Home Credit B.V. · Consolidated Statement of Cash Flows 9 Notes to the Consolidated Financial ... Country of incorporation Ownership interest ... Group’s issues of debt

Home Credit B.V.

Consolidated Financial Statements for the year ended 31 December 2007

Home Credit B.V. Consolidated Financial Statements

for the year ended 31 December 2007

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Contents

Independent Auditor’s Report 3

Consolidated Balance Sheet 5

Consolidated Income Statement 6

Consolidated Statement of Changes in Equity 7

Consolidated Statement of Cash Flows 9

Notes to the Consolidated Financial Statements 10

Home Credit B.V. Consolidated Balance Sheet

as at 31 December 2007

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2007 2006 Note TEUR TEUR ASSETS Cash and cash equivalents 8 390,085 346,491 Due from banks and other financial institutions 9 121,417 140,398 Loans to customers 10 2,407,581 1,488,342 Financial assets at fair value through profit or loss 11 19,259 30,551 Financial assets available-for-sale 12 215,640 - Assets classified as held for sale 6 7,360 - Current income tax receivables 568 1,646 Deferred tax assets 13 21,716 13,065 Investments in associates 14 42 53 Intangible assets 15 90,582 88,112 Property and equipment 16 192,338 126,824 Other assets 17 81,673 52,663

Total assets 3,548,261 2,288,145

LIABILITIES Current accounts and deposits from customers 18 325,629 202,274 Due to banks and other financial institutions 19 779,436 390,053 Debt securities issued 20 1,413,227 1,095,628 Financial liabilities at fair value through profit or loss 21 24,853 4,897 Liabilities classified as held for sale 6 2,582 - Current income tax liabilities 10,165 18,024 Deferred tax liabilities 13 304 1,481 Other liabilities 22 70,330 45,372

Total liabilities 2,626,526 1,757,729

EQUITY Equity attributable to equity holders of the parent Share capital 23 1,156,175 213,216 Share premium 23 - 336,034 Statutory reserve fund 23 2,126 910 Foreign currency translation 23 (13,950) 7,790 Revaluation reserve 23 (1) - Other reserves 23 (222,648) (27,564)

921,702 530,386

Minority interest 33 30

Total equity 921,735 530,416

Total liabilities and equity 3,548,261 2,288,145

Home Credit B.V. Consolidated Income Statement


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2007 2006 Note TEUR TEUR Continuing operations

Interest income 24 676,799 445,126 Interest expense 24 (149,923) (96,535)

Net interest income 526,876 348,591

Fee and commission income 25 162,708 75,231 Fee and commission expense 26 (53,171) (33,542)

Net fee and commission income 109,537 41,689

Other operating income 27 29,608 (3,903)

Operating income 666,021 386,377

Impairment losses 28 (245,872) (173,017) Net expense related to credit risk insurance 29 (9,996) (15,010) General administrative expenses 30 (348,224) (167,315)

Operating expenses (604,092) (355,342)

Profit before tax 61,929 31,035

Income tax expense 31 (29,890) (13,541)

Net profit for the year from continuing operations 32,039 17,494

Discontinued operations

Profit from discontinued operations (net of income tax) 24 -

Net profit for the year 32,063 17,494

Attributable to:

Equity holders of the parent 32,057 17,492 Minority interest 6 2

32,063 17,494

The consolidated financial statements as set out on pages 5 to 54 were approved by the Board of Directorson 15 April 2008. Alexander Labak Chairman of the Board of Directors

Home Credit B.V. Consolidated Statement of Changes in Equity


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Attributable to equity holders of the parent Minority Total interest equity

Share capital

Share premium

Statutory reserve

fund

Foreign currency

translation Fair value

reserve Other

reserves Total TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR

Balance as at 1 January 2007 213,216 336,034 910 7,790 - (27,564) 530,386 30 530,416

Capital contribution 381,000 - - - - - 381,000 - 381,000

Transfers 561,959 (336,034) 1,216 - - (227,141) - - -

Total 1,156,175 - 2,126 7,790 - (254,705) 911,386 30 911,416

Currency translation - - - (21,740) - - (21,740) (3) (21,743)

Revaluation of available-for-sale financial assets - - - - (1) - (1) - (1)

Profit for the year - - - - - 32,057 32,057 6 32,063

Total recognized income and expense for the year - - - (21,740) (1) 32,057 10,316 3 10,319

Total changes 942,959 (336,034) 1,216 (21,740) (1) (195,084) 391,316 3 391,319

Balance as at 31 December 2007 1,156,175 - 2,126 (13,950) (1) (222,648) 921,702 33 921,735

Home Credit B.V. Consolidated Statement of Changes in Equity


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Attributable to equity holders of the parent Minority Total interest equity

Share capital

Share premium

Statutory reserve

fund

Foreign currency

translation Fair value

reserve Other

reserves Total TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR

Balance as at 1 January 2006 87,700 217,549 8 10,349 - (44,154) 271,452 25 271,477

Capital contribution 125,516 118,485 - - - - 244,001 - 244,001

Transfers - - 902 - - (902) - - -

Total 213,216 336,034 910 10,349 - (45,056) 515,453 25 515,478

Currency translation - - - (2,559) - - (2,559) 3 (2,556)

Profit for the year - - - - - 17,492 17,492 2 17,494

Total recognized income and expense for the year - - - (2,559) - 17,492 14,933 5 14,938

Total changes 125,516 118,485 902 (2,559) - 16,590 258,934 5 258,939

Balance as at 31 December 2006 213,216 336,034 910 7,790 - (27,564) 530,386 30 530,416

Home Credit B.V. Consolidated Statement of Cash Flows for the year ended 31 December 2007

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2007 2006 Note TEUR TEUR Operating activities Profit before tax 61,953 31,035 Adjustments for:

Interest expense 24 149,923 96,535 Net loss/(gain) on disposal of property, equipment and intangible assets 2,606 (33) Net unrealized foreign exchange gain (3,854) (11,392) Impairment losses 28 245,872 173,017 Depreciation and amortization 30 19,428 9,775

Net operating cash flow before changes in working capital 475,928 298,937

Change in due from banks and other financial institutions 18,981 (80,126) Change in loans to customers (1,164,162) (556,225) Change in financial assets at fair value through profit or loss 11,292 49,563 Change in other assets (29,959) 12,197 Change in current accounts and deposits from customers 123,355 112,198 Change in financial liabilities at fair value through profit or loss 19,956 3,410 Change in other liabilities 8,849 17,029

Cash flows used in the operations (535,760) (143,017)

Interest paid (149,854) (95,506) Income tax paid (46,840) (11,803)

Cash flows used in operating activities (732,454) (250,326) Investing activities Proceeds from sale of property, equipment and intangible assets 802 320 Acquisition of property, equipment and intangible assets (94,464) (129,006) Acquisition of assets and liabilities classified as held for sale (11,358) - Acquisition of available-for-sale financial assets (215,640) - Acquisition of investment in subsidiary, net of cash acquired 216 (62,248)

Cash flows used in investing activities (320,444) (190,934) Financing activities Proceeds from the issue of share capital 381,000 125,516 Proceeds from the issue of other capital - 118,485 Proceeds from the issue of debt securities 371,928 186,458 Proceeds from due to banks and other financial institutions 1,104,439 583,410 Repayment of debt securities issued (37,530) - Repayment of due to banks and other financial institutions (715,474) (556,938)

Cash flows from financing activities 1,104,363 456,931

Net increase in cash and cash equivalents 51,465 15,671

Cash and cash equivalents at 1 January 8 346,491 327,051

Effects of exchange rate changes on cash and cash equivalents (7,871) 3,769

Cash and cash equivalents at 31 December 8 390,085 346,491

Home Credit B.V. Notes to the Consolidated Financial Statements


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1. Description of the Group Home Credit B.V. (the “Company”) was incorporated on 28 December 1999 in the Netherlands.

Registered office Registered office until April 2007

Stravinskylaan 933 Herengracht 450 1077 XX Amsterdam 1017CA Amsterdam The Netherlands The Netherlands

Shareholders Country of incorporation Ownership interest (%)

2007 2006 PPF Group N.V. Netherlands 53.82 57.60 HC S.E. Netherlands 46.18 - Home Credit Grand Holding (JSC)* Czech Republic - 5.96 HC Holding (JSC)* Czech Republic - 36.44 * Home Credit Grand Holding (JSC) and HC Holding (JSC) were merged in HC S.E. with effect from

17 December 2007. The ultimate controlling entity is PPF Group N.V. registered in the Netherlands.

Consolidated subsidiaries Country of incorporation Ownership interest (%)

2007 2006 Donmera (LLC) 5) Cyprus 100.00 - Redlione (LLC) Cyprus 100.00 100.00 Home Credit (JSC) Czech Republic 100.00 100.00 Home Credit International (JSC) Czech Republic 100.00 100.00 Eurasia Capital S.A. Luxemburg 0.00 0.00 Eurasia Structured Finance No.1 S.A. Luxemburg 0.00 0.00 HC Fin1 B.V. 4) Netherlands 100.00 - HC Fin2 B.V. 4) Netherlands 100.00 - HC Fin3 B.V. 4) Netherlands 100.00 - HC Kazakh Holdings B.V. 5) Netherlands 100.00 - HCF Funding No.1 B.V. Netherlands 0.00 0.00 Home Credit Finance B.V. Netherlands 0.00 0.00 Home Credit Finance 1 B.V. Netherlands 0.00 0.00 Russia Finance Corporation B.V. 3, 5) Netherlands 100.00 - Home Credit Bank (OAO) 5) Republic of Belarus 100.00 - Home Credit Kazakhstan (JSC) Republic of Kazakhstan 100.00 100.00 Home Credit and Finance Bank (LLC) Russian Federation 99.99 99.99 Financial Innovations (LLC) 1) Russian Federation 99.99 99.99 Global Credit Bureau (LLC) 1) Russian Federation 99.99 99.99 Infobos (LLC) 1) Russian Federation 99.99 99.99 Inko Technopolis (LLC) Russian Federation 100.00 100.00 Liko – Technopolis (LLC) 1) Russian Federation 99.99 99.99 Home Credit Slovakia (JSC) Slovak Republic 100.00 100.00 Home Credit Bank (CJSC) Ukraine 100.00 100.00 Home Credit Finance (LLC)2) Ukraine 100.00 100.00 Homer Software House4) Ukraine 100.00 - 1) subsidiaries of Home Credit and Finance Bank (LLC)

2) subsidiary of Redlione (LLC) 3) subsidiary of HC Fin1 B.V. 4) subsidiaries incorporated during 2007 5) subsidiaries acquired during 2007



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1. Description of the Group (continued) Eurasia Capital S.A., Eurasia Structured Finance No.1 S.A., Home Credit Finance B.V., Home Credit

Finance 1 B.V. and HCF Funding No.1 B.V. are special purpose entities established to facilitate theGroup’s issues of debt securities (refer to Note 20).

Associates Country of incorporation Ownership interest (%)

2007 2006 Global Credit Payment Services (LLC) Russian Federation 50.00 50.00 Board of Directors Alexander Labak Chairman (since January 2007) Ladislav Chvatal Member (since January 2007) Declan McSweeney Member (since January until May 2007, since August 2007) Deutsche International Trust Company N.V. Managing director (until January 2007) Principal activities The principal activity of the Company and its subsidiaries and associates is the provision of consumer

financing to private individual customers in the Central European and CIS countries.

