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TABLE OF CONTENTSSection 5

Independent auditors report.............................................42Financial statements in compliance with IFRS............46Auditors report on financial statements....................49Financial statements in compliance with RAS...........53Addresses of offices and branches of the Bank........57Reference information.........................................................59

Message from the President of the Bank..............................7General information on the Bank........................................10Key events 2015.....................................................................11Membership in professional organizations and payment systems. Licenses..........................................12Se

ction 1

Key indicators......................................................................16Management Board ..............................................................18Customer service network ..........................................19

Section 2

Corporate business............................................................22Retail business.....................................................................23Credit policy.......................................................................25Financial market activities................................................29Risk management..............................................................31Se

ction 3

Information technologies ..................................................36HR policy.............................................................................37Communication policy........................................................38

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The world is cyclical. The crisis itself, although to a high cost, clears the field for revitalization and recovery. Bankruptcies of banks and businesses elimi-nate the weak and inefficient, paving the way for the strong and effective. Profitable investment opportuni-ties lead to increased employment and salary.

The crisis brings us back to basic human principles: to live by our means and not to take loans, to save rather than squander, to produce and not to speculate, to calculate instead of completely believing and re-lying on someone else. Just as any other test, crisis breaks some and hardens others.

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The speculative bubble of 1634-1637 on the tulip bulbs market in the Netherlands is one of the first known ex-amples of financial fever and inadequate behavior of the stock crowd.

The fashion for Byzantium-imported tulips along with sharp growth in demand for them has led to the emer-gence of mass financial market, in which goods were tu-lips’ bulbs or financial instruments that gave rights for them. The prices have steadily increased over the years, which amplified speculative games and opera-tions with commodity derivatives, alike futures or op-tions where underlying assets were tulips’ bulbs.

Most of the transactions were carried out without real delivery of the goods, which turned into the game on the difference in rates and ending in mutual settle-ments between the winners and losers. The market was critically overheated in January 1637 (an increase of ten times) and collapsed in the first decade of Febru-ary.

6Yury Petrov, President, Chairman of the Board of Directors

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Dear clients, partners and colleagues!

In 2015 NS Bank managed not only to maintain its position in the national banking sector but also, on a number of indicators, to be ahead of competitors by indicating better results. As earlier, the Bank devoted considerable attention to capital management.

The Banks own capital showed a steadily positive dynamics: it grew up to 6.6 billion roubles (by RAS). As of 01.01.2016 the Banks assets reached 35.8 billion roubles, while the total loan portfolio grew up to 12.0 billion roubles. The Banks profit for the 2015 amounted to 452 million roubles.

The effectiveness of the Bank's activities is recognized and confirmed by NRA - leading Russian rating agency («A +» - high solvency, first level).

As a result of our credit policy, including stringent requirements of credit risk management, the indicators of high quality of credit portfolio were maintained. Throughout the year, the Bank has been reducing number of assets with signs of increased risk. The issuance of new credit products already was carried out by taking into account new approaches to risk assessment. We designed and implemented tools of early diagnosis of increased credit risks’ factors, which minimized the occurrence of overdue loans granted in 2015. The share of overdue loans in the Bank's portfolio is maintained at a moderate level (3.7% of the amount of credit the portfolio), the level of the collateral - is kept at high level.

As in all previous years, the Bank paid close attention to attract new customers. Credit products were provided to both legal bodies and individuals. Particular attention was paid to intended use of loan funds provided. The Bank diversified sales channels of credit products, focusing mainly on corporate clients. Target audience has been identified for consumer credit products offered by the Bank, base of potential borrowers and principals was formed, which is a good stepping stone for intensive growth of sales in 2016.

The Bank provided loans to finance commercial, production and investment projects. Funds were directed to credit production activities of enterprises, payment of salaries, fees, taxes, and to increase working capital.

In 2015 NS Bank continued to actively provide loans to clients for participation in

MESSAGE FROM THE PRESIDENTOF THE BANK

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public tenders and auctions, as well as in open tenders, conducted by state and municipal customers. Bank issued guarantees for participation in auctions/tenders to fulfill obligations by state and municipal contracts, including the return of advance payments.

Past year marked the continued further expansion and development of product line. Currently, the line of banking products for corporate clients includes over 10 titles and can meet the needs of virtually any client. Despite the strengthening of negative factors on funding market, the Bank managed to keep key corporate clients in the most important sectors of real economy. Flexible tariff policy along with the presence of interesting package offers allow many customers to successfully develop mutually beneficial lengthy partnership relationship with the Bank and to enjoy its variety of products, taking into account the specifics and the scale of their businesses.

The Bank also intends to increase its attractiveness to corporate customers in the future. This will be achieved by expanding the product line through the introduction of best practices in the field of cash management of legal entities. Customers will be offered unique technological solutions, as well as improved service that will provided by highly professional client managers.

In 2015 the Bank expanded the range of financial services for individuals. The Bank continued its work on the deposit market. Clients were offered new products, allowing to save available funds, as well as to profitably place savings for the future. The current interest rate policy on deposits for individuals allowed to keep the accumulated customer base and increase the volume of cross-selling.

In 2015 the Bank, as a professional securities market participant and member of the Moscow Exchange actively conducted operations in the financial market. The aims of operations were: generation of income, improvement of the quality resource allocation and efficient liquidity management.

The securities portfolio of the Bank is formed mainly of instruments with fixed income (bonds) with maturities of up to two years. Last year special attention was paid to safety and liquidity of issuers. That is the reason why the basis for the Bank's portfolio are sovereign and corporate bonds of Russian issuers with credit ratings equal or close to the sovereign, and included in the Lombard list of the Bank of Russia. Such policy aids

MESSAGE FROM THE PRESIDENTOF THE BANK

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to regulate the Bank's liquidity, allowing, if necessary, to promptly borrow the funds on the money market by direct repo transactions.

In an effort to improve efficiency of operations on the financial markets, the Bank actively utilizes all available instruments offered by Moscow Exchange and the National Settlement Depository, as well as the possibility to operate OTC and derivatives market at the Moscow Exchange.

As before, in 2015 main focus was directed to the improvement of customer services’ quality and rate. As a result of the modernization of business processes and active work in order to expand the range of services with the use of information technologies, the customer transactions have become significantly faster.

The financial performance of the Bank in 2015 together with risk management system allow the Bank to look into the future with confidence, ensuring reliability and stability to the customers. NS Bank will continue to strengthen its position on the Russian banking market.

We are grateful to customers, shareholders and partners for their trust and hope that our future cooperation will be as effective, mutually beneficial and successful as before.

Yury Petrov, President, Chairman of the Board of Directors.

MESSAGE FROM THE PRESIDENTOF THE BANK

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GENERAl INFORMATION ON THE BANk

Open Joint-Stock Bank NS Bank - was founded in October 1994. The Bank has been granted the General License of the Bank of Russia №3124. NS Bank is audited by Russian and International Financial Reporting Standards. Auditors of the Bank are LLC «NORMAPROFAUDIT» and AO «BDO Unikon» respectively. The Bank is a professional participant of the security market and is a member of the PJSC “MICEX-RTS”. NS Bank is a participant of the System of Compulsory Insurance of Deposits.

NS Bank is a universal credit and financial institution rendering a full range of up-to-date banking services.

The Bank’s network consists of 21 outlets* including 11 offices in Moscow and rest of the offices in St. Petersburg, Velikiy Novgorod, Nizhny Novgorod, Ivanovo, Tula, Dmitrov, Krasnogorsk, Kotelniki.

Among the priority areas of the Bank's activities: credit operations, bank guarantees, loans and guarantees to participants in public contests and auction services to private clients, operations with foreign currency and securities.

In 2015 NS Bank strengthened its positions in the national banking sector saving the reputation of highly reliable credit organization.

The effectiveness of the Bank's activities confirmed by the leading Russian Rating Agency NRA («A +» - high solvency, the first level).

NS Bank is a participant of the Electronic Trading System (ETC) and is included in the Register of banks and other credit organizations with the right to issue bank guarantees to cover customs payments. NS Bank is accredited by the Federal Customs Service, RUSNANO, Agency for Housing and Mortgage Lending, Rosatom, Rosoboronexport. It is the official bank-partner of the OJSC “MSP Bank” of the government program of financing small and medium businesses.

NS Bank is a member of Association of Russian Banks (ARB) and Association «Rossia» as well as is a participant of other self-regulatory and public organizations.

*Data as of 01.01.2016.

