annual report · 2018-08-11 · holding company andrei e. bougrov—board member, deputy chairman...

ANNUAL REPORT

TO OUR SHAREHOLDERS, CLIENTS AND PARTNERSLast year the Russian banking community made its strong contribution to the preparation of prin-

cipal legislative acts providing for efficient reforming of the domestic financial system. Although it is

now hardly possible to find quick and efficient solutions to all existing problems, Russian financial

institutions continued their progress, both in terms of size and financial strength. The ROSBANK’s

development was completely in line with this positive trend.

One of the leaders of the local banking community, ROSBANK delivered a sound performance

during 2002. Its total assets calculated under International Accounting Standards showed a 6%

increase to 56.8 billion Roubles, with the shareholders’ equity reaching 7.9 billion Roubles.

Throughout the year, the Bank was primarily focused on further expansion of its customer base

and development of mutually rewarding relationships with the clients. We did not emphasise exclu-

sively cooperation with large corporates, promoting our links with promising medium-sized busi-

nesses operating in the most dynamic industries. Our efforts resulted in a nearly 20% increase in the

number of clients. In addition to corporate banking, we continued to expand our private banking

business. Due to the superior quality of products and services, the number of our high net-worth cus-

tomers grew by more than 33%.

ROSBANK paid special attention to enhancing the volume and improving the quality of its loan

portfolio mostly composed of credits to Russia’s major corporates. The consolidated loan book of the

Bank totalled 35.8 billion Roubles at end-2002, thus representing a 16% annual increase.

Last year, ROSBANK maintained leading positions in the domestic investment banking area. We

were successful in arranging and underwriting bond issues, rendering financial advisory and asset

management services. The Bank has a strong market presence as an arranger of debt financing for

domestic corporations and regional governments. The amount of local debt placements with the

ROSBANK’s participation reached 31.3 billion Roubles.

In the year under review, ROSBANK showed strong results in custody business, foreign exchange

and securities trading. Plastic card business was further promoted as the Bank became one of the first

Russian financial institutions offering the entire chip card service cycle from issuance to acquiring.

The most important corporate event that occurred last year was the successful business consoli-

dation of ROSBANK and Bank MFK. The integration of the two professional banking teams enables

ROSBANK to further diversify the array of high quality products and tailor-made solutions: from tra-

ditional commercial banking to sophisticated investment banking deals.

It should be noted that successful results of the year are attributable primarily to the high profes-

sionalism and efforts of the Bank’s personnel, their creative approach and increased capabilities, as

well as the established corporate culture.

Early this year the shareholders approved a new development strategy for the Bank which estab-

lishes objectives for a 5-year term. Our target is to take a strong position among the top five largest

private banks in Russia and to become a reputable local counterparty for the international banking

community.

Today, ROSBANK is an innovative and technologically advanced bank capable of achieving the

most ambitious goals. With the new growth strategy and a strong commitment from our sharehold-

ers, we begin the year 2003 with a renewed confidence in our long-term perspectives.

We would like to express our sincere gratitude to all our shareholders, customers and partners for

support and beneficial cooperation.

Alexander V. Popov

Chairman

of the Managing Board

In accordance with its Charter, ROSBANK has a four-tier manage-ment structure:

— The General Shareholders’ Meeting

— The Board of Directors

— Chairman of the Board of Management(chief executive officer)

— The Managing Board

THE BOARD OF DIRECTORS

Evgueni I. Ivanov—Chairman of the Board of Directors

Alexander V. Popov—Board Member, Chairman of the Board of Management (CEO) of ROSBANK

Serguey V. Alexashenko—Board Member, Deputy Chairman of the Board of JSC INTERROS

Holding Company

Andrei E. Bougrov—Board Member, Deputy Chairman of the Board of JSC INTERROS Holding

Company

Igor A. Komarov—Board Member, Deputy Chairman of the Management Board of JSC MMC

Norilsk Nickel

Vladimir L. Bogdanov—Board Member, General Director of JSC Surgutneftegas

Vladislav G. Barankov—Board Member, First Deputy General Director of JSC Surgutneftegas

Victor F. Rashnikov—Board Member (Independent Director), General Director of Magnitogorsk

Iron and Steel Works

Vyacheslav P. Fedorov—Board Member (Independent Director), Member of the Board of Directors

of JSC Novolipetsk Iron and Steel Corporation

THE BOARD OF MANAGEMENTAlexander V. Popov—Chairman (CEO)

Vladimir Yu. Golubkov—First Deputy Chairman

Elena A. Krasavtseva—First Deputy Chairman

Mikhail Yu. Alekseev—Deputy Chairman

German R. Aliev—Deputy Chairman

Igor S. Antonov—Deputy Chairman

Larisa R. Dolotova—Deputy Chairman

Svetlana P. Gorbacheva—Deputy Chairman

Mikhail S. Kiselev—Deputy Chairman

Sergey A. Koshelenko—Deputy Chairman

Oksana V. Lifar—Deputy Chairman

ROSBANK’S MANAGING BODIES

CONTENTS p.

I. 2002 Business Review 5

II. Customer Base 13

III. Corporate Banking 17

IV. Financial Markets 22

V. Investment Banking 25

VI. Asset Management 29

VII. Cooperation with Financial Institutions 30

VIII. Card Services 32

IX. Custody Services 35

X. Social Involvement 38

XI. Financial Report 41

XII. Office Directory 38

The time of great reforms in Russia in the 1860s

and 1870s was the starting point of forming a

capitalist-style banking system in the country.

By 1917, Russian banks, previously modest

payment intermediaries, had grown into the

major drivers behind the development of mar-

ket relationships and the powerful centres of the

nation’s economy.

2002 BUSINESS REVIEW I

5

2002 BUSINESS REVIEWROSBANK is a universal credit institution providing a broad range of

commercial and investment banking services to corporate customers and pri-

vate individuals. It has consistently maintained its presence as one of the top

10 largest banks in Russia and, according to The Banker, now ranks 18th

among Central and eastern Europe’s banking companies. The Bank employs

over 2,180 staff and has a branch network of 81 operating units in Russia,

incorporating 14 full branches, 9 agency offices, 2 exchange offices and

56 ATMs. Additionally, the Bank’s international network coverage includes

Geneva and Beijing.

Corporate Developments

The year under review was marked by a number of important corporate

events that should definitely produce positive returns over time. First of all, the

integration of operations and business activities of Bank MFK, which was pri-

marily involved in investment banking, into ROSBANK was successfully com-

pleted, resulting in further enhancement of the range of financial services

offered to its clients and reinforcement of its team with highly professional staff.

On the shareholders’ level, Interros Group consolidated 75% of

ROSBANK’s stock, with 72% held by a principal holding company – JSC “Interros

I 2002 BUSINESS REVIEW

6

Estate”, thus increasing the transparency of the Bank’s ownership structure.

Another large share representing 20% of total stock was acquired by

“Surgutneftetgas”, a major national producer of oil and gas. In order to improve

corporate governance, the Board of Directors was strengthened by independent

members, which is essential for pursuing a balanced growth policy and enabling

unbiased assessment of the performance.

At the end of last year, the Bank management completed the elaboration

of a coherent national expansion and development strategy for the period of

2003-2007, which was prepared with a valuable advice from Deloitte & Touche

and approved by the Board of Directors in February 2003. A cornerstone of this

strategy, aimed at development of ROSBANK as a full-service commercial bank

with a strong investment banking arm, is to significantly expand its retail opera-

tions in Moscow and other Russian regions by acquiring banks with well-estab-

lished networks. Additionally, ROSBANK intends to increase its capital substan-

tially by 2007 via the capitalisation of its retained earnings, convertible bonds

and an Initial Public Offering.

Financial Performance

2002 was another year of progress for ROSBANK, both in terms of busi-

ness expansion and financial performance. In particular, the Bank recorded its

first 194 million Roubles net profit under International Accounting Standards

since the company commenced application of IAS 29 “Financial Reporting in

Hyperinflationary Economies” in 2000. Interest income for the year 2002

reached 4.6 billion Roubles, representing a 15% growth over the inflation-

adjusted 2001 result. The Bank also recorded 32% higher gains on securities

trading and a 13% increase in foreign exchange earnings, as a result of greater

volume and better diversification of dealings. Total operating expenses

decreased by 8.5%, due to its efficient cost-cutting program, which allowed to

save more staff costs and overheads. Total assets, measured at 56.8 billion

Roubles per IAS, rose by 6% compared to 2001 year-end figures. Gross cus-

tomer loans recorded a 16% growth, which was mostly driven by lending to

new sectors for the Bank, such as aircraft engineering, agriculture, hotel and


7

leisure. On the liabilities side, there was a 7% overall increase, with balances on

customer accounts growing by 5%. The shareholders’ equity remained on the

same high level at 7.9 billion Roubles.

Corporate Banking

In the year under review, Corporate Banking remained a key focus for

ROSBANK. The enhanced product range combined with flexible pricing and

advanced lending techniques allowed to expand the client base by 20% and

to achieve a considerable increase in the volumes of customer transactions.

Thus, the aggregate turnover on corporate accounts grew by 23% to

6,544 billion Roubles. As a result of the improving economic situation and

the Bank’s continued efforts to diversify its lending activities, the customer

loan portfolio reached 35.8 billion Roubles at end-2002, a good 16% rise on

the previous year.

Private Banking

ROSBANK was one of the first Russian banks to start offering western-

style private banking services to high-profile individuals back in 2000. Since

then a substantial progress in building the franchise and developing sophisti-

cated products to satisfy the client demands was made bringing the Bank to

leading positions in this segment. In 2002, the Private Banking business

showed particularly strong results, with a 33% growth in the number of cus-

tomers and a three-fold rise in total deposits, which at end-2002 exceeded

6.7 billion Roubles.

Treasury operations

The expanded range of treasury services offered by the Bank in 2002

allowed it to significantly increase the volume of money market and foreign

exchange dealings conducted in Russia and abroad, with a three-fold rise in

deposit placements that exceeded 1,977 billion Roubles during the year, while

the aggregate amount of FX deals almost reached 2 trillion Roubles.


8

ROSBANK is one of the major Russian operators in the bullion market. In

2002, the total physical volume of operations with precious metals reached

162 tonnes including 17 tonnes of gold, more than 144 tonnes of silver, and

over 1 tonne of platinoids. Loans extended to gold miners equalled nearly

1 billion Roubles.

Investment Banking

In the reported year, the Bank was increasing its involvement in arranging

and underwriting domestic regional, municipal and corporate bond issues.

According to the 2002 rating published by the Cbonds information agency,

ROSBANK ranked 2nd largest among the underwriters and 3rd largest among

the lead managers of sub-federal and municipal bond issues, while in corporate

debt it was the 4th largest underwriter and 8th lead manager, which highlights

ROSBANK as one of Russia’s major investment banking companies.

In the Asset Management, a new dynamically developing line of its activi-

ty, ROSBANK launched an innovative investment product – Individual Asset

Management Agreements and started offering its customers a variety of invest-

ment portfolios.

Institutional Banking

In 2002, ROSBANK expanded further its correspondent network, both in

Russia and abroad. At the year-end, the network comprised 146 correspondents

holding 335 loro accounts in Roubles and foreign currencies with the Bank. In

interbank transactions, the aggregated amount of placed and borrowed funds

grew by 21% to reach 31 billion US Dollars, and foreign exchange and banknote

deals registered a 51% rise to surpass the 1 billion US Dollars level.

The Bank was also improving its positions within the international bank-

ing community, which is evidenced by establishment of new clean lines and

enhancement of the existing facilities offered to ROSBANK by prime western

institutions.

1860. The establishment of the State Bankof the Russian Empire. Developmentof the commercial credit system.The Charter of the State Bank was approved on 31 May 1860. At the inception date its principal (paid-in) capital

was 15 million roubles; by 1917: 50 million roubles. Established to replace the previously operating kazenny

(public) banks, the State Bank became the key instrument for reforming Russia’s social and economic system.

According to its Charter, it was founded ‘to revitalise trading turnover and consolidate the credit and monetary

system’. In 1894, the State Bank expanded the range of its activities and started to extend mortgage loans to pri-

vate enterprises for a period of up to 2 years. In the course of the 1895-1897 monetary reform it became the cen-

tral bank of issue, while maintaining its position as the leading commercial banking institution. In the early 1900s

the State Bank was gradually developing into the ‘bank of the banks’, providing huge amounts to finance region-

al traders and manufacturers and supporting leading joint stock commercial banks. By 1914 the State Bank had

granted them credits worth 338 million roubles.

Mikhail K. Reitern.In order to develop the nation’s lending system, Mikhail Reitern, as

Minister of Finance (1862-1878), supported the establishment of

private commercial banks, initiated a reform of the system for the

Russian population’s personal savings, transforming savings into a

key source for state debt financing, and provided assistance in

funding railway construction projects that facilitated the growth

in goods turnover. Reitern wrote: ‘Banks do not create capital.

They can only act as intermediaries between the persons who

accumulate capital and those who wish to borrow funds.

The building of the State Bank, Sadovaya Street, St. Petersburg.

Photo, the early 20th century.

Count Mikhail K. Reitern (1820-1890), Russia’s Minister of

Finance from 1862 to 1878.

10


Custody Business

The customer base of ROSBANK’s Custody grew by 25% to more than

1,000 legal entities and private individuals by end-2002. More than 300 deposi-

tory accounts were opened and the total value of securities held in custody

increased by 16%, aggregating 203 billion Roubles at 31 December 2002.

Plastic Cards and Payment Systems

At end-2002, the number of ROSBANK-issued magnetic stripe cards

exceeded 30,000, which included VISA International and MasterCard

International products. In 2002, the holders of ROSBANK cards conducted over

562,000 transactions in the total amount of more than 91 million US Dollars,

being a 50% increase in transaction numbers and a 63% rise in their total volume.

The Bank is also an active participant in the ‘Customs Card’ payment system. The

total volume of transactions under this project equalled 4.2 billion Roubles, and

average monthly balances surpassed 236 million Roubles in December 2002.

In mid-2002, ROSBANK entered into a General Strategic Partnership

Agreement with Travelex Worldwide Money Limited (TWML), one of the world’s

largest providers of retail financial services. ROSBANK thus became the TWML’s

settlement bank in CIS countries, the Baltics and Eastern Europe, and was grant-

ed the exclusive authority to set up, manage and develop a system for urgent

money transfers effected by private individuals.

Research

In 2002, ROSBANK set up the Research and Analysis Division within its

organisational structure. This specialised unit provided ROSBANK’s clients with

comprehensive financial information on market trends and current develop-

ments, gave them relevant recommendations and strategic advice, and supplied

analytical data on the Bank’s operations. The up-to-date analysis and forecasts of

the events and tendencies in economy, politics and finance are highly appreci-

ated among the Russian financial community, and are regularly published by the

nation’s major mass media agencies.

11


Information Technologies

In 2002, the performance, reliability and security of ROSBANK’s automat-

ed banking system were improved significantly, with the integration of its facili-

ties and those of Bank MFK into a single data processing environment.

Importantly for further development of ROSBANK’s information system, its cen-

tralised database was replicated on the ORACLE platform.

1866. The establishment of Moskovsky KupetcheskyBank. Development of the private commercialcredit system.In 1866, on the initiative of V. Kokorev, a well-known bigwig at that time, the first private bank in Russia –

Moskovsky Kupetchesky (Moskow Merchant) Bank – was founded. The subscription to participations in its

capital attracted 77 Moscow entrepreneurs. Its paid-in capital, divided among 90 participants, was more than

1.2 million roubles. The bank started its operation on 1 December 1866, exactly 6 months after the approval

of its Charter. The State Bank provided the newly-established banking institution with a large credit against

pledged promissory notes, debentures and bonds. Kupetchesky Bank rendered services mainly to large tex-

tile firms located in the Central Industrial Region of Russia. For example, Russia’s major enterprise, Nikolskaya

textile mill owned by the Morozovs’ family, received a total of 4.5 million roubles in credits granted by the

bank in 1874. In 1896, the bank provided a loan of 1.5 million roubles to Trekhgornaya textile mill. In the

early 1900s, the bank’s new branches were set up in Kokand, Rostov-on-Don and Kharkov to develop cotton

trade transactions on a commission basis.

The Management Board of MoskovskyKupetchesky Bank.The organisational structure of the bank was built upon the

principal of ‘capital accumulation’ through selling capital

participations which was popular with Moscow business-

men in the second part of the 19th century. As a result, a

high nominal value of 5 thousand roubles (later: 10 thou-

sand roubles) per participatory share was set. The bank’s

founders pursued the aim of retaining control over the

company in the hands of its first owners and their heirs. The

operation of the bank was controlled by the Management

Board comprising up to 20 persons, all representing

Moscow’s elite. At the moment of the bank’s foundation the

list of major shareholders started with the firms owned by

S. Maliutin, S. Morozov & Sons, V. Kokshin, S. Lepyoshkin, M.

Roukavishnikov and A. Schtiglitz, the general manager of

the State Bank, representing St. Petersburg.

The building of Moskovsky Kupetchesky Bank.Photo, the late 19th century.

Vasily A. Kokorev (1817-1889), a founder and member

of Moskovsky Kupetchesky Bank (1866-1870), Chairman

of the Management Board of Volzhsko-Kamsky Bank

(1870-1879).

13

CUSTOMER BASE II

CUSTOMER BASEOne of ROSBANK’s strategic objectives is to further expand its universal

profile in terms of both – extensive product range covering commercial and

investment banking services and presence at every customer segment from

“blue-chip” corporates to mass retail customers.

