Gazprombank Group ANNUAL REPORT · 2018. 8. 12. · Further development of partnership with OAO “Gazprom”: signing new coopera-tion agreement for the period through 2015 (January

Gazprombank GroupANNUAL REPORT

2006

( I F R S )

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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GAZPROMBANK GROUP | Annual report | 2006

CONTENTS

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

Licenses, permits, certificates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

Contact details . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

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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 thepast 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’sassets 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 corporateloan 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 andimproved its international standing. A high level of trust is reflected in investmentgrade 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 centeredaround major government-owned and private companies. ОАО “Gazprom” has tradi-tionally been our top-priority client, and the Bank considers the support of Gazprom’soperations and participation in its large-scale investment projects to be a very impor-tant and prestigious mission. We see it as our contribution to strengthening the ener-gy basis of the Russian economy and a vital mission for ensuring global energy secu-rity. In January 2007, Gazprombank and Gazprom signed a cooperation agreementfor the period through 2015 providing for further development of our close partner-ship.

The Bank’s solid and well-balanced funding base guarantees continued expansion ofproducts and services offered to our corporate and retail clients. Gazprombank active-ly develops investment banking. Today the Bank is the leading underwriter and anorganizer 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 con-sumer 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 anotherimportant landmark for the Bank. The new issue boosted the Bank’s share capital by28%, while the Group’s equity more than doubled to USD 6.65 billion. In addition toGazprom the Bank acquired another major shareholder – the leading Russian Non-State Pension Fund “GAZFOND”. A new inflow of cash generated by anadditional stock placement will be invested in the regional network development pro-gram, the retail and investment banking businesses and the introduction of new prod-ucts for corporate customers from various sectors of the economy.

Gazprombank is a commercial enterprise pursuing its own business purposes. Yet,the Bank recognizes its commitment to fulfilling social responsibilities focusing onsponsorship and charity and providing support to orphanages and boarding schools,educational, research and cultural institutions, the church and sports organizations.Moreover, we fully understand that business itself is an important factor of socialdevelopment and has a direct impact on employment, public welfare and health, envi-ronmental protection, and other important aspects of social life. We strive to considerall aspects of this influence in our daily operations and are ready to assist Russianfinancial institutions in adapting international standards in the area of corporatesocial responsibility to their practices.

I am grateful to our shareholders, clients and business partners for cooperation.Please, be assured, that in the future the Bank will do its best to further strengthenand develop our relationship to the mutual satisfaction of all participants and to thebenefit of the country.

Chairman of the Management BoardGazprombank

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Andrey I. Akimov

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 broadrange of banking, financial, and investment products to corporate and individual cus-tomers, credit institutions and institutional and private investors.

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

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

n Gazprombank’s two principal shareholders are OAO “Gazprom”, the largestproducer 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 sharesof ZAO “Leader”, a “Gazfond”'s asset management company).

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

n Gazprombank is the 3rd largest bank in Russia by key indices; the 3rd largestbanking institution in Central and Eastern Europe (2006); and the 137th

largest bank in the world in terms of capital (2006).

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

n Long-term ratings from the international rating agencies at the investmentgrade:

n Moody’s Investors Service:

n Foreign currency deposit rating – Baa2;n Debt rating – A3.

n Standard & Poor’s:

n Counterparty credit rating – BBB-;n Debt rating – BBB-.

n Gazprombank’s customer base includes:

n Individual customers – over 1.8 million;n Corporate customers – over 40,000.

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

n Gazprombank’s workforce is around 6,000.

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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

n Placement of additional 6.7 million shares at RUR 1,000 each, purchased by thenew shareholder NPF “Gazfond” (December 2006). Issued share capital totaled19,997,777 ordinary shares as of 31 December 2006.

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

n International ratings upgraded to an investment grade.

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

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

n 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).

