofia Tel.: (+359 2) 8 065 822 Fax: (+359 2) 9 252 371 Botevgradsko Shose Blvd., bl. 4, Fax: (+359 2) 9 631 328 entr. G-E Addresses Sofia 8 Tel.: (+359 2) 8 190 3 61/362 1715 Sofia Fax: (+359 2) 9 454 422 Business Park Sofia, bl. 11A Tel.: (+359 2) 9 705 712 Fax: (+359 2) 9 742 019 101

Sofia 32 Sofia 47 Mega mall 1336 Sofia, 1324 Sofia Lyulin 3 Compl. 15, Tsaritsa Yoanna Blvd. Tsaritsa Yoana Blvd., bl.387 Tel.: (+359 2) 9 231 852 Tel.: (+359 2) 8 144 312 Fax: (+359 2) 9 310 804 Fax: (+359 2) 8 263 534 Sofia 48 Sofia 33 1407 Sofia 1000 Sofia 51B, Cherni Vrah Blvd. 5, Sveta Nedelya Square Tel.: (+359 2) 8 054 915 Tel.: (+359 2) 9 156 212 Sofia 50 Fax: (+359 2) 9 883 521 1528 Sofia Sofia 34 7 Iskarsko shosse Blvd., 1040 Sofia Commercial center Evropa

126, Vasil Levski Blvd. Tel.: (+359 2) 9 040 882 mission and CSR Vision, Tel.: (+359 2) 8 062 712 1619 Sofia Fax: (+359 2) 9 433 474 Sofia Cantek Sofia 35 81, Nikola Petkov Blvd. 1680 Sofia Tel.: (+359 2) 8 081 911/912 76, Gotse Delchev Blvd. Fax: (+359 2) 9 571 204 Tel.: (+359 2) 8 157 552 Sofia Militzer & Munch Fax: (+359 2) 8 586 589 1360 Sofia International Raiffeisen Bank Raiffeisen Bank Sofia 36 11, Andrey Germanov Str. 1618 Sofia Tel.: (+359 2) 9 845 775 13, Al. Pushkin Str. Fax: (+359 2) 9 250 583 Tel.: (+359 2) 8 082 742 Fax: (+359 2) 9 554 476 Sofia 37 1113 Sofia 12, Tsarigradsko Shose Blvd. Tel.: (+359 2) 8 074 311 Fax: (+359 2) 8 705 584 Management report Management Sofia 38 1584 Sofia Druzhba 2 Compl., 120, Tsvetan Lazarov Blvd. Tel.: (+359 2) 8 079 512 Fax: (+359 2) 9 790 627 Sofia 42 1113 Sofia

18А, F. J. Curie Str. reports Segment Tel.: (+359 2) 8 077 972 Fax: (+359 2) 9 711 308

Sofia 43 1142 Sofia 41А, Graf Ignatiev Str. Tel.: (+359 2) 810 22 12

Sofia 44 in Bulgaria 1606 Sofia Raiffeisen Group 8, Praga Blvd. Tel.: (+359 2) 8 953 912 Fax: (+359 2) 9 523 441 Sofia 45 1606 Sofia 53, Hristo Botev Blvd. Tel.: (+359 2) 8 951 712

Fax: (+359 2) 9 549 481 Independent auditors` report auditors` Sofia 46 1404 Sofia 2, Deyan Belishki Str. Tel.: (+359 2) 8 085 912 Fax: (+359 2) 9 583 068 Addresses Addresses 102

Raiffeisenbank (Bulgaria)EAD Burgas 6 Harmanli Offices in Bulgaria 8000 Burgas 6450 Harmanli Slaveykov Compl., bl. 126 1, Bulgaria Blvd. Aytos Tel.: (+359 56) 895 811 Tel./Fax: (+359 373) 34 91 8500 Aytos Fax: (+359 56) 586 057