2. Basis of preparation The consolidated financial statements for the year ended 31 December 2007 comprise the Company and

its subsidiaries (together referred to as the “Group”). These financial statements do not constitute financial statements for statutory purposes. Financial statements for statutory purposes, prepared in accordance with Dutch GAAP were approved by the directors on 8 April 2008 and filed with the Chamber of Commerce in Amsterdam.

(a) Statement of compliance The consolidated financial statements have been prepared in accordance with International Financial

Reporting Standards (IFRSs), including International Accounting Standards (IASs), promulgated by the International Accounting Standards Board (IASB) and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the IASB as adopted by the European Union. Additional information concerning the unconsolidated balance sheet and income statement of the Company in accordance with IFRS are included in Note 38.

(b) Basis of measurement The consolidated financial statements are prepared on the historic cost basis except for financial

instruments at fair value through profit or loss and financial assets available-for-sale that are measured at fair value. Financial assets and liabilities and non financial assets and liabilities which are valued at historic cost are stated at amortized cost or historic cost, as appropriate, net of any relevant impairment.

(c) Presentation and functional currency These financial statements are presented in Euro (EUR), which is the Company’s functional currency and

Group’s reporting currency. Financial information presented in EUR has been rounded to the nearest thousand (TEUR).



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2. Basis of preparation (continued)

(d) Comparative figures The comparative figures have been regrouped or reclassified, where necessary, on a basis consistent with

the current period.

(e) Use of estimates and judgments The preparation of the consolidated financial statements in accordance with IFRS requires management to

make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historic experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of the judgments about the carrying values of assets and liabilities that cannot readily be determined from other sources. The actual values may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised and in any future periods affected. In particular, information about significant areas of estimation, uncertainty and critical judgments made by management in preparing these consolidated financial statements in respect of impairment recognition for financial assets is described in Note 3c(vii) and Note 10.

(f) Basis of consolidation

(i) Subsidiaries Subsidiaries are those enterprises controlled by the Group. Control exists when the Group has the power,

directly or indirectly, to govern the financial and operating policies of an enterprise so as to obtain benefits from its activities. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. Reorganizations and mergers involving companies under common control are accounted for using consolidated net book values, consequently no adjustment is made to carrying amounts in the consolidated accounts and no goodwill arises on such transactions.

(ii) Associates Associates are those enterprises in which the Group has significant influence, but not control, over the

financial and operating policies. The consolidated financial statements include the Group’s share of the total recognized gains and losses of associates on an equity accounted basis, from the date that significant influence effectively commences until the date that significant influence effectively ceases. When the Group’s share of losses exceeds the Group’s interest in the associate, that interest is reduced to nil and recognition of further losses is discontinued except to the extent that the Group has incurred obligations in respect of the associate.

(iii) Special purpose entities The Group has established a number of special purpose entities (SPEs) for the purpose of raising finance.

The Group does not have any direct or indirect shareholdings in these entities. These SPEs are controlled by the Group through the predetermination of the activities of SPEs, having rights to obtain the majority of benefits of the SPEs, and retaining the majority of the residual risks related to the SPEs.



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2. Basis of preparation (continued)

(iv) Transactions eliminated on consolidation Intra-group balances and transactions, and any unrealized gains arising from intra-group transactions, are

eliminated in preparing the consolidated financial statements. Unrealized gains arising from transactions with associates are eliminated to the extent of the Group’s interest in the enterprise. Unrealized gains arising from transactions with associates are eliminated against the investment in the associate. Unrealized losses are eliminated in the same way as unrealized gains, but only to the extent that there is no evidence of impairment.

3. Significant accounting policies The following significant accounting policies have been applied in the preparation of the consolidated

financial statements. As at 1 January 2007, the Group adopted the International Financial Reporting Standard IFRS 7 “Financial Instruments: Disclosures” and the amendment to International Financial Reporting Standard IAS 1 “Presentation of Financial Statements” – “Capital Disclosures”. The application of the amendment resulted in increased disclosure in respect of Group’s financial instruments and the nature and extent of risks arising from financial instruments and increased disclosure in respect of Group’s objectives, policies and processes for managing capital.

(a) Foreign currency

(i) Foreign currency transactions A foreign currency transaction is a transaction that is denominated in or requires settlement in a currency

other than the functional currency. The functional currency is the currency of the primary economic environment in which an entity operates. For initial recognition purposes, a foreign currency transaction is translated into the functional currency using the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to EUR at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated to EUR at the foreign exchange rate ruling at the date of the transaction. Foreign exchange differences arising on retranslation are recognized in profit or loss.

(ii) Financial information of foreign operations The Group’s foreign operations are not considered an integral part of the Company’s operations.

Accordingly, the assets and liabilities of foreign operations are translated to EUR at foreign exchange rates ruling at the balance sheet date. The revenues and expenses of foreign operations are translated to EUR at rates approximating the foreign exchange rates ruling at the dates of the transactions. Foreign exchange differences arising on translation are recognized directly in equity as a foreign currency translation.

(b) Cash and cash equivalents The Group considers cash on hand, unrestricted balances with central banks and balances with banks and

other financial institutions due within one month to be cash and cash equivalents. The minimum reserve deposit with the Central Bank of Russian Federation (the”CBR”), with the National Bank of Ukraine (the “NBU”) and with the National Bank of the Republic of Belarus (the “NBRB”) is not considered to be a cash equivalent due to restrictions on its withdrawal.



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3. Significant accounting policies (continued)

(c) Financial assets and liabilities

(i) Classification Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not

quoted in an active market, other than those that the Group intends to sell immediately or in the near term, those that the Group upon initial recognition designates as at fair value through profit or loss, or those where its initial investment may not be substantially recovered, other than because of credit deterioration. When the Group is a lessor in a lease agreement that transfers substantially all of the risk and rewards incidental to ownership of an asset to the lessee, the arrangement is presented within loans and receivables. Financial assets and liabilities at fair value through profit or loss are financial assets or liabilities that are classified as held for trading or those which are upon initial recognition designated by the entity as at fair value through profit or loss. Trading instruments include those that the Group principally holds for the purpose of short-term profit taking and derivative contracts that are not designated as effective hedging instruments. The Group designates financial assets and liabilities at fair value through profit or loss where either the assets or liabilities are managed, evaluated and reported internally on a fair value basis or the designation eliminates or significantly reduces an accounting mismatch which would otherwise arise or the asset or liability contains an embedded derivative that significantly modifies the cash flows that would otherwise be required under the contract. Financial assets and liabilities at fair value through profit or loss are not reclassified subsequent to initial recognition. All trading derivatives in a net receivable position (positive fair value), as well as options purchased, are reported as an asset. All trading derivatives in a net payable position (negative fair value), as well as options written, are reported as a liability. Held-to-maturity financial assets are non-derivative financial assets with fixed or determinable payments and fixed maturity that the Group has the positive intention and ability to hold to maturity, other than loans and receivables and instruments designated as at fair value through profit or loss or as available-for-sale. Financial assets available-for-sale are those financial assets that are designated as available-for-sale or are not classified as loans and receivables, held to maturity investments or financial instruments at fair value through profit or loss.

(ii) Recognition Financial assets and liabilities are recognized in the balance sheet when the Group becomes a party to the

contractual provisions of the instrument. For regular purchases and sales of financial assets, the Group’s policy is to recognize them using settlement date accounting. Any change in the fair value of an asset to be received during the period between the trade date and the settlement date is accounted for in the same way as if the Group used trade date accounting.



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(iii) Measurement A financial asset or liability is initially measured at its fair value plus, in the case of a financial asset or

liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or liability. Subsequent to initial recognition, financial assets, including derivatives that are assets, are measured at their fair values, without any deduction for transaction costs that may be incurred on sale or other disposal, except for loans and receivables and held to maturity investments which are measured at amortized cost less impairment losses and investments in equity instruments that do not have a quoted market price in an active market and whose fair value cannot be reliably measured which are measured at cost less impairment losses. All financial liabilities, other than those designated at fair value through profit or loss and financial liabilities that arise when a transfer of a financial asset carried at fair value does not qualify for derecognition, are measured at amortized cost. Amortized cost is calculated using the effective interest method. Premiums and discounts, including initial transaction costs, are included in the carrying amount of the related instrument and amortized based on the effective interest rate of the instrument.

(iv) Fair value measurement principles The fair value of financial instruments is based on their quoted market price at the balance sheet date

without any deduction for transaction costs. If a quoted market price is not available, the fair value of the instrument is estimated using pricing models or discounted cash flow techniques. Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates and the discount rate is a market related rate at the balance sheet date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the balance sheet date. The fair value of debt securities available for sale as well as foreign currency futures is based on their quoted market price. The other derivative contracts are not exchange traded and their fair value is estimated using arbitrage pricing model where key parameters are relevant foreign exchange rates and interbank interest rates ruling at the balance sheet date.

(v) Amortized cost measurement principles The amortized cost of a financial asset or liability is the amount in which the financial asset or liability is

measured at initial recognition, minus principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between the initial amount recognized and the maturity amount, net of any relevant impairment.

(vi) Gains and losses on subsequent measurement Gains and losses on financial instruments classified as at fair value through profit or loss are recognized in

the income statement. Gains and losses on available-for-sale financial assets are recognized directly in equity (except for impairment losses and foreign exchange gains and losses) until the asset is derecognized, at which time the cumulative gain or loss previously recognized in equity is recognized in the income statement. For financial assets and liabilities carried at amortized cost, a gain or loss is recognized in the income statement when the financial asset or liability is derecognized or impaired, and through the amortization process.



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(vii) Identification and measurement of impairment The Group assesses whether there is objective evidence that financial assets not carried at fair value

through profit or loss are impaired on a regular basis. Financial assets are impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition of the assets, and that the loss event as an impact on the future cash flows on the asset that can be estimated reliably. The Group considers evidence of impairment at both a specific asset and collective level. All individually significant financial assets are assessed for specific impairment. All significant assets found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Assets that are not individually significant are then collectively assessed for impairment by grouping together financial assets (carried at amortized cost) with similar risk characteristics. The Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant, and individually 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 assets, whether significant or not, it includes the assets in a group of financial assets with similar risk characteristics and collectively assesses them for impairment. Financial assets that are individually assessed for impairment and for which an impairment loss is or continues to be recognized are not included in a collective assessment of impairment. If there is objective evidence that an impairment loss on a financial asset has been incurred, the amount of the loss is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows including amounts recoverable from guarantees and collateral discounted at the financial asset’s original effective interest rate. Contractual cash flows and historical loss experience adjusted on the basis of relevant observable data that reflect current economic conditions provide the basis for estimating expected cash flows. Financial assets with a short duration are not discounted. In some cases the observable data required to estimate the amount of an impairment loss on a financial asset may be limited or no longer fully relevant to current circumstances. This may be the case when a borrower is in financial difficulties and there is little available historical data relating to similar borrowers. In such cases, the Group uses its experience and judgment to estimate the amount of any impairment loss. All impairment losses in respect of financial assets are recognized in the income statement and are only reversed if a subsequent increase in recoverable amount can be related objectively to an event occurring after the impairment loss was recognized. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount of the asset that would have been determined, net of amortization, if no impairment loss had been recognized.

(viii) Derecognition The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial

asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognized separately as asset or liability. The Group derecognizes a financial liability when its contractual obligations are discharged or cancelled or expire.



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(ix) Offsetting Financial assets and liabilities are set off and the net amount presented in the balance sheet when there is

a legally enforceable right to set off the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted by the accounting standards, or for gains and losses arising from a group of similar transactions.

