Annual Report

Gazprombank Group ANNUAL REPORT

(IFRS)

2006 GAZPROMBANK GROUP | Annual report | 2006

CONTENTS

ADDRESS BY THE CHAIRMAN OF THE MANAGEMENT BOARD ...... 4 A PORTRAIT OF GAZPROMBANK GROUP...... 6

1. FINANCIAL PERFORMANCE AND PROSPECTS ...... 16 Macroeconomic situation and banking environment ...... 17 Financial performance ...... 19 Enhancement of shareholder base ...... 22

2. BUSINESS DEVELOPMENT ...... 26 Corporate business...... 27 Strategic partnership with OAO “Gazprom” ...... 27 Cooperation development with strategic customers ...... 28 Corporate lending...... 29 Cash and settlement services ...... 30 Investment banking ...... 31 Project finance ...... 31 Corporate finance...... 32 Financial and stock markets...... 38 Proprietary trading...... 38 Client trading in financial markets ...... 39 Capital markets ...... 40 Asset management...... 41 Custodian services ...... 42 Retail business ...... 46 Lending programs ...... 46 Deposits and money transfer services...... 47 On-line and remote banking ...... 48 Retail business outlook ...... 50

3. SUSTAINABLE DEVELOPMENT MANAGEMENT...... 54 Corporate governance development ...... 55 Risk management and internal audit ...... 56

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Human resource policy and personnel management...... 57 Regional expansion and it development...... 58 Social responsibility ...... 59

4. GAZPROMBANK GROUP FINANCIAL INFORMATION ...... 64 Independent auditors’ report...... 65 Consolidated financial statements ...... 66

REFERENCE INFORMATION ...... 140 Branches and representative offices ...... 141 Subsidiary banks ...... 144 S Licenses, permits, certificates...... 145 T

N Contact details ...... 146 E T N O C

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GAZPROMBANK GROUP | Annual report | 2006

ADDRESS BY THE CHAIRMAN OF THE MANAGEMENT BOARD

Dear Shareholders, Clients, and Partners,

We are delighted to report a steady progress and strong financial performance in the past year. We have achieved a significant growth in all key financials and expanded the Bank’s geography and the range of its products and services. In 2006, the Group’s assets grew 75% to exceed USD 31.6 billion, while customer accounts increased 1.6 times. The Bank’s corporate customer base reached 40 thousand. Our corporate loan portfolio grew 44% and our retail loan portfolio 2.7 times. The Group reported a net profit of USD 1.56 billion, or 2.8 times year on year.

Gazprombank has reaffirmed its position as one of the top three Russian banks and improved its international standing. A high level of trust is reflected in investment grade credit ratings assigned to the Bank by the leading rating agencies Moody’s Investors Service and Standard & Poor’s.

The Bank’s sustainable growth is supported by a solid customer base that is centered around major government-owned and private companies. ОАО “Gazprom” has traditionally been our top-priority client, and the Bank considers the support of Gazprom’s operations and participation in its large-scale investment projects to be a very important and prestigious mission. We see it as our contribution to strengthening the energy basis of the Russian economy and a vital mission for ensuring global energy security. In January 2007, Gazprombank and Gazprom signed a cooperation agreement for the period through 2015 providing for further development of our close partnership.

The Bank’s solid and well-balanced funding base guarantees continued expansion of products and services offered to our corporate and retail clients. Gazprombank actively develops investment banking. Today the Bank is the leading underwriter and an organizer of domestic market bond issues. Its Depositary Center is the largest in Rus- sia in terms of customer assets. We have also strengthened our positions in the consumer and mortgage lending markets and the market of remote banking services. Furthermore, we are actively developing our asset management business.

In 2006, Gazprombank completed an additional share issue, which became another important landmark for the Bank. The new issue boosted the Bank’s share capital by 28%, while the Group’s equity more than doubled to USD 6.65 billion. In addition to Gazprom the Bank acquired another major shareholder – the leading Russian Non-State Pension Fund “GAZFOND”. A new inflow of cash generated by an additional stock placement will be invested in the regional network development program, the retail and investment banking businesses and the introduction of new products for corporate customers from various sectors of the economy.

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Gazprombank is a commercial enterprise pursuing its own business purposes. Yet, the Bank recognizes its commitment to fulfilling social responsibilities focusing on sponsorship and charity and providing support to orphanages and boarding schools,

D educational, research and cultural institutions, the church and sports organizations.

R Moreover, we fully understand that business itself is an important factor of social

A development and has a direct impact on employment, public welfare and health, envi-

O ronmental protection, and other important aspects of social life. We strive to consider

B all aspects of this influence in our daily operations and are ready to assist Russian financial institutions in adapting international standards in the area of corporate T social responsibility to their practices. N

E I am grateful to our shareholders, clients and business partners for cooperation. M Please, be assured, that in the future the Bank will do its best to further strengthen E and develop our relationship to the mutual satisfaction of all participants and to the G benefit of the country. A N A M E

H Chairman T of the Management Board Andrey I. Akimov

F Gazprombank O N A M R I A H C E H T Y B S S E R D D A

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A PORTRAIT OF GAZPROMBANK GROUP

Joint-Stock Bank of the Gas Industry “Gazprombank” (Closed Joint-Stock Company) is one of the largest full-service financial institutions in Russia providing a broad range of banking, financial, and investment products to corporate and individual customers, credit institutions and institutional and private investors.

I Gazprombank was founded in 1990 as a strategic partner of OAO “Gazprom” and the gas industry.

I In late 2006, Gazprombank completed an additional placement of shares to increase its share capital by about 1/3, while its total equity more than doubled to reach USD 6.65 billion.

I Gazprombank’s two principal shareholders are OAO “Gazprom”, the largest producer and exporter of natural gas in the world (41.7%) and NPF “Gazfond”, a leading Russian non-state pension fund (50% + 1 share, including the shares of ZAO “Leader”, a “Gazfond”'s asset management company).

I The Bank provides services to companies representing key sectors of the Russ- ian economy, including natural gas, oil, nuclear energy, chemical and petrochemical, ferrous and non-ferrous metals, power, engineering, transportation, construction, communications, agriculture, trade, and other industries.

rd rd I Gazprombank is the 3 largest bank in Russia by key indices; the 3 largest banking institution in Central and Eastern Europe (2006); and the 137th largest bank in the world in terms of capital (2006).

I Winner of The Bank of the Year 2001 and 2005 in Russia awards from The Banker.

I Long-term ratings from the international rating agencies at the investment grade:

I Moody’s Investors Service:

I Foreign currency deposit rating – Baa2;

I Debt rating – A3.

I Standard & Poor’s:

I Counterparty credit rating – BBB-;

I Debt rating – BBB-.

I Gazprombank’s customer base includes:

I Individual customers – over 1.8 million;

I Corporate customers – over 40,000.

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I The Bank’s extensive regional network comprises 35 branches, 4 subsidiary banks in Russia, and one affiliated bank in Belarus with a total of 450 offices offering banking services to customers in 55 regions of Russia and Belarus (as of 30 June 2007).

I Gazprombank’s workforce is around 6,000.

P REGIONAL NETWORK U O R G K N A B M O R P Z A G F O T I A R T R O P A

Regions of presence of Gazprombank, its subsidiary and affiliated banks, and their units Gazprombank, its branches and supplementary offices Subsidiary and affiliated banks Cities where Gazprombank is planning to establish branch offices

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HIGHLIGHTS OF THE YEAR

I Placement of additional 6.7 million shares at RUR 1,000 each, purchased by the new shareholder NPF “Gazfond” (December 2006). Issued share capital totaled 19,997,777 ordinary shares as of 31 December 2006.

I Further development of partnership with OAO “Gazprom”: signing new cooperation agreement for the period through 2015 (January 2007); participation in the promotion of Gazprom stock (particularly as a custodian bank).

I International ratings upgraded to an investment grade.

I Expansion of regional network: new branches in Krasnoyarsk (January 2006), Irkutsk (July 2006), Kemerovo (February 2007) and Samara (March 2007); a representative office in Beijing (China). Acquisition of Credit Ural Bank (March 2007).

I Active development of investment business: project and corporate finance, participation in major international projects initiated by Gazprom and other strategic clients of the Bank.

I Successful European Commercial Papers (ECP) issue (February 2006) and two Ruble bond issues at RUR 5 billion each (February and November 2006); three- year USD 500 million syndicated loan (April 2006).

I Leading organizer and underwriter of corporate bond issues (26 issues for a total of USD 2.5 billion). Arranged syndicated loans for third-party borrowers (seven borrowers, including two foreign companies).

I Participation in the organization of initial public offerings (IPO) of OAO “Rosneft” and Cherkizovo Group.

I Participation in two national projects: Affordable Housing Program and Agro-industry Development Program.

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THE GROUP AT A GLANCE

As of year-end 2006 Change, 2005 2004 2003 2002 y-o-y (restated)

Financial indicators (millions of U.S. Dollars)

Total assets 31,668 75% 18,054 10,584 6,966 4,937 Total equity 6,650 128% 2,917 1,356 1,007 833

P Loans to customers, net 11,584 57% 7,401 5,030 3,133 2,370 U Including loans to individual O customers 1,684 166% 634 187 85 72 R Amounts owed to customers 11,447 59% 7,217 5,008 3,321 2,590 G Including individual

K customers’ deposits 2,883 61% 1,795 1,123 757 468

N Net profit 1,558 184% 548 392 194 116 A B Efficiency indicators (%) M O Return on average assets (ROAA) 6.3 3.8 4.5 3.3 2.7 R

P Return on average equity (ROAE) 37.8 29.2 33.2 21.3 15.0

Z Capital adequacy ratio A (Basel Accord) 26.9 18.3 20.9 19.2 27.5 G Cost to Income ratio 69.9 60.2 56.6 45.8 46.0

F Net interest margin 3.1 3.1 2.2 3.5 3.4 O

T Staff and branch network I A

R Number of employees 5,789 14% 5,089 4,857 4,015 3,462

T Number of branches 33 3% 32 32 31 31

R Number of banking offices 2 490 9% 450 414 270 260 O P A

1 Gazprombank’s head office and branches 2 Including those in the head office, branches, supplementary offices and cash-desks of Gazprombank and its subsidiary and affiliated banks

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SHAREHOLDERS

Shareholding

As of As of 31 December 2006 30 June 2007

ОAO “Gazprom” 41.73% 41.73% Non-State Pension Fund “Gazfond” 7.04% 7.11% ZAO “Leader” (on behalf of NPF “Gazfond”) 42.89% 42.89% ООО “Novye Finansovye Technologii” (treasury stock) 8.34% 8.27%

THE BOARD OF DIRECTORS

Chairman of the Board

Alexey B. Miller Chairman of the Management Board of ОАО “Gazprom”

Deputy Chairmen of the Board

Andrey I. Akimov Chairman of the Management Board of JSB Gazprombank (CJSC) Mikhail L. Sereda Deputy Chairman of the Management Board of OAO “Gazprom”

Members of the Board

Alexander G. Ananenkov Deputy Chairman of the Management Board of ОАО “Gazprom” Elena A. Vasilyeva Deputy Chairman of the Management Board, Chief Accountant of OAO “Gazprom” Alexander V. Krasnenkov General Director of OOO “Baltic Liquefied Gas” Andrey V. Kruglov Deputy Chairman of the Management Board of OAO “Gazprom” Alexander I. Medvedev Deputy Chairman of the Management Board of ОАО “Gazprom” Olga P. Pavlova Member of the Management Board, Head of the Department of Asset Management and Corporate Relations of OAO “Gazprom”

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MANAGEMENT BOARD

Chairman of the Management Board

Andrey I. Akimov

Deputy Chairmen of the Management Board

P Ilya V. Eliseev U Farid M. Kantserov O Nikolay G. Korenev R

G Victor B. Korytov Kirill Yu. Levin K Svetlana E. Maluseva Chief Accountant of the Bank N

A Alexey A. Matveev

B Alexander Yu. Muranov

M Alexei A. Obozintsev

O Alexander I. Sobol R Pavel V. Utkin P Z

A Members of the Management Board G

F Olga A. Kazanskaya First Vice-President

O Victor A. Komanov Head of the Corporate Finance Department, Managing Director T

I Andrey N. Kravtsov Executive Vice-President

A Alexander O. Shmidt First Vice-President R T R O P A

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MANAGEMENT STRUCTURE OF JSB GAZPROMBANK (CJSC)

SHAREHOLDERS' MEETING

EXTERNAL AUDITOR THE BOARD OF DIRECTORS THE REVISION COMMISSION

THE MANAGEMENT BOARD

Chairman of the Management Board

Committees of the Bank Vice-Presidents, Advisors to the Chairman of the Man- agement Board, Advisors to the Management Board

Deputy Chairman of the Management Board Deputy Chairman of the Management Board (CFO, depositary services) (administrative and corporate management)

Deputy Chairman of the Management Board Deputy Chairman of the Management (the Treasure, trust management, capital market) Board - Chief Accountant

Deputy Chairman of the Management Board Deputy Chairman of the Management Board (customer base, retail services) (legal issues)

Deputy Chairman of the Management Board First Vice-President (Corporate customer lending, IT) (legal issues)

Deputy Chairman of the Management Board Deputy Chairman of the Management Board (investment banking) (financial monitoring, administrative support)

Executive Vice-President Deputy Chairman of the Management Board (investment banking) (internal audit, tender Committee)

Managing Director Deputy Chairman of the Management Board (investment banking) (security, transportation of valuables)

First Vice-President (regional business, subsidiary banks) General management

Monitoring

Members of the Board

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FINANSOVYE VESTI

№ 1 2007 Standard & Poor’s Upgrades Rating

Standard & Poor’s raises Year-end 2006 figures should Gazprombank’s long-term place Gazprombank among the credit rating to BBB–. 100 largest banks in Europe and among the 200 biggest banks The upgrade means Standard worldwide. At the end of that & Poor’s has joined Moody’s year, it boosted capital by USD Investors Service in assigning 1.3 billion based on the alloca- an investment-level rating to tion of new stock. Assets, based Gazprombank. The bank on International Financial received a Baa2 from Moody’s Reporting Standards, topped at the end of 2005. USD 31.6 billion as of year-end Gazprombank’s debt ratings 2006, capital exceeded USD are of investment grade as 6.65 billion and net profit nearly well: a BBB– from Standard & reached USD 1.6 billion. Poor’s and an A3 from Gazprombank was the first Moody’s. It also has one of the Russian organization to place highest ratings for short-term Left to right: Andrey Morozkin, Viktoria Stepanova, Roman Abdulin, Nadezhda Sokolova ruble-denominated Eurobonds, debt assigned to a Russian with a RUR 10-billion issue in bank, an A-3 from Standard & holds leading positions in diversified business, stable February 2007. Investor interest Poor’s. Russia as well as Central and earnings flows and high profit- was high. Total bids exceeded “The rating upgrades are the Eastern Europe. The bank has ability,” First Vice-President the initial offer by 70%. The result of systematic and effec- a solid credit history, good Roman Abdulin said. bonds mature in 2010 and bear tive work on the part of man- brand recognition, a growing “That is the big reason investors coupons paying 7.25% annual- agement and staff. In terms of strategic partnership with on capital debt markets like our ly. The bid book was closed at key indicators, the bank now world energy leader Gazprom, projects,” he added. RUR 17 billion.

Strategic Cooperation

operations with investors and programs for servicing the Gazprom’s innovative opera- clients, particularly given Gazprom group of companies tions, particularly by expand- Gazprom’s diminished equity and their employees. ing their forms and sources of stake in the bank. Since its The agreement is aimed at financing for them. founding, Gazprombank has winning qualitatively new Gazprombank views the agree- worked closely with the gas positions in the strategic part- ment as: industry, and its mission has nership with Gazprom, by pen- - a strategic tool laying out the been to improve the financial etrating more deeply into the most promising areas of bilat- services it offers to Gazprom business of the gas and auxil- eral cooperation and other gas industry enter- iary industries and by perform- - a tactical tool for improving prises. ing the roles of financial con- returns on joint operations and The agreement reflects 15 sultant, finance organizer, accelerating roll-out in prom- years of experience as management company, and a ising new areas Gazprom’s partner, experience tool for consolidating and - a public tool making it possible that enabled the bank to estab- managing assets. The agree- to establish effective commu- lish competitive advantages in ment creates a stable, long- nications with clients, counter- those banking services related term platform for developing parties, and partners, to to the Gazprom group: in- the bank’s business. It addresses increase the transparency of its Gazprombank, Gazprom sign depth knowledge of the needs traditional bank operations – business, and to reduce the cooperation agreement until of the gas industry, a well- provision of commercial, risks associated with opera- 2015 established working relation- investment and retail banking tions in capital markets. ship with Gazprom, a devel- products and services – as The guiding principle of their The cooperation agreement is oped banking infrastructure well as new forms of innovative long-term cooperation and a critical element in defining focused on developing cooperation. It provides for the partnership is collaboration on the bank’s long-term develop- Gazprom’s regional business, bank’s participation in devel- a market basis under current ment outlook and in future as well as special products and oping mechanisms to improve Russian antitrust law. № 1 F I N A N C I A L N E W S

Gazfond Acquires “Your Card, Your Chance” 50% + 1 Share Gazprombank, Visa Gazfond pension fund International launch acquires 13,332 (0.07%) “Your Card, Your Chance. ordinary shares in Get your Purchase Free!” Gazprombank from campaign. OOO NFT Consumers who make a The deal, which totaled purchase with their RUR 69.1 million, raised Gazprombank Visa/Visa Gazfond’s stake in the Electron cards during the bank to 50% plus 1 share. campaign will get a chance The remaining shares are to win their money back. held by Gazprom (41.73%) Three times a week a draw- and Gazprombank sub- ing is held to determine the sidiary OOO NFT (8.27%). winning transactions. One Gazfond and the bank out of every 100 will be ran- intend to continue imple- domly selected for reim- menting joint projects on bursement. “The promotion asset management and aims to show that Visa improving client services. Gazprombank cards are universal, up-to-date and – first and foremost – con- venient,” said Gazprombank Vice-President Sergei Ogurtsov, Left to right: Leonid Taratuta, Elena Yermakova, Alexander Loshilov, Alexei Zaykov, Sergei Interest Rate Ogurtsov, Oksana Asheulova, Alexander Ulyanov the head of the Department Cuts for bankcards and retail Ogurtsov said. and Saratov. The cardhold- services. Presentation of the results ers with the most transac- “In last year’s promotion, of the promotion will be tions will be invited to come over 400 Visa Gazprombank held at Gazprombank’s for a chance to win other cardholders were reim- six largest affiliates: prizes, including the grand bursed for purchases they in Volgograd, Ukhta, prize: a voucher for travel made using their cards,” Novosibirsk, Irkutsk, Omsk anywhere worth USD 3,000.

Musical offerings to Sviatoslav Richter

Gazprombank, Gazprom Kourentzis. Kourentzis is a the importance of further sponsor concert to honor veteran conductor of the support for such events. Gazprombank lowers the late Sviatoslav Richter. most celebrated orchestras Not to mention, of course, mortgage lending rates The 2007 concert was held in Russia: the St. Petersburg their large, favorable (in rubles) for existing on the legendary pianist’s Philharmonic, the impact on our corporate homes to 11.5% birthday in the Great Hall St. Petersburg Symphony image,” Gazprombank First of the Moscow Conserva- Orchestra, the Mariinsky Vice-President Tatyana The maximum loan amount tory, the same venue Theater Orchestra, the Yurlova said. has also increased – to where the maestro tradi- Gelikon-Opera Orchestra, “In fact, creative projects USD 1.5 million from tionally performed on his the Russian National associated with the names USD 1 million. The inter- birthday for his friends Orchestra, the Grand Sym- of our great compatriots, est rate reduction is and students. phonic Orchestra and the with Russia’s cultural tradi- Gazprombank’s third in Moscow Virtuosos Orches- tions, get notice both in the last nine months. It The program included tra, as well as the Sofia Fes- Russia and abroad,” Yurlova reduced rates to 13% from Guiseppe Verdi’s Requiem, tival Orchestra, the Cleve- said. “Our personal contri- 14% in July 2006. It fur- one of Richter’s favorite land Symphony Orchestra bution to the performance ther reduced the rate on pieces and the only one of and the Belarusian National of Requiem is in the loans for home purchase Verdi’s major works not Opera Symphony Orchestra. attempt to present the work on the secondary market written for the opera. It was “Gazprom and Gazprombank as the composer would to 12% annually with loan performed by Musica Viva, employees, clients and want to hear it,” Kourentzis maturity period of 20 Musica Aeterna, the New partners were enthusiastic said. “Our conception aims years, and on April 17, Siberian Singers choir and about the concert, organ- for an absolutely precise 2007 lowered the mini- the Moscow State Conserva- ized by the Sviatoslav transmission of the poly- mum rate on ruble loans tory Chamber Choir, and Richter Foundation. It was phonic sense of the compo- to 11.5%. conducted by Theodor a clear demonstration of sition.” FINANCIAL PERFORMANCE AND PROSPECTS 1 GAZPROMBANK GROUP | Financial Performance and Prospects | 2006

MACROECONOMIC SITUATION AND BANKING ENVIRONMENT T N E

M Global economy. In 2006, the growth of global economy slowed down to 3.8% against N 4.3% in the previous year. At the same time, the economies of South-East Asia O demonstrated dynamic growth: China’s economic growth exceeded 10%, Indian economy R

I grew by 6.7%. The CIS economies also showed impressive growth rates, with

V the combined GDP of the former Soviet republics increasing 7.5%. N In 2006, the cost of borrowings was climbing up in international markets, triggered by the E

growth of the interest rate of the U.S. Federal Reserve (5.25% against 4.25%) and of

G the European Central Bank (3.5% against 2.25%). After 2005, the USD/EUR exchange

N rate declined 13% to 1.32 as of year-end 2006. In Russia, U.S. dollar depreciated from I 27.75 to 26.33 RUR/USD year on year. K

N As of year-end 2006, after three years of sustainable growth, the global stock markets A became more volatile (major correction in May, stabilization in mid-summer and growth B

in autumn), causing the return of many European and U.S. stock indices to their levels of

D some 5–6 years ago. World oil prices peaked at USD 80 per barrel, but dropped to USD 51

N in early 2007. The price of gold grew 23% over the year, to USD 636 per troy ounce. A

Russian economy. In 2006, the role of the government in the economy increased. Despite

N a stronger trend towards reliance on internal growth drivers, the growth of the Russian

O economy is still largely contingent on a favorable external environment and the situation I in world commodity markets. Due to a massive inflow of foreign currency, the internation- T al reserves of the Central Bank of the Russian Federation increased 67%, to more than A

U USD 303 billion at year-end. Russia was number three in the world (after Japan and

T China) in terms of international reserves. I

S Russian GDP grew 6.8% against 6.4% in 2005, while inflation dropped to 9% from 10.9%

in 2005. C I Foreign trade grew 29.2% (85% of which contributed by non-CIS countries). Trade surplus M increased 15%. However, in 2006, imports grew faster than exports. Successful liberalization of O currency laws is expected to facilitate further integration of Russia into the global trade system. N

O In 2006, the government adopted a new Debt Strategy focused on minimizing external debt

C and replacing it with the internal one, which eventually led to a decrease of Russia’s govern-

E ment external debt by 32% to USD 52 billion as of 31 December 2006 (approximately 5% of

1 O the national GDP), while government internal debt totaled USD 39 billion at year end. R

C In 2006, the investment climate in Russia continued to improve, so much so that Stan-

A dard & Poor’s and Fitch Ratings upgraded their sovereign credit ratings to ВВВ+, two

M notches above the minimum investment grade. OECD Council also upgraded Russia’s investment attractiveness rating and moved Russia up to the third risk group. As a result, foreign tied loans to Russian borrowers are likely to become cheaper.

The Russian stock market closed the year with record high results for the majority of traded securities and stock indices. The RTS index broke its historic maximum, rising more than 70% – from 1,125 to 1,922 points over the year. However, market growth was uneven and fol- lowed a two-stage pattern: the first stage ended with a drop from 1,765 to 1,234 points in

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early May, the second began in mid-June, and this upward trend continues. Domestic market capitalization (including RTS-listed securities) nearly doubled to over USD 966 billion.

Liberalization of the Gazprom stock market in early 2006 was an important market driver, merging two separate markets: foreign and domestic. Other important events in 2006 include a number of highly successful IPOs (21 IPOs during the year). Rosneft had the largest IPO (USD 6.3 billion), while seven other companies, such as OAO “Severstal”, OAO “Comstar-UTS”, OAO “Pipe metallurgy company”, ZAO “Sistema Gals”, Cherkizovo Group, OAO “Chelyabinsk Zinc Plant” and OAO “Open Investments”, together rose over USD 10.8 billion.

In 2006, the market saw the change of growth leaders: while in 2005 market performance was driven by oil and gas stock, in 2006 there was a shift towards telecommunication, power and banking segments.

Russia’s banking sector. Favorable economic environment in the country, stronger confidence in banks, growing demand for banking services from corporate and retail clients, increased diversification, more professional and competent management, and the transition to international accounting and financial reporting standards boosted the development of Russia’s banking sector in 2006.

Negative factors included an imperfect banking supervision system, increased stratifica- tion of banks with a growing gap between government-owned and private banks, and excessive capital burden due to accelerated asset growth.

Major banking sector indices increased faster than the GDP. At year-end the ratio of bank assets to GDP was 52.8%, while the ratio of bank capital to GDP was 6.4%.

Banking sector performance, % to GDP

2002 2003 2004 2005 2006

Banking sector assets 38.3 42.4 42.1 45.1 52.8 Banking sector capital 5.4 6.2 5.6 5.7 6.4 Corporate loans (to non-financial sector) 14.7 17.2 18.8 19.8 21.8 Retail loans 1.3 2.3 3.6 5.4 7.8 Retail deposits and current accounts 9.5 11.5 11.6 12.7 14.3 Corporate deposits and current accounts 10.1 10.5 11.7 13.6 17.2

Source: Central Bank of the Russian Federation

Bank assets grew 57% to over USD 533 billion. Retail loans demonstrated the highest growth – the total retail loan portfolio increased 1.9 times to USD 78 billion.

Since 2002, concentration of assets in the banking sector has remained almost unchanged: the top 50 banks account for over 75% of assets, with Sberbank dictating the majority of price benchmarks in the loan and deposit markets. Geographically, banks still tend to concentrate in certain regions of Russia.

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As for funding base, corporate accounts demonstrated the highest growth rates in 2006 – 55%, while the equity of banking sector increased 36% to USD 64.5 billion.

The number of active banks dropped from 1,253 to 1,189. At the same time, the percentage of banks with foreign capital increased to 153, including 67 banks with foreign participation in excess of 50%. Banks with foreign capital account for some 12% of assets and 13% of capital of the Russian banking system.

FINANCIAL PERFORMANCE E C

N The Gazprombank Group primarily consists of Joint-Stock Bank of the Gas Industry Gazprom-

A bank (CJSC) (parent company), the group of companies owned by OAO “SIBUR Holding” (SIBUR Holding Group), the group of companies owned by OAO “Gazprom Media” and M

R ZAO “PRT-1” (Gazprom Media Group), other smaller companies and banks. In 2006, the Group

O successfully developed all of its business segments – banking, petrochemical and media businesses. F As a result, the Group achieved significant growth in all key consolidated financials: R E I assets grew 75%; P

L I equity grew 128% (this growth was partly contributed by an additional share issue

A of Gazprombank); I

C I net income increased 2.8 times. N A

N ASSET STRUCTURE BY SEGMENTS I

F AS OF 31 DECEMBER 2006 4%

11% 85%

Banking Petrochemical Media

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The banking segment demonstrated the highest growth rates, with banking assets increasing 1.9 times over the year, while petrochemical assets grew 24%, and media assets – 30%.

Equity. In 2006, the Group's equity totaled USD 6.65 billion. Capital adequacy ratio was 26.9% for the Group and 23.9% for the banking segment.

Liabilities. The Group's liabilities grew 65% and exceeded USD 25 billion as of 31 December 2006. The banking segment accounted for 96% of total liabilities. Customer deposits (49%) and debt securities issued (over 32%), including Eurobonds, remained the main sources of funding for the Group.

LIABILITIES AND EQUITY AS OF 31 DECEMBER 2006

7% 2% 36% 17%

Amounts owed to customers 36% 8% Equity 21% Amounts owed to credit institutions 9% Eurobonds issued 8% Certificated debts 17% 9% Subordinated deposits 2% 21% Other liabilities 7%

Assets. The growth of funding facilitated a significant (1.5 times) increase in loan portfolio (both corporate and retail). The bulk of loans were issued to finance the development of the real sector. The Group maintains and closely monitors the quality of its loan portfolio: as of year-end 2006, contractually overdue loans accounted for some 1.2% of gross loans. The ratio of loan loss proisionsfor gross loans was 3.9%, provisions for overdue loans – 322%.

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ASSETS AS OF 31 DECEMBER 2006

2% 8%

37% 7%

E Loans to customers 37% C Non-banking assets 14% N Due from credit institutions 23% A Trading securities 7% M

R Cash and due from Central Bank 9%

O 23% Available-for-sale investments 8% F Other assets 2%

R 14% E P

L A I C

N The efficiency of the Group’s operations is demonstrated by stable margins,

A diversified sources of income and customer base and operations growth. In

N 2006, the Group reported net profit of USD 1.56 billion, with earnings per share I

F of USD 111.5 vs. USD 35.2 in 2005.

Net interest income rose approximately 60% year on year, mainly driven by loan portfolio growth. Dealing profits from stock market operations, traditionally a major component of the Group’s income, remained practically the same year on year (change – 1.7%).

Both operating and net profit of the media business segment increased almost 2.5 times. The profit of the petrochemical business contributed almost 50% of the Group’s total net profit.

In 2006, the return on average assets (ROAA) was 6.3%, the return on average equity (ROAE) – 37.8%.

|21| GAZPROMBANK GROUP | Annual report | 2006

ENHANCEMENT OF SHAREHOLDER BASE

In 2006, Gazprombank’s fast growing business could no longer feed on reinvest- ment of earnings which could hardly bring it to the level sufficient for maintaining the Bank’s capital adequacy ratio set by the Central Bank of the Russian Federation. Under the circumstances the Board of Directors adopted a new program targeting the increase of equity in 2005–2007 and successfully accomplished its first two stages in the reported year.

The Bank consolidated the minority interests held by its 100% subsidiary OOO “Novye Finansovye Technologii” and completed an additional placement of shares (6.7 million shares). The new shareholding was acquired by Non-State Pension Fund “Gazfond” using pension reserves through its asset management company ZAO “Leader”.

NPF “Gazfond” provides social support to retired gas industry workers and is the largest Russian non-state pension fund with insurance reserves of approximately USD 6.5 billion. The bulk of its pension funds is managed by ZAO “Leader”.

The placement of additional stock with NPF “Gazfond” in December 2006 and a number of other Gazprombank stock dealings in the secondary market changed the Bank’s ownership structure, reducing Gazprom’s interest to 41.7%, while NPF “Gazfond” increased its share to 49.9%. In April 2007, NPF “Gazfond” brought its shareholding up to 50% + 1 share.

Another step forward in the development of shareholders’ equity capital would be a public offering of the Bank’s shares after reorganization into an open Joint-Stock company in 2007. This will allow the shareholders to get a fair market valuation of their stock that will become a publicly listed market instrument and the Bank will be able to further increase its shareholders’ funds to finance future growth.

|22|

FINANSOVYE VESTI

№ 2 2007

Bond. Ruble Bond 100 million Dollars from China

Gazprombank – first Russian Gazprombank, The Export- bank to place ruble- Import Bank of China in memor- denominated three-year andum of understanding. Eurobonds totaling RUR The memorandum covers 10 billion and bearing financing for investment proj- 7.25% annual coupons. ects in Russia involving the ABN AMRO and Barclays import of Chinese equipment, Capital were the lead technology and associated organizers. services.

The success of the Eurobond The two banks have now issue is a clear example of the begun drafting an agreement high level of foreign investor on a USD 100-million credit confidence in Gazprombank line for Gazprombank, which and is a tribute to the profes- may be increased as funds are sionalism of the lead agents: spent. The signing of the doc- ABN AMRO and Barclays ument is slated to coincide Capital. with the opening of the Year of The bonds received a warm Left to right: Alexei Kotlov, Igor Rusanov, Alexander Krapotkin, Yegor Pavlov China in Russia and the welcome from investors. Fifty- Chinese National Exhibition one bids were received, and in Moscow. the total subscription exceed- engineering, food and elec- For the first time foreign ed the volume of the issue by tricity. investors are opening ruble over 50%. Gazprombank will It was a deal without prece- accounts in international set- use the proceeds to expand dent. The bonds are not only tlement systems in order to its loan portfolio, particularly denominated in rubles: every work with this new instrument. by lending to organizations transaction on them, including Transactions like these are a in fast growing industries: coupon payments, will be real step toward full convert- chemicals, petrochemicals, made in rubles. ibility of the ruble.

Agreement with Tekhsnabexport

Development of cooperation Tekhsnabexport, Gazprombank will allow Tekhsnabexport to is about USD 350 million with and contacts with Chinese ink general agreement on diversify its financing sources the possibility of a future business is a Gazprombank cooperation for projects to develop nuclear increase to USD 500 million. priority. The bank recently energy and for the long-term Gazprombank’s clients opened a representative The agreement defines the strategic development of the include key Rosatom enter- office in Beijing. It spon- main areas of their coopera- company, as well as optimizing prises: Rosenergoatom, TVEL, sored the Russian National tion, particularly financing for the current operations of both Atomstroyexport, as well as Exhibition in November Tekhsnabexport’s investment organizations. processing enterprises. 2006, the central event of programs. Gazprombank has been fruit- Tekhsnabexport and the Year of Russia in China, Those programs are aimed at fully engaged with enterprises Gazprombank have teamed up and underwrote publication boosting exports and expand- in the nuclear industry since on projects to manufacture of a Chinese-language ver- ing the market for uranium 2000, and partnership relations equipment for Rosatom enter- sion of a Ministry of products, as well as to aug- with Tekhsnabexport have prises, leasing programs, Economic Development and ment its resource base by been developing since 2002. projects for developing uranium Trade Catalogue: “Russian investing in mining assets and Gazprombank views mining enterprises, programs to exports: production and in uranium mining enterprises Tekhsnabexport as a major replenish working capital at the technology.” in both the CIS and abroad. In client, a reliable borrower enterprises and foreign trade The memorandum of under- addition, Gazprombank will and a partner. In 2006, financing. In addition, the bank standing is one more step provide consulting on setting Gazprombank provided over together with Tekhsnabexport in realizing Gazprombank’s up subsidiaries, developing USD 1.1 billion in financing to and TVEL are participating strategic mission to develop their strategy in capital mar- Rosatom enterprises. directly in implementing plans effective cooperation with kets and raising capitalization. The bank’s credit limit on to develop the Uranium Mining Chinese governmental and Working with Gazprombank operations with Tekhsnabexport Company. private financial institutions. № 2 F I N A N C I A L N E W S

News Global Deal of the Year

Gazprombank places Gazprombank named in eurobonds totaling USD Global Trade Review’s Best 700 million. The bonds Deals of 2006 mature in 2010 and bear The bank was recognized coupons paying three- for a project to build a month LIBOR + 0.90% factory to manufacture annual rate. Dresdner corrugated board and cor- Kleinwort and UBS Invest- rugated packaging in ment Bank are the lead Moscow region’s Dmitrov agents. The bank will use district. proceeds from the placement to expand its loan Gazprombank was able to portfolio, particularly for secure a EUR 16,925,577 lending in fast growing 6.5-year loan from the industries: chemicals, Czech Republic’s Komercni petrochemicals, engineer- banka a.s., underwritten by ing, food and electricity. the Czech national export insurance agency EGAP. Russian Federal Financial The contractor for the plant Markets Service approves construction is Czech three-year license builder UNISTAV a.s. for Gazprombank-Asset Left to right: Konstantin Limitovsky and Alexei Belous (standing), Alexander Ushkov and Mark The main challenge of the Partridge (seated) Management to manage deal was that equipment securities. for the plant would be agree with the Czech bank project laid the basis for The move broadens the manufactured in a number and EGAP on a procedure further development of range of trust management of countries: Germany, for reinsuring a portion of cooperation with Czech services the company can France, Switzerland, the risk at the Czech agency. financial institutions in offer. It can now offer trust Austria and Taiwan. One banking industry implementing new, com- management accounts to Gazprombank was able to analyst said: “Work on this plex deals.” both individual and corporate investors.

