Consolidated IFRS Financial Statements _Con... · “Joint-Stock Commercial Industrial & Investment...

Public Stock Company “Joint-Stock Commercial Industrial & Investment Bank”

Consolidated IFRS Financial Statements

Year ended 31 December 2014 together with independent auditors’ report

Translation from Ukrainian original Public Stock Company “Joint-Stock Commercial Industrial & Investment Bank” 2014 Consolidated IFRS Financial statements

Contents

Independent auditors’ report Consolidated statement of financial position .................................................................................................................. 1 Consolidated income statement .................................................................................................................................... 2 Consolidated statement of comprehensive income ........................................................................................................ 3 Consolidated statement of changes in equity ................................................................................................................. 4 Consolidated statement of cash flows ........................................................................................................................... 5

Notes to consolidated financial statements 1. Principal activities .............................................................................................................................................. 6 2. Economic environment in which the Group operates ........................................................................................... 6 3. Basis of preparation of consolidated financial statements .................................................................................... 7 4. Summary of accounting policies ......................................................................................................................... 8 5. Significant accounting judgments and estimates ............................................................................................... 23 6. Cash and cash equivalents .............................................................................................................................. 24 7. Amounts due from banks ................................................................................................................................. 24 8. Obligatory reserve with NBU ............................................................................................................................ 24 9. Derivative financial instruments ........................................................................................................................ 25 10. Loans to customers ......................................................................................................................................... 25 11. Investment securities available-for-sale ............................................................................................................ 29 12. Investments in associates ................................................................................................................................ 29 13. Property and equipment ................................................................................................................................... 30 14. Intangible assets ............................................................................................................................................. 32 15. Investment property ......................................................................................................................................... 32 16. Taxation .......................................................................................................................................................... 33 17. Other impairment and provisions ...................................................................................................................... 34 18. Other assets and liabilities ............................................................................................................................... 35 19. Amounts due to the NBU ................................................................................................................................. 35 20. Amounts due to banks ..................................................................................................................................... 35 21. Other borrowings ............................................................................................................................................. 36 22. Amounts due to customers .............................................................................................................................. 36 23. Debt securities in issue .................................................................................................................................... 37 24. Subordinated loan ........................................................................................................................................... 37 25. Equity.............................................................................................................................................................. 37 26. Commitments and contingencies...................................................................................................................... 38 27. Net fee and commission income....................................................................................................................... 39 28. Other income................................................................................................................................................... 40 29. Personnel and other operating expenses .......................................................................................................... 40 30. Earnings per share .......................................................................................................................................... 40 31. Risk management............................................................................................................................................ 41 32. Fair value measurements................................................................................................................................. 51 33. Maturity analysis of assets and liabilities........................................................................................................... 56 34. Subsidiaries .................................................................................................................................................... 57 35. Transferred financial assets and assets held or pledged as collateral ................................................................ 58 36. Related party transactions ............................................................................................................................... 58 37. Capital adequacy ............................................................................................................................................. 61 38. Events after the reporting period ...................................................................................................................... 62

A member firm of Ernst & Young Global Limited

Translation from Ukrainian original

Ernst & Young Audit Services LLC Khreschatyk Street, 19A Kyiv, 01001, Ukraine Tel: +380 (44) 490 3000 Fax: +380 (44) 490 3030 Ukrainian Chamber of Auditors Certificate: 3516 www.ey.com/ua

ТОВ «Ернст енд Янг Аудиторськi послуги» Украïна, 01001, Киïв вул. Хрещатик, 19А Тел.: +380 (44) 490 3000 Факс: +380 (44) 490 3030 Свiдоцтво Аудиторськоï Палати Украïни: 3516

INDEPENDENT AUDITORS' REPORT

To the Shareholders and Management of PUBLIC JOINT-STOCK COMPANY “JOINT-STOCK COMMERCIAL

INDUSTRIAL AND INVESTMENT BANK”

We have audited the accompanying consolidated financial statements of PUBLIC JOINT-STOCK COMPANY “JOINT-STOCK COMMERCIAL INDUSTRIAL AND INVESTMENT BANK” and its subsidiary, which comprise the consolidated statement of financial position as at 31 December 2014, and the consolidated income statement, consolidated statement of comprehensive income, consolidated statement of changes in equity and consolidated statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the consolidated financial statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of PUBLIC JOINT-STOCK COMPANY “JOINT-STOCK COMMERCIAL INDUSTRIAL AND INVESTMENT BANK” and its subsidiary as at 31 December 2014, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

Emphasis of matter

We draw attention to Note 2 to the consolidated financial statements, which describes the current political and economic situation in Ukraine. The circumstances referred to in Note 2 could continue to adversely affect the financial position and performance of PUBLIC JOINT-STOCK COMPANY “JOINT-STOCK COMMERCIAL INDUSTRIAL AND INVESTMENT BANK” and its subsidiary in a manner not currently determinable. Our opinion is not qualified in respect of this matter.

27 March 2015


Public Stock Company

“Joint-Stock Commercial Industrial & Investment Bank” 2014 Consolidated IFRS Financial statements

Consolidated statement of financial position

As at 31 December 2014

(thousands of hryvnia)

The accompanying notes on pages 6 to 62 are an integral part of these consolidated financial statements 1

Notes 2014 2013

Assets Cash and cash equivalents 6 5,946,995 3,656,452 Amounts due from banks 7 666,328 51,632 Obligatory reserve with the National Bank of Ukraine 8 – 461,495 Derivative financial assets 9 5,794 3,644 Loans to customers 10 36,401,765 28,054,619 Investment securities available-for-sale 11 3,136,882 2,845,288 Investments in associates 12 55 55 Property and equipment 13 2,693,116 2,658,959 Intangible assets 14 207,390 198,316 Investment property 15 690,033 748,976 Current income tax assets 6,077 6,875

Deferred tax assets 16 366,010 472,111 Assets held for sale 39,433 9,081 Other assets 18 367,544 213,734

Total assets 50,527,422 39,381,237

Liabilities Amounts due to the National Bank of Ukraine 19 1,768,517 1,499,980 Amounts due to banks 20 20,475,819 14,882,825 Derivative financial liabilities 9 – 1,523 Other borrowings 21 21,551 332,653 Amounts due to customers 22 14,356,717 14,513,017 Debt securities in issue 23 – 586,351 Current income tax liabilities 20,518 – Provisions 17 1,015,507 64,428 Other liabilities 18 393,010 217,950

Subordinated loan 24 4,528,201 2,274,983

Total liabilities 42,579,840 34,373,710

Equity Share capital 25 8,217,093 9,149,882 Additional paid-in capital 25 9,429,884 390,380 Treasury shares 25 (5,085) (17,795) Accumulated deficit (10,931,983) (6,070,936) Investment securities available-for-sale revaluation

reserve 25 (263,548) 1,892

Property and equipment revaluation reserve 25 1,501,221 1,554,104

Total equity 7,947,582 5,007,527

Total equity and liabilities 50,527,422 39,381,237

V. І. Kravets Acting Chairman of the Management Board

Y. V. Nazarenko Chief Accountant – Director of the Accounting Department

27 March 2015

Translation from Ukrainian original Public Stock Company


Consolidated income statement

For the year ended 31 December 2014



Notes 2014 2013

Interest income Loans to customers 4,371,863 3,709,092 Investment securities 354,735 291,683

Amounts due from banks 27,883 23,296

4,754,481 4,024,071

Interest expense Amounts due to customers (1,432,828) (1,390,992) Amounts due to banks (1,309,521) (909,926) Subordinated loan (250,680) (173,109) Amounts due to the NBU (121,274) (123,460) Debt securities in issue (9,447) (69,834)

Other borrowings (19,674) (18,677)

(3,143,424) (2,685,998)

Net interest income 1,611,057 1,338,073

Allowance for loan impairment 7, 10 (4,655,435) (635,574)

Net interest (expenses)/income after allowance for loan impairment (3,044,378) 702,499

Fee and commission income 27 457,143 327,928 Fee and commission expense 27 (37,526) (34,960) Net gains from derivative financial instruments 512,342 74,954 Net (losses)/gains from investment securities available-for-sale (3,283) 838 Net gains/(losses) from foreign currencies and precious metals: - dealing 639,871 208,395 - translation differences (1,840,249) 15,552 Losses on initial recognition of financial instruments 10 (35,088) (3,788)

Other income 28 132,431 72,417

Non-interest income (174,359) 661,336

Personnel expenses 29 (736,366) (633,275) Depreciation and amortisation 13, 14 (163,161) (127,394) Other operating expenses 29 (725,426) (592,166) Loss on redemption of loans from the Parent bank 20 – (80,786) Other (impairment and provisions charge)/recovery and provision

release 17 (952,822) 29,158

Non-interest expense (2,577,775) (1,404,463)

Loss before income tax benefit/(expense) (5,796,512) (40,628)

Income tax (expense)/benefit 16 (151,165) 37,868

Loss for the year (5,947,677) (2,760)

Loss per share (expressed in UAH per share) 30 (7,24) (0,01)

Attributable to:

- shareholders of the Bank (5,947,677) (2,760) - non-controlling interests – –



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Consolidated statement of comprehensive income




Notes 2014 2013

Loss for the year (5,947,677) (2,760) Other comprehensive income Other comprehensive income to be reclassified to the

consolidated income statement: Unrealised losses on investment securities available-for-sale 25 (326,785) (314) Realised losses/(gains) on investment securities available-for-sale

reclassified to the consolidated income statement 25 3,283 (838)

Income tax relating to components of other comprehensive income 16, 25 58,062 408

Other comprehensive loss for the year to be reclassified to the consolidated income statement (265,440) (744)

Other comprehensive gain not to be reclassified to the

consolidated income statement Revaluation of property and equipment 25 (19,284) 225 Effect of change in income tax rate 16, 25 (37,002) –

Income tax relating to components of other comprehensive income 16, 25 3,486 (36)

Other comprehensive (loss)/gain for the year not to be reclassified to the consolidated income statement (52,800) 189

Other comprehensive loss for the year, net of income tax (318,240) (555)

Total comprehensive loss for the year (6,265,917) (3,315)

Attributable to:

- shareholders of the Bank (6,265,917) (3,315)

- non-controlling interests – –



27 March 2015


Public Stock Company “Joint-Stock Commercial Industrial & Investment Bank” 2014 Consolidated IFRS Financial statements

Consolidated statement of changes in equity




Share capital Additional

paid-in capital Treasury

shares Accumulated

deficit

Investment securities

available-for-sale

revaluation reserve

Property and equipment revaluation

reserve Total

equity

31 December 2012 6,231,504 3,481,459 – (6,199,131) 2,636 1,553,915 5,070,383 Total comprehensive income for the year – – – (2,760) (744) 189 (3,315) Issue of share capital (Note 25) 2,918,378 (2,917,445) – – – – 933 Other contributed capital (Note 20) – 13,561 – – – – 13,561 Transfer of additional paid-in capital upon repayment of

loans from the Parent bank – (187,195) – 187,195 – – – Remuneration paid for financial transactions with the Parent

bank (Note 25) – – – (56,240) – – (56,240)

Purchase of treasury shares – – (17,795) – – – (17,795)

31 December 2013 9,149,882 390,380 (17,795) (6,070,936) 1,892 1,554,104 5,007,527

Total comprehensive income for the year – – – (5,947,677) (265,440) (52,800) (6,265,917) Issue of share capital (Note 25) – 9,193,305 – (43) – – 9,193,262 Transfer of additional paid-in capital upon repayment of

loans from the Parent bank – (153,801) – 153,801 – – – Reversal of hyperinflation effect (Note 25) (932,789) – – 932,789 – – – Transfer of revaluation reserve for property and equipment

to accumulated deficit (Note 25) – – – 83 – (83) – Purchase of treasury shares (Note 25) – – (5,085) – – – (5,085) Sale of treasury shares – – 17,795 – – – 17,795

31 December 2014 8,217,093 9,429,884 (5,085) (10,931,983) (263,548) 1,501,221 7,947,582



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Consolidated statement of cash flows




Notes 2014 2013

Cash flows from operating activities

Interest received 4,699,943 3,621,485 Interest paid (2,884,255) (2,470,978) Fees and commissions received 366,895 351,750 Fees and commissions paid (39,120) (64,181) Gains less losses from derivative financial instruments 508,669 72,697 Realised gains less losses from dealing in foreign currencies 639,871 208,395

Other income received 103,660 71,219 Personnel expenses paid (623,616) (610,816)

Other operating expenses paid (747,830) (629,499)

Cash flows from operating activities before changes in operating assets and liabilities 2,024,217 550,072

Net (increase)/decrease in operating assets Amounts due from banks and obligatory reserve with the NBU 31,885 (390,743) Loans to customers 2,396,783 (1,551,263) Other assets (26,013) (15,269)

Net increase/(decrease) in operating liabilities Amounts due to the NBU 268,538 (550,020) Amounts due to banks (3,427,263) 1,717,320 Other borrowings (482,151) (13,995) Amounts due to customers (4,926,843) (36,473) Debt securities in issue (565,006) (27,430)

Other liabilities (36,391) (16,954)

Net cash used in operating activities (4,742,244) (334,755)

Cash flows from investing activities

Purchase of investment securities (3,430,111) (7,828,397) Proceeds from sale and redemption of investment securities 4,960,185 7,743,207 Purchase of intangible assets and property and equipment (238,265) (189,557) Proceeds from sale of property and equipment 10,346 21,179 Purchase of investment property (1,850) (110,240) Proceeds from sale of investment property 8,956 8,310

Proceeds from sale of assets held for sale 14,332 280

Net cash from/(used in) investing activities 1,323,593 (355,218)

Cash flows from financing activities Prepayment for contributions in share capital 4,415,429 – Purchase of treasury shares (5,085) (17,795) Issue of shares – 933 Remuneration for financial transactions with the Parent bank – (56,240)

Dividends paid (2) (3)

Net cash from/(used in) financing activities 4,410,342 (73,105)

Effect of exchange rates changes on cash and cash equivalents 1,298,852 (89,802) Net increase/(decrease) in cash and cash equivalents 2,290,543 (852,880) Cash and cash equivalents, 1 January 3,656,452 4,509,332

Cash and cash equivalents, 31 December 6 5,946,995 3,656,452



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“Joint-Stock Commercial Industrial & Investment Bank” Notes to the 2014 Consolidated IFRS Financial statements

(thousands of hryvnia, unless otherwise stated)

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1. Principal activities PUBLIC STOCK COMPANY “JOINT-STOCK COMMERCIAL INDUSTRIAL & INVESTMENT BANK” (the “Bank”) is the parent company of the Group of companies (the “Group”). The Bank was incorporated in Ukraine on 26 August 1992. The Bank conducts its business under banking license № 1 dated 22 June 2012 issued by the National Bank of Ukraine (the “NBU”). The Bank’s principal activity is originating deposits, granting loans and guarantees to its corporate clients, trading in foreign currencies, securities, transferring of payments in Ukraine and abroad, exchanging currencies and providing other banking services to its commercial and retail customers. The Bank’s Head Office is located in Kyiv. In 2014, the Group continued to reorganize its branch network, main branches of each region were given outlets status. As at 31 December 2014, the Group had 130 outlet branches in Ukraine (2013: 80 outlet branches). The Bank is the participant of the Individuals Deposit Guarantee Fund (Certificate of the Fund Participant № 116 dated 2 September 1999). The Fund guarantees to compensate every depositor of banks with the amount of their deposit (including accrued interest) should the bank be unable to pay back the deposited funds. The amount of guaranteed funds cannot exceed the equivalent of UAH 200 thousand (2013: UAH 200 thousand). As at 31 December, the Bank’s shareholders structure was as follows: Shareholder 2014, % 2013, %

State Corporation “Bank for Development and Foreign Economic Affairs (Vnesheconombank)” (the “Parent bank”) 98.60 98.60

Other 1.40 1.40

Total 100.00 100.00

As at 31 December 2014 and 2013, members the Management Board and Directors didn’t own any shares. The Group is ultimately controlled by the Government of the Russian Federation. The Bank’s registered address and place of business is: 12 Shevchenko lane, Kyiv, 01001, Ukraine These consolidated financial statements have been authorised for issue by the Management Board on 27 March 2015.

2. Economic environment in which the Group operates The Group conducts its operations in Ukraine. The Ukrainian economy while deemed to be of market status continues to display certain characteristics consistent with that of an economy in transition. These characteristics include, but are not limited to, low levels of liquidity in the capital markets, high inflation, and significant imbalances in the public finance and foreign trade. In 2014, Ukrainian political and economic situation deteriorated significantly. The political and social unrest combined with regional tensions has led to the secession of the Autonomous Republic of Crimea to the Russian Federation, full-fledged armed confrontations in certain parts of the Donetsk and Lugansk regions and, ultimately, to the significant deterioration of the political and economic relations of Ukraine with the Russian Federation. These factors have contributed to the decline of key economic indices, increase of the state budget deficit, depletion of the NBU’s foreign currency reserves and, as a result, further downgrading of the Ukrainian sovereign debt credit ratings. From 1 January 2014 and up to the date of the issuance of these consolidated financial statements, the Ukrainian Hryvnia (the “UAH”) depreciated against major foreign currencies by approximately 190% calculated based on the National Bank of Ukraine (the “NBU”) exchange rate of UAH to US Dollar. The NBU imposed certain restrictions on purchase of foreign currencies, cross border settlements, and also mandated obligatory conversion of foreign currency proceeds into UAH. The known and estimable effects of the above events on the financial position and performance of the Group in the reporting period have been taken into account in preparing these consolidated financial statements. Specific effects of the secession of Crimea and the ongoing conflict in the eastern regions of the country are disclosed below in this Note.