In the reporting year ROSBANK further strengthened its co-operation

with regional governments, e.g. Moscow, Bashkortostan, Krasnoyarsk, Nizhny

Novgorod, and leading Russian corporates:

—commodity producers as Gazprom, ALROSA(diamonds), Russian

Aluminum Group, Magnitogorsk Iron and Steel Works, Vyksonsky Metal

Works, Chelyabinsk Iron and Steel Works, Slavneft and Severnaya Neft

(oil), Nizhnekamskneftekhim (petrochemicals), Kovdorsky GOK (min-

ing), Sibirsky Chemical Plant,

—manufacturers as Energomashexport-Power Machines (power machin-

ery), MIG Aircraft Building Corporation (RSK), SALUT (aircraft engines),

—and others - the Moscow Mint of Goznak, RTK Leasing, Sedmoi

Continent (retail chain), Agros-Roskhleboprodukt and Omsk Bacon

(food), Aeroflot-Russian Airlines.

The growing number of customers and increasing business volume reflect

the efficient corporate banking policy focused on establishing close long-stand-

ing relationship supported by tailor-made service.

14

II CUSTOMER BASE

In 2002, the total number of ROSBANK corporate clients rose by more

than 20%. The overall turnover on corporate accounts exceeded 6,544 billion

Roubles with the aggregated balances as of 31 December 2002 amounting to

21.5 billion Roubles.

Below is the structure of ROSBANK’s Customer base by sector

Name of sector Percentage

Manufacturing, transport and communication . . . . . . . . . . . . . . . . .12.6

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4.7

Foreign trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.9

Domestic wholesale and retail trade . . . . . . . . . . . . . . . . . . . . . . . . . . . .21.7

Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27.9

Financial institutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2.4

State-owned enterprises and organisations . . . . . . . . . . . . . . . . . . . . . .1.9

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27.9

In the reporting year ROSBANK continued to develop private banking

business, offering individual banking solutions to high profile customers. The

qualified relationship managers extend their assistance from regular customer

support to comprehensive advice on banking and finance as well as related legal

issues. In addition to regular term deposits ROSBANK has developed a variety of

investment and asset management product to ensure high return with appro-

priate level of safety. Extended range of plastic card products can meet any

requirement of the most demanding clients. The total number of private bank-

ing customers increased by more than 33%, and their funds, deposited with the

Bank more than tripled to exceed 6.7 billion Roubles.

In 2002, ROSBANK decided to expand its retail business and acquire

strong position in mass retail segment. To meet the requirements of its private

customers the Bank designed a range of new cash management products. Time

and effort provided for some noticeable results, i.e. number of clients grew by

20.4% and total deposits reached 2 billion Roubles showing approximately 50%

increase over the previous year. Extended maturities of deposits placed with the

Bank demonstrate growing customers’ confidence.

15

CORPORATE BANKING II

CORPORATE BANKING

Lending

ROSBANK positions itself as one of the leading providers of corporate

banking services on the domestic market.

Traditionally, corporate lending is one of ROSBANK’s top priorities and the

most important source of income. In line with its development strategy the Bank

extends loans to Russia’s major industries and to regional and municipal gov-

ernments. In 2002, special attention was paid to improving the risk profile and

quality of the loan book through:

- further diversification of borrowers,

- increase in lending to well-performing medium-sized businesses,

- extending loan tenors,

- expanding product range to trade and project finance.

Proper risk assessment and regular monitoring of the borrowers’ financial

standing provides for high quality of ROSBANK’s portfolio. As a matter of policy,

loans were granted mostly to the borrowers with a good track record and sound

credit history, and against certain types of collateral. Special focus was tradition-

ally made on pre-export finance.

1899. Participation of Petersburg Ouchetny and SsoudnyBank in the construction of the Tver Tramway.Petersburg Ouchetny and Ssoudny Bank (Discount and Loan Bank) financed one third of the costs of the

project for building an electric tramway system in the City of Tver. Two other project participants were a for-

eign private businessman and Societe Franco-Suisse d’Entreprise Industrielles. In 1899, the bank provided an

initial portion of financing in the amount of 34 thousand roubles. Overall, the amount of funding provided

by the bank averaged 300 thousand roubles. Tver became the 20th city in the Russian Empire with the elec-

tric tram in use. In late August 1901, the first 7.3 km long tram route from Vosmiougolnaya Square to the

Railway Station was opened. The bank retained control over this highly profitable asset until the 1917

nationalisation.

The Management Board of Petersburg Ouchetnyand Ssoudny Bank.The bank was established in 1869, with its statutory capital

of 5 million roubles. Its founders were bankers Kronenberg

and Gintzburg, entrepreneurs Vargunin, Eliseyev, etc. In the

early 1900s, with Ya. Outin as its chairman, the bank rein-

forced its positions, and acted as a partner of reputable

Petersburg-based banks: Russko-Aziatsky and Mezhdou-

narodny. Petersburg Ouchetny and Ssoudny Bank provided

funding for mining enterprises in Donbas and the Urals and

had its interest in Russia’s machine-building industry. For

instance, in the 1900s the bank, under the agreement with

Petersburg Mezhdounarodny Bank, made arrangements for

the merger of two giant enterprises: Kolomensky

Mashinostroitelny Zavod and Sormovo Joint Stock

Company.

Yakov I. Outin (1839-1916), a member of the

Management Board of Petersburg Ouchetny and Ssoudny

Bank (1885-1903) and its Chairman (1903-1916).

The Rostov-on-Don Branch of Petersburg Ouchetnyand Ssoudny Bank, 1916.

17

CORPORATE BANKING III

As of 31 December 2002, total loans exceeded 35.8 billion Roubles, of

which 77% were granted by the Head Office and the remaining 23% - by the

branches.

In 2002, the Bank extended more than 1,600 credit facilities to nearly 300

corporate borrowers, the largest of them being the Norilsk Nickel Group, the

Russian Aluminium Group, SALUT (aircraft engines), IRKUT (aircraft design and

production), Slavneft (oil), Omsk Bacon (meat processing). Generally, major

Russian industrials account for more than 60% of total loans. As in previous year

the bulk of the Bank’s lending went to non-ferrous and ferrous metals produc-

ers, engineering and machinery manufacturers, oil and petrochemical industries

and food processing companies. (Pic. III.1.) However, the list of the borrowers

includes also power plants, gas producers, gold miners, forestry and wood pro-

cessing companies, as well as trading and construction companies. As of

31 December 2002 overall amount of loans to industrial enterprises exceeded

19 billion Roubles.

Name of sector %

Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

Precious metals and diamonds . . . . . . .4

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15

Oil and gas . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Aircraft enginiring . . . . . . . . . . . . . . . . . . .15

Government . . . . . . . . . . . . . . . . . . . . . . . . . .9

Hotel business . . . . . . . . . . . . . . . . . . . . . . . .3

Pic. III.1. The credit portfolio structure at 31December 2002.

III CORPORATE BANKING

In its lending business, the Bank has a special focus on maintaining co-

operation with regional and municipal administrations. The total amount of

outstanding loans to this customer group accounted for 9% of the total credit

portfolio, with a considerable part extended through the regional branches.

One of the most noticeable shifts in ROSBANK’s loan book was the

increased share of medium term loans. At the year end loans with tenor over

1 year accounted for 14% of the total portfolio, with 12.7% being up to 5 years

and 1.3% - over 5 years. (Pic. III.2.) The currency composition of the Bank’s lend-

ing is balanced with funding sources to avoid serious mismatches and related

currency risks. As of 31 December 2002, loans denominated in US dollars and

Euro accounted for 70% of the total portfolio, with the remaining 30% granted

in Russian Roubles.

Trade Finance and Documentary Business

Current range of trade finance and documentary products completely

covers customers’ demand for respective services and the qualification of the

Bank’s personnel ensured substantial growth of business in the reporting year. In

18

Pic. III.2. Breakdown of lendings by contractual maturity at 31 December 2002

%

Up to 1 month . . . . . . . . . . . . . . . . . . . . . .10

1 month to 3 month . . . . . . . . . . . . . . . .19

3 month to 1 year . . . . . . . . . . . . . . . . . . .57

1 year to 5 years . . . . . . . . . . . . . . . . . . . . .13

Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . . .1

CORPORATE BANKING III

19

particular, the total number of guarantees and stand-by L/Cs, issued in 2002,

exceeded 450. Though the number of issued and advised letters of credit

remained at about the level of 2001, however, the total value of these transac-

tions grew substantially. (Pic. III.3, III.4, III.5, III.6) Moreover, last year L/Cs

denominated in Roubles became a widely utilised settlement instrument

between local companies, making substantial contribution to documentary

business performance. In addition to regular L/Cs and guarantees ROSBANK

offers competitively priced complex trade finance solutions which employ a

combination of documentary transactions, short-term financing, leasing instru-

ments and factoring.

Pic. III.3. Number of import L/Cs. Pic. III.4. Number of export L/Cs.

Pic. III.6. Volume of documentary operations.Pic. III.5. Number of issued guarantees.

USD mln

81.95

97.42

182.47

193.01

77 88

181

454

70

90 91

110

37

34

59

43

III CORPORATE BANKING

20

Unlike all previous years, when the major part of the Bank’s commitments

were related to a limited group of clients, in 2002 the customer base for trade

finance services was significantly diversified with its total number reaching 190.

Payments and Foreign Exchange Control

The comprehensive range and high quality of settlement products explain

further growth in demand for such services from corporate customers. In 2002

the total number of payments made by corporates increased by more than 20%,

and average corporate account balances in Roubles and foreign currencies were

up 35% and almost 8% respectively. During the reporting period, ROSBANK

opened nearly 1,000 new Rouble, foreign currency accounts and unallocated

bullion accounts. The overall volume of transactions over customer accounts

reached 6,544 billion Roubles.

In 2002, ROSBANK, as a government agent for foreign exchange control,

provided its clients with relevant information and advice on the changes in the

Russian legislation concerning foreign currency operations. In this capacity the

Bank issued for its customers 800 certificates of export and import deals for the

total amount of 4.6 billion US Dollars and 47 million Euro.

11

The Ryaboushinsky & Sons partnership of textile mills was one of the largest in the Russian textile industry.

Important facts in the course of events was the bankruptcy of Kharkovsky Zemelny Bank and its subsequent

acquisition by the Ryaboushinskys’ family, which served as a basis for the legalisation of banking transactions.

The private banking house very soon became widely recognised in the business community. By 1912, the

Ryaboushinskys had found their commercial activity to be too restricted within their private family business,

and decided to reorganise it into a bank. By 1917, Moskovsky Bank headed by Mikhail Ryaboushinsky and

Vladimir Ryaboushinsky, with paid-in capital of 25 million roubles, ranked 13th on the list of Russia’s top

commercial banks. The Ryaboushinskys used the bank as a financial platform for occupying a dominant

position in the linen industry as well as for participation in the syndicates of underwriters jointly with banks

from the City of Petersburg.

Pavel P. Ryaboushinsky.Graduated from Moskovskaya Prakticheskaya Akademiya

Kommercheskikh Nauk (the Moscow Academy of

Commercial Sciences). In the 1890s he was the head of

the Ryaboushinskys’ family business. From 1902: A co-

owner of a privately-held banking house that was later

transformed into a bank. As a politician, he became

known when, after his unsuccessful attempt to organise

the ‘moderately progressive party’, he was elected

a member of the Central Committee of the 17 October

Union. 1912: The peak of his political career; he was one

of the inspirers and organisers of the party of ‘progres-

sists’ representing the interests of Russian entrepre-

neurs. He published Outro Rossiyi (The Morning of

Russia) newspaper to advocate the idea of ‘establish-

ment of constitutional monarchy with the political

responsibility of ministers towards the Russian people’s

representation’.

1902. The establishment of the Ryaboushinskys’ Banking House.The creation of the financial and industrial group.

Pavel P. Ryaboushinsky (1871-1924), Chairman

of Moskovsky Bank and Chairman of the Management

Board of P.M. Ryaboushinsky & Sons partnership

of textile mills.

The building of Moskovsky Bank designed by

F. Schekhtel, Birzhevaya Square, Moskow, the 1900s.

Pavel P. Ryaboushinsky’s Outro Rossiyi PrintingHouse designed by F. Schekhtel, the 1900s.

22

IV FINANCIAL MARKETS

FINANCIAL MARKETSIn 2002 ROSBANK preserved its position as a market maker on domestic

foreign exchange and money markets. The list of services to corporate and insti-

tutional customers was further expanded, e.g. real-time quotations for forward

rates for future cash inflows with consequent execution of the deals, which con-

tributed significantly to the growth in the volume of transactions in the domes-

tic and international forex and money markets. As compared to the previous

year, the total deposit turnover tripled to surpass 1,977 billion Roubles. The over-

all volume of forex deals reached 2 trillion Roubles due to increasing regular FX

and derivatives trading.

The year 2002 was characterised by growing interest of domestic and for-

eign banks in trading Russian stocks and debts. In the reporting period

ROSBANK strengthened its position as one of major market players. In addition

to proprietary portfolio the Bank grew significantly the volume of customer-

driven business with a strong contribution made by primary placements of cor-

porate bonds. The increased presence of ROSBANK in the domestic equity mar-

ket was one of the positive results of consolidation with Bank MFK. In 2002,

local stock trading generated substantial part of overall gains on securities.

ROSBANK also increased considerably the total amount of REPO transactions

23

with the most liquid domestic shares and related derivatives. However, fixed

income trading remains the field of ROSBANK expertise. As of 31 December

2002 the bonds portfolio accounted for 4.5 billion Roubles, while equities

amounted to 645 million Roubles. Moreover, in 2002 investments in Russia’s

sovereign debt grew faster than the portfolio of corporate securities.

ROSBANK set up an infrastructure allowing for the diversification of propri-

etary trading and brokerage on the stock market. The Bank offered its customers

brokerage services for American depository receipts (ADRs) and global depository

receipts (GDRs). The favourable market situation also allowed for doubling the

number of users of RosTrade brokerage system (www.rostrade.rosbank.ru) which

provides for on-line access to trading on Moscow Interbank Foreign Currency

Exchange (MICEX).

For recent years ROSBANK keeps its prime position on the domestic pre-

cious metals market. In 2002, the total physical volume of trading in precious

metals reached 162 tonnes, of which 17 tonnes of gold and over 144 tonnes of

silver. In the financial year under review the Bank started to deal in platinoids

with the overall annual physical volume exceeding 1 tonne.

ROSBANK continued to strengthen its co-operation with large domestic

precious metals extracting and manufacturing enterprises based in Siberia and

the Far East, providing them with such services as seasonal financing, export and

sale of gold under commission agreements, purchase/sale of gold for the Bank’s

own account, maintenance of metal accounts and interest-bearing term

deposits. In 2002, 2.6 tonnes of gold were sold under commission agreements.

The average amount of loans extended to gold-miners reached 1 billion Roubles.

On the other hand, the Bank allocated about 3 tonnes of gold to ‘bullion’ loans

to end-users.

FINANCIAL MARKETS IV

The Charter of the Joint Stock Society Armavir-Tuapse Railway was approved on 18 July 1908. Its founders

were major banks from Petersburg. This company was established to conduct construction works and pro-

vide maintenance of the railway from Armavir to Tuapse. The company’s principal paid-in capital was 4 mil-

lion roubles. Its large shareholders were Russko-Aziatsky Bank (4,000 shares), Severo-Kavkazsky

Kommerchesky Bank (2,500), Azovsko-Donskoy Kommerchesky Bank (2,000 shares), Peterburgsky

Mezhdunarodny Kommerchesky Bank (1,000 shares), etc. In 1909, the English banks London City Midland

Bank, the British Bank for External Relations and Birch Crisp and Co. arranged a Russian state 4 per cent bear-

ing bond issue of 33.5 million roubles at par. In 1913, to finance the construction of the Stavropol railway line,

a second bond issue of 21 million roubles was also underwritten by English banks on very favourable terms

(the securities were placed at 93% of the par value).

Joint Stock Society Armavir-Tuapse Railway. In late 1907, engineer P. Pertsov made an application for the

establishment of Joint Stock Society Armavir-Tuapse Railway. This

company played an important role in the economic development

of the Kubansky Krai. The railway route connected the richest

regions of the Northern Caucasus with the Vladikavkaz railway

and the Port of Tuapse. In the early 20th century the Armavir-

Tuapse railway line became a key driver behind the exploration of

the Caucasian Black Sea Coast and the Maikop oil fields. The con-

struction of this railway attracted much attention of English busi-

nessmen who participated actively in developing the oil-bearing

lands of the region. The construction of the first section of the

railway was launched in the autumn of 1909, and a year later a

124 km section (Armavir-Belorechenskaya-Maikop) was built.

Regular traffic from Armavir to Tuapse began in 1913.

1909—1917. Investments by Russian banks inthe development of railways. The constructionof the Armavir-Tuapse railway.

Boris A. Kamenka (1855-?), a member of the Management

Board and Director of Azovsko-Donskoy Bank (1894-1910),

Chairman of the Bank’s Board (1910-1917).

The branch line of the Armavir-Tuapse railway in the Port

of Tuapse, the early 20th century.

25

INVESTMENT BANKING V

INVESTMENT BANKINGInvestment banking is one of ROSBANK’s core businesses comprising debt

origination and underwriting, financial advisory, business evaluation and asset

management services. The bank offers its clients a full range of contemporary

products based on the state-of-the-art banking technologies.

In the reported year, the Bank continued its active operation in the debt

financing market, including Rouble bonds, and was an arranger and underwriter

of a number of regional, municipal and corporate bond issues. Thus, ROSBANK

participated placements of Gazprom (gas), Severnaya neft (oil), Slavneft (oil),

Nizhnekamskneftekhim (petrochemicals), Vyksunsky Metalurgical Works,

Russian Aliuminium (aluminium production), LOMO (Russia’s largest optical

manufacturer), RTK-Leasing (a major leasing operator), the Governments of

Moscow and the Republic of Bashkortostan, the administrations of Ufa, Nizhny

Novgorod, the Moscow Region, etc.

In 2002, the amount of domestic sub-federal and municipal bond issues

totalled 21 billion Roubles, 70 % of which (14.9 billion Roubles) was brought to

the market with the participation of ROSBANK. (Pic. V.1.). Overall, last year’s

amount of all domestic corporate bond issues was 58 billion Roubles, of which

28 % was originated and placed with the Bank’s involvement. (Pic. V.2.)