Razgulyai-Finance places third bond issue on MICEX totaling RUR 3 billion. The In Keeping with Kyoto Series 03 bonds were placed in an open subscription procedure that determined the Dresdner Bank, Gazprombank The JV, which will not be effort to reduce CO2 emis- rate of the first coupon. set up joint venture to trade open to outside investors sions. The new JV is an

Gazprombank organized in CO2 emission quotas initially, will operate as an important example of the the issue. A total of 108 bids independent investor. role that financial market were received amounting to The joint venture (JV) will “Demand for new, leaders like Dresdner Bank over RUR 3.6 billion, with steer investment toward liquid derivatives on the must play.” the annual rate of the first key projects to certify car- European market in carbon “Russia has great poten- coupon ranging from 7.77% bon emission quotas under credits is steadily rising, tial to realize the oppor- to 11.25%. The entire bond the Kyoto Protocol, and to even though the market is tunities presented by issue was sold on the first bundle them into securi- already at record levels,” the Kyoto Protocol. day of the placement. ties for sale on secondary said Ingo Ramming, the Gazprombank, with its markets. head of Dresdner’s depart- broad client base in Russky Standart Bank The JV, Luxembourg-reg- ment for carbon credit Russia and its unique places Series 08 ruble istered Carbon Trade & trading. “The new JV will relationship with the bonds on MICEX. Finance SICAR S.A., was have the unique opportu- Gazprom Group, intends Gazprombank and Deutsche set up on a parity basis. nity to unite Dresdner to be among the first to Bank organized the place- The European Commission Kleinwort’s cutting-edge master this promising new ment. The entire issue was approved its creation on experience on the carbon market,” Gazprombank sold on the first day of the December 19, 2006. quotas market with Deputy Chief Executive auction. A total of 46 bids Dresdner Bank is partici- Gazprombank's one-of-a- Alexei Obozintsev said. amounting to RUR 7.707 billion pating in the project kind experience and influ- “With the new JV we will were received, of which through its investment ence in ensuring regional be able to offer our clients 35 bids amounting to arm, Dresdner Kleinwort, market access to these one-of-a-kind services RUR 4.852 billion were exe- the leader in European products,” he said. “The in capitalizing on the cuted. The first coupon on trade in greenhouse gas market in quotas is a com- market in greenhouse gas the bonds was set at an credits. ponent part of the global credits.” annual rate of 8.25% or RUR 41.14 per bond. BUSINESS DEVELOPMENT 2 GAZPROMBANK GROUP | Business Development | 2006

CORPORATE BUSINESS

Gazprombank sees its primary goal in providing up-to-date banking services to its customers and meeting their growing demand for investment banking products. Among our corporate clients are companies working in the front-line segments of the Russian economy, natural monopolies and government-owned companies. Beside traditional service of major corporate customers, Gazprombank is actively promoting interaction with medium- sized corporate clients and targets intensive growth based on the customer-oriented business model to replace a product-oriented one.

STRATEGIC PARTNERSHIP WITH OAO “GAZPROM”

S The Bank’s new role in the strategic partnership with Gazprom is to add value to its bank-

S ing business for the benefit of its main shareholder and principal client. The Bank offers

E advanced services to Gazprom Group that may use highly competitive banking products

N in every segment of the industry – from production to export. Gazprombank plans to intro- I duce new services to support investments in major projects, such as field development, S the upgrade of LNG and transportation facilities, and related industries. U B

We target the expansion of business with Gazprom Group. The Bank will continue to com-

E pete successfully with its peers for cash flow and transactions in the gas industry. To

T ensure its success, new product lines are being introduced, including financial advisory

A and project finance services; the syndication of large loans; the pooling of funds to support

R long-term investment projects, trade financing and financial risk hedging. In addition,

O the Bank is enhancing the cash flow management services it provides to Gazprom companies. P

R The cooperation agreement with Gazprom signed in January 2007 is based on our long-

O standing and mutually beneficial partnership that gives the Bank a unique competitive

C edge as a service provider to Gazprom Group companies. Moreover, the Bank plays an important role in improving the efficiency of Gazprom’s innovation programs.

The Bank used its successful experience in providing financial and advisory support to major international projects in Poland, the Balkan countries, Turkey, the UK, Bulgaria and Ukraine to develop financial and economic mechanisms regulating the participation of independent gas companies in the development of the unified gas network and to prepare proposals on financial participation in the development of pipeline networks 2 for Gazprom’s partners. Gazprombank serves the majority of syndicated loans issued to Gazprom and acts as its agent bank and an asset manager. The total amount of Gazprom’s external debt services is approximately USD 21.7 billion, having increased more than 2.5 times year on year.

Gazprombank is a traditional provider of instant settlement services to Gazprom companies, whereby a chain of payments is processed in one banking day. In 2006, the Bank processed over 37,000 interregional payments for the total amount in excess of USD 28 billion.

In 2007 and further, Gazprombank plans to take part in major gas projects, such as the Nord Stream pipeline project, Shtokman field development, expansion of Kazakhstan gas

|27| GAZPROMBANK GROUP | Annual report | 2006

supplies, completion of a gas chemical plant in Novy Urengoy, and the Orenburggazprom investment program. The Bank also plans to take part in the introduction of cash payments for gas transit across Romania and in carbon emission reduction projects within Kyoto Protocol programs.

COOPERATION DEVELOPMENT WITH STRATEGIC CUSTOMERS

Gazprombank provides top-quality banking services to a large number of companies operating in various sectors of the Russian economy, including natural gas and oil production and refining, the chemical and petrochemical industry, ferrous and non-ferrous metallurgy, engineering, power industry, transportation and communications, as well as to agricultural enterprises, retail chains and large financial institutions.

In 2006, the Bank focused on increasing cooperation with some of the largest vertically integrated oil and gas companies, such as OAO “Gazpromneft”, OAO “Rosneft”, OAO “Lukoil”, “TNK-BP” and other strategic clients.

Gazprombank is a key strategic partner of Russian nuclear energy companies. In 2006, the Bank signed a long-term cooperation agreement with the RF Federal Nuclear Energy Agency. The Bank closely interacts with the Agency’s entities operating in all segments of the nuclear energy industry and research centers engaged in fundamental and applied studies.

Since 2001, Gazprombank has been working with customers from various segments of the engineering sector: defense, automotive, manufacturing, railroad and agricultural machinery, among others. Key services offered to these clients include the financing of large export contracts, loans and investment services. The Bank also acts as a bond issue organizer and takes part in investment projects (production upgrade and development).

The Bank is a service provider for leading ferrous and non-ferrous companies (NLMK Group, OAO “MMK”, RUSAL Group etc.), acting as a strategic partner for the Russian metals and mining companies in the financial markets.

Gazprombank works with some of the largest transport companies: OAO “Russian Railways”, Severstaltrans Group, OOO “MMK-Trans”, OOO “Transgarant”, OAO “Volga Shipping”, and OAO “Aeroflot – Russian Airlines”. Besides, the Bank promotes partnership with the Ministry of Transport and its departments and agencies.

The Bank’s strategic goals include the provision of full banking services to petrochemical and chemical companies. The Bank’s customers include some of the largest companies and groups, such as OAO “SIBUR Holding”, OAO “Salavatnefteorgsintez”, OAO “Bashkhim”, OAO “Shchekinoazot” and others.

Gazprombank provides services to the companies that have emerged during reforms in the power industry, including wholesale and regional generating companies, and network and distribution companies. The Bank finances their current operations and investment programs, issues guarantees and provides financial advisory and bond placement services.

In 2006, Gazprombank broadened its cooperation with major telecommunication companies – OAO “Svyazinvest” and “Russian Post”.

|28| GAZPROMBANK GROUP | Business Development | 2006

CORPORATE LENDING

Lending has always been a priority area of operations for Gazprombank. In 2006, the Bank’s corporate loan portfolio increased 1.4 times. The share of non-performing loans in the portfolio decreased to 0.4% last year. Gazprombank has been consistently diversifying its loan portfolio to broaden opportunities for business growth and to reduce its industry and single-borrower exposures. The Bank has significantly increased its portfolio of loans to corporate customers unrelated to the Gazprom Group, which now exceeded 77%. At the same time, the Bank has succeeded in maintaining the amount of lending to Gazprom companies at its historical level.

Private companies account for nearly 75% of the corporate loan portfolio. Gazprombank has been steadily building up loan portfolios in the metals and mining industry (loans increased more than 4.6 times), coal industry (7.4 times), construction (3.4 times), oil and petrochemical industry (more than twice), and food industry (2.2 times).

S LOAN PORTFOLIO BY INDUSTRY S

E 5%

N 2%

I 4%

S 24%

U 6% B

E 7% T A R

O 7% P R 19% O C 10%

16% Manufacturing Construction Investment and finance Nuclear energy Gas Power Trade Telecommunications Oil and petrochemicals Other

The mid-corporate segment is recognized as the Bank’s strategic area of business development. Priority has been given to expanding the customer base, offering a standard product package, and adding new sales channels.

The Bank is promoting cooperation with the companies engaged in the mining and refining of precious metals, providing assistance in commodity market transactions, long- term and short-term loans to finance current operations, project finance services and

|29| GAZPROMBANK GROUP | Annual report | 2006

loans granted in the form of precious metals. Transaction services include online trade in precious metals at prices based on LME quotations, commission trade, export sales, market risk hedging, and impersonal metal accounts for corporate clients.

The Bank acquired a vast experience of successful cooperation with major gold and silver refining plants and jewelry manufacturers. In 2006, this segment of its loan portfolio increased fivefold to USD 350 million. The Bank is committed to purchasing 34 tonnes of gold and 100 tonnes of silver under agreements with precious metals companies that were signed in 2006.

In 2006, the Bank launched a new line of business services – factoring. The Bank offers its customers a significant competitive advantage from acceleration of the receivables turnover, mitigation receivables managing costs, increased sales and client base expansion. Since December 2006, the Bank has been actively engaged in factoring activity and expects to increase its factoring business to almost USD 300 million by year end 2007.

CASH AND SETTLEMENT SERVICES

Efficient cash and settlement services are the basis of the Bank’s successful relationship with its customers; accordingly, the Bank pays special attention to the improvement and development of these services. In 2006, the Bank’s corporate client base grew by 14% to 40,000 customers, while the proportion of non-gas corporate accounts increased from 43% to 52% as a result of the customer base diversification policy.

In 2006, the Bank launched a new version of a Client-Bank system with extended functionality supporting the preparation and routing of electronic payment documents and providing access to such documents from client workstations at any stage of document processing. Over 50 holding companies use Gazprombank’s specialized settlement and information services to maintain over 1,000 accounts with Gazprombank’s branches and correspondent banks.

High is the popularity of the Bank’s financial monitoring services, which provide parent companies with timely information on all account transactions, performed by their affiliates and subsidiaries. Many holding companies also rely on the Bank’s expense pre- approval services to control the cash expenses of group companies on a centralized basis.

Gazprombank actively develops remote banking services. In 2006, the Bank launched centralized management of cash-balance pools for group accounts with Gazprombank branches and correspondent banks giving customers the opportunity to transfer (consol- idate) funds from the accounts of group companies to the master account of the parent company, while payments from the accounts of regional subsidiaries are made only upon acceptance by the parent company.

In addition to standard cash and settlement services, customers of Gazprombank have access to the unique high-tech settlement products. In 2006, the Bank successfully introduced cash collection services using automated bank deposit vaults at the customer premises. This service targets trade companies and simplifies the process of cash collection at retail outlets. Another popular product is special electronic settlement services for management companies of mutual funds working with specialized depositaries. With the introduction of this product, the number of client funds tripled over the year.

|30| GAZPROMBANK GROUP | Business Development | 2006

INVESTMENT BANKING

PROJECT FINANCE

In 2006, Gazprombank remained among the leaders of the Russian project finance: its project finance portfolio increased 2.7 times, while the number of borrowers using its project and structured finance services grew more than 1.5 times.

The Bank diversified the industry structure of its portfolio. Agricultural and food industries were the most dynamic segments, contributing USD 160 million to the project finance portfolio. Gazprombank also took part in the national agro-industry support project.

The real estate financing portfolio (commercial and residential property development

G projects) grew to USD 668 million. The Bank financed projects to manufacture modern

N high-tech building materials to assist with the Affordable Housing national project. I Its subsidiary, OOO “Gazprombank-Invest”, operates in various real estate markets, K managing a development portfolio in excess of USD 0.5 billion in eight Russian N regions. A B

T NEW PROJECT FINANCE LOANS IN 2006 N E

M Borrower Project description Amount T S E V

N Exima Group Construction of a modern breeding center I and hog farm in the Orel Region USD 118 million OAO “SUMZ” Financing of a production upgrade (UMMC Group) and expansion project USD 47 million OAO “GlavBashStroi” Construction of a modern building materials plant in Ufa EUR 24 million OAO “Amurmetal” Financing of a production upgrade and expansion project EUR 39 million OOO “PO Gofra” Construction of a corrugated cardboard and packaging plant EUR 19 million “Karusel” Construction of two hypermarkets Hypermarket Chain in St. Petersburg USD 23 million OOO “Yugkhimterminal” Construction of a chemical export terminal at Kavkaz port USD 18 million Comus Group Construction of the first Russian BOPS film plant EUR 12 million

|31| GAZPROMBANK GROUP | Annual report | 2006

In addition to industry diversification, the Bank expanded the geography of its investment projects. It participates in projects both in Russia and in some other CIS countries, successfully leveraging the potential of its extensive regional network.

In the core oil and gas and petrochemical industries, the Bank continued to finance existing projects and significantly increased its portfolio of new ones. At the same time, the share of oil and petrochemical industries in the total project finance portfolio was reduced from 55% to 45%.

The total amount of loans issued to finance the development of the South Russian oil and gas field (borrower – OAO “Severneftegazprom”) exceeded USD 645 million as of year end 2006.

The Bank traditionally focused on project support and financial advisory services to the strategic Gazprom projects financed by the Bank, including:

I The Polish partition of Yamal-Europe gas pipeline (“Europolgas” Project, Poland);

I Expanding the Trans-Balkan gas pipeline capacity to Turkey and Balkan countries: “Romgaz” and “Transgaz” projects in Romania, “Bulgargaz” in Bulgaria and “Gaztranzit” in Ukraine;

I Construction of the “Interconnector” gas pipeline to connect the UK to continental Europe.

The Bank has set the following priority areas for its project and structural finance business in 2007:

I Further diversifying the customer base and building up the portfolio of projects in dynamically growing sectors;

I Promoting cooperation with strategic customers (including Gazprom companies) and providing financial advisory services in connection with large-scale project finance loans;

I Promoting Gazprombank brand recognition as the project finance provider working with western banking syndicates;

I Developing and launching new structured finance products.

CORPORATE FINANCE

Gazprombank offers corporate finance services on issues related to mergers and acquisitions and joint venture transactions. The Bank has significantly expanded its advisory business compared with 2005, acting as an advisor to large companies in the oil, gas, petrochemical, metals, power and FMCG industries. The Bank succeeded in bringing together a professional team with extensive experience in structuring complicated and large-scale M&A deals, acquisition finance and IPO preparation.

In addition to successful customer transactions, the corporate finance team has been managing long-term strategic and direct investments for Gazprombank Group.

|32| GAZPROMBANK GROUP | Business Development | 2006

The dynamic growth of the corporate finance business is supported by the Bank’s commitment to the high quality, flexibility and accessibility of its client services, maintaining high commission return and ensuring effective access to the most attractive large project for proprietary investment purposes.

Gazprombank offers full range investment banking services to the leading first- and second-tier Russian companies. Its service strategy is based on the following principles:

1. Comprehensive customer service: M&A advisory (commission fee business); direct investments; financing of transactions with securities; bridge financing; convertible bonds and other instruments; assistance with the optimization of banking financing terms and structure.

Advisory services G N I K

N SYNERGY A Borrowed Shareholders' B

funds funds T N E M T

S 2. Full range investment banking products focused on financial advisory services E (acting as a full-service bank). V N I Financial advisory services

Acquisition advice

Disposal advice CORPORATE Joint ventures FINANCE Direct investments

Private placements

Capital market advice

3. Active cooperation with other investment banks involved in their customers’ projects.

|33| GAZPROMBANK GROUP | Annual report | 2006

Financial advisory services. Gazprombank provides regular investment and financial advice to Gazprom Group on current international transactions, including the asset swap with BASF, the acquisition of a share in the “Sakhalin-2” project, and the search for foreign partners for the joint development of the Shtokman gas field. In 2006, the Bank added new projects to its advisory portfolio, including participation in the tender for the exploration and development of license territories in Libya and partnerships with national gas companies in Algeria, Angola and Equatorial Guinea.

The Bank also acted as a financial advisor to a subsidiary of Gazprom in connection with the acquisition of a 19.4% share in OAO “Novatek”. This transaction’s value was in excess of USD 2.3 billion.

The Bank also advised Gazprom on its market entry strategy with respect to the Russian and European power industry markets, including a review of specific investment proposals.

When selecting clients from other strategic industries, the Bank focused on companies working in the following sectors:

I metals;

I mining;

I transportation and logistics;

I consumer (trade, construction, health, retail lending, mortgage, insurance, travel, advertising, etc.);

I IT (unique and protected intellectual property, defense technologies).

The Bank targets dynamically growing and profitable first- and second-tier companies with revenues of USD 100 million and more, including:

I industry consolidators;

I regional companies with plans for national expansion;

I companies with a high potential for organic growth;

I companies planning vertical integration;

I primary industry companies holding and managing large assets (focus on project finance);

I companies seeking financial support and access to high-quality professionals and consultants;

I new market start-ups managed by successful businessmen based on proven business models.

Following the above principles, the Bank provides financial advisory services to OAO “Atomenergomash”, a subsidiary of Rosatom, and to OAO “Obyedinennye Mashinostroitelnye Zavody” (OMZ) in connection with a joint venture project based on the nuclear engineering assets of OAO “Izhorskiye Zavody”, a subsidiary of OMZ.

|34| GAZPROMBANK GROUP | Business Development | 2006

Another area of investment banking is the facilitation of economic cooperation between Russia and its traditional foreign partners. For example, the Bank is actively involved in several investment projects in Mongolia, where it:

I consults and finances the Russian-Mongolian project, “Ulan-Bator Railway”, to upgrade and extend the local railway;

I participates in the implementation of intergovernmental agreements on cooperation in the civil use of nuclear energy and the development of uranium deposits in Mongolia (jointly with Rosatom);

I takes part in the development of an oil refinery project to meet the demand for oil products in the Mongolian market and export products to China (jointly with OAO “Gazpromneft”).

Strategic investments. In addition to efficient client business, the Bank acquires assets and manages long-term strategic investments on behalf of the Gazprombank Group. In 2006, the Group purchased a 51% share in Sibneftegaz, a large gas producer.

G The Bank manages major shares in Mosenergo and generating companies that have spun N off from OAO “Mosenergo”. Gazprombank took an active part in the additional share issue I organized by OAO “Mosenergo” to raise funds for the construction of new generating facil- K

N ities and in arranging debt financing for OAO “Mosenergo” and its generating subsidiaries.

A In 2006, Gazprombank successfully completed a ruble bond issue for OAO “Mosenergo”

B and was involved in structuring the first project finance scheme in the power industry (investments in the construction of a power plant in Pavlovsky Posad, Moscow Region). T

N Petrochemical asset management projects included the Bank’s representation on

E OAO “SIBUR Holding”'s Board of Directors to improve the company’s performance. In

M 2006, OAO “SIBUR Holding” demonstrated positive growth and strong financial results

T good enough to fund two dividend payments. The Bank also assisted OAO “SIBUR Holding” S with investment projects, acting in a financial advisory capacity. E

V In 2006, the Bank entered into several transactions to purchase additional equity and debt

N securities of OAO “Gazprom-Media” Holding companies, bringing its total shareholding in I major TV companies (OAO “NTV-Plus”, OAO “NTV” TV Company, and OAO “TNT-Teleset”) to 100%. Gazprom works with the management of Gazprom-Media Holding and its subsidiaries to develop and implement a long-term asset strategy focused on boosting their shareholder value. The Bank issued loans and arranged international bond issues for a total of USD 80 million for OAO “TNT” to finance its regional expansion program.

In 2006, the Bank signed a cooperation agreement with the Federal Nuclear Energy Agency to promote development in the nuclear industry. The Bank will provide commercial and investment banking services to nuclear plant projects in Russia and abroad, including nuclear engineering development projects.

The future development of the corporate finance business will be driven by accelerated asset growth and consolidation in key Russian industries and the increasing number and size of M&A transactions. Growing demand for support of M&A transactions will require a significant expansion of specialized financial advisory services.

In 2007, the Bank expects to broaden its offering of investment banking services, strengthen its relations with Gazprom and finance long-term proprietary investments in rapidly growing Russian companies.

|35| GAZPROMBANK GROUP | Annual report | 2006

CORPORATE FINANCE: FINANCIAL ADVISORY SERVICES

2006 Ongoing Ongoing

USD 2,338,000,000 USD 7,450,000,000

ZGG GmbH Global Financial Advisor Global Financial Advisor on asset swap deal with BASF on acquisition of controlling stake in Acquisition of 19.4% Sakhalin II Project in NOVATEK

Financial Advisor Gazprombank Gazprombank Gazprombank

2006 2006 Ongoing

Advisor App. USD 200,000,000 Search for foreign partners for Shtokman field Organized participation in the third Global Financial Advisor development project stage of a tender for the exploration on joint realization of different and development of hydrocarbons business opportunities with Sonatrach in Lybia

Gazprombank Gazprombank Gazprombank

Ongoing Ongoing Ongoing

Organizing cooperation with national oil and gas OMZ OMZ companies in Lybia, Angola Atomenergomash Metalloinvest and Equatorial Guinea Joint venture project Joint venture project

Financial Advisor Financial Advisor Gazprombank Gazprombank Gazprombank

|36| GAZPROMBANK GROUP | Business Development | 2006

Ongoing Ongoing 2006–2007

USD 2,250,000,000

Atomstroyexport SIBUR Financial Advisor Global Financial Advisor Financial Advisor in acquisition Belene Nuclear Plant Project of additional share (Bulgaria) issue in Mosenergo

Gazprombank Gazprombank Gazprombank

G 2006 N I K Undisclosed N

A USD 250,000,000 B

T Financed the acquisition of an interest in a major steel N company (a loan secured by shares) E Syndicate member

M Gazprombank T S E V N I ACQUISITION AND MANAGEMENT OF LONG-TERM STRATEGIC INVESTMENTS

2006 2006 2006

GBP 36,411,336 USD 25,000,000

Sibneftegaz Soco International plc Mosenergo Acquisition of 51% Sale of 4.951% equity interest Project finance of power plant in Sibneftegaz on behalf construction in the Moscow Region of Gazprom Group

Gazprombank Gazprombank Gazprombank

|37| GAZPROMBANK GROUP | Annual report | 2006

FINANCIAL AND STOCK MARKETS

PROPRIETARY TRADING

In 2006, the situation in the Russian money and financial markets was determined by such factors as the nominal strengthening of ruble, euro’s increased share in the CBR two-currency basket and relatively low interest rates. Gazprombank was a leading participant in the Russian FOREX market in terms of transaction volumes and revenue, with a focus on interest spread.

The Bank consistently increased its presence in the forward segment of the USD/RUR market and was active in both spot and forward transactions. In 2006, the Bank entered into three-year forward contracts for a total of USD 1 billion, while its spot portfolio exceeded USD 5 billion. These deals were made mainly with global investment banks or their Russian subsidiaries and, accordingly, had a relatively low level of credit risk.

To benefit from surplus liquidity, Gazprombank increased its volumes of lending against liquid collateral. As for money market transactions, the Bank focused on reverse Repo transactions with third party bonds, shares and promissory notes. The gross income from reverse Repo transactions almost tripled year on year to exceed USD 180 million.

Repo transactions with ruble-denominated bonds grew 3.3 times year on year to more than USD 7.8 trillion. Repo transactions with Russian equity securities increased 2.9 times to USD 9.9 trillion.

In 2006, the Bank actively traded in securities, mainly in ruble-denominated sovereign and corporate bonds. Its trading bond portfolio grew 1.5 times year on year to USD 530 million, with total sales from its ruble-denominated trading portfolio approxi- mating USD 2.4 billion.

Trading operations with equity securities also demonstrated an upward trend: annual sales totaled almost USD 7.4 billion, while open positions averaged USD 100 million.

In 2006, the Bank focused on diversifying its securities portfolio. For instance, the Bank made its first investment in emerging markets’ securities, purchasing domestic bonds issued by the Republic of Brazil.

In the equity securities segment, the Bank significantly expanded the list of qualified issuers for trade and investment purposes. While the proportion of transactions with Gazprom’s securities declined slightly, they remained the most attractive investment instrument. Transactions with Gazprom’s securities exceeded USD 6.4 billion, which allowed the Bank to remain a market maker even after the liberalization of Gazprom securities market and the emergence of new market players – foreign institutional investors.

To improve the efficiency of proprietary trading in financial markets, Gazprombank continued to optimize its payments and correspondent relations and added almost 40 new banks to its correspondent network. The Bank consistently expanded its business geography and signed over 100 master agreements on general business terms with Russian and foreign banks.

|38| GAZPROMBANK GROUP | Business Development | 2006

CLIENT TRADING IN FINANCIAL MARKETS

In 2006, Gazprombank focused on developing client trading in money and financial markets, expanded its product range and tailored standard products to meet specific client requirements.

The Bank offered its customers new opportunities to invest their available funds into a variety of deposit products, promissory notes and deposit certificates issued by the Bank. In addition, it developed a number of unique products meeting specific client requirements. The GPB-Dealing trading system was upgraded to expand the range of available operations.

The total amount of foreign exchange transactions increased almost 1.7 times to USD 74 billion, while the average daily balance for debit operations totaled USD 5.5 billion. The Bank developed and launched a wide range of transactions with derivatives, mainly as S hedging instruments. The total amount of client transactions with derivatives (net of T interbank deals) approximated USD 3 billion. E

K In addition to standard derivatives (forward contracts, options), the Bank offers specially R structured products best suited to current risk management requirements that have been A developed in strict compliance with Russian legislation and Russian financial and tax M

accounting rules governing the treatment of forward transactions. K To make its services more competitive, the Bank re-engineered its approach to brokerage C services in the securities market and introduced a single-window procedure for brokerage O agreements. This innovative technology made it possible for the Bank to take part in the T

S sale of Rosneft shares to a wide range of private investors.

D The total amount of brokerage operations increased 3.8 times year on year to exceed

N USD 5 billion. The market value of the Bank’s aggregate client portfolio was USD 1.4 billion

A at year-end against USD 0.5 billion in 2005. The total number of customers using the Bank’s

brokerage services grew sevenfold to more than 10,500 corporate and private accounts. L A I

C BROKERAGE OPERATIONS IN THE ORGANISED N

A STOCK MARKET IN 2001–2006 N

I 2001 ...... 0.05 F

2002 ...... 0.15

2003 ...... 0.36

2004 ...... 0.44

2005 ...... 1.34

2006 ...... 5.08

01234567Total amount (USD billion)

|39| GAZPROMBANK GROUP | Annual report | 2006

CAPITAL MARKETS

Gazprombank offers a full range of services in capital markets, including:

I domestic and international bond issues;

I securitization;

I syndicated loans for financial institutions and corporate borrowers;

I initial public offerings.

The Bank’s leadership in the Russian debt capital market is yet another proof of its strong position in the investment banking segment. In 2006, Gazprombank ranked first among organizers of ruble-denominated bond issues with 26 deals for a total of almost USD 2.5 billion, and its share of this market segment exceeded 13%.

GAZPROMBANK IS No. 1 IN THE RUSSIAN DEBT CAPITAL MARKET

2005 2006 Growth, %

Number of accomplished deals 12 26 125 Amount, USD billion 0.8 2.5 6.7 Rank in Russia 3–4 1 Market share 7.7% 13.1% +5.4 percentage points

In 2006, Gazprombank was appointed sole arranger of the first Russian mortgage-backed securities issue for a total of RUR 3 billion. The underlying pool of mortgage deeds belonged to Sovfintrade Bank, and the issuer was OAO “ISO GPB-Ipoteka”, an SPV specially incorporated for the deal. The issue signaled the emergence of a new mortgage financing instrument in the Russian market.

In addition, Gazprombank jointly with Barclays Capital co-lead managed the first Russ- ian securitization deal whereby Sovfintrade Bank placed a Eurobond issue for a total of USD 218.6 million backed by regionally diversified ruble-denominated mortgage deeds. As of year end 2006, the Bank accounted for more than 9% of the Russian asset securitization market and nearly 70% of the Russian mortgage securitization market.

Gazprombank also lead-managed a Eurobond issue for OAO “TNT-Teleset”.

In 2006, the Bank continued to develop its syndicated loan business and arranged four syndicated loans for Russian and CIS banks, as well as loans for OAO “Pipe metallurgy company” and OOO “Inpromleasing”.

During the year, Gazprombank successfully implemented a public debt program to finance its own business. As a result, Gazprombank became one of the largest Russian borrowers in international capital markets. The Bank obtained a three-year USD 500 million syndicated loan and issued five-year and seven-year ruble-denominated domestic bond issues

|40| GAZPROMBANK GROUP | Business Development | 2006

(RUR 5 billion each) at competitive interest rates. In addition, the Bank obtained an international USD 300 million syndicated loan to finance its capital requirements.

BORROWINGS IN 2006

Instrument Date Amount Maturity Rate

Syndicated loan April USD LIBOR 6 m + to refinance 2005 debt 2006 500 million 3 years 0.5% S Domestic bond issue February RUR T 2006 5 billion 5 years 7.10% E

K Subordinated loan to finance June USD

R the Bank’s capital requirements 2006 300 million 5 years 7.97%

A Domestic bond issue November RUR 7 years, 6.54%

M 2006 5 billion 1 year exit

K C

O Finally, the Bank issued foreign currency promissory notes for a total of USD 286 million

T in western capital markets. S

In 2006, Gazprombank expanded its operations in equity capital markets and co-

D managed the initial public offerings (IPO) of two Russian companies – OAO “Rosneft” N and Cherkizovo Group. In OAO “Rosneft”'s largest Russian IPO, Gazprombank outranked A

all other lead managers in terms of bookbuilding, having generated 29% of the total

L demand and 75% of demand for the Russian ruble tranche. A

I The Bank sees its priority short-term objectives in this business segment to be boosting its

C ECM operations, offering structured deals (including asset securitizations), pursuing its own

N debt program and strengthening its positions in the Russian investment banking market. A N I

F ASSET MANAGEMENT

Gazprombank is a leader in asset management in the Russian market. In 2006, the total amount of assets under the Bank’s management exceeded USD 2 billion. The Bank provides asset management services to corporate and private investors, both Russian and foreign.

In 2006, the Bank reorganized its asset management business and formed a strong team of portfolio managers with many years of industry experience.

The Bank developed a variety of asset management products based on the most popular strategies, such as trust accounts for corporate clients (Non-State Pension Funds, insurance companies, corporate treasuries) and high net worth individuals, collective investment products and international investment funds. Today customers can select from 14 Russian and international investment funds with returns high enough to attract new investors.

In 2006, the Bank organized the sale of shares in mutual funds through its agency network in Moscow. In 2007, this option will be rolled out to the regions.

|41| GAZPROMBANK GROUP | Annual report | 2006

CUSTODIAN SERVICES

The Gazprombank Depositary Center (Depositary) offers depositary account services to owners of securities, asset managers and specialized depositaries. The Depositary provides services to more than 600,000 Gazprom shareholders across Russia and maintains depositary accounts for non-residents and sub-depositaries. The liberalization of the Gazprom stock market has had no negative effect on the smooth functioning of the Bank’s custodian infrastructure.

The Bank used its advanced technological platform to trade the maximum number of client portfolios at the MICEX and RTS after the liberalization of the Gazprom stock market. The high speed at which shares are transferred without involving any registrars and the broad range of available cost management options to suit any investment strategy has made Gazprom stock an absolute market leader in terms of 2006 trade volumes.

Gazprombank successfully acted as custodian of Gazprom’s ADRs under an agreement with the Bank of New York (United States). As a result of their efforts, stock prices in the domestic and international markets were aligned in the shortest time possible. Gazprombank proved its effectiveness as a custodian bank and was highly appraised by international investors and business partners.

Gazprombank ranks first among Russian depositaries in terms of the market value of its processed securities. The amount of its client assets more than doubled year on year to exceed USD 170 billion (the RTS index grew 45% over the same period). The number of issues serviced by the Bank grew 7%, and the total number of issuers – by 11%. The total number of equity securities in customer accounts increased by one-third.

In 2006, the Depositary continued to develop new depositary technologies and corporate products. Gazprombank increased the number of its regional depositary offices by more than 30% to a total of 136 outlets. In addition, the Bank used the custodian services of its correspondent banks at 38 locations.

The Bank further improved the technological platform of custodian services, including the safe keeping and recording of mortgages and the transfer of rights under the mortgages kept in its custodian network. Having unified the contract base for its mortgage programs, the Bank began to roll out its full-scale custodian and depositary products for close-ended mortgage investment funds. As a result of its focused custodian business development, the Bank registered and accepted into custody over 82,000 mortgage deeds securing loans for a total of nearly USD 1.9 billion.