Vision, mission and CSR 17, Tsar Osvoboditel Str. Haskovo 1 Tel.: (+359 558) 29 120 Byala 6300 Haskovo Fax: (+359 558) 23 530 7100 Byala 1-3, Pirin Str. 1, Ekzarh Yosif Parvi Square Tel.: (+359 38) 604 722/711 Asenovgrad Tel.: (+359 817) 713 12/13 Fax: (+359 38) 604 721 4230 Asenovgrad Fax: (+359 817) 720 56 Izlozhenie Str. Haskovo 2 Tel.: (+359 331) 60 060/062 Dimitrovgrad 6300 Haskovo 4, Svoboda Square Fax: (+359 331) 64 902 6400 Dimitrovgrad 9, Dimitar Blagoev Str. Tel.: (+359 38) 602 261/262 Blagoevgrad 1 Tel.: (+359 391) 65 113 Fax: (+359 38) 620 106 2700 Blagoevgrad Fax: (+359 391) 67 684 Haskovo 3 47, Todor Aleksandrov Str. Dobrich 1 6300 Haskovo

Raiffeisen BankRaiffeisen Tel.: (+359 73) 829 161 146, Bulgaria Blvd. International Fax: (+359 73) 831 582 9300 Dobrich 25, 25-ti Septemvri Str. Tel.: (+359 38) 650 312 Blagoevgrad 2 Tel.: (+359 58) 653 002/003 Fax: (+359 38) 661 114 2700 Blagoevgrad Fax: (+359 58) 601 783 Haskovo NAP 3, Arseniy Kostentsev Str. 6300 Haskovo Tel.: (+359 73) 882 091 Dobrich 2 2, Svoboda Square Fax: (+359 73) 882 092 9300 Dobrich 20, Otets Paisiy Str. Tel.: (+359 38) 624 093 Botevgrad Tel.: (+359 58) 655 032 Ihtiman NAP Management report 2140 Botevgrad Fax: (+359 58) 622 034 2050 Ihtiman 2, Akad. Stoyan Romanski Str. Dulovo 4, Polkovnik Drangov Str. Tel.: (+359 723) 68 711 Tel.: (+359 724) 22 54 Fax: (+359 723) 66 322 7650 Dulovo 11, Vasil Levski Str. Fax: (+359 724) 23 77 Botevgrad NAP Tel.: (+359 855) 21 112 Isperih 2140 Botevgrad Fax: (+359 855) 22 799 7400 Isperih 61, 3-ti Mart Blvd. 6, Stefan Karadzha Str. Dupnitsa Tel./Fax: (+359 723) 60 067 Tel.: (+359 8431) 46 75 2600 Dupnitsa Fax: (+359 8431) 28 22 Burgas 1 2, Solun Str. Segment reports 8000 Burgas Tel.: (+359 701) 59 813 Kazanlak 1, Adam Mitskevich Str. Fax: (+359 701) 51 113 6100 Kazanlak Tel.: (+359 56) 897 845 2, Knyaz Mirski Str. Elin Pelin Fax: (+359 56) 820 046 Tel.: (+359 431) 68 912 2100 Elin Pelin Fax: (+359 431) 70 066 Burgas NAP Vitosha Blvd., bl.4, entr.B 8000 Burgas Tel.: (+359 725) 68 012 Kardzhali 26, Aleksandrovska Str. Fax: (+359 725) 66 966 6600 Kardzhali Tel.: (+359 56) 825 663 23B, Ekzarh Yosif Str. Gabrovo Tel.: (+359 361) 60 653 Burgas 2 Raiffeisen GroupRaiffeisen 5300 Gabrovo Fax: (+359 361) 61 366 8000 Burgas 30, Skobelevska Str. in Bulgaria 115, Aleksandrovska Str. Tel.: (+359 66) 810 062 Karlovo Tel.: (+359 56) 875 922 Fax: (+359 66) 801 345 4300 Karlovo Fax: (+359 56) 830 173 1, Evstati Geshev Str. Gorna Oryahovitsa Tel.: (+359 335) 90 433 Burgas 3 5100 Gorna Oryahovitsa Fax: (+359 335) 92 295 8000 Burgas 1, Mano Todorov Str. Bratya Miladinovi Compl., bl.117 Tel.: (+359 618) 61 712 Karnobat Tel.: (+359 56) 859 487 Fax: (+359 618) 64 491 8400 Karnobat Fax: (+359 56) 831 825 1, Karnobatska Komuna Str. auditors` report Golden Sands

Independent Tel.: (+359 550) 28 843 Burgas 4 9007 Golden Sands Fax: (+359 550) 22 908 8000 Burgas Hotel Admiral 5, Ferdinandova Str. Tel.: (+359 52) 389 413 Kostinbrod Tel.: (+359 56) 851 422 Fax: (+359 52) 357 713 2230 Kostinbrod Fax: (+359 56) 842 640 11, Ohrid Str. Gotse Delchev Tel.: (+359 721) 68 861/862 Burgas 5 2900 Gotse Delchev Fax: (+359 721) 60 440 8000 Burgas 1, Byalo More Str.