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2. Economic environment in which the Group operates (continued) The Government has committed to direct its policy towards the association with the European Union, to implement a set of reforms aiming at the removal of the existing imbalances in the economy, public finance and public governance, and the improvement of the investment climate. Stabilisation of the Ukrainian economy in the foreseeable future depends on the success of the actions undertaken by the Government and securing continued financial support of Ukraine by international donors and international financial institutions. Management is monitoring the developments in the current environment and taking actions, where appropriate, to minimize any negative effects to the extent possible. Further adverse developments in the political, macroeconomic and/or international trade conditions may further adversely affect the Group’s financial position and performance in a manner not currently determinable. Following the accession of Crimea to the Russian Federation, a number of legislative limitations that impose restrictions to carry out transactions by Ukrainian banks in Crimea, was introduced in April-May 2014. As at 31 December 2014, the carrying value of the Group’s assets located in Crimea or otherwise related to it amounts to UAH 3,656,108 thousand (approximately 7.2% of total assets). In addition, some parts of Donetsk and Lugansk regions were under full-fledged armed confrontations. Under these circumstances, most of organizations in the region had to cease production and commercial activities for indefinite period. In 2014, a number of legislative limitations that impose restrictions to carry out transactions by Ukrainian banks in areas of ongoing conflict was introduced. The Group was forced to curtail a part of its operations in the areas affected by the ongoing conflict in the eastern regions of the country. As at 31 December 2014, the carrying value of assets located in the regions under the conflict amounts to 11,732,882 thousand (approximately 23.2% of total assets).

3. Basis of preparation of consolidated financial statements

General These consolidated financial statements of the Bank and its subsidiary (Note 34) (hereinafter together referred to as the “Group”) have been prepared for the year ended 31 December 2014 in accordance with International Financial Reporting Standards (the “IFRS”). These consolidated financial statements are presented in thousands of Ukrainian hryvnia, which is the Group’s functional and presentation currency. The consolidated financial statements have been prepared under the historical cost convention except as disclosed in the summary of accounting policies below. For example, buildings are measured at revalued amount, investment property, available-for-sale securities and derivative financial instruments have been measured at fair value.

Going concern For the year ended 31 December 2014, the Group incurred loss in the amount of UAH 5,947,677 thousand and cash outflows from operating activities in the amount of UAH 4,742,244 thousand. The management considers net cash flows from operating activities to be sufficient to repay the Group’s liabilities on timely basis because of optimization of loan portfolio structure and quality, introducing new banking retail products, reduction of administrative expenses and due to stable financial support from the Parent bank. The management of the Bank developed the plan to improve capitalization. In particular, this plan includes an increase in share capital by not less than UAH 4,000,000 thousand in 2014 and an increase in share capital by not less than UAH 4,777,872 thousand in 2015. The Bank’s Supervisory Board approved this plan on 25 December 2014. The management analysed current political and economic uncertainty. Taking into account their possible impact and information provided above, the management concluded that the going concern assumption used in the preparation of these consolidated financial statements is appropriate, that indicates assets to be realised and liabilities to be discharged in the ordinary course of operations.





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3. Basis of preparation of consolidated financial statements (continued) Reclassifications The following reclassifications have been made to 2013 balances to conform to the 2014 presentation.

Consolidated financial statements line item As previously

reported Reclassification As reclassified

Consolidated statement of cash flows Gains less losses from derivative financial instruments 43,855 28,842 72,697 Realised gains less losses from dealing in foreign

currencies 237,237 (28,842) 208,395 Consolidated income statement Net gains/(losses) from derivative financial instruments 46,112 28,842 74,954 Net gains from foreign currencies and precious metals: - dealing 237,237 (28,842) 208,395 The Group does not provide consolidated statement of financial position as at 31 December 2012, insofar as the above mentioned reclassifications have no impact on consolidated statement of financial position as at 31 December 2012.

4. Summary of accounting policies

Changes in accounting policies The Group has adopted the following amended IFRS and IFRIC which are effective for annual periods beginning on or after 1 January 2014: Investment Entities (amendments to IFRS 10, IFRS 12 and IAS 27) These amendments provide an exception to the consolidation requirement for entities that meet the definition of an investment entity under IFRS 10. The exception to consolidation requires investment entities to account for subsidiaries at fair value through profit or loss. This amendment is not relevant to the Group, since none of the entities in the Group qualify to be an investment entity under IFRS 10. IAS 32 Offsetting Financial Assets and Financial Liabilities − Amendments to IAS 32 These amendments clarify the meaning of “currently has a legally enforceable right to set-off” and the criteria for non-simultaneous settlement mechanisms of clearing houses to qualify for offsetting. These amendments had no impact on the Group’s financial position. IFRIC Interpretation 21 Levies (IFRIC 21) IFRIC 21 clarifies that an entity recognises a liability for a levy when the activity that triggers payment, as identified by the relevant legislation, occurs. For a levy that is triggered upon reaching a minimum threshold, the interpretation clarifies that no liability should be anticipated before the specified minimum threshold is reached. This IFRIC had no impact on the Group's consolidated financial statements as it has applied the recognition principles under IAS 37 Provisions, Contingent Liabilities and Contingent Assets consistent with the requirements of IFRIC 21 in prior years. IAS 39 Novation of Derivatives and Continuation of Hedge Accounting – Amendments to IAS 39 These amendments provide relief from discontinuing hedge accounting when novation of a derivative designated as a hedging instrument meets certain criteria. This amendment is not relevant to the Group, since the Group has not novated its derivatives during the current period. Recoverable Amount Disclosures for Non-Financial Assets – Amendments to IAS 36 These amendments remove the unintended consequences of IFRS 13 Fair Value Measurement on the disclosures required under IAS 36 Impairment of Assets. In addition, these amendments require disclosure of the recoverable amounts for the assets or cash-generating units (CGUs) for which an impairment loss has been recognised or reversed during the period. These amendments had no impact on the Group's financial position or performance.





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4. Summary of accounting policies (continued) Annual improvements 2010-2012 Cycle. These improvements are effective from 1 July 2014 and are not expected to have a material impact on the Group. They include: IFRS 2 Share-based Payment This improvement is applied prospectively and clarifies various issues relating to the definitions of performance and service conditions which are vesting conditions, including:

A performance condition must contain a service condition;

A performance target must be met while the counterparty is rendering service;

A performance target may relate to the operations or activities of an entity, or to those of another entity in the same group;

A performance condition may be a market or non-market condition;

If the counterparty, regardless of the reason, ceases to provide service during the vesting period, the service condition is not satisfied.

IFRS 3 Business Combinations

The amendment is applied prospectively and clarifies that all contingent consideration arrangements classified as

liabilities (or assets) arising from a business combination should be subsequently measured at fair value through profit or

loss whether or not they fall within the scope of IFRS 9 (or IAS 39, as applicable).

IFRS 8 Operating segments

The amendments are applied retrospectively and clarifies that:

An entity must disclose the judgments made by management in applying the aggregation criteria in paragraph 12 of IFRS 8, including a brief description of operating segments that have been aggregated and the economic characteristics (e.g., sales and gross margins) used to assess whether the segments are ‘similar’;

The reconciliation of segment assets to total assets is only required to be disclosed if the reconciliation is reported to the chief operating decision maker, similar to the required disclosure for segment liabilities.

IFRS 13 Short-term Receivables and Payables – Amendments to IFRS 13 This amendment to IFRS 13 clarifies in the Basis for Conclusions that short-term receivables and payables with no stated interest rates can be measured at invoice amounts when the effect of discounting is immaterial.

IAS 16 Property, Plant and Equipment and IAS 38 Intangible Assets The amendment is applied retrospectively and clarifies in IAS 16 and IAS 38 that the asset may be revalued by reference to observable data on either the gross or the net carrying amount. In addition, the accumulated depreciation or amortisation is the difference between the gross and carrying amounts of the asset.

IAS 24 Related Party Disclosures The amendment is applied retrospectively and clarifies that a management entity (an entity that provides key management personnel services) is a related party subject to the related party disclosures. In addition, an entity that uses a management entity is required to disclose the expenses incurred for management services. Annual improvements 2011-2013 Cycle. These improvements are effective from 1 July 2014 and are not expected to have a material impact on the Group. They include: IFRS 3 Business Combinations The amendment is applied prospectively and clarifies for the scope exceptions within IFRS 3 that:

Joint arrangements, not just joint ventures, are outside the scope of IFRS 3;

This scope exception applies only to the accounting in the financial statements of the joint arrangement itself.





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4. Summary of accounting policies (continued) IFRS 13 Fair Value Measurement The amendment is applied prospectively and clarifies that the portfolio exception for entities holding a group of financial assets and financial liabilities (a portfolio) and manage this group as a whole may be applied to portfolios that comprise not only financial assets and financial liabilities, but also to other contracts within the scope of IFRS 9 (or IAS 39, as applicable). IAS 40 Investment Property The description of ancillary services in IAS 40 differentiates between investment property and owner-occupied property (i.e., property, plant and equipment). The amendment is applied prospectively and clarifies that IFRS 3, and not the description of ancillary services in IAS 40, is used to determine if the transaction is the purchase of an asset or business combination. Meaning of effective IFRSs – Amendments to IFRS 1 The amendment clarifies in the Basis for Conclusions that an entity may choose to apply either a current standard or a new standard that is not yet mandatory, but permits early application, provided either standard is applied consistently throughout the periods presented in the entity’s first IFRS financial statements. This amendment to IFRS 1 has no impact on the Group, since the Group is an existing IFRS preparer.

Basis of consolidation Subsidiaries, which are those entities in which the Group has an interest of more than one half of the voting rights, or otherwise has power to exercise control over their operations, are consolidated. Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated from the date that control ceases. All intra-group transactions, balances and unrealised gains on transactions between group companies are fully eliminated; unrealised gains are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. Where necessary, accounting policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group. A change in the ownership interest of a subsidiary, without a change of control, is accounted for as an equity transaction. Losses of the subsidiary are attributed to the non-controlling interests even if that results in a deficit balance. If the Group loses control over a subsidiary, it derecognises the assets (including goodwill) and liabilities of the subsidiary, the carrying amount of any non-controlling interests, the cumulative translation differences, recorded in equity; recognises the fair value of the consideration received, the fair value of any investment retained and any surplus or deficit in profit or loss and reclassifies the parent’s share of components previously recognised in other comprehensive income to income statement.

Business combinations

Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the consideration transferred, measured at acquisition date at fair value and the amount of any non-controlling interests in the acquiree. For each business combination, the acquirer measures the non-controlling interests in the acquiree that are present ownership interests either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Other components of non-controlling interests at their acquisition date at fair value. Acquisition costs incurred are expensed. When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes analysis of necessity to separate the embedded derivatives in host contracts by the acquiree. If the business combination is achieved in stages, the acquirer’s equity interest is remeasured to fair value as at the acquisition date through profit or loss. Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with IAS 39 either in profit or loss or as change to other comprehensive income. If the contingent consideration is classified as equity, it shall not be remeasured until it is finally settled within equity. Goodwill is initially measured at cost being the excess of the consideration transferred, any non-controlling interest and fair value of acquirer’s ownership interest assessed as at the date of acquisition over the Group’s net identifiable assets acquired and liabilities assumed. Goodwill at acquisition of subsidiaries is represented in other assets or separately at consolidated statement of financial position if it is material.





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4. Summary of accounting policies (continued) Goodwill at acquisition of associates is represented as the part of investments into associates. Goodwill is measured at cost less any accumulated impairment losses. The Group tests the impairment of goodwill at least once a year or if there are some signs of impairment. Goodwill is allocated to each of the Group’s cash generating units and groups of cash generating units that are expected to benefit from the combination. Such units and groups of units represent the lowest level been under the Group’s control and do not exceed aggregation segment. Where goodwill forms part of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this circumstance is measured based on the relative values of the operation disposed of and the portion of the cash-generating unit retained.

Investments in associates Associates are entities in which the Group generally has between 20% and 50% of the voting rights, or is otherwise able to exercise significant influence, but which it does not control or jointly control. Investments in associates are accounted for under the equity method and are initially recognised at cost, including goodwill. Subsequent changes in the carrying value reflect the post-acquisition changes in the Group’s share of net assets of the associate. The Group’s share of its associates’ profits or losses is recognised in the consolidated income statement, and its share of movements in reserves is recognised in other comprehensive income. However, when the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless the Group is obliged to make further payments to, or on behalf of, the associate. Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s interest in the associates; unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.

Financial assets Initial recognition Financial assets in the scope of IAS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. The Group determines the classification of its financial assets upon initial recognition, and subsequently can reclassify financial assets in certain cases as described below. Date of recognition All regular way purchases and sales of financial assets are recognised on the settlement date, i.e. the date that an asset is delivered to or by the Group. Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by regulation or convention in the marketplace. Loans and receivables Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are not entered into with the intention of immediate or short-term resale and are not classified as trading securities or designated as investment securities available-for-sale. Such assets are carried at amortised cost using the effective interest method. Gains and losses are recognised in consolidated income statement when the loans and receivables are derecognised or impaired, as well as through the amortisation process. Available-for-sale financial assets Available-for-sale financial assets are those non-derivative financial assets that are designated as available-for-sale or are not classified as financial assets at fair value through consolidated income statement, loans and receivables or financial assets held to maturity. After initial recognition available-for sale financial assets are measured at fair value with gains or losses being recognised in other comprehensive income until the investment is derecognised or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in other comprehensive income is reclassified to the consolidated income statement. However, interest calculated using the effective interest method is recognised in the consolidated income statement. Measurement of financial instruments at initial recognition When financial instruments are recognised initially, they are measured at fair value, adjusted, in the case of instruments not at fair value through profit or loss, for directly attributable fees and costs.





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4. Summary of accounting policies (continued) The best evidence of the fair value of a financial instrument at initial recognition is normally the transaction price. If the Group determines that the fair value at initial recognition differs from the transaction price, then:

if the fair value is evidenced by a quoted price in an active market for an identical asset or liability (i.e., a Level 1 input) or based on a valuation technique that uses only data from observable markets, the Group recognises the difference between the fair value at initial recognition and the transaction price as a gain or loss;

in all other cases, the initial measurement of the financial instrument is adjusted to defer the difference between the fair value at initial recognition and the transaction price. After initial recognition, the Group recognises that deferred difference as a gain or loss only when the inputs become observable, or when the instrument is derecognised.

Fair value measurements The Group measures financial instruments, such as trading and available-for-sale securities, derivatives and non-financial assets such as investment property, at fair value at each balance sheet date. Also, fair values of financial instruments measured at amortised cost are disclosed in Note 32. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place either:

In the principal market for the asset or liability; or

In the absence of a principal market, in the most advantageous market for the asset or liability.

The principal or the most advantageous market must be accessible by the Group as at the date of assessment. The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest. A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of unobservable inputs. All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

Level 1 − Quoted (unadjusted) market prices in active markets for identical assets or liabilities to which an entity has access as of the date of measurement;

Level 2 − Valuation techniques for which input data, other than quoted prices included to Level 1, are directly or indirectly observable for an asset or liability;

Level 3 − Valuation techniques for which unobservable input data are used for an asset of liability.

For assets and liabilities that are recognised in the consolidated financial statements on a recurring basis, the Group determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorization (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each reporting period.

Cash and cash equivalents Cash and cash equivalents consist of cash on hand, amounts due from the NBU, excluding obligatory reserves, amounts due from banks that mature within 90 days of the date of origination and are free from contractual encumbrances, and reverse repo agreements that mature within 30 days of the date of origination.





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4. Summary of accounting policies (continued)

Repurchase and reverse repurchase agreements Sale and repurchase agreements (“repos”) are treated as secured financing transactions. Securities sold under sale and repurchase agreements are retained in the consolidated statement of financial position and, in case the transferee has the right by contract or custom to sell or repledge them, reclassified as securities pledged under sale and repurchase agreements. The corresponding liability is presented within amounts due to banks or customers. Securities purchased under agreements to resell (“reverse repo”) are recorded as amounts due from banks or loans to customers as appropriate. The difference between sale and repurchase price is treated as interest and accrued over the life of repo agreements using the effective yield method. Securities lent to counterparties are retained in the consolidated statement of financial position. Securities borrowed by the Group are not recorded in the consolidated statement of financial position, unless these are sold to third parties, in which case the purchase and sale are recorded within gains less losses from investment securities available-for-sale in the consolidated income statement. The obligation to return them is recorded at fair value as a trading liability.

Derivative financial instruments In the normal course of business, the Group enters into various derivative financial instruments including forwards and swaps in the foreign exchange and capital markets. Such financial instruments are held for trading and are recorded at fair value. The fair values are estimated based on quoted market prices or pricing models that take into account the current market and contractual prices of the underlying instruments and other factors. Derivatives are carried as assets when their fair value is positive and as liabilities when it is negative. Gains and losses resulting from these instruments are included in the consolidated income statement as net gains/(losses) from derivative financial instruments.

Borrowings Issued financial instruments or their components are classified as liabilities, where the substance of the contractual arrangement results in the Group having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity instruments. Such instruments include amounts due to the NBU, amounts due to banks, amounts due to customers, other borrowed funds and subordinated loan. After initial recognition, borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses are recognised in the consolidated income statement when the borrowings are derecognised as well as through the amortisation process. Any gain or loss on initial recognition of loans received from shareholders in their capacity as shareholders is recognised as additional paid-in capital in equity. The gain or loss is transferred to accumulated deficit / retained earnings upon repayment of loans. If the Group purchases its own debt, it is removed from the consolidated statement of financial position and the difference between the carrying amount of the liability and the consideration paid is recognised in the consolidated income statement.