V INVESTMENT BANKING

According to the 2002 survey by the Cbonds information agency, ROS-

BANK ranked 2nd largest among the Russian underwriters and 3rd in the rating

of the lead arrangers of regional and municipal bond issues, whilst in corporate

debt securities it was the 4th largest underwriter and 8th lead arranger, which

evidenced the position of ROSBANK as one of the major Russian investment

banking houses.

Pic. V.2. Total corporate bond issues in 2002.

Pic. V.1. Total regional and municipal bond issues in 2002.

Issued with ROSBANK’s

participation 28%

Issued with ROSBANK’s

participation 70%

26

27

Along with arranging Rouble bond issues, ROSBANK was advising its

clients on international borrowings programs in the form of eurobonds, credit

notes and depository receipts. Thus, ROSBANK acted as financial advisor for

Magnitogorsk Iron and Steel Works, and was one of the underwriters of an MMK

Finance S.A. eurobond issue of EUR 100 million at par.

In mid-2002, as a result of the integration of Bank MFK into ROSBANK, a

team of specialists with an extensive experience in equity-linked transactions,

including mergers and acquisitions, joined the Bank as a new Corporate Equity

Division to complement its Investment Banking arm. This division specialises

mainly in advisory services to large and medium-sized enterprises seeking to

attract strategic and portfolio investors or to increase their assets through M&A.

INVESTMENT BANKING V

28

VI ASSET MANAGEMENT

ASSET MANAGEMENTAsset management is one of the investment tools that can be used by those

who avoid conducting investment transactions themselves, due to lack of time

or experience, and are prepared to entrust professional managers to take care of

their assets. This area is new for ROSBANK, and the year 2002 became the initial

stage when all regulatory, operational and organisational arrangements for suc-

cessful development of this business line were implemented.

With a view to ensure efficient marketing of these services, the Bank elab-

orated a new investment product, an Individual Asset Management Agreement,

authorising the Bank to manage its client’s assets. The Agreement incorporates

an Investment Declaration that defines the client’s investment objectives and

asset management strategy, time horizon of investments, risk tolerance and

some other parameters, which together determine composition of individual

investment portfolios. The Bank offers its customers a choice of four investment

portfolios, each corresponding to a specific strategy. The assets accepted for

management may include both cash and securities owned by customers.

In addition, the Bank supports the clients with its own research covering

the economic situation, trends and developments in the domestic and interna-

tional financial markets, and also provides other consulting services.

At the end of 2002 the amount of assets under management was nearly

20 million US Dollars in total.

1910. The organisation of Russko-Aziatsky Bank.The new banking strategy.Russko-Aziatsky (Russia-Asia) Bank was created through the merger of two banks of differing profiles after

their bankruptcy: Russko-Kitaisky (Russia-China) Bank and Severny (Northern) Bank. Russko-Aziatsky Bank

was set up with the participation of a French investment group that consisted of Paris-Netherlands Bank

and Societe Generale responsible for bringing a 75 per cent of the bank’s shares to the Paris Stock Exchange,

while the remaining 25% was underwritten by a Russian group. The share capital of Russko-Aziatsky Bank

totalled 35 million roubles, with the amount of all reserves exceeding 20 million roubles. Under the aegis of

the bank its chairman A. Putilov created a strong financial and industrial group, with Obshchestvo

Putilovskikh Zavodov (heavy industry products) being its core. By 1914, the Russko-Aziatsky Bank had

become the leading provider of financing for the engineering and metal processing, oil production and refin-

ing, buttermaking and tobacco industries (160 companies in total). This bank had the largest number of

branches (175), many of which were based abroad. There was no other banking company in the Russian

Empire that could be compared to Russko-Aziatsky Bank in terms of financial power and significance.

Aleksey I. PutilovAleksey Putilov, one of Russia’s largest entrepreneurs. Graduated

from the Legal Faculty of St. Petersburg University in 1899. He began

his professional career in the Ministry of Finance. With the assis-

tance of S. Vitte, Russia’s prominent statesman, he became the head

of Dvoryansky Bank and Krestiyanky Bank. In 1910, Putilov was

appointed the chairman of Russko-Aziatsky Bank. He began to use

new financing structures involving participations, the creation of

holding companies, etc. Putilov contributed much to developing

Russko-Aziatsky Bank into a well-balanced universal credit institu-

tion. S. Vitte wrote about his protege, ‘At the present time, he is the

Chairman of the Board of Russko-Aziatsky Bank, and is one of the

most influential, and I would say, ‘fashionable’ financiers not only in

the banking community in Petersburg, but also abroad’.

Alexey I. Putilov (1866-1925 or later), a member of the

Management Board of Russko-Kitaisky Bank (1905-1910) and its

Executive Director (1908-1910), Chairman of the Management

Board of Russko-Aziatsky Bank (1910-1917).

Russko-Aziatsky Bank’s branch in Tuapse, the early 20th cen-

tury.

30

VII COOPERATION WITH FINANCIAL INSTITUTIONS

COOPERATION WITH FINANCIAL INSTITUTIONSPursuing the selected strategy targeted at further strengthening its pres-

ence on the interbank market and promoting business relations with financial

institutions, ROSBANK in the reporting period continued to increase the corre-

spondent network coverage and the number of its counterparties in Russia and

abroad. By the end of 2002, ROSBANK maintained correspondent relationship

with 146 banks holding 335 loro accounts in Roubles and foreign currency. The

volume of transactions over correspondent accounts clients was steadily grow-

ing through 2002, and the aggregated balances nearly doubled. The Bank

remained committed to steadily expanding the geographic coverage of corre-

spondent network primarily by promoting relationships with banks from

Russian regions, CIS and Baltic countries.

ROSBANK’s sound financial standing and reputation in the financial com-

munity, supported by the balanced counterparty limit policy, a broad range of

financial products and flexible service, allowed for further expansion of its

counterparty base to more than 300 domestic and foreign banks and a sizeable

increase in the volume of interbank dealings. The Bank’s money market transac-

tions recorded an aggregate amount of USD 31 billion, 21% increase over the

preceding year. The total volume of foreign exchange and banknote deals sur-

passed USD 51 billion and USD 1 billion, respectively.

31

COOPERATION WITH FINANCIAL INSTITUTIONS VII

In international banking ROSBANK continued its efforts for further

expanding relationships and line of products which involve the participation of

foreign financial institutions. Credit facilities, established by such international

banks as HSBC Group, HypoVereinsbank, Credit Suisse First Boston,

Commerzbank, UBS, The Bank of New York,etc. have enabled ROSBANK to

effectively trade on global financial markets, to insure high level and competitive

pricing for trade finance services for its corporate customers, to initiate sizeable

projects requiring foreign financing. Moreover, ROSBANK has strengthened its

relationships with a number of export credit agencies of developed economies,

which accepted ROSBANK as an eligible counterparty for medium term deals.

1912. The establishment of Russian General OilCorporation. The stronger presence of Russiancredit institutions in the international bankingarena. Russian General Oil Corporation was founded in London in July 1912 by a consortium of Russian and foreign

banks. Its statutory capital was £1.25 million, with Russky-Aziatsky Bank and Mezhdounarodny Bank having

major shareholdings. 1913 saw two additional contributions to the corporation’s capital that reached

£2.5 million at the end of that year. Contributors to the corporation’s development were the private banking

houses of Margulis in Brussels and Dreifus in Paris. They assisted in the inclusion of its shares in the official list

of securities traded on the stock exchanges in London, Paris, Brussels and Amsterdam. In 1912 the alliance

comprised only two companies: Tovarishchestvo Lianozova and Neft, with three more companies added

later. By 1916 the corporation had interests in 20 companies with total share capital of 135 million roubles.

Peterburgsky Mezhdunarodny Kommerchesky BankIn 1869 Peterburgsky Mezhdunarodny Kommerchesky Bank (Petersburg

International Commercial Bank) was established. At the beginning of the

20th century it was the second largest bank in Russia. It was founded by the

representatives of banking and trading firms from Petersburg, Arkhangelsk,

Odessa, Taganrog, Warsaw, Hamburg, Frankfurt, Paris, Amsterdam, and

London. Headed by A. Vyshnegradsky, a son of a mathematician and minis-

ter of finance, Peterburgsky Mezhdunarodny Kommerchesky Bank reached

its development peak in the early 1910s. By 1914, the bank’s share capital

had increased to 60 million roubles, and balances on current accounts rose

to 264 million roubles. The bank had participations in more than 50 manu-

facturing, railway and insurance companies. In 1911, the bank, together with

Russko-Aziatsky Bank, acquired a controlling interest in the English compa-

ny Lena Goldfields that controlled the Lenskoye Zolotopromyshlennoye

Tovarishchestvo (gold mining).

Sergey S. Khrulyov, Chairman of the Management Board of Peterburgsky

Mezhdunarodny Kommerchesky Bank.

The building of Peterburgsky Mezhdunarodny KommercheskyBank, Nevsky Prospekt.

33

CARD SERVICES VIII

CARD SERVICESAs a principal member of the VISA International and MasterCard

International payment systems, ROSBANK issues the full range of their plastic

cards, including Business and Gold/Platinum types, and also offers its clients

individual and corporate American Express ,as well as the American Express

Centurion card. Last year, ROSBANK was the first Russian bank to launch the

prestigious MasterCard World Signia, a valuable contribution to its private bank-

ing product portfolio.

In the year under review, ROSBANK registered a significant progress in its

plastic cards business. At end-2002, the number of ROSBANK-issued magnetic strip

cards exceeded 30,000, of which VISA cards represented approximately 75%.The

cardholders effected more than 562,000 transactions for the overall amount

exceeding 91 million US Dollars, or 50% and 63% up on the prior year, respectively.

Credit balances on card accounts at the end of 2002 exceeded 71.82 million

Roubles and 15.84 million US Dollars, representing 71% and 98% annual growth.

In 2002, the Bank completed certification of its facilities for the issuance

and servicing of VISA microchip (“smart”) cards. As a result, the first ever domes-

tic transaction with the VISA Electron—VSDC (VISA Smart Debit/Credit) card

was executed using the one issued by ROSBANK. Its branded cards were then

actively used in the popular TV reality show “The Last Hero-2” (“The Survivor”),

34

VIII CARD SERVICES

which was an important part of the smart cards promotional program. ROS-

BANK also continued implementation of a large payroll project for its client,

Norilsk Nickel Group, involving VISA smart cards.

The Bank’s proprietary network of cash withdrawal outlets was expand-

ing steadily to reach 56 ATMs and 31 cash desks in Moscow and other regions.

The sponsorship of entry of new institutions to VISA and MasterCard

International as associate/ affiliate members using the facilities established for

ROSBANK by these payment systems was continued in 2002. In addition to six

Russian banks already participating in this program, three more Moscow-based

banks were accepted in such capacity to the international payment systems cov-

ered by ROSBANK guarantees.

Pic. XVIII.2. Card account balances, average monthly figures

Pic. VIII.1. Average monthly volume of plastic card transactions

RUR mln

Months 2002

RUR mln

Months 2002

35

CUSTODY SERVICES IX

CUSTODY SERVICESIn 2002, ROSBANK was further strengthening its leadership in the custo-

dial services market by offering integrated solutions to its customers. The

Custody clientele increased by 25% to exceed 1,000 corporates and individuals

at the year-end, largely owing to the high quality of service and constant

improvement of the product range. Over 300 new safekeeping accounts were

opened, and the total value of securities held in custody registered an annual rise

of 16% to reach 203.4 billion Roubles. (Pic. IX.1.) At 31 December 2002,

ROSBANK had 386 nominee accounts with the registrars and correspondent

depositories. The transfer agent network comprising 39 registrars enabled the

Bank to handle securities of more than 2,000 issuers.

In 2002, the Bank continued to develop a comprehensive, highly competi-

tive package of products combining both custody functions and other services,

such as loans collateralised by pledged securities, lending of securities, book trans-

fers related to the securities settlements, as well as advisory and analytical support.

During the year, ROSBANK was creating a tailored infrastructure for its rel-

atively new focus group - the managing companies of mutual funds, one of the

fast-moving business sectors in Russia now. These efforts helped the Bank to

start cooperation with recognised leaders among the domestic funds managers

- PIOGLOBAL Asset Management, Tserikh, and OFG Invest.

36

IX CUSTODY SERVICES

According to the 2002 survey conducted by the Financial Research

Foundation ‘Infrastructure Institute’ (INFI) in cooperation with the Professional

Association of Registrars, Transfer Agents and Depositories (PARTAD),

ROSBANK’s Custody was assigned the highest safety rating. It also had the high-

est capital coverage ratio within the group of the custodial banks administering

the securities with an aggregate value exceeding 30 billion Roubles.

Pic. IX.1. The number of customers of the Bank’s Custody Service

Months 2002

1913. The foundation of Russkaya TabachnayaKompaniya.

Russkaya Tabachnaya Kompaniya (Russian Tobacco Company) was organised in London in September 1913

by a consortium of 6 Russian banks, with the leading role played by Russko-Aziatsky Bank. That bank took

on full responsibility for providing funds to finance the working capital needs of the factories controlled by

the company. Russian Tobacco Company was registered in London due to the hold-ups and delays in the

company’s registration in Russia. After the purchase of a 50 per cent stake in 11 Russian tobacco factories the

company incorporated such firms as Laferm, Dukat, Gabai, Asmolov, Aslanidi. By 1914, the company’s capi-

tal had come to £2.5 million.

Vasiliy I. Timiryazev.The first minister of trade and industry (1905). After graduating

from Petersburg University, he worked in the Trade and Textile

Mills Department of the Ministry of Finance. In 1984-1902 he was

a commercial agent in Berlin. After his return to Russia he held the

position of assistant minister of finance. In 1906 Vasiliy

Timiryazev became the chairman of the Council of Congresses of

Industry and Trade Representatives, the first all-Russian profes-

sional association of entrepreneurs. In 1909 Timiryazev was

appointed minister of finance again. He focused much attention

on solving the problems of the Russian business sector; in partic-

ular he was the chairman of the Board of Russky Bank Dlya

Vneshnei Torgovli (Russian Foreign Trade Bank). In 1914 he

became the chairman of the Board of Russakaya Tabachnaya

Kompaniya (Russian Tobacco Company). Timiryazev published

a number of research papers.

Vasiliy I. Timiryazev (1849-?), Minister of Trade and Industry

(1905-1906, 1909), Chairman of the Management Board

of Russky Bank Dlya Vneshnei Torgovli (1911-1917), Chairman

of the Partnership of S. Gabai Tobacco Factory, Moscow.

S. Gabai’s shop, Moscow, the 1900s.

38

X SOCIAL INVOLVEMENT

SOCIAL INVOLVEMENTROSBANK fully recognises the responsibility of business community to

society, and participates actively in numerous charitable and sponsorship pro-

grams.

The Bank views charity from the perspective of corporate citizenship,

which means inseparability of the general economic principles and assumptions

of its business from the Bank’s and its employees’ commitment to the social

environment. This concept implies not only the centralised financing of princi-

pal charitable and sponsorship projects initiated by the Bank, but also provides

its staff with the opportunity of rendering charitable assistance on a voluntary

basis. In this regard, ROSBANK has designed an “Everybody Has the Right to

Help” programme for individual contributions by the employees under which

the sum of each voluntary contribution is doubled by adding the equivalent

amount from the Bank’s charity fund.

ROSBANK is one of the few Russian banking companies supporting initia-

tives in the area of contemporary fiction. An example is the project for encour-

aging domestic fiction writers and poets through the Apollon Grigoryev Prize

established by the Academy of Modern Russian Literature. In 2002, the Apollon

Grigoryev prize winners were Marina Vishnevetskaya (the highest prize of

25,000 US Dollars), Sergei Gandlevsky, and Andrei Gelasimov.

39

SOCIAL INVOLVEMENT X

Last year, the long-lasting cooperation with the Sovremennik Theatre

progressed further. The Bank concluded a new sponsorship agreement with its

administration, and provided financial support for the production of new

plays. ROSBANK also committed funds to maintain the ticket prices at an

affordable level.

ROSBANK continued to carry out its ‘Novy Den’ (New Day) grant pro-

gramme arranged in cooperation with the United Nations Children’s Fund

(UNICEF). This charitable initiative is a nationwide tender for projects aimed to

provide assistance to disabled children, to bring up orphans, and to help the

socially vulnerable groups of young people through their involvement in art-

related and sporting activities. The lead management function under the project

has been assigned to the Russian mission of the British Charities Aid Foundation

(CAF). The open tender for charitable projects conducted on the Bank’s initia-

tive is an unprecedented event for Russia, and the participation of such rep-

utable international organisation as UNICEF in the New Day Programme is a

clear evidence of the importance of this undertaking for the development of

charitable activity in the Russian Federation. In 2002, the New Day Programme

covered the Moscow metropolitan area and the major Russian regions in which

ROSBANK branches are located. Since its launch four years ago, the Bank has

granted 465.5 thousand US Dollars for numerous charitable undertakings.

Within the framework of the Bank’s support of the Moscow Kremlin muse-

ums, an Arsenal of Russian Tsars exhibition was held in 2002. Among other things,

the Bank financed restoration of a number of valuable exhibits of that show.

1916. The establishment of MoskovskyPromyshlenny BankIn 1912 Moscow bankers of German origin created I.V.Yunker and Co. Bank. As the First World War began,

they sold their shareholdings in the bank to D. Rubinschtein. The latter was a Petersburg banker maintain-

ing a certain relationship with Gregory Rasputin, the ‘evil monk’ who was known to be in close touch with

Tsar Nikolai II. After D. Rubinschtein was arrested under the accusation of using state financial resources

abroad for speculative purposes, Nikolai Vtorov purchased his controlling stake in the bank and renamed it

into ‘Moskovsky Promyshlenny Bank’. The bank’s share capital grew from 20 million roubles to 40 million

roubles. N. Vtorov decided to use the bank to provide funding to his enterprises incorporated into a mili-

tary-industrial group. That group comprised not only the military plants founded by Vtorov, but also the

firms owned or co-owned by him: Groushevskoye Kamennougolnoye Obshchestvo (coal mining),

Donetsko-Yurievskoye Metallurgitcheskoye Obshchestvo (metallurgy), Bryansky Zavod (metallurgy), etc.