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

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

n 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 2002y-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

Loans to customers, net 11,584 57% 7,401 5,030 3,133 2,370

Including loans to individual customers 1,684 166% 634 187 85 72

Amounts owed to customers 11,447 59% 7,217 5,008 3,321 2,590

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

Net profit 1,558 184% 548 392 194 116

Efficiency indicators (%)

Return on average assets (ROAA) 6.3 3.8 4.5 3.3 2.7

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

Capital adequacy ratio (Basel Accord) 26.9 18.3 20.9 19.2 27.5

Cost to Income ratio 69.9 60.2 56.6 45.8 46.0

Net interest margin 3.1 3.1 2.2 3.5 3.4

Staff and branch network

Number of employees1 5,789 14% 5,089 4,857 4,015 3,462

Number of branches 33 3% 32 32 31 31

Number of banking offices 2 490 9% 450 414 270 260

1 Gazprombank’s head office and branches2 Including those in the head office, branches, supplementary offices and cash-desks of Gazprombank and its

subsidiary and affiliated banks

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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%

SHAREHOLDERS

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 ofJSB Gazprombank (CJSC)

Mikhail L. Sereda Deputy Chairman of the Management Board ofOAO “Gazprom”

Members of the Board

Alexander G. Ananenkov Deputy Chairman of the Management Board ofОАО “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 ofOAO “Gazprom”

Alexander I. Medvedev Deputy Chairman of the Management Board of ОАО “Gazprom”

Olga P. Pavlova Member of the Management Board, Head of theDepartment of Asset Management and CorporateRelations of OAO “Gazprom”

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MANAGEMENT BOARD

Chairman of the Management Board

Andrey I. Akimov

Deputy Chairmen of the Management Board

Ilya V. Eliseev

Farid M. Kantserov

Nikolay G. Korenev

Victor B. Korytov

Kirill Yu. Levin

Svetlana E. Maluseva Chief Accountant of the Bank

Alexey A. Matveev

Alexander Yu. Muranov

Alexei A. Obozintsev

Alexander I. Sobol

Pavel V. Utkin

Members of the Management Board

Olga A. Kazanskaya First Vice-President

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

Andrey N. Kravtsov Executive Vice-President

Alexander O. Shmidt First Vice-President

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MANAGEMENT STRUCTURE OF JSB GAZPROMBANK (CJSC)

SHAREHOLDERS' MEETING

EXTERNAL AUDITOR

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(administrative and corporate management)

Deputy Chairman of the Management Board (CFO, depositary services)

First Vice-President (regional business, subsidiary banks)

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

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

Deputy Chairman of the Management Board (Corporate customer lending, IT)

Deputy Chairman of the Management Board (investment banking)

Deputy Chairman of the Management Board - Chief Accountant

Deputy Chairman of the Management Board (legal issues)

First Vice-President (legal issues)

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

Managing Director(investment banking)

Executive Vice-President(investment banking)

Deputy Chairman of the Management Board (internal audit, tender Committee)

Deputy Chairman of the Management Board (security, transportation of valuables)

General management

Monitoring

Members of the Board

THE BOARD OF DIRECTORS

THE MANAGEMENT BOARD

Chairman of the Management Board

THE REVISION COMMISSION

F I N A N S OV Y E V E S T IStandard & Poor’s Upgrades Rating

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Strategic Cooperation

Left to right: Andrey Morozkin, Viktoria Stepanova, Roman Abdulin, Nadezhda Sokolova

Standard & Poor’s raisesGazprombank’s long-termcredit rating to BBB–.

The upgrade means Standard& Poor’s has joined Moody’sInvestors Service in assigningan investment-level rating toGazprombank. The bankreceived a Baa2 from Moody’sat the end of 2005.Gazprombank’s debt ratingsare of investment grade aswell: a BBB– from Standard &Poor’s and an A3 fromMoody’s. It also has one of thehighest ratings for short-termdebt assigned to a Russianbank, an A-3 from Standard &Poor’s.“The rating upgrades are theresult of systematic and effec-tive work on the part of man-agement and staff. In terms ofkey indicators, the bank now

holds leading positions in Russia as well as Central andEastern Europe. The bank hasa solid credit history, goodbrand recognition, a growingstrategic partnership withworld energy leader Gazprom,

diversified business, stableearnings flows and high profit-ability,” First Vice-PresidentRoman Abdulin said.“That is the big reason investorson capital debt markets like ourprojects,” he added.