(x) Repurchase and reverse repurchase agreements Securities sold under sale and repurchase agreements are accounted for as secured financing transactions,

with the securities retained in the balance sheet and the counterparty liability included in amounts due to other banks or to customers, as appropriate. The difference between the sale and repurchase price represents interest expense and is recognized in the income statement over the terms of the agreement. Securities purchased under agreements to resell are recorded as due from banks or customers as appropriate. The difference between the sale and repurchase considerations is recognized on an accrual basis over the period of the transaction and is included in interest.

(xi) Derivative financial instruments The Group uses derivative financial instruments to hedge its exposure to foreign exchange and interest

rate risk arising from financing activities. In accordance with its treasury policy, the Group does not hold or issue derivative financial instruments for trading purposes. No hedge accounting is applied and any gain or loss on the hedging instrument is recognized immediately in the income statement as foreign exchange income/(expense) or interest income/(expense).

(xii) Net investment in finance lease When the Group provides finance under a finance lease, the present value of the lease payments is

recognized as net investment in finance leases in the balance sheet. Lease payments include repayment of the finance lease principal and interest income. The recognition of the interest is based on a variable interest rate, which is applied to the net investment (principal) outstanding in respect of the finance lease. Income from finance leases is allocated over the lease term on a systematic basis.

(d) Non-current assets held for sale Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be

recovered primarily through sale rather than through continuing use are classified as held for sale. Immediately before being classified as held for sale, the assets are measured in accordance with the Group’s accounting policies. Thereafter generally the assets are measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group is allocated to assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets and deferred tax assets, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognized in the income statement. Gains are not recognized in excess of any cumulative impairment loss.



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(e) Intangible assets

(i) Goodwill and negative goodwill

Goodwill arising on an acquisition represents the excess of the cost of the acquisition over the Group’s interest in the fair value of the net identifiable assets and liabilities of the acquiree. When the excess is negative (negative goodwill), it is recognized immediately in profit and loss. Goodwill is stated at cost less accumulated impairment losses (refer to Note 3(h) below).

In respect of associates, the carrying amount of any goodwill is included in the carrying amount of the investment in the associate.

(ii) Other intangible assets

Intangible assets, which are acquired by the Group, are stated at cost less accumulated amortization and accumulated impairment losses (refer to Note 3(h) below). Expenditure on internally generated goodwill and brands is recognized in the income statement as an expense as incurred.

(iii) Amortization

Amortization is charged to the income statement on a straight-line basis over the estimated useful lives of intangible assets. Goodwill is not amortized; other intangible assets are amortized from the date the asset is available for use. The depreciation methods, useful lives and residual values, if not insignificant, are reassessed annually. If a material technical improvement is made to an asset during the year, its useful life and a residual value is reassessed at the time a technical improvement is recognized. The estimated useful lives are as follows:

Software 1-5 years Licenses 5 years

(f) Property and equipment

(i) Owned assets

Items of property and equipment are stated at cost less accumulated depreciation (refer below) and accumulated impairment losses (refer to Note 3(h) below). Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost for self-constructed assets includes the cost of materials, direct labour and an appropriate proportion of production overheads.

Where an item of property and equipment comprises major components having different useful lives, they are accounted for as separate items of property and equipment.

(ii) Leased assets

Leases in terms of which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Equipment acquired by way of finance lease is stated at an amount equal to the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation (refer below) and accumulated impairment losses (refer to Note 3(h) below).

Property and equipment used by the Group under operating leases, whereby the risks and benefits relating to ownership of the assets remain with the lessor, are not recorded in the Group’s balance sheet. Payments made under operating leases to the lessor are charged to the income statement over the period of the lease.

(iii) Subsequent expenditure

Expenditure incurred to replace a component of an item of property and equipment that is accounted for separately, including major inspection and overhaul expenditure, is capitalized. Other subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the item of property and equipment and its cost can be measured reliably. All other expenditure is recognized in the income statement as an expense as incurred.



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(iv) Depreciation Depreciation is charged to the income statement on a straight line basis over the estimated useful lives of

the individual assets. Leased assets are depreciated over the shorter of the lease term and their useful lives. Property and equipment are depreciated from the date the asset is available for use. The depreciation methods, useful lives and residual values, if not insignificant, are reassessed annually. If a material technical improvement is made to an asset during the year, its useful life and a residual value is reassessed at the time a technical improvement is recognized. The estimated useful lives are as follows: Computers and equipment 4-12 years Vehicles 4-6 years Furniture 4-6 years Leasehold improvement 5 years Buildings 17 – 50 years

(g) Inventories Inventories are stated at the lower of cost or net realizable value. Net realizable value is the estimated

selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to complete the sale. Where the net realizable value is below cost, inventories are written down to the lower value, and the impairment loss is recorded in the income statement. Cost of merchandise is determined using the “first-in first-out” method and include expenditures incurred in acquiring the inventories and bringing them to their existing condition and location.

(h) Impairment of non-financial assets The carrying amounts of Group’s non-financial assets, other than deferred tax assets, are reviewed at each

reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For the purpose of impairment testing, goodwill is allocated to cash-generating units. The recoverable amount of goodwill is estimated at each reporting date based on cash flow projections for specific cash generating units. Key assumptions are those regarding the expected business volumes, loss rates, budgeted expenses as well as discount rates for subsequent periods. Management estimates discount rates using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the cash generating unit. If the recoverable amount of the cash-generating unit is less than the carrying amount, the impairment loss is allocated first to reduce the carrying amount of goodwill allocated to the unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in the unit. The recoverable amount of other non-financial assets is the greater of their fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate cash inflows largely independent of those from other assets, the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss is recognized when the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount All impairment losses in respect of non financial assets are recognized in the income statement and reversed only if there has been a change in the estimates used to determine the recoverable amount. Any impairment loss reversed is only reversed to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. An impairment loss in respect of goodwill is not reversed. On disposal of a subsidiary, the amount of goodwill that is attributable to the subsidiary is included in the determination of the profit or loss on disposal.



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(i) Provisions A provision is recognized in the balance sheet if, as a result of a past event, the Group has a present or

legal obligation that can be estimated reliably and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

(j) Other payables Accounts payable arise when the Group has a contractual obligation to deliver cash or another financial

asset. Accounts payable are measured at amortized cost, which is normally equal to their nominal or repayment value.

(k) Financial guarantees A financial guarantee is a contract that require the Group to make specified payments to reimburse the

holder for a loss it incurs because a specified debtor fails to make payment when due in accordance with the terms of a debt instrument. A financial guarantee liability is recognized initially at fair value net of associated transaction costs, and the initial fair value is amortized over the life of the financial guarantee. The guarantee liability is subsequently carried at the higher of this amortized amount and the present value of any expected payment (when a payment under the guarantee has become probable). Financial guarantee liabilities are included within other liabilities.

(l) Equity Share capital represents the nominal value of shares issued by the Company. To the extent such shares

remain unpaid as of the balance sheet date a corresponding receivable is presented as an other asset. Dividends on share capital are recognized as a liability provided they are declared before the balance sheet date. Dividends declared after the balance sheet date are not recognized as a liability but are disclosed in the notes. Minority interests consist of the minority shareholders’ proportion of the fair values of a subsidiary’s net assets, at the date of the original combination, plus or minus their share of changes in the subsidiary’s equity since that date.



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(m) Interest income and expense Interest income and expense are recognized in the income statement using the effective interest method.

The effective interest rate that exactly discounts the estimated future cash payments and receipts through the expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount of the financial asset or liability. The effective interest rate is established on initial recognition and is not revised subsequently. The calculation of the effective interest rate includes all fees and point paid or received, transaction costs, and discounts or premiums that are an integral part of the effective interest rate. Transaction costs are incremental costs that are directly attributable to the acquisition, issue or disposal of a financial asset or liability. Interest income and expense include also fair value changes on other derivatives held for risk management purposes and related hedged items when interest rate risk is the hedged risk.

(n) Fee and commission income and expenses Fees and commission income and expenses that are integral to the effective interest rate on a financial

asset or liability are included in the measurement of the effective interest rate. Other fees and commission income and expense relate mainly to transaction and service fees, which are expensed as the services are received.

(o) Penalty fees Penalty income is recognized in the income statement when penalty is charged to a customer, taking into

account its collectability.

(p) Revenue from sale of goods Revenue from sale of goods is recognized when the significant risks and rewards of ownership have been

transferred to the buyer, and no significant uncertainties remain regarding the recovery of consideration, associated costs or the possible return of goods.

(q) Operating lease payments Payments made under operating leases are recognized in the income statement on a straight-line basis over

the term of the lease. Granted lease incentives are recognized as an integral part of the total lease expense.

(r) Pensions The governments of the countries the Group operates in are responsible for providing pensions and

retirement benefits to the Group's employees. A regular contribution linked to employees’ salaries is made by the Group to the governments to fund the national pension plans. Payments under these pension schemes are charged as expenses as they fall due.



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(s) Taxation Income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized

in the income statement except to the extent that it relates to items recognized directly to equity, in which case it is recognized in equity. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: goodwill not deductible for tax purposes, the initial recognition of assets or liabilities that affect neither accounting nor taxable profit and temporary differences related to investments in subsidiaries, branches and associates where the parent is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the temporary differences, unused tax losses and credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(t) Net profit allocated to minority interests Net profit allocated to minority interests is that part of the net results of the Group attributable to interests

which are not owned, directly, or indirectly through subsidiaries, by the equity holders of the Parent Company.

(u) Segment reporting A segment is a distinguishable component of the Group that is engaged in providing products or services

within a particular economic environment (geographical segment), which is subject to risks and rewards that are different from those of other segments. Segment revenues include interest income, fee and commission income and other operating income.



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(v) New standards and interpretations not yet adopted A number of new Standards, amendments to Standards and Interpretations are not yet effective as at

31 December 2007, and have not been applied in preparing these consolidated financial statements. Of these pronouncements, potentially the following will have an impact on the Group’s operations. The Group plans to adopt these pronouncements when they become effective. The Group has not yet analyzed the likely impact of these new standards on its consolidated financial statements. IFRS 8 Operating Segments, which is effective for annual periods beginning on or after 1 January 2009. The Standard will require segment disclosure based on the components of the entity that management used to make decisions about operating matters. IAS 23 Borrowing costs (revised March 2007), which is effective for annual periods beginning on or after 1 January 2009. The Standard will remove the option to expense borrowing costs and requires that an entity capitalize borrowing costs directly attributable to the acquisition, construction or production of a qualifying asset as part of the cost of that asset. IFRIC 11 IFRS 2 Group and Treasury Share Transactions, which is effective for annual periods beginning on or after 1 March 2007. The Interpretation and the Standard will require a share-based payment arrangement in which an entity receives goods or services as consideration for its own equity instruments to be accounted for as an equity-settled share-based payment transaction, regardless of how the equity instruments are obtained. IFRIC 12 Service Concession Arrangements, which is effective for annual periods beginning on or after 1 January 2008. The Interpretation will provide guidance on certain recognition and measurement issues that arise in accounting for public-to-private service concession arrangements. IFRIC 13 Customer Loyalty Programmes, which is effective for annual periods beginning on or after 1 July 2008. The Interpretation will address the accounting by entities that operate, or otherwise participate in, customer loyalty programmes for their customers. IFRIC 14 IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction, which is effective for annual periods beginning on or after 1 January 2008. The Interpretation and the Standard will clarify when refunds or reductions in future contributions in relation to defined benefit assets should be regarded as available and provide guidance on the impact of minimum funding requirements (MFR) on such assets. It will also address when a MFR might give rise to a liability.