Addresses Kyustendil Meden Rudnik Compl., bl.187 Tel.: (+359 751) 61 322 2500 Kyustendil Tel.: (+359 56) 857 911 Fax: (+359 751) 60 024 Fax: (+359 56) 850 096 Demokratsiya Square Tel.: (+359 78) 556 312 Fax: (+359 78) 554 152 103

Lovech Pirdop Primorsko 5500 Lovech 2070 Pirdop 8290 Primorsko 3, Bulgaria Blvd. 59, Tsar Osvoboditel Blvd. 54, Treti Mart Str. Tel.: (+359 68) 689 019 Tel.: (+359 728) 68 061 Tel.: (+359 550) 31 040 Fax: (+359 68) 689 020 Fax: (+359 7181) 86 63 Fax: (+359 550) 32 286 Mezdra Pleven 1 Radnevo 3100 Mezdra 5800 Pleven 6260 Radnevo 8, G. Dimitrov Str. 1, Vardar Str. 6, Georgi Dimitrov Str. Tel.: (+359 910) 91 711 Tel.: (+359 64) 894 423 Tel.: (+359 417) 81 122 Fax: (+359 910) 92 288 Fax: (+359 64) 804 394 Fax: (+359 417) 82 456 Montana Pleven 2 Razgrad 3400 Montana 5800 Pleven 7200 Razgrad 4, Zheravitsa Sq. 2, Tsar Boris III Str. 2, Stefan Karadzha Str.

Tel.: (+359 96) 391 939 Tel.: (+359 64) 890 512 Tel.: (+359 84) 611 463 mission and CSR Vision, Fax: (+359 96) 303 036 Fax: (+359 64) 803 470 Fax: (+359 84) 660 289 Nesebar Pleven 3 Razgrad NAP 8230 Nesebar 5800 Pleven 7200 Razgrad 3, Priboyna Str. 74, Hristo Botev Blvd. 2, Nezavisimost Square Tel.: (+359 554) 46 660 Tel.: (+359 64) 891 062 Tel.: (+359 84) 611 463 Fax: (+359 554) 43 516 Fax: (+359 64) 800 363 Fax: (+359 84) 660 289

Nova Zagora Plovdiv 1 Razlog International Raiffeisen Bank Raiffeisen Bank 8900 Nova Zagora 4000 Plovdiv 2760 Razlog 49, Vasil Levski Str. 20, Vasil Aprilov Str. 8, Sheynovo Str. Tel.: (+359 457) 61 112 Tel.: (+359 32) 261 912 Tel.: (+359 747) 89 011 Fax: (+359 457) 62 870 Fax: (+359 32) 629 966 Fax: (+359 747) 80 647 Panagyurishte Plovdiv 2 Ruse 1 4500 Panaguyrishte 4000 Plovdiv 7000 Ruse 3, G.Benkovski Str. 125, Shesti Septemvri Blvd. 22, Slavyanska Str. Tel.: (+359 357) 88 00 Tel.: (+359 32) 648 841 Tel.: (+359 82) 817 963 Fax: (+359 357) 60 37 Fax: (+359 32) 649 531 Fax: (+359 82) 821 597 Pazardzhik 1 Plovdiv 3 Ruse 2 Management report Management 4400 Pazardzhik 4000 Plovdiv 7000 Ruse 7, Tsar Shishman Str. 1, Maria Luiza Blvd. 54, Lipnik Blvd. Tel.: (+359 34) 403 023/024 Tel.: (+359 32) 646 562 Tel.: (+359 82) 814 352/354 Fax: (+359 34) 403 020 Fax: (+359 32) 662 900 Fax: (+359 82) 841 682 Pazardzhik 2 Plovdiv 4 Ruse 3 4400 Pazardzhik 4000 Plovdiv 7000 Ruse 22, General Gurko Str. 106, Bulgaria Blvd. 4, Borisova Str. Tel.: (+359 34) 406 712 Tel.: (+359 32) 907 912/913 Tel.: (+359 82) 880 411/412