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KEy EvENTS OF 2015

JANuARy– MARcH

• Central Bank included NS Bank in the top 100 banks, where funds could be placed for pension accumulation.• Moody's kept the credit rating of NS Bank at the same level «b3», as well as the long-term rating for deposits in national and foreign currency at the level of «B3 / NP».

APRIl – JuNE

• NS Bank’s equity increased by 13.9% and amounted to 6525 million rubles.• Central Bank included NS Bank in the list of major Russian banks.• NS Bank President Yury Petrov was awarded the Order «For merits in development of banking in Russia» and the highest award of the Association «Russia» - Golden Badge. •NS Bank issued «Income card» with Cash-Back function.

July – SEPTEMBER

• NS Bank changes the corporate name to Joint Stock Company «NS Bank» (« NS Bank» JSC).• NS Bank became an authorized bank of the Pension Fund.• NS Bank admitted to the partners of the Moscow Regional Guarantee Fund.

OcTOBER – DEcEMBER

• NS Bank Income card during two months led the top-10 advantageous debit cards, according to research portal «Sravni.ru».• «Expert RA» confirmed the National Assembly of the Bank rating at «A».

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MEMBERSHIP IN THE PROFESSIONAl ORGANIZATIONS AND PAyMENT SySTEMS. lIcENSES.

THE BANk IS A MEMBER OF THE FOllOwING PROFESSIONAl ORGA-NIZATIONS, uNIONS AND PAyMENT SySTEMS:

• the Association of Russian Banks• the Association of Russia's Regional Banks• Moscow Interbank Currency Exchange• Moscow International Currency Association• the Finance Managers Guild• Guild of Purveyors of the Kremlin• the National Stock Association• the Russian National SWIFT Association• International Payment SystemVisa International• International Payment System MasterCard Worldwide• International Money Transfer System Western Union• System “Zolotaya Korona - Money Transfer”• Money transfer system «UNISTREAM”

THE NS BANk IS

• a member of the System of Compulsoryinsurance of Deposits• a member of the System of Electronic Lot Trading (SELT).

NS BANk IS

• in the Register of banks and other credit organizations, holding the right to issue bank guarantees to cover customs payments,• an official partner bank with the small and medium business financing program run by JSC «MSP Bank»• accredited by Federal Customs Service, Russian Corporation of Nanotechnologies (RUSNANO), RosAtom, RosOboronExport.

lIcENSES:

• The Bank of Russia's General Banking License № 3124, granted on 20.08.2003, for the right to perform banking operations in roubles and foreign currencies with a right to at-tract private funds into deposits.

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MEMBERSHIP IN THE PROFESSIONAlORGANIZATIONS AND PAyMENT SySTEMS. lIcENSES.

• The license to carry out banking operations with precious metals (№ 3124 granted on 20.08.2003).

• The license of the Federal Financial Markets Service to carry out dealer activities № 045-07409-010000 granted on 27.01.2004.

• The license of the Federal Financial Markets Service to carry out broker activities № 045-07407-100000 granted on 27.01.2004.

• The license of the Federal Financial Markets Service to carry out securities manage-ment № 045-07413-001000 granted on 27.01.2004.

• The license of the Federal Financial Markets Service to carry out custody activities № 045-07421-000100 granted on 30.01.2004.

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Money, which is the cause of the inflation, was in circu-lation among people from time immemorial. The first paper money, as well as the paper itself, were manufactured and produced in large quantities in china during the yuan Dy-nasty (1271-1368). In western Europe, paper money signs began to be issued later: in France - in 1718, in Austria - in 1762, in Prussia - in 1765.

Europe learned what inflation was in the XVIII century, though the term itself appeared years later. created in France in 1716 Scotsman John law’s bank issued numer-ous banknotes, obviously exceeding the needed circula-tion, and was unable to exchange them for gold and silver coins.

The collapse of the system created by law had a great in-fluence on the economy of France, until the end of the XVIII century, slowing the development of banking and in-dustrial growth. Next paper money appeared in France only during the Great French Revolution.

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kEy INDIcATORS

In 2015 the NS Bank managed not only to maintain its position in the national banking sector, but also on a number of indicators get ahead of the competitors by demonstrating better results.

The Bank ended the year, as in the past, by devoting considerable attention to capital management. Own capital of the Bank in 2015 showed stable positive dynamics of growth: increased by 5.7% - up to 6 616 million roubles. (by RAS). The Bank's profit for 2015 amounted to 452 million roubles.

As at 01.01.2016, the Bank's assets amounted to 35.8 billion roubles, while the total loan portfolio to 12.0 billion roubles.

Corporate loan portfolio occupies a predominant place in the total loan portfolio - 11.3 billion roubles.. (95%), the retail loan portfolio is at 0.7 billion rubles. This is fully consistent with the Bank's conservative credit policy, aimed, first and foremost, to meet the financial needs of corporate clients and their staff.

An important part in the structure of assets (about 36.3% as of 01.01.2016) is occupied by the bonds portfolio, which allows to optimize resource management, ROIs and the Bank's liquidity. Significant part of the portfolio consists of securities with high ratings and which are included in the Lombard list of the Bank of Russia. NS Bank securities portfolio provides moderate income during liquidity excess and acts as security to attract resources during liquidity deficit.

Of particular importance to strengthening the business position of the Bank is the stability and diversification of funding. Thus, as of 01.01.2016, the Bank’s funding client base consisted of 33% of the assets of organizations and 67% of the means of individuals.

It should be noted that in 2015 despite increasing financial instability, the Bank managed to maintain the confidence of depositors and to successfully compete with the leading Russian banks. As of 01.01.2016, the volume of funds attracted from individuals amounted to 17.4 billion roubles.

During 01.01.2015 - 01.01.2016, the Bank, having sufficient liquidity, was active in the interbank market, using various financial instruments including repo and swap. The values of mandatory liquidity standards had a significant margin above the established levels.

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kEy INDIcATORS

The financial results of the Bank in 2015 the risk management system enables the Bank to guarantee its customers reliability and stability. In the future, NS Bank will continue to strengthen its position in the Russian banking market.

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MANAGEMENT BOARD

PETROV yuRy GEORGIEVIcHPresident, Сhairman of the Board of Directors

kuRTASOVA NADEZHDA EVGENIEVNAActing Chairman of the Board, First Deputy Chairman of the Board

BAZHENOV NIkOlAy DMITRIEVIcHDeputy Chairman of the Board, Member of the Board

AlEXEEVA SVETlANA AlEXANDROVNAChief Accountant, Member of the Board

TROPAREVSky VlADIMIR NIkOlAEVIcHDirector of Treasury, Member of the Board

AGEyEV VIcTOR OlEGOVIcHVice-president

lEGcHIlIN MIkHAIl NIkOlAEVIcHVice-president

AyGulIS OlGA yuRIEVNAVice-president

kAZANTSEV SERGEy AlEkSANDROVIcHAdvisor to President

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cuSTOMER SERVIcE NETwORk

Optimization of the retail network, cost reduction and constant work to attract custom-ers has allowed the NS Bank to maintain its position in the Russian banking market in 2015. As before, the Bank pursues a balanced policy, creating a concept for the develop-ment of each branch and additional office, carefully choosing location of sales offices on the basis of market analysis and risk assessment.

Bank Network as of 01.01.2016, consisted of 21 sales offices. It includes the central office of the Bank, 10 additional offices in Moscow, 3 offices in the Moscow region (Dmitrov, Kotelniki, Pavshino), as well as branches and offices in St. Petersburg, Veliky Novgorod, Nizhny Novgorod , Ivanovo and Tula.

The bulk of the offices provides customer service in a seven-day working week, provid-ing full range of banking products and services to individuals and legal entities.

Employees of additional offices and branches are active in attracting clients - individuals for service on deposit products. Particularly popular in 2015 were deposits «Reliable» and «Saving», as well as a new card product «Income Card» with 2% cash-back.

Legal entities are offered both credit and deposit products. Bank guarantees, credit lines, overdrafts are especially in demand among credit products. Among the deposit prod-ucts from customers the most popular are integrated packet services and allocation of funds on the accounts.

The Bank strives to make its services more available by moving its outlets maximally closer to its customers. Serious focus is concentrated on the quality of service.