4. Financial risk management The Group has exposure to the following risks from its use of financial instruments:

• credit risk • liquidity risk • market risks • operational risks.

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established the Asset Liability Committee (ALCO) and the Group Credit Risk Department, which are responsible for developing and monitoring risk management policies in their specified areas. Both bodies report regularly to the Board of Directors on their activities. The Group’s risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment, in which all employees understand their roles and obligations.



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4. Financial risk management (continued)

(a) Credit risk Credit risk is the risk of financial loss occurring as a result of default by a borrower or counterparty on

their obligation to the Group. The majority of the Group’s exposure to credit risk arises in connection with the provision of consumer financing to private individual customers, which is the Group’s principal business. The Group classifies the loans to individual customers into several classes where the significant ones are consumer loans, revolving loans, cash loans, car loans and mortgage loans. As the Group’s loan portfolio consists of large amount of loans with relatively low outstanding amounts, the loan portfolio does not comprise any significant individual items. The remaining part of Group’s exposures to credit risk is related to financial assets at fair value through profit or loss and financial assets available-for-sale. The Board of Directors has delegated responsibility for the management of credit risk to the Group Credit Risk Department. The department is responsible for oversight of the Group’s credit risk, including:

• Formulating credit policies in consultation with business units covering credit assessment, underwriting policies, collection policies and risk reporting by business units and loan classes;

• Establishing the authorization structure for the approval and renewal of credit facilities. Authorization limits are allocated to business units management, large exposures and new types of exposures require Group approval. The Group uses one central loan administration system to facilitate loan underwriting;

• Continuous monitoring of performance of individual Group’s credit exposures by countries, product classes and distribution channels;

• Limiting concentrations of credit exposures by countries, product classes and distribution channels;

• Reviewing compliance of business units with agreed exposure limits; • Providing advice, guidance and specialist skills to business units to promote best practice

throughout the Group in the management of credit risk. The Group continuously monitors the performance of individual credit exposures both on business units and Group level using number of criteria including delinquency rates, default rates or collection efficiency measures. The Group has an active fraud prevention and detection program. Credit risk developments are reported by the Group Credit Risk Department to the Board of Directors on regular basis.

Exposure to credit risk Loans to customers Note 2007 2006 TEUR TEUR Individually impaired Gross amount 4,785 9,362 Allowance for impairment 10 (819) (1,576) Carrying amount 3,966 7,786 Not impaired 23,617 23,868 Collectively impaired Gross amount 2,747,619 1,690,855 Current 2,094,406 1,202,743 Past due 1 – 90 days 301,197 239,653 Past due 91 – 360 days 211,103 170,398 Past due more than 360 days 140,913 78,061 Allowance for impairment 10 (367,621) (234,167) Carrying amount 2,379,998 1,456,688 Total carrying amount 10 2,407,581 1,488,342



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From the beginning of 2002 the Group has insurance policies to cover the credit risk arising from loans to customers originated in respect of the Czech and Slovak operations of the Group. There are specific conditions for loans to qualify for this insurance and, consequently, certain loans remain uninsured. The balance of insured receivables amounts to TEUR 164,205 (31 December 2006: TEUR 116,546).

Analysis of collateral

The following table provides the analysis of gross loan portfolio by types of collateral as at 31 December 2007:

2007 2006 Portfolio % of loan Portfolio % of loan TEUR portfolio TEUR portfolio Pledged assets 270,853 9.8 77,272 4.5 Guarantees 15,390 0.6 4,560 0.3 Deposits with banks 2,970 0.1 4,991 0.3 Unsecured (no collateral) 2,486,808 89.5 1,637,262 94.9 Total 2,776,021 1,724,085 The amounts shown in the table above represent the gross amount of the loans, and do not necessarily

represent the fair value of the collateral. Mortgage loans are secured by underlying housing real estate. Car loans are secured by underlying cars. Loans to corporations are secured by third parties guarantees. Small part of consumer loan portfolio is secured by consumer goods. Revolving loans and cash loans are not secured.

(b) Liquidity risk Liquidity risk is the risk that the Group will encounter difficulty in meeting obligations from its financial

liabilities. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation. All liquidity policies and procedures as well as liquidity position projections are subject to review and approval by ALCO. The Group’s Treasury Department collects information from business units regarding the liquidity profile of their financial assets and liabilities and details of other projected cash flows arising from projected future business. Portfolio of short-term liquid assets is maintained to ensure sufficient liquidity. The daily liquidity position is monitored and regular liquidity stress testing is conducted under a variety of scenarios covering both normal and more severe market conditions. The individual scenarios focus on liquidity available on markets, the nature of related risks and magnitude of their impact on the Group’s business, management tools available as well as preventive actions. The Group has access to a diverse funding base. Funds are raised using a broad range of instruments including deposits, bank loans, bond issues, securitizations and contributions by shareholders. Shareholder’s support is an important aspect in the liquidity management of the Group. This enhances funding flexibility, limits dependence on any one source of funds and generally lowers the cost of funds. Management strives to maintain a balance between continuity of funding and flexibility through use of liabilities with a range of maturities.



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Exposure to liquidity risk The following table shows assets and liabilities by remaining contractual maturity dates.

2007 2006

TEUR Less than 1 month

1 to 3 months

3 monthsto 1 year 1 to 5 years

More than5 yearsNo maturity Total

Less than1 month

1 to 3months

3 monthsto 1 year 1 to 5 years

More than5 yearsNo maturity Total

Cash and cash equivalents 390,085 - - - - - 390,085 346,491 - - - - - 346,491 Due from financial institutions 14,092 34,167 66,421 - 136 6,601 121,417 - 34,345 106,053 - - - 140,398 Loans to customers 110,892 167,477 1,063,619 900,936 164,657 - 2,407,581 131,850 132,757 648,633 572,499 2,603 - 1,488,342 Financial assets at fair value through profit or loss 1,178 190 17,891 - - - 19,259 607 68 12,869 17,007 - - 30,551 Financial assets available-for-sale 953 1,348 - - - 213,339 215,640 - - - - - - - Assets classified as held for sale - - 7,360 - - - 7,360 - - - - - - - Current income tax receivables 564 - 4 - - - 568 - 1,077 569 - - - 1,646 Deferred tax assets - - - 2,052 19,664 - 21,716 - - 61 13,004 - - 13,065 Investments in associates - - - - - 42 42 - - - - - 53 53 Intangible assets - - - - - 90,582 90,582 - - - - - 88,112 88,112 Property and equipment - - - - - 192,338 192,338 - - - - - 126,824 126,824 Other assets 11,339 46,885 18,707 1,074 908 2,760 81,673 10,744 1,222 30,034 2,955 411 7,297 52,663

Total assets 529,103 250,067 1,174,002 904,062 185,365 505,662 3,548,261 489,692 169,469 798,219 605,465 3,014 222,286 2,288,145 Current accounts and deposits from customers 262,595 14,628 47,973 433 - - 325,629 117,085 13,034 71,720 435 - - 202,274 Due to financial institutions 315,631 38,413 425,371 21 - - 779,436 65,144 32,500 280,363 12,046 - - 390,053 Debt securities issued* 15,543 101,662 186,674 883,535 225,813 - 1,413,227 18,304 86,354 - 990,970 - - 1,095,628 Financial liabilities at fair value through profit or loss 5,501 8,368 10,984 - - - 24,853 891 682 3,324 - - - 4,897 Liabilities classified as held for sale - - 2,582 - - - 2,582 - - - - - - - Current income tax liabilities 6 337 9,822 - - - 10,165 - 102 17,922 - - - 18,024 Deferred tax liabilities - - 304 - - - 304 - - 231 1,250 - - 1,481 Other liabilities 42,203 11,072 15,898 1,157 - - 70,330 22,983 11,683 10,706 - - - 45,372

Total liabilities 641,479 174,480 699,608 885,146 225,813 - 2,626,526 224,407 144,355 384,266 1,004,701 - - 1,757,729 Net position (112,376) 75,587 474,394 18,916 (40,448) 505,662 921,735 265,285 25,114 413,953 (399,236) 3,014 222,286 530,416

* Debt securities are classified based on their contractual maturity regardless of redemption rights (refer to Note 20).



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(c) Market risk Market risk is the risk that changes in market prices, such as interest rates or foreign exchange rates will

affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters. The majority of the Group’s exposure to market risk arises in connection with the funding of the Group’s operations with liabilities denominated in foreign currencies, and to the extent the term structure of interest bearing assets differs from that of liabilities. Exposure to interest rate risk The principal risk to which the Group is exposed is the risk of loss from fluctuations in the future cash flows or fair values of financial instrument because of a change in market interest rates. Interest rate risk is managed principally through monitoring interest rate gaps and by having pre-approved limits for repricing bands. The ALCO is the monitoring body for compliance with these limits. As part of its management of this position, the Group uses interest rate derivatives (refer to Note 32). A summary of the Group’s interest rate gap position is provided below. The management of interest rate risk against interest rate gap limits is supplemented by monitoring the sensitivity of the Group’s financial assets and liabilities to various standard and non-standard interest rate scenarios. Standard scenarios that are considered include a 100 basis point parallel fall or rise in all yield curves worldwide. In such case, the net interest income for the year ended 31 December 2007 would be approximately TEUR 16,437 higher/lower (the year ended 31 December 2006: TEUR 8,528). The above sensitivity analysis is based on amortized costs of assets and liabilities. Exposure to foreign currency risk The Group has assets and liabilities denominated in several foreign currencies. Foreign currency risk arises when the actual or forecast assets in a foreign currency are either greater or less than the liabilities in that currency. Foreign currency risk is managed principally through monitoring foreign currency mismatches in the structure of assets and liabilities. It is the Group’s policy to hedge such mismatches by derivative financial instruments to eliminate the foreign currency exposure (refer to Note 32). The ALCO is the monitoring body for compliance with this rule. A summary of the Group’s foreign currency position is provided below.



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Interest rate gap position

2007 2006 TEUR Effective

interest rate

Less than3 months

3 to 12months

1 to 2 years

2 to 5 years

More than 5 years Total

Effective interest

rateLess than3 months

3 to 12months

1 to 2 years

2 to 5 years Total

Interest bearing financial assets

Cash and cash equivalents 3.6% 288,203 - - - - 288,203 0.5% 300,294 - - - 300,294

Due from financial institutions 8.3% 44,461 66,421 - - 136 111,018 5.0% 34,345 106,053 - - 140,398 CZK* 8.5% 29,973 66,421 - - - 96,394 4.0% 10,891 84,348 - - 95,239 USD* 6.0% 8,594 - - - 136 8,730 8.3% - 8,275 - - 8,275 RUB* 4.3% 1,534 - - - - 1,534 5.2% 23,454 510 - - 23,964 Other currencies 9.6% 4,360 - - - - 4,360 9.4% - 12,920 - - 12,920

Loans to customers, net 36.7% 277,906 1,063,147 550,599 349,834 164,657 2,406,143 39.6% 261,562 648,633 295,520 279,582 1,485,297 RUB* 42.3% 175,440 840,965 378,384 213,883 31,748 1,640,420 46.4% 147,377 434,332 116,786 216,784 915,279 CZK* 25.0% 53,403 129,916 112,298 57,100 9,501 362,218 26.1% 49,842 125,709 105,548 21,891 302,990 USD 11.8% 1,971 4,759 2,219 23,170 117,407 149,526 11.5% 5,005 11,149 20,414 10,291 46,859 SKK* 26.3% 20,723 36,453 31,482 31,724 1,068 121,450 27.3% 20,804 31,199 22,756 21,289 96,048 KZT* 48.6% 20,646 30,939 7,001 - - 58,586 54.1% 34,435 37,123 13,313 - 84,871 Other currencies 27.8% 5,723 20,115 19,215 23,957 4,933 73,943 19.2% 4,099 9,121 16,703 9,327 39,250

Financial assets at fair value through profit or loss - - - - - - - 7.7% - 12,354 12,147 4,840 29,341

Financial assets available-for-sale 10.0% 2,301 - - - 10 2,311 - - - - - - Total interest bearing financial assets 32.1% 612,871 1,129,568 550,599 349,834 164,803 2,807,675 30.7% 596,201 767,040 307,667 284,422 1,955,330

*These assets bear interest at a fixed rate.