Fax: (+359 34) 431 019 Fax: (+359 32) 940 076 Fax: (+359 82) 820 177 reports Segment Pazardzhik NAP Plovdiv 5 Samokov

4400 Pazardzhik 4000 Plovdiv 2000 Samokov 7, Asen Zlatarov Str. 5, Avksentiy Veleshki Str. 33, Makedonia Blvd Tel.: (+359 34) 441 250 Tel.: (+359 32) 601 287/270 Tel.: (+359 722) 68 011 Fax: (+359 32) 629 911 Fax: (+359 722) 60 186 Pernik 2300 Pernik Plovdiv 7 Sandanski 15, Krakra Str. 4023 Plovdiv 2800 Sandanski in Bulgaria Tel.: (+359 76) 688 111 Saedinenie Blvd., 1, Hristo Smirnenski Str. Raiffeisen Group Fax: (+359 76) 609 062 Arimag Shopping Center Tel.: (+359 746) 34 631 Tel.: (+359 32) 271 412 Fax: (+359 746) 32 703 Peshtera Fax: (+359 32) 682 053 4550 Peshtera Sevlievo 19, Doyranska Epopeya Str. Pomorie 5400 Sevlievo Tel.: (+359 350) 63 71 8200 Pomorie 1, Svoboda Square Fax: (+359 350) 41 51 40, Prof. Stoyanov Str. Tel.: (+359 675) 31 213 Tel.: (+359 596) 28 912 Fax: (+359 675) 33 091

Petrich Independent Fax: (+359 596) 28 096 2850 Petrich Shumen report auditors` 51/53, Rokfeler Str. Popovo 9700 Shumen Tel.: (+359 745) 69 611 7800 Popovo 97, Tsar Osvoboditel Str. Fax: (+359 745) 61 461 15-ti January Str. Tel: (+359 54) 850 953 Tel.: (+359 608) 401 22/23/27 Fax: (+359 54) 830 757 Fax: (+359 608) 400 89 Addresses Addresses 104

Shumen NAP Svoge NAP Veliko Tarnovo 2 9700 Shumen 2260 Svoge 5000 Veliko Tarnovo 1, Adam Mitskevich Str. 3, Al. Stamboliiski Str. 37, B Nikola Gabrovski Str. Tel: (+359 54) 30 105 Tel.: (+359 726) 52 47 Tel.: (+359 62) 610 512 Fax: (+359 54) 820 135 Fax.: (+359 726) 52 48 Fax: (+359 62) 671 114 Vision, mission and CSR Silistra Targovishte Velingrad 7500 Silistra 7700 Targovishte 4600 Velingrad 20, Tsar Shishman Str. 2, Preslav Str. Аl. Stambolyiski Str., bl.1 Tel.: (+359 86) 818 213 Tel: (+359 601) 69 553 Tel.: (+359 359) 56 921 Fax: (+359 86) 822 877 Fax: (+359 601) 69 303 Fax: (+359 359) 51 026 Sliven 1 Targovishte NAP Vidin 8800 Sliven 7700 Targovishte 3700 Vidin 11, Tsar Simeon Str. 1, Svoboda Square 1, Tsar Ivan Asen II Str. Tel.: (+359 44) 610 431/33 Tel: (+359 601) 62 059 Tel.: (+359 94) 609 112 Fax: (+359 44) 662 123 Fax: (+359 94) 607 143 Troyan Sliven 2 5600 Troyan Vidin NAP Raiffeisen BankRaiffeisen