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The financial crisis that emerged in the united States 1857-1858 is considered to be the first of its kind on a global level. By hitting Britain - the biggest com-mercial and industrial power, it did not spare other major countries, such as Germany, Switzerland, France, Russia. It is also known as «beloved crisis of Marx.» The crisis turned out to be short-lived, as Marx hoped for a deeper and more protracted nature of its gradual transformation into a social explosion.

undoubtedly, the crisis has left its mark on the po-litical situation in the world. Having lived through it, capitalism entered a new era of rapid growth. Es-pecially significant rise occurred in the united States - after the civil war (1861-1865), in Germany - after the country's unification in 1871, in Russia - after the reforms of Alexander II (1860-1870).

In 1858, 19-year old Rockefeller started a small business sell-ing flour, grain, pork and other products. By doing so, he be-gan his dizzying entrepreneur and businessman career. He wrote following: «First and main prerequisite for business success is patience.»

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cORPORATE BuSINESS

High-quality service provided for corporate clients is one of the key directions of the NS Bank. To date, the Bank’s product line for corporate customers has more than 10 titles and can meet the needs of almost any customer.

The Bank offers cash services in roubles and foreign currency. Wide range of transactional services combined with remote banking services allow clients’ orders on a competitive basis within the banking market.

Despite the strengthening of negative factors on the funding market, the Bank managed to keep key corporate clients in most important sectors of the real economy. Clients continue to enjoy the full range of Bank's products. Evidence of high reliability and trust is the expansion of the volumes of cooperation with a number of large companies.

Flexible tariff policy, the presence of interesting package offers allow many customers to successfully develop long-term partnerships mutually beneficial relationship with the Bank and to use its various products, taking into account the specificity and scale of their business.

As well as providing full range of services and loyalty to the customers, the Bank paid in 2015 a considerable attention to the safety of operations and the preservation of clients' funds.

In 2016 the Bank intends to increase its attractiveness to corporate customers. This will be achieved by expanding the product line through the introduction of best practices in the field of cash management services of business entities. Unique technological solutions will be offered to clients, as well as improved service, which will be provided by highly professional client managers.

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RETAIl BuSINESS

In 2015 the Bank expanded the range of financial services for private individuals. Ad-vanced technologies were introduced, high-tech products developed, improved custom-er service implemented.

DEPOSITS OF THE POPulATION

The Bank continued to work on the deposit market. At the beginning of the year short deposits were favored. This was due to the uncertainty on the financial market. But as it started to stabilize the emphasis shifted to longer periods.

Customers were offered new products, allowing to save funds as well as to make profit-able placements in the future. The current interest rate policy on deposits of individuals allowed to keep accumulated customer base and to increase cross-selling.

cOINS OF PREcIOuS METAlS

In 2015 the Bank continued to work on the precious metals market. Customers were of-fered: • sales of commemorative and investment coins made of precious metals by Bank of Russia • sales of commemorative coins of foreign countries from precious metals • opening by individuals and maintaining depersonalized metal accounts and deposits in precious metals • sales of ingots of precious metals.

Coins made of precious metals have already managed to establish themselves as an ex-cellent gift. In 2015 the Bank held frequent special promotions. Customers were offered to buy coins to holiday and anniversary dates for a special price.

PAyMENT SySTEMS

In 2015 NS Bank provided its customers modern and high quality services in the transac-tion and payments market. The Bank continued to actively cooperate with international money transfer systems «Zolotaya Korona», «Western Union » and «Unistream». This was due to lower turnover of the Russian market of cash cross-border money transfers of individuals, tightening of immigration legislation and the outflow of migrant workers

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RETAIl BuSINESS

from Russia. The total amount of cross-border transactions in 2015 amounted to about 5.4 billion roubles.

BANk cARDS

The Bank's activities in the bank card market was characterized by the following indicators in 2015. More than 43 000 cards are issued. The volume of transactions made by cardholders amounted to about 5 billion rubles. As of 01.01.2016, the Bank installed 43 ATMs and 120 POS-terminals.

The plan of the Bank is to expand the network of ATMs and service outlets in Moscow, Moscow region and other regions of Russia.

The Bank is an associate member of payment systems VISA Int. and MasterCard WW.

Holders of Gold and Platinum cards automatically become owners of health insurance on the 100 and 150 thousand USD, respectively, having also access to ISOS concierge services.

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cREDIT POlIcy

In 2015 the Bank maintained its approach to loan risk assessment and throughout the year has been working to reduce assets with signs of increased risk.

Issuance of new loan products was carried out with new approach to risk assessment. The Bank developed and implemented tools of early diagnosis of increased credit risk factors that minimized the occurrence of overdue debt on loans in 2015.

In general, the work carried out has improved the quality of the loan portfolio at the expense of the old problematic debts and the issuance of new credit products, in accor-dance with more stringent risk assessment standards. On the end of 2015 overdue loans amounted to 3.7% of the total loan portfolio.

The Bank, as in all previous years, paid close attention to attract new clients. Credit prod-ucts were offered to both legal entities and individuals. Lending carried out on a contrac-tual basis in compliance with the basic principles of lending: maturity, interest payment, repayment, loan security. Special attention was paid to the intended use of loan funds provided. Bank diversified sales channels of credit products by focusing mainly on cor-porate clients. Target audience has been identified, which is the main consumer of credit products offered by the Bank. Bank also formed the base of potential borrowers and principals, which is a good stepping stone for the rapid growth of sales in 2016.

Loans and bank guarantees are provided to organizations that are already Bank’s cus-tomers with accounts in the Bank and to organizations without an account. Loans are granted for the purposes stipulated by the statutes of the borrower, but on condition that the return of the resources provided will performed by means of cash flow generated from current production and financial activities of the borrower.

When lending, throughout entire 2015 the Bank continued to adhere to the principle of close cooperation with customers:

• attracting corporate clients from different sectors of the economy to in order to maximally diversify the loan portfolio • building security of the loan portfolio, attracting the most liquid securities. • identifying the most complete information about the customer and his business • regular monitoring of financial and business activity of the client • development and implementation of customized solutions for clients in a crisis economy • providing convenient and high-quality service

The Bank provides loans for the financing of commercial, industrial and investment proj-

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cREDIT POlIcy

ects. Funds were directed to lending production activities of enterprises, payments of salary, fees, taxes, to finance working capital.

In 2015 the NS Bank continued to actively provide loans to clients in order to participate in public tenders and auctions on «Sberbank-AST», «Unified electronic trading platform (Roseltorg)», «RTS-tender», etc., as well as in open tenders held by state and municipal customers. The Bank issued guarantees for participation in auctions/competitions in order to fulfill obligations under state and municipal contracts, including refunds of ad-vance payments.

As before, one of the key activities of the Bank is lending loans to enterprises. The bank offers loans in rubles and foreign currency to enterprises and organizations operating in various sectors of the economy with own capital and liquid assets. As a security, the Bank took highly liquid assets, both the borrowers and third parties, investment rights for residential and non-residential premises, real estate, vehicles, fixed assets, claims on government contracts, surety from business owners. By working with clients, the Bank approaches individually by rapidly making decisions on administrating and issuing the loan.

The line of credit products for customers includes: one-time loans, loans in the form of a credit line with the establishment of the issuance limit, the debt limit, overdrafts, bank guarantees for participation in electronic auctions, the execution of contractual obliga-tions, the return of the advance payment guarantee of the Federal Customs Service, of IATA, the Federal Tax Service, the legal authorities.

The development of business relations and strengthening ties with enterprises and orga-nizations of various sectors of the economy allowed to maintain a loan portfolio diversi-fied by market segment, timing and type.

In 2015 still a priority for the Bank was to provide bank guarantees to principals execut-ing state and municipal contracts. To simplify the procedure of consideration of applica-tions The Bank has developed and implemented a scoring product «express warranty». The introduction of this product has significantly simplified the procedure for granting low-amount bank guarantees to those who implement state and municipal contracts in the shortest terms. In 2016 the support of SMEs in the framework of this product remains a priority.

NS Bank is included in the list of banks that meet the provisions of the Federal Law from 05.04.2013, # 44-FZ «About contract system in the procurement of goods, works, services

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cREDIT POlIcy

for state and municipal needs» related to the provision of bank guarantees on public contracts.

Bank adapted current loan products to the requirements of this federal law, standard forms of documents were developed and approved. The Bank on a regular basis is moni-toring customers’ contracts secured by guarantees, as well as the target expenditure of funds received from government customers.

In accordance with the approach defined by this law, the Bank has implemented control procedures for the execution of state and municipal contracts, which helped to reduce risks of misuse of budgetary funds and Bank’s risks associated with the failure of con-tracts.