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2007 2006 TEUR Effective

interest rate

Less than 3 months

3 to 12months1 to 2 years

2 to 5 years Total

Effective interest

rateLess than 3 months

3 to 12months

1 to 2years

2 to 5 years Total

Interest bearing financial liabilities

Current accounts and deposits from customers 2.8% 277,208 47,973 433 - 325,614 7.1% 23,250 71,811 - - 95,061RUB 0.8% 216,649 336 11 - 216,996 6.9% 23,245 67,363 - - 90,608USD 5.8% 24,340 24,682 422 - 49,444 11.6% 2 4,437 - - 4,439Other currencies 7.3% 36,219 22,955 - - 59,174 3.8% 3 11 - - 14

Due to banks and other financial institutions 6.7% 356,999 422,437 - - 779,436 8.0% 108,744 269,263 12,046 - 390,053EUR 6.4% 235,876 265,161 - - 501,037 - - - - - -SKK 6.0% 46,612 60,235 - - 106,847 5.9% 65,196 29,320 - - 94,516KZT 11.4% 1 63,162 - - 63,163 12.6% - 65,135 12,046 - 77,181CZK 5.2% 33,449 20,615 - - 54,064 5.0% 29,168 19,197 - - 48,365RUB 5.4% 23,429 7,920 - - 31,349 7.6% 12,646 155,611 - - 168,257USD 8.0% 17,526 5,344 - - 22,870 - - - - - -Other currencies 8.0% 106 - - - 106 10.7% 1,734 - - - 1,734

Debt securities issued 8.5% 724,945 356,070 194,757 137,455 1,413,227 7.0% 510,139 178,842 406,647 - 1,095,628RUB 9.3% 226,983 168,447 81,745 - 477,175 8.9% 89,106 69,403 85,981 - 244,490USD 9.8% 104,942 187,623 - 137,455 430,020 8.8% 13,220 - 320,666 - 333,886CZK 6.3% 268,981 - 113,012 - 381,993 4.3% 284,956 109,439 - - 394,395EUR 7.9% 124,039 - - - 124,039 6.7% 122,857 - - - 122,857

Total interest bearing financial liabilities 7.2% 1,359,152 826,480 195,190 137,455 2,518,277 7.2% 642,133 519,916 418,693 - 1,580,742

Effect of interest rate derivatives (RUB) - 102,202 (102,202) - - - - 105,525 (105,525) - - -



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Foreign currency position

2007 2006 TEUR

RUB CZK SKK USDOther

currencies Total RUB CZK SKK USDOther

currencies Total

Cash and cash equivalents 181,856 30,786 2,070 122,249 53,124 390,085 88,675 57,807 35 178,517 21,457 346,491Due from banks and other financial institutions 8,135 96,394 - 8,730 8,158 121,417 23,964 95,239 - 8,275 12,920 140,398Loans to customers 1,640,420 362,768 122,338 149,526 132,529 2,407,581 915,279 304,869 97,214 46,859 124,121 1,488,342Financial assets at fair value through profit or loss 18,715 - - - 544 19,259 30,032 - - - 519 30,551Financial assets available-for-sale 135,245 - - 77,075 3,320 215,640 - - - - - -Assets classified as held for sale - - - - 7,360 7,360 - - - - - -Current income tax receivables - - - - 568 568 - - 569 - 1,077 1,646Deferred tax assets 19,664 190 1,504 - 358 21,716 12,223 - 807 - 35 13,065Investments in subsidiaries and associates 42 - - - - 42 53 - - - - 53Intangible assets 7,759 6,272 70 73,641 2,840 90,582 7,935 2,453 32 73,641 4,051 88,112Property and equipment 177,553 4,683 439 - 9,663 192,338 118,674 2,966 536 - 4,648 126,824Other assets 42,821 9,855 2,934 481 25,582 81,673 23,709 11,856 5,193 6,189 5,716 52,663

Total assets 2,232,210 510,948 129,355 431,702 244,046 3,548,261 1,220,544 475,190 104,386 313,481 174,544 2,288,145

Current accounts and deposits from customers 216,996 - - 49,444 59,189 325,629 90,608 - - 61,574 50,092 202,274Due to banks and other financial institutions 31,349 54,064 106,847 22,870 564,306 779,436 168,257 48,365 94,516 1,179 77,736 390,053Debt securities issued* 477,175 381,993 - 430,020 124,039 1,413,227 244,490 394,395 - 333,886 122,857 1,095,628Financial liabilities at fair value through profit or loss 24,490 - - - 363 24,853 4,897 - - - - 4,897Liabilities classified as held for sale - - - - 2,582 2,582 - - - - - -Current income tax liabilities 4,195 4,470 726 - 774 10,165 14,615 3,195 - - 214 18,024Deferred tax liabilities - - - - 304 304 - 1,202 - - 279 1,481Other liabilities 21,393 32,492 5,655 526 10,264 70,330 5,852 16,074 6,108 4,525 12,813 45,372

Total liabilities 775,598 473,019 113,228 502,860 761,821 2,626,526 528,719 463,231 100,624 401,164 263,991 1,757,729

Effect of foreign currency derivatives (915,539) 31,006 (8,914) 272,513 620,934 - (421,442) - - 298,790 122,652 -

Net position 541,073 68,935 7,213 201,355 103,159 921,735 270,383 11,959 3,762 211,107 33,205 530,416



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(d) Operational risk Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with

the Group’s processes, personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and generally accepted standards of corporate behaviour. Operational risks arise from all of the Group’s operations and are faced by all business entities. The Group’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Group’s reputation with overall cost effectiveness and to avoid control procedures that restrict initiative and creativity. The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management of the Group. This responsibility is supported by the development of standards for the management of operational risk in the following areas:

• requirements for appropriate segregation of duties, including the independent authorization of transactions;

• requirements for the reconciliation and monitoring of transactions; • compliance with regulatory and other legal requirements; • documentation of controls and procedures; • requirements for the periodic assessment of operational risks faced, and the adequacy of controls

and procedures to address the risks identified; • requirements for the reporting of operational losses and proposed remedial action; • development of contingency plans; • training and professional development; • ethical and business standards; • risk mitigation, including insurance where this is effective.

(e) Capital management The Company considers share capital, share premium, statutory reserve fund and other reserves as a part

of the capital. The Company’s policy is to maintain capital base adequate to its investments in subsidiaries so as to maintain investor, creditor and market confidence, sustain future development of the business and meet the capital requirements related to its funding operations. There are no regulatory capital requirements for the Company and there have been no material changes in the Company’s management of capital during the period. Some of the Company’s subsidiaries maintain capital adequacy in compliance with local regulatory requirements which require the respective entities to maintain the ratio of total capital to total risk-weighted assets at or above certain minimum level. The ratios are calculated based on financial statements prepared in accordance with local accounting standards. Some of the subsidiaries also operate its capital adequacy in compliance with the methodology set out by the BIS in connection with commitments arising from funding operations. The Group’s policy in this respect is to support the subsidiaries with capital as necessary in order to maintain the subsidiaries’ full compliance with capital regulations described above.



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(f) Fair values of financial instruments The fair values of the following financial instruments differ from their carrying amounts shown in the

balance sheet:

NoteCarrying

amount Fair

Value Carrying

amount Fair

Value 2007 2007 2006 2006 TEUR TEUR TEUR TEUR

Debt securities issued 20 1,413,227 1,412,768 1,095,628 1,094,105

The Group has performed an assessment of fair values of its financial instruments, as required by IFRS 7,

to determine whether it is practicable within the constraints of timeliness and cost to determine their fair values with sufficient reliability. The Group’s estimates of fair values of its other financial assets and liabilities are not materially different from their carrying values. Fair value has been determined either by reference to the market value at the balance sheet date or by discounting the relevant cash flows using current interest rates for similar instruments. Fair value estimates are based on judgments regarding future expected cash flows, current economic conditions, risk characteristics of various financial instruments and other factors. Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities not considered financial instruments. In addition, tax ramifications related to the realization of the unrealized gains and losses can have an effect on fair value estimates and have not been considered.

5. Acquisition of subsidiaries In 2006, the Group acquired the following subsidiaries:

• Redlione (LLC) registered in Cyprus and Privat Kredit (LLC) registered in Ukraine (through Redlione) for TEUR 52,562, satisfied in cash;

• Agrobank (CJSC) registered in Ukraine (subsequently renamed to Home Credit Bank) for TEUR 34,153, satisfied in cash.

In 2007, the Group acquired the following subsidiaries:

• Donmera (LLC) registered in Cyprus for TEUR 1, satisfied in cash; • Handelsmaatschappij Vroom B.V. registered in the Netherlands (subsequently renamed to

HC Kazakh Holdings B.V.) for TEUR 113, satisfied in cash; • Luka Holdings B.V. registered in the Netherlands (subsequently renamed to Russia Finance

Corporation B.V.) for TEUR 124,547. TEUR 50 were satisfied in cash and TEUR 124,497 were settled by means of an assumption of the debt;

• Lorobank (OAO) registered in the Republic of Belarus (subsequently renamed to Home Credit Bank) for TEUR 5,245, satisfied in cash.

The acquisitions were accounted for using the purchase method of consolidation. Any excess of the cost of the acquisition over the fair value of the identifiable assets and liabilities acquired in a subsidiary as at the date of the exchange transaction is described as goodwill and recognized as an asset.



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5. Acquisition of subsidiaries (continued) The acquisitions had the following effect on the Group’s assets and liabilities:

2007 2006 TEUR TEUR

Cash and cash equivalents 5,625 23,127 Due from banks and other financial institutions 113 12,920 Loans to customers 40 84,990 Financial assets at fair value through profit or loss - 20 Current income tax receivable 2 - Deferred tax asset 3 35 Intangible assets 1 4,100 Property and equipment 33 4,035 Other assets 2 619 Current accounts and deposits from customers (25) (114,646) Due to banks and other financial institutions - (582) Debt securities issued (261) - Current income tax liability - (112) Deferred tax liability - (46) Other liabilities (6) (2,726)

Net identifiable assets and liabilities 5,527 11,734

Goodwill on acquisition (118) 73,641

Consideration paid 5,409 85,375

Cash and cash equivalents acquired 5,625 23,127

Net cash (inflow)/outflow (216) 62,248

6. Non-current assets held for sale In November 2007 the Group acquired Privatinvest (LLC) registered in Ukraine for TEUR 11,358. The

control over the entity is intended to be temporary because the subsidiary is acquired and held exclusively with a view to its disposal. Net income attributable to this participation is presented as net profit from discontinued operations.