Operating lease Leases are classified as operating leases whenever the terms of the lease leave substantially all the risks and rewards of ownership with the lessor. Rental payments under operating leases are recognised on a straight-line basis over the term of the relevant lease and included into operating expenses. The Group presents assets subject to operating leases in the consolidated statement of financial position according to the nature of the asset. Lease income from operating leases is recognised in the consolidated income statement on a straight-line basis over the lease term as other income. The aggregate cost of incentives provided to lessees is recognised as a reduction of rental income over the lease term on a straight-line basis. Initial direct costs incurred specifically to earn revenues from an operating lease are added to the carrying amount of the leased asset.





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4. Summary of accounting policies (continued) Offsetting of financial instruments Financial assets and liabilities are offset and the net amount is reported in the consolidated statement of financial position when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. This is not generally the case with master netting agreements, and the related assets and liabilities are presented gross in the consolidated statement of financial position.

Impairment of financial assets

The Group assesses at each reporting date whether there is any objective evidence that a financial asset or a group of financial assets is impaired. A financial asset or a group of financial assets is deemed to be impaired if, and only if, there is objective evidence of impairment as a result of one or more events that has occurred after the initial recognition of the asset (an incurred ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or the group of financial assets that can be reliably estimated. Evidence of impairment may include indications that the borrower or a group of borrowers is experiencing significant financial difficulty, default or delinquency in interest or principal payments, the probability that they will enter bankruptcy or other financial reorganisation and where observable data indicate that there is a measurable decrease in the estimated future cash flows, such as changes in arrears or economic conditions that correlate with defaults. Amounts due from banks and loans to customers

For amounts due from banks and loans to customers carried at amortised cost, the Group first assesses individually whether objective evidence of impairment exists individually for financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in a group of financial assets with similar credit risks characteristics and collectively assesses them for impairment. Assets that are individually assessed for impairment and for which an impairment loss is, or continues to be, recognised are not included in a collective assessment of impairment.

If there is an objective evidence that an impairment loss has been incurred, the amount of the loss is measured as the difference between the assets’ carrying amount and the present value of estimated future cash flows (excluding future expected credit losses that have not yet been incurred). The carrying amount of the asset is reduced through the use of an allowance account and the amount of the loss is recognised in the consolidated income statement. Interest income continues to be accrued on the reduced carrying amount based on the original effective interest rate of the asset. Loans together with the associated allowance are written off when there is no realistic prospect of future recovery and all collateral has been realised or has been transferred to the Group. If, in a subsequent year, the amount of the estimated impairment loss increases or decreases because of an event occurring after the impairment was recognised, the previously recognised impairment loss is increased or reduced by adjusting the allowance account. If a future write-off is later recovered, the recovery is credited to the consolidated income statement.

The present value of the estimated future cash flows is discounted at the financial asset’s original effective interest rate. If a loan has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate. The calculation of the present value of the estimated future cash flows of a collateralised financial asset reflects the cash flows that may result from foreclosure less costs for obtaining and selling the collateral, whether or not foreclosure is probable. For the purpose of a collective evaluation of impairment, financial assets are grouped based on the Group’s internal credit grading system that considers credit risk characteristics such as asset type, industry, collateral type, past-due status and other relevant factors. Future cash flows on a group of financial assets that are collectively evaluated for impairment are estimated on the basis of historical loss experience for assets with credit risk characteristics similar to those in the group. Historical loss experience is adjusted on the basis of current observable data to reflect the effects of current conditions that did not affect the years on which the historical loss experience is based and to remove the effects of conditions in the historical period that do not exist currently. Estimates of changes in future cash flows reflect, and are directionally consistent with, changes in related observable data from year to year (such as changes in unemployment rates, property prices, commodity prices, payment status, or other factors that are indicative of incurred losses in the group or their magnitude). The methodology and assumptions used for estimating future cash flows are reviewed regularly to reduce any differences between loss estimates and actual loss experience.





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4. Summary of accounting policies (continued) Investment securities available-for-sale

For available-for-sale investment securities, the Group assesses at each reporting date whether there is objective evidence that an investment or a group of investments is impaired.

In the case of equity investments classified as available-for-sale, objective evidence would include a significant or prolonged decline in the fair value of the investment below its cost. Where there is evidence of impairment, the cumulative loss – measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that investment previously recognised in the consolidated income statement – is reclassified from other comprehensive income to the consolidated income statement. Impairment losses on equity investments are not reversed through the consolidated income statement; increases in their fair value after impairment are recognised in other comprehensive income. In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets carried at amortised cost. Future interest income is based on the reduced carrying amount and is accrued using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. The interest income is recorded in the consolidated income statement. If, in a subsequent year, the fair value of a debt instrument increases and the increase can be objectively related to an event occurring after the impairment loss was recognised in the consolidated income statement, the impairment loss is reversed through the consolidated income statement. Renegotiated loans Where possible, the Group seeks to restructure loans rather than to take possession of collateral. This may involve extending the payment arrangements and the agreement of new loan conditions. The accounting treatment of such restructuring is as follows:

If the currency of the loan has been changed the old loan is derecognised and the new loan is recognised;

If the loan restructuring is not caused by the financial difficulties of the borrower the Group uses the same approach as for financial liabilities described below;

If the loan restructuring is due to the financial difficulties of the borrower and the loan is impaired after restructuring, the Group recognizes the difference between the present value of the new cash flows discounted using the original effective interest rate and the carrying amount before restructuring in the provision charges for the period. In case loan is not impaired after restructuring the Group recalculates the effective interest rate.

Once the terms have been renegotiated, the loan is no longer considered past due. Management continuously reviews renegotiated loans to ensure that all criteria are met and that future payments are likely to occur. The loans continue to be subject to an individual or collective impairment assessment, calculated using the loan’s original effective interest rate.

Derecognition of financial assets and liabilities Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where:

the rights to receive cash flows from the asset have expired;

the Group has transferred its rights to receive cash flows from the asset, or retained the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a ‘pass-through’ arrangement; and

the Group either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Where an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recognised in the consolidated income statement.





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4. Summary of accounting policies (continued) Financial guarantees In the ordinary course of business, the Group gives financial guarantees, consisting of letters of credit, guarantees and acceptances. Financial guarantees are initially recognised in the consolidated financial statements at fair value, in ‘Other liabilities’, being the premium received. Subsequent to initial recognition, the Group’s liability under each guarantee is measured at the higher of the amortised premium and the best estimate of expenditure required settling any financial obligation arising as a result of the guarantee. Any increase in the liability relating to financial guarantees is taken to the consolidated income statement. The premium received is recognised in the consolidated income statement on a straight-line basis over the life of the guarantee.

Taxation The current income tax expense is calculated in accordance with the regulations of Ukraine and based on a taxable profit for the year. Taxable profit differs from net profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. Deferred tax assets and liabilities are calculated in respect of temporary differences using the liability method. Deferred taxes are provided for all temporary differences arising between the income tax bases of assets and liabilities and their carrying values for financial reporting purposes, except where the deferred tax arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss. A deferred tax asset is recorded only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax assets and liabilities are measured at income tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on income tax rates that have been enacted or substantively enacted at the reporting date. Deferred tax is provided on temporary differences arising on investments in associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets and deferred tax liabilities are offset and reported net on the consolidated statement of financial position if:

The Group has a legally enforceable right to set off current income tax assets against current income tax liabilities; and

Deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority on the same taxable entity.

Ukraine also has various operating taxes, which are assessed on the Group’s activities. These taxes are included as a component of other operating expenses in consolidated income statement.

Property and equipment Property, equipment and intangible assets (except buildings) are recognised at cost, excluding the costs of day-to-day servicing, less accumulated depreciation and any accumulated impairment. Such cost includes the cost of replacing part of an item of equipment when that cost is incurred and if the recognition criteria are met. The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable. Subsequent to initial recognition at cost, buildings, which are owned by the Group, are measured at revalued amount, which is the fair value at the date of the revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Valuations are performed frequently enough to ensure that the fair value of a revalued asset does not differ materially from its carrying amount.





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4. Summary of accounting policies (continued) Accumulated depreciation as at the revaluation date is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount. Any revaluation surplus is credited to the revaluation reserve for property and equipment included in other comprehensive income, except to the extent that it reverses a revaluation decrease of the same asset previously recognised in the consolidated income statement, in which case the increase is recognised in the consolidated income statement. A revaluation deficit is recognised in the consolidated income statement, except that a deficit directly offsetting a previous surplus on the same asset is directly offset against the surplus in the revaluation reserve for property and equipment. Upon disposal, any revaluation reserve relating to the particular asset being sold is transferred to accumulated deficit / retained earnings. Depreciation of property and equipment commences from the date the assets are available for use. Depreciation is calculated on a straight-line basis over the following estimated useful lives:

Years

Buildings 10-60 Equipment 2-12 Motor vehicles 5-10

Land is not depreciated. Leasehold improvements are amortised over the rent period. Expenses related to repairs and renewals are charged when incurred and included in operating expenses unless they qualify for capitalisation at the time when they occur. The asset’s residual values, useful lives and methods are reviewed, and adjusted as appropriate, at each financial year-end.

Intangible assets Intangible assets include computer software and licenses. Intangible assets are measured on initial recognition at cost. Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets are amortised over the useful economic lives of 2 to 10 years and assessed for impairment whenever there is an indication that the intangible asset may be impaired. Amortisation periods and methods for intangible assets with indefinite useful lives are reviewed at least at each financial year-end.

Investment property Investment property is land or building or a part of building held to earn rental income or for capital appreciation and which is not used by the Group or held for the sale in the ordinary course of business. Property that is being constructed or developed or redeveloped for future use as investment property is also classified as investment property. Investment property is initially recognised at cost, including transaction costs, and subsequently remeasured at fair value reflecting market conditions at the end of the reporting period. Fair value of the Group’s investment property is determined on the base of various sources including reports of independent appraisers, who hold a recognised and relevant professional qualification and who have recent experience in valuation of property of similar location and category. Investment property that is being redeveloped for continuing use as investment property or for which the market has become less active continues to be measured at fair value. Earned rental income is recorded in the consolidated income statement within income arising from non-banking activities. Gains and losses resulting from changes in the fair value of investment property are recorded in the consolidated income statement and presented within other income or expense. Subsequent expenditure is capitalised only when it is probable that future economic benefits associated with it will flow to the Group and the cost can be measured reliably. All other repairs and maintenance costs are expensed when incurred. If an investment property becomes owner-occupied, it is reclassified to premises and equipment, and its carrying amount at the date of reclassification becomes its deemed cost to be subsequently depreciated.

Assets classified as held for sale The Group classifies a non-current asset as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use. For this to be the case, the non-current asset must be available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets and its sale must be highly probable.





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4. Summary of accounting policies (continued) The sale qualifies as highly probable if the Group’s management is committed to a plan to sell the non-current asset and an active program to locate a buyer and complete the plan must have been initiated. Further, the non-current asset must have been actively marketed for a sale at price that is reasonable in relation to its current fair value and in addition the sale should be expected to qualify for recognition as a completed sale within one year from the date of classification of the non-current asset as held for sale. The Group measures an asset classified as held for sale at the lower of its carrying amount and fair value less costs to sell. The Group recognises an impairment loss for any initial or subsequent write-down of the asset to fair value less costs to sell if events or changes in circumstance indicate that their carrying amount may be impaired.

Provisions Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the amount of obligation can be made.

Retirement and other employee benefit obligations In accordance with the requirements of the Ukrainian legislation, the Group withholds amounts of pension contributions from employee salaries and pays them to the pension fund of Ukraine. In addition, the pension system provides for calculation of current payments by the employer as a percentage of current total disbursements to staff. The expense is charged in the period the related salaries are earned. Upon retirement, all retirement benefit payments are made by the State pension fund of Ukraine. The Group does not have any pension arrangements separate from the State pension system of Ukraine that requires pension contributions from employees’ salaries calculated as a percentage of current total disbursements to staff. In addition, the Group has no post-retirement benefits or other significant compensated benefits requiring accrual.

Share capital Share capital Contributions to share capital are recognised at their cost. External costs directly attributable to the issue of new shares, other than on a business combination, are shown as a deduction from the proceeds in equity. Any excess of the fair value of consideration received over the par value of shares issued is recognised as additional paid-in capital. Settlement of financial liability with equity instrument In situations when the Group and the creditor renegotiate the terms of a financial liability with the result that the Group extinguishes the liability fully or partially by issuing equity instruments to the creditor (“debt to equity swap”) and the creditor is a shareholder acting in its capacity as such, the accounting treatment of such transaction is as follows:

Any unamortised discounts or premiums remained at extinguishment date are set off against respective gains or losses recognised in equity at initial recognition of a financial liability;

Any remaining gains and losses recognised in equity are transferred to accumulated deficit at extinguishment date;

The equity instruments are issued at the nominal amount of the financial liability extinguished so that no profit or loss is recognised.

Treasury shares Where the Group purchases its shares, the consideration paid, including any attributable transaction costs, net of income taxes, is deducted from total equity as treasury shares until they are cancelled or reissued. Where such shares are subsequently sold or reissued, any consideration received is included in equity. Treasury shares are stated at weighted average cost. Dividends Dividends are recognised as a liability and deducted from equity at the reporting date only if they are declared before or on the reporting date. Dividends are disclosed when they are proposed before the reporting date or proposed or declared after the reporting date but before the consolidated financial statements are authorised for issue.





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4. Summary of accounting policies (continued) Segment reporting The Group continues development of its managerial segment reporting system. Consequently, Management Board is not assessing the performance or making decisions based on segment information. Therefore no segment disclosure is provided in these consolidated financial statements.

Contingencies Contingent liabilities are not recognised in the consolidated statement of financial position but are disclosed unless the possibility of any outflow in settlement is remote. A contingent asset is not recognised in the consolidated statement of financial position but disclosed when an inflow of economic benefits is probable.

Recognition of income and expenses Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The following specific recognition criteria must also be met before revenue is recognised: Interest and similar income and expense For all financial instruments measured at amortised cost and interest bearing investment securities classified as available-for-sale, interest income or expense is recorded at the effective interest rate, which is the rate that exactly discounts estimated future cash payments or receipts through the expected life of the financial instrument or a shorter period, where appropriate, to the net carrying amount of the financial asset or financial liability. The calculation takes into account all contractual terms of the financial instrument (for example, prepayment options) and includes any fees or incremental costs that are directly attributable to the instrument and are an integral part of the effective interest rate, but not future credit losses. The carrying amount of the financial asset or financial liability is adjusted if the Group revises its estimates of payments or receipts. The adjusted carrying amount is calculated based on the original effective interest rate and the change in carrying amount is recorded as interest income or expense. Once the recorded value of a financial asset or a group of similar financial assets has been reduced due to an impairment loss, interest income continues to be recognised using the original effective interest rate applied to the new carrying amount. Fee and commission income The Group earns fee and commission income from a diverse range of services it provides to its customers. Fee income can be divided into the following two categories: - Fee income earned from services that are provided over a certain period of time Fees earned for the provision of services over a period of time are accrued over that period. These fees include commission income and asset management, custody and other management and advisory fees. Loan commitment fees for loans that are likely to be drawn down and other credit related fees are deferred (together with any incremental costs) and recognised as an adjustment to the effective interest rate on the loan. - Fee income from providing transaction services Fees arising from negotiating or participating in the negotiation of a transaction for a third party – such as the arrangement of the acquisition of shares or other securities or the purchase or sale of businesses – are recognised on completion of the underlying transaction. Fees or components of fees that are linked to a certain performance are recognised after fulfilling the corresponding criteria.

Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the year by the weighted average number of ordinary shares outstanding during the year. The Group has no convertible preference shares or convertible bonds, so diluted earnings per share equals to basic earnings per share. There have been no transactions with shares or potential shares, which should result in adjusting of earnings per share subsequent to the reporting date.





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4. Summary of accounting policies (continued) Foreign currency translation Transactions in foreign currencies are initially recorded in the Ukrainian Hryvnia, converted at the rate of exchange ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the functional currency rate of exchange ruling at the reporting date. Gains and losses resulting from the translation of foreign currency transactions are recognised in the consolidated income statement as translation differences. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date when the fair value was determined. Differences between the contractual exchange rate of a transaction in a foreign currency and the NBU exchange rate on the date of the transaction are included in gains less losses from dealing in foreign currencies and precious metals. The exchange rates at year-end used by the Group in the preparation of the consolidated financial statements are as follows:

31 December

2014 31 December

2013

UAH/1 US dollar 15.768556 7.993000

UAH/1 Euro 19.232908 11.041530

Future changes in accounting policies The standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Group’s consolidated financial statements are disclosed below. The Group intends to adopt these standards, if applicable, when they become effective. IFRS 9 Financial Instruments In July 2014, the IASB issued the final version of IFRS 9 Financial Instruments which reflects all phases of the financial instruments project and replaces IAS 39 Financial Instruments: Recognition and Measurement and all previous versions of IFRS 9. The standard introduces new requirements for classification and measurement, impairment, and hedge accounting. IFRS 9 is effective for annual periods beginning on or after 1 January 2018, with early application permitted. Retrospective application is required, but comparative information is not compulsory. Early application of previous versions of IFRS 9 is permitted if the date of initial application is before 1 February 2015. The adoption of IFRS 9 will have an effect on the classification and measurement of the Group’s financial assets, but no impact on the classification and measurement of the Group’s financial liabilities. IFRS 15 Revenue from Contracts with Customers IFRS 15 was issued in May 2014 and establishes a new five-step model that will apply to revenue arising from contracts with customers. Revenue arising from lease contracts within the scope of IAS 17 Leases, insurance contracts within the scope of IFRS 4 Insurance Contracts and financial instruments and other contractual rights and obligations within the scope of IAS 39 Financial Instruments: Recognition and Measurement (or IFRS 9 Financial Instruments, if early adopted) is out of IFRS 15 scope and is dealt by respective standards. Under IFRS 15 revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer. The principles in IFRS 15 provide a more structured approach to measuring and recognising revenue. The new revenue standard is applicable to all entities and will supersede all current revenue recognition requirements under IFRS. Either a full or modified retrospective application is required for annual periods beginning on or after 1 January 2017 with early adoption permitted. The Group is currently assessing the impact of IFRS 15 and plans to adopt the new standard on the required effective date. IFRS 14 Regulatory Deferral Accounts IFRS 14 is an optional standard that allows an entity, whose activities are subject to rate-regulation, to continue applying most of its existing accounting policies for regulatory deferral account balances upon its first-time adoption of IFRS. Entities that adopt IFRS 14 must present the regulatory deferral accounts as separate line items on the statement of financial position and present movements in these account balances as separate line items in the statement of profit or loss and other comprehensive income. The standard requires disclosures on the nature of, and risks associated with, the entity’s rate-regulation and the effects of that rate-regulation on its financial statements. IFRS 14 is effective for annual periods beginning on or after 1 January 2016. Since the Group is an existing IFRS preparer, this standard would not apply.