In 2007, the Bank will continue to focus on new products and services, including the issue of Russian depositary receipts, participation in highly promising security loan projects with leading Russian stock exchanges and supporting the infrastructure of market trading in hydrocarbons and hydrocarbon products. Other priority objectives include improving security income payment procedures, upgrading existing depositary technologies and further improving depositary and custodian services.

|42| GAZPROMBANK GROUP | Business Development | 2006

RUBLE BONDS – 2006 DEALS

Moscow February 2, 2006 MМоскваoscow 01 February марта 15, 2005 2006 Moscow March 2, 2006

Gazprombank БанкRussian «Русский Standard Стан Bankдарт» Mosenergo Ruble bonds (01 series) with annual Ruble bonds (06 series) with annual Ruble bonds (02 series) with annual coupon of 7.1% Выпускc рублouponевых of 8.1% облигаций coupon of 7.65% RUR 5,000,000,000 с купонныRURм 6,000,000,000доходом 8,99% годовых RUR 5,000,000,000 Due on 27 January 2011 3 000Due 000 on 09 000February рублей 2011 Due on 18 February 2016 Lead manager Lead manager Lead manager S Gazprombank ПогашениеGazprombank 03 марта 2008 г. Gazprombank T E Moscow March 3, 2006 Moscow April 18, 2006 Moscow April 20, 2006 K Организатор Москва 18 апреля 2006 R Газпромбанк A Российские M Коммунальные Системы

Serov Steel Plant RussianВыпуск руб лUtilityев ых облигаций Systems сер. 01 ACBK-Invest K Ruble bonds (01 series) with annual Rubleс к уbondsпонным (01 дох оseries)дом 9,7% with годо вannualых 5-year Ruble bonds (03 series) with

C coupon of 8.75% coupon of 9.7% annual coupon of 9.95%

O RUR 2,000,000,000 1RUR 500 1,500,000,000000 00 0 рублей RUR 1,500,000,000

T Погаш ение 14 апреля 2009 г. Due on 27 February 2009 Due on 14 April 2009 S

Lead manager LeadОрга нmanagerи зато р Lead manager Gazprombank Gazprombank Gazprombank D Газпро мбанк N

A Moscow June 22, 2006 Moscow June 6, 2006 Moscow June 8, 2006

L A I C

N Mechel Cherkizovo Group SIBAKADEMBANK

A 7-year Ruble bonds (02 series) with 5-year Ruble bonds (01 series) with 3-year Ruble bonds (03 series) with annual coupon of 8.4% annual coupon of 8.85% annual coupon of 9.6% N

I RUR 5,000,000,000 RUR 2,000,000,000 RUR 3,000,000,000 F

Lead manager Lead manager Lead manager Gazprombank Gazprombank Gazprombank

Moscow September 7, 2006 Moscow September 10, 2006 Moscow September 20, 2006 Москва 7 сентября 2006

ОАО «Московское областное ипотечное агентство» Moscow Regional ВыпускMortgage рублев ых облигаций Agency сер. 01 Mosenergo Alliance Oil Company с купонным доходом 7,99% годовых 5-year Ruble bonds (01 series) with 5-year Ruble bonds (01 series) with 5-year Ruble bonds (01 series) with 3 0annual00 000 coupon 00 0 of р 7.99%убле й annual coupon of 7.54% annual coupon of 8.92% RUR 3,000,000,000 RUR 5,000,000,000 RUR 3,000,000,000 Срок обращения - 5 лет

Органи зато р Lead manager Lead manager Lead manager GazprombankГазпро мбанк Gazprombank Gazprombank

|43| GAZPROMBANK GROUP | Annual report | 2006

Moscow September 21, 2006 MoscowМосква September01 марта 26, 2005 2006 Moscow September 27, 2006

Karusel Hypermarket Russian Standard Mosobltrastinvest Chain Банк «РусскийBank Стандарт» 7-year Ruble bonds (01 series) with 5-yearВыпуск Ruble рубл bondsевых (07 облигацийseries) with 3-year Ruble bonds (01 series) with annual coupon of 9.75% annual coupon of 8.5% annual coupon of 9.0% с купонным доходом 8,99% годовых RUR 3,000,000,000 RUR 5,000,000,000 RUR 3,000,000,000 3 000 000 000 рублей Lead manager Lead manager Lead manager Gazprombank ПогашениеGazprombank 03 марта 2008 г. Gazprombank

Moscow October 5, 2006 MoscowОрганизатор October 12, 2006 Moscow October 24, 2006 Газпромбанк

OGK-5 FSC UES SIBAKADEMBANK 5-year Ruble bonds (01 series) with 5-year Ruble bonds (04 series) with 5-year Ruble bonds (05 series) with annual coupon of 7.5% annual coupon of 7.3% annual coupon of 10.05% RUR 5,000,000,000 RUR 6,000,000,000 RUR 3,000,000,000

Lead manager Lead manager Lead manager Gazprombank Gazprombank Gazprombank

Moscow October 24, 2006 Moscow November 15, 2006 Moscow November 21, 2006 Москва 24 октября 2006

Промтрактор-Финанс Promtractor-Finance Moscow Pledge Bank SIBUR Holding 5-yearВыпуск Ruble рубле bondsв ых облигаций (02 series) се рwith. 02 3-year Ruble bonds (01 series) with 7-year Ruble bonds (01 series) with с купоannualнным д couponоходом 1of0 ,710.75%5% годовых annual coupon of 11.65% annual coupon of 7.7% RUR 3,000,000,000 RUR 800,000,000 RUR 1,500,000,000 3 000 000 00 0 рублей

Срок оLeadбращ managerения - 5 лет Lead manager Lead manager Gazprombank Gazprombank Gazprombank Органи зато р

Moscow Газпро мбанкNovember 22, 2006 Moscow November 23, 2006 Moscow November 29, 2006

M.Video-Finance Parnas-M Gazprombank 5-year Ruble bonds (01 series) with 5-year Ruble bonds (02 series) with 7-year Ruble bonds (02 series) with annual coupon of 10% annual coupon of 10.8% annual coupon of 6.54% RUR 800,000,000 RUR 1,000,000,000 RUR 5,000,000,000

Lead manager Lead manager Lead manager Gazprombank Gazprombank Gazprombank

|44| GAZPROMBANK GROUP | Business Development | 2006

Moscow December 5, 2006 Moscow December 5, 2006

FSC UES OGK-3 3-year Ruble bonds (05 series) with 5-year Ruble bonds (01 series) with annual coupon of 7.2% annual coupon of 7% RUR 5,000,000,000 RUR 3,000,000,000

Lead manager Lead manager Gazprombank Gazprombank

S SYNDICATED LOANS, CLN/LPN

T 2006 DEALS WITH GAZPORMBANK AS SYNDICATE MEMBER E Moscow September 25, 2006 Moscow December 2006 Минск September 14, 2006 K

R Минск сентябрь 2006 A M

K TMK Inpromleasingг АBelgazprombankО «Белгазпромбанк» 1-year syndicated loan C Синдицированный кредит Syndicated loan 5.5-year syndicated loan EUR 5,000,000 O USD 150,000,000 USD 41,350,000 USD5 000 14,000,000 00 0 EUR T Due in 2.5 years with 1 year option

S 14 000 000 USD Senior Lead Manager Mandated Manager СроLeadк кр еmanagerдита - 1 год

D Gazprombank Gazprombank Gazprombank

N Органи зато р

A Moscow December 2006 Moscow October 5, 2006 Moscow Газпро мбанкJuly 22, 2006 Москва 6 июля 2006 L A I

C МеInternationalждународны Bankй Бан к N TNT-Teleset Азofе рAzerbaijanбайджана - -Moscow Москва RosEuroBank A 4-year LPN issue Син1-yearдицир syndicatedованный кloanредит 1-year syndicated loan N

I USD 60,000,000 RUR 300,000,000 USD 53,000,000 F Lead manager 300 0 00Lead 0 0 manager0 рублей Lead manager Gazprombank Gazprombank Gazprombank Срок кредита - 1 год

INITIAL PUBLICОрга нOFFERINGSи зато р (IPO)

Г2006азпро мбанк 2006 USD 10,800,000,000 USD 251,000,000 2006

ОАО НRosneftК «Роснефть» Cherkizovo Group Первичное публичное размещеIPOние акций IPO listed at LSE 10 800 000 000 USD Co-Manager Co-Lead Manager Gazprombank Gazprombank |45| Ко-менеджер Газпро мбанк GAZPROMBANK GROUP | Annual report | 2006

RETAIL BUSINESS

One of Gazprombank’s strategic priorities and areas of active development is retail business. In 2006, the Bank paid special attention to the projects focused on offering quality services to the employees of our corporate customers and VIP clients.

The Bank’s approach is to offer a standard product range, harmonize its banking technologies and pursue a flexible pricing and marketing policy adjusted to specific regional requirements. To reduce the cost of its products and services, the Bank relied on its partners’ distribution channels – retail chains, car dealers and real estate agencies.

LENDING PROGRAMS

In 2006, the retail lending market entered a stage of explosive growth. Gazprombank’s policy focused on qualitatively diversifying its loan portfolio, minimizing credit risks and developing new products and services to support business growth.

The Bank’s retail loan portfolio grew 2.7 times year on year (hitting the top in the banking sector) and totaled USD 1.7 billion.

Mortgage loans accounted for 58% of the Group’s total retail portfolio.

In 2006, car loans were issued to more than 13,000 borrowers, and mortgage loans to approx. 4,000 borrowers. The Bank processed over 6,500 overdraft lending applications.

Overdue loans represented less than 0.2% as of year end 2006, which is more than 10 times below industry average. The Bank relies on sound risk assessment and monitoring procedures as well as the professional underwriting of borrowers and collateral to maintain constant control over the eventual growth of bad debt.

The Bank promoted partnership relations to boost its retail loan portfolio. During the year, it signed approx. 600 agreements with car dealers and launched a number of regional programs in cooperation with the Russian offices of several foreign car manufacturers.

In 2006, the Bank entered into joint program agreements with more than 20 major real estate companies and is now implementing a consumer lending program secured with goods purchased by borrowers (the pilot project has been launched at “Tri Kita” furniture supermarket).

The Bank successfully implemented a new Mortgage+ lending program, which com- bines a mortgage loan with a consumer loan to finance redecoration of a new home.

The Bank’s subsidiary SOVFINTRADE Bank (to be renamed JSB “GPB-Ipoteka” (CJSC) in 2007) is a recognized market leader with its mortgage and housing loan refinancing program (approximately USD 650 million as of year end 2006).

|46| GAZPROMBANK GROUP | Business Development | 2006

The Bank offers its customers additional services under joint programs with insurance companies. These products include:

I financial risk insurance for investments in housing development projects;

I life insurance for borrowers under mortgage programs;

I car insurance for car loans with subsidized interest rates;

I insurance for individuals purchasing consumer goods.

In 2006, the Bank developed and tested a credit scoring system in cooperation with Experian-Scorex. Gazprombank closely cooperates with the National Credit History Bureau and plans to partner with ZAO “Experian-Interfax” to support its automated credit scoring system.

DEPOSITS AND MONEY TRANSFER SERVICES

S Gazprombank is an active participant in the retail deposit market, offering a broad selec-

S tion of efficient and competitive savings options tailored to customer needs that meet E current liquidity, yield and security requirements and ensure growth and accumulation of N customer funds. I

S In 2006, retail deposits grew 1.6 times to USD 2.9 billion, higher than the average U industry growth rates. Ruble-denominated deposits contributed 80% of total retail B

accounts. L I RETAIL DEPOSITS A T E

R As of year end, USD million Retail account balances 2,883 3,000

1,795 2,000 1,123

757 1,000 468 0 2002 2003 2004 2005 2006

The Bank’s money transfer service products, such as Region (ruble, U.S. dollar and euro transfers); Gazprombank-EXPRESS and Paid-up Transfer, are very popular with retail customers. Gazprombank remained a leading Western Union service provider, offering money transfer services in more than 100 regional outlets. In 2006, the Bank processed almost 110,000 transfers for a total of USD 59 million.

|47| GAZPROMBANK GROUP | Annual report | 2006

LOANS TO INDIVIDUALS

As of year end, USD million Retail loans 3,000

2,000 1,684

634 1,000 187 72 85 0 2002 2003 2004 2005 2006

The Bank continued to expand its VIP customer base and upgraded its services to this group. Having upgraded its asset management services, the Bank offered its private banking customers a range of six asset management strategies with different risk-to-return ratios.

In order to diversify customer investment risks, the Bank offers an alternate choice of direct or portfolio investments in real estate as well as financial advisory for investments in works of art. Another popular product of the Bank is borrowing against securities.

Gazprombank expanded its range of VIP products by forming a pool of business partners that offer professional asset management, real estate, tax planning and consulting services and signed a number of agreements with leading professional service providers.

The Bank is committed to ensuring easy and comfortable access to a vast range of banking and financial services and consistently adapts its products to meet new customer requirements. Gazprombank opened a Call Center to furnish special customer needs and get feedback on a number of issues and introduced an information help desk to ensure that call center operators have the most up-to-date information on all products and services available to the Bank’s customers.

ON-LINE AND REMOTE BANKING

The Bank was actively developing on-line and remote banking services to offer its customers maximum ease and comfort in performing operations.

The Bank provided bankcard services to employees of its corporate customers in 81 regions of Russia under payroll projects with Gazprombank and its correspondent banks. In 2006, it added 950 corporate customers to its payroll project portfolio, bringing the total client base to more than 3,400 organizations. For customer convenience, the Bank installed nearly 1,700 ATMs, over 1,680 cash desks and more than 5,500 POS terminals.

|48| GAZPROMBANK GROUP | Business Development | 2006

BANKING CARD NETWORK*

As of year-end 2002 2003 2004 2005 2006

ATMs 498 699 946 1,264 1,695 Cash-desks 307 618933 1,313 1,683 POS terminals 738 1,441 2,532 3,705 5,58

* Jointly with partner banks.

Nearly 90% of ATMs have been upgraded to offer additional functions, including payments for telecommunication and paid-TV services, instant money transfers between card accounts and utility payments. In 2006, the Bank’s network of self-service ATMs S

S with Cash-In functionality grew by 73%. The total amount of cash credited to card

E accounts exceeded RUR 600 million. N

I Total payments through ATMs and bank terminals exceeded USD 44 million. In 2006,

S over 26,000 customers used the “Telecard” mobile phone system to get access to infor-

U mation on their financial transactions. In cooperation with VISA Int., the Bank intro-

B duced the option to transfer funds from a Gazprombank card to any VISA card issued

by other banks. L I A T BANKING CARD BUSINESS E R

As of year-end, USD billion 2002 2003 2004 2005 2006

Card account balances (average for Q4) 0.07 0.166 0.250 0.385 0.608 Card accounts transactions 1.078 1.763 2.936 4.320 6.728

The Bank developed its trade acquiring business, which more than doubled year on year to USD 221 billion. In 2006, the Bank signed new agreements with major retail chains, expanded the service network at existing clients and established new partnership agreements for VISA and MasterCard issue-and-acquiring services with seven banks.

|49| GAZPROMBANK GROUP | Annual report | 2006

RETAIL BUSINESS OUTLOOK

The huge potential and high growth rates of the retail business set forth a number of new business objectives for 2007 and the years to follow. These objectives are focused on boosting the upward trend in this business segment. The Bank plans to:

I Expand its office network in Moscow and other Russian cities.

I Develop and implement new lending programs and streamline existing ones, including car loans based on factoring and repurchase schemes, secured loans for the purchase of yachts and boats, pre-mortgage loans and express loans based on borrower scoring (consumer loans, car loans, credit cards).

I Develop and introduce new deposit products: pension and housing deposits and special pension deposits for NPF “Gazfond”; launch a pension card program for pension payments, including access to pension account information using Gazprombank cards.

I Launch the issue of microchip cards; implement banking technologies that protect against on-line fraud.

I Launch new premium products for VIP clients: VISA Infinite and MasterCard World Signia cards with extended credit limit; expand the range of products and services offered using the Bank’s own products, the services of selected partners and the cross-selling of services provided by other Bank units, including the development and introduction of non-financial products.

I Extend ATM functionality to the processing of payments for shares in mutual investment funds and transfers to brokerage accounts for the purchase of equity securities.

I Implement a joint discount program with SOGAZ Insurance Group providing discounts of 10% to 30% to cardholders paying for the company’s services.

|50|

FINANSOVYE VESTI

№3 2007

Man as Hitting the Black Capital Sea Coast

Vnesheconombank, Gazprom- bank will also install a network bank, International Moscow of ATMs throughout the Finance-Banking School host coastal area. interbank conference: “Man “Krasnodar territory is now one as capital. The technology of of Russia’s fastest growing management and assessing regions,” said Olga Kazan- efficiency” skaya, First Vice-President and Member of the Board. Nikolai Korenev, Gazprom- “We are seeing significant bank’s Deputy Chairman, gave growth in investment activity the opening address at the con- and a substantial increase in ference in Moscow. He dis- demand for banking services cussed the implementation of that offer quality and conven- personnel management at the ience, both among organiza- bank, noting that every com- tions and individuals.” pany that hopes to become a “By expanding Gazprombank’s leading business focuses first Left to right: Vyacheslav Gainochenko, Valeriya Galshenko, Mariya Kotovskaya, Yury Kats, presence in Krasnodar territo- Dmitry Zauers, Olga Klimova and Anatoly Malakhov and foremost on improving its ry, particularly on the Black system of managing human Gazprombank begins pro- in Novorossiysk, Tuapse and Sea coast, we are aiming at our capital. gram to expand network on Temruk, to join the existing traditional corporate clients – Many of the speakers stressed Russia’s Black Sea coast branch of its regional affiliate who are stepping up their oper- that any plan for managing in Sochi. Automated self- ations in the region – as well human resources is primarily a At the first stage of the pro- service banking offices will as a host of local companies and plan for managing assets. Despite gram in 2007, Gazprombank begin operating in Anapa, of course, residents and vaca- a severe shortage of qualified per- will open three new branches Gelendzhik and Adler. The tioners in the resort towns.” sonnel (and the shortage is worst in the banking sector, due to its traditional human resources “conservatism”), the banking Stipends for Students sector is optimistic. The practice of identifying career paths helps Gazprombank awards stipends ly qualified specialists and to sustain employees in crisis sit- at Russia’s leading educational managers, about two-thirds of uations, they said. One theory institutions whom work at branches in the holds that if managers show they Russian regions. The stipend love their work, clients will be The 20 stipend recipients, the recipients in future might infected by their enthusiasm – winners of a competitive selec- serve an internship at and will be more loyal to the tion process, received their Gazprombank and begin their bank. certificates and Visa bankcards careers there,” Razdobudko In the closing address, Sergei from Gazprombank First Vice- said. Candidate selection was Razdobudko, First Vice-Presi- President Sergei Razdobudko, held in the fall of 2006. Stu- dent, Head of Gazprombank's the Head of Personnel Depart- dents from a number of lead- Personnel Department, who ment. The stipends amount to ing educational institutions talked about designing salary USD 1,200 annually. Left to right: Sergei Razdobudko and Grigory were recommended, including schedules and motivating per- “Working with young people Plotnikov with a stipend recipient Moscow State University, the sonnel, highlighted the pro- is a key element of our com- cial programs to adapt and Finance Academy under the gram of incentives for prehensive program for corpo- develop ‘newbies’ and to auspices of the Government of managers and specialists. rate training and professional enable them – in every way the Russian Federation, Razdobudko, also discussed development in 2006–2008,” possible – to identify their Moscow State Institute the comprehensive targeted Razdobudko said. “That is no potential and then to maximal- of International Relations program for corporate training accident, because in order to ly achieve it. We value profes- (MGIMO), the Plekhanov and personnel motivation. preserve and build on its sionalism and the ability to Russian Academy of Econom- Over 150 people – employees achievements, the bank has to work as part of a team and to ics, the Higher School of Eco- at Russia’s biggest banks, constantly keep in mind the meet the challenges of a rapid- nomics, Moscow Aviation financial analysts and experts – promising, inspiring younger ly growing bank. Gazprom- Institute and Moscow Institute attended the conference. generation, to work out spe- bank today is over 5,500 high- of Physics and Technology. №3 F I N A N C I A L N E W S

News USD 100 Million for Severnaya Verf

Gazprom bank unveils Ipoteka Plus, a new mortgage lending program that provides additional funds to mortgage holders to finance construction, installation and fit out work needed to complete the building. Under the program, borrowers who purchased their homes with a Gazprombank loan and who have a good repayment history can receive up to 50% of the original amount, secured by the property.

Gazprombank signs up for Finance Technology Center’s banking system, Left to right: Sergei Yezhovkin, Alexander Kaznacheyev, Andrei Smirnov running on the Oracle Gazprombank approves USD foreign defense export financing in the national platform. Gazprombank 100 million four-year credit orders. The loan was economy’s critical indus- will soon install Settlement line for Northern Wharf, approved based on Sever- tries, especially the defense Center, a subsystem of a leading Russian shipbuilder. naya Verf’s preliminary industry, said Gazprombank FTC’s flagship product, to Russian-standard financials Vice-President Andrei automate inter-bank and The proceeds will finance for 2006, and fits with the Smirnov, Head of the Strate- inter-branch settlements. shipbuilding programs under bank’s strategy of providing gic Clients Department. Gazprombank has over 470 affiliates serving individuals and corporate clients. Urals Operators Dial Gazprombank

Gazprombank inks credit Gazprombank wins tender Sverdlovsk, Tyumen and 140,000 broadband internet agreement with German to lend 3 billion rubles Chelyabinsk regions, Perm clients. bank consortium to to Uralsvyazinform during territory and the Khanty- Uralsvyasinform has charter finance equipment pur- a period of 5 years. Mansii and Yamalo-Nenets capital of RUR 4.816 billion. chases from European autonomous districts. The About 13% of shares are traded manufacturers under the Uralsvyazinform is the company serves over 3.7 mil- on exchanges abroad in the guarantee of the relevant telecommunications operator lion fixed-line subscribers, form of ADR/GDR. The com- national insurance agen- in the Urals area, with opera- 4.5 million mobile communi- pany’s capitalization currently cies. The agreement tions in the Kurgan, cations subscribers and stands at USD 2.2 billion. with АКА Ausfuhrkredit- Gesellschaft mbH, which does not limit the total amount of borrowing, will Children Draw Mozart enable Gazprombank to receive long-term financ- Winning pictures in “Children The opening of the exhibition corner of Europe with concerts, ing on import contracts Draw Mozart” contest exhibit- was attended by Open awards and meetings with their for its investment projects ed at Salzburg Festival Europe’s initiators and organ- peers. The combination of free- and programs. izers: Gazpromexport and dom, travel, meeting new Children at Russia’s art spe- its partners Gazprombank, friends and creativity transmit- Gazprombank sponsors cialty schools participated in Austria’s OMV, Casinos ted the feeling of Open Europe equestrian events, works the competition as part of the Austria AG and the public to the young participants. to save Russian horse Open Europe initiative, which organization Blick nach Europa. The festival organizers and breed. Gazprombank’s kicked off in May 2006 with a Later in Moscow and Vienna sponsors, which included the assistance aims to pre- festival of children’s creativity about 170 children aged 6-15 – largest power companies in serve a national treasure: in Baden, Austria. from Russia, Austria and else- Europe, aimed to promote an the Orel Trotter horse The exhibit first toured several where – showed off their tal- atmosphere of openness, of breed, which is on the European cities before return- ents in folk and classical music cooperation in international verge of disappearing. ing to Mozart’s homeland for and dance. culture and the humanities, to The breed stock today the celebration of the 250th For the children the festival fulfill the event’s motto: “From numbers no more than anniversary of the legendary was first and foremost a holi- energy for heating to warming 1,000. composer’s birth. day, an excursion to a beautiful children’s hearts.” SUSTAINABLE DEVELOPMENT MANAGEMENT 3 GAZPROMBANK GROUP | Sustainable development management | 2006

Gazprombank’s sustainable financial and operating results are contingent upon the quality of management, compliance with corporate governance standards, business continuity strategies and sound risk management. The Bank also maintains corporate values, personnel development, and attends to issues of social responsibility and public welfare. Corporate governance is focused primarily on matters of efficiency, development of systemic approach, transparency of operations and performance monitoring. T N E CORPORATE GOVERNANCE M

P DEVELOPMENT O L E V Gazprombank’s system of corporate governance includes overall management of the E Bank’s activities through the General Meeting of Shareholders and the Board of Directors D

in cooperation with the Management Board, its Chairman and other Bank’s executives.

E The system is focused on: C

N I setting up strategic goals, ways to achieve them and monitor execution; A I maintaining the balance between the interests of shareholders, the Board, the N management of the Bank, its creditors, customers, and other stakeholders; R E I staff motivation; V

O I compliance with the Russian legislation, the Bank’s charter and internal docu-

G ments.

E The efficiency of the Bank’s decision-making system is evidenced by the following T statistics: in 2006 Gazprombank held three General Meetings of Shareholders, 26 meetings A of the Board of Directors, and 57 meetings of the Management Board of the Bank. R

O In 2006, the Board of Directors considered over 60 issues of topical significance ranging from P successful domestic and international public borrowing programs, further development of R relationship with Gazprom to capital increases, and the improvement of internal control. O

C In addition to current financial policy, priorities in asset and liability management and issues 3 to be submitted to the Board, the Bank’s Management Board regularly reviews matters of strategic development, both generally and in specific business areas (including retail and investment matters), the work of branch and unit managers, and IT development projects.

In 2006, the Management Board approved and adopted the Code of Corporate Gover- nance and policies on risk management, dividends, information, and incentives for senior and top management. The Bank is completing a Strategic Management and Disclosure Handbook and the Project Management Concept.

The Bank’s committees are responsible for collective decision-making on key current and prospective objectives for specific business lines and business development areas. The most active committees include Asset and Liability Management Committee (ALMC), Credit Commit- tee, Investment Committee, Technology Committee, and Corporate Governance Committee.

|55| GAZPROMBANK GROUP | Annual report | 2006

RISK MANAGEMENT AND INTERNAL AUDIT

In 2006, the Board of Directors approved a risk management policy based on a centralized risk management approach, including common risk assessment and management principles, continuous methodological improvement and technological upgrades.

The Bank pays special attention to comprehensive risk management and external and internal controls of its operations.

Gazprombank is consistently enhancing its credit risk management methodology in line with the documents of the Basel Committee on Banking Supervision (Basel II). Credit risk management is based on standard technologies. In 2006, the Bank upgraded its approach to credit risk limits definition in order to diversify accepted credit risk exposure and adapted it to the increased product range and the scale of the Bank’s businesses. The Bank applies an internal rating system for correspondent banks based on a combined scoring technique.

The credit risk management system used by the Bank includes credit limits setting for groups of borrowers broken down by products and terms of lending. The Bank’s head office continuously monitors the compliance of the Bank branches with applicable limits. Other critical system elements include monitoring and controlling interest and principal debt settlement (including the security of pledge) and concentration of risks and exposure on major corporate borrowers.

The market risk management system is focused on interest, price and currency risks, as well as general market risks. The Asset and Liability Management Committee (ALMC), and the Management Board, review market risk reports on a monthly and semi-annual basis. Risks are managed based on a system of limits set for different types of operations and for specific instruments and issuers.

Value-At-Risk (VAR) methodology is used to assess regular market risks for different types of instruments and portfolios. Extreme market fluctuations are assessed on the basis of stress-analysis that may also be applied to market risks related to dramatic changes in the market.

As for liquidity management priorities, Gazprombank is committed to meeting all of its financial obligations fully and in due time, while achieving its target level of profitability.

The Asset and Liability Management Committee manages medium and long-term liquidity, imposing limits on the amounts, terms and interest rates for operations with assets and liabilities, and approves financial plans that include target asset-to-liability ratio with minimum interest margins for different lines of business. Short-term liquidity is managed in real-time mode, using limits set for different types of instruments.

In 2006, Gazprombank developed an operational risk management concept that provides for the transition from a case-by-case risk management at different bank units to a centralized risk management approach. The Concept involves the development of a system to

|56| GAZPROMBANK GROUP | Sustainable development management | 2006

detect and register risk events and their consequences, an integrated assessment of operational risk and the estimation of the level of funds required, as well as allowing disaster planning and business recovery procedures for emergency situations.

T The Bank uses the Bankers Blanket Bond (ВВВ) comprehensive banking risk insurance N system. In 2006, the Bank secured a 15 mln coverage to provide for its growth. E

M The key issue in the improvement of the comprehensive risk management and capital dis-

E tribution system is the aggregation of legal, reputational and compliance risks. This

G approach will help the Bank to reach a new management decision level, including those

A relating to decisions on managing assets, liabilities, profitability and risks. N

A The internal audit system provides the Bank’s management bodies with instruments of comprehensive control over the banking risk management system, the distribution M

of authority in the banking and other transactions together with information security. L

E The system relies on an internal control culture – a combination of moral and ethical val-

N ues, professional standards, and a corporate culture which enhances the awareness of

N the critical importance and need for internal audits based on operational continuity, inde-

O pendence, impartiality, and professional competence. S Since 1996, Gazprombank has been audited by major international audit companies. R ZAO Deloitte and Touche CIS has been Gazprombank’s auditor since 2002. In accordance E

P with the Bank’s Charter, its activities are also audited by a Revision Commission elected at the General Meeting of Shareholders. D N A

Y C I

L HUMAN RESOURCE POLICY O P

AND PERSONNEL MANAGEMENT E C R Gazprombank’s HR policy aims at building a highly qualified and united team. The funda- U mental HR policy objectives are to streamline the organizational structure, promote O

S professional development, improve the remuneration and incentives system, implement

E more efficient HR techniques and methods, and to preserve and enhance corporate culture. R

Gazprombank’s efforts to develop and diversify its business and expand its network of

N branches and supplementary offices were accompanied by planned increases in the

A number of staff, which by year-end totaled 5,800 employees.

M The Bank streamlined its corporate governance system in line with business development U priorities, as follows: H

I reorganization of the Corporate Business, Treasury and Retail Business Depart- ments;

I streamlining back office units to mirror the structure of business departments;

|57| GAZPROMBANK GROUP | Annual report | 2006

I introduction of a separate remote banking unit;

I outsourcing of auxiliary and non-core functions to subsidiaries.

The motivational policy is based on the new system of incentives and remuneration that presupposes building a clear hierarchical classification of employee positions, the market value of similar positions and dependence of salaries on such factors as the scope of responsibility, workload and performance. The Bank has also introduced a long-term motivation mechanism involving stock option agreements for top managers.

To ensure efficient personnel training and development, the Bank introduced a Comprehensive Corporate Training and Professional Development Program. In 2006, Gazprombank arranged 628 training and educational events, attended by 3,700 employees. Nearly 260 employees received various professional banking certificates. Gazprombank continued co-operation with major training and educational centers, consulting and training companies in Russia and abroad.

The Bank implements a variety of social guarantees to retain a stable team. Its social program includes a broad range of insurance, medical services, benefits and compensations, and additional pension insurance offered to the Bank’s employees. Over a 100 Bank retirees have already benefited from additional non-government pensions.

The Bank has been consistently promoting a corporate culture focused on uniting the Bank’s personnel and strengthening its team spirit. The Bank regularly hosts team- building events including sports competitions, contests, and parties, and takes care of pensioners providing them with individual financial assistance. The values, social norms, and rules of conduct are an integral part of the Code of Corporate Conduct for Gazprom- bank employees.

REGIONAL EXPANSION AND IT DEVELOPMENT

The Bank consistently develops its branch network to raise efficiency of its regional business and expands the product range offered to regional customers (including retail business development and comprehensive services to corporate clients in strategic industries). In 2006, two new branches were added to the branch network: in Krasnoyarsk and Irkutsk. In early 2007, the Bank opened branches in Kemerovo and Samara, bringing the total number of its regional branches to 35. Another branch will soon be opened in Kaliningrad. The Bank also opened 26 new outlets (mainly additional offices), with the total number of offices now exceeding 190. Finally, the Bank opened a representative office in Beijing (China).

Regional development is also supported by strategic partnership with members of the Interregional Banking Group for the Gas Industry (IBGGI). The existing agreement

|58| GAZPROMBANK GROUP | Sustainable development management | 2006

provides for a common financial and economic policy, unified corporate standards of banking services in the regions and enhanced coordination of joint operations.

The agreement also provides for further specialization through the development of retail mortgage and consumer lending, as well as SME lending. The subsidiaries and affiliated banks are strengthening their positions in the regions by expanding their client base and product range and through introducing new financial instruments, while Gazprombank assists in their development through capital contributions. The Group’s mid-term development plans focus on increasing the banks’ share in specialized regional markets and improving their capitalization and profitability.

IT development programs include the preparation of migration to a new, more advanced banking platform and regular upgrades to the existing IT systems. The Bank has an advanced, reliable and highly efficient computer center that supports the corporate data processing system, shared data archives, LAN and telecommunication/telephone networks. Y Priority areas include retail banking automation, and remote and specialized banking for T

I large corporate accounts, including Internet access to Bank services. In 2006, the Bank L expanded its regional network of self-service outlets and actively promoted Internet I banking services. B I

S Much effort was invested into front-office systems, including the system of credit rating

N of individual borrowers and Treasury/call center applications. The implementation of

O the multifunctional office automation system (Company Media) has had a positive effect

P on the Bank’s corporate culture. S E R

L A I

C SOCIAL RESPONSIBILITY O S

Gazprombank believes that the financial and social elements of its business are closely connected. Its business philosophy is based on such concepts as social importance, responsibility and transparency:

I the Bank actively supports the development of key domestic industries and the implementation of national projects;

I the Bank sees its priority goal in promoting the prosperity of Russia and the well- being and security of its population;

I our policy of business transparency ensures availability of operational results to our shareholders, partners and clients and reflects our commitment to market discipline.

Charity. Gazprombank supports a variety of charity projects focused on providing assistance to children and war-veterans, cultural, educational and scientific organizations as well as religious institutions.

|59| GAZPROMBANK GROUP | Annual report | 2006

The Bank has always placed great emphasis on supporting orphans. The Bank’s projects include assistance to the Priozersk boarding school, Ardatov, Sortavala and Saltykov orphanages, and boarding schools at the Saint Nicholas Monastery in Cehrny Ostrov, Kaluga Region, and the Saint Nicholas (Svyato-Nickolo-Shartomskiy) Monastery in Shar- tom, Ivanovo Region. Assistance to war veterans is organized through specialized committees and associations.

Gazprombank recognizes the Russian Orthodox Church as a key center of Russian cultural Renaissance. It assists orthodox churches and monasteries; sits on the Trustee Board of the Monastery of the Saviour’s Transfiguration (Spaso-Preobrazhenskiy) Valaam Monastery and donates funds for the restoration of churches and monasteries. The Bank also sponsors a multi-volume edition of the Orthodox Encyclopedia.

The Bank also provides significant aid to scientific, cultural and educational institutions, including the Museums of the Moscow Kremlin, the State Historical Museum, Marina Tsvetaeva Museum, the Pushkin State Museum of Fine Arts, and the Chekhov Art Theater School.

Working for the future, the Bank plans to invest capital in gifted students, our national intellectual wealth. In 2006, the Bank established 20 special scholarships to be awarded to the best students of several leading Russian universities on an annual basis.

Sponsorship activities of the Bank have always been focused on supporting cultural and educational projects. In 2006, Gazprombank donated funds for socially important projects run by the Meyerhold Centre, Sholokhov Encyclopedia Foundation and the National Sviridov Fund.

The Bank is also an active supporter of sports organizations. Its sponsorship aid has helped the Russian mountaineer team to climb K2, the second highest mountain in the world. The Bank supports the project to revive Russian horse breeds on the verge of extinction and provides aid to the Gazprom Fakel Club (table tennis), the Russian Chess Federation and the Russian Dance Union.

|60|

FINANSOVYE VESTI

№4 2007 г.