NS Bank is actively cooperating with the Foundation for lending to small business in Moscow, which provides the Bank with own guarantees to secure loans and guarantees issued by the Bank to small businesses in the region.

For retail lending in 2015 the Bank paid special attention to the mortgage products - tar-geted loans to buy housing in the primary and secondary markets on bail of acquired property.

In order to comply with market conditions of lending, the Bank somewhat reduced re-quirements for borrowers in terms of age, as well as increased the maximum term of lending up to 25 years. Along with this, the Bank refused floating interest mortgage rates, which led to direct dependence on the key rate of the Central Bank of the Russian Federation.

September 4, 2015 marked the approval and implementation of «NA Partner 2» loan program - long-term loans to individuals for purchase of residential real estate for bail of acquired property. Terms of lending provided a grace period - the first year rate is signif-icantly reduced, depending on the size of the down payment. Before the end of 2015 14 applications were reviewed, 8 were granted loans to the amount of 16 million roubles.

September 22, 2015 marked the approval and implementation of loan program «NS Ga-rages» - long-term loans to individuals to purchase garages (Parking spaces) on bail for acquired property.

The Bank is accredited by OJSC «AHML» (Agency for Housing Mortgage Lending) as the supplier of mortgages and is a member of the program «Stimulus», developed by AHML. It should be noted that the Bank switched to standard forms of contracts with

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cREDIT POlIcy

AHML mortgage lending, agreed on new construction projects to participate in the lend-ing programs of new buildings.

In 2016 special attention will be given to the further expansion of lending services pro-vided to clients of the Bank.

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FINANcIAl MARkET AcTIVITIES

In 2015 the Bank, as a professional securities market participant and member of the Mos-cow Exchange actively conducted operations on the financial market. The goal of the operations was income generation, improvement of the quality of resource allocation and efficient management of liquidity.

The Bank’s securities portfolio is formed mainly out of instruments with fixed income (bonds) with maturities of up to two years. Last year special attention was paid to safety and liquidity of issuers. That is why the basis for the Bank's portfolio are sovereign and corporate bonds belonging to Russian issuers with credit ratings equal or close to the sovereign, and included in the Lombard list of the Bank of Russia. This policy helps to regulate bank liquidity and allows to quickly borrow on the money market with opera-tions of direct repo transactions. Chronologicaly, average size of investments in bonds in 2015 amounted to about 12.3 billion roubles.

In 2015 the Bank gave preference to bonds that are denominated in foreign currencies (eurobonds), ensuring high profitability despite the extremely volatile financial markets and a significant weakening of the national currency. As a result, the portfolio formed mainly by free liabilities along with the loan portfolio made a substantial contribution to the earnings of the Bank.

In an effort to improve its efficiency in the financial markets, the Bank is actively using all available tools offered by the Moscow Exchange and the National Settlement Deposi-tory, as well as the possibility to operate OTC and derivatives market.

The presence of trade lines with major market makers and broker market platforms en-ables the Bank to effectively manage own portfolio of securities and to provide competi-tive services in the execution of client transactions.

Transactions on the futures market together with derivative financial instruments allow the Bank not only to generate additional revenue, but also to reduce risks related to cur-rent positions, thus achieving the optimum ratio between risk and return.

NS Bank has access not only to domestic but also to leading international trading plat-forms, as well as a client of the world's major news agencies such as Bloomberg and Thomson Reuters, which allows tracking all the relevant market information.

Customers are offered competitive rates for brokerage services on the securities market, as well as the Bank provides brokerage services in the OTC market. For customers’ con-venience, the Bank uses a remote access system QUIK, which allows them to promptly make the purchase/sale transaction on Russian securities market. The Bank's specialists are certified in accordance with the law and have a great experience on the stock mar-kets, which guarantees an individual approach and provides customers the best condi-

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FINANcIAl MARkET AcTIVITIES

tions for the execution of transactions.

The money market in the past year was used by the Bank exclusively for treasury man-agement and to conduct own arbitrage operations between various market segments. The Bank significantly increased the requirements for contractors and transferred the bulk of transactions on the the Moscow Exchange. As a result of these measures, the volume of transactions on the the Moscow Exchange increased more than twice, and the share of deposit operations with the Bank of Russia in comparison with 2014 increased by more than 90% to 95% of total interbank loans portfolio.

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RISk MANAGEMENT

In 2014 NS Bank’s main goal in risk management was to provide financial stabil-ity, good business reputation and steadiness of the Bank’s operation. The “Strat-egy of NS Bank’s development for the period till 2016” accepted by the Bank’s Board in 2014 was of great importance for defining priorities in the sphere of risk management. It includes the strategy of risk management aimed at imple-menting systematic risk-oriented approach to running the Bank’s activities. The Strategy concerns administering all kinds of risks that are crucial for the Bank.

The risk oriented management was especially needed in terms of unstable ex-ternal environment (instable development of the world economy, increasing fi-nancial instability, further development of risk-oriented regulation and control, growing inter-bank competition and complication of banking technologies and products).

In 2015 One of the top-priority tasks of putting the Strategy, aimed at implement-ing risk-oriented approach to the management of the Bank and corresponding increase in the quality of management decisions, into effect was the rational-ization of the structure and organization of work of the management, business divisions and personnel that control risk management and formation of a new motivation and remuneration system including management of the risk of fi-nancial incentives.

The risk management system of the Bank is based on the following principles: proportionality, complexity, integrity, regulation, awareness, duties separation and efficiency. The bank controls the following risks: credit risk, lending risk, risk of business concentration, market risk, exchange rate risk, liquidity risk operational, regulatory and strategic risk.

The main factor of financial stability of the Bank is its conservative policy. In unstable geopolitical conditions during 2015, the Bank gave priority to low-risk activities and conducted activities that could mitigate all risks including creation of reserves and buffers. In order to maintain normal level of risk the Bank’s management reviewed management accounts, risk reports and structure of the credit portfolio and bad debts on a regular basis. In the meantime the

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RISk MANAGEMENT

bank paid special attention to managing market risks. During 2015 the Bank interrupted his operations on stock and commodities markets, which resulted in lower market risk. What is more, taking into consideration foreign exchange rates volatility, the Bank avoided operations with foreign currency and, thus, reduced foreign exchange risk. During 2015 interest risk on the Bank’s bond portfolio remained within required limits and was strictly controlled, while the portfolio demonstrated high and robust returns, which was the outcome of right managerial decisions and good risk management policy. The bank used a va-riety of special instruments that could hedge the risk: diversification, different limits, regulation of duration.

The liquidity risk in 2015 was also one of the most important issues of the Bank’s policy in 2015. The Bank monitored the statutory liquidity ratio day-to-day, participated in the programs of the Bank of Russia on liquidity standby and in 2014 provided a high level of current liquidity exceeding the one specified by the statutory ratio of the Central Bank of the Russian Federation. Bank has improved it’s liquidity risk management by implementing long and short-term planning, valuation of short-term liquidity, GAP – analysis and stress-testing.

An important role in realizing the Strategy of banking risk management in 2016 played procedures of planning, monitoring and capital adequacy control on the basis of the estimation of the existing and anticipated capital requirements.

Another important risk for the Bank in the highly competitive banking sector became strategic one. Strategic risk management was the key instrument of the Bank’s business administering in the long run. The Bank has executed activities that resulted in positive capital dynamics: the capital has increased by 5,7% and constituted 6616 mln RUB by 1 January 2016. This meant meeting strict BASEL-3 requirement in terms of minimum capital requirements. This potentially creates an opportunity for future business development.

On the whole, the risk management system that functioned in the Bank in 2015 was adequate to the scale and complexity of the business, allowed timely iden-tifying, assessing and controlling existing and potential risks, compensating

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RISk MANAGEMENT

losses connected with risk realization, deciding on complex of actions aimed at support of the Bank’s financial stability. At the same time the work on improv-ing risk management is one of the focal areas for the increase of efficient opera-tion of the Bank and will be continued in 2016.

34

“Picture of Hyperinflation in Germany” 1919-1923.

35

During the decade preceding world war I, Germany's economic growth has overtaken all other countries of Europe. Its currency was attached to gold as a result German currency was stable for many years. However, having lost the war, Germany was forced to pay huge reparations to the winners. In 1921, Germany paid about a third of the total indemnity, for the most part in its natural form – by shipments of coal, steel and wood. In order to pay the remaining sum the Government decided to increase the supply of money by printing money at full capacity which lead to inflation.

