CJSC AK&M Rating Agency assigned the State Fund of the Kemerovo Region for Business Support (SFKRBS) an 'A' tier 2 microfinance institution credit rating on the national scale, with a stable outlook.

The 'A' rating indicates that the State Fund of the Kemerovo Region for Business Support qualifies as a microfinance institution with a high degree of financial stability and a good level of SME assistance in the region. The risk of a failure to meet obligations in time is low, the full or partial debt restructuring risk is minimal.

The MFI rating reflects the high total amount of microloans provided by the Fund, the comfortable level of key regulatory performance indicators, and a good sectoral structure of microloans.

For the whole period of microfinance activities, the Fund has concluded 614 microloan contracts for a total amount of RUB 390 million (as of July 1, 2014). Every year, the State Fund of the Kemerovo Region for Business Support expands lending to SME businesses registered in the region. In particular, the current microloan portfolio increased by 13.7% in 2013. A slight reduction (-5%) followed this growth in 2014, reflecting the general trend in the segment of lending to small and medium-sized businesses in the region: for 6 months of 2014, the total loan balances of the SME sector in Kemerovo region decreased by 8.7%.

We appreciate the high efficiency of the Fund’s investment (lending) operations. SFKRBS's current loan portfolio reaches 83.9% of its capitalization, meeting the Ministry of Economic Development’s applicable requirement of at least 80%.

The Fund has always kept its operating expense equal to the amount of financial income; consequently, its operational sustainability is 100% (equal to the minimum recommended percentage). The level of operating expense across the average microloan portfolio stays within acceptable limits (9.7%, the recommended cost-based performance ratio being no more than 30%).

The biggest group of SFKRBS's borrowers comprises small business entities engaged in the manufacturing sector (25% of the Fund's current loan portfolio), the amount of their loans being RUB 21.5 million. This generally corresponds to the target profile of the region’s economic development as a whole.

The Fund’s rating is constrained by the high percentage of debt arrears and the excessive portfolio-at-risk (PAR) ratio.

The State Fund of the Kemerovo Region for Business Support’s current loan book contains 13 microloans (for a total amount of RUB 5 million) 1 year or longer in arrears. The Fund’s legal actions against this group of borrowers have shown that the full recovery of the loans in the medium term is quite unlikely; as of the end of August 2014, only 713 thousand rubles (ca. 8% of the total amount of debt in arrears) were actually paid back to the lender. The portfolio-at-risk (PAR) ratio at the end of August 2014 was 5.9%, the maximum acceptable percentage being 7%.

It has to be noted that the last loan with arrears on it was provided in the first quarter of 2012, which implies a better and more efficient risk management system of the microfinance institution in recent years.

The State Fund of the Kemerovo Region for Business Support was registered in June 1996 as an entity affiliated with the government of Kemerovo region to ensure SME support and assistance opportunities in Kemerovo region and to provide available loan facilities to small and medium-sized businesses in the region. The Fund was registered as a microfinance institution on August 24, 2011.

This press release is based on the Statement of assignment of a microfinance institution credit rating to the State Fund of the Kemerovo Region for Business Support.

The rating, along with any information and conclusions provided in this press release, only conveys our opinion on the rated entity’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.

CJSC Analysis, Consulting and Marketing 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.

CJSC AK&M Rating Agency

ul. Gubkina 3, Moscow, Russia

www.akmrating.ru

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