Nikolai A. Vtorov.Nikolai Vtorov came from solid merchant stock. He was

a large Russian industrialist and financier. His father spe-

cialised in wholesale trading in drapery, furs and gold in

Irkutsk, a large Siberian city. In the 1900s, the Vtorovs’

family owned stores and arcades with shops and market

stalls in 11 cities in Siberia and the Urals. Nikolai Vtorov’s

business energy was particularly seen during World War I

when he purchased a controlling stake in Yunker and Co.

Bank and reorganised it into Moskovsky Promyshlenny

Bank. Vtorov created a strong military-industrial group

that incorporated Russko-Kraska and Koksobenzol dye-

works and the first Russian electricity-powered steel

works in the Moscow gubernia.

Nikolai A. Vtorov (1866-1918), Director of the

Management Board of Moskovsky Promyshlenny Bank

(1916-1917).

‘Delovoy Dvor’, the complex of office, hoteland storehouse premises owned by N. Vtorov,

designed by I. Kuznetsov, Varvarinskaya Square,

the 1910s.

FINANCIAL REPORT

43

FINANCIAL REPORT XI

INDEPENDENT AUDITORS’ REPORT

To the Shareholders and Board of Directors

of Joint Stock Bank ROSBANK:

We have audited the accompanying consolidated balance sheet of Joint Stock Bank ROSBANK and

subsidiaries (the “Bank”) as at 31 December 2002 and the related consolidated profit and loss account,

consolidated statement of cash flows and consolidated statement of shareholders’ equity for the year

then ended. These financial statements are the responsibility of the Bank’s management. Our responsi-

bility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement. An audit includes examining, on a test basis, evidence sup-

porting the amounts and disclosures in the financial statements. An audit also includes assessing the

accounting principles used and significant estimates made by management as well as evaluating the over-

all financial statement presentation. We believe that our audit provides a reasonable basis for our opin-

ion.

In our opinion, the financial statements present fairly, in all material respects, the financial position

of the Bank as at 31 December 2002, and the results of its operations and its cash flows for the year then

ended, in accordance with International Accounting Standards.

7 March 2003

45

FINANCIAL REPORT XI

CONSOLIDATED PROFIT AND LOSS ACCOUNTFOR THE YEAR ENDED 31 DECEMBER 2002

(in Russian Roubles and in thousands)

Notes 2002 2001Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,25 . . . . .4,645,521 . . . . .4,051,467

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,25 . . . .(3,172,326) . . . .(2,304,981)

NET INTEREST INCOME BEFORE RECOVERY OF PROVISION FOR POSSIBLE LOAN LOSSES . . . . . . . . . . . . . .1,473,195 . . . .1,746,486

(Provision)/recovery of provision for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,25 . . . . . . . .(9,198) . . . . . . .572,601

NET INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,463,997 . . . .2,319,087

Net gain on foreign exchange operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .603,734 . . . . . . .532,499

Net gain on operations with trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .874,030 . . . . . . .663,366

Fee and commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,25 . . . . . . .831,184 . . . . .1,112,780

Fee and commission expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 . . . . .(202,572) . . . . .(176,155)

Fair value adjustment on securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(33,284) . . . . . . . .79,896

Dividend income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44,117 . . . . . . . . .3,212

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6 . . . . . . .128,678 . . . . . . .256,639

NET NON-INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,245,887 . . . .2,472,237

OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,709,884 . . . .4,791,324

OPERATING EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 . . .(2,238,930) . . .(2,448,109)

PROFIT BEFORE OTHER PROVISIONS, INCOME TAX, EXTRAORDINARY LOSSES . . . . . . . . . . . . . . . . . . . . . . . .1,470,954 . . . .2,343,215AND LOSS ON NET MONETARY POSITION

Provision for possible investment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15 . . . . . .(15,515) . . . . . .(15,193)

(Provision)/recovery of provision

for possible losses on other operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,25 . . . . .(176,220) . . . . . . . . .6,342

PROFIT BEFORE INCOME TAX, EXTRAORDINARY LOSSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,279,219 . . . .2,334,364AND LOSS ON NET MONETARY POSITION

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8 . . . . . .(47,211) . . . . .(112,257)

PROFIT FROM ORDINARY ACTIVITIES BEFORE EXTRA-ORDINARY LOSSES . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,232,008 . . . .2,222,107AND LOSS ON NET MONETARY POSITION

Extraordinary losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 . . . . . . . . . . . . — . . . .(1,240,132)

PROFIT BEFORE LOSS ON NET MONETARY POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,232,008 . . . . . .981,975

Loss on net monetary position due to inflation effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 . . . .(1,037,764) . . . .(1,597,771)

NET PROFIT/(LOSS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .194,244 . . . .(615,796)

On behalf of the Management Board

Chairman Chief Financial Officer

47

FINANCIAL REPORT XI

CONSOLIDATED BALANCE SHEET31 DECEMBER 2002


Notes 2002 2001ASSETS:Cash and balances with the Central Bank of the Russian Federation

and National Bank of Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 . . . . .6,064,192 . . . . .6,212,116

Loans and advances to banks, less allowance for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 . . . . .8,589,104 . . . . .9,565,931

Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 . . . . .6,700,852 . . . . .4,134,042

Loans and advances to customers, less allowance for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13,25 . . . .33,671,340 . . . .28,001,653

Securities purchased under agreement to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 . . . . . . . .62,832 . . . . . . . . . . . . —

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15,25 . . . . . . .897,428 . . . . .4,410,993

Fixed and intangible assets, less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 . . . . . . .133,371 . . . . . . .131,953

Other assets, less allowance for possible losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 . . . . . . .722,844 . . . . .1,116,121

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56,841,963 . . .53,572,809

LIABILITIES AND SHAREHOLDERS’ EQUITYLIABILITIES:Deposits from the Central Bank of the Russian Federation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . .3,122,203

Deposits from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 . . . . .4,737,460 . . . . .2,552,068

Customer accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19,25 . . . .33,676,310 . . . .32,109,019

Debt securities issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 . . . . .9,998,776 . . . . .7,442,365

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21,25 . . . . . . .477,130 . . . . . . .433,495

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48,889,676 . . . .45,659,150

SHAREHOLDERS’ EQUITY:Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 . . . . .5,478,179 . . . . .5,478,179

Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,474,108 . . . . .2,435,480

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,952,287 . . . . .7,913,659

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56,841,963 . . .53,572,809



49

FINANCIAL REPORT XI

CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2002


Notes 2002 2001CASH FLOWS FROM OPERATING ACTIVITIES:Profit before income tax, extraordinary losses and loss on net monetary position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,279,219 . . . . .2,334,364Adjustments for:

Provision/(recovery of provision) for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9,198 . . . . .(572,601)Provision for possible investment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15,515 . . . . . . . .15,193Provision/(recovery of provision) for possible losses on other operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .176,220 . . . . . . . .(6,342)Fair value adjustment on securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33,284 . . . . . .(79,896)Depreciation charge on fixed and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39,297 . . . . . . . .35,615Change in accrued commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15,585 . . . . . .(15,585)Net change in net replacement value of derivatives and spot deals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(111,531) . . . . . . . .96,240Net change in interest accruals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(192,824) . . . . . . . .54,839Change in translation reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(155,616) . . . . . .(57,884)Operating profit before changes in operating assets and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,108,347 . . . . .1,803,943

Changes in operating assets and liabilities:(Increase)/decrease in operating assets:Minimum reserve deposit with the Central Bank of the Russian Federationand National Bank of Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(302,609) . . . . .(717,606)Loans and advances to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(683,359) . . . . .2,042,093Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(2,825,563) . . . .(1,450,667)Loans and advances to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1,538,520) . . . . .(213,376)Securities purchased under agreement to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(62,832) . . . . . . . . . . . . —Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(255,929) . . . . . . .335,957Increase/(decrease) in operating liabilities:Deposit from the Central Bank of the Russian Federation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(3,122,203) . . . . .3,122,203Deposits from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,231,439 . . . .(1,494,130)Deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,515,123 . . . . .4,959,270Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(79,525) . . . . . .(62,410)

Cash inflow from operating activities before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(4,015,631) . . . .8,325,277Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(50,572) . . . . .(131,278)Net cash (outflow)/inflow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(4,066,203) . . . .8,193,999

CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of fixed and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(48,027) . . . . . .(84,128)Proceeds on sale of fixed and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,312 . . . . . . . .11,558Proceeds on (purchase)/sale of investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(147,763) . . . . . . .584,224Net cash (outflow)/inflow from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(188,478) . . . . . . .511,654

CASH FLOWS FROM FINANCING ACTIVITIES:Net proceeds on sale/(redemption) of debt securities issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,556,171 . . . .(3,809,522)Net cash inflow/(outflow) from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,556,171 . . . .(3,809,522)

NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1,698,510) . . . .4,896,131

INFLATION EFFECT ON CASH (INCLUDING CHANGE IN VALUATION ALLOWANCES) . . . . . . . . . . . . . . . . . .(1,430,963) . . .(2,223,068)

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 . . .11,283,719 . . . .8,610,656

CASH AND CASH EQUIVALENTS AT END OF THE PREIOD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 . . . .8,154,246 . . .11,283,719



Interest paid and received by the Bank in cash during the year ended 31 December 2002 amounted to RUR 3,165,965 thousand and RUR 4,446,336 thousand,

respectively.

Interest paid and received by the Bank in cash during the year ended 31 December 2001 amounted to RUR 2,373,163 thousand and RUR 4,124,451 thousand,

respectively.

51

FINANCIAL REPORT XI

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY FOR THE YEAR ENDED 31 DECEMBER 2002


Share Share Translation Accumulated Total capital premium reserve deficit shareholders’

equityBalance 1 January 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,478,179 . . . . .3,672,190 . . . . . . . . . . . . — . . . . .(563,030) . . . . .8,587,339

Changes in translation reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . .(57,884) . . . . . . . . . . . . — . . . . . .(57,884)

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . .(615,796) . . . . .(615,796)

Balance 31 December 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,478,179 . . . . .3,672,190 . . . . . .(57,884) . . . .(1,178,826) . . . . .7,913,659

Changes in translation reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . .(155,616) . . . . . . . . . . . . — . . . . .(155,616)

Net profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . .194,244 . . . . . . .194,244

Balance 31 December 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,478,179 . . . . .3,672,190 . . . . .(213,500) . . . . .(984,582) . . . . .7,952,287



53

FINANCIAL REPORT XI

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2002


1. ORGANISATIONROSBANK is a joint stock bank which was incorporated in the Russian Federation in 1993. ROSBANK is regulated by the Central Bank

of the Russian Federation (the “CBR”) and conducts its business under license number 2272. ROSBANK's primary business consists of

commercial banking activities, securities dealings, foreign currency transactions and retail banking. On 7 June 1999 ROSBANK re-reg-

istered its legal status from a Limited liability bank to a Joint-stock bank. On 14 September 2000, at a joint shareholders meeting, it was

approved to merge UNEXIM Bank into ROSBANK. UNEXIM Bank was a joint stock bank incorporated in the Russian Federation. On

21 November 2000, the CBR approved the merger and de-registered UNEXIM Bank with ROSBANK as the successor bank.

ROSBANK has 13 branches in the Russian Federation and a representative office in Beijing (China). ROSBANK is registered at:

11, Ul. Mashi Poryvaevoy, Moscow, 107078, Russia.

ROSBANK is a parent company of the Banking Group (the “Bank”) which consists of the following enterprises which are consolidated

in the financial statements:

Name Country Proportion of ROSBANK’s of incorporation ownership interest

and voting powerRosbank (Switzerland) SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Switzerland . . . . . . . . . . . . . . . . . . . . . . . .100%

Rosbank International Finance BV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .The Netherlands . . . . . . . . . . . . . . . . . . . . . . . .100%

RosInvest SA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Luxembourg . . . . . . . . . . . . . . . . . . . . . . . .100%

Total number of employees of the Bank at 31 December 2002 and 2001 was 2,183 and 2,023, respectively.

These financial statements were authorized for issue by the Management Board of the Bank on 28 February 2003.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESAccounting basis – The financial statements have been prepared on the accrual basis of accounting, under the historical cost con-

vention and restated in terms of measuring unit (i.e. Russian Rouble) current at 31 December 2002.

The Bank maintains its accounting records in accordance with Russian and other applicable regulations. These financial statements

have been prepared from the Russian statutory accounting records and have been adjusted to conform to International Accounting

Standards (“IAS”).

The Russian Federation is currently experiencing high levels of inflation. Under IAS 29, “Financial Reporting in Hyperinflationary

Economies,” the accompanying financial statements have been adjusted to reflect the effects of the diminution of the purchasing

power of the Russian Rouble. The rates of inflation were 15.1% in 2002, 18.8% in 2001, 20.1% in 2000 and 36.7% in 1999.

All amounts in these financial statements, including corresponding figures, are stated in terms of the measuring unit (i.e. Russian Rouble)

current at 31 December 2002. Monetary assets and liabilities as at 31 December 2002 are not restated because they are already expressed

in terms of the monetary unit current at 31 December 2002. Non-monetary assets and liabilities and shareholders’ equity, including share

capital as at 31 December 2002 and all amounts as at 31 December 2001 are restated by applying a relevant conversion factor. The effect

of inflation on the Bank’s net monetary position is reflected in the profit and loss accounts as a loss on net monetary position.

It is expected that starting from 1 January 2003 the Russian economy will no longer be considered to be a hyperinflationary econo-

my for IAS purposes. Therefore, effective 1 January 2003 the Bank will discontinue application of the provisions of IAS 29 “Financial

Reporting in Hyperinflationary Economies”. The value of non-monetary assets, liabilities and shareholders’ equity expressed in terms

of the measuring unit current at 31 December 2002 will be a basis for carrying values during the subsequent periods effective

1 January 2003.

54

XI FINANCIAL REPORT

The preparation of financial statements in conformity with IAS requires management to make estimates and assumptions that affect

the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and

reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates that

are particularly susceptible to change relate to the provisions for losses on loans, investments and other operations, and the fair value

of financial instruments.

Reporting currency – The currency used in these financial statements is the Russian Rouble (RUR).

Principles of consolidation – The consolidated financial statements include the accounts of majority-owned subsidiaries. All sig-

nificant intercompany transactions and balances have been eliminated. The ownership interest of the Bank and proportion of voting

power of the Bank in the significant subsidiaries as at 31 December 2002 and 2001 is presented in Note 1.

In translating the financial statements of a foreign subsidiary into reporting currency for incorporation in the financial statements, the

Bank follows a translation policy in accordance with International Accounting Standard No. 21 (IAS 21), “The Effects of Changes in

Foreign Interest Rates” and the following procedures are done:

—assets and liabilities, both monetary and non-monetary, of the foreign entity are translated at closing rate;

—income and expense items of the foreign entity are translated at exchange rates at the dates of transactions;

—all resulting exchange differences are classified as equity until the disposal of the investment;

—on disposal of investment in the foreign entity related exchange differences are recognized in the profit and loss statement.

Investments in other subsidiaries and associated companies – Investments in corporate shares where the Bank owns more

than 20% of share capital, but does not have ability or intent to control or exercise significant influence over operating and financial

policies, or non-consolidation of such companies does not have a significant effect on the financial statements taken as a whole, or the

Bank intends to resell such investments in the nearest future, as well as investments in corporate shares where the Bank owns less than

20% of share capital, are accounted for at fair value of at cost, or at cost of acquisition, if the fair value of investments cannot be deter-

mined. Management periodically assesses the carrying values of such investments and provides valuation allowances, if required.

Cash and cash equivalents – Cash and cash equivalents include cash, unrestricted balances on correspondent and deposit accounts

with the Central Bank of the Russian Federation and the National Bank of Switzerland and loans and advances to banks in countries

included in the Organization for Economic Co-operation and Development (“OECD”) with remaining maturity within 90 days, pre-

cious metals in vault and placed at nostro accounts with OECD banks, as well as government debt securities included into trading port-

folio which may be converted to cash within a short period of time. For purposes of determining cash flows, the minimum reserve

deposit required by the Central Bank of the Russian Federation and the National Bank of Switzerland is not included as a cash equiva-

lent due to restrictions on its availability (Note 10).

Trading securities – Trading securities represent debt and equity securities held for trading that are acquired principally for the pur-

pose of generating a profit form short-term fluctuations in price or dealer’s margin. Trading securities are initially recorded at cost which

approximates fair value of the consideration given and subsequently measured at fair value. The Bank uses quoted market prices to deter-

mine fair value for the Bank’s trading securities. Fair value adjustment on trading securities is recognised in profit and loss for the period.

Securities available-for-sale – Securities available-for-sale represent equity and debt investments that are intended to be held for an

indefinite period of time. Such securities are initially recorded at cost which approximates the fair value of the consideration given.

Subsequently the securities are measured at fair value, with such remeasurement included in the profit and loss account. The Bank uses

quoted market prices to determine fair value for its securities available-for-sale. If such quotes do not exist, independent professional

estimation or management estimation is used.

Originated loans – Loans originated by the Bank are financial assets that are created by the Bank by providing money directly to a borrow-

er or by participating in a loan facility, other that those that are originated with the intent to be sold immediately or in the short term, which

are classified as held-for-trading. Originated loans are carried at the amount of principal debt, less any provision for possible loan losses.