In the first five months of 1922 prices doubled and began soaring even higher. Debtors were suddenly free from debt, and investors saw their savings vanish. By the fall of 1923 one dollar was equal to one trillion of Deutche-marks. People from better off society were less influenced by such economic disaster, since they had more reliable assets and currencies. later on, German Government headed for stabilization of national currency by collaborating with u.S., and successfully made their plans come to life.

In September 1923 the old currency was replaced by Rent Mark which which was also attached to gold, obtained from uSA. One Rent Mark was equivalent to one billion old Marks. However, the lost savings were not reimbursed. like in France more than a hundred years before, the monetary chaos has created an opportunity for developing of various political movements. That is when Adolf Hitler took his chance.

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INFORMATION TEcHNOlOGIES

In 2015 the NS Bank was actively developing the automated support for a functional part of the business, as well as continued the technological modernization and improvement of its information infrastructure. The information security of the customer service was being improved, including providing required defense level for their personal data. The Management and shareholders of the Bank paid great attention to these questions, system-atic support was given to implementing decisions in the sphere of the automation of the Bank’s day-to- day operation.

In 2014 in the interest of the business a further development of the automated banking sys-tem “CFT-Bank (Platform 1)” (ABC) was undertaken: new subsystems were implemented (“Registration of guarantees”, “Loan and guarantee requests”). The functionality of the Stock subsystem was greatly enhanced: registration of transactions with the Central Bank of the Russian Federation as well as with the basket of securities and others was imple-mented.

New specific applications have been implemented, in terms of transactions, client services and operations with securities. Also, the Bank has completed a significant work devoted to informational security.

However the most important issues for the future year will be development of different client services, making various banking services automatic and increasing the range of rendered services by the Bank.

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HuMAN RESOuRcE POlIcy

NS Bank’s successful operation is due to its well-qualified personnel capable of solving tasks set by the Bank’s Management in any economic situation.

The Bank’s HR policy is aimed at retaining qualified workers and maximum using their po-tential as well as attracting talented specialists, highly qualified employees who could take part in the Bank’s development. Besides high professionalism the Bank also appreciates skills in problem solving and decision making, openness and honesty, potential to develop and being result-oriented. The system of personnel selection through interviews and trial periods helps to create a team of professionals. Training of personnel of all ranks is a stimulus to de-velop for the personnel and contributes to strengthening of the Bank’s competiveness.

The main goal of the staff stimulation system is to increase the level of their motivation to achieve high personal results of labor in accordance with criteria of performance and profes-sionalism determined for each position. The Bank developed an Act, which regulates salary manner and conditions, material stimulation and motivation of personnel. It was created in the accordance with the Labor Code of the Russian Federation and other statutes of the Rus-sian Federation. In order to stimulate productivity and initiative the Bank annually carries out the «The best in the profession» competition. It is aimed at promoting productive labor among the staff, rising and perfecting professional skills, improving the quality of work, stim-ulating professional growth.

Thanks to our specialists we are able to maintain a very high level of serving clients preserv-ing our warm and friendly corporate culture.

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cOMMuNIcATION POlIcy

In 2015 the main goal of the Bank's communication policy was to further form its image as a modern and effective financial institution, to create a positive information coverage of the Bank's activities for an organic development and growth of its business. The Bank worked on promoting its brand by the use of main communicative means of the Internet: it tapped onto Russian and foreign social networks, worked with social instruments of major blogging services as well as with Internet mass media. Image positioning by means of these instru-ments allowed reaching the interested audience, strengthening the brand and accentuating it against its main competitors.

The Bank actively expanded cooperation with traditional mass media to spread true and maximally complete information about its activities. The volume of information presented in mass media increased notably, raising of customers’ awareness about conditions of products and services on offer and the Bank’s technological capabilities improved. In 2015 the Bank rolled out massive advertising campaigns to launch new products and ser-vices on the market. The combined use of traditional mass media together with interactive communicational resources promoted the growth of trust towards NS Bank and the develop-ment of its business.

In 2014 the work on forming the Bank’s image as a high-tech structure and yet a bank to work easily with will continue (personal attitude to customers, flexibility of services). Com-munication programs and projects on effective promotion of new products and services are constantly created and carried out.

39

The Great Depression in uSA 1929–1933 years.

40

In 1929 the world faced a serious economic crisis. In the uSA the consequences of this crisis were the most severe and lasted until the end of 1933. cana-da, France, Germany and Great Britain also received collateral damage from this crisis. Everything began on the 24th of October 1929, when all stock markets crashed.

In the beginning of the 20th century military produc-tion was one of the most important and dynamic sectors of world economy. As a result, after world war 1, in-dustry nearly stopped as well as construction, which lead to recession and deflation.

In 1930, people began to withdraw their saving from banks which resulted in numerous bankruptcies. The GDP of uSE has decreased by nearly 32% by the end of 1932. This was the bottom of economic cycle, when 23,6 people were unemployed and even demographic problems showed up. Nothing seemed to save economy.

The President of the uSA Roosevelt conceived a plan according to which the Government should participate in every aspect of its citizens. The new economy of Roosevelt – were measures that were supposed to im-prove economy, increase people financial position, and regulate relationships between entrepreneurs and in-dustrials. But first of all it was necessary to recover the banking system.

In 1933 the quantity of bank has decreased by 15% and many of them stopped their operations. This permit-ted to distribute capital among fewer banks, rendering them more stable. Another important issue was to ex-ecute social works in infrastructure and construction which later on positively contributed to the recovery of the economy.

41

Interesting fact is that many wealthy people were not only able to stay wealthy but managed to multiply their wealth. This fact aroused interest of the u.S. congress, who invit-ed these people to publicly explain such state of affairs. Probably, the most interesting answer was one answered by J.P. Morgan Jr. when he was asked how he managed to pre-serve his wealth when the stock market crashed, he told a story about his normal day. On his way to work he used to clean his shoes. One day the man who cleaned his shoes asked him about some insight on the stock market since he wanted to invest in shares of a railroad company. After that J.P. Morgan Jr. hurried to his office and gave an order to sell all the shares he had. He explained than, that if shoe cleaners were investing on the stock market that was a bad sign for the industry and something bad could happen and professional investors should quit the market.

The outcomes of the Great Recession were drastic. The industrial production slowed down. Many people were still unemployed in many developed industrial coun-tries. Only by the end of 1939 the world could final-ly recover from this crisis, while another even more horrifying era began – world war 2.

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INDEPENDENT AuDITOR’S REPORT BDOuNIcON GROuP

TO THE SHAREHOlDERS AND THE BOARD OF cOMMER-cIAl BANk «NS BANk» (cJSc)

Audited Entity Commercial Bank “NS Bank” (CJSC) (abbreviation - “NS Bank” (CJSC)). State registration number: PSRN 1027739198200issued on 17.09.2002; registered by the Bank of Russia on 08.08.2001, № 3124.

Location: 20, Dobrovolcheskaya St., 20, construction 2, Moscow, 109004

REPORT ON THE FINANcIAl STATEMENTS

We have audited the accompanying financial statements of NS Bank, which comprise the statement of financial position as at 31 December 2015, and the statement of comprehensive income, statement of cash flows and statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory information.

MANAGEMENT’S RESPONSIBIlITy FOR THE FINANcIAlSTATEMENTS

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

AuDITOR’S RESPONSIBIlITy

Our responsibility is to express an opinion about the reli-ability of the annual report on the basis of the carried audit. We have carried out the audit in accordance with the fed-eral law “On auditing”, federal and corporate standards of auditing. These standards require observance of applicable ethical norms as well as planning and carrying out the au-

Auditor CJSC “BDO”Registered by Inspectorate of the Ministry for Taxes and Duties №26 SAD primary registration number 1037739271701Contacts117587, Moscow, Varshavskoye av., 125 - 1, section 11General registration number 10201018307 in the register of auditors and auditing organizations of the self-regulated organization of auditors non-profit partnership “Audit Chamber of Russia”.Power of attorney by auditorD.A. TaradovPartner of the CJSC “BDO”N 15-01/2015-BDO 01.01.2015

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43

INDEPENDENT AuDITOR’S REPORT BDO uNIcON GROuP

dit in the way enough to receive sufficient confidence that the annual report contains no essential distortions.The audit included carrying out the auditing procedures, aimed at the reception of auditor proofs, which could confirm numerical indicators in the annual report and disclosure of the information in it. The choice of auditing procedures is a subject of our judgment, which is based on the evaluation of the risk of the significant misstatements admitted due to im-proper actions or errors.