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7. Segment reporting

Segment information is presented in respect of the Group’s geographical segments based on the Group’s management and internal reporting structure. Segment information inrespect of the Group’s business segments is not presented as the Group’s operations are concentrated in one main business segment only, consumer lending products. The Group operates in six principal geographical areas, the Czech Republic, the Slovak Republic, the Russian Federation, the Republic of Kazakhstan, Ukraine and sinceFebruary 2007 in Republic of Belarus. The geographical segments are based on the geographical location of assets which corresponds to the geographical location of customersat the same time. Segment results include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Inter-segment pricing is determined on an arm’slength basis.

Czech

RepublicSlovak

Republic Russian

FederationRepublic of Kazakhstan Ukraine Other Unallocated* Eliminations Consolidated

2007 2007 2007 2007 2007 2007 2007 2007 2007 TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR

Revenue from external customers 108,014 32,762 639,633 31,615 30,545 1,447 25,099 - 869,115Inter-segment revenue 32,000 66 (569) 56 8,243 177 18,734 (58,707) -

Total revenue 140,014 32,828 639,064 31,671 38,788 1,624 43,833 (58,707) 869,115

Segment result 27,962 995 75,317 (4,868) (13,193) 40 (24,300) - 61,953

Depreciation and amortization (4,151) (301) (11,113) (275) (3,561) (27) - - (19,428)Other significant non-cash expenses (11,028) (8,533) (209,028) (9,509) (7,768) (6) - - (245,872)Capital expenditure (11,430) (235) (80,475) (675) (7,395) (915) - - (101,125) Segment assets 434,123 127,850 2,242,140 79,182 188,814 23,038 1,994,659 (1,563,829) 3,525,977

Investments in associates - - 42 - - - - - 42

Segment liabilities and equity 429,843 128,628 2,257,609 79,458 188,794 23,061 1,994,228 (1,563,829) 3,537,792

* Unallocated items represent items of revenue, operating expense, assets and liabilities which cannot be reasonably allocated to the geographical segments.



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7. Segment reporting (continued)

Czech

RepublicSlovak

Republic Russian

FederationRepublic of Kazakhstan Ukraine Other Unallocated* Eliminations Consolidated

2006 2006 2006 2006 2006 2006 2006 2006 2006 TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR TEUR

Revenue from external customers 93,520 25,473 378,708 17,391 - - 1,362 - 516,454Inter-segment revenue 7,641 35 1,149 34 - - 3,651 (12,510) -

Total revenue 101,161 25,508 379,857 17,425 - - 5,013 (12,510) 516,454

Segment result 19,434 2,194 28,115 (7,711) - (11) (10,986) - 31,035

Depreciation and amortization (3,136) (273) (6,213) (153) - - - - (9,775)Other significant non-cash expenses (13,022) (3,364) (145,675) (10,949) - (7) - - (173,017)Capital expenditure (5,998) (142) (111,094) (379) - - - - (117,613) Segment assets 398,093 116,260 1,295,646 92,339 129,841 - 886,441 (645,186) 2,273,434

Investments in associates - - 53 - - - - - 53

Segment liabilities and equity 393,696 117,636 1,293,152 93,185 129,716 - 886,441 (645,186) 2,268,640

* Unallocated items represent items of revenue, operating expense, assets and liabilities which cannot be reasonably allocated to the geographical segments.



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8. Cash and cash equivalents 2007 2006 TEUR TEUR

Cash 24,241 17,337 Current accounts 87,799 88,685 Current accounts with central banks 34,398 28,860 Placements with financial institutions due within one month 243,647 211,609

390,085 346,491

9. Due from banks and other financial institutions

2007 2006 TEUR TEUR

Term deposits with financial institutions due after one month 111,018 130,866 Minimum reserve deposits with central banks 10,399 9,532

121,417 140,398 The minimum reserve deposits are mandatory non-interest bearing deposits calculated in accordance with

regulations issued by the CBR, the NBU and the NBRB and whose withdrawability is restricted. Term deposits of TEUR 30,597 (2006: TEUR 39,430) were pledged as security for bank loan facility

drawn by the Group as described in Note 19.

10. Loans to customers

2007 2006 TEUR TEUR Gross amount Consumer loan receivables 1,219,330 831,473 Revolving loan receivables 925,189 659,338 Cash loan receivables 402,777 152,917 Mortgage loan receivables 132,023 25,721 Loans to corporations 42,762 30,185 Secured personal loans 28,936 15,253 Car loan receivables 23,113 5,675 Other 1,891 3,523

2,776,021 1,724,085 Collective allowances for impairment Consumer loan receivables (171,883) (131,049) Revolving loan receivables (149,838) (96,231) Cash loan receivables (39,357) (5,787) Secured personal loans (2,737) (187) Loans to corporations (1,349) (79) Car loan receivables (1,151) (195) Mortgage loan receivables (885) (202) Other (421) (437)

(367,621) (234,167) Specific allowances for impairment to loans to corporations (819) (1,576)

2,407,581 1,488,342



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10. Loans to customers (continued) Consumer loan receivables and cash loan receivables of TEUR 198,217 (2006: TEUR 140,511) and

revolving loan receivables of TEUR 67,290 (2006: TEUR 49,624) were pledged as security for a bank loan facilities (refer to Note 19).

2007 2006 Analysis of movements in allowances for impairment TEUR TEUR

Balance as at 1 January 235,743 170,650 Balance acquired by business combinations - 5,053 Translation difference (6,893) (749) Impairment losses recognized in the income statement 244,923 173,474 Amount related to loans disposed of (46,842) (78,714) Amount related to loans written off (58,491) (33,971)

Balance as at 31 December 368,440 235,743 The Group has estimated the impairment on loans to customers in accordance with the accounting policy

described in Note 3c(vii). Changes in collection estimates could significantly affect the impairment losses recognized.

11. Financial assets at fair value through profit or loss

2007 2006 TEUR TEUR

Positive fair value of derivative instruments 19,259 1,190 Debt securities - 29,341 Equity securities - 20

19,259 30,551 The fair value of derivative instruments has been determined by reference to the market value or based on

a valuation model using market data inputs.

12. Financial assets available-for-sale 2007 2006 TEUR TEUR

Equity securities 213,329 - Debt securities 2,311 -

215,640 - The equity securities represent the Group’s participation in NOMOS-BANK (JSC) (refer to Note 37).



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13. Deferred tax assets and liabilities Deferred tax assets and liabilities are attributable to the following items (netted for all jurisdictions):

Assets Liabilities Net 2007 2006 2007 2006 2007 2006 TEUR TEUR TEUR TEUR TEUR TEUR

Due from financial institutions - - (84) (23) (84) (23) Loans to customers 30,514 21,943 (7,093)(11,296) 23,421 10,647 Fair value of derivative financial instruments 90 - (298) (721) (208) (721) Carrying value of property and equipment 472 4,187 (13,172)(12,042) (12,700) (7,855) Other assets 20,192 46 - - 20,192 46 Debt securities issued - - (990) (762) (990) (762) Tax-loss carry forward - 7,431 - - - 7,431 Other 915 4,964 (9,134) (2,143) (8,219) 2,821

Deferred tax assets/(liabilities) 52,183 38,571 (30,771)(26,987) 21,412 11,584

Net deferred tax assets 21,412 11,584

14. Investment in associates At 31 December 2007 the Group has the following investments in associates:

Country of Incorporation

Ownership interest

Carrying amount

Income from associate

2007 2007 2007 (%) TEUR TEUR

Global Credit Payment Services (LLC) Russian Federation 50.00 42 -

42 -

At 31 December 2006 the Group has the following investments in associates:

Country of Incorporation

Ownership interest

Carrying amount

Income from associate

2006 2006 2006 (%) TEUR TEUR

Global Credit Payment Services (LLC) Russian Federation 50.00 53 -

53 -



- 39 -

15. Intangible assets

2007

Goodwill Software

Other intangible

assets Total TEUR TEUR TEUR TEUR Acquisition cost Balance at 1 January 2007 73,641 15,578 4,860 94,079 Subsidiaries acquired - 2 - 2 Additions - 8,914 997 9,911 Disposals - (4,932) (100) (5,032) Transfers - 8 (8) - Translation difference - (3) (312) (315)

Balance at 31 December 2007 73,641 19,567 5,437 98,645

Accumulated amortization Balance at 1 January 2007 - 5,666 301 5,967 Subsidiaries acquired - 1 - 1 Additions - 2,452 983 3,435 Disposals - (1,345) (100) (1,445) Translation difference - 158 (53) 105

Balance at 31 December 2007 - 6,932 1,131 8,063

Carrying amount

at 1 January 2007 73,641 9,912 4,559 88,112 at 31 December 2007 73,641 12,635 4,306 90,582

2006

Goodwill Software

Other intangible

assets Total TEUR TEUR TEUR TEUR Acquisition cost Balance at 1 January 2006 - 9,169 535 9,704 Subsidiaries acquired - 258 3,789 4,047 Additions 73,641 5,983 1,490 81,114 Disposals - (20) (983) (1,003) Transfers - 8 (8) - Translation difference - 180 37 217

Balance at 31 December 2006 73,641 15,578 4,860 94,079

Accumulated amortization Balance at 1 January 2006 - 4,149 121 4,270 Additions - 1,350 168 1,518 Disposals - (68) - (68) Translation difference - 235 12 247

Balance at 31 December 2006 - 5,666 301 5,967

Carrying amount

at 1 January 2006 - 5,020 414 5,434 at 31 December 2006 73,641 9,912 4,559 88,112



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15. Intangible assets (continued) The whole carrying amount of goodwill is allocated to the Group’s business in Ukraine. The recoverable

amount of this cash-generating unit was determined as the unit’s value in use based on management cash flow projections for the period 2008 to 2010. Key assumptions are those regarding the growth of the local market, expected competition structure and business volumes, yield and loss rates as well as budgeted expenses. The management estimates of the values of key assumptions reflect past experience as well as available market forecasts. The growth rate used to extrapolate cash flow projections beyond 2010 was 11%, the discount rate applied to the cash flow projections was 16%.

