The 'B++' rating indicates that the autonomous nonprofit organization Fund of Guarantees and Business Development of Pskov Region qualifies as a guarantee institution with a satisfactory degree of reliability. The risk of a delay in meeting obligations is moderate, the full or partial debt restructuring risk is insignificant. The rating assignment was based on the Credit Rating Methodology for Guarantee Institutions rev. March 3, 2015.

The guarantee institution's rating is supported by a relatively conservative approach of the Fund to mutualizing credit risks and a robust guarantee coverage.

The relative size of sureties provided by the Fund has increased this year, which implies higher revenues from the core business activity of FGBD PR. At the same time, the guarantee institution still sticks to a moderately conservative policy: the actual share of funds secured by the obligations of FGBD PR is 44.5%.

In view of AK&M Rating Agency, the highly reliable guarantee coverage for the Fund's sureties contributes the rating. As of October 1, 2015, the Fund deposited RUB 150 million with four credit institutions ranking among the top 10 leading Russian in terms of net assets and equity capital and rated similar to or above the 'A++' level on the AK&M Rating Scale. Average yield of the deposits is 10.6% p.a. It should be noted that the guarantee institution meets the regulatory authority's requirement as regards the relative share of deposits with one financial institution (50% for entities whose guarantee capital does not exceed RUB 200 million); none of the banks accounts for more than 32.6% of the Fund's deposits.

It should however be noted that the effects of FGBD PR's improper investment policy of prior years reduced its capitalization by 20% against the moment of our previous review. The guarantee institution's assets in the amount of RUB 43.75 million were invested in banks which forfeited their licenses.

In addition, we regard the following key rating constraints: an increase in the amount of obligations discharged by the Fund, a high loss ratio, scanty provisions for doubtful debts which is substantially below the amount of discharged obligations, a negative financial result and a shrinking current portfolio of surety commitments.

For the 9-month period in 2015, the guarantee institution effected 11 payments for a total amount of RUB 15.6 million. As a result, the total amount of obligations to banks reached RUB 22.6 million increasing by RUB 21.5 million since our previous review.

As a result, the loss ratio of FGBD PR increased from 0.3% to 6.34% indicating a poor risk management system and certainly putting pressure on the rating. This year, the Fund recovered RUB 816 thousand through applicable recourse procedures. Therefore, the debt recovery ratio was 4.6% decreasing by 16.1 p.p. against October 1, 2014.

In the period under review, the guarantee institution made provisions in the amount of RUB 3.9 million, covering a mere 25% of the obligations discharged by it.

As a result of the payments made under the surety agreements this year, expenses of FGBD PR exceed its 9-month income RUB 4.5 million. As an offsetting factor, the Fund's total income is commensurate with the previous year's level.

Since the start of 2015, the current portfolio of surety commitments decreased by RUB 27.8 million to reach RUB 70.7 million as of the last reporting date, the lowest level in the period under review. The guarantee capital multiple has also been on a negative trend this year, an evidence of the guarantee institution's underperformance in providing SME businesses with access to banks' credit facilities.

Full business name: autonomous nonprofit organization Fund of Guarantees and Business Development of Pskov Region

Short name: FGBD PR

Autonomous nonprofit organization Fund of Guarantees and Business Development of Pskov Region (FGBD PR) was established in 2009. The mission of the Fund affiliated with the government of Pskov region is to provide SME businesses with access to credit facilities and other financial resources. FGBD PR started providing sureties in 2009.

AK&M Rating Agency assigned a credit rating to FGBD PR for the first time on December 8, 2014. The last rating action in relation to the Fund was taken on December 8, 2014. All rating action announcements are available on the akmrating.ru website.

The rating is valid until December 2016. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the Fund's creditworthiness are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the guarantee institution. The rationale for AK&M Rating Agency's judgment on the rating may include information acquired from other sources we deem to be reliable; however, the agency does not check the input data exhaustively and disclaims all responsibility for their possible errors.

This press release is based on the Statement of assignment of a credit rating to FGBD PR and the Credit Rating Methodology for Guarantee Institutions rev. March 3, 2015.

The rating, along with any information and conclusions provided in this report, only conveys our opinion and shall not be construed as a recommendation to lend money resources to the Fund or to seek its guarantees and sureties.

AK&M Rating Agency shall not be held liable for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

AK&M Rating Agency is a leading independent national rating agency engaged in rating activities since 1993. CJSC AK&M Rating Agency is accredited by the Ministry of Finance of the Russian Federation (order no. 452 as of September 17, 2010) and is on the Central Bank of Russia's Register of Accredited Rating Agencies.

AK&M Rating Agency

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www.akmrating.ru

Phone no. (495) 916-70-30, fax no.: (499) 132-69-18.