RUR 15.3 billion Agreement with Novoship in Profit Gazprombank, OAO Novoship Gazprombank Q1 pretax sign cooperation agreement profit up 128% to 15.3 RUR billion The agreement sets out the key areas of interaction between Gazprombank reported the companies in implement- substantial improvements ing Novoship’s development in key financial indicators program, focusing on expan- for Q1 2007: sion of specialized tanker • gross assets rose 44% to transportation to provide Rus- RUR 1,304.2 billion sian oil and gas companies the • loans rose 42% to RUR most favorable transportation 646.9 billion, and options for oil and products, • corporate customer ac- delivered with a high standard counts increased 139% to of reliability and quality. RUR 725.1 billion. In the agreement, Gazprombank “Profit growth was a expresses its readiness to result not only of steady finance projects targeted at earnings flows from lend- developing Russia’s shipping Left to right: Wolfgang Skribot, Sergei Grishenko, Salavat Razbayev, Alexander Garankin ing operations, but from companies and increasing the operations on the securi- Russian transport fleet’s share to finance construction and partner in developing and ties market, despite the of export shipments. It also modernization of oil terminals implementing programs to pro- volatility of the latter,” pledges to assist in implement- at major ports on the Black Sea vide project financing services, one bank official said. ing these projects by serving as and the Sea of Azov. financial and investment financial consultant and Novoship recognizes consulting and organization of investor. The bank is also ready Gazprombank as a priority syndicated financing. A Diplomatic Affair

steps up its operations in world and international gas sector Gazprombank has established capital markets and expands projects and the expansion correspondent relations with over operations with leading inter- plans for the bank and its net- 739 financial institutions around national investors and lending work of affiliates. the globe. A total of 57 Nostro and financial institutions. The “In 2006 Gazprombank reported accounts have been opened at meeting was devoted to the record pretax profit of RUR 19.4 45 banks, including the leading bank’s operating results for billion rubles. Its assets rose 70% clearing banks in Europe, the U.S. 2006 and preliminary indicators on the year and are now near and Asia. Over 200 foreign banks for the Q1 2007. RUR 730 billion. Bank capital are Gazprombank counteragents Deputy Chairmen Alexander more than doubled to over RUR for financing international trade Mikhail Rybin Sobol and Alexei Obozintsev 89 billion,” Sobol noted in his operations. Gazprombank will Gazprombank hosts corporate reported on Gazprombank’s report. “The main positive fac- continue working with state agen- presentation for foreign officials place and role in the Gazprom tors impacting development of cies and development banks. The Group and the Russian banking the banking sector are: a favor- bank is currently accredited by The presentation was attended system. They also discussed able macroeconomic climate in the majority of the leading export by top officials from the con- various business areas, the Russia, rising confidence in insurance agencies and exim- sulting divisions, economic high-tech services on offer and banks and growth in demand for banks in Europe, America and departments and trade mis- new financial products. They banking services on the part of Asia. Memorandums of under- sions attached to foreign briefed attendees in detail on both companies and the public, standing were signed in embassies in Russia and by offi- the bank’s current operations increasing diversification of the 2005–2007 with Japan Bank cials from several major compa- on world financial markets, its banking business, more profes- for International Cooperation, nies and banks operating in expansion plans and the major sionalism and better manage- MEHIB – Hungarian Export Russia, as well as the heads of international deals completed ment, and the move to interna- Credit Insurance and The Export- departments and units at the or planned for the near future. tional accounting standards and Import Bank of China.” Obozintsev Ministry of Foreign Affairs. Foreign officials at the presenta- business development plan- also recalled this year’s upcoming The presentation at the tion said they were impressed by ning.” road shows and corporate presen- Baltschug Kempinski Hotel in information on Gazprombank’s Obozintsev noted that “as of tations to be held at leading world Moscow took place as the bank participation in major Russian the end of March this year, financial centers. №4 F I N A N C I A L N E W S

News RUR 4.17 trillion in Client Assets

Gazprombank’s St. Petersburg Client assets held in branch approves credit Gazprombank’s depositary limits for companies in network top RUR 4.17 trillion the Uralmash-Izhora Group (OMZ): USD 10 million “We have been working under for Izhorskiye Zavody and the liberalized market in USD 4 million each for OMZ Gazprom shares for over a Mining Equipment and Engi- year,” said Vice-President neering and OMZ-Special Steels. Vladimir Tatsii, the Head The two-year loans will be used of the Depositary Center. to replenish working capital “Gazprombank’s established and finance current operations. mechanisms for working with Gazprombank is also currently depositary receipts (Bank of developing a project to finance New York) is our pledge of construction of an electric-arc successful operation of the furnace (DSP–120) at Izhorskiye program on Gazprom Level 1 Zavody. The first stage of the ADRs which foreign investors project will require investment of are seeing.” about USD 50 million. Forpost “Growth in the number Management is OMZ’s leading of client-owned Gazprom shareholder. Gazprombank is its shares nominally held by strategic financial partner. Gazprombank – over 20% in the latest year – reflects more than just complete compliance A Wholly Owned with the criteria for foreign Subsidiary custodian banks (Rule 17f–5).” “The depositary’s orientation on the client was especially Gazprombank acquires 52.2% clear during the ‘public’ IPO, stake in OAO Morion when we worked not only with (St. Petersburg) from the EBRD our own depositors, but also Morion is a world leader in pro- with a significant number of duction of high-tech piezoelec- clients with more modest tric instruments used to stabi- investment portfolios, who lize and separate frequencies switched to us from other in control systems as well as depositaries,” Tatsii said. Left to right: Veniamin Fyodorovich, Vladimir Tatsii, Irina Aldyakova, Marina Tikhomirova, Olga navigational, radar and meas- Chernyshev, Vladimir Melentyev and Alexander Klimanov uring systems. “Acquisition of the Morion stake, a world leader in precision quartz fre- quency stabilization and sepa- First Place in Ruble Obligations ration instruments, is part of the bank’s strategy for invest- Cbonds ranks Gazprombank issuance of bonds bearing securities and a fairly difficult ing in high-tech Russian busi- first among ruble bond organ- coupons with interest lower time for the market, the issue nesses applying the latest sci- izers, underwriters than 8% annually, of which it was fully placed among a wide entific developments and placed bonds from nine issuers number of Russian and for- occupying a leading position The bank was also ranked first totaling over RUR 36 billion. eign investors, at a yield of on the world market,” by the National Securities The bank is also moving into 7.28% annually. The transac- Gazprombank Deputy Chief Market Association, which the market to organize equity tion has given Russian issuers Executive Ilya Yeliseyev said. unites all Russian banks financing. Gazprombank was an effective new instrument The stake had been managed engaged in securities trading, the leader by volume in plac- for refinancing their mortgage by Germany’s Quadriga Capital based on the results for the ing Rosneft shares during last portfolios. Russia. first nine months of 2006. July’s IPO on MICEX and the “This deal practically proves Cbonds reported that London Stock Exchange, and that the ruble has become con- MIEL-Novostroiki, Gazprombank Gazprombank organized 27 bond took part in organizing the IPO vertible – both de jure and de roll out joint mortgage lending issues totaling RUR 65 billion in for the Cherkizovo Group. facto,” Obozintsev said. program 2006, meaning that one out of “The bank also successfully “Investors now have Russian Home buyers can now obtain every seven Russian corporate placed Russia’s first-ever issue rubles on their books. They an apartment at 10.5% interest bonds on the ruble market last of mortgage-backed bonds,” know how to work with them, on U.S. dollar loans and at year was managed by Deputy Chairman Alexei they monitor the exchange 12% on ruble loans, based on a Gazprombank. In the last three Obozintsev said. “We demon- rate, interest rates, etc. It is a 10% down payment. years the bank was involved in strated that mortgage securities first step toward the ruble The special offer can be used to a total of 98 bond issues can be issued in Russia, that the eventually becoming a global buy apartments in a wide range exceeding RUR 330 billion. market is already there.” reserve currency. It is now in of prices. Gazprombank is the leader in Despite the novelty of the the realm of possibilities.” GAZPROMBANK GROUP FINANCIAL INFORMATION 4 GAZPROMBANK GROUP | Independent Auditors’ Report | 2006

ZAO Deloitte & Touche CIS Business Center “Mokhovaya” 4/7 Vozdvizhenka St., Bldg. 2 Moscow, 125009, Russia Tel: +7 (495) 787 0600 Fax: +7 (495) 787 0601 www.deloitte.ru INDEPENDENT AUDITORS’ REPORT

To the Shareholders and the Board of Directors of the Joint-Stock Bank of the Gas Industry Gazprombank (Closed Joint-Stock Company): We have audited the accompanying consolidated financial statements of Joint-Stock Bank of the Gas Industry Gazprombank (Closed Joint-Stock Company) and its subsidiaries (the “Group”), which comprise the consolidated balance sheet as of 31 December 2006, and the consolidated profit and loss account, statement of changes in equity and cash flow statement (the “consolidated financial statements”) for the year then ended, and a summary of significant accounting policies and other explanatory notes.

Management’s responsibility for the financial statements T

R Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards. This responsibility includes: O designing, implementing and maintaining internal control relevant to the preparation and fair pres- P entation of financial statements that are free from material misstatement, whether due to fraud or E error; selecting and applying appropriate accounting policies; and making accounting estimates R

that are reasonable in the circumstances. ’

S Auditor’s responsibility R

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

U misstatement.

A An audit involves performing procedures to obtain audit evidence about the amounts and disclo-

sures in the consolidated financial statements. The procedures selected depend on the auditor’s T judgement, including the assessment of the risks of material misstatement of the consolidated N financial statements, whether due to fraud or error. In making those risk assessments, the auditor E considers internal control relevant to the entity’s preparation and fair presentation of the consoli-

D dated financial statements in order to design audit procedures that are appropriate in the circum-

N stances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s inter-

E nal control. An audit also includes evaluating the appropriateness of accounting policies used and

P the reasonableness of accounting estimates made by management, as well as evaluating the over-

E all presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis D for our audit opinion. N I Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the 4 financial position of the Group as of 31 December 2006, and its consolidated financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Without qualifying our opinion we draw attention to Note 3 to the consolidated financial statements. The consolidated financial statements for the year ended 31 December 2005 were restated.

27 June 2007 Moscow

|65| GAZPROMBANK GROUP | Annual report | 2006 CONSOLIDATED FINANCIAL STATEMENTS

Consolidated profit and loss accounts for the years ended 31 December 2006 and 2005 (thousands of U.S. Dollars, except for earnings per share amounts which are in U.S. Dollars) Notes 2006 2005 (restated)

Interest income 1,260,360 739,520 Interest expense (811,978) (458,600) Net interest income 5 448,382 280,920

Provision for impairment of interest-earning assets 6 (128,175) (30,385) Net interest income after provision for impairment of interest-earning assets 320,207 250,535

Petrochemical business operating revenues 7 4,493,632 – Media business operating revenues 8 883,151 359,599 Dealing profits, net 9 494,624 503,335 Fees and commissions income 10 278,716 168,069 Profit from available-for-sale investments, net 17 205,276 93,724 Profit from foreign exchange, net 162,387 49,002 Dividend income 21,415 38,958 Other operating income 70,571 30,766 Non interest income 6,609,772 1,243,453

Petrochemical business operating expenses 7 (3,476,145) – Media business operating expenses 8 (685,150) (279,869) Salaries and employment benefits 11 (403,325) (297,262) Administrative and other expenses 11 (269,714) (178,943) Fees and commissions expense 10 (41,050) (29,359) (Other provisions)/recovery of other provisions 6 (40,886) 2,803 Non interest expense (4,916,270) (782,630)

Profit from operations 2,013,709 711,358

Income from associates 17 60,967 11,809 Profit before income tax and minority interests 2,074,676 723,167

Income tax expense 12 (517,013) (174,777) Net profit 1,557,663 548,390

Attributable to: Group’s shareholders 1,330,775 457,347 Minority interest 226,888 91,043 1,557,663 548,390

Basic earnings per share (US Dollars) 28 111.5 35.2 Diluted earnings per share (US Dollars) 28 111.4 –

Signed on behalf of the Management Board:

Andrey I. Akimov Alexander I. Sobol Chairman of the Board Deputy Chairman of the Board 27 June 2007

|66| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

Consolidated balance sheets as of 31 December 2006 and 2005 (thousands of U.S. Dollars ) Notes 31 December 31 December 2006 2005 ASSETS Cash and due from the Central Bank of the Russian Federation 13 2,907,450 1,069,751 Due from credit institutions, net 14 7,237,682 2,882,823 Securities at fair value through profit or loss 15 2,346,425 1,637,666 Loans to customers, net 16 11,583,990 7,401,093 Available-for-sale, net and investments in associates 17 2,496,550 1,090,514 Trade receivables, net 18 540,846 463,559 S

T Inventories, net 19 672,894 450,157

N Property, equipment and intangibles, net 20 2,447,399 1,971,390 E Goodwill 21 619,333 552,651 M Other assets, net 22 815,898 534,855 E

T Total assets 31,668,467 18,054,459 A T

S LIABILITIES

L Amounts owed to credit institutions 23 2,979,652 2,140,252

A Amounts owed to customers 24 11,447,091 7,217,013 I

C Subordinated deposits 24 688,832 607,519

N Certificated debts 25 5,454,543 1,566,445 A Eurobonds issued 25 2,613,738 2,065,800 N I Income tax liabilities 12 345,358 258,648 F Other liabilities 26 1,489,115 1,281,843 D Total liabilities 25,018,329 15,137,520 E T

A EQUITY D

I Share capital 27 1,160,857 907,057

L Share premium 27 1,061,899 – O Treasury stock 27 (84,343) (84,343) S

N Foreign currency translation reserve 3 (c) 297,283 (32,300)

O Fair value reserve 3 (g) 549,417 162,581

C Retained earnings 28 2,929,985 1,368,648 Total equity attributable to the Group’s shareholders 5,915,098 2,321,643 Minority interest 735,040 595,296 Total equity 6,650,138 2,916,939

Total liabilities and equity 31,668,467 18,054,459

Signed on behalf of the Management Board:

Andrey I. Akimov Alexander I. Sobol Chairman of the Board Deputy Chairman of the Board 27 June 2007

|67| GAZPROMBANK GROUP | Annual report | 2006

Consolidated statements of changes in equity for the years ended 31 December 2006 and 2005 (thousands of U.S. Dollars )

Share Share Treasury Foreign Fair Retained Equity Minority Total capital premium stock currency value earnings attributable interest equity translation reserve to the Group’s reserve shareholders

31 December 2004 907,057 – (10,632) 131 8,940 450,711 1,356,207 – 1,356,207 Acquisition of subsidiaries – – – – – 536,259 536,259 504,253 1,040,512 Net profit – – – – – 457,347 457,347 91,043 548,390 Fair value adjustment of available-for-sale investments – – – – 111,850 – 111,850 – 111,850 Disposal of available-for-sale investment – – – – 42,112 – 42,112 – 42,112 Treasury stock purchased – – (73,711) – – – (73,711) – (73,711) Dividends paid – – – – – (55,473) (55,473) – (55,473) Foreign exchange difference from translation to presentation currency (Note 3(c)) – – (32,431) (321) (20,196) (52,948) – (52,948) 31 December 2005 907,057 – (84,343) (32,300) 162,581 1,368,648 2,321,643 595,296 2,916,939 Acquisitions of subsidiaries – – – – – (71,881) (71,881) (68,429) (140,310) Net profit – – – – – 1,330,775 1,330,775 226,888 1,557,663 Share capital issue 253,800 1,061,899 – – – – 1,315,699 – 1,315,699 Fair value adjustment of available-for-sale investments – – – – 447,637 – 447,637 – 447,637 Disposal of available-for-sale investment – – – – (60,801) – (60,801) – (60,801) One-off income from the parent company (Note 28) 367,806 367,806 367,806 Dividends paid by subsidiaries – – – – – – – (18,715) (18,715) Dividends paid – – – – – (65,363) (65,363) – (65,363) Foreign exchange difference from translation to presentation currency (Note 3 (c)) – – – 329,583 – – 329,583 – 329,583 31 December 2006 1,160,857 1,061,899 (84,343) 297,283 549,417 2,929,985 5,915,098 735,040 6,650,138

Fair value reserve on available-for-sale investments as of 31 December 2006 has been shown net of deferred tax liability of USD 173,500 thousand (31 December 2005 – net of deferred tax liability of USD 51,341 thousand, 31 December 2004 – net of deferred tax liability USD 2,823 thousand).

Signed on behalf of the Management Board:

Andrey I. Akimov Alexander I. Sobol Chairman of the Board Deputy Chairman of the Board 27 June 2007

|68| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

Consolidated cash flow statements For the years ended 31 December 2006 and 2005 (thousands of U.S. Dollars)

Notes 2006 2005 CASH FLOWS FROM OPERATING ACTIVITIES Interest received 1,130,897 729,830 Fees and commissions received 243,652 157,784 Interest paid (739,447) (433,072) Fees and commissions paid (37,858) (27,978) Dealing profits, net 352,327 272,548 Profit from available-for-sale investments and

assets held for sale, net – 93,724 S Foreign exchange gains, net 114,284 32,194 T

N Media business operating profit, net 534,598 187,078

E Petrochemical business operating profit, net 692,989 –

M Other operating income 304,907 30,766

E Salaries and employment benefits (355,459) (257,566) T

A Administrative expenses and other operating expenses (240,867) (160,070)

T Cash flows from operating profits before changes S

in operating assets and liabilities 2,000,023 625,238 L A I (INCREASE)/DECREASE IN OPERATING ASSETS C Obligatory reserve with the Central Bank N of the Russian Federation (88,192) (55,064) A

N Due from credit institutions (2,318,208) (157,227) I

F Securities at fair value through profit or loss (395,461) 305,974 Loans to customers (3,500,160) (2,103,374) D

E Other assets (96,459) (147,488) T

A INCREASE/(DECREASE) IN OPERATING LIABILITIES D I Amounts owed to credit institutions 679,493 321,726 L Amounts owed to customers 3,436,062 2,342,746 O

S Other liabilities (186,525) (71,843)

N Net cash flows from operating activities before profit taxes (469,427) 1,060,688 O Income taxes paid (593,379) (229,540) C Net cash flows from operating activities (1,062,806) 831,148

CASH FLOWS FROM INVESTING ACTIVITIES Available-for-sale investments purchased (2,452,049) (897,711) Available-for-sale investments sold 1,861,626 1,044,517 Property, equipment and intangibles purchased (737,824) (270,040) Property, equipment and intangibles sold 199,954 142,707 Net cash acquired from acquisition of subsidiaries – (938,436) Dividends received – affiliated undertakings 18,658 37,348 Asset held for sale sold – 80,000 Net cash flows from investing activities (1,109,635) (801,615)

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Consolidated cash flow statements For the years ended 31 December 2006 and 2005 (thousands of U.S. Dollars) (continued)

Notes 2006 2005 CASH FLOWS FROM FINANCING ACTIVITIES Share capital issue 253,800 – Share premium 1,061,899 – Treasury stock purchased – (73,711) Certificated debts 3,586,928 250,071 Euro-commercial papers issued 528,690 – Eurobonds issued – 1,000,000 Eurobonds redeemed – (178,155) Syndicated loans 23 52,554 244,404 Subordinated deposits 24 48,555 (5,109) Dividends paid (84,078) (55,473) Net cash flows from financing activities 5,448,348 1,182,027

Effect of change in exchange rates on cash and cash equivalents (113,358) (9,151)

Foreign exchange difference from translation to presentation currency 3(c) 404,882 (74,601)

Change in cash and cash equivalents 3,567,431 1,127,808

Cash and cash equivalents, beginning of the period 30 2,940,924 1,813,116

Cash and cash equivalents, end of the period 30 6,508,355 2,940,924

Signed on behalf of the Management Board:

Andrey I. Akimov Alexander I. Sobol Chairman of the Board Deputy Chairman of the Board 27 June 2007

|70| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

Notes to Consolidated financial statements for year ended 31 December 2006 (thousands of U.S. Dollars, unless otherwise stated)

NOTE 1 – PRINCIPAL ACTIVITIES AND ORGANIZATION

a) Activities and organization

The Gazprombank Group (the “Group”) primarily consists of:

S I the parent company – Joint-stock Bank of the Gas Industry Gazprombank T

N (Closed Joint-stock Company) (the “Bank”), E

M I the group of companies owned by OAO “SIBUR Holding” (SIBUR Holding Group –

E the “SHG”), T A

T I the group of companies owned by OAO “Gazprom Media” and ZAO “PRT-1” S (Gazprom Media Group – the “GMG”), L A

I I other smaller companies and banks. C

N The parent company of the Group – Gazprombank (the “Bank”) was established as a lim- A

N ited liability partnership in 1990. In November 2001 the Bank changed its legal form to a I

F closed joint-stock company. The Bank possesses a general banking license and a license for operations with precious metals from the Central Bank of the Russian Federation D

E (the “CBR”), and licenses for securities operations and custody services from the Federal T Stock Market Commission. A D I The Bank is the third bank in the Russian Federation in terms of assets and equity L

O (source: Interfax Information Agency), providing a broad array of banking services to

S many of Russia’s leading corporations and government entities including, in particular, N OAO “Gazprom” and the OAO “Gazprom” Group, as well as to individual clients. The Bank O

C is a universal financial institution and its principal activities include commercial lending, trade finance, deposit taking, domestic and international settlement services, depositary and custodian services, project finance, private equity activities, capital market services, foreign exchange and securities trading, asset management, structured finance and brokerage services and retail banking services. The Bank’s legal address is: Nametkina Str., 16, Bld.1, Moscow, 117420, Russian Federation.

SIBUR Holding Group (the “SHG”) is a vertically integrated Russian petrochemical group of companies involved in the following principal activities primarily undertaken in the Russian Federation: refining, processing and distribution of petrochemical products and production and distribution of tires. The Group obtained control over 75% minus one share of SHG in November – December 2005 as a result of the acquisition of the newly issued OAO “SIBUR Holding” ordinary shares from other Gazprom Group companies.

Gazprom Media Group (the “GMG”) is a Russian media group of companies, the principal activities of which are: TV and radio broadcasting, advertising, publishing, film production and

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distribution primarily undertaken in the Russian Federation. The Group has purchased from OAO “Gazprom” and some of its subsidiary companies the controlling interests in two holding companies – OAO “Gazprom-Media” and ZAO “PRT-1” (together with its subsidiaries known as the Gazprom Media Group (GMG)) and minor interests in OAO “NTV” and OAO “TNT” in July 2005.

These consolidated financial statements were authorized for issue by the Management Board of the Bank on 27 June 2007. b) Acquisitions

During the year ended 31 December 2006 the Group made several acquisitions of additional stakes in consolidated subsidiaries of SHG and GMG from third party minority shareholders. Also, the Group commenced several business combinations by acquiring controlling stakes in various companies primarily in telecommunications (GMG). Goodwill on these acquisitions was determined provisionally and may be subject to further adjustment.

Details of material acquisitions and their effect on the consolidated cash flows and equity are as follows:

Subsidiary % Conside- Carrying Share Retained Goodwill/ acquired ration value in net earnings Excess in given of assets of fair value the share minority acquired over cost of capital interest investment

OAO NTV (GMG) 30.6% 60,322 45,361 – 14,961 – ООО Tomskneftekhim (SHG) 19.3% 44,495 11,124 – 33,371 – OOO Dom Otdiha Chehova 100.0% 22,096 – 22,096 – – OOO ZK Evropeysky 75.0% 16,533 – 16,533 – – OAO TNT-Teleset (GMG) 48.3% 15,362 7,421 – 7,941 – OOO Lora-97 (GMG) 100.0% 15,117 – 11,020 – 4,097 ZAO Publishing House Seven Days (GMG) 25.0% 11,909 3,209 – 8,700 – OOO Prominveststroy 90.0% 11,435 – 11,435 – – OOO Proektstroyinvest 85.0% 10,765 – 10,765 – – OAO NTV-Plus (GMG) 45.5% 10,590 204 – 10,386 – ZAO Media-Press (GMG) 51.0% 8,482 – 207 – 8,275 OOO Gazprombank Invest Severo-Zapad 100.0% 7,962 – 7,962 – – OOO Gazprombank Invest Kuban 100.0% 7,848 – 7,848 – – OOO Sevzapzhilpromsrtoy 100.0% 5,406 – 5,406 – – OAO Uralorgsintez (SHG) 6.3% 4,751 3,102 – 1,649 – OOO Prestizh 100.0% 3,788 – 3,788 – – OOO Novaya Volna (GMG) 70.0% 2,556 – 1,519 – 1,037 ZAO TNT-Perm (GMG) 49.0% 2,447 6 – 2,441 – OOO Stroy-Proekt 100.0% 2,409 – 2,409 – – ZAO Vega-RT (GMG) 100.0% 2,244 – 17 – 2,227 OOO Severny Gorod 100.0% 1,672 – 1,672 – – OAO Volzhskiy Airnitrogen Plant (SHG) 40.5% 1,624 1,015 – 609 – Other minor acquisitions 1,738 (3,400) 1,019 (7,790) – 271,551 68,042 103,696 72,268 15,636 OOO TSB (GMG) 100.0% 1,827 – 1,882 – (55)

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Additionally, in March 2006 the Group acquired 100% of additional share issue completed by the subsidiary bank “Sovfintrade” (“SFT”) in amount of USD 14,242 thousand, which resulted in dilution of share of SFT’s minority shareholders in the Group’s equity. The overall effect of this transaction on the carrying value of minority interests (decrease) and the Group’s retained earnings (increase) was USD 387 thousand. As of 31 December 2006 the Group owned a 60.98% interest in SFT.

c) Economic dependence

As of 31 December 2006, OAO “Gazprom” owned 41.73% of the outstanding shares of the Group and controlled the majority of seats in the Council of the Bank. A substantial portion of the Group’s funding is from, and credit exposures are to the OAO “Gazprom” Group. As such the Group is economically dependent on the OAO “Gazprom” Group. Some of the S

T Group’s transactions are linked with the requirements of the OAO “Gazprom” Group and N determination of pricing of transactions with the OAO “Gazprom” Group is undertaken E

M in conjunction with other OAO “Gazprom” Group companies. See also Note 32. E T A T

S NOTE 2 – BASIS OF PRESENTATION

L A I

C a) General N A N

I The consolidated financial statements have been prepared in accordance with Interna- F

tional Financial Reporting Standards (IFRS) issued by the International Accounting Stan-

D dards Board and are presented in thousands of U.S. Dollars. E T The Bank, SHG, GMG and other subsidiaries domiciled in the Russian Federation main- A

D tain their books of account and prepare statements for regulatory purposes in accordance I

L with Russian accounting and banking legislation and instructions (RAL). Foreign sub-

O sidiaries of the Group prepare their financial statements in accordance with Internation- S

N al Financial Reporting Standards (IFRS). The accompanying consolidated financial state-

O ments are based on the statutory records, which are maintained under the historical cost

C convention. At each reporting date Group members make appropriate adjustments and reclassifications to their unconsolidated statutory financial statements for the purpose of fair presentation in accordance with IFRS. The accompanying consolidated financial statements have been prepared based on those financial statements.

Management is responsible for the preparation of the consolidated financial statements that present fairly the financial position of the Group as of the reporting date, the results of its operations, cash flows and changes in equity for the reported periods in accordance with IFRS.

The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

|73| GAZPROMBANK GROUP | Annual report | 2006

Actual results could differ from those estimates. Key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year include assets that are measured at amortized cost or cost less allowance for impairment losses. These include due from credit institutions, loans to customers, available-for-sale investments and other assets. The estimation of allowance for impairment losses involves an exercise of judgment. It is impracticable to assess the extent of the possible effects of key assumptions or other sources of uncertainty on these balances at the balance sheet date. b) Functional and presentation currency

Following the adoption of revised IAS 21 “The Effects of Changes in Foreign Exchange Rates” (IAS 21) from 1 January 2005 the Group has re-assessed the underlying events and circumstances that define functional (measurement) currency of the Group’s financial statements. As a result Management decided that starting from 1 January 2005 the functional currency of the Group’s financial statements should be the Russian Ruble. Prior to 2005 the Group’s functional currency was the U.S. Dollar.

Following the requirements of revised IAS 21 the effect of the change in the functional currency is accounted for prospectively starting from the date of the change. All of the Group’s opening balances as of 1 January 2005 were translated into the new functional currency – the Russian Ruble – using the prevailing Ruble/Dollar exchange rate at the date of the change. The resulting translated amounts for non- monetary items are treated as their historical cost.

However, the Group continues to use the U.S. Dollar as the presentation currency of the Groups’ consolidated financial statements prepared in accordance with IFRS for the convenience of users of these financial statements. See Note 3 (c) for details of currency translation techniques. c) Accounting for the effects of hyperinflation

Until 1 January 2003 the Russian Federation met the criteria of a hyperinflationary economy as defined by IAS 29 “Financial Reporting in Hyperinflationary Economies” (IAS 29). As a result, until that date the subsidiaries of the Group, that used the Russian Ruble as the functional currency of their financial statements (the companies named in Note 1(b)), applied the provisions of IAS 29. IAS 29 requires that the financial statements prepared in the currency of a hyperinflationary economy be stated in terms of the measuring unit current at the balance sheet date. According- ly, the amounts expressed in the measuring unit current at 31 December 2002 are treated as the basis for the carrying amounts in the financial statements of these subsidiaries.

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NOTE 3 – PRINCIPAL ACCOUNTING POLICIES

a) Principles of consolidation and accounting for associates

The consolidated financial statements of the Group include the Bank and the companies that it controls (subsidiaries). This control is normally evidenced when the Group owns, either directly or indirectly, more than 50% of the voting rights of a company's share capital and is able to govern the financial and operating policies of an enterprise so as to benefit from its activities. The purchase method of accounting is used for acquired businesses unless they are classified as assets held for sale or are acquired from a parent or entities under common control. Companies acquired or disposed of during the year are

included in the consolidated financial statements from the date of acquisition or to S

T the date of disposal. N

E Intercompany balances and transactions including intercompany profits and losses are

M eliminated. The consolidated financial statements are prepared using uniform account- E

T ing policies for like transactions and other events in similar circumstances. A

T The portion of the net assets and the post acquisition profit or loss of a subsidiary attribut- S able to equity interests that are not owned, directly or indirectly, by the Group is present- L

A ed as minority interest in the consolidated financial statements of the Group. In the case I

C of purchase of previously recorded minority interests in consolidated subsidiaries the

N difference, if any, between the carrying amount of a minority interest and the amount paid A to acquire it is recorded in the equity. Dividends paid to minority shareholders decrease N I the carrying amount of minority interests recorded in the equity. F

D Investments in associated companies where the Group exercises a significant influence E

T (generally investments of between 20% to 50% in a company’s equity) are accounted for

A by using the equity method unless they are classified as assets held for sale. When the D

I investee incurs losses the Group recognizes its share of losses until the carrying amount L of the investment is reduced to nil. Recognition of further losses is discontinued. O S N

O b) Acquisition of subsidiaries from a parent or entities under C common control

Acquisitions of subsidiaries from a parent or entities under common control are accounted for by using the predecessor cost accounting method. The assets and liabilities of a subsidiary purchased from a parent or entities under common control are consolidated into the Group’s financial statements using their carrying amounts in the IFRS financial statements of predecessor owner, i.e. using their “predecessor cost”. As a result, when the Group purchases a group of entities, the goodwill arising from the original acquisitions of entities that are parts of the purchased group is included in the Group’s consolidated financial statements as an asset. Any difference between the nominal amount of consideration paid by the Group and the predecessor cost of the Group’s share of net assets purchased (including the predecessor entity’s goodwill) is accounted as an adjustment of the Group’s equity.

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c) Foreign currency translation

Income and expenses, and non-monetary items included in the balance sheet at period end, denominated in currencies other than the functional currency (the Russian Ruble – see Note 2(b)), are recorded by applying the exchange rate prevailing on the date of the transaction. Non-Ruble denominated monetary items included in the period end balance sheet are translated at the exchange rate prevailing at the period end.

Exchange differences resulting from translation of balance sheet and profit and loss items, denominated in currencies other than the functional currency (unrealized profits and losses), as well as profit or loss from foreign exchange dealing (realized profits and losses) are recognized in the profit and loss account as profit or loss from foreign exchange. Net profits from foreign exchange dealing include both the currency spread realized in the transaction and the built-in foreign exchange trading commission.

If foreign subsidiaries or foreign associates, whose operations are not considered integral to the operations of the Group, have functional currencies that are different from the functional currency of the Group (the Russian Ruble), the resulting exchange differences arising from translation to Rubles of their financial statements (in the case of a subsidiary) or of their net assets (in the case of an associate) are included directly in equity in the Foreign currency translation reserve.

The Group’s results and financial position are translated into the presentation currency (U.S. Dollar - see Note 2(b)) using the following procedures: assets and liabilities are translated at the closing rate at the date of the balance sheet; income and expenses for each profit and loss account are translated at exchange rates prevailing on the date of the transactions; all resulting exchange differences are recognized in Foreign currency translation reserve in the Group’s equity.

The U.S. Dollar/Ruble exchange rate in the Russian Federation ranged from 26.33 Rubles per U.S. Dollar at 31 December 2006 to 28.78 Rubles per U.S. Dollar at 31 December 2005. The Russian Ruble is not freely convertible currency in the majority of countries outside of the Russian Federation; furthermore, certain limitations for currency exchange and currency control procedures exist in the Russian Federation. d) Income and expense recognition

Interest income and expense are recognized on an accrual basis calculated using the effective interest method. Interest income earned on debt securities at fair value through profit or loss is recognized as part of the Group’s interest income. Revenue on equity investments is recognized only to the extent of dividends received and adjustment for fair value. Commissions and other banking income and expense are recognized when the related transactions are completed as the majority of Group’s operations are mostly of short-term nature; otherwise they are capitalized and amortized over the life of the related assets.

The Group recognizes advertising revenue net of value added tax (VAT) and discounts when broadcasting or publishing of the related advertisement occurs. Revenue from selling of programming rights is recognized net of VAT and discounts when all of the following

|76| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

conditions are met: sale of the related rights can be confirmed; programs are complete and delivered to clients or ready for delivering; license agreement period has started and clients may use the airtime; and revenue can be reliably measured.

Sales of petrochemicals and tires are recognized when products are delivered to customers and title passes and are stated net of VAT, excise taxes and other similar compulsory payments. Related revenues are measured at the fair value of the consideration received or receivable. When the fair value of consideration received cannot be measured reliably, the revenue is measured at the fair value of the goods or services given up.

e) Recognition and derecognition of financial instruments

T The Group recognizes securities at fair value through profit or loss and available-for-sale

N investments on the date it commits to purchase the assets (trade date). Held-to-maturity E instruments and originated loans and receivables are recognized on the day they are M transferred to or originated by the Group (settlement date). E T

A A financial instrument is derecognized when the Group loses control over contractual T

S rights that comprise that asset. This occurs when the rights are realized, expire or are

L surrendered. A financial liability is derecognized when it is extinguished – that is, when A

I the obligation specified in the contract is discharged, cancelled, or expires. C

N Available-for-sale investments and securities at fair value through profit or loss that are A sold are derecognized and corresponding receivables from the buyer for the payment are N I recognized as of the date the Group non-recourse commits to sell the asset (trade date). F Held-to-maturity instruments and originated loans and receivables are derecognized on D

E the day they are transferred by the Group or repaid (settlement date). T A D

I f) Due from credit institutions L O

S In the normal course of business, the Group lends or deposits funds for various periods N with other credit institutions. Such amounts are categorized as loans originated by the O

C Group and are carried at amortized cost. As these placements of funds are typically unsecured extensions of credit, some of the assets may be impaired. The principles used to create allowance for loan impairment on amounts due from credit institutions are the same as for loans to customers (see below).

g) Securities at fair value through profit or loss and available- for-sale investments

The Group classifies its investments in securities into the following two categories:

I Securities which were either acquired for the purpose of selling them in the near term, or included in a portfolio of identified financial instruments that are managed together and in which a pattern of short-term profit-taking exists are classified as securities at fair value through profit or loss;

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I Securities intended to be held for an indefinite period of time, which may be sold in response to needs for liquidity or changes in interest rates, exchange rates or equity prices are classified as available-for-sale investments.

The classification of investments in securities is determined by management at the time of the purchase.