Year-end 2006 figures shouldplace Gazprombank among the100 largest banks in Europe andamong the 200 biggest banksworldwide. At the end of thatyear, it boosted capital by USD1.3 billion based on the alloca-tion of new stock. Assets, basedon International FinancialReporting Standards, toppedUSD 31.6 billion as of year-end2006, capital exceeded USD6.65 billion and net profit nearlyreached USD 1.6 billion.Gazprombank was the firstRussian organization to placeruble-denominated Eurobonds,with a RUR 10-billion issue inFebruary 2007. Investor interestwas high. Total bids exceededthe initial offer by 70%. Thebonds mature in 2010 and bearcoupons paying 7.25% annual-ly. The bid book was closed atRUR 17 billion.

Gazprombank, Gazprom signcooperation agreement until2015

The cooperation agreement isa critical element in definingthe bank’s long-term develop-ment outlook and in future

operations with investors andclients, particularly givenGazprom’s diminished equitystake in the bank. Since itsfounding, Gazprombank hasworked closely with the gasindustry, and its mission hasbeen to improve the financialservices it offers to Gazpromand other gas industry enter-prises.The agreement reflects 15years of experience asGazprom’s partner, experiencethat enabled the bank to estab-lish competitive advantages inthose banking services relatedto the Gazprom group: in-depth knowledge of the needsof the gas industry, a well-established working relation-ship with Gazprom, a devel-oped banking infrastructurefocused on developingGazprom’s regional business,as well as special products and

programs for servicing theGazprom group of companiesand their employees.The agreement is aimed atwinning qualitatively newpositions in the strategic part-nership with Gazprom, by pen-etrating more deeply into thebusiness of the gas and auxil-iary industries and by perform-ing the roles of financial con-sultant, finance organizer,management company, and atool for consolidating andmanaging assets. The agree-ment creates a stable, long-term platform for developingthe bank’s business. It addressestraditional bank operations –provision of commercial,investment and retail bankingproducts and services – aswell as new forms of innovativecooperation. It provides for thebank’s participation in devel-oping mechanisms to improve

Gazprom’s innovative opera-tions, particularly by expand-ing their forms and sources offinancing for them.Gazprombank views the agree-ment as:- a strategic tool laying out themost promising areas of bilat-eral cooperation- a tactical tool for improvingreturns on joint operations andaccelerating roll-out in prom-ising new areas- a public tool making it possibleto establish effective commu-nications with clients, counter-parties, and partners, toincrease the transparency of itsbusiness, and to reduce therisks associated with opera-tions in capital markets.The guiding principle of theirlong-term cooperation andpartnership is collaboration ona market basis under currentRussian antitrust law.

2007

FF II NN AA NN CC II AA LL NN EE WW SS

Gazfond Acquires50% + 1 Share

G a z f o n d p e n s i o n f u n dacquires 13 ,332 (0 .07%)o r d i n a r y s h a r e s i nG a z p r o m b a n k f r o m OOO NFT

The deal , which totaledRUR 69.1 mil l ion, raisedG a z f o n d ’ s s t a k e i n t h ebank to 50% plus 1 share.The remaining shares areheld by Gazprom (41.73%)and Gazprombank sub-sidiary OOO NFT (8.27%).Gazfond and the bankintend to continue imple-menting joint projects onasset management andimproving client services.

Interest RateCuts

G a z p r o m b a n k l o w e r sm o r t g a g e l e n d i n g r a t e s( in rubles) for exist inghomes to 11.5%

The maximum loan amounthas a lso increased – t oU S D 1 . 5 m i l l i o n f r o m USD 1 mil l ion. The inter-e s t r a t e r e d u c t i o n i sG a z p r o m b a n k ’ s t h i r d i nt h e l a s t n i n e m o n t h s . I treduced rates to 13% from14% in July 2006. I t fur-ther reduced the rate onloans for home purchaseon the secondary marketto 12% annually with loanm a t u r i t y p e r i o d o f 2 0y e a r s , a n d o n A p r i l 1 7 ,2 0 0 7 l o w e r e d t h e m i n i -mum rate on ruble loansto 11.5%.

G a z p r o m b a n k , V i s a I n t e r n a t i o n a l l a u n c h“Your Card, Your Chance.Get your Purchase Free!”campaign.