In the course of the evaluation of the given risk we considered the system of internal con-trol, which provides guidelines for reliable composition of the annual report in order to choose proper auditing procedures.

The audit also included the evaluation of appropriate character of the registration policy in use and validity of the evaluation indicators, received by the management of the au-dited entity as well as the evaluation of the process of financial reporting on the whole. We believe that the auditing we have carried out presents reasonable grounds to express our opinion on the reliability of the annual report.

OPINION

We believe that the annual report gives a fair representation in all significant factors of the financial condition of Commercial Bank “NS Bank” (CJSC) as of 31 December, 2015, results of its financial activities and cash flow in 2015, the capital adequacy level, provisions capac-ity to cover doubtful loans and other assets as of 31 December 1, 2015, information on statu-tory requirements assets as of 31 December 2015 in compliance with the established rules of the Russian Federation for accounting reporting and preparation of the annual report.

REPORT IN AccORDANcE wITH THE REQuIREMENTS OF THE FEDERAl lAw № 395-1 “ON BANkS AND BANkING OPERATIONS” FROM DEcEMBER, 2 1990

• meets the Central Bank’s obligatory requirements; Internal controls and Company’s risk The management of the company is responsible for meeting obligatory standards created by Central Bank of Russian Federation as well as for compliance of Internal con-trols and Risk management of the company with existing requirements. In accordance with the 42 Article of federal Law dated 2 December 1990 №395-1 “On bank and banking operations” ss the result of the auditing procedures we confirm:• As of January 1 2016 the company -management meet central Bank’s requirements. The range of conducted procedures according to our judgment included requests, analy-sis, document investigation, comparison of the Bank’s methodology with the require-ments of the Central Bank of Russian Federation and recalculation and benchmarking of

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44

financial indicators.

As a result of conducted procedures, we confirm:1) In terms of Bank’s capability to meet Central Bank’s obligatory requirements:As of January 1 2016 all the obligatory indicators are within the established boundaries ac-cording to the requirements.

We haven’t conducted any other specific procedures with the financial data of the Bank ex-cept for those we consider necessary to form an opinion on whether the financial statements fairly represent the actual financial position as of January 1 2016 and financial performance for the year 2015 according to rules and principles of Russian financial reporting of credit organizations.

2) In terms of correspondence of the Bank’s Internal controls and Risk management to the Central Bank’s requirements:

a) According to the Central Bank’s requirements and recommendations as of 31 Decem-ber 2015 the Internal control service should be subordinate to the board of directors of a credit organization and risk management department should not be relied or subordi-nate to the departments who bear the correspondent risks and both should meet Central Bank’s minimum qualification requirements;

b) Current internal principles that establish methodology of detecting and preventing significant credit, operational, market, liquidity reputation and stress-testing risks in ac-cordance with the Central Bank’s requirements.

c) Existence of reporting system as of 31 December 2015 of significant credit, opera-tional, market, liquidity reputation risks and meeting minimum capital requirements

d) Periodic and consequent system of reports that are prepared by Internal control and Risk management departments of a credit organization and address significant credit, operational, market, liquidity reputation risks and meeting minimum capital require-ments. The reports in question, should include departments’ vision on ways of improv-ing the existing methodology.

e) As of 31 December 2015 the Board of Directors of a credit organization and its ex-ecutive bodies are responsible for risk value that should remain within the established boundaries and Bank’s meeting minimum capital requirements.

f) As at 31 December 2015 the Board of Directors of the Bank and all the executive bodies are responsible for the assessment and control the normal levels of risks and capital re-quirements. During 2015, in order to improve control efficiency the Board and Executive

INDEPENDENT AuDITOR’S REPORT BDO uNIcON GROuP

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45

bodies periodically discussed the reports prepared by Risk management and Internal audit departments and worked out possible ways to eliminate control deficiencies.g) The Board of Directors of a credit organization establish the human resource policy and resource planning policy and correspondence of this policy to the general strategy of the credit organization taking into consideration its financial position, performance and inherent risks.

Procedures that address Internal controls and risk management systems of a credit organiza-tion were conducted in order to confirm compliance of Internal controls and risk manage-ment activities of the credit organization with Central Bank’s requirements.

V.Y. PogulyaevCEO of JSC «BDO Unikon»

June, 8, 2016

INDEPENDENT AuDITOR’S REPORT BDO uNIcON GROuP

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46

FINANcIAl STATEMENT IN cOMPlIANcE wITH IFRSStatement of financial position as of 31 December 2015 (in thousands of Russian Roubles)

Notes 2015 2014 ASSEtS Cash and cash equivalents 5 4 289 866 8 124 329Mandatory cash balances with CBR 177 825 243 998Due from other banks 6 658 766 3 009 478Loans to customers 7 10 950 667 15 541 227Financial assets available for sale 8 8 169 234 6 443 380Investment held to maturity 9 4 979 571 2 272 004Non-current assets held for sale 10 - 54 624Premises and equipment 11 1 361 585 1 426 415Other assets 12 4 954 544 4 370 091Current tax assets 1 667 73 029Total assets 35 543 725 41 558 575LiABiLitiES Due to other banks 13 2 267 611 3 189 962Customer accounts 14 25 774 855 30 831 758Debt securities issued 15 82 110 216 793Other borrowed funds 16 2 275 000 2 375 000Other liabilities 17 393 938 789 936Deferred tax liabilities 24 185 058 69 933Total liabilities 30 978 572 37 473 382EquitY Share capital 18 1 953 158 1 953 158Share premium 18 26 26Revaluation reserve for premises and equipment 11 395 431 354 177Fair value reserve for financial assetsavailable for sale 56 402 (400 641)Retained earnings 2 160 136 2 178 473Total equity 4 565 153 4 085 193Total liabilities and equity 35 543 725 41 558 575

Acting Chairman of the Board,First Deputy Chairman of the Executive Board

Chief Accountant

8 June 2016

N.E. Kurtasova

S.A. Alexeeva.

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47

FINANcIAl STATEMENT IN cOMPlIANcE wITH IFRSStatement of income and other comprehensive income as of 31 December 2015 (in thousands of Russian Roubles)

Notes 2015 2014 Interest income 20 3 338 113 2 995 853Interest expense 20 (2 601 565) (2 112 073)Net interest income 736 548 883 780Provision for impairment of due from other banks and loans to customers 6, 7 (159 825) (460 359)Net interest (expense)/income after provision 576 723 423 421for impairment of due from other banks and loans to customers Gains less losses arising (31 662) (51 602) financial assets at fair value through profit or loss Gains less losses arising from financial , 33 631 (143 747)assets available for sale Gains less losses from dealing in foreign (212 905) (212 800)currency and precious metals Gains less losses from revaluation of 644 192 674 832currency and precious metalsFee and commission income 21 359 140 951 372Fee and commission expense 21 (37 768) (98 672)Provision for impairment of other assets and credit related commitments 9 (53 465) -Provision for losses on other assets and credit 12, 29 (238 118) 196 238related commitments Dividends received - 2 735Income from participation interests in other entities - 4 136Proceeds from sale of real estate and property 23 63 573 346 487 rights under investment contractsOther operating income 207 907 42 654Operating income 1 311 248 2 135 054Operating expense 22 (1 242 562) (1 178 135)Profit before taxation 68 686 956 919Income tax expense 24 (13 376) (185 523)Net profit 55 310 771 396OthER COmPREhENSivE iCOmE Items that will not be reclassified subsequently to profit or loss Effect of revaluation of premises and equipment 11, 26 51 568 160 320Income tax relating to items that will not be 24 (10 314) (32 064)reclassified subsequently Items that will be reclassified subsequently to profit or loss Effect of revaluation of financial assets available for sale 26 571 304 (503 788)

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Acting Chairman of the Board,First Deputy Chairman of the Executive Board

Chief Accountant 8 June 2016

N.E. Kurtasova

S.A. Alexeeva.

FINANcIAl STATEMENT IN cOMPlIANcE wITH IFRSStatement of income and other comprehensive income as of 31 December 2015 (in thousands of Russian Roubles)

Notes 2015 2014 Income tax relating to items that 24 (114 261) 100 757will be reclassified subsequentlyOther comprehensive income after taxation Other comprehensive income for the year 498 297 (274 775)Итого совокупный доход за период 553 607 496 621

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AuDITOR’S REPORTON FINANcIAl STATEMENTS

to the Shareholders and the Board of Commer-cial Bank “NS Bank” (CJSC)

Audited Entity title: Commercial Bank “NS Bank” (CJSC) (abbreviation - “NS Bank” (CJSC)).