All securities are initially recognized at fair value, which is normally the transaction price (i.e. the fair value of the consideration given for them). Subsequently securities at fair value though profit or loss and available-for-sale securities are measured as follows:

I Securities at fair value through profit or loss are subsequently measured at fair value based on quoted bid prices. All related realized and unrealized gains and losses are included in dealing gains in the profit and loss account;

I Available-for-sale investments are subsequently measured at fair value based on quoted bid prices, weighted average prices for the period or present value of future cash flows. Unrealized gains and losses arising from changes in the fair value are recognized directly in equity (fair value reserve), except for impairment losses and foreign exchange gains and losses. Realized gains and losses arising from the sale of available-for-sale investments are recognized as profit or loss from available-for- sale investments in the profit and loss account. If fair value of available-for-sale investments is not determinable they are accounted for at cost or amortized cost less allowances for impairment.

Interest earned while holding securities at fair value through profit or loss and available- for-sale investments is reported as interest income. Dividends receivable are included in dividend income when a dividend is declared.

All purchases and sales of securities classified as at fair value through profit or loss or available-for-sale investments that require delivery within the time frame established by regulation or market convention (“regular way” purchases and sales) are recognized at trade date, which is the date that the Group commits to purchase or sell the asset. Other- wise such transactions are treated as derivatives until settlement occurs (see below). h) Promissory notes

In the normal course of business the Group acquires promissory notes of third parties. These notes generally have short-term to medium-term maturity. Promissory notes are categorized as securities at fair value through profit or loss or amount due from credit institutions or loans to customers depending on their economic substance. Promissory notes are measured by the Group according to the appropriate accounting policies for the respective assets. i) Repurchase and reverse repurchase agreements

The Group, as an element of its treasury management and trading business, utilizes repurchase and reverse repurchase agreements with securities. Repurchase agreements

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(repo agreements) are accounted for as financing transactions. As such, the related securities are recorded in the Group’s accounts and the related payable is included as an amount due to credit institutions (regardless of whether the counterparty is a credit institution or other financial organization). Any related expense arising from the pricing spreads for the underlying securities is recognized as interest expense and accrued over the period that the related transactions are open using the effective interest method. Securities under repo agreements are also included in the financial statements.

Reverse repo agreements are accounted for as due from credit institutions. Any related income arising from the pricing spreads for the underlying securities is recognized as interest income over the period that the related transactions are open using the effective interest method. Securities under reverse repo agreements are not recognized in the financial statements.

S T

N j) Derivatives E

M The Group enters into derivative financial instruments for trading purposes. Derivatives E

T are initially recognized at fair value, which is normally the transaction price (i.e. the fair A

T value of the consideration given or received for them), and subsequently are measured at S

their fair value. Fair values are obtained from quoted market prices (if available) or are L estimated using appropriate valuation models and available market prices. Since at pres- A I ent there is a very limited market for derivatives in the Russian Federation, the fair value C of the foreign currency derivative position is calculated based on the exchange rate N

A effective as of the reporting date. N I

F The realized dealing profits from derivatives and unrealized changes in the fair value of

D derivative contracts are included in the profit and loss account in the appropriate caption

E according to the nature of the underlying asset, i.e. as profit or loss from foreign exchange T

A (in the case of foreign exchange or bullion derivatives) or as dealing profit or loss from

D securities (in the case of derivatives with securities). I L O

S k) Loans to customers N O

C Loans to customers include loans granted by the Group by providing money directly to the borrower and loans purchased from other financial institutions where the Group intends to hold these to their original maturity or to sell them in the normal course of business. They are initially recognized at fair value plus transaction costs that are directly attributable to the granting or purchase of the loan and are subsequently measured at amortized cost. Expenses incurred in securing a loan, such as legal fees, are treated as part of the cost of the transaction, which is added to a loan amount and amortized over the loan life. All loans and advances are recognized when cash is advanced to borrowers.

The allowance for impairment losses is established if there is objective evidence that the Group will not be able to collect all amounts due. The amount of the allowance is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, including amounts recoverable from guarantees and collateral, discounted based on the interest rate at inception.

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The allowance for impairment losses also covers losses where there is objective evidence that probable losses are present in components of the loan portfolio at the balance sheet date. These have been estimated based upon historical patterns of losses in each component, the credit ratings allocated to borrowers and reflecting the current economic conditions in which the borrowers operate. When a loan is uncollectable, it is written off against the related allowance for impairment losses. Subsequent recoveries are credited to the provision for impairment losses in the profit and loss account.

If the amount of the impairment losses subsequently decreases due to an event occurring after the write-down, the release of the allowance is credited to the provision for impairment losses in the profit and loss account.

Loans are regarded as “non-performing” if either the loan has been in default as to payment of principal or interest for 90 days or more. Loans are considered “contractually overdue” when a borrower fails to make a scheduled payment of principal or interest for more than five days from the date stated in the loan agreement. l) Trade receivables/payables

Trade receivable/payables are initially recognized at cost, which is the fair value of the consideration given/received, and are subsequently measured at amortized cost. A provision for impairment of trade receivables is established if there is objective evidence that the Group will not be able to collect all amounts due according to the original terms of receivables. The amount of the provision is the difference between the carrying amount and the recoverable amount, being the present value of expected cash flows, discounted at the market rate of interest for similar borrowers at the date of origination of the receivables. m) Assets held for sale

A non-current asset is classified as held for sale if it is highly probable that the asset’s carrying amount will be recovered through a sale transaction rather than through con- tinuing use. Such sale transaction shall be principally completed within one year from the date of classification of an asset as held for sale. Events or circumstances may extend the period to complete the sale beyond one year. An extension of the period does not preclude an asset from being classified as held for sale if the delay is caused by events or circumstances beyond the Group’s control.

Assets held for sale are measured at the lower of its carrying amount and fair value less costs to sell. If the fair value less costs to sell of an asset held for sale is lower than its carrying amount, an impairment loss is recognized in the profit and loss account as loss from assets held for sale. Any subsequent increase in an asset’s fair value less costs to sell is recognized to the extent of the cumulative impairment loss that was previously recognized in relation to that specific asset.

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n) Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill is tested annually for impairment and carried at cost less accumulated impairment losses.

Any excess of the Group’s share of the net identifiable assets over the cost of an acquisition is recognized immediately in profit and loss account.

o) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the balance S

T sheet when there is a legally enforceable right to set off the recognized amounts and there N is an intention to settle on a net basis, or realize the asset and settle the liability simulta- E neously. M E T A

T p) Fair value of financial instruments S

L Fair value is the amount at which a financial instrument could be exchanged in a current A I transaction between willing parties, other than in a forced sale or liquidation, and is best C

N evidenced by a quoted market price. A

N The estimated fair values of financial instruments have been determined by the Group using I F

available market information, where it exists, and appropriate valuation methodologies,

D as described in accounting policies for the financial instruments that are carried at fair E value as prescribed by IAS 39 “Financial instruments: recognition and measurement”. T

A However, judgment is necessarily required to interpret market data to determine the esti- D

I mated fair value. As described in more detail in Note 33(i), the Russian Federation exhibits

L signs of an emerging market and has a relatively small volume of activity in its financial O markets. While management has used available market information in estimating the fair S

N value of financial instruments, the market information may not be fully indicative of the

O value that could be realized in the current circumstances. C According to IAS 32 “Financial instruments: disclosure and presentation” the Group is required to disclose estimates of fair value of financial instruments even if they are carried at amortized cost as prescribed by IAS 39. Such instruments include: loans and advances to banks and customers, time deposits and certificated debt which are not currently traded in the Russian financial markets. As a result, an objective estimate of the fair value of such instruments may be not possible. Management estimates their fair value by applying valuation techniques, which are based on discounting future projected cash flows of such instruments using current market rates for respective financial instruments. Also, the fair value of assets and liabilities maturing within one year are deemed to be approximated by their amortized cost. The estimated fair values of financial instruments carried at amortized cost are disclosed in the respective notes of these financial statements.

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q) Property, equipment and intangibles

Property, equipment and intangibles are recorded at historical cost less accumulated depreciation (amortization) and any accumulated impairment losses. Furthermore, the historical cost of property, equipment and intangibles of the subsidiaries, that used the Russian Ruble as the functional currency of their financial statements during the period when the Russian Federation met the criteria of a hyperinflationary economy (see Note 2(с)), is restated to the equivalent purchasing power of the Russ- ian Ruble at 31 December 2002 for assets acquired prior to that date. Depreciation (amortization) is provided to write off the cost on a straight-line basis over the estimated useful economic life of the asset. The economic lives are as follows:

Years

Buildings 20-100 Office equipment 3-20 Leasehold improvements Over expected life of the lease Programming rights See below Software and other intangible assets 3-10

Programming rights include licenses for broadcasting of films and TV programs owned by the Group. Programming rights are amortized dependent on the number of contracted airings as follows:

Number of airings Amortization rate

1 airing 100% 2 airings 65% – at the first; 35% – at the second 3 airings 50% – at the first; 30% – at the second; 20% – at the third

Assets under construction are not depreciated. Depreciation of these assets will begin when the related assets are ready to be placed in service.

Repairs and maintenance are charged to the profit and loss account on the date the services are provided.

At each reporting date the management assess whether there is any indication of impairment of property, equipment and intangibles. If any such indication exists, the management estimates the recoverable amount, which is determined as the higher of an asset’s fair value less costs to sell and its value in use. The carrying amount is reduced to the recoverable amount and the impairment loss is recognised in the profit and loss account. An impairment loss recognised for an asset in prior years is reversed if there has been a change in the estimates used to determine the asset’s value in use or fair value less costs to sell.

|82| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

r) Bullion in vault

The Group enters into operations with bullion for trading purposes. Bullion in vault is measured at fair value based on the USD/ounce of precious metals quotations of the Lon- don Bullion Market Association fixing rates.

s) Inventories

The Group regards non-financial assets (property) that are held for sale in the ordinary course of business as inventories. Inventories are measured at the lower of cost and net realizable value. The cost of inventories held by the Group comprises all costs of purchase including purchase price, duties and other taxes, transportation and other costs directly

S attributable to acquisition. The Group recognizes the amount of any write-down of T inventories to net realizable value and all losses of inventories as an expense in the period N

E the write-down or loss occurs. M E T

A t) Operating and financial leases T S The Group enters into operating lease agreements as a lessee. The total payments made L

A under operating leases are charged to the profit and loss account on a straight-line basis I

C over the period of the lease. N

A Where the Group is a lessee in a lease, which transferred substantially all the risks N

I and rewards incidental to ownership to the Group, the assets leased are capitalized in F property, plant and equipment at the commencement of the lease at the lower of the D fair value of the leased asset and the present value of the minimum lease payments. E

T Each lease payment is allocated between the liability and finance charges so as to A achieve a constant rate on the finance balance outstanding. The corresponding rental D I obligations, net of future finance charges, are included in other liabilities. The interest L

O cost is charged to the income statement over the lease period using the effective

S interest method. The assets acquired under finance leases are depreciated over their N useful life or the shorter lease term if the Group is not reasonably certain that it will O

C obtain ownership by the end of the lease term.

u) Fiduciary activities

The Group provides trustee services to its customers. Also the Group provides depositary services to its customers, which include transactions with securities on their “depo” accounts. Assets and liabilities incurred under the trustee and depository activities are not included in the Group’s financial statements. The Group accepts the operational risk on these activities, and the Group’s customers bear the credit and market risks associated with such operations.

v) Amounts owed to credit institutions and to customers

Amounts owed to credit institutions and to customers are initially recognized at fair value less transaction costs that are directly attributable to the acquisition or issue of

|83| GAZPROMBANK GROUP | Annual report | 2006

the financial liability. Subsequently amounts due are stated at amortized cost and any difference between the carrying amount and the redemption value is recognized in the profit and loss account over the period of the borrowings using the effective interest method. If the Group purchases its own debt, it is removed from the balance sheet and the difference between the carrying amount of a liability and the consideration paid is included in net interest income. w) Certificated debts and Eurobonds issued

Certificated debts represent promissory notes, certificates of deposit and bonds issued by the Group to domestic customers. Eurobonds represent internationally traded Euro Medium Term Notes and Loan Participation Notes issued by the Group. They are accounted for according to the same principles used for amounts owed to credit institutions and to customers. x) Dividends, treasury stock and share premium

Dividends on ordinary shares are recognized in equity in the period in which they are declared. Dividends for the year, which are declared after the balance sheet date, are treated as a subsequent event under IAS 10 “Events after the balance sheet date”.

The Bank’s shares that are reacquired by the Bank or its subsidiaries are referred to as treasury stock shown as a deduction from total equity. Gains and losses on sales of own shares are charged or credited to the treasury stock account in equity.

Amount received on the issuance of the Bank’s shares that is the excess over their par value is referred to as share premium and is accounted as part of the equity. y) Provisions

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

The taxation charge is calculated in accordance with the regulations of the Russian Fed- eration and other jurisdictions in which the Bank has offices and branches or where its subsidiaries are located and is based on the results reported in the profit and loss accounts of the Bank and its subsidiaries prepared under statutory tax legislation. Deferred income taxes are provided on temporary differences between the tax base of an asset or liability and its carrying amount in the balance sheet. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes. Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the period when the asset is realized or the liability is settled.

|84| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

Tax assets and liabilities are offset only if the Group has a legally enforceable right to set off the recognized amounts and intends to settle on a net basis, or to realize the asset and settle the liability simultaneously.

The Russian Federation also has various other taxes, which are assessed on the Group’s activities. These taxes (except value added tax) are included as a component of administrative expenses in the profit and loss account.

aa) Value added tax

Value added tax related to sales of products and services is payable to tax authorities upon collection of receivables from customers. Input VAT is reclaimable against sales VAT

upon payment for purchases. The tax authorities permit the settlement of VAT on a net S

T basis. VAT related to sales and purchases which have not been settled at the balance sheet

N date (VAT recoverable and deferred VAT payable) is recognized on a gross basis and dis- E closed separately as other asset and other liability. Where provision has been made for M impairment of receivables, impairment loss is recorded for the gross amount of the debtor, E

T including VAT. The related VAT deferred liability is maintained until the debtor is written A

T off for tax purposes. S

L A

I bb) Cash and cash equivalents C N

A The Group considers cash, current account with the Central Bank of the Russian Feder- N

I ation and amounts due from credit institutions with maturity of three months or less F

when originated to be cash equivalents. D

E Cash balances with contractual limitations on immediate disposal and overdue amounts T were excluded from cash and cash equivalents A D I L

O cc) Financial guarantees S N

O Financial guarantees issued by the Group represent obligation to pay certain amount to

C a beneficiary as a compensation of loss, incurred as a result of the payer’s failure to make payment in specified period in accordance with the original or modified terms of the financial instrument. Such guarantees are initially recognized at fair value. Subsequently they are measured at the higher of created allowance and initial cost less, where applicable, accumulated amortization of commission income, received under the financial guarantee.

dd) Share-based payments

Equity-settled share-based payments to employees are measured at the fair value of the equity instrument at the grant date. Fair value is measured by use of a market quotation or an independent appraisal if the equity instrument is not traded. Further details on how the fair value of equity-settled share-based transactions has been determined can be found in Note 11.

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The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest.

For cash-settled share-based payments, a liability equal to the portion of the services received is recognized at the current fair value determined at each balance sheet date.

Share-based payment transactions with cash alternative are structured so that the employee has the right to choose whether the transaction is settled in equity instruments or in cash-settled share appreciation rights and on the day of settlement the fair value of one settlement alternative is the same as the other. As a result, such transactions are accounted for in the same way as cash-settled share-based payments. At the date of settlement the liability is re-measured to its fair value. If the employee chooses settlement in equity instruments, the liability is transferred directly to equity. ee) Restatements and reclassifications

Following reclassifications have been made to the balance sheet as of 31 December 2005 to conform to the presentation as of 31 December 2006:

Financial Financial Amount of Description statements caption statements caption reclassification of reclassification before reclassification after reclassification

Dealing profits realized, net Dealing profits, net 272,548 Dealing profits unrealized, net Dealing profits, net 230,787 Changing the presentation Other expenses Administrative and other expenses (23,137) Changing the presentation

In 2006 the Group identified errors in measurement of minority interest in net income of GMG for the year ended 31 December 2005 and carrying value of minority interest in equity of SHG reported in the Group’s consolidated financial statements as of 31 December 2005 in amount of USD 75,937 thousand. The amounts of profit attributable to the Group shareholders and minority interest as of 31 December 2005 were restated accordingly. ff) Effect of adoption of new IFRS

The Group estimated the effect of adoption of new IFRS and amendments to the existing IFRS/IAS, which had been issued but not yet become effective as of 31 December 2006.

|86| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

In accordance with IFRS 7 “Financial Instruments: Disclosures” effective from 1 January 2007 the Group should present additional information regarding financial instruments. The Group intends to assess the influence of this IFRS on the financial statements and develop a plan to modify accounting and reporting systems, which will ensure appropriate level of disclosures.

Also following standards and interpretations have been published that are mandatory to the Group’s accounting periods beginning on or after 1 January 2006 or later periods and which the Group has not early adopted: Complementary amendments to IAS 1 “Presentation of Financial Statements – Capital Disclosures” (effective for annual periods beginning on or after 1 January 2007), IFRIC 8 “Scope of IFRS 2” (effective for annual periods beginning on or after 1 May 2006) and IFRIC 9 “Reassessment of Embedded Derivatives” (effective for annual periods beginning on

or after 1 June 2006). S T

N These new standards, amendments to standards and interpretations are not

E expected to significantly affect the Group’s financial statements when adopted. M E T A T S

L NOTE 4 – SEGMENT REPORTING A I

C The Group’s risks and rates of return are affected predominantly by differences in N

A the products and services it produces; hence the Group’s primary format for report-

N ing segment information are business segments. Following the acquisitions I F

described in Note 1 of these financial statements the Group as of 31 December 2006

D distinguishes the following three business segments according to IAS 14 “Segment E Reporting”: banking, petrochemicals and tires, and media. For additional disclo- T

A sures on types of products and services included in each business segment see D

I Notes 1, 7 and 8. Prior to the acquisitions made in the second half of 2005 the

L Group’s operations were highly integrated and primarily constituted a single indus- O

S try segment, banking. The regional breakdown of the Group’s assets and liabilities

N is presented in Note 31. O

C The Group’s segment information for the primary business segments as of 31 December 2006 and 2005 and for the periods then ended is as follows:

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Banking Petrochemicals Media Eliminations Consolidated and tires

Year ended 31 December 2006

PROFIT AND LOSS INFORMATION Net interest income after provision for losses – external 320,843 (12,631) 11,995 – 320,207 Inter-segment net interest income 12,453 (2,541) (9,912) – – Non interest income – external 1,202,840 4,519,005 887,927 – 6,609,772 Inter-segment non interest income 1,084 – – (1,084) - Non interest expense – external (729,312) (3,480,212) (706,746) – (4,916,270) Inter-segment non interest expense – – (1,084) 1,084 – Profit from operations 807,908 1,023,621 182,180 – 2,013,709 Income from associate 37,418 23,549 – – 60,967 Income tax expense (207,753) (256,536) (52,724) – (517,013) Net profit 637,573 790,634 129,456 – 1,557,663

Capital expenditure 70,941 304,203 385,195 – 760,339

Depreciation and amortization expense 19,318 132,082 262,625 – 414,025

BALANCE SHEET Cash and due from the CBR and credit institutions, net 9,948,507 162,238 34,387 – 10,145,132 Securities at fair value through profit or loss 2,316,826 91 29,508 – 2,346,425 Loans to customers, gross 12,025,312 18,157 10,965 – 12,054,434 Allowance for impairment losses – loans to customers (463,327) (7,117) – – (470,444) Available-for-sale, gross and investments in associates 2,470,509 87,591 21,239 – 2,579,339 Allowance for impairment losses – available-for-sale investments (59,463) (23,260) (66) – (82,789) Trade receivables, gross 35,658 383,772 210,847 – 630,277 Allowances for impairment losses – trade receivables – (71,133) (18,298) – (89,431) Inventories, gross 158,524 524,223 4,460 – 687,207 Allowances for impairment losses – inventories – (14,313) – – (14,313) Property, equipment and intangibles, gross 313,996 3,189,764 858,315 – 4,362,075 Depreciation and amortization (112,828) (1,380,573) (421,275) – (1,914,676) Goodwill – – 619,333 – 619,333 Other assets, net 264,276 486,240 65,382 – 815,898 Total segment assets 26,897,990 3,355,680 1,414,797 – 31,668,467

Amounts owed to credit institutions 2,766,945 212,701 6 – 2,979,652 Amounts owed to customers 11,370,411 60,188 16,492 – 11,447,091 Subordinated deposits 688,832 – – – 688,832 Certificated debts 5,389,819 63,225 1,499 – 5,454,543 Eurobonds issued 2,552,909 – 60,829 – 2,613,738 All other liabilities 1,151,707 461,573 221,193 – 1,834,473 Total segment liabilities 23,920,623 797,687 300,019 – 25,018,329

|88| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

Banking Petrochemicals Media Eliminations Consolidated and tires

Year ended 31 December 2005

PROFIT AND LOSS INFORMATION Net interest income after provision for losses – external 243,470 – 7,065 – 250,535 Inter-segment net interest income 1,331 – (1,331) – – Non interest income – external 878,046 – 365,407 – 1,243,453 Inter-segment non interest income 739 – – (739) – Non interest expense – external (497,616) – (285,014) – (782,630) Inter-segment non interest expense – – (739) 739 – Profit from operations 625,970 – 85,388 – 711,358 Income from associate – 11,809 – – 11,809 S

T Income tax expense (149,505) – (25,272) – (174,777)

N Net profit 476,465 11,809 60,116 – 548,390 E

M Capital expenditure 42,211 – 227,829 – 270,040 E T

A Depreciation and amortization 18,873 – 107,348 – 126,221 T S

L BALANCE SHEET

A Cash and due from the CBR I and credit institutions, net 3,913,358 13,626 25,590 – 3,952,574 C

N Securities at fair value through

A profit or loss 1,611,781 – 25,885 – 1,637,666 N

I Loans to customers, gross 7,615,067 120,929 85,490 – 7,821,486 F

Allowance for impairment losses –

D loans to customers (303,388) (117,005) – – (420,393)

E Available-for-sale, gross and

T investments in associates 1,061,668 147,381 197,686 – 1,406,735 A Allowance for impairment losses – D

I available-for-sale investments (23,805) (113,239) (179,177) – (316,221) L Trade receivables, gross 99,651 493,958 45,675 – 639,284 O

S Allowances for impairment losses –

N trade receivables – (159,397) (16,328) – (175,725)

O Inventories, gross 54,152 405,320 2,806 – 462,278

C Allowances for impairment losses – inventories – (12,121) – – (12,121) Property, equipment and intangibles, gross 227,943 2,677,530 581,317 – 3,486,790 Depreciation and amortization (96,786) (1,138,470) (280,144) – (1,515,400) Goodwill – – 552,651 – 552,651 Other assets, net 94,402 390,245 50,208 – 534,855 Total segment assets 14,254,043 2,708,757 1,091,659 – 18,054,459

Amounts owed to credit institutions 1,900,103 240,149 – – 2,140,252 Amounts owed to customers 7,134,840 70,029 12,144 – 7,217,013 Subordinated deposits 607,519 – – – 607,519 Certificated debts 1,499,781 7,409 59,255 – 1,566,445 Eurobonds issued 2,065,800 – – – 2,065,800 All other liabilities 803,887 544,193 192,411 – 1,540,491 Total segment liabilities 14,011,930 861,780 263,810 – 15,137,520

|89| GAZPROMBANK GROUP | Annual report | 2006

NOTE 5 – NET INTEREST INCOME

Net interest income for the years ended 31 December 2006 and 2005 comprises:

2006 2005 INTEREST INCOME Loans to customers: – Loans to legal entities 795,705 535,151 – Loans to individuals 139,693 54,653 Due from credit institutions 217,658 88,554 Debt securities 107,304 61,162 1,260,360 739,520 INTEREST EXPENSE Amounts owed to customers: – Amounts owed to legal entities 208,690 108,005 – Amounts owed to individuals 96,258 80,206 Certificated debts 210,066 93,260 Eurobonds issued 152,976 110,104 Amounts owed to credit institutions 143,988 67,025 811,978 458,600 Net interest income 448,382 280,920

NOTE 6 – PROVISIONS FOR IMPAIRMENT LOSSES

Provisions for impairment losses in the consolidated profit and loss account represent the charge required in the current period to establish total allowance for losses carried forward in accordance with IFRS.

The movement in the allowances for impairment losses on interest-earning assets during the years ended 31 December 2006 and 2005 was:

Due from credit Loans to Total institutions customers allowances

31 December 2004 9,583 275,810 285,393 Effect of consolidation of subsidiaries – 132,623 132,623 (Recoveries)/provisions charged to profit (228) 30,613 30,385 Amounts written off – (8,746) (8,746) Foreign exchange difference from translation to presentation currency (Note 3 (c)) (344) (9,907) (10,251) 31 December 2005 9,011 420,393 429,404 Provisions charged to profit 1,029 127,146 128,175 Amounts written off – (116,556) (116,556) Foreign exchange difference from translation to presentation currency (Note 3 (c)) 871 39,461 40,332 31 December 2006 10,911 470,444 481,355

|90| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

The movement in the allowances and provisions for other risks during the years ended 31 December the 2006 and 2005 was:

Available- Trade Inventories Other Other Total for- receivables assets risks allowances sale investments

31 December 2004 26,289 – – 478 5,839 32,606 Effect of consolidation of subsidiaries 292,614 175,725 12,121 886 3,780 485,126 Recoveries of provisions charged to profit (1,739) – – (874) (190) (2,803) Foreign exchange difference

from translation to presentation

S currency (Note 3 (c)) (943) – – (16) (210) (1,169)

T 31 December 2005 316,221 175,725 12,121 474 9,219 513,760 N Provisions /(recoveries of provisions) E charged to profit 32,473 (3,270) 1,402 (122) 10,403 40,886 M Amounts written off (287,602) (94,284) (370) (56) – (382,312) E

T Foreign exchange difference from A translation to presentation T currency (Note 3 (c)) 21,697 11,260 1,160 39 1,175 35,331 S 31 December 2006 82,789 89,431 14,313 335 20,797 207,665 L A I C N

A Allowances for losses on assets are deducted from the related asset. Provisions for other N

I risks are recorded in liabilities (see Note 26). In accordance with the statutory legislation, F loans may only be written off with the approval of the Council of the Bank and, in certain D cases, with the respective decision of the Court. E T A D I L O S N O C

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NOTE 7 – PETROCHEMICAL BUSINESS OPERATING REVENUES AND EXPENSES

Petrochemical business operating revenues and expenses attributable to the Group for the year ended 31 December 2006 comprise:

Notes 2006 PETROCHEMICAL BUSINESS OPERATING REVENUES, NET Rubbers and other polymers 1,315,736 Other refined products 1,212,879 Tires 699,807 Products of organic synthesis 556,890 Liquefied hydrocarbon and dry gas 390,461 Other 375,571 Less - Compulsory duties (57,712) 4,493,632 PETROCHEMICAL BUSINESS OPERATING EXPENSES Materials 1,431,677 Salaries and other employment benefits 697,780 Electricity 465,420 Depreciation 20 132,082 Processing services of third parties 94,787 Gas for own needs 87,342 Purchased refinery products 78,498 Repairs and maintenance 73,485 Expedition costs 67,036 Transit and storage costs 37,775 Rent expenses 36,374 Security expenses 36,153 Operating taxes 33,979 Other expenses 203,757 3,476,145 Petrochemical business operating profit 1,017,487

Operating revenues are presented net of VAT and other compulsory duties including excise tax and custom duties.

Operating taxes include property, land and taxes other than on income.

|92| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

NOTE 8 – MEDIA BUSINESS OPERATING REVENUES AND EXPENSES

Media business operating revenues and expenses attributable to the Group for the year ended 31 December 2006 and for the period from 29 July 2005 (the date of acquisition of Gazprom Media Group) to 31 December 2005 comprises:

Notes 2006 2005 MEDIA BUSINESS OPERATING REVENUES Advertising 632,754 259,945 Broadcasting 173,316 67,171 Programming rights 30,925 10,616

Publishing activities 25,810 14,811

S Other revenues 20,346 7,056 T 883,151 359,599 N

E MEDIA BUSINESS OPERATING EXPENSES

M Depreciation and amortization 20 262,625 107,348

E Salaries and other employment benefits 157,338 64,484 T

A Broadcasting services 88,652 34,647

T Other costs to sell 65,202 19,709 S Publishing expenses 33,167 19,997 L Administrative expenses 30,677 15,004 A I Cost of goods sold 13,713 3,522 C Other expenses 33,776 15,158 N

A 685,150 279,869 N

I Media business operating profit 198,001 79,730 F

D E T A D I NOTE 9 – DEALING PROFITS, NET L O

S Net dealing profits for the years ended 31 December 2006 and 2005 comprise: N O

C 2006 2005 Fair Sale Total Fair Sale Total value and value and adjust- redemp- adjust- redemp- ment tion ment tion

Corporate shares 121,244 373,581 494,825 265,129 303,879 569,008 Corporate bonds 6,461 (12,889) (6,428) 554 7,256 7,810 Russian and Moscow government bonds 4,334 (12,097) (7,763) 3,801 6,964 10,765 Derivatives 10,258 3,732 13,990 (38,697) (45,551) (84,248) Dealing profit, net 142,297 352,327 494,624 230,787 272,548 503,335

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NOTE 10 – FEES AND COMMISSIONS INCOME AND EXPENSE

Fees and commissions income for the years ended 31 December 2006 and 2005 comprise:

2006 2005

Depository and custodian operations 83,747 26,246 Debit/credit cards 63,504 50,563 Settlements operations 32,566 35,934 Arrangement fees and other financial services 32,460 3,129 Cash operations 28,292 20,987 Trade finance 14,902 13,752 Asset management 7,748 1,561 Other 15,497 15,897 Fees and commissions income 278,716 168,069

Commissions on debit/credit cards represent commissions received from the Group’s clients on issue and processing of debit/credit cards and from other financial institutions on acquiring services. Settlements commissions represent commissions received for transfer of customers’ funds and on other operations with clients’ accounts.

Commission income from depository and custodian services for the year ended 31 December 2006 includes USD 34,001 thousand that represents commission for the processing of dividend payments via the Group’s depository network (2005 – USD 12,184 thousand).

Fees and commissions expense for the years ended 31 December 2006 and 2005 comprise:

2006 2005

Debit/credit cards 12,816 8,841 Depository and custodian services 9,441 4,394 Arrangement fees and other financial services 7,093 170 Settlements operations 3,632 3,523 Cash related services 3,400 2,702 Brokerage operations 2,146 1,845 Trade finance 1,902 4,651 Other 620 3,233 Fees and commissions expense 41,050 29,359

|94| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

NOTE 11 – SALARIES, ADMINISTRATIVE AND OTHER EXPENSES

Salaries and administrative expenses for the years ended 31 December 2006 and 2005 comprise:

2006 2005

Salaries 365,542 265,081 Social security costs 27,659 23,351 Defined contribution pension plan 10,124 8,830 Salaries and employment benefits 403,325 297,262

S Operating taxes 38,079 12,200 T Occupancy 33,461 21,033 N

E Rent 33,423 19,457

M Professional services 31,307 21,980

E Business development 26,934 9,953 T Depreciation and amortization 19,318 18,873 A

T Charges to the State Deposit Insurance System 14,850 4,991 S

Communications 13,110 9,749 L Charity expenses 7,032 3,722 A I Insurance expenses 5,036 5,866 C Other 47,164 51,119 N

A Administrative expenses 269,714 178,943 N I F

D E

T Salaries for the year ended 31 December 2006 include USD 17,840 thousand that relates

A to bonus payments to the Management Board (2005 – USD 20,720 thousand). D I

L In 2005 the Group’s shareholders adopted a formal procedure that determines the O amount of annual remuneration payable to the Council of the Bank. As a result, in 2005 S

N the Group started to recognize the remuneration of the Council of the Bank on an accru-

O al basis (i.e. in proportion to the rendering of services). Included in salaries for the year C ended 31 December 2006 is the amount of USD 23,297 thousand that relates to the accrued remuneration of the Council of the Bank (2005 – USD 26,165 thousand accrued and USD 19,310 thousand of cash payments).

The Group has pension arrangements under the State pension system of the Russian Fed- eration. The Russian Federation system requires current contributions by the employer calculated as a percentage of current gross salary payments; such expense, included in social security costs, is charged to the consolidated profit and loss account in the period the related compensation is earned by an employee. Also, in 2005 the Bank has set out a defined contribution pension plan for its employees. The Bank has recognized USD 10,124 thousand as an expense for defined contribution plan attributable to services provided by employees to the Bank in 2006 (2005 – USD 8,830 thousand).

The operating taxes include property tax, VAT, transport tax and other minor taxes paid according to Russian tax legislation.

|95| GAZPROMBANK GROUP | Annual report | 2006

Employee share-option plans

In June and November 2006 the Council of the Bank approved two ownership-based compensation plans for the Bank’s top and senior management, which were launched on 25 December 2006. The plans span over the next three years and are based on performance of the managers. The parameters of the plans follow:

Plan Qualifying Number Grant Service Vesting Method Exercise Fair value employees of shares date period date of sett- price per per share covered lement share at grant (RUR) date (RUR)

1(a) members 200,000 25.12.2006 01.01.2007 to15.02.2008 equities 5,184 11,248 of Management 31.12.2007 or cash Board 1(b) members 200,000 25.12.2006 01.01.2008 to15.02.2009 equities 5,184 11,248 of Management 31.12.2008 or cash Board 1(c) members 200,000 25.12.2006 01.01.2009 to15.02.2010 equities 5,184 11,248 of Management 31.12.2009 or cash Board 2 senior 400,000 25.12.2006 01.01.2007 to31.12.2009 equities 5,184 11,248 managers 31.12.2009

The Bank reserved 1,000,000 shares that are currently held by the Group (and are shown as part of treasury stock in these financial statements) for the plans. The execution of both plans is subject to the Bank changing its legal form into an open joint-stock company.

Plan 1

The plan is set up for the members of the Bank’s Management Board. In accordance with the provisions of the plan, at grant date the managers purchased a series of three call options on the Bank’s shares, each covering a one-year period during the next three years. The vesting conditions include the Bank’s financial performance according to IFRS financial statements during the measurement period (year).

Options may be exercised on vesting date or on the first day of each quarter from the date of vesting to the date of their expiry. The options may be settled in equities or in cash by choice of the manager. The exercise price amounts to RUR 5,184 per share, which is less than estimated fair value of the shares being RUR 11,248 at grant date. The estimation of the fair value of the Bank’s shares was based on appraisal, which was used because the Bank’s equities are currently not traded. The appraisal techniques involved both market multiples and net asset value approaches.

The total premium payable by the recipients for the options at grant date is RUR 15,552 thousand (USD 591 thousand) and is not refundable whether the vesting conditions are met or not. The options carry neither rights to dividends nor voting rights.

|96| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

Plan 2

The plan is set up for the 165 senior managers of the Bank, including regional managers. The vesting conditions include remaining in the Bank’s employ for the three years after the grant date. According to the plan, at grant date the managers agreed to purchase the Bank’s shares at a price of RUR 5,184 per share and simultaneously issue put options on the shares to the Group with the same exercise price. The options expire in three years and are exercisable only in equities. The shares carry both the rights to dividends and the voting rights during the three-year period.