Purchased loans and receivables – Loans and receivables acquired in the market subsequently to the original date are either clas-

sified as loans held-to-maturity or available-for-sale. Fair value of purchased loans classified as available-for-sale, is based on an active

market or on a discounted cash flow (“DCF”) model. If market price is not available and DCF model is not practicable, the price for sim-

ilar assets is used.

Allowance for possible loan losses – The determination of the allowance for possible loan losses is based on an analysis of the loan

portfolio and reflects the amount which, in the judgment of management, is adequate to provide for losses inherent in the loan port-

55

FINANCIAL REPORT XI

folio. Specific provisions are made as a result of a detailed appraisal of risk assets. In addition, provisions are carried to cover potential

risks, which although not specifically identified, are present in the loan portfolio judging by the previous experience.

The total increase in the allowance for possible loan losses is charged to profit and loss account and the total of the allowance for pos-

sible loan losses is deducted in arriving at loans and advances to customers and banks. Management's evaluation of the allowance is

based on the Bank’s past loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's

ability to repay, the estimated value of any underlying collateral and current economic conditions.

It should be understood that estimates of possible loan losses involve an exercise of judgment. While it is possible that in particular

periods the Bank may sustain losses, which are substantial relative to the allowance for possible loan losses, it is the judgment of man-

agement that the allowance for possible loan losses is adequate to absorb losses inherent in the loan portfolio.

Write off of loans and receivables – Loans and receivables are written off against allowance for possible loan losses and losses on

other assets in case of uncollectibility of loans and receivables, including through repossession of collateral. Loans and receivables are

written off after 3 years overdue according to the legislation or under arbitrage decision.

Non-accrual loans – Loans are placed on non-accrual status when interest or principal is delinquent for a period in excess of 90 days,

except when all amounts due are fully secured by cash or marketable securities and collection proceedings are in process. Interest

income is not recognised where recovery is doubtful.

Derivative financial instruments – The Bank enters into derivative financial instruments to manage currency and liquidity risks.

Although, such instruments are not qualified for hedging purposes. Derivatives entered into by the Bank for trading purposes include

forward, swaps as well as combinations of such instruments on foreign currency, precious metals and securities.

Derivative financial instruments are initially recorded at cost with their subsequent remeasurement to fair value. Fair values are

obtained from discounted cash flow model. Most of derivatives the Bank enters in are of short-term and speculative nature. The results

of the valuation of derivatives are reported in assets (aggregate of positive market values) or liabilities (aggregate of negative market val-

ues), respectively. Both positive and negative valuation results are recognised in the profit and loss account for the year in which they

arise under net gain on foreign exchange operations for foreign currency, net gain on operations with trading securities for securities

and under other income for precious metals derivatives.

Reverse repurchase agreements – The Bank enters into purchase and sale back agreements (“reverse repos”) in the normal course of its

business. A reverse repo is an agreement to purchase assets and resell them at a future date with accrued interest received. Assets purchased

under reverse repos are recorded in the financial statements as cash received on deposit which is collateralized by securities or other assets.

Impairment loss – If the recoverable amount of an asset is less that its carrying amount, the carrying amount of the asset is reduced

to its recoverable value. The difference being an impairment loss is recognized as an expense in the profit and loss account for the year

in which it arises.

Depreciation – Depreciation of fixed assets is designed to write off assets over their useful economic lives and is calculated on a

straight-line basis at the following annual prescribed rates:

Buildings and leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2 %

Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 %

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Over useful life of 3-10 years

After the recognition of an impairment loss the depreciation charge for fixed assets is adjusted in future periods to allocate the assets’

revised carrying value, less its residual value (if any), on a systematic basis over its remaining useful life.

Offset of financial assets and liabilities – A financial asset and financial liability are offset and the balanced amount is recorded in

the balance sheet, if the Bank has a legally enforceable right to set off the amounts recognized in the balance sheet and it has an inten-

tion to settle on a net basis or realize the asset and settle the liability simultaneously.

Foreign currency transactions – Assets and liabilities denominated in foreign currencies are translated at the appropriate spot rates

of exchange ruling at the balance sheet date. Profits and losses arising from these translations are included in net profit on foreign

exchange operations.

56

XI FINANCIAL REPORT

Rates of exchange – The exchange rates at year-end used by the Bank in the preparation of the financial statements are as follows:

31 Dec 2002 31 Dec 2001RUR/USD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31.7844 . . . . . . . . . . . . . . . . . . . . . . . .30.14

RUR/EUR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .33.1098 . . . . . . . . . . . . . . . . . . . . . . . .26.49

RUR/CHF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22.778 . . . . . . . . . . . . . . . . . . . . . . . .17.86

RUR/gold (1 ounce) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,894.73 . . . . . . . . . . . . . . . . . . . . .8,333.71

RUR/palladium (1 ounce) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,406.19 . . . . . . . . . . . . . . . . . . . .13,261.60

RUR/platimun (1 ounce) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19,008.17 . . . . . . . . . . . . . . . . . . . .14,376.78

Income taxes – Taxes on income are computed in accordance with the laws of the Russian Federation and countries of domicile of

the members of the Bank. Deferred taxes, if any, are provided on items recognised in different periods for financial reporting purposes

and income tax purposes, using the liability method at the statutory tax rate. Deferred tax liabilities, if any, which result from temporary

differences, are provided for in full. Deferred tax assets are recorded to the extent that there is a reasonable expectation that these assets

will be realised. Deferred income tax assets and liabilities are offset when:

—the Bank has a legally enforceable right to set off the recognised amounts of current tax assets and current tax liabilities;

—the Bank has an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously;

—the deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority in the each

future period in which significant amounts of deferred tax liabilities and assets are expected to be settled or recovered.

Fiduciary activities – The Bank provides trustee services to its customers. Assets accepted and liabilities incurred under the trustee

activities are not included in the Bank’s financial statements. The Bank provides depositary services to its customers, that include trans-

actions with securities on their depo accounts.

Reclassifications – Certain reclassifications and restatements have been made to the financial statement as at 31 December 2001 to

conform to the presentation as at 31 December 2002 and in accordance with IAS 29.

3. NET INTEREST INCOME BEFORE PROVISION

FOR POSSIBLE LOAN LOSSES2002 2001

Interest incomeInterest on loans and advances to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,189,950 . . . . . . . . . . . . . . . . . . . .3,166,748

Interest on loans and advances to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .537,999 . . . . . . . . . . . . . . . . . . . . . .463,299

Interest income on debt securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .909,585 . . . . . . . . . . . . . . . . . . . . . .421,420

Interest income on securities purchased under agreement to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,987 . . . . . . . . . . . . . . . . . . . . . . . . . . .—

Total interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,645,521 . . . . . . . . . . . . . . . . .4,051,467

Interest expenseInterest on deposits from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,738,399 . . . . . . . . . . . . . . . . . . . .1,204,939

Interest on deposits from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 390,056 . . . . . . . . . . . . . . . . . . . . . .239,379

Interest on debt securities issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,043,871 . . . . . . . . . . . . . . . . . . . . . .840,307

Interest expense on swap operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .— . . . . . . . . . . . . . . . . . . . . . . .20,356

Total interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,172,326 . . . . . . . . . . . . . . . . .2,304,981

Net interest income before provision for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . .1,473,195 . . . . . . . . . . . . . . . . .1,746,486

4. (PROVISION)/RECOVERY OF PROVISION2002 2001

(Provision)/recovery of provision for possible loan losses(Provision)/recovery of provision for loans and advances to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(15,064) . . . . . . . . . . . . . . . . . . . . . . .10,833

Recovery of provision for loans and advances to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,866 . . . . . . . . . . . . . . . . . . . . . .561,768

(9,198) 572,601

57

FINANCIAL REPORT XI

2002 2001(Provision)/recovery of provision for possible losses on other operations(Provision)/recovery of provision on other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(15,644) . . . . . . . . . . . . . . . . . . . . . . .71,370

Provision for possible losses on guarantees issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(160,576) . . . . . . . . . . . . . . . . . . . . .(65,028)

(176,220) 6,342

5. FEES AND COMMISSIONS2002 2001

Fees and commissions income:Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .421,863 . . . . . . . . . . . . . . . . . . . . . .579,999

Cash operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .203,228 . . . . . . . . . . . . . . . . . . . . . .209,782

Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71,352 . . . . . . . . . . . . . . . . . . . . . . .52,109

Foreign exchange operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55,214 . . . . . . . . . . . . . . . . . . . . . 229,496

Securities operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .46,605 . . . . . . . . . . . . . . . . . . . . . . . .2,976

Documentary operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,263 . . . . . . . . . . . . . . . . . . . . . . .16,914

Other operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27,659 . . . . . . . . . . . . . . . . . . . . . . .21,504

831,184 1,112,780

2002 2001Fees and commissions expense:Settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .146,531 . . . . . . . . . . . . . . . . . . . . . .121,413

Cash operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26,945 . . . . . . . . . . . . . . . . . . . . . . .21,339

Securities operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20,681 . . . . . . . . . . . . . . . . . . . . . . . .6,106

Foreign exchange operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8,374 . . . . . . . . . . . . . . . . . . . . . . .27,256

Guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 . . . . . . . . . . . . . . . . . . . . . . . . . . .41

202,572 176,155

6. OTHER INCOMEOther income includes net gain on precious metals operations amounting to RUR 86,977 thousand and RUR 228,995 thousand for the

years ended 31 December 2002 and 2001, respectively.

7. OPERATING EXPENSES2002 2001

Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,157,292 . . . . . . . . . . . . . . . . . . . .1,386,786

Operating lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .406,134 . . . . . . . . . . . . . . . . . . . . . .402,847

Taxes, other than income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .214,683 . . . . . . . . . . . . . . . . . . . . . .192,992

Repairs and maintenance expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .71,527 . . . . . . . . . . . . . . . . . . . . . . .58,481

Customs duties paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57,262 . . . . . . . . . . . . . . . . . . . . . . .61,005

Professional services fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48,969 . . . . . . . . . . . . . . . . . . . . . . .78,803

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39,297 . . . . . . . . . . . . . . . . . . . . . . .35,615

Expenses on stationery and other office expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31,605 . . . . . . . . . . . . . . . . . . . . . . .21,390

Advertising and marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28,622 . . . . . . . . . . . . . . . . . . . . . . .29,380

Security costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .26,504 . . . . . . . . . . . . . . . . . . . . . . .26,864

Telecommunication service expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22,915 . . . . . . . . . . . . . . . . . . . . . . .31,941

Charity expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20,577 . . . . . . . . . . . . . . . . . . . . . . .16,357

Penalties paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18,187 . . . . . . . . . . . . . . . . . . . . . . . .1,171

Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16,328 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Business trip expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15,364 . . . . . . . . . . . . . . . . . . . . . . .14,318

Representation expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12,559 . . . . . . . . . . . . . . . . . . . . . . .16,868

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51,105 . . . . . . . . . . . . . . . . . . . . . . .73,291

2,238,930 2,448,109

58

XI FINANCIAL REPORT

8. INCOME TAXESThe Bank provides for taxes based on the statutory financial statements maintained and prepared in local currency and in accordance

with Russian laws and accounting regulations that may differ from International Accounting Standards.

Future tax investigations or inquiries may result in material assessments. The Bank believes now that it has already complied with them,

and therefore has not provided for in the financial statements.

The Bank is subject to certain permanent tax differences due to non-tax deductibility of certain expenses and tax-free regime for cer-

tain income under Russian tax regulations.

Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial

reporting purposes and the amounts used for tax purposes.

Temporary differences as at 31 December 2002 and 2001 relate mostly to different methods of income and expense recognition as well

as to recorded values of certain assets.

Temporary differences as at 31 December 2002 and 2001 were:

2002 2001Deferred assets:Loans to banks and customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,274,057 . . . . . . . . . . . . . . . . . . . .1,014,466

Loans and advances from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77 . . . . . . . . . . . . . . . . . . . . . . .58,455

Securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51,154 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . . .15,557

Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . .170,765

Debt securities issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . . .47,195

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . . . .3,024

Loss carry forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . .203,537

Total deferred assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,325,288 . . . . . . . . . . . . . . . . .1,512,999

Deferred liabilities:Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(32,272) . . . . . . . . . . . . . . . . . . . . . . . . . . —

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(26,181) . . . . . . . . . . . . . . . . . . . . . . . . . . —

Securities purchased under agreement to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1,474) . . . . . . . . . . . . . . . . . . . . . . . . . . —

Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1,329) . . . . . . . . . . . . . . . . . . . . .(32,943)

Securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . .(95,578)

Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(82,222) . . . . . . . . . . . . . . . . . . . . . . . . . . —

Fixed and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(33,770) . . . . . . . . . . . . . . . . . . . . . .(4,703)

Total deferred liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(177,248) . . . . . . . . . . . . . . . . .(133,224)

Net deferred asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,148,040 . . . . . . . . . . . . . . . . .1,379,775Deferred income tax asset at the statutory tax rate (24%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .263,572 . . . . . . . . . . . . . . . . . . . . . .331,146

Deferred income tax asset at the statutory tax rate (15%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,474 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Total deferred income tax asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .271,045 . . . . . . . . . . . . . . . . . . .331,146Less valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(271,045) . . . . . . . . . . . . . . . . . . . .(331,146)

Net deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . . . —

59

FINANCIAL REPORT XI

Relationships between tax expenses and accounting profit for the year ended 31 December 2002 and 2001 are explained as follows:

2002 2001Profit before income tax, extraordinary lossesand after loss on net monetary position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .241,455 . . . . . . . . . . . . . . . . . . .736,593Income tax at the statutory tax rate (24% for 2002, 43% for 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .57,949 . . . . . . . . . . . . . . . . . . . . . .316,735

Tax effect of permanent differences (24% for 2002, 43% for 2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .49,363 . . . . . . . . . . . . . . . . . . . .(236,887)

Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(60,101) . . . . . . . . . . . . . . . . . . . . . . .32,409

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47,211 . . . . . . . . . . . . . . . . . . .112,257Current income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47,211 . . . . . . . . . . . . . . . . . . . . . .112,257

Deferred income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . . . . . . —

Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47,211 . . . . . . . . . . . . . . . . . . .112,257

9. EXTRAORDINARY LOSSESExtraordinary losses for the year ended 31 December 2001 are represented by the loss from selling of loans to customers. During 2001

the Bank exchanged part of its loan portfolio for cash, new loans and corporate shares. The exchange transaction losses reconciliation

is as follows:

2001Carrying value of loans exchanged out . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8,596,489

Promissory notes received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1,479,392)

Corporate shares received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(4,006,079)

Provision used to write off part of the exchanged loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(347,820)

Cash received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1,502,607)

Foreign exchange difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(20,459)

1,240,132

10. CASH AND CASH EQUIVALENTSThe balances of RUR 6,064,192 thousand and RUR 6,212,116 thousand as at 31 December 2002 and 2001 include RUR 4,542,614 thou-

sand and RUR 4,240,005 thousand, respectively, which represents the minimum reserve deposit required by the Central Bank of the

Russian Federation and National Bank of Switzerland. The Bank is required to maintain the reserve balance at the Central Bank of the

Russian Federation and National Bank of Switzerland at all times.

Cash and cash equivalents for the purposes of the statement of cash flows are comprised of the following:

2002 2001Cash and balances with the Central Bank of the Russian Federation

and National Bank of Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,064,192 . . . . . . . . . . . . . . . . . . . .6,212,116

Loans and advances to banks in OECD countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,094,882 . . . . . . . . . . . . . . . . . . . .6,757,076

Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,288,594 . . . . . . . . . . . . . . . . . . . .1,586,706

Precious metals in vault . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .245,403 . . . . . . . . . . . . . . . . . . . . . .657,617

Nostro in gold bullion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,789 . . . . . . . . . . . . . . . . . . . . . .310,209

12,696,860 15,523,724Less minimum reserve deposit with the Central Bank of the Russian Federation

and National Bank of Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(4,542,614) . . . . . . . . . . . . . . . . . .(4,240,005)

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8,154,246 . . . . . . . . . . . . . . . .11,283,719

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XI FINANCIAL REPORT

11. LOANS AND ADVANCES TO BANKS2002 2001

Advances to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,148,984 . . . . . . . . . . . . . . . . . . . .2,979,548

Loans to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,520,253 . . . . . . . . . . . . . . . . . . . .6,668,524

Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9,137 . . . . . . . . . . . . . . . . . . . . . . . .4,446

8,678,374 9,652,518Less allowance for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(89,270) . . . . . . . . . . . . . . . . . . . . .(86,587)

8,589,104 9,565,931Allowance for possible loan losses:At beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .86,587 . . . . . . . . . . . . . . . . . . . . . .114,629

Provision/(recovery) for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15,064 . . . . . . . . . . . . . . . . . . . . .(10,833)

Gain on net monetary position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(12,381) . . . . . . . . . . . . . . . . . . . . .(17,209)

At end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .89,270 . . . . . . . . . . . . . . . . . . . .86,587

At 31 December 2001 included in loans and advances to banks are assets pledged to guarantee forward security transactions amount-

ing to RUR 42,223 thousand.

At 31 December 2002 and 2001 the Bank had loans and advances to two and four counterparties totalling RUR 6,141,866 thousand

and RUR 5,944,483 thousand, respectively, which individually exceeded 10% of Bank’s equity capital.

Included in loans and advances to banks is a non-accrual loan of RUR 200 thousand and RUR 230 thousand as at 31 December 2002

and 2001, respectively.

As at 31 December 2002 and 2001 included in loans and advances to banks are guarantee deposits for plastic cards of RUR 56,988 thou-

sand and RUR 156,831 thousand, respectively. Those guarantee deposits were subsequently repaid within 90 day period and were treat-

ed as cash equivalents at the above dates.