State registration number: PSRN 1027739198200 issued on 17.09.2002; registered by the Bank of Russia on 08.08.2001, № 3124.

Location: 20, Dobrovolcheskaya St., 20, construc-tion 2, Moscow, 109004

We have conducted an audit of the attached financial state-ments of CB “NSBank” (CJSC), in accordance with the rules of preparing financial statements of Russian Federation con-sist of:

• Balance sheet (form 0409806) as of January, 1 2016;• Profit and loss statement (form 0409807) for 2015;• Notes on accounting balance sheet and financial state-ments;• Statement on the capital adequacy level, provisions ca-pacity to cover doubtful loans and other assets (form 0409808) as of January 1, 2016;• Information on statutory requirements (form 0409813) as of January 1, 2016;• Cash flow statement (form 0409814) for 2015;• Explanatory note for the financial report for 2015.

AuDITED ENTITy RESPONSIBIlITy FOR THE FINAN-cIAl STATEMENTS

The management of the audited entity bears responsibility for preparation and reliability of the annual report in ac-cordance with the Russian rules of the accounting reporting preparation as well as for the system of the internal control necessary for the composition of the annual report, which does not contain significant misstatements due to improper actions or errors.

LLC “Norma-Profaudit”

119333, Moscow, Fotiefoy St., 18, c. 2 PSRN: 1027739262924 issued on 26.09.2002

Member of the Professional Audit Association of the non-commercial partnership «Audit Chamber of Russia”, which is included in the State Register of self-regulated audit organizations by the order of the inistry of Finance № 455 issued on 01.10,2009 under number 1. Number of the audit organization in the register of the non-commercial partnership “Audit Chamber of Russia” (PNRE) 10301001996

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50

AuDITOR’S RESPONSIBIlITy

Our responsibility is to express an opinion about the reliability of the annual report on the ba-sis of the carried audit. We have carried out the audit in accordance with the federal law “On auditing”, federal and corporate standards of auditing. These standards require observance of applicable ethical norms as well as planning and carrying out the audit in the way enough to receive sufficient confidence that the annual report contains no essential distortions.

The audit included carrying out the auditing procedures, aimed at the reception of auditor proofs, which could confirm numerical indicators in the annual report and disclosure of the information in it. The choice of auditing procedures is a subject of our judgment, which is based on the evaluation of the risk of the significant misstatements admitted due to improper actions or errors.

In the course of the evaluation of the given risk we considered the system of internal control, which provides guidelines for reliable composition of the annual report in order to choose proper auditing procedures.

The audit also included the evaluation of appropriate character of the registration policy in use and validity of the evaluation indicators, received by the management of the audited entity as well as the evaluation of the process of financial reporting on the whole. We believe that the auditing we have carried out presents reasonable grounds to express our opinion on the reliability of the annual report.

OPINION

We believe that the annual report gives a fair representation in all significant factors of the financial condition of Commercial Bank “NS Bank” (CJSC) as of January, 1, 2016, results of its financial activities and cash flow in 2015, the capital adequacy level, provisions capacity to cover doubtful loans and other assets as of January, 1, 2016, information on statutory require-ments assets as of January, 1, 2016 in compliance with the established rules of the Russian Federation for accounting reporting and preparation of the annual report.

REPORT IN AccORDANcE wITH THE REQuIREMENTS OF THE FEDERAl lAw № 395-1 “ON BANkS AND BANkING OPERATIONS” FROM DEcEMBER, 2 1990.

The management of the company is responsible for meeting obligatory standards created by Central Bank of Russian Federation as well as for compliance of Internal controls and Risk management of the company with existing requirements.

In accordance with the 42 Article of federal Law dated 2 December 1990 №395-1 “On bank

AuDITOR’S REPORTON FINANcIAl STATEMENTS

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51

and banking operations” ss the result of the auditing procedures we confirm: • As of January 1 2016 the company meets the Central Bank’s obligatory requirements; • Internal controls and Company’s risk-management meet central Bank’s requirements.

The range of conducted procedures according to our judgment included requests, analysis, document investigation, comparison of the Bank’s methodology with the requirements of the Central Bank of Russian Federation and recalculation and benchmarking of financial indica-tors.

As a result of conducted procedures, we confirm:

1) IN TERMS OF BANk’S cAPABIlITy TO MEET cENTRAl BANk’S OBlIGATORy REQuIREMENTS:

As of January 1 2016 all the obligatory indicators are within the established boundaries ac-cording to the requirements.

We haven’t conducted any other specific procedures with the financial data of the Bank ex-cept for those we consider necessary to form an opinion on whether the financial statements fairly represent the actual financial position as of January 1 2016 and financial performance for the year 2015 according to rules and principles of Russian financial reporting of credit organisations.

2) IN TERMS OF cORRESPONDENcE OF THE BANk’S INTERNAl cONTROlS AND RISk MANAGEMENT TO THE cENTRAl BANk’S REQuIREMENTS:

a) According to the Central Bank’s requirements and recommendations as of 31December 2015 the Internal control service should be subordinate to the board of directors of a credit organization and risk management department should not be relied or subordinate to the de-partments who bear the correspondent risks and both should meet Central Bank’s minimum qualification requirements;

b) Current internal principles that establish methodology of detecting and preventing sig-nificant credit, operational, market, liquidity reputation and stress-testing risks in accordance with the Central Bank’s requirements.

c) Existence of reporting system as of 31 December 2015 of significant credit, operational, market, liquidity reputation risks and meeting minimum capital requirements.

AuDITOR’S REPORTON FINANcIAl STATEMENTS

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d) Periodic and consequent system of reports that are prepared by Internal control and Risk management departments of a credit organization and address significant credit, operational, market, liquidity reputation risks and meeting minimum capital requirements. The reports in question, should include departments’ vision on ways of improving the existing methodology.

e) As of 31 December 2015 the Board of Directors of a credit organization and its executive bodies are responsible for risk value that should remain within the established boundaries and Bank’s meeting minimum capital requirements.

f) As at 31 December 2015 the Board of Directors of the Bank and all the executive bodies are responsible for the assessment and control the normal levels of risks and capital requirements. During 2015, in order to improve control efficiency the Board and Executive bodies periodically discussed the reports prepared by Risk management and Internal audit departments and worked out possible ways to eliminate control deficiencies.

g) The Board of Directors of a credit organization establish the human resource policy and resource planning policy and correspondence of this policy to the general strategy of the credit organization taking into consideration its financial position, performance and inherent risks.

Procedures that address Internal controls and risk management systems of a credit organization were conducted in order to confirm compliance of Internal controls and risk management activities of the credit organization with Central Bank’s requirements.

OTHER INFORMATION

We point out that the given auditor’s report refers to the whole body of the annual report and should be considered together with the whole body of the annual report including the Explanatory note which provides the complete disclosure of the relevant information about the credit institution not represented in the complex of the annual report.

AuDITOR’S REPORTON FINANcIAl STATEMENTS

General Director of LLC “NORmA-PROfAuDit”

Lyakhovskiy victor Semenovich

Member of the self-regulated organization, non-profit partnership “Audit Chamber of Russia” Number in the register of SRO NP ACR 5108; Principal registration number of the Auditors Register record 29501037022;Auditor’s qualification certificate № 01-000322 for the right of bank audit for unlimited period May, 11, 2016