16. Property and equipment

2007

Buildings Equipment Vehicles

Other tangible

assets Total TEUR TEUR TEUR TEUR TEUR Acquisition cost Balance at 1 January 2007 98,061 52,665 5,741 950 157,417 Subsidiaries acquired 4 54 - - 58 Additions 60,376 22,111 2,992 5,735 91,214 Disposals (471) (7,680) (628) (2,195) (10,974) Transfers - (15) - 15 - Translation difference (5,169) (2,104) (110) (208) (7,591)

Balance at 31 December 2007 152,801 65,031 7,995 4,297 230,124

Accumulated depreciation Balance at 1 January 2007 186 27,580 2,320 507 30,593 Subsidiaries acquired - 26 - - 26 Additions 3,277 10,869 1,701 146 15,993 Disposals (7) (7,458) (467) (34) (7,966) Transfers - 3 (4) 1 - Translation difference (95) (752) (25) 12 (860)

Balance at 31 December 2007 3,361 30,268 3,525 632 37,786

Carrying amount

at 1 January 2007 97,875 25,085 3,421 443 126,824 at 31 December 2007 149,440 34,763 4,470 3,665 192,338



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16. Property and equipment (continued)

2006

Buildings Equipment Vehicles

Other tangible

assets Total TEUR TEUR TEUR TEUR TEUR Acquisition cost Balance at 1 January 2006 5,562 35,940 5,413 265 47,180 Subsidiaries acquired - 3,952 132 25 4,109 Additions 94,220 13,414 719 1,787 110,140 Disposals (60) (256) (539) (1,128) (1,983) Translation difference (1,661) (385) 16 1 (2,029)

Balance at 31 December 2006 98,061 52,665 5,741 950 157,417

Accumulated depreciation Balance at 1 January 2006 96 22,211 1,509 88 23,904 Additions 174 6,354 1,289 440 8,257 Disposals (82) (835) (509) (32) (1,458) Translation difference (2) (150) 31 11 (110)

Balance at 31 December 2006 186 27,580 2,320 507 30,593

Carrying amount

at 1 January 2006 5,466 13,729 3,904 177 23,276 at 31 December 2006 97,875 25,085 3,421 443 126,824

17. Other assets

2007 2006 TEUR TEUR

Settlements with suppliers 51,378 30,076 Prepaid expenses 9,661 8,048 Goods held for resale, supplies and other inventories 3,428 3,850 Other taxes receivable 2,248 461 Insurance receivable, net 648 2,858 Other 16,231 8,304

83,594 53,597

Specific allowances for impairment on settlement with suppliers (1,236) (705) Specific allowances for impairment on goods held for resale (685) (229)

(1,921) (934) 81,673 52,663

2007 2006 Analysis of movements in allowances for impairment TEUR TEUR

Balance as at 1 January 934 356 Translation difference 52 - Impairment losses recognized in the income statement 949 578 Amount related to loans written off (14) -

Balance as at 31 December 1,921 934



- 42 -

18. Current accounts and deposits from customers

2007 2006 TEUR TEUR

Term deposits 168,859 95,061 Current accounts and demand deposits 156,770 107,213

325,629 202,274

19. Due to banks and other financial institutions

2007 2006 TEUR TEUR

Unsecured loans 617,391 253,260 Secured loans 153,223 120,043 Other balances 8,822 16,750

779,436 390,053 Out of the secured loans stated above the amount of TEUR 81,082 (2006: TEUR 50,965) was secured by

pledge of consumer loan receivables and cash loan receivables, the amount of TEUR 42,056 (2006: TEUR 39,767) was secured by pledge of revolving loan receivables and the amount of TEUR 30,038 (2006: TEUR 29,311) was collateralized by a cash deposit.

20. Debt securities issued Unsecured bond issues Amount outstanding Interest

rate Final

maturity 2007 2006 TEUR TEUR

RUB loan participation notes of TRUB 8,200,000 Variable March 2014 226,985 -

USD loan participation notes 2 of TUSD 275,000 Fixed June 2008 186,719 216,748

USD loan participation notes of TUSD 200,000 Fixed April 2010 137,532 -

CZK senior variable loan notes of MCZK 5,000 Variable April 2009 132,546 150,960

Unsecured CZK bond issue 1 of MCZK 3,000 Variable July 2009 115,767 110,451

Unsecured CZK bond issue 2 of MCZK 3,000 Variable June 2009 113,012 109,439

USD loan participation notes of TUSD 150,000 Fixed February 2008 105,768 117,138

Class A1 loan note of TEUR 100,000 Variable May 2012 98,025 97,084

Unsecured RUB bond issue 4 of MRUB 3,000 Variable October 2011 84,849 87,771

Unsecured RUB bond issue 3 of MRUB 3,000 Variable September 2010 83,597 86,564

Unsecured RUB bond issue 2 of MRUB 3,000 Variable May 2010 81,745 70,156

CZK junior variable loan notes of TCZK 779,221 Variable April 2009 20,668 23,545

Class A2 loan note of TEUR 13,500 Variable May 2012 13,244 13,130

Class B loan note of TEUR 13,000 Variable May 2012 12,770 12,642

1,413,227 1,095,628



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20. Debt securities issued (continued) The USD loan participation notes were issued by the Group through Eurasia Capital S.A. (refer to Note

1). The CZK denominated variable loan notes were issued by the Group through HCF Funding No.1 B.V. (refer to Note 1). The proceeds from the issue were used to finance revolving loan receivable purchases under receivables sale agreement between the entity and the Group. The EUR denominated consumer loan receivables backed notes were issued by the Group in December 2005 through Eurasia Structured Finance No.1 S.A. (refer to Note 1). The proceeds from the issue were used to finance consumer loan receivable purchases under receivables purchase agreement between the entity and the Group. The notes can be redeemed in full at the option of the Group at par in May 2010. The RUB denominated bonds 4 were issued by the Group in October 2006 with a fixed coupon rate valid for the subsequent twenty four months. Coupon rates for the remaining period will be set by the Group on a quarterly basis starting October 2008. Bondholders are entitled to require early redemption of the bond issue at par in October 2008. The RUB denominated bonds 3 were issued by the Group in September 2005 with a fixed coupon rate valid for the subsequent eighteen months. Coupon rates for the remaining period were reset by the Group in March 2007. Bondholders are entitled to require early redemption of the bond issue at par in September 2008. The RUB denominated bonds 2 were issued by the Group in May 2005 with a fixed coupon rate valid for the subsequent twelve months. Coupon rates for the remaining period are set by the Group each twelve months starting in May 2006. A portion of the RUB bonds 2 were repurchased at par in May 2007. Some of repurchased bonds were subsequently sold by the Group on the open market. Bondholders are entitled to require early redemption of the bond issue at par in May 2009. The RUB denominated credit revolving loan receivables backed notes were issued by the Group in August 2007 through Eurasia Credit Card Funding I S.A. and Eurasia Credit Card Company S.A. (refer to Note 1). The proceeds from the issue were used to finance revolving loan receivable purchases under receivables purchase agreement between the entity and the Group. The notes will be redeemed in full by Eurasia Credit Card Company S.A. at par in March 2014.

21. Financial liabilities at fair value through profit or loss

2007 2006 TEUR TEUR

Negative fair value of derivative instruments 24,853 4,897

24,853 4,897 The fair value of derivative instruments has been determined by reference to the market value or based on

a valuation model using market data inputs.



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22. Other liabilities

2007 2006 TEUR TEUR

Settlements with suppliers 38,471 33,619 Accrued employee compensation 12,108 2,983 Other taxes payable 5,596 2,259 Insurance liability, net 107 - Other 14,048 6,511

70,330 45,372

23. Equity At 31 December 2007 the share capital of the Group comprised 1,250,000 (2006: 213,216) ordinary

shares at a par value of EUR 1,000, from which 1,156,175 (2006:213,216) shares were issued and fully paid. All issued shares bear equal voting rights. The holders of shares are entitled to receive dividends when declared. No dividends can be distributed if distributable reserves are negative. The statutory share premium was converted into share capital in 2007. The creation and use of the statutory reserve fund is limited by legislation and the articles of each company within the Group. The legal reserve fund is not available for distribution to the shareholders. The translation reserve comprises foreign exchange differences arising from translation of the financial statements of companies within Group with a functional currency other than the presentation currency. The translation reserve is not available for distribution to the shareholders. Fair value reserve represents the revaluation surplus, net of deferred tax, recognized on changes in the fair value of financial assets available for sale. The fair value reserve is not available for distribution to the shareholders.

24. Interest income and interest expense

2007 2006 TEUR TEUR Interest income Consumer loan receivables 273,674 243,983 Revolving loan receivables 261,103 156,705 Cash loan receivables 98,043 22,169 Due from banks and other financial institutions 20,243 16,564 Other 23,736 5,705

676,799 445,126

Interest expense Debt securities issued 100,176 68,739 Balances from banks and other financial institutions 38,058 27,711 Current accounts and deposits from customers 11,662 - Finance leases 27 85

149,923 96,535



- 45 -

25. Fee and commission income

2007 2006 TEUR TEUR

Penalty fees 67,077 21,561 Insurance commissions 42,712 4,133 Cash transactions 20,822 15,814 Retailers commissions 18,628 28,019 Customer payment processing and account maintenance 11,486 5,146 Other 1,983 558

162,708 75,231

26. Fee and commission expense

2007 2006 TEUR TEUR

Commissions to retailers 36,365 19,970 Payment processing and account maintenance 12,764 10,704 Cash transactions 3,813 2,295 Other 229 573

53,171 33,542

27. Other operating income

2007 2006 TEUR TEUR

Sale of goods 19,057 21,756 Cost of goods sold (17,679) (20,627) Storage of goods and distribution expenses (548) (682) Net gain on disposal of AFS 7,120 - Net loss on revaluation and disposal of FVTPL (370) - Net foreign exchange expense (8,590) (8,591) Other 30,618 4,241

29,608 (3,903)

28. Impairment losses

2007 2006 TEUR TEUR

Consumer loan receivables 132,305 125,815 Revolving loan receivables 73,551 41,942 Cash loan receivables 35,043 5,717 Other assets 4,973 (457)

245,872 173,017



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29. Net expense related to credit risk insurance

2007 2006 TEUR TEUR

Consumer loan receivables 14,326 11,968 Cash loan receivables 10,467 5,655 Revolving loan receivables 1,214 1,782 Commission income for collecting defaulted receivables (16,011) (4,395)

9,996 15,010

30. General administrative expenses

2007 2006 TEUR TEUR

Employee compensation 130,550 51,816 Payroll related taxes (including pension contributions) 25,336 12,771 Professional services 42,434 24,022 Telecommunication and postage 42,118 29,191 Occupancy 30,932 11,328 Depreciation and amortization 19,428 9,775 Advertising and marketing 14,392 10,381 Information technologies 11,960 6,157 Travel expenses 11,641 3,287 Taxes other than income tax 2,770 1,163 Other 16,663 7,424

348,224 167,315

31. Income tax expense

2007 2006 TEUR TEUR

Current tax expense 40,319 29,098 Deferred tax benefit (10,429) (15,557)

Total income tax expense in the income statement 29,890 13,541

Reconciliation of effective tax rate 2007 2006 TEUR TEUR

Profit before tax 61,953 31,035

Income tax using the domestic tax rate of 22.2% (2006: 29.6%) (13,754) (9,186) Effect of tax rates in foreign jurisdictions (3,584) (329) Effect of deferred tax assets not recognize (1,548) - Non-deductible costs and non-taxable income (11,025) (4,126) Effect of income taxed at lower tax rates 21 100

Total income tax expense (29,890) (13,541)



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32. Derivative financial instruments At 31 December 2007 the following derivative contracts were outstanding:

Contract type Sell/Buy Maturity Notional amount Fair value

(in thousands of

purchased currency) TEUR

Foreign currency forward contracts RUB/USD less than 1 month 155,400 (4,307) USD/RUB less than 1 month 4,500 (7) USD/EUR less than 1 month 9,022 193 RUB/USD 1 to 3 months 366,000 (7,083) RUB/USD 3 months to 1 year 288,000 (5,575)

Foreign currency futures contracts RUB/USD 1 to 3 months 20,000 (152)

Foreign currency swap contracts RUB/EUR less than 1 month 123,078 230 RUB/USD less than 1 month 30,000 (393) USD/CZK less than 1 month 625,625 (259) EUR/CZK less than 1 month 200,000 (104) RUB/USD 1 to 3 months 104,000 (538) USD/EUR 1 to 3 months 223,000 350 SKK/EUR 1 to 3 months 8,914 1 RUB/USD 3 months to 1 year 176,000 (4,909) USD/EUR 3 months to 1 year 360,781 17,758

Interest rate swap contracts Fixed/Floating (RUB) less than 1 month 28,738,450 (27) Fixed/Floating (RUB) 1 to 3 months 21,153,009 (405) Fixed/Floating (RUB) 3 months to 1 year 17,617,823 (367)

(5,594)



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32. Derivative financial instruments (continued) At 31 December 2006 the following derivative contracts were outstanding:

Contract type Sell/Buy Maturity Notional amount Fair value

(in thousands of

purchased currency) TEUR

Foreign currency forward contracts RUB/USD less than 1 month 9,000 (326) RUB/USD 1 to 3 months 30,000 (377) RUB/USD 3 months to 1 year 249,700 (2,395)

Foreign currency futures contracts RUB/USD less than 1 month 26,000 (230) RUB/USD 1 to 3 months 33,000 (278) RUB/USD 3 months to 1 year 44,000 (446)

Foreign currency swap contracts RUB/EUR less than 1 month 123,222 (283) EUR/USD less than 1 month 328 (1) CZK/USD less than 1 month 500 - CZK/USD less than 1 month 50,200 499 RUB/USD 1 to 3 months 1,000 1

Interest rate swap contracts Fixed/Floating (RUB) less than 1 month 6,661,063 57 Fixed/Floating (RUB) 1 to 3 month 13,691,505 40 Fixed/Floating (RUB) 3 months to 1 year 11,771,088 32

(3,707)

33. Commitments The Group has outstanding commitments to extend credit. These commitments take the form of approved

credit limits related to customer’s revolving loan accounts, consumer loan facilities, cash loan facilities, overdraft facilities and term loan facilities.