International 8800 Sliven 1, Rakovski Square 3700 Vidin 4, Dimitar Dobrovich Str. Tel.: (+359 670) 66 612/613 12, 6-ti Septemvri Str. Tel.: (+359 44) 610 412 Fax: (+359 670) 60 977 Tel.: (+359 94) 601 804 Fax: (+359 44) 630 555 Fax.: (+359 94) 601 434 Varna 1 Smolyan 9000 Varna Vratsa 4700 Smolian 32, Tsar Simeon Parvi Str. 3000 Vratsa 73, Bulgaria Blvd. Tel.: (+359 52) 688 023 Hristo Botev Square Tel.: (+359 301) 62 095 Fax: (+359 52) 633 007 Tel.: (+359 92) 668 833 Management report Fax: (+359 301) 92 096 Fax: (+359 92) 666 698 Varna 3 Sozopol 9000 Varna Vratsa NAP 8130 Sozopol 80-82, Osmi Primorski Polk Blvd. 3000 Vratsa 3, Industrialna Zona Str., Sozopol Hotel Tel.: (+359 52) 685 713 86, Vasil Kanchov Str. Tel.: (+359 550) 24 550 Fax: (+359 52) 603 744 Tel: (+359 92) 661 610 Fax: (+359 550) 22 313 Varna 4 Yambol Stara Zagora 1 9000 Varna 8600 Yambol 6000 Stara Zagora 91, Slivnitsa Blvd. 20, Zhorzh Papazov Str. 79, Knyaz Boris Str. Tel.: (+359 52) 952 711/712 Tel.: (+359 46) 683 462/464 Segment reports Tel.: (+359 42) 617 512 Fax: (+359 52) 654 627 Fax: (+359 46) 664 175 Fax: (+359 42) 604 498 Varna 5 Stara Zagora 2 9000 Varna 6000 Stara Zagora 68, Vladislav Varnenchik Blvd. 67, Tsar Simeon Veliki Str. Tel.: (+359 52) 662 412 Tel.: (+359 42) 602 043 Fax: (+359 52) 695 454 Fax: (+359 42) 601 924 Varna 7 Stara Zagora 3 9000 Varna

Raiffeisen GroupRaiffeisen 6000 Stara Zagora 3-5, Vladislav Varnenchik Blvd. 2, Mitropolit Metodi Kusev Blvd. Tel.: (+359 52) 679 942 in Bulgaria Tel.: (+359 42) 693 512 Fax: (+359 52) 623 447 Fax: (+359 42) 230 045 Varna Piccadilly Sunny Beach 9000 Varna 8240 Sunny Beach 482, Primorski Park II Blvd. Hotel Diamond Saltanat Area Tel: (+359 554) 24 565 Tel.: (+359 52) 385 312 Fax: (+359 554) 23 621 Fax: (+359 52) 308 033 auditors` report Svilengrad Varna Mall Independent 6500 Svilengrad 9000 Varna 73, Bulgaria Blvd. 186, Vladislav Varnenchik Blvd. Tel.: (+359 379) 706 52/53 Tel.: (+359 52) 575 832 Fax: (+359 379) 71 552 Fax: (+359 52) 731 069 Svishtov Veliko Tarnovo 1 5250 Svishtov 5000 Veliko Tarnovo 100, Tsar Osvoboditel Str. 31, Marno Pole Str. Addresses Tel.: (+359 631) 61 311 Tel.: (+359 62) 616 411 Fax: (+359 631) 60 385 Fax: (+359 62) 601 204 105

Others:

Raiffeisen Leasing Bulgaria 1407 Sofia Lozenets 32 A, Cherni vrah Blvd., 6th floor Tel.: (+359 2) 491 91 91 Fax: (+359 2) 974 20 57

Raiffeisen Asset Management 1407 Sofia 55, N. Vaptsarov Blvd. Business Centre EXPO 2000 Tel.: (+359 2) 919 85 452 Vision, mission and CSR Vision, Fax: (+359 2) 943 33 65

Raiffeisen Direct - Call Centre 1407 Sofia 55, N. Vaptsarov Blvd. Business Centre EXPO 2000, Building D Tel.: 0 700 10 000 Fax: (+359 2) 862 38 81 International Raiffeisen Bank Raiffeisen Bank

Raiffeisen Insurance Broker 1407 Sofia 55, N. Vaptsarov Blvd. Business Centre EXPO 2000 Tel.: (+359 2) 817 42 60, 817 43 39 Fax: (+359 2) 973 30 94

Raiffeisen Real Estate EOOD 1504 Sofia 5, Sveta Nedelia sqr. Management report Management Tel.: (+359 2) 817 42 90 Fax: (+359 2) 971 24 04 Segment reports Segment

in Bulgaria Raiffeisen Group Independent Independent auditors` report auditors` Addresses Addresses 106