Consumers who make apurchase with theirGazprombank Visa/VisaElectron cards during thecampaign will get a chanceto win their money back.Three times a week a draw-ing is held to determine thewinning transactions. Oneout of every 100 will be ran-domly selected for reim-bursement. “The promotionaims to show that VisaGazprombank cards areuniversal, up-to-date and –first and foremost – con-venient,” said GazprombankVice-President Sergei Ogurtsov,the head of the Departmentfor bankcards and retailservices.

“In last year’s promotion,over 400 Visa Gazprombankcardholders were reim-bursed for purchases theymade using their cards,”

Ogurtsov said.Presentation of the resultsof the promotion will beheld at Gazprombank’s s i x l a r g e s t a f f i l i a t e s : i n V o l g o g r a d , U k h t a , Novosibirsk, Irkutsk, Omsk

and Saratov. The cardhold-ers with the most transac-tions will be invited to comefor a chance to win otherprizes, including the grandprize: a voucher for travelanywhere worth USD 3,000.

Left to right: Leonid Taratuta, Elena Yermakova, Alexander Loshilov, Alexei Zaykov, SergeiOgurtsov, Oksana Asheulova, Alexander Ulyanov

“Your Card, Your Chance”

Musical offerings to Sviatoslav RichterGazprombank, Gazpromsponsor concert to honorthe late Sviatoslav Richter.The 2007 concert was heldon the legendary pianist’sbirthday in the Great Hallof the Moscow Conserva-tory, the same venuewhere the maestro tradi-tionally performed on hisbirthday for his friendsand students.

The program includedGuiseppe Verdi’s Requiem,one of Richter’s favoritepieces and the only one ofVerdi’s major works notwritten for the opera. It wasperformed by Musica Viva,Musica Aeterna, the NewSiberian Singers choir andthe Moscow State Conserva-tory Chamber Choir, andconducted by Theodor

Kourentzis. Kourentzis is aveteran conductor of themost celebrated orchestrasin Russia: the St. PetersburgP h i l h a r m o n i c , t h e St. Petersburg SymphonyOrchestra, the MariinskyTheater Orchestra, theGelikon-Opera Orchestra,the Russian NationalOrchestra, the Grand Sym-phonic Orchestra and theMoscow Virtuosos Orches-tra, as well as the Sofia Fes-tival Orchestra, the Cleve-land Symphony Orchestraand the Belarusian NationalOpera Symphony Orchestra. “Gazprom and Gazprombankemployees, clients andpartners were enthusiasticabout the concert, organ-ized by the SviatoslavRichter Foundation. It wasa clear demonstration of

the importance of furthersupport for such events.Not to mention, of course,their large, favorableimpact on our corporateimage,” Gazprombank FirstVice-President TatyanaYurlova said.“In fact, creative projectsassociated with the namesof our great compatriots,with Russia’s cultural tradi-tions, get notice both inRussia and abroad,” Yurlovasaid. “Our personal contri-bution to the performanceof Requiem is in theattempt to present the workas the composer wouldwant to hear it,” Kourentzissaid. “Our conception aimsfor an absolutely precisetransmission of the poly-phonic sense of the compo-sition.”

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FINANCIAL PERFORMANCE AND

PROSPECTS

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MACROECONOMIC SITUATION ANDBANKING ENVIRONMENT

Global economy. In 2006, the growth of global economy slowed down to 3.8% against4.3% in the previous year. At the same time, the economies of South-East Asia demonstrated dynamic growth: China’s economic growth exceeded 10%, Indian economygrew by 6.7%. The CIS economies also showed impressive growth rates, with the combined GDP of the former Soviet republics increasing 7.5%.

In 2006, the cost of borrowings was climbing up in international markets, triggered by thegrowth of the interest rate of the U.S. Federal Reserve (5.25% against 4.25%) and of the European Central Bank (3.5% against 2.25%). After 2005, the USD/EUR exchangerate declined 13% to 1.32 as of year-end 2006. In Russia, U.S. dollar depreciated from27.75 to 26.33 RUR/USD year on year.