2007 2006 TEUR TEUR

Revolving loan commitments 821,765 565,964 Consumer loan commitments 68,827 47,935 Bank guarantees 9,542 - Cash loan commitments 7,585 6,440 Undrawn overdraft facilities 1,128 35,260 Term loan facilities - 7,660

908,847 663,259 The total outstanding contractual commitments to extend credit indicated above represents future cash

requirements, though some of these commitments may expire or terminate without being funded.



- 49 -

34. Operating leases Non-cancellable operating lease rentals are payable as follows: 2007 2006 TEUR TEUR

Less than one year 27,741 10,569 Between one and five years 62,337 17,132 More than five years 6,648 1,593

96,726 29,294 The Group leases a number of premises and equipment under operating lease. Lease payments are usually

increased annually to reflect market rentals. None of the leases includes contingent rentals. During the year TEUR 26,742 (2006: TEUR 9,261) was recognized as an expense in the income statement in respect of operating leases.

35. Contingencies

(a) Litigation

(i) Consumer protection laws The Russian Federation does not have legislation specifically regulating consumer lending or loan

collection. In a court dispute in 2006 between Home Credit and Finance Bank (“HCFB”) and the Russian Consumer Protection Service, the Federal Arbitration Court of the Urals Region held that a bank may not: (a) charge a fee to a borrower for the opening of loan accounts with the lending bank as a pre requisite for providing the loan; or (b) charge any prepayment or late payment penalties. As a result of this decision a penalty EUR 586 was assessed on HCFB. In 2006 HCFB amended its standard form consumer lending loan agreements to comply with this decision. Total amount of the penalties paid by HCFB in 2007 is EUR 343. The Group’s management has made an assessment of the situation above and considers that in the Russian environment the costs of making claims to have previous commission and penalties refunded for individuals and the potential uncertainty of the legal outcome would outweigh the benefits of making the claims. Consequently management considers the likelihood of a future material outflow of funds is remote and accordingly no provision has been made in these financial statements in respect of the above.

(ii) Labour disputes Under Russian labour law, the company shall provide its employees in Far Northern regions of Russia

with additional benefits, in particular, each salary payment shall be adjusted by governmentally determined factors. When HCFB calculated salaries to its employees of regional representative offices located in Far Northern regions of Russia such as Archangelsk, Irkutsk and Murmansk, it did not fully comply with the application of these law requirements: HCFB only included these factors increase in base salary compensation, whereas they should have been applied to the overall compensation package. As at 31 December 2007 HCFB had claims from its employees totaling TEUR 185 (31 December 2006: TEUR 88) pending resolution in the court. The Group’s management created a provision for the full amount of such claims in these financial statements. Since November 2006, HCFB has fully complied with the labour legislation. However, in the future new claims may arise in respect of the past periods of non-compliance. The Group’s management assesses the likelihood of new claims to be remote as many of potential plaintiffs are still HCFB’s employees and the management believes that it was paying compensation at market levels. No provisions were created in respect of these potential claims.



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35. Contingencies (continued)

(b) Taxation contingencies The taxation systems in the Russian Federation, in the Republic of Kazakhstan and in Ukraine are

relatively new and are characterized by frequent changes in legislation, official pronouncements and court decisions, which are often unclear, contradictory and subject to varying interpretation by different tax authorities. Taxes are subject to review and investigation by a number of authorities, which have the authority to impose severe fines, penalties and interest charges. A tax year remains open for review by the tax authorities during several subsequent calendar years. Recent events within the Russian Federation, the Republic of Kazakhstan and Ukraine suggest that the tax authorities are taking a more assertive position in their interpretation and enforcement of tax legislation. The facts mentioned above may create tax risks in respective countries that are substantially more significant than in other countries. Management believes that it has provided adequately for tax liabilities based on its interpretations of applicable Russian, Kazakhstan and Ukrainian tax legislation, official pronouncements and court decisions.

(c) Insurance The insurance industry in the Republic of Kazakhstan and in Ukraine is in a developing state and many

forms of insurance protection common in other parts of the world are not yet generally available. Respective Group companies do not have full coverage for their premises and equipment, business interruption, or third party liability in respect of property or environmental damage arising from accidents on their property or relating to their operations.

(d) Uncertainties There is a considerable degree of uncertainty in the Republic of Belarus surrounding the continued

success of domestic economic policy. Furthermore, the recoverability of the Home Credit Bank’s (“HCB”) loans and advances to domestic commercial banks, as well as their financial positions and consequently their ability to repay the loans, largely depends on the future direction of the economic policy of the Government of the Republic of Belarus. The management of HCB has made its best estimate on recoverability and classification of recorded assets and liabilities. While management of HCB believes that adjusted amounts represent their net realizable value and that any deterioration in the economic or political stability of the country will not have a material affect on the operations of HCB, this cannot be predicted with absolute certainty and the future operations of HCB may continue to be affected by the economic policy of the government.

36. Related party transactions

(a) Transactions with the parent Amounts included in the balance sheet in relation to transactions with the parent are as follows:

2007 2006 TEUR TEUR

Due from banks and other financial institutions - 7,980

Other assets 9,218 -

Due to banks and other financial institutions - (276)

Other liabilities (66) (11)

9,152 7,693



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36. Related party transactions (continued) Amounts included in the income statement in relation to transactions with the parent are as follows:

2007 2006 TEUR TEUR

Interest income - 413

Interest expense - (285)

Other operating income 9,218 5,381

General administrative expenses (66) (93)

9,152 5,416

(b) Transactions with fellow subsidiaries Amounts included in the balance sheet in relation to transactions with fellow subsidiaries are as follows:

2007 2006 TEUR TEUR

Cash and cash equivalents 90,951 14,727

Due from banks and other financial institutions 96,394 39,814

Loans to customers 306 -

Financial assets at fair value through profit or loss 17,975 -

Other assets 26,761 2,594

Due to banks and other financial institutions (513,150) (130,226)

Debt securities issued (136,254) (73,729)

Financial liabilities at fair value through profit or loss (872) -

Other liabilities (4,287) (4,754)

(422,176) (151,574) Amounts included in the income statement in relation to transactions with fellow subsidiaries are as

follows:

2007 2006 TEUR TEUR

Interest income 10,279 6,914

Interest expense (21,918) (6,606)

Fee and commission income 42,504 4,192

Fee and commission expense (289) (30)


Net expense related to credit risk insurance 1,633 113

General administrative expenses (8,663) (5,900)

49,749 635



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36. Related party transactions (continued)

(c) Transactions with key management personnel Amounts included in the income statement in relation to transactions with members of key management

are short-term benefits comprising salaries and bonuses in amount of TEUR 14,940 (2006: TEUR 8,699). The members of Board of Directors of the Company and key management of its subsidiaries are considered as the key management of the Group.

37. Subsequent events In January 2008, the Group disposed of its participations in HC Fin 1 B.V., Russia Finance Corporation

B.V. and NOMOS-BANK (JSC) (the latter two participations held through HC Fin 1 B.V.) to PPF Group N.V. for TEUR 257,576. The proceeds from disposal were used to repay unsecured loans provided by related parties. The participation interest in NOMOS-BANK was acquired in 2007 due to the intention of PPF Group N.V. to create a partnership with the shareholders of NOMOS-BANK.

38. Unconsolidated financial information of the Company The unconsolidated balance sheet of Home Credit B.V. prepared in accordance with IFRS as endorsed by

EU is as follows:

2007 2006 TEUR TEUR

ASSETS

Cash and cash equivalents 247,251 123,918 Due from banks and other financial institutions 106,201 83,085 Financial assets at fair value through profit or loss 544 499 Investments in subsidiaries and associates 1,095,686 673,909 Other assets 24,073 5,030

Total assets 1,473,755 886,441

LIABILITIES

Due to banks and other financial institutions 235,712 11,109 Debt securities issued 113,012 109,439 Financial liabilities at fair value through profit or loss 363 - Other liabilities 4,082 7,761

Total liabilities 353,169 128,309

EQUITY

Share capital 1,156,175 213,216 Share premium - 561,959 Other reserves (35,589) (17,043)

Total equity 1,120,586 758,132

Total liabilities and equity 1,473,755 886,441 Investments in subsidiaries and associates are stated at cost less impairment losses.



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38. Unconsolidated financial information of the Company (continued) The unconsolidated income statement of Home Credit B.V. prepared in accordance with IFRS as endorsed

by EU is as follows:

2007 2006 TEUR TEUR

Interest income 11,203 7,118 Interest expense (11,173) (10,182)

Net interest income/(expense) 30 (3,064)

Fee and commission expense (321) (12)

Net fee and commission expense (321) (12)

Other operating income 29,977 (2,105)

Operating income 29,686 (5,181)

Impairment losses (4,095) - General administrative expenses (44,137) (5,805)

Operating expenses (48,232) (5,805)

Loss before tax (18,546) (10,986)

Income tax expense - -

Loss for the year (18,546) (10,986) Amounts included in the unconsolidated balance sheet of the Company in relation to related party

transactions are as follows:

2007 2006 TEUR TEUR

Cash and cash equivalents 246,824 71,918

Due from banks and other financial institutions 106,201 121,862

Financial assets at fair value through profit or loss 181 499

Other assets 24,073 -

Due to banks and other financial institutions (235,712) (11,877)

Debt securities issued - (103,693)

Other liabilities (1,228) (6,859)

140,339 71,850



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38. Unconsolidated financial information of the Company (continued) Amounts included in the unconsolidated income statement of the Company in relation to related party

transactions are as follows:

2007 2006 TEUR TEUR

Interest income 10,803 6,365

Interest expense (901) (4,852)

Fee and commission expense (263) -


General administrative expenses (27,258) (5,231)

12,167 914

Documents

Home Credit B.V. · Consolidated Statement of Cash Flows 9 Notes to the Consolidated Financial ... Country of incorporation Ownership interest ... Group’s issues of debt