Contacts of Selected Members of

Vision, mission and CSR Raiffeisen Bank International AG

Raiffeisen Bank International AG Czech Republic Serbia Austria Raiffeisenbank a.s. Raiffeisen banka a.d. Am Stadtpark 9 Hvìzdova 1716/2b Djordja Stanojevica 16 1030 Vienna 14078 Prague 4 11070 Novi Beograd Phone: +43-1-71 707-0 Phone: + 420-234-405-222 Phone: +381-11-32 021 00 Fax: +43-1-71 707-1715 Fax: +420-234-402-111 Fax: +381-11-22 070 80 www.rbinternational.com SWIFT/BIC: RZBCCZPP SWIFT/BIC: RZBSRSBG [email protected] www.rb.cz www.raiffeisenbank.rs Raiffeisen BankRaiffeisen [email protected] International Hungary Slovakia Banking network Raiffeisen Bank Zrt. Tatra banka, a.s. Akadémia utca 6 Hodovo námestie 3 Albania 1054 Budapest P.O. Box 42 Raiffeisen Bank Sh.a. Phone: +36-1-48 444-00 85005 Bratislava 55 „European Trade Center” Fax: +36-1-48 444-44 Phone: +421-2-59 19-1111 Bulevardi „Bajram Curri” SWIFT/BIC: UBRTHUHB Fax: +421-2-59 19-1110

Management report Tirana www.raiffeisen.hu SWIFT/BIC: TATRSKBX www.tatrabanka.sk Phone: +355-4-23 8 1000 Kosovo Fax: +355-4-22 755 99 Slovenia SWIFT/BIC: SGSBALTX Raiffeisen Bank Kosovo J.S.C. www.raiffeisen.al Rruga UÇK, No. 51 Raiffeisen Banka d.d. 10000 Pristina Zagrebška cesta 76 Belarus Phone: +381-38-22 222 2 2000 Maribor Priorbank JSC Fax: +381-38-20 301 130 Phone: +386-2-22 931 00 V. Khoruzhey Str. 31-A SWIFT/BIC: RBKOXKPR Fax: +386-2-30 344 2 220002 Minsk www.raiffeisen-kosovo.com SWIFT/BIC: KREKSI22

Segment reports www.raiffeisen.si Phone: +375-17-28 9-9090 Poland Fax: +375-17-28 9-9191 Ukraine SWIFT/BIC: PJCBBY2X Raiffeisen Bank Polska S.A. www.priorbank.by Ul. Piêkna 20 Raiffeisen Bank Aval JSC 00-549 Warsaw 9, Vul Leskova Bosnia and Herzegovina Phone: +48-22-58 5-2000 01011 Kiev Raiffeisen Bank d.d. Fax: +48-22-58 5-2585 Phone: +38-044-49 088 88, Bosna i Hercegovina SWIFT/BIC: RCBWPLPW +380 (800) 500 500 Zmaja od Bosne bb www.raiffeisen.pl Fax: +38-044-295-32 31 SWIFT/BIC: AVALUAUK 71000 Sarajevo Romania Raiffeisen GroupRaiffeisen Phone: +387-33-287 101 www.aval.ua in Bulgaria Fax: +387-33-21 385 1 Raiffeisen Bank S.A. SWIFT/BIC: RZBABA2S 246 C Calea Floreasca Leasing companies www.raiffeisenbank.ba 014476 Bucharest Phone: +40-21-30 610 00 Austria Bulgaria Fax: +40-21-23 007 00 Raiffeisen-Leasing International GmbH Raiffeisenbank (Bulgaria) EAD SWIFT/BIC: RZBRROBU Am Stadtpark 3 Ulica N. Gogol 18/20 www.raiffeisen.ro 1030 Vienna 1504 Sofia Russia Phone: +43-1-71 707-2071

auditors` report Phone: +359-2-91 985 101 Fax: +43-1-71 707-76 2966

Independent Fax: +359-2-94 345 28 ZAO Raiffeisenbank www.rli.co.at SWIFT/BIC: RZBBBGSF Smolenskaya-Sennaya Sq. 28 Albania www.rbb.bg 119002 Moscow Phone: +7-495-72 1-9900 Raiffeisen Leasing Sh.a. Croatia Fax: +7-495-72 1-9901 „European Trade Center” Raiffeisenbank Austria d.d. SWIFT/BIC: RZBMRUMM Bulevardi „Bajram Curri” Petrinjska 59 www.raiffeisen.ru Tirana 10000 Zagreb Phone: +355-4-22 749 20 Addresses Phone: +385-1-45 664 66 Fax: +355-4-22 325 24 Fax: +385-1-48 116 24 www.raiffeisen-leasing.al SWIFT/BIC: RZBHHR2X www.rba.hr 107