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4. Summary of accounting policies (continued) Amendments to IAS 19 Defined Benefit Plans: Employee Contributions IAS 19 requires an entity to consider contributions from employees or third parties when accounting for defined benefit plans. Where the contributions are linked to service, they should be attributed to periods of service as a negative benefit. These amendments clarify that, if the amount of the contributions is independent of the number of years of service, an entity is permitted to recognise such contributions as a reduction in the service cost in the period in which the service is rendered, instead of allocating the contributions to the periods of service. These amendments are effective for annual periods beginning on or after 1 July 2014. It is not expected that this amendment would be relevant to the Group, since none of the entities within the Group has defined benefit plans with contributions from employees or third parties. Amendments to IFRS 11 Joint Arrangements: Accounting for Acquisitions of Interests The amendments to IFRS 11 require that a joint operator accounting for the acquisition of an interest in a joint operation, in which the activity of the joint operation constitutes a business must apply the relevant IFRS 3 principles for business combinations accounting. The amendments also clarify that a previously held interest in a joint operation is not remeasured on the acquisition of an additional interest in the same joint operation while joint control is retained. In addition, a scope exclusion has been added to IFRS 11 to specify that the amendments do not apply when the parties sharing joint control, including the reporting entity, are under common control of the same ultimate controlling party. The amendments apply to both the acquisition of the initial interest in a joint operation and the acquisition of any additional interests in the same joint operation and are prospectively effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group. Amendments to IAS 16 and IAS 38: Clarification of Acceptable Methods of Depreciation and Amortisation The amendments clarify the principle in IAS 16 and IAS 38 that revenue reflects a pattern of economic benefits that are generated from operating a business (of which the asset is part) rather than the economic benefits that are consumed through use of the asset. As a result, a revenue-based method cannot be used to depreciate property, plant and equipment and may only be used in very limited circumstances to amortise intangible assets. The amendments are effective prospectively for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group given that the Group has not used a revenue-based method to depreciate its non-current assets. Amendments to IAS 16 and IAS 41 Agriculture: Bearer Plants The amendments change the accounting requirements for biological assets that meet the definition of bearer plants. Under the amendments, biological assets that meet the definition of bearer plants will no longer be within the scope of IAS 41. Instead, IAS 16 will apply. After initial recognition, bearer plants will be measured under IAS 16 at accumulated cost (before maturity) and using either the cost model or revaluation model (after maturity). The amendments also require that produce that grows on bearer plants will remain in the scope of IAS 41 measured at fair value less costs to sell. For government grants related to bearer plants, IAS 20 Accounting for Government Grants and Disclosure of Government Assistance will apply. The amendments are retrospectively effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. These amendments are not expected to have any impact to the Group as the Group does not have any bearer plants. Amendments to IAS 27: Equity Method in Separate Financial Statements The amendments will allow entities to use the equity method to account for investments in subsidiaries, joint ventures and associates in their separate financial statements. Entities already applying IFRS and electing to change to the equity method in its separate financial statements will have to apply that change retrospectively. For first-time adopters of IFRS electing to use the equity method in its separate financial statements, they will be required to apply this method from the date of transition to IFRS. The amendments are effective for annual periods beginning on or after 1 January 2016, with early adoption permitted. The Group currently considers whether to apply these amendments for preparation of its separate financial statements. These amendments will not have any impact on the Group’s consolidated financial statements. Amendments to IFRS 10 and IAS 28: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture The amendments address the acknowledged inconsistency between the requirements in IFRS 10 and IAS 28 in dealing with the loss of control of a subsidiary that is contributed to an associate or a joint venture. The amendments clarify that an investor recognises a full gain or loss on the sale or contribution of assets that constitute a business, as defined in IFRS 3, between an investor and its associate or joint venture. The gain or loss resulting from the re-measurement at fair value of an investment retained in a former subsidiary is recognised only to the extent of unrelated investors’ interests in that former subsidiary. These amendments are applied prospectively to transactions occurring in annual periods beginning on or after 1 January 2016. Earlier application is permitted.





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4. Summary of accounting policies (continued) Annual improvements 2012-2014 Cycle These improvements are effective on or after 1 January 2016 and are not expected to have a material impact on the Group. They include: IFRS 5 Non-current Assets Held for Sale and Discontinued Operations – changes in methods of disposal Assets (or disposal groups) are generally disposed of either through sale or through distribution to owners. The amendment to IFRS 5 clarifies that changing from one of these disposal methods to the other should not be considered to be a new plan of disposal, rather it is a continuation of the original plan. There is therefore no interruption of the application of the requirements in IFRS 5. The amendment also clarifies that changing the disposal method does not change the date of classification. The amendment must be applied prospectively to changes in methods of disposal that occur in annual periods beginning on or after 1 January 2016, with earlier application permitted. IFRS 7 Financial Instruments: Disclosures – servicing contracts IFRS 7 requires an entity to provide disclosures for any continuing involvement in a transferred asset that is derecognised in its entirety. The International Accounting Standards Board (IASB) was asked whether servicing contracts constitute continuing involvement for the purposes of applying these disclosure requirements. The amendment clarifies that a servicing contract that includes a fee can constitute continuing involvement in a financial asset. An entity must assess the nature of the fee and arrangement against the guidance for continuing involvement in paragraphs B30 and 42C IFRS 7 in order to assess whether the disclosures are required. The amendment must be applied for annual periods beginning on or after 1 January 2016, with earlier application permitted. The amendment is to be applied such that the assessment of which servicing contracts constitute continuing involvement will need to be done retrospectively. However, the required disclosures would not need to be provided for any period beginning before the annual period in which the entity first applies the amendments. IFRS 7 Financial Instruments: Disclosures - applicability of the offsetting disclosures to condensed interim financial statements In December 2011, IFRS 7 was amended to add guidance on offsetting of financial assets and financial liabilities. In the effective date and transition for that amendment IFRS 7 states that “An entity shall apply those amendments for annual periods beginning on or after 1 January 2013 and interim periods within those annual periods. The interim disclosure standard, IAS 34, does not reflect this requirement, however, and it is not clear whether those disclosures are required in the condensed interim financial report. The amendment removes the phrase ’and interim periods within those annual periods’, clarifying that these disclosures are not required in the condensed interim financial report. The amendment must be applied retrospectively for annual periods beginning on or after 1 January 2016, with earlier application permitted. IAS 19 Employee Benefits – regional market issue regarding discount rate The amendment to IAS 19 clarifies that market depth of high quality corporate bonds is assessed based on the currency in which the obligation is denominated, rather than the country where the obligation is located. When there is no deep market for high quality corporate bonds in that currency, government bond rates must be used. The amendment must be applied for annual periods beginning on or after 1 January 2016, with earlier application permitted. IAS 34 Interim Financial Reporting – disclosure of information ‘elsewhere in the interim financial report’ The amendment states that the required interim disclosures must either be in the interim financial statements or incorporated by cross-reference between the interim financial statements and wherever they are included within the greater interim financial report (e.g., in the management commentary or risk report). The IASB specified that the other information within the interim financial report must be available to users on the same terms as the interim financial statements and at the same time. If users do not have access to the other information in this manner, then the interim financial report is incomplete. The amendment should be applied retrospectively for annual periods beginning on or after 1 January 2016, with earlier application permitted.





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5. Significant accounting judgments and estimates

Judgments In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those involving estimates, which have the most significant effect on the amounts recognised in the consolidated financial statements: Recognition of financial instruments Management applies judgment to determine whether financial assets and financial liabilities should be recognised in a transaction where the counterparty for both asset and liability is the same. No asset or liability is recognised in the consolidated statement of financial position where the arrangement is in the same currency, for the same amount and with the same maturity, unless there is a substantial business purpose for such an arrangement. Gains and losses on initial recognition of financial instruments Management applies judgment to determine whether gains and losses should be recorded on initial recognition of financial assets and liabilities in a transaction where the counterparty is not a related party of the Group. The basis for judgment is the level of prevailing market interest rates for transactions with similar terms, effective interest rate analysis, and credit risk of the counterparty and specific terms of particular transaction.

Estimation uncertainty In the process of applying the Group’s accounting policies, management has used its judgments and made estimates in determining the amounts recognised in the consolidated financial statements. The most significant use of judgments and estimates are as follows: Fair value of financial instruments Where the fair values of financial assets and financial liabilities recorded in the consolidated statement of financial position cannot be derived from active markets, they are determined using a variety of valuation techniques that include the use of mathematical models. The input to these models is taken from observable markets where possible, but where this is not feasible, a degree of judgment is required in establishing fair values. Allowance for loan impairment The Group regularly reviews its loans and receivables to assess impairment. The Group uses its judgment to estimate the amount of any impairment loss in cases where a borrower is in financial difficulties and there are few available sources of historical data relating to similar borrowers. Similarly, the Group estimates changes in future cash flows based on the observable data indicating that there has been an adverse change in the payment status of borrowers in a group, or national or local economic conditions that correlate with defaults on assets in the group. Management uses estimates based on historical loss experience for assets with credit risk characteristics and objective evidence of impairment similar to those in the group of loans and receivables. The Group uses its judgment to adjust observable data for a group of loans or receivables to reflect current circumstances. Fair value of buildings and investment property Buildings and investment property of the Group are subject to revaluation on a regular basis. Such revaluations are based on the results of the work of independent appraisers. The basis for the valuation is the sales comparison approach. When performing the revaluation certain judgments and estimates are applied by the appraisers in order to determine which comparable premises should be used in the sales comparison approach. Deferred tax assets Deferred tax assets are recognised in respect of tax income losses to the extent that it is probable that taxable profit will be available against which the losses can be utilised. Judgment is required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and level of future taxable profits, together with future income tax planning strategies.





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6. Cash and cash equivalents Cash and cash equivalents comprise: 2014 2013

Current accounts with banks 2,353,142 2,178,667 Current accounts with the NBU 1,857,055 659,477 Overnight deposits 954,275 22,323 Cash on hand 582,482 642,603 Deposit certificates issued by the NBU with maturity less than 90 days 200,041 –

Reverse repo agreements with banks – 153,382

Cash and cash equivalents 5,946,995 3,656,452

The current account with the NBU represents amounts deposited with the NBU relating to daily settlements and other activities. Overnight deposits represent overnight deposits placed with OECD banks. These placements bear market interest rates.

7. Amounts due from banks Amounts due from banks comprise: 2014 2013

Restricted current accounts 666,328 42,956 Time deposits for more than 90 days – 16,779

Other amounts – 765

666,328 60,500

Less – Allowance for impairment – (8,868)

Amounts due from banks 666,328 51,632

As at 31 December 2014, UAH 666,328 thousand (2013: UAH 42,956 thousand) of restricted current accounts were placed as collateral under guarantees, letters of credit and standby letters of credit, issued by the Group on behalf of its clients to OECD banks. The movements in allowance for impairment of amounts due from banks were as follows: 2014 2013

1 January 8,868 10,785 Charge/(reversal) 12,481 (1,186) Foreign exchange differences (939) (731)

Written-off against allowance (20,410) –

31 December – 8,868

8. Obligatory reserve with NBU As at 31 December 2013 Ukrainian banks were required to keep 40% of the obligatory reserve for the previous month on a separate account with the NBU. The obligatory reserve must be composed of cash. As at 31 December 2013 the amount placed by the Bank on such account was UAH 461,495 thousand. Starting from 2014, NBU abolished the requirement to keep obligatory reserve on a separate account, which provided for restrictions on the use of cash.





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9. Derivative financial instruments The Group enters into derivative financial instruments for trading purposes. The table below shows the fair values of derivative financial instruments, recorded as assets or liabilities, together with their notional amounts. The notional amount, recorded gross, is the amount of a derivative’s underlying asset, basic rate or index and is the basis upon which changes in the value of derivatives are measured. The notional amounts indicate the volume of transactions outstanding at the year end and are not indicative of the credit risk. 2014 2013

Fair values Fair values

Notional amount Assets Liabilities

Notional amount Assets Liabilities

Foreign exchange contracts Swaps 193,353 3,656 – 556,719 1,864 (528)

Forward 10,157 2,138 – 46,153 1,780 (995)

Total derivative assets/(liabilities) 5,794 – 3,644 (1,523)

10. Loans to customers Loans to customers comprise: 2014 2013

Corporate lending 43,740,614 30,204,080 Consumer lending 73,876 69,500 Residential mortgages 19,300 20,970 Small business lending 715 2,822 Car lending 264 541

Other 31,197 114,334

Gross loans to customers 43,865,966 30,412,247

Less – Allowance for impairment (7,464,201) (2,357,628)

Loans to customers 36,401,765 28,054,619





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10. Loans to customers (continued)

Allowance for impairment of loans to customers A reconciliation of the allowance for impairment of loans to customers by class is as follows:

Corporate

lending Consumer

lending Residential mortgages

Small

business

lending Car lending Other Total

At 1 January 2014 2,345,380 3,334 608 2,816 382 5,108 2,357,628 Charge/(reversal) for the year 4,610,729 25,946 3,199 (2,060) (150) 5,290 4,642,954 Recoveries 212,018 – – 2,947 – 9 214,974 Amounts written off (1,002,128) – – (2,988) – – (1,005,116)

Foreign exchange differences 1,251,742 – 28 – – 1,991 1,253,761

31 December 2014 7,417,741 29,280 3,835 715 232 12,398 7,464,201

Individual impairment 5,801,673 – – – – – 5,801,673

Collective impairment 1,616,068 29,280 3,835 715 232 12,398 1,662,528

7,417,741 29,280 3,835 715 232 12,398 7,464,201

Gross amount of loans, individually determined to be impaired, before deducting any individually assessed impairment allowance 25,941,793 – – – – – 25,941,793





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Corporate

lending

Reverse repurchase agreements

Consumer lending

Residential mortgages

Small

business lending Car lending Other Total

At 1 January 2013 4,361,084 335 2,802 1,419 2,779 136 26,777 4,395,332 Charge/(reversal) for the year 662,561 (335) 529 (811) (3,761) 246 (21,669) 636,760 Recoveries 256,276 – 2 – 3,798 – – 260,076 Amounts written off (2,923,215) – – – – – – (2,923,215)

Foreign exchange differences (11,326) – 1 – – – – (11,325)

31 December 2013 2,345,380 – 3,334 608 2,816 382 5,108 2,357,628

Individual impairment 1,307,648 – – – – – – 1,307,648

Collective impairment 1,037,732 – 3,334 608 2,816 382 5,108 1,049,980

2,345,380 – 3,334 608 2,816 382 5,108 2,357,628

Gross amount of loans, individually determined to be impaired, before deducting any individually assessed impairment allowance 7,105,007 – – – – – – 7,105,007





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Individually impaired loans

Interest income accrued on loans, for which individual impairment allowances is recognised, for the year ended 31 December 2014, comprised UAH 1,746,579 thousand (2013: UAH 366,342 thousand).

Collateral and other credit enhancements

The amount and type of collateral required depends on an assessment of the credit risk of the counterparty. Guidelines are implemented regarding the acceptability of types of collateral and valuation parameters.

The main types of collateral obtained are as follows:

For securities lending and reverse repurchase transactions – cash equivalents or securities,

For commercial lending –real estate and movable properties, inventory and trade receivables,

For retail lending – mortgages over residential properties.

Management monitors the market value of collateral, requests additional collateral in accordance with the underlying agreement, and monitors the market value of collateral obtained during its review of the adequacy of the allowance for loan impairment. During 2014, the Group took possession of equipment and industrial building with an estimated value of UAH 21,942 thousand (2013: UAH 48,934 thousand) as a foreclosure on loans, which the Group is in the process of selling. It is the Group’s policy to dispose of repossessed properties in an orderly fashion. The proceeds are used to reduce or repay the outstanding claim. In general, the Group does not occupy repossessed properties for business use.

Concentration of loans to customers

As at 31 December 2014, the Group had a concentration of loans represented by UAH 13,400,602 thousand due from ten largest third party borrowers (30.5% of gross loan portfolio) (2013: UAH 9,279,896 thousand or 30.5%). An allowance of UAH 1,726,199 thousand (2013: UAH 164,284 thousand).

