The 'B++' rating indicates that means that the Small Business Fund of Krasnokamensk City qualifies as a satisfactory creditworthy microfinance institution. 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 Microfinance Institutions rev. October 12, 2015.

The credit rating is essentially supported by an increase in the existing portfolio of loans, lending efficiency improvements and outstripping growth of incomes over expenses.

For the whole period of microfinance activities, the Fund has concluded 278 micro-lending contracts for a total amount of RUB 165 million (as of January 1, 2016). In 2015 alone, the Fund provided RUB 60.5 million in loans to SME businesses. The portfolio of existing loans increased by 56% against the previous year to RUB 47 million, which had a positive impact on the lending efficiency ratio: as of the last reporting date, the ratio of existing loans to capitalization increased by 25.5 p.p. against January 1, 2015 to 75.6%.

We are pleased to see the growth of incomes earned by the Fund under the microfinancing program outstrip the growth of expenses. In 2015, the microfinance institution earned RUB 3.19 million in income, while its expenses amounted to RUB 2.19 million. As a result, the Fund's consolidated core business profitability exceeded the 2014 result by 39%.

The operational sustainability also stays on a positive trend. Over the period from January 1, 2015 to January 1, 2016, it increased by 11 p.p. reaching 146%, more than enough to meet the Ministry of Economic Development's requirement (at least 100% after two years in operation).

In AK&M Rating Agency's view, the microfinance institution's rating is constrained by weak diversification of the loan portfolio across industries and insufficient efficiency of the risk management system as regards recovery of the debt receivable on microloans.

The portfolio of microloans is under-diversified across industries: small and medium-sized businesses borrowing from the Fund that are engaged in the wholesale and retail sector account for 70% (RUB 33 million) of the total amount of loans as of January 1, 2016.

As of January 1, 2016, the Fund's debtor register had a total of 15 SME businesses unable to timely and fully meet their obligations to the Fund (total arrearage reaching RUB 6.5 million). The recourse-based recovery ratio was a mere 12%, an evidence or poor efficiency of the microfinance institution's risk management system, which has a negative impact on the Fund's credit rating.

Full name: Small Business Fund of Krasnokamensk City

Short name: SBF of Krasnokamensk City

The Small Business Fund of Krasnokamensk City was established at the end of 2011 by the local government of Krasnokamensk City and the Small Business Fund of Zabaykalsky Krai for the purpose of supporting small businesses in the region. The Fund was registered as a microfinance institution on January 24, 2012.

AK&M Rating Agency assigned a credit rating to Small Business Fund of Krasnokamensk City for the first time on January 24, 2013. The last rating action in relation to the Fund was taken on December 30, 2014. All rating action announcements are available on the akmrating.ru website.

The rating is valid until March 2017. AK&M Rating Agency may revise the rating and/or the outlook during this period if circumstances fundamentally influencing the microfinance institution's creditworthiness are revealed.

For estimation purposes, we completely rely on the reliability of information provided by the microfinance 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 the Small Business Fund of Krasnokamensk City and the Credit Rating Methodology for Microfinance Institutions rev. October 12, 2015.

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

Ul. Gubkina 3, Moscow, Russia

www.akmrating.ru

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