The credit rating of Kursk region reflects a favorably-structured public debt, an acceptable ratio of consolidated budget revenues to budget expenses, as well as moderately high economic growth rates.

As of June 1, 2016, the public debt of Kursk region was wholly composed of public budget loans, whereas loans from banking institutions accounted for 20% to 75% of the federal subject's debt obligations in 2015. According to the results of financial monitoring (Order no. 552 of Russia's Ministry of Finance), as of January 1, 2016, Kursk region had the lowest ratio of public debt (excluding public budget loans) to total budget revenues (excluding non-repayable receipts) in the Central Federal District.

In 2015, Kursk region had a very low consolidated budget deficit (0.7% of consolidated revenues); as of June 1, 2016, the region achieved a budget surplus of RUB 1.1 billion, the annual budget gap being projected at RUB 4.2 billion.

The regional industrial production index was 104.2% in 2015 (96.6% in the Russian Federation as a whole), 100.1% in the first quarter of 2016 (99.4% in Russia). Total capital investment increased by 28.6% against the first quarter of 2015.

The key rating constraint is Kursk region's heavy debt burden. In the 12-month period ending on May 31, 2016, the public debt of the federal subject grew 1.25 times to reach RUB 8.43 billion as of the last settlement date (13.8% of revenues of the consolidated regional budget and the territorial state off-budget fund for 2015).

AK&M Rating Agency assigned a credit rating to Kursk region for the first time on December 30, 2013. The last rating action was taken on December 24, 2014. All rating action announcements are available on the www.akmrating.ru website.

For estimation purposes, we completely rely on the reliability of information provided by the region. 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.

The rating assignment is based on the results of monitoring the current credit rating assigned to Kursk region and the Credit Rating Methodology for Federal Subjects and Municipal Entities rev. February 25, 2016.

The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Bank's creditworthiness and shall not be construed as a recommendation to purchase or sell securities, or to lend funds.

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.

AK&M Rating Agency

Ul. Gubkina 3, Moscow, Russia

www.akmrating.ru

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