The Bank partly subsidized the share purchase under Plan 2 by paying to the managers a special-purpose bonus to cover approximately a half of the share price. The total amount of the bonus paid is RUR 1,242,700 thousand (USD 45,798 thousand), which is

included in the salaries expense for the year ended 31 December 2006. S T N

E NOTE 12 – INCOME TAX M E

T The provision for income taxes for the years ended 31 December 2006 and 2005 comprises: A T S

2006 2005 L A I Current tax charge 569,065 210,292 C Deferred tax recovery (71,252) (50,160) N

A Transfer of deferred tax previously

N recorded directly in equity 19,200 14,645 I

F Income tax expense 517,013 174,777

D E T A Russian legal entities must individually report taxable income and remit income taxes D I thereon to the appropriate authorities. L O

S The effective income tax rate differs from the statutory income tax rate. A reconciliation of

N the income tax provision based on the statutory rate with the actual income tax provision O follows: C

2006 2005

Income before taxation and minority interest 2,074,676 723,167 Statutory tax rate 24% 24% Theoretical income tax charge at statutory rate 497,922 173,560 Tax concession of subsidiary (18,209) (18,085) Unrecognized tax losses carried forward for the year 1,997 1,213 Income/expense taxed at different rates (6,899) 9,530 Tax losses carried forward utilized during the year – (1,674) Tax effect of non-temporary differences 42,202 10,233 Income tax expense 517,013 174,777

|97| GAZPROMBANK GROUP | Annual report | 2006

As of 31 December 2006 and 2005 the Group’s income tax assets comprise:

31 December 31 December 2006 2005

Current income tax assets 51,613 34,187 Deferred income tax assets 31,596 29,124 Income tax assets 83,209 63,311

The current income tax asset reported within other assets arises from advance payments of income tax by the Group due to the statutory advance tax payments system and is usually realized either by off-setting with the Group’s income tax liabilities in subsequent periods or upon repayment by the tax authorities. Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of: (i) deductible temporary differences; (ii) the carry forward of unused tax losses; and (iii) the carry forward of unused tax credits.

As of 31 December 2006 and 2005 the Group’s income tax liability comprises:

31 December 31 December 2006 2005

Current income tax liabilities 25,054 42,211 Deferred income tax liabilities 320,304 216,437 Income tax liabilities 345,358 258,648

Deferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences.

|98| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

The following represents an analysis of the deferred tax balance sheet position as of 31 December 2006 and 2005, respectively:

31 December 31 December 2006 2005 Tax effect of taxable temporary differences Provision for impairment losses 55,908 53,515 Property, plant and equipment and intangibles 20,162 15,087 Tax losses carry forward 8,267 – Accounts payable 7,653 – Accounts receivable 4,396 – Financial assets through profit or loss 1,833 3,087 Accrued expenses 1,625 12,620 Assets held for sale – 25,296 Other 20,283 16,993 S

T Deferred tax asset 120,127 126,598 N Off-set with deferred tax liabilities (88,531) (97,474) E Deferred tax asset, net 31,596 29,124 M E

T Tax effect of deductible temporary differences A Fair value adjustments (190,961) (76,090) T

S Property, plant and equipment and intangibles (184,641) (161,890)

L Income from associates (11,887) – A

I Provision for impairment losses (5,936) (38,145)

C Trade payables (1,875) –

N Accrued interest and expenses (1,409) (10,928) A Other (12,126) (26,858) N I Deferred tax liability (408,835) (313,911) F Off-set with deferred tax assets 88,531 97,474 D Deferred tax liability, net (320,304) (216,437) E T

A Deferred income tax liability, net (288,708) (187,313) D I L O S

N A reconciliation of changes in the net balance sheet deferred income tax position during

O the years ended 31 December 2006 and 2005 follows: C

Net deferred income tax liability as of 31 December 2004 84,665 Effect of consolidation of subsidiaries 96,108 Net deferred tax charge to the profit and loss account (50,160) Change in deferred tax recorded directly to equity 63,193 Foreign exchange difference from translation to presentation currency (Note 3 (c)) (6,493) Net deferred income tax liability as of 31 December 2005 187,313 Effect of consolidation of subsidiaries 8,199 Net deferred tax charge to the profit and loss account (71,252) Change in deferred tax recorded directly to equity 142,941 Foreign exchange difference from translation to presentation currency (Note 3 (c)) 21,507 Net deferred income tax liability as of 31 December 2006 288,708

|99| GAZPROMBANK GROUP | Annual report | 2006

NOTE 13 – CASH AND DUE FROM THE CENTRAL BANK OF THE RUSSIAN FEDERATION

Cash and due from the Central Bank of the Russian Federation comprise:

31 December 31 December 2006 2005

Cash on hand 459,220 272,450 Current accounts 948,910 551,229 Time deposits 1,139,337 – Obligatory reserve 359,983 246,072 Cash and due from the Central Bank of the Russian Federation 2,907,450 1,069,751

As of 31 December 2006 proceeds received by the Group for the ordinary shares issued by the Bank in December 2006 in the amount of USD 1,315,699 thousand were placed on time and current accounts with the Central Bank of the Russian Federation. For details of the share capital increase see also Note 27.

The Central Bank of the Russian Federation requires credit institutions to maintain a non-interest earning cash deposit (obligatory reserve) with the Central Bank of the Russian Federation, the amount of which depends on the level of funds attracted by a credit institution from individuals. The Bank’s ability to withdraw such deposit is significantly restricted by the statutory legislation.

NOTE 14 – DUE FROM CREDIT INSTITUTIONS

Due from credit institutions comprise:

31 December 31 December 2006 2005

Current accounts 1,287,494 680,847 Time deposits 4,968,803 1,089,904 Repurchase agreements 992,296 1,121,083 7,248,593 2,891,834 Less – Allowances for impairment losses (10,911) (9,011) Due from credit institutions, net 7,237,682 2,882,823

As of 31 December 2006 38% (USD 2,722,486 thousand) of the gross amounts due from credit institutions relate to placements with Vnesheconombank (Russian Federation), International Investment Bank (Russian Federation) and Sberbank (Russian Federation). As of 31 December 2005 47% of the gross amounts due from credit institutions in the amount of USD 1,370,008 thousand relate to placements with Deutsche Bank AG (Ger- many), Rosprombank (Russian Federation) and Vneshtorgbank (Russian Federation).

|100| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

Included in time deposits placed with credit institutions as of 31 December 2006 is an amount of USD 70,155 thousand (31 December 2005 – USD 70,145 thousand) that represents the following U.S. Dollar denominated subordinated loans granted by the Group:

Bank Notional Origination date Maturity Interest rate amount

Altalanos Ertekforgalmi Bank (Hungary) 60,000 December 1997 December 2007 12 month LIBOR Belgazprombank (Belorussia) 5,000 December 2004 December 2011 12 month LIBOR + 6% Belgazprombank (Belorussia) 5,000 March 2005 March 2012 12 month LIBOR + 6% 70,000

T In the event of bankruptcy, subordinated loans are to be repaid by a borrowing bank only

N after the settlement of all other liabilities. E

M As of 31 December 2006 the Bank had USD 30,473 thousand placed on time deposits E

T with foreign banks that represent amounts transferred under letters of credit opened with

A the Group (31 December 2005 – USD 13,512 thousand). These placements are covered by T

S customer funds blocked on their time deposit accounts.

A As of 31 December 2006 and 2005 the maximum credit risk exposure on amounts due I

C from credit institutions is limited to USD 7,237,682 thousand and USD 2,882,823 thou-

N sand, respectively. A N

I Reverse repo agreements represent short-term funding granted by the Group with secu- F

rities received as collateral. Securities received by the Group under reverse repo agree-

D ment are not recognized in the Group’s financial statements and are regarded as collat- E

T eral by substance of transaction. According to the regular way of such deals, securities

A received under reverse repo agreement may be sold or re-pledged by the Group in the D

I absence of default by the owner of these securities (counterparty). However, according to L the terms of reverse repo agreements the Group has an obligation to return the same O

S amount of securities to the counterparty when the transaction is settled. As of

N 31 December 2006 and 2005 the Group had the following securities received as collater- O al under reverse repo agreements. C

31 December 2006 31 December 2005 Fair value of Fair value of Fair value of Fair value of securities securities securities securities received under received under received under received under reverse repo reverse repo reverse repo reverse repo agreement agreement sold agreement agreement sold or re-pledged or re-pledged

Corporate shares 837,623 63,390 1,957,451 52,818 Corporate bonds 328,585 4,555 74,202 – Russian and Moscow government bonds 35,730 – 4,728 – Promissory notes 30,043 – 52,845 – 1,231,981 67,945 2,089,226 52,818

|101| GAZPROMBANK GROUP | Annual report | 2006

NOTE 15 – SECURITIES AT FAIR VALUE THROUGH PROFIT OR LOSS

Securities at fair value through profit or loss comprise:

31 December 2006 31 December 2005 Nominal Carrying Nominal Carrying value value value value

Corporate shares 21,763 1,161,048 39,531 815,550 Corporate bonds 623,452 635,435 538,304 543,577 Promissory notes 280,741 285,754 103,474 100,154 Russian and Moscow government bonds 251,936 264,188 171,240 178,385 1,177,892 2,346,425 852,549 1,637,666

As of 31 December 2006 corporate shares included USD 1,031,557 thousand of OAO “Gazprom” ordinary shares (31 December 2005 – USD 779,081 thousand). The market quotations of OAO “Gazprom” ordinary shares increased from USD 6.76 per share at year- end 2005 to USD 11.5 as of 31 December 2006. Other Russian “blue-chip” companies’ corporate shares represent the rest of the corporate shares portfolio.

As of 31 December 2006 corporate bonds consist of USD 1,020 thousand of OAO “Gazprom” bonds (31 December 2005 – USD 20,150 thousand). The remaining balance comprises corporate bonds of Russian “blue-chip” enterprises. The annual nominal coupon rates on these bonds range from 5 % to 12 % and yields to maturity range from 5 % to 13 %.

Russian and Moscow government bonds comprise Ruble and foreign currency denominated government securities issued and guaranteed by the Ministry of Finance of the Russian Federation (OFZ, Vnesheconombank (VEB) bonds), and municipal bonds issued and guaranteed by the government of the City of Moscow.

The promissory notes portfolio is represented by liquid promissory notes of Russian “blue-chip” banks.

As of 31 December 2006 and 2005 the Group had the following securities pledged as collateral under repo agreements (see Note 23). Securities are stated at their estimated fair values as of the reporting dates.

31 December 31 December 2006 2005

Corporate shares 1,638,091 32,162 Corporate bonds 8,685 50,450 1,646,776 82,612

Corporate shares pledged as collateral under repo agreements include both, shares owned by the Group and shares received by the Group as collateral.

Securities at fair value through profit or loss are measured on last quoted bid prices. It should be noted that because of the relative illiquidity in the Russian securities markets, the market quotations used in valuing the Group’s securities may not be reflective of their net realizable value in an exchange between a willing buyer and a willing seller due to the volume of the Group’s holdings.

|102| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

NOTE 16 – LOANS TO CUSTOMERS

Loans to customers comprise:

31 December % 31 December % 2006 2005

Finance and investment companies 2,011,443 16.7% 1,111,671 14.2% Individuals 1,683,774 14.0% 634,211 8.1% Gas extraction, transportation and sale enterprises 1,627,867 13.5% 1,855,738 23.7% Trading enterprises 1,007,950 8.4% 695,061 8.9% Metal manufacture 858,819 7.1% 183,470 2.3% Real estate construction 763,242 6.3% 225,048 2.9% Oil extraction, transportation, sale S enterprises and petrochemical industries 725,210 6.0% 349,788 4.5% T

N Nuclear industry 628,298 5.2% 562,798 7.2%

E Machine building 462,809 3.8% 302,269 3.9%

M Electric power industry 416,134 3.5% 350,868 4.5% E Leasing 302,952 2.5% 104,667 1.3% T

A Mining 294,733 2.4% 40,002 0.5% T Food industry 294,464 2.4% 134,785 1.7% S Telecommunications 210,657 1.7% 191,475 2.4% L

A Chemical industry 178,748 1.5% 136,443 1.7% I Agriculture 97,046 0.8% 49,941 0.6% C

N Transport 83,608 0.7% 327,821 4.2%

A Timber industry 79,689 0.7% 33,342 0.4% N

I Shipbuilding 49,397 0.4% 242,363 3.1% F

Insurance 36,449 0.3% 32,417 0.4%

D Other 241,145 2.1% 257,308 3.5%

E 12,054,434 100.0% 7,821,486 100.0% T

A Less – Allowances for impairment losses (470,444) (420,393)

D Loans to customers, net 11,583,990 7,401,093 I L O S

N The Group has significant loan exposures to the OAO “Gazprom” Group. As of 31 December

O 2006 such exposures accounted for 23% (USD 2,765,930 thousand) of the gross loan portfolio C (31 December 2005 – 31% or USD 2,451,057 thousand).

In July and August 2006 the Group sold the major part of its loan exposure to Europolgaz S.A. to a third party for consideration of USD 676,207 thousand, which approximated the carrying value of the loan as of the dates of its disposal. As a result, as of 31 December 2006 the Group’s total loan exposure to Europolgaz S.A. amounts to USD 7,913 thousand (31 December 2005 – USD 721,112 thousand) maturing in July 2018.

As of 31 December 2006 the ten largest loan exposures accounted for USD 3,186,589 thousand or 26% of the gross loan portfolio (31 December 2005 – USD 3,059,579 thousand or 39%).

As of 31 December 2006 USD 48,800 thousand (31 December 2005 – USD 427,977 thousand) of loans to customers were originated by the Group by purchasing borrowers’ promissory notes.

Included in loans to individuals as of 31 December 2006 is an amount of USD 968,837 thousand (58% of total loans to individuals) that represents mortgage loans granted or purchased by the Group with a residual maturity exceeding 10 years (31 December 2005 – USD 206,264 thousand or 33%). As of 31 December 2006 USD 332,030 thousand of the mortgage loan portfolio was securitized by the Group by means of several issues of mortgage backed securities. See Note 25 for details.

|103| GAZPROMBANK GROUP | Annual report | 2006

The Group’s loan portfolio has been extended to the following types of enterprises:

31 December 31 December 2006 2005

Private companies, gross 7,765,885 4,420,510 Less – Allowances for impairment losses (365,610) (303,413) Private companies, net 7,400,275 4,117,097 State controlled companies, gross 2,604,775 2,766,765 Less – Allowances for impairment losses (79,349) (96,127) State controlled companies, net 2,525,426 2,670,638 Individuals, gross 1,683,774 634,211 Less – Allowances for impairment losses (25,485) (20,853) Individuals, net 1,658,289 613,358 Loans to customers, net 11,583,990 7,401,093

As of 31 December 2006 the amount of contractually overdue loans was USD 146,158 thousand (31 December 2005 – USD 162,364 thousand). As of 31 December 2006 the amount of non-performing loans was USD 47,436 thousand (31 December 2005 – USD 147,999 thousand). See Note 3(k) for accounting policy on non-performing loans.

As of 31 December 2006 included in loans to customers is an amount of USD 512,503 thousand (31 December 2005 – USD 531,567 thousand) that represents loans collateralized by equity shares which can be sold or re-pledged by the Group in the absence of default by the borrowers. As of 31 December 2006 the Group sold the most part of these shares.

As of 31 December 2006 the fair value of loans to customers estimated based on the valuation techniques described in Note 3 (p) lies in the range from USD 11,563,606 thousand to USD 11,583,990 thousand (31 December 2005 – from USD 7,078,926 thousand to USD 7,401,093 thousand).

As of 31 December 2006 and 2005 the maximum credit risk exposure on loans to customers is limited to USD 11,583,990 thousand and USD 7,401,093 thousand, respectively.

|104| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

NOTE 17 – AVAILABLE-FOR-SALE INVESTMENTS, NET AND INVESTMENTS IN ASSOCIATES

Available-for-sale investments comprise:

31 December 31 December 2006 2005

Available-for-sale investments accounted for at fair value 2,082,986 851,627 Investments in associates accounted for under the equity method 226,686 31,825 Available-for-sale investments accounted for at cost: - Unconsolidated subsidiaries 55,236 326,000 - Associates accounted for at cost 34,812 46,645 S

T - Other investments accounted for at cost 179,619 150,638

N 2,579,339 1,406,735 E Less – Allowances for impairment (82,789) (316,221) M Available-for-sale investments, E net and investments in associates 2,496,550 1,090,514 T A T S

L A I C

N a) Investments accounted for at fair value A N I Investments accounted for at fair value comprise: F

E 31 December 31 December

T 2006 2005 A D

I Corporate shares and ADRs 1,386,521 343,558 L U.S. Treasury bills 509,189 357,573 O Tradable CLNs 103,369 66,369 S

N Funds participation shares 83,907 84,127

O 2,082,986 851,627 C

As of 31 December 2006 the investment in U.S. Treasury bills with a residual maturity less than one year is pledged by the Group as security on time deposits received from foreign bank in the amount of USD 357,374 thousand (31 December 2005 – USD 357,506 thousand) (see Note 23).

|105| GAZPROMBANK GROUP | Annual report | 2006

As of 31 December 2006 and 2005 included in corporate shares and ADRs are investments of the Group in OJSC “Mosenergo” (‘‘Mosenergo’’), Russia’s largest regional utility company and the principal supplier of electricity and heat to the Moscow region, and other companies (“Mosenergo companies”), which were spun-off from Mosenergo on 1 April 2005 as a result of its reorganization. A list of these investments and their fair values follows: Group’s 31 December Group’s 31 December holding, % 2006 holding, % 2005

Mosenergo 10.0% 562,573 6.6% 249,125 Moskovskaya Oblastnaya Electrosetevaya Kompanya 9.6% 227,572 6.6% – Moskovskaya Gorodskaya Electrosetevaya Kompanya 9.6% 150,655 6.6% –1 OGK-1 (GRES-4) 2.1% 80,011 6.6% –1 Zagorskaya GAES 12.6% 61,064 6.6% –1 Moskovskaya Teplosetevaya Kompanya 9.6% 58,702 6.6% –1 Mosenergosbit 11.3% 57,550 6.6% –1 OGK-4 (GRES-5) 1.1% 41,227 6.6% –1 OGK-6 (GRES-24) 0.6% 18,463 6.6% –1 1,257,817 249,125

The available-for-sale investments above, except for investments in Mosenergo and Mosenergo companies, are measured at fair value based on last quoted bid prices. Invest- ments in Mosenergo and Mosenergo companies are measured at the weighted average price for the period. It should be noted that because of the relative illiquidity in the Russ- ian securities markets, the market quotations used in valuing the Group’s securities may not be reflective of their net realizable value in an exchange between a willing buyer and a willing seller due to the volume of the Group’s holdings. b) Investments in associates accounted for under the equity method

As of 31 December 2006 and 2005 available-for-sale investments accounted for under the equity method comprise:

Name Principal Country 31 December 2006 31 December 2005 activity Group’s Carrying Group’s Carrying holding, % value holding, % value Sibneftegas Oil and gas Russia 51.0% 129,620 – – Sibmetakhim Methanol production Russia 66.7% 43,743 – – Gaztekhleasing Leasing Russia 100.0% 35,815 – – SP Matador-Omskshina Tires production Russia 50.0% 11,963 50.0% 7,748 NIPI Gazpererabotka Research activity Russia 38.0% 5,545 38.0% 4,482 Metafraks Methanol production Russia – – 33.5% 19,595 226,686 31,825

|106| 1 - These companies were not tradable on the Russian stock-exchange as of 31 December 2005 and were included in available-for-sale investments accounted for at cost. See Note 17 (d). GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

As of 31 December 2006 summarized financial information on the Group’s available-for- sale investments accounted for under the equity method is as follows:

Name Assets Liabilities Profit /(loss) 2

Sibneftegas 787,396 533,238 – Sibmetahim 82,838 17,223 14,927 Gaztekhleasing 421,259 385,726 4,910 SP Matador-Omskshina 41,795 20,147 2,594 NIPI Gazpererabotka 15,050 5,326 1,799

In December 2006 the Group acquired a 51% interest in OAO “Sibneftegas”, a Russian oil

S and gas company, from a third party for total consideration of USD 129,620 thousand

T being the fair value of the Group’s share in net assets of OAO “Sibneftegas” as of the date N

E of acquisition. M

E In 2006 the Group started equity accounting for its investment in OOO “Gaztekhleasing”

T made in September 2001, a Russian company rendering leasing services within A

T OAO “Gazprom” Group, because the results of its operations became material for the S

Group’s consolidated financial statements since 1 July 2006. On the date of commence- L ment of equity accounting the Group has recognized the excess of the Group’s share of the A I net fair value of OOO “Gaztekhleasing” identifiable assets, liabilities and contingent C

N liabilities over the cost of the investment in the amount of USD 32,508 thousand as

A income from associate. N I

F The ownership of controlling stakes by the Group in OAO “Sibneftegas” and

D OOO “Gaztekhleasing” either by virtue of charter agreements or by substance does not

E constitute control over operations of the companies, although it does constitute a right of T

A significant influence. Hence the Group regards OAO “Sibneftegas” and D

I OOO “Gaztekhleasing” as associate companies accounted for under the equity method. L

O In August 2006, the SIBUR Holding Group (SHG) contributed its 33.5 percent interest in S OAO “Metafraks”, a methanol producing company, and the methanol producing property, N

O plant and equipment of its consolidated subsidiary OOO “Tomskneftekhim” to the char-

C ter capital of a newly formed entity OOO “Sibmetakhim”. The carrying value of these assets was USD 41,586 thousand. At 31 December 2006 the Group had a 66.7 percent interest in OOO “Sibmetakhim” and OAO “Gazprom” had a 33.3 percent interest. OAO “Gazprom” financed its interest by contributing a 29 percent interest in OOO “Tomskneftekhim”. The management of SHG estimated the fair value of each asset contributed equal to USD 68,778 thousand.

OOO “Sibmetakhim” is jointly controlled by OAO “Gazprom” and SHG and is accounted for under the equity method in these consolidated financial statements. The Group recorded a gain in its consolidated profit and loss account for the year ended 31 December 2006 of USD 31,030 thousand relating to disposals of the interest in OAO “Metafraks” and the property, plant and equipment representing OAO “Gazprom’s” share of the difference between fair value and the carrying value of the assets contributed by the Group.

|107| 2 - Profit/(loss) is disclosed from the date of acquisition till 31 December 2006 or for the year then ended. GAZPROMBANK GROUP | Annual report | 2006

c) Unconsolidated subsidiaries accounted for at cost

As of 31 December 2006 and 2005, the Group had investments in the following unconsolidated subsidiaries:

Name Principal Country 31 December 2006 31 December 2005 activity Group’s Carrying Group’s Carrying holding, % value holding, % value FK Zenit Sports Russia 51.0% 39,621 51.0% 36,247 Permskii GPZ Petrochemicals Russia 50.1% 5,072 50.1% 4,640 Pansionat Samara Entertainment Russia 75.4% 1,431 75.4% 1,309 Raschetno-Depositarnaya Kompanya Clearing&Custody Russia 55.0% 1,308 55.0% 1,197 Strategicheskie activi Banking Russia 100.0% 1,139 – – Sibur-International Ltd Petrochemicals U.K. 100.0% 1,100 100.0% 1,006 Media-Most Telecommunications Russia – –3 78.2% 179,177 SeverGazPererabotka Petrochemicals Russia – –3 100.0% 58,369 Apparat Upravleniya Management Russia – –3 51.0% 9,089 Novokuybishevskaya NHK Petrochemicals Russia – –3 100.0% 23,703 Sibur-Neftesbit Petrochemicals Russia – –3 100.0% 5,602 Other 5,565 5,661 55,236 326,000 d) Associates accounted for at cost

As of 31 December 2006 and 2005, the Group has investments in the following associates accounted for at cost:

Name Principal Country 31 December 2006 31 December 2005 activity Group’s Carrying Group’s Carrying holding, % value holding, % value Belgazprombank Banking Belarus 33.9% 10,233 33.9% 9,361 Mezhregionteploenergo Utilities Russia 40.8% 5,057 40.8% 4,626 Yamal SPG Oil & gas Russia 25.1% 4,557 – – Tambeyneftegaz Oil & gas Russia 25.1% 4,557 20.0% 3,322 Dvorec Kulturi Toliatti Entertainment Russia 50.0% 3,801 50.0% 3,477 Sportsroyresurs Construction Russia 25.0% 1,899 –– Sibgaztrans Oil & gas Russia 49.6% 1,747 49.6% 1,598 Gazenergoprombank Banking Russia – –4 45.2% 13,789 SK Regiongarant Financial services Russia – – 35.2% 7,461 Specdepozitarii Clearing&Custody Russia – –5 25.0% 1,172 Other 2,961 1,839 34,812 46,645

Unconsolidated subsidiaries and associates have not been consolidated with the results of the Group nor accounted for under the equity method as either the Group does not execute control or significant influence over some of the subsidiaries and associates, or the effect would not materially alter the financial position of the Group as of 31 December 2006 and 2005 or the results of its operations or cash flows of the Group for years ended 31 December 2006 and 2005.

|108| 3 These investments were written off against allowances set up in previous reporting periods. 4 Transferred to Assets Held for Sale. 5 Included in other available-for-sale investments accounted for at cost due to decrease of the Group’s holding. GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

d) Other investments accounted for at cost

Included in other investments accounted for at cost as of 31 December 2006 is an amount of USD 14,949 thousand representing investments in five Mosenergo companies (31 December 2005 – USD 129,934 thousand representing investments in thirteen Mosenergo companies). The shares of the five Mosenergo companies are currently not quoted in an active market. As a result, the Group accounts for the investments in these companies at cost being the fair value assigned to each company as of 1 April 2005 – the date of Mosenergo restructuring. When the five Mosenergo companies become listed on the Russian stock-exchange market they will be re-measured to fair value because their share quotations will become representative. See also Note 17 (a) “Available-for-sale investments accounted for at fair value”.

Other investments accounted for at cost also include minor stakes in various Russian companies.

T The equity instruments disclosed above (other than those accounted for at fair value) are carried at

N cost, because they do not have a quoted market price in an active market and other methods of E reasonably estimating fair value are unworkable due to the lack of reliable information for discounted M

E cash flow analysis and the absence of comparable quoted companies. It is also currently impossible to

T calculate the range of estimates within which fair value of the equity investments is highly likely to lie. A T

S As of 31 December 2006 allowances for impairment losses of USD 82,789 thousand are set up

L against the investments carried at cost (31 December 2005 – USD 316,221 thousand). A I

C The movements of available-for-sale investments and investments in associates during the years

N ended 31 December 2006 and 2005 were as follows: A N I F

D 31 December 2004 1,141,727 E

T Net effect of adjustments to fair value 147,171

A Available-for-sale investments purchased 941,654 D

I Transfer to assets held for sale (24,703)

L Effect of consolidation of subsidiaries (43,943) O Rights issue of an associate 3,152 S

N Available-for-sale investments disposed (1,044,517)

O Investments acquired as a result of business combination 327,464

C Foreign exchange difference from translation to presentation currency (Note 3 (c)) (41,270) 31 December 2005 1,406,735 Net effect of adjustments to fair value 588,996 Available-for-sale investments purchased 2,531,979 Transfer to assets held for sale (11,901) Effect of consolidation of subsidiaries (97,341) Available-for-sale investments disposed (1,728,841) Income from associates 60,967 Dividends from associates (3,200) Rights issue 1,206 Amounts written off (287,602) Transfer to securities at fair value through profit or loss (8,622) Foreign exchange difference from translation to presentation currency (Note 3 (c)) 126,963 31 December 2006 2,579,339

|109| GAZPROMBANK GROUP | Annual report | 2006

Amounts written off for the year 2006 primarily relate to write-off of the Group’s investment in ZAO “Media Most” against the allowance set up in previous reporting periods. This results from the liquidation of ZAO “Media Most” by the decision of Moscow Arbitrary court in December 2006. The rest of the amounts written off relate to various minor available-for-sale investments of SHG.

Net profit from available-for-sale investments for the year ended 31 December 2006 in the amount of USD 205,276 thousand (2005 – USD 93,724 thousand) represents realized gains on disposal of (1) part of the stakes in Mosenergo and Mosenergo companies owned by the Group – USD 82,927 thousand; (2) 5% interest in a UK-based oil and gas international company – USD 66,482 thousand; (3) U.S. Treasury bills – USD 21,574 thousand; (4) participation shares of foreign investment funds – USD 15,684 thousand; (5) other available-for-sale investments – USD 18,609 thousand).

NOTE 18 – TRADE RECEIVABLES, NET

As of 31 December 2006 and 2005 trade receivables comprise the following:

31 December 31 December 2006 2005

Trade receivables 294,541 181,564 Prepayments and advances 256,714 217,415 Other trade receivables 79,022 240,305 630,277 639,284 Less – Allowance for impairment losses (89,431) (175,725) Trade receivables, net 540,846 463,559

Trade receivables and prepayments primarily consist of prepayments under raw materials purchase agreements and short- and medium-term receivables for petrochemical products marketed and processing services rendered by petrochemical and tires business segment of the Group. As of 31 December 2006 the amount of such receivables and prepayments amounted to USD 383,772 thousand (31 December 2005 – USD 493,958 thousand). As of 31 December 2006 the allowance for impairment associated with these assets was USD 71,133 thousand (31 December 2005 – USD 159,397 thousand).

NOTE 19 – INVENTORIES, NET

As of 31 December 2006 and 2005 inventories comprise the following:

31 December 31 December 2006 2005

Refined products 386,471 274,919 Property and goods for resale 191,470 98,641 Materials and supplies 87,796 83,378 Other finished goods 21,470 5,340 687,207 462,278 Less – Allowance for impairment losses (14,313) (12,121) Inventories, net 672,894 450,157

|110| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

NOTE 20 – PROPERTY, EQUIPMENT AND INTANGIBLES, NET

The movements of property, equipment and intangibles during the years ended 31 December 2006 and 2005 were as follows: Subsidiary Land, Machinery, Other Software Assets Total buildings transport and under facilities and program- const- equipment ming rights ruction COST OF ACQUISITION 31 December 2004 23,970 70,458 – 8,444 20,437 123,309 Acquisition of subsidiaries (Note 1(b)) 1,302,164 1,265,871 40,932 290,637 339,809 3,239,413

Additions 71,346 39,491 683 206,544 42,267 360,331

S Disposals (245) (6,593) (267) (135,601) (90,291) (232,997) T Translation to presentation N currency (Note 3(c)) (642) (2,464) 3 580 (743) (3,266) E 31 December 2005 1,396,593 1,366,763 41,351 370,604 311,479 3,486,790 M

E Transfer 2,361 (2,361) – – – –

T Additions 90,790 311,282 4,422 345,019 56,613 808,126 A

T Disposals (24,675) (21,356) (2,034) (151,889) (70,302) (270,256) S

Translation to presentation

L currency (Note 3(c)) 132,268 133,584 3,921 40,879 26,763 337,415 A

I 31 December 2006 1,597,337 1,787,912 47,660 604,613 324,553 4,362,075 C

N ACCUMULATED DEPRECIATION AND AMORTIZATION A 31 December 2004 1,925 48,137 – 5,553 – 55,615 N I Acquisition of subsidiaries (Note 1(b)) 433,070 784,084 25,247 159,447 – 1,401,848 F Charge for the period 1,908 23,821 610 99,882 – 126,221 D Disposals (219) (5,017) (264) (59,393) – (64,893) E

T Translation to presentation currency

A (Note 3(c)) (95) (2,049) (11) (1,236) (3,391) D

I 31 December 2005 436,589 848,976 25,582 204,253 – 1,515,400

L Transfer 400 (400) – ––– O Charge for the period 15,455 147,595 4,440 246,535 – 414,025 S

N Disposals (575) (8,407) (884) (153,920) – (163,786)

O Translation to presentation currency

C (Note 3(c)) 41,146 83,267 2,490 22,134 – 149,037 31 December 2006 493,015 1,071,031 31,628 319,002 – 1,914,676

NET BOOK VALUE 31 December 2005 960,004 517,787 15,769 166,351 311,479 1,971,390 31 December 2006 1,104,322 716,881 16,032 285,611 324,553 2,447,399

Machinery, transport and equipment consist of office equipment, plant machinery, television and broadcasting equipment and vehicles.

Included within machinery, transport and equipment are assets held under finance leases with a carrying value of USD 43,438 thousand and USD 47,670 thousand as of 31 December 2006 and 2005, respectively.

Included in depreciation and amortization charge for the year ended 31 December 2006 is an amount of USD 394,707 thousand (31 December 2005 – USD 107,348 thousand) that relates to depreciation and amortization charges included in the petrochemical business operating expenses and in the media business operating expenses (see Notes 7, 8).

|111| GAZPROMBANK GROUP | Annual report | 2006

As of 31 December 2006 the gross carrying amount of fully depreciated property and equipment that is still in use by the Group was USD 14,553 thousand (31 December 2005 – USD 12,111 thousand).

As of 31 December 2006 net book value of fixed assets pledged as security for loans received by the Group was nil (31 December 2005 – USD 76,192 thousand).

NOTE 21 – GOODWILL

The movement of goodwill for the years ended 31 December 2006 and 2005 is as follows:

31 December 2004 – Business combination (Note 1 (а)) 552,651 31 December 2005 552,651 Business combination (Note 1 (b)) 15,652 Foreign exchange difference from translation to presentation currency (Note 3 (c)) 51,030 31 December 2006 619,333

Following the application of the predecessor cost accounting method (see Note 3(b)), as of 31 December 2005 the Group recognized goodwill in the amount of USD 552,651 thousand arising from acquisitions by the predecessor owner of subsidiaries that are currently part of the Gazprom Media Group (the “GMG”).

As of 31 December 2005 the amount of goodwill is shown net of impairment loss of USD 236,917 thousand. The impairment occurred prior to the acquisition of GMG by the Group in July 2005. As of 31 December 2006 no indication exists that further impairment provision for the goodwill recognized is necessary.

NOTE 22 – OTHER ASSETS, NET

As of 31 December 2006 and 2005 other assets comprise the following: Notes 31 December 31 December 2006 2005

Settlements with budget for other taxes 394,475 371,135 Derivative financial assets 29 82,708 17,389 Receivables from operations with securities 78,353 19,499 Current income tax assets 12 51,613 34,187 Deferred income tax assets 12 31,596 29,124 Accrued income 30,904 – Assets held for sale 28,605 24,703 Bullion in vault 5,336 1,849 Dividends receivable 2,842 – Receivables from operations with bullion – 5,130 Other 109,801 32,313 816,233 535,329 Less – Allowance for impairment losses (335) (474) Other assets, net 815,898 534,855

|112| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

Included in settlements with budget for other taxes is an amount of USD 326,303 thousand that represents short-term recoverable VAT primarily relating to activities of petrochemical and tires business segment of the Group (31 December 2005 – USD 348,686 thousand).

As of 31 December 2006 and 2005 assets held for sale comprise: Name Principal Country 31 December 2006 31 December 2005 activity Group’s Carrying Group’s Carrying holding, % value holding, % value Assets held for sale: Atomstroyexport Construction Russia 30.8% 15,469 53.9% 24,703 Gazenergoprombank Banking Russia 30.6% 11,398 30.6% –7 Sochigazprombank Banking Russia 85.3% 866 85.3% –7

7 S RosUkrEnergo AG Gas trading Switzerland 50.0% 39 50.0% – T Other minor investments 833 – N Total assets held for sale 28,605 24,703 E M E

T The Group has negotiated the price of these assets and terms of their disposal with poten- A

T tial buyers. The sale of 30.8% interest in Atomstroyexport is subject to a formal approval S of the Federal Antimonopoly Service. Subsequent to the balance sheet date the Group dis- L

A posed of its investments in Gazenergoprombank, Sochigazprombank and I RosUkrEnergo AG by selling their stocks for USD 22,241 thousand, USD 2,186 thousand C

N and USD 3,110 thousand, respectively. A N I F NOTE 23 – AMOUNTS OWED TO D

E CREDIT INSTITUTIONS T A D

I Amounts owed to credit institutions comprise: L 31 December 31 December O

S 2006 2005 N

O Current accounts 44,993 53,908 C Time deposits 1,184,923 1,367,217 Repo agreements 1,049,245 65,899 Syndicated loans 700,491 653,228 Amounts owed to credit institutions 2,979,652 2,140,252

In April 2006 the Group received a three-year committed loan in the amount of USD 500,000 thousand from a syndicate of foreign banks. The loan bears interest at USD 6-month LIBOR plus 0.5%. Included in syndicated loans as of 31 December 2006 is the amount of USD 500,499 thousand that relates to the amounts owed to credit institutions under this agreement.