Belarus Moldova Branches and representative JLLC „Raiffeisen-Leasing” I.C.S. Raiffeisen Leasing S.R.L. offices – Europe V. Khoruzhey 31-A Alexandru cel Bun 51 France 220002 Minsk 2012 Chiºinãu Phone: +375-17-28 9-9394 Phone: +373-22-27 931 3 RBI Representative Office Paris Fax: +375-17-28 9-9974 Fax: +373-22-22 838 1 9-11 Avenue Franklin D. Roosevelt www.rl.by www.raiffeisen-leasing.md 75008 Paris Phone: +33-1-45 612 700 Bosnia and Herzegovina Poland Fax: +33-1-45 611 606 Raiffeisen Leasing d.o.o. Sarajevo Raiffeisen-Leasing Polska S.A. Germany Danijela Ozme 3 Ul. Prosta 51 71000 Sarajevo 00-838 Warsaw RBI Frankfurt Branch Phone: +387-33-25 435 4 Phone: +48-22-32 636-66 Mainzer Landstraße 51 Fax: +387-33-21 227 3 Fax: +48-22-32 636-01 60329 Frankfurt Vision, mission and CSR Vision, www.rlbh.ba www.rl.com.pl Phone: +49-69-29 921 918 Fax: +49-69-29 921 9-22 Bulgaria Romania Sweden Raiffeisen Leasing Bulgaria OOD Raiffeisen Leasing IFN S.A. 32A Cherni Vrah Blvd. Fl.6 246 D Calea Floreasca RBI Representative Office 1407 Sofia 014476 Bucharest Nordic Countries Phone: +359-2-49 191 91 Phone: +40-21-36 532 96 Drottninggatan 89, 14th floor Fax: +359-2-97 420 57 Fax: +40-37-28 799 88 113 60 Stockholm International www.rlbg.bg www.raiffeisen-leasing.ro Phone: +46-8-440 5086 Raiffeisen Bank Croatia Russia Fax: +46-8-440 5089 Raiffeisen Leasing d.o.o. OOO Raiffeisen-Leasing UK Radnicka cesta 43 Stanislavskogo Str. 21/1 RBI London Branch 10000 Zagreb 109004 Moscow 10 King William Street Phone: +385-1-65 9-5000 Phone: +7-495-72 1-9980 London EC4N 7TW Fax: +385-1-65 9-5050 Fax: +7-495-72 1-9572 Phone: +44-20-79 33-8000 www.rl-hr.hr www.raiffeisen-leasing.ru Fax: +44-20-79 33-8099 Czech Republic Serbia

Branches and representative report Management Raiffeisen-Leasing s.r.o. Raiffeisen Leasing d.o.o. Hvìzdova 1716/2b Djordja Stanojevica 16 offices – Asia and America 14078 Prague 4 11070 Novi Beograd China Phone: +420-221-511-611 Phone: +381-11-220 7400 Fax: +420-221-511-666 Fax: +381-11-228 9007 RBI Beijing Branch www.rl.cz www.raiffeisen-leasing.rs Beijing International Club Suite 200 2nd floor Hungary Slovakia Jianguomenwai Dajie 21 Raiffeisen Lízing Zrt. Tatra-Leasing s.r.o. 100020 Beijing K˜smark utca 11-13 Èernyševského 50 Phone: +86-10-65 32-3388 reports Segment 1158 Budapest 85101 Bratislava Fax: +86-10-65 32-5926 Phone: +36-1-298 8000 Phone: +421-2-59 19-3168 RBI Representative Office Harbin

