The 'A+' rating indicates that JSC Agency for Supporting Small and Medium-sized Businesses, regional microcredit organization of Leningrad region (hereinafter also abbreviated as ASSMB) qualifies as a microfinance institution with a very high degree of reliability. The risk of a failure to meet obligations in time is insignificant. The rating assignment was based on the Credit Rating Methodology for Microfinance Institutions rev. February 10, 2016.

JSC ASSMB was established in 2003 pursuant to a decree of the Governor of Leningrad region with the aim of assisting in increasing the number of creditworthy and financially viable SME businesses in the region by creating favorable conditions for access to credit facilities of banks and leasing companies.

The key positive rating drivers include the company's growing capitalization and an increase in the amount of loans provided to small and medium-sized businesses, high lending efficiency, good profitability of microlending operations, a sufficient level of security for microloans and good diversification of the loan portfolio across economic sectors.

In the period from October 1, 2016 to October 1, 2017, capitalization of ASSMB increased by RUB 42.2 million to reach RUB 162.4 million, thereby creating good opportunities for increasing the volume of the Fund's asset-side transactions with the aim of providing SME businesses with access to credit resources. For the 9-month period in 2017, the Fund provided 47 loans for a total amount of more than RUB 84 million, which is above the previous year's results (37 loans for a total amount of RUB 66.3 million).

We appreciate the ability of ASSMB to keep lending efficiency for budgetary allocations at a good level throughout 2017. The lending efficiency ratio did not fall below 78.5% and reached the maximum level of 100% at the end of September. ASSMB has fully meet the Russian Ministry of Economic Development's requirements for the lending efficiency ratio at the end of one calendar year after the launch of the microlending program.

The rating is supported by the positive and stronger financial result from microlending operations. For the 9-month period in 2017, the positive financial result reached RUB 5,215.8 thousand, which is 15 times above the result achieved for the same period in 2016. The high profitability was complemented by efficiency of the microlending business, incomes exceeding expenses more than twice as of October 1, 2017. The good operational sustainability reaching 228% is an evidence of the growing potential to further expand the scale of asset-side transactions.

Another positive rating driver is that the amount of security is three times above the loan portfolio. This substantially reduces risks of possible losses for ASSMB under an adverse scenario resulting in defaults of SME businesses.

As of October 1, 2017, the Fund's microloan portfolio was well-diversified in terms of industries. The relatively high investments in the real economy (23.3% for the manufacturing industry, 8.5% for agriculture, 13.0% for transport, 5% for construction), combined with the actual level of diversification across industries reduces risks of additional losses which JSC ASSMB may incur due to stagnation of separate components of the sectoral structure amidst a recession in the economic cycle.

The rating is primarily constrained by the microloan portfolio deterioration and a short period of the microlending activity of ASSMB.

In the period from October 1, 2016 to October 1, 2017, the share of microloans with payment delays exceeding 30 days increased from zero to 4.6% and reached 6.4% on April 1, 2017. The reduction in the percentage of overdue loans at the end of the 9-month period is largely due to considerable volumes of new lending – which implies the risk of a latent negative potential for an increase in overdue payments.

Besides, the rating is constrained by ASSMB's short experience in the microlending business (since the start of 2016), which indicates organizational risks.

Full name: JSC Agency for Supporting Small and Medium-sized Businesses, regional microcredit organization of Leningrad region.

Short name: ASSMB.

JSC ASSMB was registered on August 14, 2003. Its sole founder is the Government of Leningrad region represented by the Leningrad regional committee for the management of state-owned property. Over its existence, the microcredit organization has provided 119 loans for a total amount of RUB 210.9 million. As of October 1, 2017, capitalization of JSC ASSMB for microfinance purposes was RUB 162.4 million, the loan portfolio amounted to RUB 162.4 million.

AK&M Rating Agency assigned a reliability rating to JSC ASSMB for the first time on December 29, 2016. The last rating action was taken on December 29, 2016. All rating action announcements are published on the akmrating.ru website.

The rating is valid until July 2016. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the creditworthiness of the microfinance organization are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the microcredit company. 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 microfinance organization rating to JSC ASSMB and the Credit Rating Methodology for Guarantee Institutions rev. February 10, 2016.

The rating, along with any information and conclusions provided in this press release, only conveys our reliability opinion 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.