CJSC AK&M Rating Agency assigned an 'A' guarantee institution rating to the SME Development Assistance Fund of Vladimir region as per the national scale, with a stable outlook.

The 'A' rating indicates a high credit worthiness / reliability of the institution. Risk of a failure to meet liabilities in time is insignificant.

The SME Development Assistance Fund of Vladimir region (SMEDAF) provides an institutional framework to assist small and medium-sized enterprises (SME) in the region. The fund's mission is to provide guarantees for loans and other debt obligations of SME businesses registered in the region, where collateral coverage is insufficient. This guarantee institution is the legal successor of State Autonomous Institution 'SME Development and Guarantee Fund' converted into a business incubator in early 2013.

The guarantee institution rating assigned to SMEDAF is backed by its high key performance indicators, steadily growing portfolio of surety commitments, and higher capitalization.

As of January 1, 2014, the guarantee institution's surety portfolio (total amount of the current surety commitments undertaken by it) reached RUB 543 million increasing by 114% year-on-year. The fund's guarantee capital multiple is 113%, which puts the Company in a position to further expand its surety portfolio without endangering its financial viability. The sector structure of the fund's surety portfolio generally corresponds to the target purposes of the loans provided to legal entities and individual entrepreneurs in the region.

Over the surety provision period (including the activity of state autonomous institution 'SME Development and Guarantee Fund'), the fund has effected 5 indemnity payments to credit institutions for a total of RUB 20.16 million. The fund's relative loss ratio is 1.8%, which is 2.5 times below the upper limit set by the regulatory authority.

At the same time, the Agency primarily regards the relatively lumpy portfolio of surety commitments as a negative rating driver. As of January 1, 2014, large surety bonds equal to or exceeding RUB 15 million accounted for 43% of the guarantee institution's off-balance sheet liabilities. The average surety bond is RUB 5.7 million. This means a higher risk of indemnity payments under the fund's obligations.

Nevertheless, the conditional risk of overshooting the loss ratio threshold (regulatory risk) on the short-term horizon, estimated using our stochastic model for guarantee institutions, is about 8%, comfortably within the range corresponding to the rating assigned.

The Fund is highly likely to forfeit its deposit in the amount of RUB 86 million (21.3% of its total amount of deposits) placed with JSCB Investbank whose license was recalled on December 13, 2013, which exerts significant pressure on the financial standing of the guarantee institution. The write-off of that amount would result in a dramatic decline of the fund's capitalization. However, the agency considers this a force majeure event, without any errors committed in this respect by the guarantee institution.

The SME Development Assistance Fund of Vladimir region was registered in December 2012. Its sole founder is the Department of Business Development, Trade and Services, a structural unit of the regional government.

Over its existence (including the activity of state autonomous institution 'SME Development and Guarantee Fund'), the guarantee institution has concluded more than 200 surety agreements exceeding RUB 1 billion, raising 4.8 rubles in SME-targeted external investments per each ruble of public investment. As of January 1, 2014, the guarantee institution's surety portfolio totaled RUB 543 million, the amount of funds raised reaching RUB 906 million.

This press release is based on the statement of assigning a guarantee institution credit rating to the SME Development Assistance Fund.

The credit rating, along with any information and conclusions provided in this press release, only conveys our opinion on the Company's credit standing and shall not be construed as advice on the provision of loan facilities, receipt of guarantees or surety bonds.

CJSC AK&M Rating Agency will not incur any responsibility for any interpretations, inferences and consequences related to the application of results of the rating estimation procedure by any third parties.

CJSC 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).

CJSC AK&M Rating Agency

ul. Gubkina 3

Moscow, Russia

www.akmrating.ru

Press release by: Y.V. Denisovskaya

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