During 2014, the Group has issued loans to corporate customers of UAH 144,522 thousand (2013: UAH 178,122 thousand) under non-market interest rates. Losses on initial recognition of these loans of UAH 35,088 thousand (2013: UAH 3,788 thousand) were recognised in the consolidated income statement.

Loans have been extended to the following types of customers: 2014 2013

Legal entities 43,741,329 30,206,902

Individuals 124,637 205,345


Loans are made in the following industry sectors: 2014 2013

Metallurgy and mining 11,395,986 6,981,421 Real estate constructions 8,156,670 5,701,785 Agriculture and food processing 6,806,716 4,276,177 Energy 5,072,616 3,811,468 Manufacturing and machine-building 4,793,144 3,107,853 Transport 2,741,346 1,454,369 Oil and gas 2,278,095 2,183,491 Trade 1,795,403 2,152,871 Individuals 124,637 205,345 Services 120,866 117,841

Other 580,487 419,626






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11. Investment securities available-for-sale Available-for-sale securities comprise: 2014 2013

Ukrainian State bonds 2,900,698 2,523,499 Corporate bonds 234,968 250,576 Corporate shares 1,216 1,300

Municipal bonds – 69,913

Available-for-sale securities 3,136,882 2,845,288

As at 31 December 2014, Ukrainian State bonds with a carrying value of UAH 2,140,340 thousand were pledged as collateral under loans received from the NBU (2013: UAH 1,637,094 thousand) (Note 19). As at 31 December 2014, the Group did not pledge Ukrainian State bonds as collateral under repo agreement (2013: UAH 784,697 thousand).

12. Investments in associates The following associate is accounted for under the equity method: 2014

Associates Ownership, % Country Date of

incorporation Industry Date of

acquisition

LLC “Bereg” 39 Ukraine March 1999 Designing, construction,

freight services 7 June 2000 2013

Associates Ownership, % Country Date of

incorporation Industry Date of

acquisition

LLC “Bereg” 39 Ukraine March 1999 Designing, construction,

freight services 7 June 2000 Movement in investments in associates was as follows: 2014 2013

1 January 55 55

Share of profit – –

31 December 55 55

The following table illustrates summarised financial information of the associate:

2014 2013

Aggregated assets and liabilities of associates Assets 101 102

Liabilities – –

Net assets 101 102

2014 2013

Aggregated revenue and profit of associates Revenue – – Loss (1) –





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13. Property and equipment The movements in property and equipment were as follows:

Leasehold improve-

ments Land Buildings Equipment

Motor

vehicles

Assets under

construction Total

Cost or revalued amount and impairment 31 December 2013 7,397 17,161 1,935,372 697,103 85,031 284,028 3,026,092 Additions – – – – – 174,019 174,019

Disposals (4,154) (1,302) (183) (44,645) (9,115) (3,629) (63,028) Transfers 11,889 – 76,355 168,812 2,339 (259,395) – Effect of revaluation

(Note 25) – – (19,284) – – – (19,284) Impairment – – (941) – – (1,038) (1,979) Transfer to assets held for

sale – – (21,076) – (708) (84) (21,868) Transfer from investment

property (Note 15) – – 154,756 – – 900 155,656

Transfer to investment property (Note 15) – – (102,702) (22) – (55) (102,779)

31 December 2014 15,132 15,859 2,022,297 821,248 77,547 194,746 3,146,829

Accumulated depreciation 31 December 2013 (4,371) (56,785) (263,302) (42,675) (367,133)

Depreciation charge (1,755) (45,227) (81,517) (9,777) (138,276) Transfer to investment

property (Note 15) – 2,479 – – 2,479

Accumulated depreciation of impaired properties carried at revaluated amount – 677 – – 677

Impairment – – (172) (2,999) (3,171) Transfer to assets held for

sale – 1,071 – 706 1,777

Disposals 3,891 55 38,020 7,968 49,934

31 December 2014 (2,235) (97,730) (306,971) (46,777) (453,713)

Net book value:

31 December 2013 3,026 17,161 1,878,587 433,801 42,356 284,028 2,658,959

31 December 2014 12,897 15,859 1,924,567 514,277 30,770 194,746 2,693,116





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13. Property and equipment (continued)

Leasehold improve-

ments Land Buildings Equipment Motor

vehicles Assets under construction Total

Cost or revalued amount and impairment 31 December 2012 5,094 15,456 1,825,147 468,915 81,450 460,408 2,856,470 Additions – – – – – 332,019 332,019

Disposals (284) – (2) (89,777) (11,072) (34,545) (135,680) Transfers 2,587 1,705 136,944 317,965 14,653 (473,854) – Effect of revaluation – – 225 – – – 225

Transfer to investment property (Note 15) – – (26,942) – – – (26,942)

31 December 2013 7,397 17,161 1,935,372 697,103 85,031 284,028 3,026,092

Accumulated depreciation 31 December 2012 (2,256) (13,035) (305,148) (43,397) (363,836)

Depreciation charge (2,330) (43,977) (46,867) (9,753) (102,927) Transfer to investment

property (Note 15) – 225 – – 225

Disposals 215 2 88,713 10,475 99,405

31 December 2013 (4,371) (56,785) (263,302) (42,675) (367,133)

Net book value:

31 December 2012 2,838 15,456 1,812,112 163,767 38,053 460,408 2,492,634

31 December 2013 3,026 17,161 1,878,587 433,801 42,356 284,028 2,658,959

The latest valuation of buildings was performed by an independent appraiser as at 1 December 2014. Fair values were determined on the basis of the results of comparable sales of similar buildings on the market. The key assumptions relate to the condition, quality and location of compared properties. The main parameter used in this valuation method is the price per square meter of property. The total amount of net book value of the buildings was not significantly different from their fair value at the date of valuation.

The Management of the Group considers that the carrying amount of buildings does not differ materially from that which would have been determined using fair value as at 31 December 2014. If the buildings were measured using the cost model, the carrying amounts would be as follows: 2014 2013

Cost 1,178,543 1,018,898

Accumulated depreciation and impairment (390,291) (372,340)

Net carrying amount 788,252 646,558





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14. Intangible assets The movements in intangible assets were as follows:

Licenses and

computer software

Assets under development Total

Cost 31 December 2013 198,333 63,373 261,706 Additions – 33,978 33,978 Disposals (143) (19) (162)

Transfers 53,725 (53,725) –

31 December 2014 251,915 43,607 295,522

Accumulated amortisation 31 December 2013 (63,390) (63,390) Amortisation charge (24,885) (24,885)

Disposals 143 143

31 December 2014 (88,132) (88,132)

Net book value:

31 December 2013 134,943 63,373 198,316

31 December 2014 163,783 43,607 207,390

Licenses and

computer software

Assets under development Total

Cost 31 December 2012 179,774 70,055 249,829 Additions – 19,721 19,721 Disposals (7,844) – (7,844)

Transfers 26,403 (26,403) –

31 December 2013 198,333 63,373 261,706

Accumulated amortisation 31 December 2012 (46,767) (46,767) Amortisation charge (24,467) (24,467)

Disposals 7,844 7,844

31 December 2013 (63,390) (63,390)

Net book value:

31 December 2012 133,007 70,055 203,062

31 December 2013 134,943 63,373 198,316

15. Investment property The movements in investment property were as follow:

2014 2013

1 January 748,976 566,141 Revaluation (Note 28) 2,817 – Additions 1,850 110,240 Transfer from property and equipment (Note 13) 100,300 26,717 Transfer to property and equipment (Note 13) (155,656) – Transfer from assets held for sale – 54,312

Disposals (8,254) (8,434)

31 December 690,033 748,976

During 2014б the Group received income from lease of investment property amounted to UAH 24,584 thousand (2013: UAH 18,483 thousand) that was recognised in other income.





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16. Taxation The corporate income tax expense comprises: 2014 2013

Current income tax expense 20,518 – Deferred tax charge / (benefit) – origination and reversal of temporary differences 106,101 (38,240)

Deferred tax recognised directly in other comprehensive income 24,546 372

Income tax expense / (benefit) 151,165 (37,868)

Deferred tax related to items charged or credited to other comprehensive income during the year is as follows:

2014 2013

Net losses on investment securities available-for-sale (58,062) (408)

Revaluation of property and equipment 33,516 36

Income tax charged to other comprehensive income (24,546) (372)

According to the Tax Code income tax rate is 21% starting from 1 January 2012, 19% from 1 January 2013 and 18% from 1 January 2014 (2013: 19% starting from 1 January 2013, 16% from 1 January 2014). On 27 March 2014, Verkhovna Rada of Ukraine passed the Law of Ukraine # 1166-VII “On prevention of financial disaster and creating conditions for economic growth in Ukraine” which determined income tax rate to be 18% after 1 April 2014. Deferred tax balances are measured using the income tax rates that will be applicable when temporary differences are expected to reverse.

The effective income tax rate differs from the statutory income tax rates. A reconciliation of the income tax expense based on statutory rates with actual is as follows: 2014 2013

Loss before income tax (5,796,512) (40,628)

Statutory income tax rate 18% 19%

Theoretical income tax benefit at the statutory rate (1,043,372) (7,719) Income tax for the reporting period on transactions with securities 20,518 – Non-deductible expenditures: - operating and administrative 31,983 76,562 - amortisation of gain from loan received at rates below market previously

recognised in equity – 48,440 Income recognised for income tax purposes only – accrual of interests 657 16,127 Change in income tax rate (113,702) 71,074

Change in unrecognised deferred tax asset 1,255,081 (242,352)

Income tax expense / (benefit) 151,165 (37,868)





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16. Taxation (continued) Deferred tax assets and liabilities as at 31 December and their movements for the respective years comprise:

2012

Origination and reversal of temporary differences

2013

Origination and reversal of temporary differences

2014

in the conso-lidated income

statement

in other compre-hensive income

in the conso-lidated income

statement

in other compre-hensive income

Income tax effect of deductible temporary differences: Loans to banks and customers

and allowance for impairment 578,463 (462,842) – 115,621 309,803 – 425,424 Other liabilities 24,016 4,469 – 28,485 17,371 – 45,856 Deferred expenses 8 442 – 450 (450) – – Amounts due to banks 11,287 (11,287) – – 172,625 – 172,625 Other assets 123 4,466 – 4,589 4,370 – 8,959 Accrued expenses 25,515 (14,387) – 11,128 121,698 – 132,826 Debt securities in issue 1,746 (1,746) – – – – – Investment securities available-

for-sale – – – – (128) 58,062 57,934 Property, equipment and

intangible assets 10,993 (4,024) (36) 6,933 113,257 (33,516) 86,674 Accrued income 959 396 – 1,355 (1,355) – –

Income tax losses carried forward 433,872 275,779 – 709,651 373,518 – 1,083,169

Gross deferred tax asset 1,086,982 (208,734) (36) 878,212 1,110,709 24,546 2,013,467

Unrecognised deferred tax asset (634,615) 242,352 – (392,263) (1,255,081) – (1,647,344)

Deferred tax assets 452,367 33,618 (36) 485,949 (144,372) 24,546 366,123

Income tax effect of taxable temporary differences: Investment securities available-

for-sale (18,496) 4,428 408 (13,660) 13,660 – – Deferred expenses – – – – (92) – (92) Accrued income – – – – (21) – (21)

Accrued expenses – (178) – (178) 178 – –

Deferred tax liabilities (18,496) 4,250 408 (13,838) 13,725 – (113)

Deferred tax asset/ (liabilities) 433,871 37,868 372 472,111 (130,647) 24,546 366,010

17. Other impairment and provisions The movements in other impairment allowances and provisions were as follows:

Other financial

assets Other non-

financial assets

Guarantees and commit-

ments Legal claims Total

31 December 2012 7,095 9,798 91,441 45,431 153,765 Charge/(reversal) 7,382 5,967 (48,619) 6,112 (29,158) Write-offs (1,235) – – (29,734) (30,969)

Foreign exchange differences – – (203) – (203)

31 December 2013 13,242 15,765 42,619 21,809 93,435

Charge/(reversal) 65,372 3,400 887,710 (3,660) 952,822 Write-offs (54) (2) – – (56)

Foreign exchange differences 556 – 67,029 – 67,585

31 December 2014 79,116 19,163 997,358 18,149 1,113,786

Allowance for impairment of assets is deducted from the carrying amounts of the related assets. Provisions for guarantees and commitments are recorded in liabilities.





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18. Other assets and liabilities Other assets comprise: 2014 2013

Financial assets: Accrued commissions 106,751 16,510 Other prepayments and debtors 31,103 5,292

Other receivables from the Bank’s employees 25,154 10,998

163,008 32,800

Less – Allowance for impairment of other financial assets (Note 17) (79,116) (13,242)

Non-financial assets: Prepayments for risk insurance 178,344 140,001 Other prepayments and debtors 78,766 46,971 Prepayments for intangible assets and property and equipment 37,795 7,880 Taxes payable, other than income tax 3,339 10,665

Other non-financial assets 4,571 4,424

302,815 209,941

Less – Allowance for impairment of other non-financial assets (Note 17) (19,163) (15,765)

Other assets 367,544 213,734

Other liabilities comprise: 2014 2013 Financial liabilities: Payables to employees 297,473 160,538 Settlements with suppliers and contractors 25,711 4,892 Settlements on operations with plastic cards 18,800 24,950 Payments to Individuals’ Deposits Guarantee Fund 15,773 13,064 Settlements with banks and customers 1,117 147 Dividends payable to shareholders of the Bank 719 721 Accrued expenses 242 122

Other financial liabilities 4,050 2,668

363,885 207,102

Non-financial liabilities: Taxes payable, other than income tax 26,162 7,547 Deferred income 2,600 2,150

Other non-financial liabilities 363 1,151

29,125 10,848

Other liabilities 393,010 217,950

19. Amounts due to the NBU In December 2014, the Group received two loans from the NBU of UAH 69,507 thousand and UAH 1,700,000 thousand respectively (carrying value of UAH 69,471 thousand and UAH 1,699,046 thousand respectively as at 31 December 2014). These loans are secured by Ukrainian State Bonds with a fair value of UAH 2,140,340 thousand (31 December 2013: UAH 1,637,094thousand) (Note 11), are denominated in hryvnia, bear a fixed interest rate of 19.5% and mature in January and November 2015.

20. Amounts due to banks

Amounts due to banks comprise: 2014 2013

Time deposits and loans 20,475,013 14,102,579 Current accounts 806 17,634

Direct repo – 762,612

Amounts due to banks 20,475,819 14,882,825

As at 31 December 2014, loans and deposits due to banks include UAH 20,418,102 thousand (2013: UAH 11,109,331 thousand) received from the Parent bank. In 2013, the Group received loans of USD 50,000 thousand (UAH 399,650 thousand in equivalent as at the date of receipt) from the Parent bank.





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20. Amounts due to banks (continued)

This loan carries floating interest rate (3 month USD LIBOR + 4.27%), which is lower than market ones, and matured in 2014. The gain on initial recognition of this loan of UAH 13,561 thousand was recorded in consolidated statement of changes in equity as additional paid-in capital. In 2013, the Group recognised a loss of UAH 80,786 thousand from early repayment of loans to the Parent bank related to accelerated amortisation of a discount to fair value at initial recognition.

21. Other borrowings

As at 31 December 2014, other borrowings comprised loans received from international financial organization. The loans are denominated in USD and EUR, bear a floating interest rate of 12 months LIBOR+5.75% and 12 months EURIBOR+5.75%. The loans mature in June 2015 – April 2016. As at 31 December 2013, other borrowing comprised loans received from three international financial organizations. The loans are denominated in USD and EUR, bear a floating interest rate of 12 months LIBOR+5.75%, 12 months EURIBOR+5.75% and fixed interest rates of 6.75% and 8.25% respectively. Some of them were repaid at their maturity in August 2014, September 2014 and October 2014, the rest is payable in June 2015 and April 2016.

22. Amounts due to customers Amounts due to customers include the following: 2014 2013 Time deposits 8,822,363 9,678,216

Current accounts 5,534,354 4,834,801

Amounts due to customers 14,356,717 14,513,017

Held as security against letters of credit (Note 26) 481,172 41,896 Held as security against guarantees (Note 26) 126,570 12,901

As at 31 December 2014, amounts due to customers of UAH 3,072,000 thousand (21.4%) were due to ten largest third party customers (2013 – UAH 2,570,815 thousand (17.7%)).

As at 31 December 2014, included in time deposits are deposits of individuals of UAH 6,581,431 thousand (2013: UAH 6,639,456 thousand). In accordance with the Ukrainian Civil Code, the Group is obliged to repay such deposits upon demand of a depositor. In the event that a term deposit is repaid upon demand of the depositor prior to its maturity, interest is paid based on the interest rate for demand deposits, unless a different interest rate is specified in the agreement.

Amounts due to customers include accounts with the following types of customers: 2014 2013 Individuals 7,631,258 8,057,034 Legal entities 6,156,683 5,694,094

State and budgetary organizations 568,776 761,889


An analysis of customer accounts by economic sector follows: 2014 2013

Individuals 7,631,258 8,057,034 Trade 1,884,128 2,134,495 Machine building 1,074,628 667,949 Finance sector 518,769 512,032 Metallurgy 446,654 419,611 Manufacturing 408,855 611,911 Food and Agriculture 378,001 276,296 Transport and communication 329,727 416,818 Real estate constructions 221,579 176,123 Services 130,166 196,497 Energy 46,596 103,413 Chemical 7,949 93,851 Local authorities 2,091 20,870

Other 1,276,316 826,117






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23. Debt securities in issue As at 31 December 2014, the Group redeemed all debt securities in issue (2013: debt securities in issue for the amount of UAH 586,351 thousand).