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№ Name of the article Data for the period Data for the under report corresponding period of the previous year

i. ASSEtS 1 Cash 827,329 1,505,1472 Balances with CBRF 2,268,468 4,653,764 (Central Bank of the Russian Federation) 2.1 Statutory provisions 177,825 243,9983 Due from other banks 290,527 401,9474 Net investment in the traded securities evaluated 0 0 at fair value through profit or loss5 Net lending receivables 12,607,783 20,567,9716 Net investment in the securities and other 13,178,703 9,132,044 available-for-sale financial assets6.1 Investments in subsidiaries and affiliates 4,944,856 07 Net investments in the securities deferred for redemption 4,978,443 2,238,7678 Requirements for current tax 1,538 72,4949 Deferred tax asset 7,966 44,31610 Main assets, intangible assets and material assets 1,201,733 1,260,58111 Other assets 360,047 970,11112 Total assets 35,722,537 40,847,142ii. LiABiLitiES 13 Loans, deposits and other assets of the Central Bank 0 3,013,000 of the Russian Federation14 Due to other credit institutions 2,266,612 173,48815 Customers’ accounts excluding credit institutions accounts 28,282,336 33,044,14615.1 Retail deposits 17,509,507 17,514,73716 Financial liabilities evaluated at fair 7,887 0 value through profit or loss17 Debt securities issued 101,501 301,68818 Liability for current income taxes 0 019 Deferred tax asset 64,395 120,98120 Other liabilities 475,491 253,60721 Provision on possible losses on contingent 64,151 305,550 credit liabilities, other possible losses and operations with residents of offshore zones 22 Total liabilities 31,262,373 37,212,460iii. SOuRCES Of OwN CAPitAL 23 Funds of shareholders (participants) 1,760,000 1,760,00024 Own shares bought back from shareholders (participants) 0 025 Share premium 17 1726 Provision fund 111,800 95,70027 Revaluation at fair value 103,302 -357,713 available-for-sale securities № Наименование статьи № Name of

BALANCE SHEETAS OF JANuARy, 01 2016 (THOuSANDS OF ROuBlES)

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BALANCE SHEETAS OF JANuARy, 01 2016 (THOuSANDS OF ROuBlES)

№ Name the article Data for the period Data for the under report corresponding period of the previous year28 Revaluation of fixed assets 87,067 118,94829 Retained earnings (uncovered losses) of previous years 1,945,830 1,695,76430 Profit (loss) outstanding for the reported period 452,148 321,96631 Total sources of own funds 4,460,164 3,634,682iv. Off-BALANCE-ShEEt LiABiLitiES32 Irrevocable liabilities of the credit institution 6,661,531 3,882,44533 Guarantees issued by the credit institution 7,300,263 11,245,07434 Non-credit contingent liabilities 0 0

Acting Chairman of the Board,first Deputy Chairman of the Executive Board N.E. Kurtasova

Chief Accountant S.A. Alexeeva

Н

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№ Name the article Data for the period Data for the under report corresponding period of the previous year1 2 3 4 1 Total interest income, 3,330,238 3,087,385 including: 1.1 Due from other banks 39,083 10,444 1.2 Loans granted to customers other 2,317,859 2,485,875 than credit institutions 1.3 Leasing 0 0 1.4 Investment in securities 973,296 591,0662 Total interest expenses 2,602,165 2,112,075 2.1 Due to other banks 242,262 335,810 2.2 Borrowing from customers other 2,347,606 1,757,085 than credit institutions 2.3 Debt securities issued 12,297 19,180 3 Net interest income 728,073 975,310 (negative interest margin) 4 Provision change on possible loss on loans, -546,752 -269,449 debt under loans and debt equivalent to it, funds on correspondence accounts, accrued interest income 4.1 Provision change on possible loss -49,457 -6,774 on accrued interest income 5 Net interest income after provision on possible loss 181,321 705,861 (negative interest margin) 6 Net income on financial assets 5,217 -87,443 assets evaluated at fair value through profit or loss 7 Net income on available-for-sale 368,408 -141,735 securities deals 8 Net income on hold to maturity -3,714 0 securities deals 9 Net income on foreign currency operations -212,905 -212,801 10 Net income on foreign currency revaluation 634,000 667,765 11 Income on holdings in other companies 0 6,872 12 Commission income 388,435 857,112 13 Commission expenses 37,767 98,672 14 Provision changes on possible loss -111,537 -36,525 on available-for-sale securities 15 Provision changes on possible loss 63,317 -64,970 on hold to maturity securities 16 Provision changes on other loss 201,750 -117,587 17 Other operating income 189,268 342,066 18 Net income (expenses) 1,665,793 1,819,943 19 Operating expenses 1,292,542 1,325,108 20 Profit (loss) before tax 373,251 494,835

PROFIT AND lOSSES STATEMENTFOR 2015 (IN THOuSANDS OF RuSSIAN ROuBlES)

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№ Name the article Data for the period Data for the under report corresponding period of the previous year1 2 3 4 21 Accrued (paid) tax -78,897 172,869 22 Profit (loss) after tax 452,148 321,966 23 Payments out of net profit, total, 0 0 including: 23.1 Distribution of dividends 0 0 among shareholders 23.2 Allowances for provisions 0 0 24 Retained profit (loss) for the period under report 452,148 321,966

PROFIT AND lOSSES STATEMENTFOR 2015 (IN THOuSANDS OF RuSSIAN ROuBlES)

Acting Chairman of the Board,first Deputy Chairman of the Executive Board N.E. KurtasovaChief Accountant S.A. Alexeeva

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ADDRESSES OF OFFIcES AND BRANcHES OF THE BANKAS OF 01.06.2016

HEAD OFFIcE OF THE BANk20, Dobrovolcheskaya St., Bld. 2MoscowTel. 8 (800) 555 43 24

«yuGO-ZAPADNy»50 Novocheremushkinskaya St.,MoscowTel. 8 (800) 555 43 24

«TVERSkOy BOulEVARD»20 Tverskoy boulevard, 1,MoscowTel. 8 (800) 555 43 24

«NA kROPOTkINSkOy»20 Tverskoy boulevard, 1,MoscowTel. 8 (800) 555 43 24

«NA kuRSkOy»36 Zemlianoy Val,MoscowTel. 8 (800) 555 43 24

«TSVETNOy BOulEVARD»5/14 Samotechnaya St.,MoscowTel. 8 (800) 555 43 24

«lENINGRASky PROSEcT»31 Leningradsky avenue, Bld. 3,MoscowTel. 8 (800) 555 43 24

«kON’kOVO»7 Ostrovitianova St.,MoscowTel. 8 (800) 555 43 24

«yuZHNOyE cHERTANOVO»152 Varshavskoye highway, Bld. 11,MoscowTel. 8 (800) 555 43 24

«NA SEMENOVSkOy»5 Tkatskaya St., Bld. 3,MoscowTel. 8 (800) 555 43 24

«NA AZOVSkOy»25 Azovskaya St., Bld. 1,MoscowTel. 8 (800) 555 43 24

«PAVSHINO»1 Podmoskovny boulevard,Krasnogorsk, Moscow regionTel. 8 (800) 555 43 24

«DMITROV»4 Professionalnaya St., Dmitrov,Moscow regionTel. 8 (800) 555 43 24

«kOTEl’NIkI»1 3-d Pokrovsky lane,Kotel’niki, Moscow regionTel. 8 (800) 555 43 24

ST. PETERSBuRG’S BRANcH3 Bankovsky lane, Bld. B,St. PetersburgTel. +7 (812) 406-98-08

SuPPlEMENTARy OFFIcE «OBukHOVSky»Bld. B, Obukhovskoy Oborony avenue,St. PetersburgTel. +7 (812) 326-62-82

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ADDRESSES OF OFFIcES AND BRANcHES OF THE BANKAS OF 01.06.2016

NIZHNy NOVGOROD’S BRANcH 52 Maxima Gorgogo St.,Nizhny NovgorodTel. +7 (831) 212-00-21

VElIky NOVGOROD’S BRANcH 4 Voskresensky boulevard,Veliky NovgorodTel. +7 (816) 278-60-01

IVANOVO’S BRANcH33 Bagaeva St.,IvanovoTel. +7 (4932) 47-15-15

SuPPlEMENTARy OFFIcE «NA SARMENTOVOy»9 Sarmentovoy St.,IvanovoTel. +7 (4932) 93-93-28

OPERATIONAl OFFIcE «TulSkIJ» Pervomajskaja st./Fridricha engelsa, 9/133, TulaTel. 8 (800) 555-43-24

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REFERENcE INFORMATION

Full NAME:Open JOint-StOck cOmpany «nS Bank»

SHORT NAME:NS Bank

REGISTRATION DATE:October 11,1994

GENERAl lIcENSE OF THE BANk OF RuSSIA:№3124

BANk DETAIlS:TIN 7444001024Сor.acc. 30101810945250000158 in the Main office of the Bank of Russia Central Federal district (briefly: GU of Bank of Russia for the Central Federal district)BIC 044525158OKPO 29308428OKONh 96120PSRN 1027739198200ADDRESS:20, Dobrovolcheskaya st., building 2, Moscow, 109004

MulTI-cHANNEl TElEPHONE:8(800) 555 43 24

wEB-SITE:www.NSBank.ru