12. TRADING SECURITIESInterest rates 2002 Interest rates 2001

to nominal to nominalSharesOrdinary shares of JSC UES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . .208,480 . . . . . . . . . . . . — . . . . . . .278,197

Ordinary shares of JSC Krasnoyarskenergo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . .105,325 . . . . . . . . . . . . — . . . . . . . . . . . . —

Ordinary shares of JSC Surgutneftegaz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . .80,047 . . . . . . . . . . . . — . . . . . . .147,152

Ordinary shares of JSC Rostelecom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . .64,898 . . . . . . . . . . . . — . . . . . . . .39,180

Ordinary shares of JSC Gazprom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . .47,477 . . . . . . . . . . . . — . . . . . . . . . . . . —

Privileged shares of JSC Transneft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . .38,225 . . . . . . . . . . . . — . . . . . . . .87,694

Ordinary shares of JSC NK Lukoil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . .24,488 . . . . . . . . . . . . — . . . . . . .145,135

Ordinary shares of JSC Mosenergo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . .24,224 . . . . . . . . . . . . — . . . . . . . .65,401

ADR shares of JSC Mosenergo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . .19,824 . . . . . . . . . . . . — . . . . . . . . . . . . —

ADR shares of JSC UES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . .8,560 . . . . . . . . . . . . — . . . . . . . . . . . . —

Privileged shares of JSC Krasnoyarskenergo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . .6,651 . . . . . . . . . . . . — . . . . . . . . . . . . —

Other shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . .17,329 . . . . . . . . . . . . — . . . . . . . .10,628

61

FINANCIAL REPORT XI

Interest rates 2002 Interest rates 2001to nominal to nominal

BondsOFZ bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10-15% . . . . . 1,107,183 . . . . . . .10-15% . . . . . . .170,053

Bonds of Moscow region authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17% . . . . . . .918,918 . . . . . . . . . .17% . . . . . . . . . . . . —

Bonds of JSC Severnaya Neft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23% . . . . . . .523,635 . . . . . . . . . .23% . . . . . . . . . . . . —

Bonds of LLC Russky Aluminy Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18% . . . . . . .318,552 . . . . . . . . . .18% . . . . . . . . . . . . —

OVVZ Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3% . . . . . . 264,675 . . . . . . . . . . .3% . . . . .1,523,448

Bonds of JSC RTK leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18% . . . . . . .244,026 . . . . . . . . . .18% . . . . . . . . . . . . —

Bonds of TD Prodimex . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21% . . . . . . .138,639 . . . . . . . . . .21% . . . . . . . . . . . . —

Bonds of IAPO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19% . . . . . . .122,858 . . . . . . . . . .19% . . . . . . . . . . . . —

Bonds of JSC UES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15% . . . . . . .111,434 . . . . . . . . . .15% . . . . . . . . . . . . —

Bonds of Moscow authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15% . . . . . . .103,826 . . . . . . . . . .15% . . . . . . .243,453

Bonds of JSC LOMO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20% . . . . . . .103,510 . . . . . . . . . .20% . . . . . . . . . . . . —

Bonds of Ufa authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14% . . . . . . . .90,355 . . . . . . . . . .14% . . . . . . . . . . . . —

Bonds of JSC Alrosa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16-20% . . . . . . . .91,765 . . . . . . .16-20% . . . . . . . . . . . . —

Bonds of Vyksunsky Metallugical Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19% . . . . . . . .75,006 . . . . . . . . . .19% . . . . . . . . . . . . —

Bonds of St-Peterburg authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14-17% . . . . . . . .73,299 . . . . . . .14-17% . . . . . . . . . . . . —

Bonds of RITEK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19% . . . . . . . .55,567 . . . . . . . . . .19% . . . . . . . . . . . . —

Bonds of Impexbank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18% . . . . . . . .50,375 . . . . . . . . . .18% . . . . . . . . . . . . —

Bonds of VBRR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10% . . . . . . . .47,543 . . . . . . . . . .10% . . . . . . . . . . . . —

Bonds of Nizhny Novgorod authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19% . . . . . . . .40,908 . . . . . . . . . .19% . . . . . . . . . . . . —

Bonds of JSC Uralsvyasinform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18% . . . . . . . .38,260 . . . . . . . . . .18% . . . . . . . . . . . . —

Bonds of Volzhsky Trubny Zavod . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18% . . . . . . . .24,653 . . . . . . . . . .18% . . . . . . . . . . . . —

Eurobonds of the Russian Federation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5-8% . . . . . . . 17,374 . . . . . . . .5-13% . . . . . . . .63,258

Bonds of JSC Aeroflot . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21% . . . . . . . .10,533 . . . . . . . . . .18% . . . . . . .260,085

Bonds of Magnitogorsky Metallurgy Combinat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . .18% . . . . . . .414,160

Bonds of Bashkorstan Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . .15% . . . . . . .113,195

Other corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20% . . . . . . . . .4,345 . . . . . . . . . .20% . . . . . . . . . . . . —

Promissory notesPromissory notes of JSC Gazprom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . 581,326 . . . . . . . . . . . — . . . . . . .303,733

Promissory notes of JSC Vneshtorgbank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . 517,891 . . . . . . . . . . . — . . . . . . . . . . . . —

Promissory notes of JSC Sberbank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . 241,199 . . . . . . . . . . . — . . . . . . . . . . . . —

Promissory notes of JSC TNK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . 80,645 . . . . . . . . . . . — . . . . . . . . . . . . —

Promissory notes of JSC Alrosa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . 53,053 . . . . . . . . . . . — . . . . . . . . . . . . —

Promissory notes of CB Gazprombank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . 3,971 . . . . . . . . . . . — . . . . . . . . . . . . —

Promissory notes of JSC Norilsky Nickel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . .269,270

6,700,852 4,134,042

At 31 December 2002 included in trading securities are OFZ bonds amounting to RUR 100,638 thousand that are pledged under general

agreements on money market transactions. At 31 December 2002 the Bank had no funds received under the above mentioned agree-

ments.

At 31 December 2001 included in trading securities are OFZ bonds amounting to RUR 170,053 thousand that were pledged under

deposit agreement (Note 18). Those securities were not included in calculation of cash equivalents.

Included in trading securities is accrued interest income on debt securities amounting to RUR 103,951 thousand and RUR 64,592 thou-

sand as at 31 December 2002 and 2001, respectively.

62

XI FINANCIAL REPORT

13. LOANS AND ADVANCES TO CUSTOMERS2002 2001

Loans collateralized by corporate guarantees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,389,667 . . . . . . . . . . . . . . . . . . . .6,715,877

Loans collateralized by securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,001,623 . . . . . . . . . . . . . . . . . . . . . .250,604

Loans collateralized by goods in turnover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,471,149 . . . . . . . . . . . . . . . . . . . .3,632,020

Loans collateralized by inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,515,480 . . . . . . . . . . . . . . . . . . . . . .578,276

Loans collateralized by cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .997,724 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Loans collateralized by property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .255,642 . . . . . . . . . . . . . . . . . . . . . .767,464

Loans collateralized by real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .243,615 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Unsecured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18,756,348 . . . . . . . . . . . . . . . . . . .18,494,361

Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .220,867 . . . . . . . . . . . . . . . . . . . . . . .96,444

35,852,115 30,535,046Less allowance for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(2,180,775) . . . . . . . . . . . . . . . . . .(2,946,673)

33,671,340 27,588,373Purchased unsecured loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . .413,280

33,671,340 28,001,653

Allowance for possible loan losses: 2002 2001At beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,946,673 . . . . . . . . . . . . . . . . . . . .4,433,554

Loans written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(955,805) . . . . . . . . . . . . . . . . . . . .(353,519)

Recovery of loans previously written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .540,794 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Recovery of provision for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(5,866) . . . . . . . . . . . . . . . . . . . .(561,768)

Gain on net monetary position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(345,021) . . . . . . . . . . . . . . . . . . . .(571,594)

At end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,180,775 . . . . . . . . . . . . . . . . .2,946,673

Included in loans and advances to customers are non-accrual loans of RUR 540,916 thousand and RUR 385,399 thousand at

31 December 2002 and 2001, respectively.

The Bank had loans to seven customers, amounting to RUR 12,570,174 thousand and RUR 11,840,869 thousand, which individually

exceed 10% of the Bank’s equity capital at 31 December 2002 and 2001, respectively.

Analysis by sector 2002 2001Originated loansFinance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,886,029 . . . . . . . . . . . . . . . . . . . .8,114,789

Trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,331,249 . . . . . . . . . . . . . . . . . . . .4,937,646

Aircraft engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,254,509 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Government . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,190,289 . . . . . . . . . . . . . . . . . . . . . .340,696

Oil and gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,131,163 . . . . . . . . . . . . . . . . . . . .4,523,383

Food . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,234,668 . . . . . . . . . . . . . . . . . . . . . .330,771

Precious metals and diamond extraction and manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,253,341 . . . . . . . . . . . . . . . . . . . . . .420,435

Hotel business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,217,860 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .985,126 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .830,918 . . . . . . . . . . . . . . . . . . . . . .283,667

Ferrous metals manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .758,146 . . . . . . . . . . . . . . . . . . . . . .586,799

Manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .734,482 . . . . . . . . . . . . . . . . . . . . . .346,911

Non-ferrous metals manufacturing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .690,320 . . . . . . . . . . . . . . . . . . . .7,460,812

Chemical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .548,580 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Heavy industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .467,587 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417,488 . . . . . . . . . . . . . . . . . . . . . .799,363

Individuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .363,520 . . . . . . . . . . . . . . . . . . . . . .203,117

Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40,214 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . .1,170,148

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .295,759 . . . . . . . . . . . . . . . . . . . . . .920,065

Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .220,867 . . . . . . . . . . . . . . . . . . . . . . .96,444

35,852,115 30,535,046Less allowance for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(2,180,775) . . . . . . . . . . . . . . . . . .(2,946,673)

33,671,340 27,588,373

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FINANCIAL REPORT XI

Analysis by sector 2002 2001Purchased loansFood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . .239,825

Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . .173,455

— 413,28033,671,340 28,001,653

14. SECURITIES PURCHASED UNDER AGREEMENTS TO RESELLAs at 31 December 2002 securities purchased under agreements to resell comprised of shares of JSC “Aeroflot” of RUR 58,109 thousand

and OVVZ (4th and 5th transhes) of RUR 4,723 thousand. The reverse repurchase agreements mature within one month.

15. INVESTMENT SECURITIES2002 2001

Securities available-for-sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .842,513 . . . . . . . . . . . . . . . . . . . .4,326,860

Equity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145,081 . . . . . . . . . . . . . . . . . . . . . .171,400

987,594 4,498,260Less allowance for possible investment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(90,166) . . . . . . . . . . . . . . . . . . . . .(87,267)

897,428 4,410,993

Securities available-for-sale 2002 2001MMK Finance bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .417,720 . . . . . . . . . . . . . . . . . . . . . . . . . . —

OFZ Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .195,236 . . . . . . . . . . . . . . . . . . . . . .323,346

Ordinary shares of JSC Kamaz . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90,224 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Promissory notes of Uralo-Sibirsky Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .55,186 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Ordinary shares of JSC Sibirtelecom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35,963 . . . . . . . . . . . . . . . . . . . . . . . . . . —

OVVZ Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19,791 . . . . . . . . . . . . . . . . . . . . . . .13,322

Other shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28,393 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Privileged shares of JSC Transneft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . .3,990,192

842,513 4,326,860Less allowance for possible investment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(39,105) . . . . . . . . . . . . . . . . . . . . . . . . . . —

803,408 4,326,860

At 31 December 2001 included in securities available-for-sale are OFZ bonds amounting to RUR 62,688 thousand which were pledged

under deposit agreement (Note 18).

Included in securities available-for-sale is accrued interest income on debt securities amounting to RUR 36,933 thousand and

RUR 6,221 thousand as at 31 December 2002 and 2001, respectively.

Interest is paid on MMK Finance bonds and OFZ Bonds at a rate of 10% and 10-15% per annum to nominal, respectively.

2002 2001Equity investmentsSubsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .550 . . . . . . . . . . . . . . . . . . . . . . . . . .289

Associates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22,066 . . . . . . . . . . . . . . . . . . . . . . .26,805

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .122,465 . . . . . . . . . . . . . . . . . . . . . .144,306

145,081 171,400Less allowance for possible investment losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(51,061) . . . . . . . . . . . . . . . . . . . . .(87,267)

94,020 84,133

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XI FINANCIAL REPORT

Subsidiaries Share 2002 Share 2001of ownership of ownership

Security Agency Shield Plus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100% . . . . . . . . . . 300 . . . . . . . . . . . — . . . . . . . . . . . . —

LLC “OP Regional detective agency” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100% . . . . . . . . . . 110 . . . . . . . . .100% . . . . . . . . . . .127

LLC “PMD-Shield” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100% . . . . . . . . . . . 80 . . . . . . . . .100% . . . . . . . . . . . .92

LLC “Trapeznaya” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100% . . . . . . . . . . . 50 . . . . . . . . .100% . . . . . . . . . . . .58

Processing company “Nickel” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100% . . . . . . . . . . . 10 . . . . . . . . .100% . . . . . . . . . . . .12

550 289AssociatesJSC “National Registration Company” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20% . . . . . . . . . 9,394 . . . . . . . . . .20% . . . . . . . .10,812

LLC “Interbank Loan Union” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31% . . . . . . . . . 8,466 . . . . . . . . . .31% . . . . . . . . .9,744

JSC “DCC” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27% . . . . . . . . . 3,692 . . . . . . . . . .27% . . . . . . . . .4,249

NPF “Interros Dostoinstvo” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .38% . . . . . . . . . . 500 . . . . . . . . . .50% . . . . . . . . . . .576

JSC Rosinspektorat . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28% . . . . . . . . . . . 14 . . . . . . . . . . . — . . . . . . . . . . . . —

JSC “Belstrakhinvest” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . .49% . . . . . . . . .1,424

22,066 26,805

Allowance for possible investment losses: 2002 2001At beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .87,267 . . . . . . . .86,852

Provision for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15,515 . . . . . . . .15,193

Gain on net monetary position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(12,616) . . . . . .(14,778)

At end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .90,166 . . . . . . . .87,267

In 2002 JSC “Belstrakhinvest” increased its share capital. As a result the Bank’s share in the share capital of JSC “Belstrakhinvest”

decreased to 0.4% as at 31 December 2002.

In 2002 NPF “Interros Dostoinstvo” increased its share capital. As a result the Bank’s share in the share capital of NPF “Interros

Dostoinstvo” decreased to 38.46% as at 31 December 2002.

Subsidiaries and associates were not consolidated and/or accounted for under equity method in these financial statements because this

would not have had a significant effect on the Bank’s financial statements taken as a whole.

16. FIXED AND INTANGIBLE ASSETSBuilding and Furniture and Intangible Total

leasehold equipment assetsimprovements

At cosAs at 31 December 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70,371 . . . . . . . . .91,681 . . . . . . .100,777 . . . . . . .262,829

Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,098 . . . . . . . . 24,832 . . . . . . . .17,097 . . . . . . . .48,027

Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1,693) . . . . . . . .(7,754) . . . . . . . (3,727) . . . . . .(13,174)

As at 31 December 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .74,776 . . . . . . .108,759 . . . . . .114,147 . . . . . . .297,682

Accumulated depreciationAs at 31 December 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27,507 . . . . . . . . .58,236 . . . . . . . .45,133 . . . . . . .130,876

Charge for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,148 . . . . . . . . .21,707 . . . . . . . .13,442 . . . . . . . .39,297

Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(84) . . . . . . . .(4,109) . . . . . . . .(1,669) . . . . . . . .(5,862)

As at 31 December 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31,571 . . . . . . . .75,834 . . . . . . . .56,906 . . . . . . .164,311

Net book valueAs at 31 December 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43,205 . . . . . . . . .32,925 . . . . . . . .57,241 . . . . . . 133,371

Net book valueAs at 31 December 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42,864 . . . . . . . . .33,445 . . . . . . . .55,644 . . . . . . .131,953

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17. OTHER ASSETS2002 2001

Penalties on VAT recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .169,865 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Platinum bullion in vault . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120,428 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Gold bullion in vault . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100,404 . . . . . . . . . . . . . . . . . . . . . .657,617

Positive replacement value of derivatives and spot deals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99,945 . . . . . . . . . . . . . . . . . . . . . . . . . .922

Debtors on plastic cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,668 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Prepaid expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30,612 . . . . . . . . . . . . . . . . . . . . . . .48,129

Palladium bullion in vault . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24,571 . . . . . . . . . . . . . . . . . . . . . . . . . . —

Taxes, other than income tax, recoverable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16,451 . . . . . . . . . . . . . . . . . . . . . . . .9,004

Nostro in gold bullion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3,789 . . . . . . . . . . . . . . . . . . . . . .310,209

Due on restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . . .35,752

Accrued commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . . .15,585

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,483 . . . . . . . . . . . . . . . . . . . . . . .74,655

741,216 1,151,873Less allowance for losses on other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(18,372) . . . . . . . . . . . . . . . . . . . . .(35,752)

722,844 1,116,121

Allowance for losses on other assets: 2002 2001At beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,752 . . . . . . . . . . . . . . . . . . . . . .119,976

Assets written off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(31,390) . . . . . . . . . . . . . . . . . . . . . . . . . . —

Provision /(recovery of provision) for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15,644 . . . . . . . . . . . . . . . . . . . . .(71,370)

Gain on net monetary position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1,634) . . . . . . . . . . . . . . . . . . . . .(12,854)

At end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18,372 . . . . . . . . . . . . . . . . . . . . . . .35,752

18.DEPOSITS FROM BANKS2002 2001

Repayable on demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,301,481 . . . . . . . . . . . . . . . . . . . .1,455,085

Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,423,571 . . . . . . . . . . . . . . . . . . . .1,038,528

Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12,408 . . . . . . . . . . . . . . . . . . . . . . .58,455

4,737,460 2,552,068

Included in deposits from banks are demand deposits denominated in gold bullion of RUR 6,646 thousand and RUR 20,068 thousand

as at 31 December 2002 and 2001, respectively.