24. Subordinated loan In August 2010, the Group received a subordinated loan of USD 300,000 thousand (UAH 2,367,000 thousand in equivalent as at the date of receipt) from the Parent bank. The subordinated loan carries a floating interest rate (12 months USD LIBOR+5.5%), which is lower than market, and matures in August 2020. The gain on initial recognition of this loan of UAH 231,281 thousand was recorded in consolidated statement of changes in equity as additional paid-in capital. As at 31 December 2014, the subordinated loan amounted to USD 300,000 thousand (equivalent of UAH 4,528,201 thousand) (2013: USD 300,000 thousand (equivalent of UAH 2,274,983 thousand)).

25. Equity Movements in shares outstanding, issued and fully paid are as follows:

Number of ordinary

shares Nominal amount

Inflation adjustment

Treasury shares

Adjusted amount

31 December 2012 529,871,452 5,298,715 932,789 – 6,231,504 Issue of shares 291,837,789 2,918,378 – – 2,918,378

Purchase of treasury shares (1,779,521) (17,795) – 17,795 –

31 December 2013 819,929,720 8,199,298 932,789 17,795 9,149,882

Sale of treasury shares 1,779,521 17,795 – (17,795) – Reversal of the effect of hyperinflation – – (932,789) – (932,789)

Purchase of treasury shares (508,532) (5,085) – 5,085 –

31 December 2014 821,200,709 8,212,008 – 5,085 8,217,093

As at 31 December 2014, the number of authorised ordinary shares is 821,709,241 (2013: 821,709,241) with a nominal value of UAH 10 per share. All authorised shares have been issued and fully paid. In April 2013 shareholders of the Bank approved an issue of 291,837,789 ordinary shares. The total consideration received for these shares was comprised of cash for the total amount of UAH 2,918,378 thousand (therefrom the Parent bank – UAH 2,917,445 thousand). This share issue was registered by National Commission for Securities and Stock Market on 15 October 2013. Interest expenses amounted to UAH 56,240 thousand on loans being recognised in 2013 as equity instruments and converted to share capital, were represented in consolidated statement of changes in equity as remuneration paid for financial transactions with the Parent bank. In November 2014, the Bank’s shareholders decided to carry out a private placement of 470,000,000 of ordinary registered shares of the Bank. This share issue was registered by National Commission for Securities and Stock Market on 16 December 2014. As a matter of fact, 441,611,999 were placed, the total consideration received for these shares was comprised of cash for the total amount of UAH 4,416,120 thousand (therefrom the Parent bank – UAH 4,415,424 thousand). In December 2014, the Bank entered into an agreement with its Parent bank to exchange loans received from the Parent bank with a nominal value of USD 303,000 thousand for 477,787,200 ordinary shares at a price of UAH 10 per share. Additional paid-in capital of UAH 4,777,872 thousand being the nominal value of ordinary shares of UAH 4,777,872 thousand was recognised in equity and then reclassified to share capital upon completion of the share issue in 2015. Unamortised discount on the exchanged loans in the amount of UAH 43 thousand was included to the accumulated deficit, thus, neither loss nor gain was recognised on this transaction. The share capital of the Bank was contributed by the shareholders in Ukrainian hryvnia and they are entitled to dividends and any capital distribution in Ukrainian hryvnia.





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25. Equity (continued) Reversal the effect of hyperinflation. During the period of hyperinflation, the Bank made respective adjustments to the share capital in order to present it in the measuring unit effective at the respective reporting date. After the hyperinflation ended, the amounts presented in the measuring unit effective at the end of the previous reporting period are taken as a basis of the book value of the share capital in the consolidated financial statements in future periods. Consequently, the share capital is neither recognised nor accounted for at historical cost of the authorised capital registered with the National Bank of Ukraine and the National Commission for Securities and Stock Market. In 2014, the Bank’s management decided to transfer the loss recognised in prior periods as a result of the share capital transformation from accumulated deficit to share capital, while the amount of net assets remained unchanged. Movements in other reserves were as follows:

Property and equipment

revaluation reserve

Investment securities

available-for-sale revaluation

reserve Total

31 December 2012 1,553,915 2,636 1,556,551

Revaluation of property and equipment 225 – 225 Income tax effect of revaluation of property and equipment (36) – (36) Net unrealised losses on investment securities available-for-sale – (314) (314) Realised gains on investment securities available-for-sale reclassified

to the consolidated income statement – (838) (838) Income tax effect of net gains on investment securities available-for-

sale – 408 408

31 December 2013 1,554,104 1,892 1,555,996

Revaluation of property and equipment (19,284) – (19,284)

Transfer of the revaluation of property and equipment to accumulated deficit (83) – (83)

Income tax effect of revaluation of property and equipment 3,486 – 3,486 Net unrealised losses on investment securities available-for-sale – (326,785) (326,785) Realised gains on investment securities available-for-sale reclassified

to the consolidated income statement – 3,283 3,283 Income tax effect of change in income tax rate (37,002) – (37,002) Income tax effect of net gains on investment securities available-for-

sale – 58,062 58,062

31 December 2014 1,501,221 (263,548) 1,237,673

Nature and purpose of reserves within equity Property and equipment revaluation reserve The revaluation reserve for property and equipment is used to record increases in the fair value of buildings and decreases to the extent that such decrease relates to an increase on the same asset previously recognised in equity. Investment securities available-for-sale revaluation reserve This reserve records changes in fair value of available-for-sale investment securities.

26. Commitments and contingencies

Legal

In the ordinary course of business, the Group is subject to legal actions and complaints. Management believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial condition or the results of future operations of the Group.

Taxation

Ukrainian tax and currency legislation is subject to varying interpretations, and changes, which can occur frequently. Management's interpretation of such legislation as applied to the transactions and activity of the Group may be challenged by the relevant regional and federal authorities. Recent events within Ukraine suggest that the tax authorities are taking a more assertive position in its interpretation of the legislation and assessments and, as a result, it is possible that transactions and activities that have not been challenged in the past may be challenged. As such, significant additional taxes, penalties and interest may be assessed. Fiscal periods remain open to review by the authorities in respect of taxes for three calendar years preceding the year of review. Under certain circumstances reviews may cover longer periods.





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26. Commitments and contingencies (continued) As at 31 December 2014 the Group had some legal proceedings with fiscal authorities. When cash outflow risk based on some uncertainty on Ukrainian tax legislation and regulatory base is considered to be possible and the amount of such outflow could be assessed reliably, the Group recognizes it in the consolidated financial statements respectively. As at 31 December 2014 management believes that cash outflow risk is low and these amounts should not be recognised in the consolidated financial statements. Starting from 1 September 2013, new rules of transfer pricing came into force in the Ukrainian law. These rules introduce additional requirements for accounting and documentation of transactions. The new legislation allows the tax authorities to impose additional tax liabilities in respect of certain transactions, including, but not limited to, transactions with related parties if, in their opinion, a transaction price differs from market conditions. Given that the practice of establishing new rules of transfer pricing is not yet well developed and certain provisions of the new law can be construed ambiguously, the impact of any claim by the tax authorities on the Group’s position in respect of its implementation cannot be estimated reliably.

Commitments and contingencies

As at 31 December the Group’s commitments and contingencies comprised the following: 2014 2013 Credit related commitments Guarantees 5,353,104 3,675,322 Letters of credit 482,672 265,925 Undrawn loan commitments 17,246 273,599 Avals – 17,233

5,853,022 4,232,079 Capital expenditure commitments 7,872 7,622

Total 5,860,894 4,239,701

Less – Provisions (Note 17) (997,358) (42,619)

Commitments and contingencies (before deducting collateral) 4,863,536 4,197,082 Less – Cash held as security against letters of credit and guarantees (Note 22) (607,742) (54,797)

Commitments and contingencies 4,255,794 4,142,285

27. Net fee and commission income Net fee and commission income comprises: 2014 2013 Settlements operations 238,489 146,788 Guarantees and letters of credit 154,967 99,580 Loan servicing 48,821 17,414 Cash collection services 7,039 9,451 Transactions with securities 3,030 2,153 Non-active accounts – 47,184

Other 4,797 5,358

Fee and commission income 457,143 327,928

Settlements operations (31,171) (29,567) Agent remunerations (3,816) (170) Guarantees and letters of credit (1,744) (1,955) Transactions with securities (426) (212)

Other (369) (3,056)

Fee and commission expense (37,526) (34,960)

Net fee and commission income 419,617 292,968





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28. Other income Other income comprises: 2014 2013

Income from early withdraw of deposits 43,325 3,066 Operating lease 35,243 25,228 Fines and penalties 34,797 11,970 Income from education services 3,402 858 Income from revaluation of investment property (Note 15) 2,817 – Sale of written-off loans – 25,311

Other 12,847 5,984

Total other income 132,431 72,417

29. Personnel and other operating expenses Personnel and other operating expenses comprise: 2014 2013 Salaries and bonuses 639,502 522,029

Social security costs 96,864 111,246

Personnel expenses 736,366 633,275

Repair and maintenance of property and equipment 122,343 99,113 Insurance 109,616 67,746 Taxes, other than income tax 108,672 50,011 Payments to Individuals’ Deposits Guarantee Fund 55,986 49,383 Development of growth strategy and other policies for retail business 54,782 83,927 Administration costs 41,173 43,070 Loss from sale of loans 33,823 – Utilities 33,270 37,872 IT consulting and professional services 25,916 7,440 Communications 23,659 22,835 Royalty payment 15,837 15,406 Advertising 15,059 8,858 Operating lease 12,168 10,218 Business travel and personnel training 9,253 13,728 Security 9,253 9,979 Charity 8,196 8,081 Legal and audit services 7,072 7,515 Cash collection costs 3,133 4,396 Loss on disposal of property and equipment 2,748 15,096 Loss from forgiveness of loans – 3,951

Other 33,467 33,541

Other operating expenses 725,426 592,166

30. Earnings per share Basic earnings per share are calculated by dividing net profit / loss by the weighted average number of ordinary shares in issue during the period, excluding treasury shares. The Group has no dilutive potential ordinary shares; therefore the diluted earnings per share equal the basic earnings per share. 2014 2013

Loss for the year (5,947,677) (2,760)

Weighted average number of ordinary shares in issue (thousands) 821,282 591,262

Loss per share, basic (expressed in UAH per share) (7.24) (0.01)





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31. Risk management

Introduction Risk is inherent to banking activities but it is managed through a process of ongoing identification, measurement and monitoring, subject to risk limits and other controls. This process of risk management is critical to the Group’s continuing profitability and each individual within the Group is accountable for the risk exposures relating to his or her responsibilities. The Group is exposed to credit risk, liquidity risk and market risk, the latter being subdivided into trading and non-trading risks. It is also subject to operating risks. The independent risk control process does not include business risks such as changes in the environment, technology and industry. They are monitored through the Group’s strategic planning process. Risk management structure The Management Board is ultimately responsible for identifying and controlling risks; however, there are separate independent bodies responsible for managing and monitoring risks. In particular, the Risk Management Department and Retail Risk Management Department carry the central responsibility for the identification, measurement and mitigation of risks. The Supervisory Board The Supervisory Board is responsible for the overall risk management approach and for approving the risk strategies and principles. The Management Board The Management Board has the responsibility to monitor the overall risk process within the Group, approval of general risk strategies and procedures. Credit Committee Credit Committee could be held in two forms – the Small Credit Committee (which has authority to approve credit exposures up to UAH 25,000 thousand) and the Large Credit Committee (with authority to approve credit exposures more than UAH 25,000 thousand). The Credit Committee is responsible for the decisions making in respect of assigning the credit limits to certain borrower, approval of other terms and conditions under which loan and other credit instruments are granted (e.g. interest rate, maturity, collateral to be provided etc.). Assets and Liabilities Committee The Assets and Liabilities Committee is responsible for the management of general market risks and the attraction of financial resources for the Group. The Asset and Liabilities Committee meeting is held at least monthly. Changes in exposure of the Group to general market risks, situation on capital markets, loans to customers and deposits markets, foreign currency dealing market are discussed on these meetings. Risk Management Department The Risk Management Department is responsible for the implementation and maintenance of risk related procedures to ensure an independent control process, monitoring compliance with risk principles, policies and limits across the Group. This unit also ensures the complete capture of the risks in risk measurement and reporting systems. Retail Risk Management Department The Retail Risk Management Department is responsible for the implementation and maintenance of risk related procedures to ensure an independent control process, monitoring compliance with risk principles, policies and limits related to retail business. Group Treasury The Treasury is responsible for managing the Group’s assets and liabilities and the overall financial structure. It is also primarily responsible for the funding and liquidity risks of the Group.





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31. Risk management (continued) Internal Audit Department The Group’s risks are measured using a method which reflects both the expected loss likely to arise in normal circumstances and unexpected losses, which are an estimate of the ultimate actual loss based on statistical models. The models make use of probabilities derived from historical experience, adjusted to reflect the economic environment. The Group also runs worst case scenarios that would arise in the event that extreme events which are unlikely to occur do, in fact, occur. Risk management processes throughout the Group are audited annually by the Internal Audit Department, which examines both the adequacy of the procedures and the Group’s compliance with the procedures. Internal Audit Department discusses the results of all assessments in the Audit Committee, and reports its findings and recommendations to the Supervisory Board. Risk measurement and reporting systems Monitoring and controlling risks is primarily performed based on limits established by the Group. These limits reflect the business strategy and market environment of the Group as well as the level of risk that the Group is willing to accept, with additional emphasis on selected industries. In addition the Group monitors and measures the overall risk bearing capacity in relation to the aggregate risk exposure across all risks types and activities. Information compiled from all the businesses is examined and processed in order to analyse, control and identify early risks. This information is presented and explained to the Management Board, the Credit Committee, and the head of each business division. The report includes aggregate credit exposure, credit metric forecasts, hold limit exceptions, liquidity ratios, amounts at risk and risk profile changes. On a monthly basis detailed reporting of industry, customer and geographic risks takes place. Senior management assesses the appropriateness of the allowance for credit losses on a monthly basis. The Management Board receives a detailed risk report which is designed to provide all the necessary information to assess and conclude on the risks of the Group. For all levels throughout the Group, specifically tailored risk reports are prepared and distributed in order to ensure that all business divisions have access to extensive, necessary and up-to-date information. Regular reports are given to the Management Board, principal shareholder and all other relevant employees of the Group on the utilisation of market limits, proprietary investments and liquidity, plus any other risk developments. Risk mitigation As part of its overall risk management, the Group uses derivatives and other instruments to manage exposures resulting from changes in interest rates, foreign currencies, equity risks, credit risks, and exposures arising from forecast transactions. The Group actively uses collateral to reduce its credit risks (see below for more detail). Excessive risk concentration Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the Group’s performance to developments affecting a particular industry or geographical location.

In order to avoid excessive concentrations of risks, the Group’s policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. Identified concentrations of risks are controlled and managed accordingly.

Credit risk Credit risk is the risk that the Group will incur a loss because its customers, clients or counterparties failed to discharge their contractual obligations. The Group manages and controls credit risk by setting limits on the amount of risk it is willing to accept for individual counterparties and for geographical and industry concentrations, and by monitoring exposures in relation to such limits.





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31. Risk management (continued) The Group has established a credit quality review process to provide early identification of possible changes in the creditworthiness of counterparties, including regular collateral revisions. Counterparty limits are established by the use of a credit risk classification system, which assigns each counterparty a risk rating. Risk ratings are subject to regular revision. Derivative financial instruments Credit risk arising from derivative financial instruments is, at any time, limited to those with positive fair values, as recorded in the consolidated statement of financial position. Credit-related commitments risks The Group makes available to its customers guarantees which may require that the Group make payments on their behalf. Such payments are collected from customers based on the terms of the letter of credit. They expose the Group to similar risks to loans and these are mitigated by the same control processes and policies. The maximum exposure to credit risk for the components of the consolidated statement of financial position, including derivatives, before the effect of mitigation through the use of master netting and collateral agreements, is best represented by their carrying amounts. Where financial instruments are recorded at fair value, the carrying value represents the current credit risk exposure but not the maximum risk exposure that could arise in the future as a result of changes in values. For more detail on the maximum exposure to credit risk for each class of financial instrument, references shall be made to the specific notes. The effect of collateral and other risk mitigation techniques is shown in Note 10. Credit quality per class of financial assets The credit quality of financial assets is managed by the Group’s internal credit ratings based on the NBU regulations: - High grade. This category includes exposures with insignificant credit risk which is characterised by strong financial position of the borrower and good loan servicing; - Standard grade. This category includes exposures with insignificant credit risk which however may increase as a result of unfavourable conditions; these are exposures to borrowers with good financial standing and good payment history or borrowers with strong financial position and payment history with delays not exceeding 90 days; - Sub-standard grade. This category includes exposures with significant credit risk which is characterised by weak/poor financial position of the borrower and good/poor/unsatisfactory loan servicing.





