The 'B++' rating indicates that the autonomous institution "Guarantee Fund of Credit Support of the Republic of Mordovia" qualifies as a guarantee institution with a satisfactory degree of reliability. 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 Guarantee Institutions rev. March 3, 2015.

The key negative factors motivating the rating downgrade include a higher amount of payment obligations discharged by the guarantee institution, a negative financial result, lower capitalization as poor diversification of the surety portfolio in terms of the amount of obligations.

Since the start of 2015, the guarantee institution has effected 8 payments for a total amount of RUB 28.7 million. As a result, the total amount of obligations to banks has reached RUB 60.8 million increasing by 90% since our previous review.

As a result of the payment obligations discharged under the surety agreements this year, the Fund's expenses exceed the income earned in the first quarter of 2016 by RUB 2.6 million. At the same time, aggregate income earned by the Fund decreased by 13% year-on-year.

Given the need to use own capital for loss compensation and the absence of additional financing from the budget, the capitalization of

The guarantee institution's rating remains supported by the growing amount of sureties provided, a high guarantee multiple of the Fund and a growing recovery ratio.

In 2015 the amount of sureties provided was RUB 172 million, which enabled borrowers to take out RUB 249 million in loans against these sureties. In the first quarter of 2016 alone, the guarantee institution provided sureties for a total amount of RUB 29 million which secured loans provided by partner banks for a total amount of RUB 41 million (+174% year-on-year).

The guarantee capital multiple was on an upward trend in 2015 and Guarantee Fund of Credit Support of the Republic of Mordovia' was registered on March 19, 2009. Over its existence, the guarantee institution has concluded 196 surety agreements amounting to RUB 920 million, which enabled SME businesses to borrow RUB 1.381 billion from banks.

AK&M Rating Agency assigned a reliability rating to the Guarantee Fund of Credit Support of the Republic of Mordovia for the first time on February 27, 2013. The last rating action in relation to the Fund was taken on April 3, 2015. All rating action announcements are available on the www.akmrating.ru website.

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

For estimation purposes, we completely rely on the reliability of information provided by the guarantee 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 guarantee institution rating to the autonomous institution 'Guarantee Fund of Credit Support of the Republic of Mordovia' and the applicable Guarantee Institution Rating Methodology as of March 3, 2015.

The rating, along with any information and conclusions provided in this report, only conveys our opinion and shall not be construed as a recommendation to lend money resources to the Fund or to seek its guarantees and sureties.

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

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www.akmrating.ru

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