As at 31 December 2001 included in deposits from banks are demand deposits amounting to RUR 338,049 thousand that are colla-

teralised by OFZ bonds reported as trading securities and securities available-for-sale at fair value totalling RUR 232,741 thousand

(Notes 12, 15).

19. CUSTOMER ACCOUNTS2002 2001

Repayable on demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8,176,147 . . . . . . . . . . . . . . . . . . .14,634,432

Time deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25,324,924 . . . . . . . . . . . . . . . . . . .17,351,516

Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .175,239 . . . . . . . . . . . . . . . . . . . . . .123,071

33,676,310 32,109,019

Included in customer accounts are time and demand deposits denominated in precious metals of RUR 297,952 thousand and RUR

931,410 thousand as at 31 December 2002 and 2001, respectively.

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XI FINANCIAL REPORT

20. DEBT SECURITIES ISSUED2002 2001

Discount bearing promissory notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,170,832 . . . . . . . . . . . . . . . . . . . .1,806,597

Adjustable Rate Guaranteed Bonds due in 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,131,972 . . . . . . . . . . . . . . . . . . . .4,509,848

Interest-free promissory notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .694,524 . . . . . . . . . . . . . . . . . . . .1,035,659

Interest bearing promissory notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .568 . . . . . . . . . . . . . . . . . . . . . . .89,621

Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .880 . . . . . . . . . . . . . . . . . . . . . . . . . .640

9,998,776 7,442,365

As at 31 December 2002 and 2001 interests rates on promissory notes denominated in foreign currency range from 0% to 6.2% per

annum and from 0% to 9.2% per annum, respectively, interest rates on the promissory notes denominated in Roubles range from 0% to

30% per annum and from 0% to 37.5% per annum, respectively. The discount on respective bearing promissory notes is amortized over

the life of the note using effective interest rate method and is recorded in interest expense on debt securities issued.

Adjustable Rate Guaranteed Bonds due in 2012 bear interest rate at 7% which is subject to subsequent scheduled correction.

21. OTHER LIABILITIES2002 2001

Allowance for possible losses on guarantees issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .218,255 . . . . . . . . . . . . . . . . . . . . . . .79,226

Creditors on operations with securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .128,579 . . . . . . . . . . . . . . . . . . . . . .141,892

Creditors on operations with plastic cards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28,390 . . . . . . . . . . . . . . . . . . . . . . .21,663

Taxes, other than income tax, payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28,366 . . . . . . . . . . . . . . . . . . . . . . .25,560

Negative replacement value of derivatives and spot deals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,181 . . . . . . . . . . . . . . . . . . . . . . .38,689

Current income tax payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,790 . . . . . . . . . . . . . . . . . . . . . . . .6,151

Suspense amounts subsequently paid back . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . .101,839

Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44,569 . . . . . . . . . . . . . . . . . . . . . . .18,475

477,130 433,495

Allowance for possible losses on guarantees issued: 2002 2001At beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .79,226 . . . . . . . . . . . . . . . . . . . . . . .23,060

Provision for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .160,576 . . . . . . . . . . . . . . . . . . . . . . .65,028

Gain on net monetary position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(21,547) . . . . . . . . . . . . . . . . . . . . . .(8,862)

At end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .218,255 . . . . . . . . . . . . . . . . . . . . . . .79,226

22. SHARE CAPITAL AND SHARE PREMIUMAs at 31 December 2002 and 2001 share capital authorized, issued and fully paid comprised of 340,528,420 ordinary shares with par

value of RUR 10 each. All shares are ranked equally and carry one vote.

Share premium of RUR 3,672,190 thousand represents the excess of contributions received in share capital over the nominal value of

shares issued.

23. FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKIn the normal course of business the Bank is a party to financial instruments with off-balance sheet risk in order to meet the needs of

its customers. These instruments, involving varying degrees of credit risk, are not reflected in the balance sheet.

The Bank’s maximum exposure to credit loss under contingent liabilities and commitments to extend credit, in the event of non-per-

formance by the other party where all counterclaims, collateral or security prove valueless, is represented by the contractual amounts

of those instruments.

The Bank uses the same credit control and management policies in undertaking off-balance sheet commitments as it does for on-bal-

ance sheet lending.

67

FINANCIAL REPORT XI

The risk-weighted amount is obtained by applying credit conversion factors and counterparty risk weightings according to the princi-

ples employed by the Basle Committee on Banking Supervision.

As at 31 December 2002 and 2001 the nominal or contract amounts and the risk weighted credit equivalents of instruments with off-

balance sheet risks were:

31 Dec 2002 31 Dec 2001Nominal Risk Nominal RiskAmount Weighted Amount Weighted

Amount AmountContingent liabilities and credit commitments:Guarantees issued and similar commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2,565,587 . . . . .2,565,587 . . . . .2,100,515 . . . . .2,100,515

Letters of credit and other transaction related

contingent obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .370,701 . . . . . . .143,066 . . . . . . .442,151 . . . . . . . . .1,553

Commitments on loans and unused lines of credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,342,266 . . . . .1,690,935 . . . . .4,800,409 . . . . . . .350,745

Exchange rate contracts (amount payable):Forward foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .739,612 . . . . . . .29,584 . . . . . .609,869 . . . . . . . .24,394

Swap foreign exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,493,042 . . . . . . .59,722 . . . . .1,470,894 . . . . . . . .58,836

Forward contracts on precious metals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .467,500 . . . . . . . .18,700 . . . . . . .14,013 . . . . . . . . . . .561

Forward contracts on securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .207,078 . . . . . . . . .8,283 . . . . . . . . . . . — . . . . . . . . . . . . —

As at 31 December 2002 the Bank has entered into spot contracts to purchase and sell currency amounting to RUR 105,888 thousand

and RUR 105,949 thousand, respectively.

As at 31 December 2001 the Bank had entered into spot contracts to purchase OVVZ bonds and sell Eurobonds amounting to

RUR 307,171 thousand and RUR 53,301 thousand, respectively, with fair value of RUR 308,000 thousand and RUR 53,290 thousand,

respectively.

24. COMMITMENTS AND CONTINGENCIESCapital commitments – The Bank had no material commitments for capital expenditures outstanding as at 31 December 2002.

Operating Leases – The Bank’s future minimum rental payments under non-cancelable operating leases of buildings and equipment

in effect at 31 December 2002 are presented in the table below:

RUR thnd2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .431,609

2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44,577

2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35,964

2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35,964

2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32,032

Operating Environment – The Bank's principal business activities are within the Russian Federation. Laws and regulations affecting

business environment in the Russian Federation are subject to rapid changes and the Bank's assets and operations could be at risk due

to negative changes in the political and business environment.

Legal proceedings – From time to time and in the normal course of business, claims against the Bank are received from customers.

Management is of the opinion that no material unaccrued losses will be incurred and accordingly no provision has been made in these

financial statements.

Taxes – Due to the presence in Russian commercial legislation, and tax legislation in particular, of provisions allowing more than one

interpretation, and also due to the practice developed in a generally unstable environment by the tax authorities of making arbitrary

judgment of business activities, if a particular treatment based on Management’s judgment of the Bank’s business activities was to be

challenged by the tax authorities, the Bank may be assessed additional taxes, penalties and interest. Tax years remain open to review by

the tax authorities for three years.

68

XI FINANCIAL REPORT

Fiduciary deposits – As at 31 December 2002 and 2001 the Bank received funds for administration in the fiduciary deposits amount-

ing to RUR 558,096 thousand and RUR 1,096,222 thousand, respectively. The Bank also provides depositary services to its customers. As

at 31 December 2002 and 2001 the Bank held the clients’ securities on its accounts for nominal holding in the amount of 2,536,448,671

and 2,198,035,128 securities, respectively.

25. TRANSACTIONS WITH RELATED PARTYRelated parties are considered to include shareholders of the Bank and entities under common ownership and control with the Bank.

As at 31 December 2002 and 2001 the Bank had loans and advances to customers – related parties totaling RUR 2,971,782 thousand

and RUR 1,275,001 thousand, respectively, for which the Bank had an allowance for possible loan losses of RUR 58,821 thousand and

RUR 29,752 thousand, respectively.

During the years ended 31 December 2002 and 2001 the Bank originated loans and advances to customers – related parties amount-

ing to RUR 4,186,071 thousand and RUR 1,381,868 thousand, respectively, and received loans and advances repaid of RUR 2,489,290

thousand and RUR 1,256,627 thousand, respectively.

As at 31 December 2002 and 2001 the Bank’s investments into the equity of non-consolidated subsidiaries and affiliated companies –

related parties amounted to RUR 22,616 thousand and RUR 27,094 thousand, respectively.

The Bank also held deposits from customers – related parties of RUR 1,089,117 thousand and RUR 5,762,857 thousand as at

31 December 2002 and 2001, respectively.

During the years ended 31 December 2002 and 2001 the Bank received deposits from customers – related parties of RUR 94,730,456

thousand and RUR 120,900,903 thousand, respectively, and repaid deposits totaling RUR 99,404,196 thousand and RUR 118,367,483

thousand, respectively.

The Bank had guarantees issued on behalf of related parties and outstanding as at 31 December 2002 and 2001 amounting to

RUR 186,165 thousand and RUR 122,342 thousand, respectively, for which the Bank had an allowance for possible losses of RUR 34,006

thousand and RUR 2,354 thousand, respectively.

As at 31 December 2001 the commitments to issue loans to related parties were RUR 387,395 thousand.

Included in the profit and loss account for the years ended 31 December 2002 and 2001 are the following amounts which arose due

to transactions with related parties:

2002 2001Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99,499 . . . . . . . . . . . . . . . . . . . . . . .25,864

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(11,224) . . . . . . . . . . . . . . . . . . . .(301,542)

Commission income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16,142 . . . . . . . . . . . . . . . . . . . . . . .27,196

Transactions with related parties entered by the Bank during the years ended 31 December 2002 and 2001 and outstanding as at these

dates were made in the normal course of business and mostly on an arm-length basis.

26. PENSIONS AND RETIREMENT PLANSEmployees receive pension benefits from the Russian Federation in accordance with the laws and regulations of the country. As at

31 December 2002 and 2001 the Bank was not liable for any supplementary pensions, post-retirement health care, insurance benefits,

or retirement indemnities to its current or former employees.

27. FAIR VALUE OF FINANCIAL INSTRUMENTSEstimated fair value disclosures of financial instruments is made in accordance with the requirements of IAS 32 “Financial Instruments:

Disclosure and Presentation” and IAS 39 “Financial Instruments: Recognition and Measurement”. As no readily available market exists

for a large part of the Bank’s financial instruments, judgment is necessary in arriving at fair value, based on current economic conditions

and specific risks attributable to the instrument. The estimates presented herein are not necessarily indicative of the amounts the Bank

could realize in a market exchange from the sale of its full holdings of a particular instrument.

69

FINANCIAL REPORT XI

As at 31 December 2002 and 2001 the following methods and assumptions were used by the Bank to estimate the fair value of each

class of financial instrument for which it is practicable to estimate such value:

Cash and balances with the Central Bank of the Russian Federation and National Bank of Switzerland – For these instru-

ments the carrying amount is a reasonable estimate of fair value.

Loans and advances to banks – For these assets, the carrying amount is a reasonable estimate of fair value.

Trading securities – As at 31 December 2002 and 2001 trading securities are stated at fair value. Fair value of trading securities was

determined by reference to active markets plus accrued coupon on debt securities.

Loans and advances to customers – The fair value of originated loans in the loan portfolio is based on the credit and interest rate

characteristics of the individual loans within each sector of the portfolio. The estimation of the provision for loan losses includes con-

sideration of risk premiums applicable to various types of loans based on factors such as the current situation of the economic sector

in which each borrower operates, the economic situation of each borrower, collateral and guarantees obtained. Accordingly, the pro-

vision for loan losses reflects a reasonable estimate of the carrying value adjustment required to reflect the impact of credit risk.

Fair value of purchased loans included in the loan portfolio is determined based on subsequent reimbursement price.

Securities purchased under agreements to resell – The fair value of securities purchased under agreements to resell with carry-

ing value of RUR 62,832 thousand amounted to RUR 93,477 thousand as at 31 December 2002 that is determined based on market

value of backed securities with reference to an active market.

Investment securities – As at 31 December 2002 and 2001 securities available-for-sale are stated at fair value. Fair value of securities

available-for-sale was determined by reference to active markets plus accrued coupon on debt securities, for unquoted securities the

base was the value of share in estimated equity capital of investee and/or management estimation.

Deposits from banks – As at 31 December 2002 and 2001 the carrying amount of deposits from banks is a reasonable estimate of

their fair value.

Customer accounts – As at 31 December 2002 and 2001 the carrying amount of deposits and current accounts of the Bank’s cus-

tomers is a reasonable estimate of their fair value.

Debt securities issued – Promissory notes issued by the Bank as at 31 December 2002 and 2001, mature mainly within one year and

are stated at cost, adjusted for amortization of premium and discounts, which approximates their fair value of RUR 5,866,804 thousand

and RUR 2,932,517 thousand, respectively. Fair value of Adjustable Rate Guaranteed Bonds issued by the Bank and due in 2012 was

determined using DCF model and at 31 December 2002 and 2001 amounted to RUR 3,539,265 thousand and RUR 3,772,148 thousand,

respectively.

Derivative financial instruments – As at 31 December 2002 and 2001 derivative financial instruments are stated at fair value.

28. REGULATORY MATTERSQuantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios

(as set forth in the table below) of total and tier 1 capital to risk weighted assets.

The capital is calculated as the amount of restricted and unrestricted elements of the shareholders’ equity plus the Bank’s provisions for

the principal risks, provided that the total provision for possible loan losses does not exceed 1.25% of the risk weighted assets.

70

XI FINANCIAL REPORT

The ratio was calculated in accordance with rules established by the Basle Agreement by applying the following risk estimates:

Estimate . . . . .Description of position0% . . . . . . . . . . .Cash and balances with the Central Bank of the Russian Federation

0% . . . . . . . . . . .Government debt securities nominated in Russian Roubles

20% . . . . . . . . . . .Loans and advances to banks maturing within 1 year

100% . . . . . . . . . .Loans and advances to customers

100% . . . . . . . . . .Other assets

0% . . . . . . . . . . .Standby letters of credit secured by customer funds

50% . . . . . . . . . . .Other standby letters of credit and other transaction related contingent obligations

and commitments on unused loans with the initial maturity of over 1 year

100% . . . . . . . . . .Guarantees issued and similar commitments

The Bank’s actual capital amounts and ratios are presented in the following table:

Capital amounts and ratios Actual For Capital Ratio MinimumAdequacy For Capital Requiredpurposes Adequacy Ratio

purposesAs at 31 December 2002Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,952,287 . . . . .8,416,455 . . . . . . . . .18.2% . . . . . . . . . . . .8%

Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,952,287 . . . . .7,952,287 . . . . . . . . .17.2% . . . . . . . . . . . .4%

As at 31 December 2001Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,913,659 . . . . .8,294,472 . . . . . . . . .19.6% . . . . . . . . . . .8 %

Tier 1 capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7,913,659 . . . . .7,913,659 . . . . . . . . .18.7% . . . . . . . . . . .4 %

As at 31 December 2002 the Bank decreased its Total capital for Capital adequacy purposes by the subordinated loans of RUR 115,000

thousand issued to companies and banks the Bank has investment in that are reported in other investments.

29. RISK MANAGEMENT POLICIESThe Bank manages the following main types of risks:

Credit Risk – The Credit Committee approves each new loan and any changes and amendments to loan agreements. The Credit and

Guarantees Department performs current monitoring.

Liquidity and cash flow risks – The Resources Department performs management of these risks through analysis of asset and lia-

bility maturity and performance of money market transactions for current liquidity support and cash flow optimization.

Currency risk – The Currency Department performs currency risk management through management of open currency position,

which enables the Bank to minimize losses from significant fluctuations of exchange rates of national and foreign currencies.

Interest rate and market risks – The Resources Department performs management of interest rate and market risks through interest

position hedges, which enables the Bank to avoid negative interest margin.

Country risk – The Budgeting and Analytical Department performs risk optimization related to changes in legislation and regulative

documents, and its impact on the Bank. This approach allows the Bank to minimize possible losses from the impairment of the invest-

ment climate in the Russian Federation.

30. MATURITY ANALYSISThe following table presents an analysis of interest rate risk and liquidity risk on a contractual basis. Interest bearing assets and liabili-

ties generally have relatively short maturities and interest rates are reprised only at maturity.