Fax: +36-1-298 8010 Fax: +421-2-59 19-3048 Room 1104, Pufa Piaza No. 209 www.raiffeisenlizing.hu www.tatraleasing.sk Chang Jiang Street Kazakhstan Slovenia Nang Gang District 150090 Harbin Raiffeisen Leasing Kazakhstan LLP Raiffeisen Leasing d.o.o. Phone: +86-451-55 531 988 in Bulgaria Shevchenko Str. 146, No. 12 Letališka cesta 29a Fax: +86-451-55 531 988 Raiffeisen Group 050008 Almaty SI-1000 Ljubljana RBI Hong Kong Branch Phone: +7-727-37 8-5430 Phone: +386 1 241-6250 Fax: +7-727-37 8-5431 Fax: +386 1 241-6268 Unit 2102, 21st Floor, www.rlkz.at www.rl-sl.si Tower One, Lippo Centre 89 Queensway, Hong Kong Kosovo Ukraine Phone: +85-2-27 30-2112 Fax: +85-2-27 30-6028 Raiffeisen Leasing Kosovo LLC Raiffeisen Leasing Aval Gazmend Zajmi n.n., Sunny Hill 9, Moskovskyi Av. RBI Xiamen Branch

10000 Pristina Build. 5 Office 101 Unit B, 32/F, Zhongmin Building, Independent Phone: +381-38-22 222 2 04073 Kiev No. 72 Hubin North Road, report auditors` Fax: +381-38-20 301 136 Phone: +38-044-59 024 90 Xiamen, Fujian Province www.raiffeisenleasing-kosovo.com Fax: + 38-044-20 004 08 361013, P.R. China www.rla.com.ua Phone: +86-592-26 2-3988 Fax: +86-592-26 2-3998 Addresses Addresses 108

RBI Representative Office Zhuhai Raiffeisen Room 2404, Yue Cai Building Zentralbank AG No. 188, Jingshan Road, Jida, Zhuhai, Guangdong Province Austria 519015, P.R. China Am Stadtpark 9 Vision, mission and CSR Phone: +86-756-32 3-3500 1030 Vienna Fax: +86-756-32 3-3321 Phone: +43-1-26 216-0 Fax: +43-1-26 216-1715 India www.rzb.at RBI Representative Office Mumbai 803, Peninsula Heights Selected Raiffeisen Specialist C.D. Barfiwala Road, Andheri (W) Companies 400 058 Mumbai Phone: +91-22-26 230 657 Kathrein Privatbank Fax: +91-22-26 244 529 Aktiengesellschaft Wipplingerstrae 25 Korea 1010 Vienna

Raiffeisen BankRaiffeisen RBI Representative Office Korea Phone: +43-1-53 451-300 International # 1809 Le Meilleur Jongno Town Fax: +43-1-53 451-8000 24 Jongno 1-ga www.kathrein.at Seoul 110-888 Raiffeisen Centrobank AG Republic of Korea Tegetthoffstrae 1 Phone: +82-2-72 5-7951 1015 Vienna Fax: +82-2-72 5-7988 Phone: +43-1-51 520-0 Malaysia Fax: +43-1-51 343-96

Management report www.rcb.at RBI Labuan Branch Licensed Labuan Bank No. 110108C ZUNO BANK AG Level 6 (1E), Main Office Tower Muthgasse 26 Financial Park 1190 Vienna Labuan Phone: +43-1-90 728 88-01 Phone: +607-29 1-3800 www.zuno.eu Fax: +607-29 1-3801 Singapore RBI Singapore Branch Segment reports One Raffles Quay #38-01 North Tower Singapore 048583 Phone: +65-63 05-6000 Fax: +65-63 05-6001 USA RB International Finance (USA) LLC 1133 Avenue of the Americas,

Raiffeisen GroupRaiffeisen 16th Floor

in Bulgaria 10036 New York Phone: +01-212-84 541 00 Fax: +01-212-94 420 93 RZB Austria Representative Office New York 1133 Avenue of the Americas, 16th Floor 10036 New York

auditors` report Phone: +01-212-59 3-7593

Independent Fax: +01-212-59 3-9870 Vietnam RBI Representative Office Ho-Chi-Minh-City 35 Nguyen Hue Str., Harbour View Tower Room 601A, 6th Floor, Dist 1 Addresses Ho-Chi-Minh-City Phone: +84-8-38 214 718, +84-8-38 214 719 Fax: +84-8-38 215 256

Bulgaria