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31. Risk management (continued)

31 December 2014 Notes

Neither past due nor individually impaired Past due but not

individually impaired

Individually impaired Total High grade

Standard grade

Sub-standard

grade

Cash equivalents 6 5,364,513 – – – – 5,364,513 Amounts due from

banks 7 666,328 – – – – 666,328 Loans to customers 10 Corporate lending 1,508,293 2,743,605 9,450,528 2,480,327 20,140,120 36,322,873 Consumer lending 39,595 791 1,423 2,787 – 44,596 Residential

mortgages 8,741 2,192 2,265 2,267 – 15,465 Small business

lending – – – – – – Car lending 20 – – 12 – 32 Other 12,592 359 875 4,973 – 18,799 Investment

securities available-for-sale 11 – 3,124,188 11,478 – – 3,135,666

Total 7,600,082 5,871,135 9,466,569 2,490,366 20,140,120 45,568,272

31 December 2013 Notes

Neither past due nor individually impaired Past due but not

individually impaired

Individually impaired Total High grade

Standard grade

Sub-standard

grade

Cash equivalents 6 3,013,849 – – – – 3,013,849 Amounts due from

banks 7

43,721 7,911 – – – 51,632 Obligatory reserve

with NBU 8

461,495 – – – – 461,495 Loans to customers 10 Corporate lending 4,765,408 11,145,299 5,771,540 379,094 5,797,359 27,858,700 Consumer lending 64,319 957 391 499 – 66,166 Residential

mortgages

13,129 3,207 2,946 1,080 – 20,362 Small business

lending

– – – 6 – 6 Car lending 121 – 3 35 – 159 Other 103,066 783 2,377 3,000 – 109,226 Investment

securities available-for-sale

11 – 2,716,733 127,255 – – 2,843,988

Total 8,465,108 13,874,890 5,904,512 383,714 5,797,359 34,425,583





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31. Risk management (continued) An analysis of past due loans, by age, is provided below. The majority of the past due loans are not considered to be individually impaired. It is the Group’s policy to maintain accurate and consistent risk ratings across the credit portfolio. This facilitates focused management of the applicable risks and the comparison of credit exposures across all lines of business, geographic regions and products, the rating system is supported by a variety of financial analytics, combined with processed market information to provide the main inputs for the measurement of counterparty risk. All internal risk ratings are tailored to the various categories and are derived in accordance with the Group’s rating policy. The attributable risk ratings are assessed and updated regularly.

Ageing analysis of past due but not individually impaired loans per their classes

31 December 2014 Less than

30 days 31 to 60 days 61 to

90 days Over

90 days Total Loans to customers Corporate lending 1,817,648 90,434 – 572,245 2,480,327 Consumer lending 1,321 816 650 – 2,787 Residential mortgages 1,603 126 311 227 2,267 Small business lending – – – – – Car lending – – – 12 12

Other 2,281 790 794 1,108 4,973

Total 1,822,853 92,166 1,755 573,592 2,490,366

31 December 2013 Less than

30 days 31 to 60 days 61 to

90 days Over

90 days Total

Loans to customers Corporate lending 73,885 – 91,019 214,190 379,094 Consumer lending 329 136 34 – 499 Residential mortgages 1,013 – – 67 1,080 Small business lending – – – 6 6 Car lending 15 – – 20 35

Other 1,454 922 214 410 3,000

Total 76,696 1,058 91,267 214,693 383,714

See Note 10 for more detailed information with respect to the allowance for impairment of loans to customers.

Impairment assessment

The main considerations for the loan impairment assessment include whether any payments of principal or interest are overdue by more than 90 days or there are any known difficulties in the cash flows of counterparties, credit rating downgrades, or infringement of the original terms of the contract. The Group addresses impairment assessment in two areas: individually assessed allowances and collectively assessed allowances.

Individually assessed allowances

The Group determines the allowances appropriate for each individually significant loan on an individual basis. Items considered when determining allowance amounts include the sustainability of the counterparty’s business plan, its ability to improve performance once a financial difficulty has arisen, projected receipts and the expected dividend payout should bankruptcy ensue, the availability of other financial support and the realisable value of collateral, and the timing of the expected cash flows. The impairment losses are evaluated at each reporting date, unless unforeseen circumstances require more careful attention.

Collectively assessed allowances

Allowances are assessed collectively for losses on loans to customers that are not individually significant (including credit cards, residential mortgages and unsecured consumer lending) and for individually significant loans where there is not yet objective evidence of individual impairment. Allowances are evaluated on each reporting date with each portfolio receiving a separate review.





46

31. Risk management (continued) The collective assessment takes account of impairment that is likely to be present in the portfolio even though there is no yet objective evidence of the impairment in an individual assessment. Impairment losses are estimated by taking into consideration of the following information: historical losses on the portfolio, current economic conditions, the appropriate delay between the time a loss is likely to have been uncured and the time it will be identified as requiring an individually assessed impairment allowance, and expected receipts and recoveries once impaired. Local management is responsible for deciding the length of this period which can extend for as long as one year. The impairment allowance is then reviewed by credit management to ensure alignment with the Group’s overall policy.

Financial guarantees and letters of credit are assessed and provision made in a similar manner as for loans.

Geographical concentration The geographical concentration of the Group’s assets and liabilities is set out below: 2014

Ukraine

CIS and other non - OECD

countries OECD countries Total

Assets: Cash and cash equivalents 2,639,578 1,644,306 1,663,111 5,946,995 Amounts due from banks – – 666,328 666,328 Derivative financial assets 5,794 – – 5,794 Loans to customers 36,401,765 – – 36,401,765 Investment securities available-for-

sale 3,136,882 – – 3,136,882 Investments in associates 55 – – 55 Property and equipment 2,693,116 – – 2,693,116 Intangible assets 207,390 – – 207,390 Investment property 690,033 – – 690,033 Current income tax assets 6,077 – – 6,077

Deferred tax assets 366,010 – – 366,010 Assets held for sale 39,433 – – 39,433

Other assets 367,469 – 75 367,544

46,553,602 1,644,306 2,329,514 50,527,422

Liabilities: Amounts due to the NBU 1,768,517 – – 1,768,517 Amounts due to banks – 20,418,909 56,910 20,475,819 Other borrowings – – 21,551 21,551 Amounts due to customers 14,125,679 19,348 211,690 14,356,717 Current income tax liabilities 20,518 – – 20,518 Provisions 1,015,507 – – 1,015,507 Other liabilities 390,787 283 1,940 393,010

Subordinated loan – 4,528,201 – 4,528,201

17,321,008 24,966,741 292,091 42,579,840

Net assets/(liabilities) 29,232,594 (23,322,435) 2,037,423 7,947,582





47

31. Risk management (continued) 2013

Ukraine

CIS and other non - OECD

countries OECD countries Total

Assets: Cash and cash equivalents 1,456,670 1,327,475 872,307 3,656,452 Amounts due from banks 765 7,911 42,956 51,632 Obligatory reserve with NBU 461,495 – – 461,495 Derivative financial assets 3,644 – – 3,644 Loans to customers 28,054,619 – – 28,054,619 Investment securities available-for-

sale 2,845,288 – – 2,845,288 Investments in associates 55 – – 55 Property and equipment 2,658,959 – – 2,658,959 Intangible assets 198,316 – – 198,316 Investment property 748,976 – – 748,976 Current income tax assets 6,875 – – 6,875

Deferred tax assets 472,111 – – 472,111 Assets held for sale 9,081 – – 9,081

Other assets 213,374 145 215 213,734

37,130,228 1,335,531 915,478 39,381,237

Liabilities: Amounts due to the NBU 1,499,980 – – 1,499,980 Amounts due to banks 1,020,048 12,676,173 1,186,604 14,882,825 Derivative financial liabilities 599 924 – 1,523 Other borrowings – – 332,653 332,653 Amounts due to customers 14,290,742 22,215 200,060 14,513,017 Debt securities in issue 586,351 – – 586,351 Provisions 64,428 – – 64,428 Other liabilities 217,918 32 – 217,950


17,680,066 14,974,327 1,719,317 34,373,710

Net assets/(liabilities) 19,450,162 (13,638,796) (803,839) 5,007,527

Liquidity risk and funding management Liquidity risk is the risk that the Group will be unable to meet its payment obligations when they fall due under normal and stress circumstances. To limit this risk, management has arranged diversified funding sources in addition to its core deposit base, manages assets with liquidity in mind, and monitors future cash flows and liquidity on a daily basis. This incorporates an assessment of expected cash flows and the availability of high grade collateral which could be used to secure additional funding if required. The Group maintains a portfolio of highly diverse assets that can be easily liquidated in the event of an unforeseen interruption of cash flow. The Group also has committed lines of credit that it can assess to meet liquidity needs.





48

31. Risk management (continued) The liquidity position is assessed and managed by the Group primarily based on certain liquidity ratios established by the NBU. As at 31 December, these ratios were as follows:

2014, % 2013, %

N4 “Instant Liquidity Ratio” (cash on hands and balances on nostro accounts with NBU and banks/balances on loro accounts due to NBU and banks, balances on customers’ current accounts, balances on customers’ time deposits which matured) (minimum required by the NBU – 20%) 113.76 76.14

N5 “Current Liquidity Ratio” (cash on hands, balances on nostro accounts with NBU and banks, banking metals, claims on banks maturing within with residual maturity of up to 31 days, debt securities with residual maturity of up to 31 days / balances on loro accounts due to NBU and banks, balances on customers’ current accounts, balances on customers’ time deposits which matured, debt securities issued, term deposits and other debt obligations and commitments with residual maturity of up to 31 days) (minimum required by the NBU – 40%) 201.26 67.50

N6 “Short-Term Liquidity Ratio” (cash on hands, balances on nostro accounts with NBU and banks, banking metals, claims on banks maturing within with residual maturity of up to 1 year, debt securities with residual maturity of up to 1 year / balances on loro accounts due to NBU and banks, balances on customers’ current accounts, balances on customers’ time deposits which matured, debt securities issued, term deposits and other debt obligations and commitments with residual maturity of up to 1 year) (minimum required by the NBU – 60%) 86.48 75.79

Analysis of financial liabilities by remaining contractual maturities The tables below summarise the maturity profile of the Group’s financial liabilities at 31 December based on contractual undiscounted repayment obligations on cash payments and management expectations except for gross settled derivatives which are shown by contractual maturity.

Financial liabilities Less than 3 months

3 to 12 months

1 to 5 years

Over 5 years Total

31 December 2014 Amounts due to the NBU 152,064 1,917,973 – – 2,070,037 Amounts due to banks 8,489,868 8,069,329 5,024,480 – 21,583,677 Other borrowings – 14,423 8,234 – 22,657 Amounts due to customers 14,096,675 521,106 33,746 – 14,651,527 Subordinated loan – 286,937 1,148,535 5,012,289 6,447,761

Other financial liabilities 64,870 297,317 1,668 30 363,885

Total undiscounted financial liabilities 22,803,477 11,107,085 6,216,663 5,012,319 45,139,544





49


Financial liabilities Less than 3 months

3 to 12 months

1 to 5 years

Over 5 years Total

31 December 2013 Amounts due to the NBU 131,421 1,456,595 – – 1,588,016 Amounts due to banks 1,000,652 8,661,356 6,463,874 – 16,125,882 Other borrowings 5,545 334,677 12,621 – 352,843 Gross settled derivative financial instruments - Contractual amounts payable 65,681 – – – 65,681 - Contractual amounts receivable (64,158) – – – (64,158) Amounts due to customers 9,741,134 4,027,525 1,262,387 1,851 15,032,897 Debt securities in issue 595,058 – – – 595,058 Subordinated loan – 147,679 592,745 2,691,378 3,431,802

Other financial liabilities 45,813 161,246 43 – 207,102

Total undiscounted financial liabilities 11,521,146 14,789,078 8,331,670 2,693,229 37,335,123

The maturity analysis does not reflect the historical stability of current accounts. Their liquidation has historically taken place over a longer period than indicated in the tables above. These balances are included in amounts due in less than three months in the tables above. Also included in due to customers are term deposits of individuals. In accordance with the Ukrainian legislation, the Group is obliged to repay such deposits upon demand of a depositor. Refer to Note 22. The table below shows the contractual expiry by maturity of the Group’s financial commitments and contingencies. Each undrawn loan commitment is included in the time band containing the earliest date it can be drawn down. For issued financial guarantee contracts, the maximum amount of the guarantee is allocated to the earliest period in which the guarantee could be called.

Less than 3 months

3 to 12 months

1 to 5 years

Over 5 years Total

2014 5,827,733 25,289 – – 5,853,022 2013 4,185,176 – 46,903 – 4,232,079

The Group expects that not all of the contingent liabilities or commitments will be drawn before expiry of the commitments.

Market risk Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchanges, and equity prices. Market risks are managed and monitored using risk limits and analyses based on historic volatilities. Interest rate risk Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the Group’s consolidated income statement.





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31. Risk management (continued) The sensitivity of the consolidated income statement is the effect of the assumed changes in interest rates on the net interest income for one year, based on the floating rate non-trading financial assets and financial liabilities held at 31 December. The sensitivity of equity is calculated by revaluing fixed rate available-for-sale financial assets at 31 December for the effects of the assumed changes in correlation of short-term and long-term interest rates based on the assumption that there are parallel simultaneous shifts in the yield curve.

Interest rate

Increase in basis points

2014

Sensitivity of net interest income

2014

Sensitivity of equity

2014

3M LIBOR USD 25 (32,097) – 3M LIBOR EUR 5 47 – 3M MosPrime 300 (4,673) – 3M Ukrainian interbank 950 – – YTM Ukrainian state bonds 3,000 – (823,472) YTM 5Y US Treasuries 60 – (10,711)

Interest rate

Decrease in basis points

2014


2014


2014

3M LIBOR USD 5 6,419 – 3M LIBOR EUR 8 (76) – 3M MosPrime 1,000 15,577 – 3M Ukrainian interbank 950 – – YTM Ukrainian state bonds 700 – 192,144 YTM 5Y US Treasuries 10 – 1,785

Interest rate

Increase in basis points

2013


2013


2013

3M LIBOR USD 25 (11,762) –

3M LIBOR EUR 50 7,994 –

3M MosPrime 100 653 –

3M Ukrainian interbank 950 (1,001) – YTM Ukrainian state bonds 700 – (85,089) YTM 5Y US Treasuries 80 – (15,277)

Interest rate

Decrease in basis points

2013


2013


2013

3M LIBOR USD 5 2,352 – 3M LIBOR EUR 10 (1,599) – 3M MosPrime 100 (653) – 3M Ukrainian interbank 950 1,001 – YTM Ukrainian state bonds 700 – 85,089 YTM 5Y US Treasuries 80 – 15,227





51


Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Management Board has set limits on positions by currency based on the NBU regulations. Positions are monitored on a daily basis. The tables below indicate the currencies to which the Group had significant exposure at 31 December on its non-trading monetary assets and liabilities and its forecasted cash flows. The analysis calculates the effect of a reasonably possible movement of the currency rate against the Ukrainian hryvnia, with all other variables held constant on the consolidated income statement (due to the fair value of currency sensitive non-trading monetary assets and liabilities). The effect on equity does not differ from the effect on the consolidated income statement. A negative amount in the table reflects a potential net reduction in the consolidated income statement or equity, while a positive amount reflects a net potential increase.

Currency

Change in currency rate

in %, 2014

Effect on profit before income tax

2014

Change in currency rate

in %, 2013

Effect on profit before income tax

2013

USD +49.11% 664,839 +48.63% (304,825) EUR +34.15% (151,458) +56.21% (17,605) RUB +37.51% (216,865) +56.07% (72,922) Respective decrease of currency rates will have an opposite impact on profit before income tax.

Operational risk Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When internal controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Group cannot expect to eliminate all operational risks, but a control framework and monitoring and responding to potential risks are effective tools to manage the risks. Controls should include effective segregation of duties, access, authorisation and reconciliation procedures, staff education and assessment processes, including the use of internal audit.

32. Fair value measurements Financial instruments recorded at fair value The Group uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

Level 2: techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly; and

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data.

All assets and liabilities for which fair value is disclosed in the consolidated financial statements are categorised within their nature, characteristics, relating risks and the fair value hierarchy, as described above. The date of assessment for all assets and liabilities, described below, - 31 December 2014 with the exception of buildings and investment property, which were assessed on 1 December 2014.





52

32. Fair value measurements (continued) 31 December 2014 Level 1 Level 2 Level 3 Total

Assets measured at fair value Derivatives – 5,794 – 5,794 Investment securities available-for-

sale 1,063,350 2,072,316 – 3,135,666 Buildings – – 1,924,567 1,924,567

Investment property – – 690,033 690,033

Total assets measured at fair value 1,063,350 2,078,110 2,614,600 5,756,060

Assets for which fair values are

disclosed Cash and cash equivalents 5,946,995 – – 5,946,995 Amounts due from banks – 666,328 – 666,328

Loans to customers – – 36,401,765 36,401,765

Total assets for which fair values are disclosed 5,946,995 666,328 36,401,765 43,015,088

Liabilities for which fair values are

disclosed Amounts due to the NBU – 1,768,517 – 1,768,517 Amounts due to banks – 20,475,819 – 20,475,819 Other borrowings – 21,551 – 21,551 Amounts due to customers – – 14,356,717 14,356,717


Total liabilities for which fair values are disclosed – 26,794,088 14,356,717 41,150,805





53

32. Fair value measurements (continued)

31 December 2013 Level 1 Level 2 Level 3 Total

Assets measured at fair value Derivatives – 3,644 – 3,644 Investment securities available-for-

sale 2,612,831 231,157 – 2,843,988 Buildings – – 1,878,587 1,878,587

Investment property – – 748,976 748,976

Total assets measured at fair value 2,612,831 234,801 2,627,563 5,475,195

Assets for which fair values are

disclosed Cash and cash equivalents 3,656,452 – – 3,656,452 Obligatory reserve with the NBU – 461,495 – 461,495 Amounts due from banks – 51,632 – 51,632 Loans to customers – – 28,054,619 28,054,619

Total assets for which fair values are disclosed 3,656,452 513,127 28,054,619 32,224,198

Liabilities measured at fair value Derivatives – 1,523 – 1,523

Total liabilities measured at fair value – 1,523 – 1,523

Liabilities for which fair values are

disclosed Amounts due to the NBU – 1,499,980 – 1,499,980 Amounts due to banks – 14,882,825 – 14,882,825 Other borrowings – 332,653 – 332,653 Amounts due to customers – – 14,513,017 14,513,017 Debt securities in issue – 586,351 – 586,351


Total liabilities for which fair values are disclosed – 19,576,792 14,513,017 34,089,809

There were no transfers between level of hierarchy in 2014. In 2013 Investment securities available-for-sale with a carrying value of UAH 2,593 thousand were transferred from level 1 into level 2. The transfer was caused by the inactive market and reduction in quantity of securities purchase contracts. Financial instruments categorised in level 2 comprise unquoted debt securities issued by high-grade borrower. Their fair value was measured using valuation techniques for which the lowest level input been significant to the fair value measurement is observable. The characteristics of similar quoted financial instruments were used as input for such valuation techniques.