71

FINANCIAL REPORT XI

Up 1 month 3 months 1 year Over Maturity 31 Dec 2002to 1 month to 3 months to 1 year to 5 years 5 years undefined RUR thnd

(incl. allowance Totalfor losses)

ASSETSLoans and advances to banks, . . . . . . .4,858,420 . . . . . . .512,696 . . . . . . . .55,240 . . . . . . .877,944 . . . . . . . . . . . . — . . . . . .(48,147) . . . . .6,256,153

less allowance for possible loan losses

Trading securities . . . . . . . . . . . . . . . . . .6,055,324 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . .6,055,324

Loans and advances to customers, . . .2,983,911 . . . . .6,892,894 . . . .20,480,447 . . . . .4,551,438 . . . . . . .402,509 . . . .(1,746,383) . . . .33,564,816

less allowance for possible loan losses

Securities purchased under agreement to resell62,832 . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . .62,832

Investment securities . . . . . . . . . . . . . . . . . .34,507 . . . . . . . .57,611 . . . . . . .593,142 . . . . . . . . .2,614 . . . . . . . . . . . .59 . . . . . . . .(2,614) . . . . . . .685,319

Total interest bearing assets . . .13,994,994 . . . .7,463,201 . . .21,128,829 . . . .5,431,996 . . . . . .402,568 . . .(1,797,144) . . .46,624,444Cash and balances with

the Central Bank of the Russian

Federation and National Bank

of Switzerland . . . . . . . . . . . . . . . . . . . . .1,521,578 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . .4,542,614 . . . . .6,064,192

Loans and advances to banks, less

allowance for possible loan losses . . .2,374,074 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . .(41,123) . . . . .2,332,951

Trading securities . . . . . . . . . . . . . . . . . . . .645,528 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . .645,528

Loans and advances to customers, less

allowance for possible loan losses . . . . .540,916 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . .(434,392) . . . . . . .106,524

Investment securities . . . . . . . . . . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . .154,580 . . . . . . .145,081 . . . . . . . . . . . . — . . . . . .(87,552) . . . . . . .212,109

Fixed and intangible assets,

less accumulated depreciation . . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . .90,166 . . . . . . . .43,205 . . . . . . . . . . . . — . . . . . . .133,371

Other assets,

less allowance for possible losses . . . . . .598,386 . . . . . . .126,806 . . . . . . . .16,024 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . .(18,372) . . . . . . .722,844

TOTAL ASSETS . . . . . . . . . . . . . . . .19,675,476 . . . .7,590,007 . . .21,299,433 . . . .5,667,243 . . . . . .445,773 . . . .2,164,031 . . .56,841,963

LIABILITIESDeposits from banks . . . . . . . . . . . . . . . . .299,650 . . . . . . . .22,810 . . . . . . . .65,369 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . .387,829

Deposits from customers . . . . . . . . . . .5,930,794 . . . .12,381,070 . . . . .8,361,497 . . . . . . .162,739 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . .26,836,100

Debt securities issued . . . . . . . . . . . . . . . .848,978 . . . . .1,049,460 . . . . .2,705,906 . . . . .4,699,908 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . .9,304,252

Total interest bearing liabilities .7,079,422 . . .13,453,340 . . .11,132,772 . . . .4,862,647 . . . . . . . . . . — . . . . . . . . . . — . . .36,528,181Deposits from banks . . . . . . . . . . . . . . .2,521,132 . . . . . . .139,615 . . . . . . .816,289 . . . . . . .872,595 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . .4,349,631

Deposits from customers . . . . . . . . . . .6,840,210 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . .6,840,210

Debt securities issued . . . . . . . . . . . . . . . .432,344 . . . . . . . .92,118 . . . . . . . .96,368 . . . . . . . .73,694 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . .694,524

Other liabilities . . . . . . . . . . . . . . . . . . . . . . .67,603 . . . . . . .164,731 . . . . . . . .26,541 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . .218,255 . . . . . . .477,130

TOTAL LIABILITIES . . . . . . . . . . . .16,940,711 . . .13,849,804 . . .12,071,970 . . . .5,808,936 . . . . . . . . . . — . . . . . .218,255 . . .48,889,676

Liquidity gap . . . . . . . . . . . . . . . . . . . . . .2,734,765 . . . .(6,259,797) . . . . .9,227,463 . . . . .(141,693) . . . . . . .445,773

Interest sensitivity gap . . . . . . . . . . . . . .6,915,572 . . . .(5,990,139) . . . . .9,996,057 . . . . . . .569,349 . . . . . . .402,568

Cumulative interest sensitivity gap . . .6,915,572 . . . . . . .925,433 . . . .10,921,490 . . . .11,490,839 . . . .11,893,407

Cumulative interest sensitivity gap . . . . . .12.2% . . . . . . . . . .1.6% . . . . . . . . .19.2% . . . . . . . . .20.2% . . . . . . . . .20.9%

as a percentage of total assets

OFF-BALANCE SHEET COMMITMENTSPayable under forward,

swap and spot contracts . . . . . . . . . .(2,846,215) . . . . .(166,966) . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . .(3,013,181)

Receivable under forward,

swap and spot contracts . . . . . . . . . . . .2,910,980 . . . . . . .175,965 . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . .3,086,945

OFF-BALANCE SHEET COMMITMENTS, NET . . . . . . . . . . . . .64,765 . . . . . . . .8,999 . . . . . . . . . . — . . . . . . . . . . — . . . . . . . . . . — . . . . . . . . . . — . . . . . . .73,764

Substantially all of the Bank’s interest bearing assets and interest bearing liabilities are at fixed rates of interest.

72

XI FINANCIAL REPORT

Asset and liability maturity periods and the ability to replace interest liabilities at an acceptable cost when they mature are crucial in

determining the Bank’s liquidity and its susceptibility to fluctuation of interest rates and exchange rate.

31. EFFECTIVE INTEREST RATE ANALYSISThe following table presents an analysis of interest rate risk and thus the potential of the Bank for gain or loss. Interest rates effective in

2002 are analyzed by categories of financial assets and liabilities to determine interest rate exposure and effectiveness of the interest

rate policy used by the Bank.

RUR USD EUR CHF Preciousmetals

ASSETSLoans and advances to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.3% . . . . . . . . . .3.0% . . . . . . . . . .3.2% . . . . . . . . . .5.6% . . . . . . . . . . . . —

Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20.8% . . . . . . . . .18.4% . . . . . . . . .18.0% . . . . . . . . . . . . — . . . . . . . . . . . . —

Loans and advances to customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16.7% . . . . . . . . .12.8% . . . . . . . . . .8.3% . . . . . . . . . . . . — . . . . . . . . . . . . —

Securities purchased

under agreement to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17.0% . . . . . . . . . .5.4% . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . —

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14.7% . . . . . . . . . .7.0% . . . . . . . . .12.1% . . . . . . . . . . . . — . . . . . . . . . . . . —

LIABILITIESDeposits from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.4% . . . . . . . . . .5.4% . . . . . . . . . .7.5% . . . . . . . . . .4.4% . . . . . . . . . . . . —

Customer accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11.3% . . . . . . . . . .5.8% . . . . . . . . . .3.1% . . . . . . . . . .2.0% . . . . . . . . . .4.0%

Debt securities issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16.7% . . . . . . . . . .6.3% . . . . . . . . . . . . — . . . . . . . . . . . . — . . . . . . . . . . . . —

73

FINANCIAL REPORT XI

32. CURRENCY ANALYSIS31 Dec 2002

Roubles USD EUR CHF Precious Other Currency RUR thnd1 USD= 1 EUR= 1CHF= metals currency undefined Total

31.7844 RUR 33.1098 RUR 22.778 RUR (incl. allowance

for losses)

ASSETSCash and balances

with the Central Bank

of Russian Federation

and National Bank

of Switzerland . . . . . . . . .5,728,672 . . . . . .288,586 . . . . . . . .35,479 . . . . . . . . .6,478 . . . . . . . . . . . — . . . . . . . . .4,977 . . . . . . . . . . . — . . . . .6,064,192

Loans and advances

to banks, less allowance

for possible loan losses . . .630,923 . . . . .7,505,087 . . . . . .315,676 . . . . . .127,156 . . . . . . . . . . . — . . . . . . . .99,532 . . . . . .(89,270) . . . . .8,589,104

Trading securities . . . . . . .6,410,183 . . . . . .289,781 . . . . . . . . . .888 . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . .6,700,852

Loans and advances

to customers,

less allowance

for possible loan losses 10,605,347 . . . .25,199,504 . . . . . . . .47,264 . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . . . . — . . .(2,180,775) . . . .33,671,340

Securities purchased

under agreement

to resell . . . . . . . . . . . . . . . . . .58,109 . . . . . . . . .4,723 . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . . .62,832

Investment securities . . . . .550,083 . . . . . . . .19,791 . . . . . .417,720 . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . . . . — . . . . . .(90,166) . . . . . .897,428

Fixed and intangible

assets, less accumulated

depreciation . . . . . . . . . . . . .124,347 . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . .9,024 . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . . . . . . . . . . . . . .133,371

Other assets, less

allowance

for possible losses . . . . . . . .367,858 . . . . . . . .44,730 . . . . . . . . . .380 . . . . . . . .79,056 . . . . . .249,192 . . . . . . . . . . . — . . . . . .(18,372) . . . . . .722,844

TOTAL ASSETS . . . . . .24,475,522 . . .33,352,202 . . . . .817,407 . . . . .221,714 . . . . .249,192 . . . . .104,509 . .(2,378,583) . . .56,841,963

LIABILITIESDeposits from banks . . .1,262,638 . . . . .3,353,309 . . . . . .113,098 . . . . . . . . .1,769 . . . . . . . . .6,646 . . . . . . . . . . . — . . . . . . . . . . . — . . . . .4,737,460

Deposits

from customers . . . . . . . .9,210,717 . . . .23,538,456 . . . . . .614,067 . . . . . . . . .9,204 . . . . . .297,952 . . . . . . . . .5,914 . . . . . . . . . . . — . . . .33,676,310

Debt securities issued . . .4,803,884 . . . . .5,194,892 . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . . . . — . . . . . . . . . . . — . . . . .9,998,776

Other liabilities . . . . . . . . . .236,346 . . . . . . . .11,637 . . . . . . . . .1,860 . . . . . . . . .8,943 . . . . . . . . . . . — . . . . . . . . . . . .89 . . . . . .218,255 . . . . . .477,130

TOTAL LIABILITIES .15,513,585 . . .32,098,294 . . . . .729,025 . . . . . .19,916 . . . . .304,598 . . . . . . . .6,003 . . . . .218,255 . . .48,889,676

OPEN BALANCESHEET POSITION . . . .8,961,937 . . . .1,253,908 . . . . . .88,382 . . . . .201,798 . . . . .(55,406) . . . . . .98,506

OFF-BALANCE SHEET COMMITMENTSPayable under

forward, swap

and spot contracts . . . . .(286,528) . . .(1,908,446) . . . . .(318,929) . . . . . .(31,778) . . . . .(467,500) . . . . . . . . . . . — . . . . . . . . . . . — . . .(3,013,181)

Receivable under

forward, swap

and spot contracts . . . . . . .204,815 . . . . . .833,990 . . . . . .252,700 . . . . .1,569,138 . . . . . .226,302 . . . . . . . . . . . — . . . . . . . . . . . — . . . . .3,086,945

OFF-BALANCE SHEET COMMITMENTS, NET . . . . . . . . . . . . . . . . .(81,713) . .(1,074,456) . . . . .(66,229) . . . .1,537,360 . . . .(241,198) . . . . . . . . . . — . . . . . . . . . . — . . . . . .73,764

NET POSITION . . . . . .8,880,224 . . . . .179,452 . . . . . .22,153 . . . .1,739,158 . . . .(296,604) . . . . . .98,506

74

XI FINANCIAL REPORT

33. GEOGRAPHICAL ANALYSIS31 Dec 2002

OECD Non-OECD Undefined RUR thndcountries countries (incl. allowance Total

for losses)

ASSETSCash and balances with the Central Bank

of Russian Federation and National Bank

of Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,616 . . . . .6,058,576 . . . . . . . . . . . . — . . . . .6,064,192

Loans and advances to banks, less allowance

for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,173,986 . . . . .3,504,388 . . . . . .(89,270) . . . . .8,589,104

Trading securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .888 . . . . .6,699,964 . . . . . . . . . . . . — . . . . .6,700,852

Loans and advances to customers, less allowanc

for possible loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,119,686 . . . .34,732,429 . . . .(2,180,775) . . . .33,671,340

Securities purchased under agreement to resell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . . .62,832 . . . . . . . . . . . . — . . . . . . . .62,832

Investment securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . . . .987,594 . . . . . .(90,166) . . . . . . .897,428

Fixed and intangible assets, less

accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9,024 . . . . . . .124,347 . . . . . . . . . . . . — . . . . . . .133,371

Other assets, less allowance for possible losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77,828 . . . . . . .663,388 . . . . . .(18,372) . . . . . . .722,844

TOTAL ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6,387,028 . . .52,833,518 . . .(2,378,583) . . .56,841,963

LIABILITIESDeposits from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .139,102 . . . . .4,598,358 . . . . . . . . . . . . — . . . . .4,737,460

Customer accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .317,880 . . . .33,358,430 . . . . . . . . . . . . — . . . .33,676,310

Debt securities issued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — . . . . .9,998,776 . . . . . . . . . . . . — . . . . .9,998,776

Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10,803 . . . . . . .248,072 . . . . . . .218,255 . . . . . . .477,130

TOTAL LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .467,785 . . .48,203,636 . . . . . .218,255 . . .48,889,676

NET POSITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5,919,243 . . . .4,629,882

OFF-BALANCE SHEET COMMITMENTSPayable under forward, swap and spot contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .(1,493,052) . . . .(1,520,129) . . . . . . . . . . . . — . . . .(3,013,181)

Receivable under forward,

swap and spot contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1,570,778 . . . . .1,516,167 . . . . . . . . . . . . — . . . . .3,086,945

OFF-BALANCE SHEET COMMITMENTS, NET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .77,726 . . . . . .(3,962) . . . . . . . . . . — . . . . . . .73,764

OFFICE DIRECTORY

76

JOINT STOCK COMMERCIAL BANK ROSBANK(open joint stock company)

11 Masha Poryvaeva Street, P.O.B. 208, Moscow 107078

Telephone: (095) 725-0595, fax: (095) 725-0511

e-mail: mailbox@rosbаnk.ru

www.rosbаnk.ru

Moscow-based branches:Volokolamskoye1 Volokolamskoye Shosse, Moscow 125080

Telephone/fax: +(095), 158-9824, 158-1003

Kountsevo6 Veresayeva St., Moscow 121374

Telephone/fax: +(095) 440 3083, 232 0084

Kutouzovsky23 block 1 Kutouzovsky Prospect, Moscow 121151

Telephone/fax: +(095) 249 3773, 249 3766

Tverskoye15 Tverskaya St., Moscow 103009

Telephone: +(095) 721 9539, 721 9541, fax: (095) 721 9543

Cheryomoushky43 Profsoyuznaya St., Moscow 117420

Telephone: + (095) 742 5421, telephone/fax: (095) 742 5417

Udarnik2 Seraphimovitcha St., Moscow 119072

Telephone: (095) 725 6613, telephone/fax: (095) 935 7892

Pushkinsky 13 block 1 Pushkinsky prospekt, Moscow 123104

Telephone/fax: +(095) 725 5667

XII OFFICE DIRECTORY

77

Smolensky7 Smplenskaya St., Moscow 119121

Telephone/fax: +(095) 248 8007, 248 5452

Novoslobodsky 40 Dolgorukovskaya St., Moscow 127006

Telephone/fax: +(095) 351 9521, 251 9734

ROSBANK’s Custody Service6 Veresayeva St., Moscow 121357

Telephone: (095) 956 9238, fax: (095) 725 7698

e-mail: [email protected]

www.custody.ru

Regional Branches:Buryatsky60 Tereshkovoi St., Ulan Ude, Buryat Republic 670031

Telephone: (3012) 37 19 88, telephone/fax: (3012) 43 55 22

Dudinsky6 Begitcheva St., Dudinka, Krasnoyarsky Krai 647000

Telephone: (39111) 5-6438, 5-6957, telephone/fax: (39111) 5 62 04

Krasnogorsky17 Pionerskaya St., Krasnogorsk, Moscow Region 143400

Telephone: (095) 562-1024, fax: (095) 562-8418

Krasnodarsky118 Krasnaya St., Krasnodar 350000

Telephone: (8612) 59-3215, 59-1923, 51-8550, fax: (8612) 59-3994

Krasnoyarsky108 Prospect Mira, Krasnoyarsk 660017

Telephone: (3912) 65-2040, fax: (3912) 65-1914

Novosibirsky47/2 Lineinaya St., Novosibirsk 630105

Telephone/fax: (3832) 20-8029

Norilsky56 Talnakhskaya St., Norilsk, Krasnoyarsky Krai 663318

Telephone: (3919) 34-5934, fax: (3919) 34-7152; (095) 721-1260

Omsky5a Sportivny Proyezd, Omsk 644042

Telephone/fax: (3812) 53-2341.

OFFICE DIRECTORY XII

78

Permsky7a Geroyev Khasana St., Perm 614600

Telephone: (3422) 41-0114, fax: (3422) 41-0139

Tomsky8a Lenina Square, Tomsk 634050

Telephone/fax: (3822) 51-1010, 51-2930, 51-0758

St.-Petersburg3 Ryleyeva St., Russia St.-Petersburg 191104

Telephone: +(812) 273 9616

Fax: +(812) 273 9616

Tulsky47 Boldina St., Tula 300013

Telephone/fax: (0872) 24-5035

Khabarovsky71 Komsomolskaya St., Khabarovsk 680000

Telephone/fax: (095) 725-6521, (4212) 30-5014

Yuzhno Sakhalinsky37 Chekhova St., Yuzhno Sakhalinsk, Sakhalin Region 693000

Telephone: (4242) 72-6112, 72-6110, fax: (4242) 72-6108

Subsidiary bank in SwitzerlandROSBANK (SWITZERLAND) SA17, Rue Du Rhone, P.О. Box 5734, CH-1211, Geneva 11, Switzerland.

Telephone: (4422) 818-7333, fax: (4422) 818-7350.

Е-mail: [email protected]

www.rosbank.ch

Representative office in China1-703 Henderson Center, 18, Jianguo Mennei St.,Dongcheng District, Beijing, 100005, China. Telephone:(8610) 651-83827, fax: (8610) 651-83837.

Subsidiary financial companiesROSINVEST S.A. Financial Company12, Rue Leon Thyes, L-2636, Luxembourg, Grand Duchy of Luxembourg.

ROSBANK International Finance B.V.Arent Janszoon Ernststraat 595H, 1082 LD, Amsterdam, Kingdom of Netherlands.

XII OFFICE DIRECTORY

Concept design—Design Depot creative bureau.

Scientific editor—I. Potkina, Doctor of Sciences.

Illustrative material—M. Zolotarev.

annual report · 2018-08-11 · holding company andrei e. bougrov—board member, deputy chairman...

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