ABH Financial Limited Consolidated Financial Statements 31 December 2003 ABH Financial Limited Consolidated Financial Statements Contents Auditors’ Report Consolidated Balance Sheet ..........................................................................................................................................1 Consolidated Statement of Income................................................................................................................................2 Consolidated Statement of Cash Flows.........................................................................................................................3 Consolidated Statement of Changes in Shareholders’ Equity .......................................................................................4 Notes to the Consolidated Financial Statements 1 Principal Activities of ABH Financial Limited..................................................................................................5 2 Operating Environment of the Group.................................................................................................................5 3 Basis of Preparation ...........................................................................................................................................6 4 Significant Accounting Policies.........................................................................................................................8 5 Cash and Cash Equivalents ..............................................................................................................................14 6 Trading Securities ............................................................................................................................................14 7 Due from Other Banks .....................................................................................................................................15 8 Loans and Advances to Customers ..................................................................................................................16 9 Investments ......................................................................................................................................................17 10 Other Assets and Receivables ..........................................................................................................................18 11 Premises and Equipment..................................................................................................................................19 12 Due to Other Banks..........................................................................................................................................20 13 Customer Accounts ..........................................................................................................................................20 14 Other Borrowed Funds.....................................................................................................................................21 15 Other Liabilities and Payables..........................................................................................................................22 16 Share Capital....................................................................................................................................................22 17 Interest Income and Expense............................................................................................................................23 18 Fee and Commission Income and Expense......................................................................................................23 19 Other Operating Income...................................................................................................................................24 20 Operating Expenses..........................................................................................................................................24 21 Income Taxes ...................................................................................................................................................25 22 Analysis by Segment........................................................................................................................................26 23 Financial Risk Management.............................................................................................................................30 24 Contingencies, Commitments and Derivative Financial Instruments ..............................................................35 25 Fair Value of Financial Instruments.................................................................................................................40 26 Related Party Transactions...............................................................................................................................40 27 Principal Consolidated Subsidiaries.................................................................................................................43 28 Subsequent Events ...........................................................................................................................................43 ZAO PricewaterhouseCoopers Audit Kosmodamianskaya Nab. 52, Bld. 5 115054 Moscow Russia Telephone +7 (095) 967 6000 Facsimile +7 (095) 967 6001 AUDITORS’ REPORT To the Shareholders and Board of Directors of ABH Financial Limited: 1 We have audited the accompanying consolidated balance sheet of ABH Financial Limited and its subsidiaries (the “Group” as defined in Note 1 to the consolidated financial statements) as at 31 December 2003, and the related consolidated statements of income, of cash flows and of changes in shareholders’ equity for the year then ended. These consolidated financial statements are the responsibility of the Group’s Management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. 2 We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by Management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. 3 In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Group as at 31 December 2003 and the consolidated results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Moscow, Russian Federation 20 April 2004 The firm is an authorized licensee of the tradename and logo of PricewaterhouseCoopers. ABH Financial Limited Consolidated Balance Sheet as at 31 December 2003 (expressed in thousands of US dollars - Note 3) Note 2003 2002 Assets Cash and cash equivalents 5 923 191 382 234 Mandatory cash balances with the Central Bank of the Russian Federation and other local central banks 293 294 214 252 Trading securities 6 694 575 416 238 Due from other banks 7 131 621 211 342 Loans and advances to customers 8 3 440 680 2 440 366 Investments 9 65 443 95 776 Other assets and receivables 10 185 609 222 054 Premises and equipment 11 149 721 135 928 Total assets 5 884 134 4 118 190 Liabilities Due to other banks 12 796 301 672 120 Customer accounts 13 3 400 406 1 997 416 Promissory notes issued 594 940 644 976 Other borrowed funds 14 323 917 212 684 Other liabilities and payables 15 201 517 146 011 Deferred tax liability 21 13 448 10 312 Total liabilities 5 330 529 3 683 519 Minority interest 6 635 3 485 Shareholders’ equity Share capital 16 160 800 160 800 Fair value reserve for investments available for sale 9 22 798 62 657 Revaluation reserve for premises and equipment 11 5 195 6 267 Retained earnings 358 177 201 462 Total shareholders’ equity 546 970 431 186 Total liabilities and shareholders’ equity 5 884 134 4 118 190 Approved for issue by the Board of Directors and signed on its behalf on 20 April 2004 ________________________ ________________________ Mr. Oleg Tumanov Mr. Teijo Pankko Deputy Chief Executive Officer Chief Financial Officer The notes set out on pages 5 to 43 form an integral part of these consolidated financial statements. 1 ABH Financial Limited Consolidated Statement of Income for the Year Ended 31 December 2003 (expressed in thousands of US dollars - Note 3) Note 2003 2002 Interest income 17 477 475 367 125 Interest expense 17 (242 490) (177 132) Net interest income 234 985 189 993 Provision for loan impairment 7, 8 (42 069) (38 021) Net interest income after provision for loan impairment 192 916 151 972 Fee and commission income 18 135 818 91 300 Fee and commission expense 18 (41 150) (39 800) Gains less losses arising from trading securities 18 987 19 742 Gains less losses arising from investments available for sale 9 31 054 43 684 Gains less losses arising from trading in foreign currencies 38 908 26 638 Foreign exchange translation gains less losses (15 968) 854 Other provisions 9, 10, 24 (4 450) (3 978) Other operating income 19 65 244 46 150 Operating income 421 359 336 562 Operating expenses 20 (305