In June 2006, the SIBUR Holding Group (SHG) signed a USD 200,000 thousand syndicated credit facility with ABN AMRO Bank N.V. and Citibank N.A., which was fully drawn as of 30 September 2006. The facility bears interest at 3 months USD LIBOR plus 1.6 percent. The funds were primarily used to repay the SHG short-term borrowings.

|113| 7 As of 31 December 2005 were recognized as available-for-sale investment accounted for at cost. GAZPROMBANK GROUP | Annual report | 2006

In September 2006, the SHG signed a credit facility for up to USD 31,625 thousand with ING Bank Deutschland AG. The Euro-denominated facility will be used for acquisition of technological equipment and machinery. The facility bears interest at EURIBOR plus 2.25 percent per annum and is due in September 2014. As of 31 December 2006 SHG received USD 7,785 thousand relating to this credit facility.

As of 31 December 2006 43% (USD 1,289,049 thousand) of amounts owed to credit institutions relate to Dresdner Bank AG (Germany). As of 31 December 2005 25% (USD 542,006 thousand) of amounts owed to credit institutions relate to Dresdner Bank AG (Germany) and ABN AMRO Bank (Netherlands).

Repo agreements represent short-term funding received by the Group with securities pledged as collateral to credit institutions (see Note 15).

Time deposits received from a foreign bank in the amount of USD 357,374 thousand (31 December 2005 – USD 357,506 thousand) are covered by U.S. Treasury bills pledged by the Group in the same amount (see Note 17(a)).

As of 31 December 2006 the fair value of amounts owed to credit institutions estimated based on the valuation techniques described in Note 3(p) lies in the range from USD 2,979,652 thousand to USD 3,333,095 thousand (31 December 2005 – from USD 2,140,252 thousand to USD 2,574,084 thousand).

NOTE 24 – AMOUNTS OWED TO CUSTOMERS AND SUBORDINATED DEPOSITS

Amounts owed to customers comprise:

31 December 31 December 2006 2005 CURRENT ACCOUNTS: - State controlled companies 3,079,732 3,063,629 - Private companies 1,418,075 813,477 - Individuals 1,275,089 692,696 5,772,896 4,569,802 TIME DEPOSITS: - State controlled companies 1,542,693 568,609 - Private companies 2,524,050 976,360 - Individuals 1,607,452 1,102,242 5,674,195 2,647,211 Amounts owed to customers 11,447,091 7,217,013

As of 31 December 2006 current accounts and time deposits of OAO “Gazprom” Group composed 32% (USD 3,694,321 thousand) of the Group’s total amounts owed to customers (31 December 2005 – 48% or USD 3,442,250 thousand).

|114| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

The following represents amounts, which were blocked by the Group as collateral against the Group’s placements with Deutsche Bank AG related to syndicated loans received by OAO “Gazprom” (“escrow accounts”); and as coverage under letters of credit opened by the Bank as of 31 December 2006 and 2005 (see Note 33).

31 December 31 December 2006 2005

Coverage under letters of credit 138,878 85,289 Escrow accounts – 54,407 Blocked customer accounts 138,878 139,696

As of 31 December 2006 and 2005 subordinated deposits comprise: S

T 31 December 31 December N 2006 2005 E M

E State controlled companies 280,595 306,989

T Private companies 408,237 300,530 A

T Subordinated deposits 688,832 607,519 S

L A I

C Subordinated deposits of the Group represent time deposits that were placed by cus-

N tomers according to agreements that include the following terms: (i) original maturity is A not less than 5 years; (ii) customers have no right to claim the deposits before maturity; N I and (iii) in the event of the Bank’s bankruptcy or default, subordinated deposits are to be F repaid only after the settlement of all other liabilities. At the same time, the classification D

E of deposits as subordinated for the purpose of compliance to Russian statutory legislation

T (for the calculation of statutory capital adequacy) also needs formal approval of the terms A of each deposit agreement by the Central Bank of the Russian Federation (the “registra- D I tion” of deposit agreements). As of 31 December 2006 subordinated deposits in amount of L

O USD 625,492 thousand represent agreements registered by the Central Bank of the Russian S Federation (31 December 2005 – USD 523,031 thousand). N

O As of 31 December 2006 included in subordinated deposits is an amount of C USD 280,595 thousand that relates to deposits of the OAO Gazprom Group (31 December 2005 – USD 306,989 thousand). Interest rates on the OAO Gazprom Group deposits are floating and are linked to LIBOR. The rest of Ruble-denominated subordinated deposits bear fixed Ruble interest rates up to 6.5%.

In June 2006 the Group received a 5-year subordinated deposit from an international institution in the amount of USD 300,000 thousand at a fixed rate of 7.97% per annum with interest paid semi-annually.

Subordinated deposits mature between 2007 and 2016.

As of 31 December 2006 the fair value of customer and subordinated deposits estimated based on the valuation techniques described in Note 3(p) lies in the range from USD 12,135,923 thousand to USD 12,573,222 thousand (31 December 2005 – from USD 7,824,532 thousand to USD 7,852,861 thousand).

|115| GAZPROMBANK GROUP | Annual report | 2006

NOTE 25 – CERTIFICATED DEBTS AND EUROBONDS ISSUED

Certificated debts issued comprise:

31 December 31 December 2006 2005

Promissory notes issued 4,852,677 1,506,526 Ruble domestic bonds issued 440,576 – Domestic residential mortgage backed securities issued 91,468 – Certificates of deposit issued 69,822 59,919 Certificated debts 5,454,543 1,566,445

In November 2006, the SIBUR Holding Group issued USD 56,967 thousand of Ruble-denominated redeemable non-convertible documentary bonds each with a nominal value of RUR 1,000 maturing in 2012. The issue bears a nominal 7.7 percent coupon paid semi-annually and was placed at 99.85 percent of par value. The issue is redeemed in November 2009.

For further details on the maturity profile of the certificated debts portfolio as well as the information on effective interest rates see Note 31.

As of 31 December 2006 the fair value of certificated debts issued by the Group estimated based on the valuation techniques described in Note 3(p) and market quotations lies in the range from USD 5,454,543 thousand to USD 6,544,817 thousand (31 December 2005 – from USD 1,566,445 thousand to USD 1,682,542 thousand).

As of 31 December 2006 and 2005 Eurobonds issued internationally comprise:

% Maturity date 31 December 31 December 2006 2005

USD loan participation notes 7.25% October 2008 1,059,500 1,057,804 USD euro medium term notes 6.50% September 2015 1,008,585 1,007,996 Euro cross-border residential mortgage 1-month December 2046 backed securities EURIBOR+1.3% 185,831 – USD Euro commercial papers 6.29%-6.39% February 2007 – September 2007 171,355 – Euro commercial papers 4.67% June 2007 119,513 – USD Secured Limited Resource Notes 9.25% December 2010 60,829 – Ruble cross-border residential mortgage backed securities 8%-11% December 2046 8,125 – Eurobonds 2,613,738 2,065,800

|116| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

In December 2006 the Group securitized RUR 8.7 billion (USD 332,030 thousand) of its mortgage loan portfolio by means of: (1) domestic Ruble-denominated residential mortgage backed securities (“RMBS”) issue in the amount of USD 113,934 thousand and (2) both Euro- and Ruble-denominated cross border RMBS issue in the amount of USD 218,644 thousand. As of 31 December 2006 USD 91,468 thousand of domestic RMBS and USD 193,956 thousand of cross- border RMBS were placed by the Group with the third parties.

As of 31 December 2006 included in Eurobonds issued is an amount of USD 60,829 thousand that represents U.S. Dollar-denominated Secured Limited Resource Notes issued internationally in December 2006 by one of the subsidiaries of GMG.

As of 31 December 2006 the fair value of Eurobonds issued by the Group

S estimated based on the market quotations was USD 2,655,353 thousand T

N (31 December 2005 – USD 2,064,952 thousand). E M E T A T

S NOTE 26 – OTHER LIABILITIES

L A

I Other liabilities comprise: C N

A Notes 31 December 31 December

N 2006 2005 I F Payable on operations with securities 660,548 592,550 D

E Trade payables, advances received and settlements

T with suppliers 220,041 259,218 A Derivative contracts 29 137,484 52,004 D

I Deferred VAT and other operating taxes payable 109,076 175,972 L Payable to employees 99,140 45,571 O

S Accounts payable in respect of acquisition of property,

N plant and equipment 64,249 –

O Deferred income 44,789 43,601

C Provisions for other risks 6, 33 20,797 9,219 Other 132,991 103,708 Other liabilities 1,489,115 1,281,843

Included in payables on operations with securities is an amount of USD 636,859 thousand that represents a deferred nominal payment to OAO “Gazprom” for controlling stake in GMG and the related debts of GMG due in September 2008 (31 December 2005 – USD 592,365 thousand).

|117| GAZPROMBANK GROUP | Annual report | 2006

NOTE 27 – SHARE CAPITAL

The authorized share capital of the Bank comprises 23,331,851 ordinary shares; issued share capital comprises 19,997,777 ordinary shares as of 31 December 2006 and 13,331,851 ordinary shares as of 31 December 2005. All shares have a par value of 1,000 Rubles. The holders of ordinary shares are entitled to receive dividends as annually declared and are entitled to one vote per share at annual and other general meetings of the Bank’s shareholders.

In December 2006 OAO “Gazprom” sold a 24.9% interest in the Bank’s shares to a non-state pension fund “Gazfond” (NPF “Gazfond”). Also in December 2006 the general meeting of shareholders of the Bank approved the increase of the Bank’s share capital by issuing additional 6,665,926 ordinary shares at a price of RUR 5,184 per share which resulted in a total Ruble-denominated equity contribution of RUR 34,556 million (USD 1,315,699 thousand). The difference between the par value of the shares and the price of the issue in the amount of USD 1,061,899 thousand was recognized as share premium in the Group’s equity. Together these transactions resulted in the reduction of OAO “Gazprom” share in the Bank to 41.73%. For subsequent events see Note 35.

As of 31 December 2006 the Group held 1,668,108 of the Bank’s shares as treasury stock (31 December 2005 – 1,668,108 shares). 1,000,000 shares out of treasury stock are committed by the Group under employee share option plans (see Note 11).

NOTE 28 – RETAINED EARNINGS AND EARNINGS PER SHARE

Dividends payable by the Group are restricted to the maximum distributable reserves, which are determined by the amount of reserves as disclosed in the accounts of the Bank prepared in accordance with statutory legislation. As of 31 December 2006, the statutory accounts of the Bank disclosed distributable reserves of USD 1,355,172 thousand and non-distributable reserves of USD 76,122 thousand (31 December 2005 – distributable reserves of USD 864,869 thousand and non-distributable reserves of USD 69,639 thousand). The major part of statutory non-distributable reserves are general reserves, which represent amounts set aside, as required by the regulations of the Russian Feder- ation, in respect of general banking risks, including future losses and other unforeseen risks or contingencies.

In June 2006 the general meeting of shareholders of the Bank approved a dividend payout for 2005 in amount of USD 65,363 thousand (dividend payout for 2004 paid in 2005 was USD 55,473 thousand). Also, included in the movement of equity is an amount of USD 18,715 thousand that represents dividends for 2005 declared or paid by subsidiary banks Severgazbank, Sibirgazbank, various subsidiaries of GMG and OAO “SIBUR Holding” to their minority shareholders.

|118| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

In 2006 the Group received a one-off income of USD 367,806 thousand from OAO “Gazprom” in the form of dividends distributed by RosUkrEnergo AG (Switzerland), an entity controlled by OAO “Gazprom”, therefore it was recorded directly in equity. During 2006 the Group rendered advisory services and provided finance to RosUkrEnergo AG (Switzerland).

As of 31 December 2006 the basic earnings per share of the Group were diluted with contingently saleable shares held as treasury stock ordinary shares as a result of employee share-option plans launched by the Group in December 2006 (see Note 11 for details). As of 31 December 2006 and 2005 the basic and diluted earnings per share were as follows:

2006 2005

S BASIC EARNINGS PER SHARE, USD:

T Net profit for the period, USD 1,330,775,000 457,347,000 N Weighted-average number of ordinary shares E outstanding during the period 11,937,685 12,982,586 M Earnings per share, USD 111,5 35,2 E T

A DILUTED EARNINGS PER SHARE, USD: T

S Net profit for the period, USD 1,330,775,000 –

L Weighted-average number of ordinary shares

A outstanding during the period 11,945,070 – I Earnings per share, USD 111,4 – C N A N I F

D E T A D I L O S N O C

|119| GAZPROMBANK GROUP | Annual report | 2006

NOTE 29 – DERIVATIVE FINANCIAL INSTRUMENTS

The Group enters into deals with derivative financial instruments for trading purposes.

The Group’s position and fair value of derivatives outstanding as of 31 December 2006 were as follows:

Notional principal Fair value of equivalent derivative contracts DERIVATIVE ASSETS Foreign exchange contracts Forward contracts Assets foreign 2,590,430 47,481 Assets domestic 1,580,500 22,538

BULLION CONTRACTS Forward contracts Assets domestic 5,137 68

SECURITIES CONTRACTS Option contracts Call options held - foreign 167,644 9,439 Call options held - domestic 55,163 3,160

Forward contracts Assets domestic 34,839 22 Total derivative assets 4,433,713 82,708

DERIVATIVE LIABILITIES Foreign exchange contracts Option contracts Call options written - foreign (38,790) (920) Put options written - foreign (37,350) (6)

Forward contracts Liabilities foreign (1,676,058) (14,506) Liabilities domestic (1,706,565) (13,387)

BULLION CONTRACTS Forward contracts Liabilities foreign (4,950) (255)

SECURITIES CONTRACTS Option contracts Call options written - foreign (236,869) (12,588) Put options written - foreign (610,434) (95,669)

Forward contracts Liabilities domestic (24,629) (153) Total derivative liabilities (4,335,645) (137,484)

Included in derivative liabilities under securities contracts – put option written-foreign as of 31 December 2006 is an amount of USD 95,669 thousand that represents the fair value of European put option contracts written to a foreign institution for 46 million ordinary shares of OAO “Gazprom”.

|120| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

The Group’s position and fair value of derivatives outstanding as of 31 December 2005 were as follows:

Notional principal Fair value of equivalent derivative contracts DERIVATIVE ASSETS Foreign exchange contracts Forward contracts Assets foreign 599,125 8,765 Assets domestic 1,287,032 7,891

Option contracts Put options held - foreign 88,800 607

SECURITIES CONTRACTS Option contracts S

T Put options held - domestic 26,538 – N

E Forward contracts M Assets foreign 58,822 126 E

T Assets domestic 711 –

A Total derivative assets 2,061,028 17,389 T S

L DERIVATIVE LIABILITIES

A Foreign exchange contracts I

C Option contracts

N Call options written - foreign (19,804) (264) A Put options written - foreign (19,456) (22) N I F Forward contracts D Liabilities foreign (472,670) (5,314) E

T Liabilities domestic (1,185,935) (7,582) A D

I SECURITIES CONTRACTS

L Option contracts O Put options written - domestic (25,691) (38,590) S N

O Forward contracts

C Liabilities foreign (111,741) (232) Total derivative liabilities (1,835,297) (52,004)

The fair value of the Group’s position in derivatives was calculated as follows:

I Bullion contracts – based on the USD/ounce of gold bullion exchange rate of the London Bullion Market Association effective as of reporting dates;

I Foreign exchange contracts – based on the appropriate official currency exchange rates as of the period end;

I Securities contracts – based on closing bid rates for corporate shares and debt securities quoted on Moscow Interbank Currency Exchange (MICEX) and Russian Trading System (RTS) as of the period-end.

The fair value of these transactions is believed to reflect the credit and other types of economic risk for the Group and therefore no allowance for losses on derivative contracts has been created.

|121| GAZPROMBANK GROUP | Annual report | 2006

A significant part of derivative contracts mature within a 3-month period. Subsequent to the balance sheet date the short-term deals were settled at their maturities in the normal course of business.

NOTE 30 – CASH AND CASH EQUIVALENTS

Cash and cash equivalents as of 31 December 2006 and 2005 as shown in the consolidated cash flow statements comprised: 31 December 31 December 2006 2005

Cash on hand 459,220 272,450 Current account with the Central Bank of the Russian Federation 948,910 551,121 Time deposit with the Central Bank of the Russian Federation 1,139,337 – Due from credit institutions: – Current accounts 1,287,494 626,440 – Time deposits with a maturity of three months or less when originated 2,673,394 1,490,913 Cash and cash equivalents 6,508,355 2,940,924

NOTE 31 – RISK MANAGEMENT POLICIES

Management of risk is fundamental to the banking business and is an essential element of the Group’s operations. The Group considers risk management and risk controls to be vitally important aspects of its business operations and management activities, establishing and integrating these functions into corporate organization in the form of continuous process. The Group has set internal standards of risk transparency as the basis for controlling, limiting and managing risks. The Group has established a Risk Management Department, which directly reports to the Management Board and is responsible for developing methods used to measure risks and for independently measuring and monitoring risks on an ongoing basis. The Group considers economic dependence on OAO “Gazprom” (see Note 1 (c)) within the framework of its risk management policies.

In addition to that, the Group has an Internal Control Department, one of the activities of which is aimed specifically at preventing losses for the Group and its customers. Management believes that all the regulatory requirements of the Central Bank of the Russian Federation regarding an internal audit function are fully satisfied.

The main risks inherent to the Group’s operations are those related to credit exposures, liquidity and market movements in interest rates and foreign exchange rates. A description of the Group’s risk management policies in relation to those risks follows: a) Credit risk

The Group is exposed to credit risk which is the risk that a counterparty will be unable to pay amounts in full when due. The Group structures the levels of credit risk it undertakes by placing limits on the amount of risk accepted in relation to one borrower or groups of borrowers. Such risks are monitored on a revolving basis and subject to a quarterly or more frequent review. The Credit Committee approves limits on the level of credit risk by borrowers on a monthly basis.

|122| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

The exposure to any one borrower including banks and brokers is further restricted by sub-limits covering on and off balance sheet expenses set by the Credit Committee, which is called once a week. Actual exposures against limits are monitored daily.

Exposure to credit risk is managed through regular analysis of the ability of borrowers and potential borrowers to meet interest and principal repayment obligations and by changing these lending limits where appropriate. Exposure to credit risk is also managed in part by obtaining collateral and corporate and personal guarantees.

The credit risk exposure on derivatives is managed as part of the overall lending limits with customers, together with potential exposures from market movements. Collateral or other security is not usually obtained for credit risk exposures on these instruments.

Credit-related commitments ensure that funds are available to a customer as required.

S Guarantees and standby letters of credit, which represent irrevocable assurances that the Group

T will make payments in the event that a customer cannot meet its obligations to third parties, carry N

E the same credit risk as loans. Documentary and commercial letters of credit, which are written

M undertakings by the Group on behalf of a customer authorizing a third party to draw drafts on

E the Group up to a stipulated amount under specific terms and conditions, are frequently fully or T

A partially covered by the funds deposited by customers and therefore bear remote credit risk. T S

With respect to undrawn loan commitments the Group is potentially exposed to loss in an amount L equal to the total amount of such commitments. However, the likely amount of loss is less than that, A I since most commitments are contingent upon certain conditions set out in the loan agreements. C

N The Group’s credit policy is approved and periodically reviewed by the Management Board. A

N The geographical concentration of banking assets and liabilities as of 31 December 2006 and 2005 follows: I F 31 December 2006 D Russia OECD Other Total E non-OECD T ASSETS A

D Cash and due from the CBR 2,907,450 – – 2,907,450 I

L Due from credit institutions, net 4,390,542 2,553,643 293,497 7,237,682

O Securities at fair value through profit or loss 2,346,425 – – 2,346,425

S Loans to customers, net 10,139,767 214,828 1,229,395 11,583,990 N Available-for-sale, net and O investments in associates 1,807,747 668,022 20,781 2,496,550 C Trade receivables, net 540,846 – – 540,846 Inventories, net 672,894 – – 672,894 Property, equipment and intangibles, net 2,447,399 – – 2,447,399 Goodwill 619,333 – – 619,333 Other assets, net 700,630 59,215 56,053 815,898 26,573,033 3,495,708 1,599,726 31,668,467 LIABILITIES Amounts owed to credit institutions 191,312 2,516,671 271,669 2,979,652 Amounts owed to customers 11,201,540 33,219 212,332 11,447,091 Subordinated deposits 388,832 300,000 – 688,832 Certificated debts 5,174,212 276,617 3,714 5,454,543 Eurobonds issued – 2,613,738 – 2,613,738 Income tax liabilities 345,358 – – 345,358 Other liabilities 1,363,996 124,450 669 1,489,115 18,665,250 5,864,695 488,384 25,018,329 Net position 7,907,783 (2,368,987) 1,111,342 6,650,138

|123| GAZPROMBANK GROUP | Annual report | 2006

31 December 2005 Russia OECD Other Total non-OECD ASSETS Cash and due from the CBR 1,069,751 – – 1,069,751 Due from credit institutions, net 1,735,922 1,122,886 24,015 2,882,823 Securities at fair value through profit or loss 1,637,666 – – 1,637,666 Loans to customers, net 5,680,666 1,400,217 320,210 7,401,093 Available-for-sale, net and investments in associates 513,743 554,729 22,042 1,090,514 Trade receivables, net 463,559 – – 463,559 Inventories, net 450,157 – – 450,157 Property, equipment and intangibles, net 1,971,390 – – 1,971,390 Goodwill 552,651 – – 552,651 Other assets, net 501,516 19,748 13,591 534,855 14,577,021 3,097,580 379,858 18,054,459 LIABILITIES Amounts owed to credit institutions 487,366 1,596,214 56,672 2,140,252 Amounts owed to customers 6,867,198 236,538 113,277 7,217,013 Subordinated deposits 607,519 – – 607,519 Certificated debts 1,517,614 48,831 – 1,566,445 Eurobonds issued – 2,065,800 – 2,065,800 Income tax liabilities 258,648 – – 258,648 Other liabilities 1,275,768 6,075 – 1,281,843 11,014,113 3,953,458 169,949 15,137,520 Net position 3,562,908 (855,878) 209,909 2,916,939 b) Operational risk

Operational risk arises from a failure to control properly all aspects of the documentation, processing, settlement of, and accounting for, transactions and, more widely, all the hazards to which the Group is exposed as a result of being in business and of doing business. Losses that are characterized as operational include, but are not limited to, the following examples: personnel unavailability or injury; natural disasters; the failure of external accounting systems such as an Exchange; the failure of internal controls; or the failure of internal processing systems.

By their nature, these risks are difficult to measure or quantify and are therefore managed judgementally and with less precision than other types of risk. c) Liquidity risk

The Group is exposed to daily calls on its available cash resources from overnight deposits, current deposits, maturing deposits, loan draw downs, guarantees and from margin and other derivatives settled by cash. The Group maintains liquidity management with the objective of ensuring that funds will be available at all times to honor all cash flow obligations as they become due.

The Asset and Liability Management Committee sets limits on the minimum proportion of maturing funds available to cover such cash outflows and on the minimum level of interbank and other borrowing facilities that should be in place to cover withdrawals at unexpected levels of demand.

|124| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

31 December 2006 On Less than 1 to 3 months 1 to Over Total demand 1 month 3 months to 1 year 5 years 5 years ASSETS Cash and due from the CBR 2,751,048 47,840 65,864 35,270 5,763 1,665 2,907,450 Due from credit institutions, net 1,287,897 2,740,284 207,295 2,969,680 27,513 5,013 7,237,682 Securities at fair value through profit or loss 710,219 1,636,206 – – – – 2,346,425 Loans to customers, net 559,439 1,039,594 1,666,558 3,878,268 3,138,964 1,301,167 11,583,990 Available-for-sale, net and investments in associates – – – 509,189 1,800,483 186,878 2,496,550 Trade receivables, net – 540,846 – – – – 540,846 Inventories, net – – – 672,894 – – 672,894 Property, equipment and intangibles, net – – – – 1,343,077 1,104,322 2,447,399 Goodwill – – – – – 619,333 619,333 Other assets, net – 161,925 93,867 542,104 18,002 – 815,898 5,308,603 6,166,695 2,033,584 8,607,405 6,333,802 3,218,378 31,668,467 S

T LIABILITIES

N Amounts owed to credit institutions 56,574 371,875 1,185,773 10,118 1,255,766 99,546 2,979,652 E Amounts owed to customers 6,473,701 1,521,250 2,094,401 1,121,535 183,267 52,937 11,447,091 M Subordinated deposits – – 4,133 12,776 565,744 106,179 688,832 E

T Certificated debts 194,410 144,392 801,019 3,349,743 553,865 411,114 5,454,543

A Eurobonds issued – – 59,681 231,186 1,120,329 1,202,542 2,613,738 T

S Income tax liabilities – – – 345,358 – – 345,358

L Other liabilities 114 164,806 67,219 604,880 651,966 130 1,489,115

A 6,724,799 2,202,323 4,212,226 5,675,596 4,330,937 1,872,448 25,018,329 I

C Net position (1,416,196) 3,964,372 (2,178,642) 2,931,809 2,002,865 1,345,930 6,650,138

N Accumulated gap (1,416,196) 2,548,176 369,534 3,301,343 5,304,208 6,650,138 A N I F

D 31 December 2005

E On Less than 1 to 3 months 1 to Over Total

T demand 1 month 3 months to 1 year 5 years 5 years

A ASSETS D

I Cash and due from the CBR 979,279 34,547 9,131 31,247 13,098 2,449 1,069,751

L Due from credit institutions, net 697,033 1,519,074 494,726 78,191 83,799 10,000 2,882,823 O Securities at fair value through profit or loss 1,522,317 105,241 – 7,321 2,787 – 1,637,666 S

N Loans to customers, net 123,601 554,061 1,207,887 2,303,768 2,311,411 900,365 7,401,093

O Available-for-sale, net and investments in associates – – – – 851,627 238,887 1,090,514

C Trade receivables, net – 58,420 86,907 318,232 – – 463,559 Inventories, net – – – 450,157 – – 450,157 Property, equipment and intangibles, net – – – – 1,011,386 960,004 1,971,390 Goodwill – – – – – 552,651 552,651 Other assets, net – 25,062 54,423 455,370 – – 534,855 3,322,230 2,296,405 1,853,074 3,644,286 4,274,108 2,664,356 18,054,459 LIABILITIES Amounts owed to credit institutions 53,908 377,494 76,543 295,362 1,213,271 123,674 2,140,252 Amounts owed to customers 4,563,530 1,013,232 267,803 916,449 384,159 71,840 7,217,013 Subordinated deposits – 4,747 3,033 16,823 452,365 130,551 607,519 Certificated debts 98,147 120,712 68,242 779,434 391,972 107,938 1,566,445 Eurobonds issued – – – – 1,057,804 1,007,996 2,065,800 Income tax liabilities – – – 258,648 – – 258,648 Other liabilities 52 590,192 52,062 41,271 598,266 – 1,281,843 4,715,637 2,106,377 467,683 2,307,987 4,097,837 1,441,999 15,137,520 Net position (1,393,407) 190,028 1,385,391 1,336,299 176,271 1,222,357 2,916,939 Accumulated gap (1,393,407) (1,203,379) 182,012 1,518,311 1,694,582 2,916,939

|125| GAZPROMBANK GROUP | Annual report | 2006

The maturity gap analysis does not reflect the historical stability of current accounts, whose liquidation has historically taken place over a longer period than that indi- cated in the table above. The table is based upon these accounts’ entitlement to withdraw on demand.

Management regards securities at fair value through profit or loss, except for those pledged under repurchase agreements, as liquid assets available for immediate disposal as they are stated at fair value at the report date. Maturities of available-for- sale investments are stated based on the Management plans as to their realization.

The maturity of the obligatory reserve with the Central Bank of the Russian Federation is based on the maturities of respective amounts owed to customers, that determine the amount of the obligatory reserve. d) Interest rate risk

The Group is exposed to the effects of fluctuations in the prevailing levels of market interest rates on its financial position and cash flows. Interest rate risk is measured by the extent to which changes in market interest rates impact margins and net income. To the extent the term structure of interest bearing assets differs from that of liabilities, net interest income will increase or decrease as a result of movements in interest rates.

Interest rate risk is managed by increasing or decreasing positions within limits, specified by the Group’s management. These limits restrict the potential effect of movements in interest rates on interest margin and on the value of interest- sensitive assets and liabilities.

The Group’s interest rate policy is reviewed and approved by the Asset and Liability Management Committee.

The table below summarizes the Group’s exposure to interest rate risks. Included in the table are the Group’s assets and liabilities at carrying amounts as of 31 December 2006 and 2005, categorized by the earlier of contractual repricing or maturity dates.

|126| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

31 December 2006 On Less than 1 to 3 months 1 to Over Total demand 1 month 3 months to 1 year 5 years 5 years ASSETS Cash and due from the CBR 2,751,048 47,840 65,864 35,270 5,763 1,665 2,907,450 Due from credit institutions, net 1,287,897 3,713,468 212,168 2,001,623 22,513 13 7,237,682 Securities at fair value through profit or loss 710,219 1,636,206 – – – – 2,346,425 Loans to customers, net 559,439 1,088,163 1,727,211 3,959,830 2,971,912 1,277,435 11,583,990 Available-for-sale, net and investments in associates – – – 509,190 1,800,482 186,878 2,496,550 Trade receivables, net – 540,846 – – – – 540,846 Inventories, net – – – 672,894 – – 672,894 Property, equipment and intangibles, net – – – – 1,343,077 1,104,322 2,447,399 Goodwill – – – – – 619,333 619,333 Other assets, net – 161,925 93,867 542,104 18,002 – 815,898 5,308,603 7,188,448 2,099,110 7,720,911 6,161,749 3,189,646 31,668,467 S

T LIABILITIES

N Amounts owed to credit institutions 56,574 373,213 1,201,350 497,113 757,046 94,356 2,979,652 E Amounts owed to customers 6,473,701 1,521,250 2,094,401 1,121,535 183,267 52,937 11,447,091 M Subordinated deposits – – 75,638 181,834 431,360 – 688,832 E

T Certificated debts 194,410 144,392 801,019 3,349,743 553,865 411,114 5,454,543

A Eurobonds issued – – 59,681 231,186 1,120,329 1,202,542 2,613,738 T

S Income tax liabilities – – – 345,358 – – 345,358

L Other liabilities 114 164,806 67,219 604,880 651,966 130 1,489,115

A 6,724,799 2,203,661 4,299,308 6,331,649 3,697,833 1,761,079 25,018,329 I

C Net position (1,416,196) 4,984,787 (2,200,198) 1,389,262 2,463,916 1,428,567 6,650,138

N Accumulated gap (1,416,196) 3,568,591 1,368,393 2,757,655 5,221,571 6,650,138 A N I F 31 December 2005 D On Less than 1 to 3 months 1 to Over Total E demand 1 month 3 months to 1 year 5 years 5 years T ASSETS A

D Cash and due from the CBR 943,934 61,036 8,319 26,011 24,978 5,473 1,069,751 I

L Due from credit institutions, net 697,033 1,523,754 494,726 73,511 83,799 10,000 2,882,823

O Securities at fair value through profit or loss 1,522,317 105,241 – 7,321 2,787 – 1,637,666

S Loans to customers, net 123,603 555,640 1,236,170 2,348,017 2,266,189 871,474 7,401,093 N Available-for-sale, net and investments in associates – – – – 851,627 238,887 1,090,514 O Trade receivables, net – 58,420 86,907 318,232 – – 463,559 C Inventories, net – – – 450,157 – – 450,157 Property, equipment and intangibles, net – – – – 1,011,386 960,004 1,971,390 Goodwill – – – – – 552,651 552,651 Other assets, net – 25,062 54,423 455,370 – – 534,855 3,286,887 2,329,153 1,880,545 3,678,619 4,240,766 2,638,489 18,054,459 LIABILITIES Amounts owed to credit institutions 53,918 377,484 76,543 298,047 1,210,586 123,674 2,140,252 Amounts owed to customers 4,563,530 1,013,232 217,984 966,268 384,159 71,840 7,217,013 Subordinated deposits – 45,099 219,568 14,671 328,181 – 607,519 Certificated debts 98,147 120,712 68,242 779,434 391,972 107,938 1,566,445 Eurobonds issued – – – – 1,057,804 1,007,996 2,065,800 Income tax liabilities – – – 258,648 – – 258,648 Other liabilities 52 590,192 52,062 41,271 598,266 – 1,281,843 4,715,647 2,146,719 634,399 2,358,339 3,970,968 1,311,448 15,137,520 Net position (1,428,760) 182,434 1,246,146 1,320,280 269,798 1,327,041 2,916,939 Accumulated gap (1,428,760) (1,246,326) (180) 1,320,100 1,589,898 2,916,939

The maturities of assets and liabilities are calculated according to the principles disclosed in Note 31 (c). |127| GAZPROMBANK GROUP | Annual report | 2006

The Group’s average effective interest rates for the periods ended 31 December 2006 and 2005 for monetary financial instruments follow.

31 December 2006 31 December 2005 Rubles Foreign Rubles Foreign currencies currencies Average % Average % Average % Average % volume volume volume volume INTEREST-EARNING ASSETS Credit institutions - current accounts 247,066 0.2% 657,548 0.9% 138,119 0.2% 603,273 0.4% - term deposits 2,180,259 6.8% 1,303,848 4.3% 755,994 6.2% 1,313,364 2.8% Securities at fair value through profit or loss 836,813 9.0% 131,516 10.3% 492,989 8.2% 145,209 7.5% Loans to customers - individuals 871,178 11.0% 257,107 9.1% 312,124 14.4% 107,018 9.2% - legal entities 4,527,067 9.0% 4,396,650 8.0% 2,865,211 10.8% 3,232,371 8.0%

INTEREST-BEARING LIABILITIES Credit institutions - current accounts 42,504 3.1% 12,016 1.0% 32,186 4.2% 12,667 1.1% - term deposits 680,920 1.3% 1,723,802 5.4% 250,539 0.4% 1,219,282 5.3% Customers - current accounts 3,665,879 0.8% 1,667,922 2.3% 2,454,967 1.1% 1,495,234 1.3% - term deposits 2,754,031 7.0% 1,503,663 5.6% 1,383,619 7.1% 1,098,702 4.0% Certificated debts 2,551,246 7.1% 376,653 5.3% 1,282,804 6.4% 164,660 4.9% Eurobonds issued 8,125 9.5% 2,245,974 6.4% – – 1,623,837 6.8%

The following table summarizes the Group’s effective interest rates as of 31 December 2006 and 2005 for monetary financial instruments.