The following is a description of the determination of fair value for financial instruments which are recorded at fair value using valuation techniques. These incorporate the Group’s estimate of assumptions that a market participant would make when valuing the instruments.





54

32. Fair value measurements (continued) Derivatives

Derivatives valued using a valuation technique with market observable inputs are mainly currency swaps. The most frequently applied valuation techniques include forward pricing and swap models, using present value calculations. The models incorporate various inputs including the credit quality of counterparties, foreign exchange spot and forward rates.

Investment securities available-for-sale

Investment securities available-for-sale valued using a valuation technique or pricing models primarily consist of unquoted equity and debt securities. These securities are valued using models which incorporate data observable in the market. The non-observable inputs to the models include assumptions regarding the future financial performance of the investee, its risk profile, and economic assumptions regarding the industry and geographical jurisdiction in which the investee operates. As at 31 December 2014 the equity investments classified as investment securities available-for-sale for the carrying amount of UAH 1,216 thousand (2013: UAH 1,300 thousand) do not have neither quoted market price in an active market nor appropriate methods to determine the fair value and are measured at cost less impairment allowance. Investment property The Group uses discounted cash flow method (“DCF”) for valuation of its investment property. Under the DCF method, fair value is estimated using assumptions regarding the benefits and liabilities of ownership over the asset’s life including an exit or terminal value. This method involves the projection of a series of cash flows on a real property interest. To this projected cash flow series, a market-derived discount rate is applied to establish the present value of the income stream associated with the asset. The exit yield is normally separately determined and differs from the discount rate. The duration of the cash flows and the specific timing of inflows and outflows are determined by events such as rent reviews, lease renewal and related re-letting, redevelopment, or refurbishment. The appropriate duration is typically driven by market behaviour that is a characteristic of the class of real property. Periodic cash flow is typically estimated as gross income less vacancy, non-recoverable expenses, collection losses, lease incentives, maintenance cost, agent and commission costs and other operating and management expenses. The series of periodic net operating income, along with an estimate of the terminal value anticipated at the end of the projection period, is then discounted. Property and equipment – buildings Fair value of the properties was determined by using market comparable method. This means that valuations performed by the appraiser are based on market transaction prices, significantly adjusted for difference in the nature, location or condition of the specific property. As at the date of revaluation, 1 December 2014, the properties’ fair values are based on valuations performed by an accredited independent appraiser.





55

32. Fair value measurements (continued)

Fair value of financial assets and liabilities not carried at fair value

Set out below is a comparison by class of the carrying amounts and fair values of the Group’s financial instruments that are not carried at fair value in the consolidated statement of financial position. The table does not include the fair values of non-financial assets and non-financial liabilities.

Carrying value 2014

Fair value 2014

Unre-cognised

gain/(loss) 2014

Carrying value 2013

Fair value 2013

Unre-cognised

gain/(loss) 2013

Financial assets Cash and cash

equivalents 5,946,995 5,946,995 – 3,656,452 3,656,452 – Amounts due from banks 666,328 666,328 – 51,632 55,491 3,859 Obligatory reserve with

NBU – – – 461,495 461,495 – Loans to customers 36,401,765 35,566,983 (834,782) 28,054,619 27,183,115 (871,504) Financial liabilities Amounts due to the NBU 1,768,517 1,768,517 – 1,499,980 1,499,980 – Amounts due to banks 20,475,819 19,438,946 1,036,873 14,882,825 14,714,683 168,142 Other borrowings 21,551 21,551 – 332,653 332,653 – Subordinated loan 4,528,201 3,600,969 927,232 2,274,983 2,285,855 (10,872) Debt securities in issue – – – 586,351 585,354 997

Amounts due to customers 14,356,717 14,441,087 (84,370) 14,513,017 14,516,719 (3,702)

Total unrecognised change in unrealised fair value 1,044,953 (713,080)

The following describes the methodologies and assumptions used to determine fair values for those financial instruments which are not already recorded at fair value in the consolidated financial statements. Assets for which fair value approximates carrying value For financial assets and financial liabilities that are liquid or having a short term maturity (less than three months) it is assumed that the carrying amounts approximate to their fair value. This assumption is also applied to demand deposits and savings accounts without a specific maturity. Financial assets and financial liabilities carried at amortised cost Fair value of the quoted bonds is based on price quotations at the reporting date. The fair value of unquoted instruments, loans to customers, amounts due to customers, amounts due from banks and amounts due to the NBU and banks and other financial assets and liabilities, is estimated by discounting future cash flows using rates currently available for debt on similar terms, credit risk and remaining maturities. Fixed and floating rate financial instruments The fair value of fixed rate financial assets and liabilities carried at amortised cost are estimated by comparing market interest rates when they were first recognised with current market rates offered for similar financial instruments. The estimated fair value of fixed interest bearing deposits is based on discounted cash flows using prevailing money-market interest rates for debts with similar credit risk and maturity. For those bonds issued where quoted market prices are not available, a discounted cash flow model is used based on a current interest rate yield curve appropriate for the remaining term to maturity.





56

33. Maturity analysis of assets and liabilities The table below shows an analysis of assets and liabilities according to when they are expected to be recovered or settled. See Note 31 “Risk management” for the Group’s contractual undiscounted repayment obligations. 2014

Within one

year More than one

year Maturity

undefined Total

Cash and cash equivalents 5,946,995 – – 5,946,995 Amounts due from banks 664,973 1,355 – 666,328 Derivative financial assets 4,124 1,670 – 5,794 Loans to customers 27,376,807 9,024,958 – 36,401,765 Investment securities available-for-sale 2,118,015 1,017,651 1,216 3,136,882 Investments in associates – – 55 55 Property and equipment – – 2,693,116 2,693,116 Intangible assets – – 207,390 207,390 Investment property – – 690,033 690,033 Current income tax assets 6,077 – – 6,077 Deferred tax assets – – 366,010 366,010 Assets held for sale 39,433 – – 39,433

Other assets 312,324 55,220 – 367,544

Total 36,468,748 10,100,854 3,957,820 50,527,422

Amounts due to the NBU 1,768,517 – – 1,768,517 Amounts due to banks 16,054,477 4,421,342 – 20,475,819 Other borrowings 13,881 7,670 – 21,551 Amounts due to customers 3,967,308 389,409 – 14,356,717 Current income tax liabilities 20,518 – – 20,518 Provisions – – 1,015,507 1,015,507 Other liabilities 390,308 2,702 – 393,010

Subordinated loan 100,625 4,427,576 – 4,528,201

Total liabilities 32,315,634 9,248,699 1,015,507 42,579,840

Net 4,153,114 852,155 2,942,313 7,947,582





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33. Maturity analysis of assets and liabilities (continued) 2013

Within one

year More than one

year Maturity

undefined Total

Cash and cash equivalents 3,656,452 – – 3,656,452 Amounts due from banks 27,851 23,781 – 51,632 Obligatory reserve with NBU 461,495 – – 461,495 Derivative financial assets 3,644 – – 3,644 Loans to customers 17,204,709 10,849,910 – 28,054,619 Investment securities available-for-sale 2,384,899 459,089 1,300 2,845,288 Investments in associates – – 55 55 Property and equipment – – 2,658,959 2,658,959 Intangible assets – – 198,316 198,316 Investment property – – 748,976 748,976 Current income tax assets 6,875 – – 6,875 Deferred tax assets – – 472,111 472,111 Assets held for sale 9,081 – – 9,081

Other assets 196,101 17,633 – 213,734

Total 23,951,107 11,350,413 4,079,717 39,381,237

Amounts due to the NBU 1,499,980 – – 1,499,980 Amounts due to banks 8,996,215 5,886,610 – 14,882,825 Derivative financial liabilities 1,523 – – 1,523 Other borrowings 321,192 11,461 – 332,653 Amounts due to customers 13,321,278 1,191,739 – 14,513,017 Debt securities in issue 586,351 – – 586,351 Provisions – – 64,428 64,428 Other liabilities 217,169 781 – 217,950

Subordinated loan 51,526 2,223,457 – 2,274,983

Total 24,995,234 9,314,048 64,428 34,373,710

Net (1,044,127) 2,036,365 4,015,289 5,007,527

The maturity analysis does not reflect the stability of current accounts. Their liquidation has historically taken place over a longer period than indicated in the table above. These balances are included in amounts due within one year. Also included in due to customers are term deposits of individuals. In accordance with Ukrainian legislation, the Group is obliged to repay such deposits within five days upon demand of a depositor. However, the Group does not expect that many customers will request repayment at dates earlier than their maturity and expects that many deposits will be rolled-over. These balances are included above in accordance with their contractual maturity.

34. Subsidiaries Consolidated financial statements include financial statements of the following subsidiary: 2014

Subsidiary Ownership, % Country Date of

incorporation Industry Date of acquisition

«Russian-Ukrainian gymnasium»

100 Ukraine 7 March 2013 Education 7 March 2013

2013

Subsidiary Ownership, % Country Date of

incorporation Industry Date of acquisition

«Russian-Ukrainian gymnasium»

100 Ukraine 7 March 2013 Education 7 March 2013

The subsidiary was founded in 2013. As at 31 December 2014, the Bank didn’t pay its contribution amounting to UAH 10 thousand into the share capital of the subsidiary, but the Bank has already gained control over the subsidiary according to IFRS 10 as the Bank is the sole founder of the subsidiary. As at 31 December 2014, the Bank’s share in the Prominvestbank’s agricultural subsidiary Obriy and Kyiv Institute of Banking exceeded 50% in each.





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34. Subsidiaries (continued) Despite the share of ownership, the Group does not control the financial and operational policy of these companies, does not participate in the actual management of their activities and does not impact their profitability. As at 31 December 2014, the Bank’s investments in Prominvestbank’s agricultural subsidiary Obriy and Kyiv Institute of Banking were classified as available-for-sale investments (Note 11).

35. Transferred financial assets and assets held or pledged as collateral The following table provides a summary of financial assets which have been transferred in such a way that part or all of the transferred financial assets do not qualify for derecognition:


Government debt

securities

Transferred financial asset 2014

Carrying value of assets Ukrainian state bonds (Note 11) 2,140,340

Total 2,140,340

Carrying value of respective liabilities Amounts due to the NBU (Note 19) 1,768,517

Total 1,768,517


Government debt

securities

Transferred financial asset 2013

Carrying value of assets

Ukrainian state bonds on repo transactions (Note 11) 784,697

Ukrainian state bonds (Note 11) 1,637,094

Total 2,421,791

Carrying value of respective liabilities

Repurchase agreements (Note 20) 762,612

Amounts due to the NBU (Note 19) 1,499,980

Total 2,262,592

36. Related party transactions In accordance with IAS 24 “Related Party Disclosures”, parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the same terms, conditions and amounts as transactions between unrelated parties.

Transactions with government-related entities The Russian Federation, acting through the Russian Government, controls the Parent bank. The Russian Federation directly and indirectly controls and has significant influence over a significant number of entities through its government agencies and other organizations (together referred to as “government-related entities”). The Group enters into banking transactions with these entities including but not limited to lending, deposit taking, cash settlement, as well as foreign exchange transactions.





59

36. Related party transactions (continued) The outstanding balances of government-related party transactions are as follows: 31 December 2014 31 December 2013

Amount Currency Interest rate Amount Currency Interest rate

Current accounts in banks:

Bank A 26,251 RUB 0.49% 34,405 RUB 0.87% Bank B 5,312 RUB 0.5% 2,223 RUB 0.5% Bank C 234 BYR 0% 129 BYR 0%

Bank D – – – 80 RUB 0%

Total 31,797 36,837

Amounts due to

banks: Bank E 721 UAH 0% 11,199 UAH 0% Bank E 1 USD 0% 6,395 USD 0% Bank F – – – 796,662 USD 6%

Bank G – – – 487,396 USD 5.5%

Total 722 1,301,652





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36. Related party transactions (continued)

Transactions with the Parent bank and entities other than government-related The outstanding balances of other than government-related party transactions are as follows: 31 December 2014 31 December 2013

Parent bank Associates

Key manage-

ment personnel Parent bank Associates

Key manage-

ment personnel

Cash and cash equivalents 1,515,209 – – 1,225,082 – – Loans outstanding at 1 January,

gross – – 1,139 – – 1,687 Loan repayments during the

year – – (409) – – (548)

Loans outstanding at 31 December, gross – – 730 – – 1,139

Less - allowance for impairment at 31 December – – (12) – – (6)

Loans outstanding at the end of period , net – – 718 – – 1,133

Other assets at the end of period – – – 145 – –

Due to banks at the end of period 20,418,102 – – 11,109,331 – –

Subordinated loan 4,528,201 – – 2,274,983 – – Deposits at 1 January – – 264,411 – – 203,315 Deposits received during the

year – – 791,001 – – 128,189

Deposits repaid during the year – – (519,359) – – (67,093)

Deposits at 31 December – – 536,053 – – 264,411

Current accounts at 31 December – 12 4,963 – 16 3,348

Other liabilities at the end of period – – 107,049 – – 63,446

The income and expense arising from related party transactions are as follows: 2014 2013

Parent bank Associates

Key manage-

ment personnel Parent bank Associates

Key manage-

ment personnel

Interest income on loans – – 66 – – 80 Fees and commissions (paid) /

received (170) 4 42 (346) 2 10 Interest expense on amounts due

to banks (1,030,680) – – (634,950) – – Interest expenses on

subordinated loan (250,680) – – (173,109) – – Interest expenses on amounts

due to customers – – (39,622) – – (21,286) Other operating expenses – – – (80,786) – –

Transactions with related parties, both the key management personnel and members of the Bank, were carried out an arm’s length basis, except for amounts received from the Parent bank (Note 20, 24). As at 31 December 2014, deposits placed by the key management personnel had a market interest rate ranging 8.8%-21.6% (2013: 8.2%-15.8%).





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36. Related party transactions (continued)

Compensation of key management personnel was comprised of the following: 2014 2013

Salaries and other short-term benefits 183,422 120,057

Social security costs 831 1,604

Total 184,253 121,661

37. Capital adequacy The Group maintains an actively managed capital base to cover risks inherent in the bank activity. The adequacy of the Group’s capital is monitored using, among other measures, the ratios established by the Basel Capital Accord 1988 and the ratios established by the NBU in supervising the Bank. During the past year, the Group had complied in full with all its externally imposed capital requirements. The primary objectives of the Group’s capital management are to ensure that it complies with externally imposed capital requirements and that it maintains strong credit ratings and healthy capital ratios in order to support its business and to maximise shareholders’ value. The Group manages its capital structure and makes adjustments to it in the light of changes in economic conditions and the risk characteristics of its activities. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividend payment to shareholders, return capital to shareholders or issue capital securities. No changes were made in the objectives, policies and processes from the previous years. NBU capital adequacy ratio The NBU requires banks to maintain a capital adequacy ratio of 10% of risk-weighted assets calculated in accordance with the NBU requirements. Capital adequacy ratio (N2) is calculated based on the daily balance sheet data (file #01). As at 31 December 2014 and 2013, the Bank’s capital adequacy ratio on this basis was as follows: 2014 2013

Main capital 6,046,450 2,627,474 Additional capital 5,744,244 2,627,474

Less - deduction from capital (122) (122)

Total capital 11,790,572 5,254,826

Risk weighted assets 54,025,358 38,415,575

Capital adequacy ratio 21.82% 13.68% Capital adequacy ratio under Basel Capital Accord 1988 The Group’s capital adequacy ratio, computed in accordance with the Basel Capital Accord 1988, with subsequent amendments including the amendment to incorporate market risks, as at 31 December 2014 and 2013, comprised: 2014 2013

Tier 1 capital 6,709,909 3,451,531

Tier 2 capital 4,592,573 3,281,706

Total capital 11,302,482 6,733,237

Risk weighted assets 51,072,735 39,767,396

Tier 1 capital ratio 13.14% 8.68% Total capital ratio 22.13% 16.93%





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38. Events after the reporting period In February 2015, due to devaluation of Hryvnia against major foreign currencies by more than 70%, the Group incurred a significant loss on revaluation of currency position, thus violating a number of the NBU’s obligatory ratios, including capital adequacy ratio. In accordance with the NBU’s requirements, no sanctions are currently applied to banks for violations of economic ratios if these violations were caused by a decrease in UAH exchange rate and/or by the need to provide an allowance for possible losses on active banking transactions. Also, the NBU has introduced certain restrictions on the activities of banks which failed to meet the requirements for economic ratios. The Group’s management develops measures to restore economic ratios to the required level. As a result of significant devaluation of the national currency and increase in inflation risks, the National Bank of Ukraine increased the discount rate up to 30% starting from 4 March 2015, which led to an increase in interest rates on interbank loans and loans to customers. The Group’s management undertakes efficient measures to maintain the economic stability of the Group under current conditions.



27 March 2015

Consolidated IFRS Financial Statements _Con... · “Joint-Stock Commercial Industrial & Investment...

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