31 December 2006 31 December 2005 Rubles U.S. Euro Other Rubles U.S. Euro Other Dollars Dollars INTEREST-EARNING ASSETS Credit institutions - current accounts 0.4% 4.2% 2.7% 0.002% 0.6% 3.4% 0.3% 0.2% - term deposits 5.6% 5.5% 2.9% 2.0% 7.5% 4.9% 2.3% 4.6% Securities at fair value through profit or loss - State debt 7.6% 4.7% – – 6.7% 4.6% – – - Corporate bonds 8.9% 7.5% – – 8.1% 7.2% 8.0% – - Promissory notes 5% – – – 8.7% 5.7% – – Loans to customers - individuals 14.1% 10.6% 10.2% – 14.6% 12.4% 12.4% – - legal entities 10.1% 8.6% 7.4% 5.9% 10.1% 8.2% 8.8% 5.1%

INTEREST-BEARING LIABILITIES Credit institutions - current accounts 0.2% 0.9% 1.0% – 0.2% 1.0% 1.0% – - term deposits 5.8% 5.8% 4.5% 2.5% 5.8% 5.7% 4.7% 7.4% Customers - current accounts 0.3% 2.2% 0.6% 2.5% 0.1% 0.2% – – - term deposits 5.6% 6.0% 2.9% 4.0% 4.9% 3.7% 3.2% – Certificated debts 6.6% 5.9% 5.5% – 8.4% 5.4% 5.6% – Eurobonds issued 8.7% 6.9% 4.8% – – 6.9% – –

|128| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

e) Foreign exchange rate risk

The Group has assets and liabilities denominated in several foreign currencies. The Group’s financial position and cash flows are exposed to the effects of fluctuations in the prevailing foreign currency exchange rates.

The Group’s Asset and Liability Management Committee sets limits on the level of exposure by currency. These limits also comply with the minimum requirements of the Central Bank of the Russian Federation.

The Group’s exposure to foreign currency exchange rate risk as of 31 December 2006 and 2005 follows:

31 December 2006

S Rubles U.S. Dollars Euro Other Total T ASSETS N Cash and due from the CBR 2,845,349 42,992 18,121 988 2,907,450 E Due from credit institutions, net 4,543,035 2,096,761 174,088 423,798 7,237,682 M

E Securities at fair value through profit or loss 2,194,401 119,782 – 32,242 2,346,425 T Loans to customers, net 5,973,946 4,260,248 1,293,243 56,553 11,583,990 A

T Available-for-sale, net and investments in associates 1,807,746 671,567 17,127 110 2,496,550 S

Trade receivables, net 540,303 543 – – 540,846

L Inventories, net 672,894 – – – 672,894 A

I Property, equipment and intangibles, net 2,447,399 – – – 2,447,399 C Goodwill 619,333 – – – 619,333 N Other assets, net 778,314 31,796 – 5,788 815,898 A

N 22,422,720 7,223,689 1,502,579 519,479 31,668,467 I

F LIABILITIES

Amounts owed to credit institutions 1,135,804 1,276,596 364,089 203,163 2,979,652 D

E Amounts owed to customers 9,269,803 1,460,773 536,037 180,478 11,447,091

T Subordinated deposits 115,833 532,150 40,849 – 688,832 A Certificated debts 4,617,549 825,384 11,610 – 5,454,543 D I Eurobonds issued 8,125 2,300,269 305,344 – 2,613,738 L Income tax liabilities 345,358 – – – 345,358 O

S Other liabilities 1,347,590 125,771 5,235 10,519 1,489,115

N 16,840,062 6,520,943 1,263,164 394,160 25,018,329 O Net balance sheet position 5,582,658 702,746 239,415 125,319 6,650,138 C

|129| GAZPROMBANK GROUP | Annual report | 2006

31 December 2005 Rubles U.S. Dollars Euro Other Total ASSETS Cash and due from the CBR 989,610 55,301 23,946 894 1,069,751 Due from credit institutions, net 1,531,477 1,080,300 243,441 27,605 2,882,823 Securities at fair value through profit or loss 1,485,419 150,886 1,361 – 1,637,666 Loans to customers, net 3,856,734 3,044,959 408,732 90,668 7,401,093 Available-for-sale, net and investments in associates 513,743 502,016 18,433 56,322 1,090,514 Trade receivables, net 463,111 448 – – 463,559 Inventories, net 450,157 – – – 450,157 Property, equipment and intangibles, net 1,971,390 – – – 1,971,390 Goodwill 552,651 – – – 552,651 Other assets, net 485,289 40,002 46 9,518 534,855 12,299,581 4,873,912 695,959 185,007 18,054,459 LIABILITIES Amounts owed to credit institutions 121,573 1,800,786 185,095 32,798 2,140,252 Amounts owed to customers 4,960,432 1,514,359 476,185 266,037 7,217,013 Subordinated deposits 307,478 250,698 49,343 – 607,519 Certificated debts 1,478,215 80,986 7,244 – 1,566,445 Eurobonds issued – 2,065,800 – – 2,065,800 Income tax liabilities 258,648 – – – 258,648 Other liabilities 1,273,364 5,706 2,135 638 1,281,843 8,399,710 5,718,335 720,002 299,473 15,137,520 Net balance sheet position 3,899,871 (844,423) (24,043) (114,466) 2,916,939

NOTE 32 – RELATED PARTIES

Related parties or transactions with related parties, as defined by IAS 24 “Related party disclosures”, represent: (a) Parties that directly, or indirectly through one or more intermediaries: control, or are controlled by, or are under common control with, the Group (this includes parents, subsidiaries and fellow subsidiaries); have an interest in the Group that gives then significant influence over the Bank; and that have joint control over the Group; (b) Associates – enterprises on which the Group has significant influence and which is neither a subsidiary nor a joint venture of the investor; (c) Joint ventures in which the Group is a venturer; (d) Members of key management personnel of the Group or its parent; (e) Close members of the family of any individuals referred to in (a) or (d); (f) Parties that are entities controlled, jointly controlled or significantly influenced by, or for which significant voting power in such entity resides with, directly or indirectly, any individual referred to in (d) or (e); or (g) Post-employment benefit plans for the benefit of employees of the Group, or of any entity that is a related party of the Group.

The Group distinguishes between the following categories of related parties: the parent company – OAO “Gazprom”, entities with joint control – OAO “Gazprom” subsidiary companies, subsidiaries and associates of the Group and key management personnel of the Group, including members of the Management Board and the Bank’s Council. In considering each possible related party relationship, attention is directed to the substance of the relationship, and not merely the legal form. The Group had the following transactions outstanding with the defined categories of related parties:

|130| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

31 December 2006 31 December 2005 Related party Total category Related party Total category transactions as per financial transactions as per financial statements statements caption caption

Due from credit institutions, gross: - entities with joint control – 54,407 - unconsolidated subsidiaries and associates 27,095 23,808 - state controlled companies 2,244,483 554,567 Total due from credit institutions, gross 2,271,578 7,248,593 632,782 2,891,834 Allowances for losses, due from credit institutions – (10,911) – (9,011) Securities at fair value through profit or loss (by issuer): - parent 1,032,577 799,231

- unconsolidated subsidiaries and associates 6,720 1,469 S - state controlled companies 429,555 7,042 T

N Total securities at fair value through

E profit or loss (by issuer): 1,468,852 2,346,425 807,742 1,637,666

M Loans to customers, gross:

E - entities with joint control 2,238,917 1,896,779 T

A - unconsolidated subsidiaries and associates 245,760 230,236

T - state controlled companies 885,795 1,223,014 S - key management personnel 9,036 7,140 L Total loans to customers, gross 3,379,508 12,054,434 3,357,169 7,821,486 A I Allowances for losses, loans to customers (152,325) (470,444) (187,866) (420,393) C Available-for-sale investments, gross: N

A - entities with joint control 1,392,135 – N

I - unconsolidated subsidiaries and associates 109,355 404,470 F

- state controlled companies 49,446 81,753

D Total available-for-sale investments, gross 1,550,936 2,579,339 786,223 1,406,735

E Allowances for impairment, T available-for-sale investments (53,199) (82,789) (307,212) (316,221) A Trade receivables and inventories, gross D I - parent 25,787 – L

O - entities with joint control 127,158 113,680

S - unconsolidated subsidiaries and associates 2,647 –

N - state controlled companies 32,775 – O Trade receivables and inventories, gross 188,367 630,277 113,680 639,284 C Allowances for losses, trade receivables and inventories (18,002) (89,431) (23,139) (175,725) Other assets - unconsolidated subsidiaries and associates 28,605 24,703 - state controlled companies 477,684 434,446 Other assets, gross 506,289 816,233 459,149 535,329 Allowances for impairment losses, other assets – (335) – (474) Amounts owed to credit institutions: - entities with joint control 164 – - unconsolidated subsidiaries and associates 5,840 10,279 - state controlled companies 79,453 117,614 Total amounts owed to credit institutions 85,457 2,979,652 127,893 2,140,252

|131| GAZPROMBANK GROUP | Annual report | 2006

31 December 2006 31 December 2005 Related party Total category Related party Total category transactions as per financial transactions as per financial statements statements caption caption

Amounts owed to customers: - parent 1,275,153 1,826,874 - entities with joint control 2,419,168 1,615,376 - unconsolidated subsidiaries and associates 50,899 61,584 - state controlled companies 928,103 196,089 - key management personnel 90,157 53,168 Total amounts owed to customers 4,763,480 11,447,091 3,753,091 7,217,013 Subordinated deposits: - parent 224,150 255,222 - entities with joint control 56,445 51,767 Total subordinated deposits 280,595 688,832 306,989 607,519 Income tax liabilities: - state controlled companies 345,358 258,648 Total income tax liabilities 345,358 345,358 258,648 258,648 Other liabilities: - parent 665,128 592,365 - entities with joint control 51,998 36,248 - unconsolidated subsidiaries and associates 179 - state controlled companies 6,152 175,972 - key management personnel 33,420 54,858 Total other liabilities 756,877 1,489,115 859,443 1,281,843 Undrawn loan commitments: - entities with joint control 415,187 238,647 - unconsolidated subsidiaries and associates 47,588 5,389 - state controlled companies 427,856 426,431 Total undrawn loan commitments 890,631 3,425,063 670,467 1,921,541 Guarantees given: - parent 1,899 1,737 - entities with joint control 352,989 38,513 - unconsolidated subsidiaries and associates 26,461 - - state controlled companies 3,379 13,386 - key management personnel 950 950 Total guarantees given 385,678 623,103 54,586 181,182 Allowances for impairment losses, guarantees given (4,097) (8,269) (909) (2,366) Letters of credit: - parent 40,376 14,227 - entities with joint control 149,418 100,365 - unconsolidated subsidiaries and associates 5,450 1,754 - state controlled companies 44,739 28,537 Total letters of credit 239,983 445,985 144,883 261,165 Allowances for impairment losses, letters of credit (2,745) (7,128) (908) (3,292) Fiduciary activities - key management personnel 268,054 46,135 Total fiduciary activities 268,054 1,840,284 46,135 2,599,255

|132| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

Also, as of 31 December 2006 the Group had USD 527,013 thousand (31 December 2005 – USD 554,278 thousand) of loans extended to third parties on transactions executed on behalf of related parties of the Group.

31 December 2006 31 December 2005 Related party Total category Related party Total category transactions as per financial transactions as per financial statements statements caption caption

Interest income, loans to customers: - parent 959 28 - entities with joint control 61,007 68,564 - unconsolidated subsidiaries and associates 24,314 38,012 - state controlled companies 72,146 55,856 Total interest income, loans to customers 158,426 935,398 162,460 589,804 S

T Interest income, due from credit institution:

N - unconsolidated subsidiaries and associates – 1,720 E - state controlled companies 50,629 48 M Total interest income, E

T due from credit institutions 50,629 217,658 1,768 88,554

A Petrochemical business operating revenues T

S - entities with joint control 134,920 –

L - state controlled companies 32,320 –

A Total petrochemical business I operating revenues 167,240 4,493,632 – – C

N Media business operating revenues

A - parent 13,754 2,861 N

I - entities with joint control 334 442 F

- unconsolidated subsidiaries and associates 138 –

D - state controlled companies 6,482 – E Total media business operating revenues 20,708 883,151 3,303 359,599 T

A Dealing profits/(losses), net

D - entities with joint control 20,719 – I

L - key management personnel (20,013) (45,896)

O Total dealing (losses)/profits, net 706 494,624 (45,896) 503,335 S Fees and commissions income: N - parent 17,883 10,898 O

C - entities with joint control 32,562 70,286 - unconsolidated subsidiaries and associates 1,306 5,192 - state controlled companies 8,468 1,480 Total fees and commissions income 60,219 278,716 87,856 168,069 Dividend income: - parent 9,463 25,380 - entities with joint control 4,497 1,012 - unconsolidated subsidiaries and associates 313 5,551 - state controlled companies 3,344 4,484 Total dividend income 17,617 21,415 36,427 38,958

|133| GAZPROMBANK GROUP | Annual report | 2006

31 December 2006 31 December 2005 Related party Total category Related party Total category transactions as per financial transactions as per financial statements statements caption caption

Interest expense, amounts owed to customers: - parent 68,280 34,688 - entities with joint control 40,091 12,434 - unconsolidated subsidiaries and associates 2,067 1,166 - state controlled companies 6,488 10,943 Total interest expense, amounts owed to customers 116,926 304,948 59,231 188,211 Petrochemical business operating expenses - parent 184,230 – - entities with joint control 249,902 – - state controlled companies 723,983 – Total petrochemical business operating expenses 1,158,115 3,476,145 –– Media business operating expenses - entities with joint control 2,891 155 - unconsolidated subsidiaries and associates 1,813 – - state controlled companies 28,024 – Total media business operating expenses 32,728 685,150 155 279,869 Salaries and employment benefits - short-term employee benefits 83,153 111,281 Total salaries and employment benefits 83,153 403,325 111,281 297,262

For pricing considerations of related party transactions see Note 1(c).

NOTE 33 – FINANCIAL COMMITMENTS AND CONTINGENCIES a) Credit related financial commitments

The credit related financial commitments as of 31 December 2006 and 2005 comprise:

31 December 31 December 2006 2005

Undrawn loan commitments 3,425,063 1,921,541 Guarantees given 623,103 181,182 Letters of credit 445,985 261,165 4,494,151 2,363,888

|134| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

The Group’s management evaluated the likelihood of probable losses arising from credit related commitments and concluded that a provision of USD 15,397 thousand was necessary as of 31 December 2006 (31 December 2005 – USD 5,658 thousand) (see Note 26).

As of 31 December 2006 USD 138,878 thousand (31 December 2005 – USD 85,289 thousand) of letters of credit was covered by customers’ funds (see Note 24).

b) Operating lease obligations

In the normal course of business, the Group enters into operating lease agreements for office equipment and branch facilities. Future minimum payments under non-cancelable operating leases are as follows:

S 31 December 31 December T 2006 2005 N E Not later than 1 year 5,371 2,833 M

E Later than 1 year and not later than 5 years 10,285 7,287 T Later than 5 years 18,676 7,774 A

T 34,332 17,894 S

L A I C

N c) Fiduciary activities A N I In the normal course of its business the Group enters into agreements with clients to F manage their assets with limited right on decision making in accordance with specific D criteria established by clients. The Group may be liable for losses or actions aimed at E

T appropriation of the clients’ funds until such funds or securities are not returned to A the client. The maximum potential financial risk of the Group at any given moment is D I equal to the volume of the clients’ funds and securities plus/minus any unrealized L

O gain/loss on the clients’ position. In the judgment of management, as of 31 December 2006

S and 2005 the maximum potential financial risk on funds accepted by the Group on N behalf of its clients does not exceed USD 684,171 thousand and O

C USD 190,179 thousand, respectively. As of the above dates the maximum potential financial risk on securities accepted by the Group on behalf of its clients does not exceed USD 1,156,113 thousand and USD 2,409,076 thousand, respectively. Assets accepted and liabilities incurred under the trustee and depository activities are not included in the Group’s financial statements.

d) Capital commitments

In the normal course of business, the Group enters into various contracts for purchase of programming rights, property and equipment, construction and repair works of the Group’s buildings, with suppliers of consulting systems and other services. As of 31 December 2006 and 2005 the future contracted liabilities with respect to these contracts were budgeted by the Group as follows:

|135| GAZPROMBANK GROUP | Annual report | 2006

31 December 31 December 2006 2005

Programming rights 55,596 82,983 Property, plant and equipment 1,855,223 393,814 1,910,819 476,797 e) Environmental matters

The enforcement of environmental regulation in the Russian Federation is evolving and the enforcement posture of government authorities is continually being recon- sidered. The Group (the petrochemicals and tires business segment as affected by environmental regulation) periodically evaluates its obligations under environmental regulations. As obligations are determined, they are recognized immediately. Potential liabilities, which might arise as a result of changes in existing regulations, civil litigation or legislation, cannot be reasonably estimated. Under the current levels of enforcement of existing legislation, Management believes that there are no probable liabilities for environmental damage, which would have a materially adverse effect on the financial position or the operating results of the Group. f) Social commitments

The Group (the petrochemicals and tires business segment as affected by social commitments) contributes to the maintenance and upkeep of the local infrastructure and the welfare of its employees in the areas of its production operations, including contributions towards the construction, development and maintenance of housing, hospitals, transportation services, recreation and other social needs. Such funding is expensed as incurred. g) Legal

In the ordinary course of business, the Group is subject to legal actions and complaints. Management believes that the ultimate liability, if any, arising from such actions or complaints will not have a material adverse effect on the financial condi- tion or the results of future operations of the Group. As of 31 December 2006 the Group’s estimated probable losses in conjunction with the lawsuits in action were USD 5,400 thousand included in provisions for other risks (31 December 2005 – USD 3,561 thousand).

In the ordinary course of business, the Group is subject to legal actions and complaints. As of 31 December 2006 the contingent liability, if any, arising from such actions or complaints will not exceed USD 34 million. Management believes that such ultimate liability will not have a material adverse effect on the financial condi- tion or the results of future operations of the Group.

|136| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

h) Insurance

The Bank has obtained an international comprehensive banking risk insurance policy (“BBB” – Bankers Blanket Bond) covering professional activities and crimes, including electronic and computer crimes. The amount of total insurance indemni- ty is limited to USD 5,000 thousand. However, the Group does not have full insurance coverage. There is a risk that, until it obtains adequate coverage, the loss or destruction of certain assets could have a material adverse effect on the Group’s operations and its financial position.

i) Operating environment

S The economic conditions in the Russian Federation are characterized by the real T GDP growth of around 7%, slowly declining inflation, budget and current account N

E surpluses, the significant fall of external debt down to the comfortable level of under

M 11% of GDP and rising foreign exchange reserves. The use of substantial oil rev- E enues to repay external debt and build up a stabilization fund will help to safeguard T

A the public finances in the event of a possible drop in the oil prices. The improved sit- T

S uation was acknowledged in January 2005, when Standard & Poor’s became the last

L of the major international rating agencies to award Russia investment grade credit A

I rating. C

N However, operations in Russia still involve risks that are not typical for developed A economies. Significant concerns remain that the government is moving too slowly in N I reforming the economy and legal institutions. The economy’s dependence on the oil F and gas sector has been increased by the high export prices of hydrocarbons in D

E recent years. In the longer term, the economic stability is dependent on the pace of

T reforms to boost the real sector of the Russian economy. An acceleration of the A structural reforms, including support for small and medium-sized businesses, fur- D I ther development of the banking sector and financial market, and administrative L

O reform should improve the long-term growth prospects of Russia. S N

O j) Taxation C The Russian Federation currently has a number of laws related to various taxes imposed by both federal and regional governmental authorities. Applicable taxes include value added tax, income tax, and social tax. Implementing regulations are often unclear or contradictory and few precedents have been established. Often, dif- fering opinions regarding legal interpretation exist both among and within government ministries and organizations (like the Ministry of Taxes and Levies and its various inspectorates); thus creating uncertainties and areas of conflict. Tax declarations, together with other legal compliance areas (for example, customs and currency control matters) are subject to investigation by a number of authorities, which are enabled by law to impose extremely severe fines, penalties and interest charges. These facts create tax risks in the Russian Federation substantially more significant than typically found in countries with more developed tax systems. Management believes that the Group is in substantial compliance with the tax laws affecting its operations.

|137| GAZPROMBANK GROUP | Annual report | 2006

NOTE 34 – CAPITAL ADEQUACY

The Central Bank of the Russian Federation requires banks to maintain a statutory capital adequacy ratio of 10% of risk-weighted assets, computed based on RAL. As of 31 December 2006 and 2005 the Bank’s statutory capital adequacy ratio calculated on this basis exceeded the statutory minimum and amounted to 15.2% and 11.2%, accordingly.

The Group also meets international standards with respect to capital adequacy, which recom- mend the minimum ratio of 8% set by the Basel Accord. The table below sets forth the Group’s capital adequacy as at 31 December 2006 and 2005, calculated in accordance with Basel I Guidelines. 31 December 31 December 2006 2005

Paid in share capital 1,160,857 907,057 Share premium 1,061,899 – Applicable reserves less goodwill 3,013,323 861,935 Minority interest 794,726 595,296 Tier I Capital 6,030,805 2,364,288 Tier II Capital 542,267 666,898 Total Capital 6,573,072 3,031,186 Adjustments to Tier II Capital (72,467) (105,045) Net available capital 6,500,605 2,926,141 Risk weighted assets 24,190,677 15,968,694

CAPITAL ADEQUACY RATIOS: Tier I ratio 24.9% 14.8% Total capital ratio 26.9% 18.3%

Capital adequacy ratios calculated in accordance with Basel I Guidelines for the banking segment of the Group are as follows: 31 December 31 December 2006 2005

Tier I ratio 21.7% 14.0% Total capital ratio 23.9% 17.3%

NOTE 35 – SUBSEQUENT EVENTS

Share capital

In April 2007 the subsidiary of the Group – OOO “Novye Finansovye Technologii” sold 13,332 shares of the Bank (0.07% of the Bank’s total stock) to NPF “Gazfond” which brought the cumulative share of NPF “Gazfond” in the Group’s stock to 50% plus 1 share.

In June 2007 the general shareholders meeting of the Bank approved a dividend payout for the year 2006 in the amount of USD 80,734 thousand.

In June 2007 the general shareholders meeting of the Bank approved the decision of the Council of the Bank to change the legal form of the Bank to an open joint-stock company. |138| GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

Acquisitions and disposals of assets

In October 2006 the Management Board approved the purchase of 100% interest in OAO “CreditUralBank” from third parties for USD 103,798 thousand. The transaction was finalized in March 2007.

In March 2007 the joint venture OOO “National Polymers” formed by the Sibur Holding Group (“SHG”) and OAO “Lukoil-Neftekhim” acquired a 50% plus 1 share interest in OAO “Polief” (terephthalic acid and mylar producer based in the Bashkortostan Republic) for USD 80 million (RUR 2,085 million). The acquisition was financed by the loan facility provided by the joint venture participants.

In June 2007 the Group has disposed of its 10% interest in OAO “Mosenergo” for USD 658,779 thousand.

T In June 2007 a subsidiary bank of the Group “Sovfintrade” (“SFT”) completed additional N share issue in amount of USD 43,439 thousand, 100% of which was acquired by E the Group. As a result the Group has increased its share in SFT to 72.27%. M E T A

T Joint ventures S

L In December 2006, the SHG signed an agreement with “TNK-BP” to form a joint venture A

I in the Tyumen region to process associated petroleum gas. In March 2007 the SHG

C financed its 51% share in the joint venture by contributing its 99.99% interest in its con- N

A solidated subsidiaries “Nizhnevartovskiy GPK”, “Belozerniy GPK” and “Truboprovodnaya

N Company”. “TNK-BP” financed its share by contributing USD 88 million in cash. I F In February 2007 the SHG also signed a framework agreement with OAO “Novatek” to form a joint D

E venture for production of polypropylene and its derivative products based on production assets of

T the SHG subsidiary “Tobolsk-Polimer”. Under this agreement OAO “Novatek” will supply raw mate- A

D rials and capital investments. The start of joint venture activity is planned for not earlier than 2010. I L O

S Borrowings N

O In February 2007 the Group placed internationally a Ruble-denominated loan participation C notes (LPN) issue in the nominal amount of 10 billion Rubles (USD 377,643 thousand). The Ruble annual interest rate is 7.25% while the maturity of the issue is 3 years.

In March 2007 the Group placed a 3-year Dollar-denominated Eurobond (LPN-structured) issue in the nominal amount of USD 700,000 thousand with a floating rate of 3-month LIBOR plus 0.9%.

Other events

In April-June 2007 the Group’s amounts owed to customers increased by over USD 31.7 billion due to significant inflows made to the current account of the Russian oil company “Yukos” with the Bank relating to a series of auction sales of Yukos’ assets. The amounts represent auction deposits of the participants and proceeds from auctions. These funds are placed by the Group primarily on deposit accounts with the Central Bank of the Russian Federation.

In June 2007 the general shareholders meeting approved two additional members of the Council of the Bank representing NPF “Gazfond” and ZAO “Leader”. This increased the total number of seats in the Council of the Bank from nine to eleven. |139| REFERENCE INFORMATION GAZPROMBANK GROUP | Reference Information | 2006

BRANCHES AND REPRESENTATIVE OFFICES

Astrakhan Izhevsk 12–2 Proyezd Vorobyova, Astrakhan, 182 Votkinskoye Shosse st., Izhevsk, 414057 Russia Republic of Udmurtia, 426039 Russia S

E Tel. +7 8512 339459 Tel. +7 3412 750563

C Head of the branch: Head of the branch:

I Gennady N. Sagunov Vyacheslav A.Vasilyev F

F Barnaul Irkutsk O

20 Severo-Zapadnaya st., Barnaul, 41 Sverdlova st., Irkutsk, 664011 Russia

E 656037 Russia Tel. +7 3952 283182

V Tel. +7 3852 361267 Head of the branch: I Head of the branch: Yuri V. Gorshkov T Ludmila M. Kulpina A

T Kemerovo

N Beloyarsky 3 Sobornaya st., Zavodskoi District,

E 7a Molodosti st., Beloyarsky, Tyumen Kemerovo, 650004 Russia

S Region, 628161 Russia Tel. +7 3842 345090

E Tel. +7 34670 22177 Head of the branch:

R Head of the branch: Nelly D. Morozenko P Lyubov G. Dorokhova E Kostroma R

Bryansk 8a Sovetskaya st., Kostroma,

D 4 Partizan Square, Bryansk, 156000 Russia

N 241011 Russia Tel. +7 4942 490900

A Tel. +7 4832 745917 Deputy Head of the branch: Head of the branch: Sergei A. Voskresensky S Naum S. Khenkin E Krasnodar H Volgograd 36 Dzerzhinskogo st., Krasnodar, C 34a Kozlovskaya st., Volgograd, 350051 Russia N 400074 Russia Tel. +7 8612 103440 A

R Tel. +7 8442 930005 Head of the branch:

B Head of the branch: Vladislav D. Tsyganesh Larisa S. Turetskaya Krasnoyarsk Yekaterinburg 87B Akademika Kirenskogo st., Krasno- 55A Radishcheva st. Yekaterinburg, yarsk, 660041 Russia 620086 Russia Tel. +7 3912 745800 Tel. +7 3432 121601 Head of the branch: Head of the branch: Pavel G. Avdeev Anatoliy S. Shakhov

|141| GAZPROMBANK GROUP | Annual report | 2006

Lipetsk Orenburg 49a Gagarina st., Lipetsk, 18 Pravdy st., Orenburg, 460000 Russia 398002 Russia Tel. +7 3532 733071 Tel. +7 4742 420101 Head of the branch: Head of the branch: Yelena S. Varnavskaya Svetlana V. Yefanova Perm Makhachkala 54 Kommunisticheskaya st., Perm, 24 Yermoshkina st., Makhachkala, Repub- 614000 Russia lic of Daghestan, 367025 Russia Tel. +7 3422 375660 Tel. +7 8722 675329 Head of the branch: Rostov-on-Don Abdulatip M. Saypulaev 20 Prospekt Voroshilovskiy st., Rostov-on-Don, 344006 Russia Nadym Tel.: +7 8632 497760 53 Orudzheva Naberezhnaya st., Nadym, Head of the branch: Tyumen Region, Yamalo-Nenets Tatyana Y. Malakhova Autonomous District, 629736 Russia Tel. +7 34995 20020 Samara Head of the branch: 191 Galaktionovskaya st., 191 and 190 Olga V. Samokhvalova Samarskaya st., Leninsky District, Sama- ra, 443001 Russia Nizhny Novgorod Tel. +7 846 337-4849 3/5 Piskunova st., Nizhny Novgorod, Head of the branch: 603005 Russia Ivan M. Babushkin Tel. +7 8312 333637 Head of the branch: Saint Petersburg Tamara A. Zhukova 15 Sedova st., Saint Petersburg, 192148 Russia Novosibirsk Tel. +7 812 740-5373 2 Kavaleristskaya st., Novosibirsk, Head of the branch: 630132 Russia Olga V. Dragomiretskaya Tel. +7 3832 202800 Head of the branch: Saratov Namzhil N. Urbanayev 41 Gorkogo st., Saratov, 410012 Russia Novy Urengoy Tel. +7 8452 442402 4 26 Syezda KPSS st., Novy Urengoy, Tyu- Head of the branch: men Region, 629300 Russia Viktor I. Sverchkov Tel. +7 34949 45595 Head of the branch: Stavropol Larisa G. Khomyakova 419-2 Lenina st., Stavropol, 355012 Russia Omsk Tel. +7 8652 566783 2 Magistralnaya st., Omsk, Head of the branch: 644088 Russia Valeriy V. Kostyukov Tel. +7 3812 655869 Head of the branch: Yelena P. Kholopova

|142| GAZPROMBANK GROUP | Reference Information | 2006

Tomsk Schelkovo 52E Pushkina st., Tomsk, 1-1a Proletarsky Prospekt st., Schelkovo, 634006 Russia Moscow Region, 141100 Russia Tel. +7 3822 791027 Tel. +7 256 70849 Head of the branch: Head of the branch: Vladimir A. Gaga Tatyana I. Romanenko

Tula Yugorsk 106 Prospekt Lenina st., Tula, 31 Lenina st., Yugorsk, Sovetskiy District, S 300026 Russia Tyumen Region, 628260 Russia E Tel. +7 4872 333529 Tel. +7 34675 20475 C

I Head of the branch: Head of the branch:

F Valeriy V. Kuznetsov Nadezhda V. Dovgomelya F

O Tyumen Representative Office in Kazan

62 Respubliki st., Tyumen, 64 Moskovskaya st., Kazan, Republic of E

V 625000 Russia Tatarstan, 420021 Russia

I Tel. +7 3452 465191 Tel. +7 8432 923061 T Head of the branch: Director: A Vladimir A. Davydov Tatyana S. Ryabova T N Ufa Representative Office in Beijing, China E

S 138 Mendeleyeva st., Ufa, Republic of 1801, Tower D, Central International

E Bashkortostan, 450022 Russia Trade Centre, 6A, Jianguomenwai Dajie,

R Tel. +7 3472 566780 Beijing, 100022 China

P Head of the branch: Tel. +86 10 65630516

E Anatoliy I. Arkhipov Head of the office:

R Alexander I. Kobin

Ukhta D 25 30-let Oktyabrya st., Ukhta, Republic N of Komi, 169400 Russia A

Tel. +7 82147 47134 S

E Tchaikovsky H 30 Primorsky Bulvar st., Tchaikovsky, C Perm Region, 617760 Russia N Tel. +7 34241 64651 A Head of the branch: R Galsina V. Sozinova B

Chelyabinsk 11B Kalinina st., Chelyabinsk, 454084 Russia Tel. +7 3512 689190 Head of the branch: Igor R. Kamenskikh

|143| GAZPROMBANK GROUP | Annual report | 2006

SUBSIDIARY BANKS

Bank %

Belgazprombank, Joint Belorussian-Russian Open Joint-Stock Company 60/2 Pritytskogo st., Minsk, 220121 Belarus Chairman: Victor D. Babariko Gazprombank’s shareholding 33.91 OAO “Gazprom”'s shareholding 67.82

Credit Ural Bank Open Joint-Stock Company 17 Gagarina st., Magnitogorsk, Chelyabinsk Region, 455044 Russia Chairman: Alexander E. Grabovsky Gazprombank’s shareholding 100.00

SEVERGAZBANK, Open Joint-Stock Company Commercial Bank for the Development of the Gas Industry in the North 3 Blagoveschenskaya st., Vologda, 160001 Russia Chairman: Alexei V. Zhelezov Gazprombank Group shareholding 98.30

Sibirgazbank Commercial Joint-Stock Bank Closed Joint-Stock Company 1/1 Universitetskaya st., 628400 Surgut, Tyumen Region Chairman: Vladislav V. Novikov-Lavrov Gazprombank Group shareholding 92.74

Sovfintrade Commercial Joint-Stock Bank Closed Joint-Stock Company 14/16 Marksistskaya, st., bld. 1, Moscow, 109147 Russia Chairman: Valery A. Seregin Gazprombank’s shareholding 60.74

|144| GAZPROMBANK GROUP | Reference Information | 2006

LICENSES, PERMITS, CERTIFICATES

I General License of the Bank of Russia No. 354, registration renewed 13 November 2001.

I Authorized Bank of Gazprom for settlement and cashier’s services, lending operations and other services to enterprises and organizations of the gas industry.

I Certificate of participation in the Mandatory Deposit Insurance System No. 629 of 10 February 2005.

S I Certificate of membership in the Professional Association of Registrars, Transfer

E Agents and Depositories (PARTAD) of 29 September 1994. T

A I Principal Member Status in VISA International and Europay International. C

I I Licenses of the Federal Commission on Securities: F I for professional dealing activities No. 177-04280-010000 of I

T 27 December 2000; R I for professional brokerage activities No. 177-04229-100000 of E 27 December 2000; C

, I for securities operations No. 177-04329-001000 of 27 December 2000; S I for specialized depositary services to investment funds, unit trusts and T

I non-government pension funds No. 22-000-0-00021 of 13 December 2000;

M I for depositary services No. 177-04464-000100 of 10 January 2001. R I License of the Commission on Commodity Exchanges under the Federal Financial E

P Markets Service for futures and option transactions at stock exchanges No. 811 of 27 February 2006. , S I General licenses of the Ministry of Economic Development and Trade of E the Russian Federation: S

N I for the export of gold – No. LG 0270605507090 of 26 June 2006; E I for the export of silver – No. LG 0270605507091 of 26 June 2006. C I I Certificate of special registration by the Russian State Assay Office of the Ministry L of Finance of the Russian Federation (operations with precious metals and precious stones) No. 0160000099 of 15 October 2003.

I Notification No. 3 of the Federal Customs Service dated 1 May 2007, certifying that JSB Gazprombank (CJSC) is included in the Registry of banks and other credit institutions authorized to act as guarantors before customs authorities.

I Certificate of registration in the Unified State Register of Legal Entities No. 1027700167110, issued by the Ministry for Taxes and Levies of the Russian Federation on 28 August 2002.

|145| GAZPROMBANK GROUP | Annual report | 2006

CONTACT DETAILS

Full name: Joint-Stock Bank of the Gas Industry Gazprombank (Closed Joint-Stock Company) Short name: JSB Gazprombank (CJSC) Incorporated on: 31 July 1990 Mailing (legal) address: 16 Nametkina st., bld. 1, 117420 Moscow Head office location: 63 Novocheremushkinskaya st., Moscow 16 Raushskaya Naberezhnaya st., Moscow Telephone: +7 495 913-7474 Fax: +7 495 913-7319 Telex: 412027 GAZ RU Web-site: www.gazprombank.ru E-mail: [email protected] SWIFT Code: GAZPRUMM Reuters Dealing Code: GZPM Correspondent account: 30101810200000000823 at OPERU of the Bank of Russia’s Main Department for Moscow INN (Taxpayer Identification Number): 7744001497 KPP: 775001001 BIC (Bank Identification Code): 044525823 OKPO: 09807684 OKVED: 65.12

|146|