As of year-end 2006, after three years of sustainable growth, the global stock marketsbecame more volatile (major correction in May, stabilization in mid-summer and growthin autumn), causing the return of many European and U.S. stock indices to their levels ofsome 5–6 years ago. World oil prices peaked at USD 80 per barrel, but dropped to USD 51in early 2007. The price of gold grew 23% over the year, to USD 636 per troy ounce.

Russian economy. In 2006, the role of the government in the economy increased. Despitea stronger trend towards reliance on internal growth drivers, the growth of the Russianeconomy is still largely contingent on a favorable external environment and the situationin world commodity markets. Due to a massive inflow of foreign currency, the internation-al reserves of the Central Bank of the Russian Federation increased 67%, to more thanUSD 303 billion at year-end. Russia was number three in the world (after Japan andChina) in terms of international reserves.

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

Foreign trade grew 29.2% (85% of which contributed by non-CIS countries). Trade surplusincreased 15%. However, in 2006, imports grew faster than exports. Successful liberalization ofcurrency laws is expected to facilitate further integration of Russia into the global trade system.

In 2006, the government adopted a new Debt Strategy focused on minimizing external debtand replacing it with the internal one, which eventually led to a decrease of Russia’s govern-ment external debt by 32% to USD 52 billion as of 31 December 2006 (approximately 5% ofthe national GDP), while government internal debt totaled USD 39 billion at year end.

In 2006, the investment climate in Russia continued to improve, so much so that Stan-dard & Poor’s and Fitch Ratings upgraded their sovereign credit ratings to ВВВ+, twonotches above the minimum investment grade. OECD Council also upgraded Russia’sinvestment 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 tradedsecurities and stock indices. The RTS index broke its historic maximum, rising more than70% – 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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GAZPROMBANK GROUP | Financial Performance and Prospects | 2006

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

Liberalization of the Gazprom stock market in early 2006 was an important marketdriver, merging two separate markets: foreign and domestic. Other important events in2006 include a number of highly successful IPOs (21 IPOs during the year). Rosneft hadthe 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 performancewas 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 con-fidence in banks, growing demand for banking services from corporate and retail clients,increased diversification, more professional and competent management, and the transi-tion to international accounting and financial reporting standards boosted the develop-ment 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, andexcessive capital burden due to accelerated asset growth.

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

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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 highestgrowth – the total retail loan portfolio increased 1.9 times to USD 78 billion.

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

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ASSET STRUCTURE BY SEGMENTSAS OF 31 DECEMBER 2006

Banking

Petrochemical

Media

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 percent-age of banks with foreign capital increased to 153, including 67 banks with foreign par-ticipation in excess of 50%. Banks with foreign capital account for some 12% of assetsand 13% of capital of the Russian banking system.

FINANCIAL PERFORMANCE

The Gazprombank Group primarily consists of Joint-Stock Bank of the Gas Industry Gazprom-bank (CJSC) (parent company), the group of companies owned by OAO “SIBUR Holding” (SIBURHolding Group), the group of companies owned by OAO “Gazprom Media” and ZAO “PRT-1” (Gazprom Media Group), other smaller companies and banks. In 2006, the Groupsuccessfully developed all of its business segments – banking, petrochemical and media businesses.

As a result, the Group achieved significant growth in all key consolidated financials:

n assets grew 75%;

n equity grew 128% (this growth was partly contributed by an additional share issueof Gazprombank);

n net income increased 2.8 times.

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The banking segment demonstrated the highest growth rates, with bankingassets 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 adequacyratio 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%), includingEurobonds, remained the main sources of funding for the Group.

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

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LIABILITIES AND EQUITYAS OF 31 DECEMBER 2006

Amounts owed to customers 36%

Equity 21%

Amounts owed to credit institutions 9%

Eurobonds issued 8%

Certificated debts 17%

Subordinated deposits 2%

Other liabilities 7%

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Loans to customers 37%

Non-banking assets 14%

Due from credit institutions 23%

Trading securities 7%

Cash and due from Central Bank 9%

Available-for-sale investments 8%

Other assets 2%

The efficiency of the Group’s operations is demonstrated by stable margins,diversified sources of income and customer base and operations growth. In2006, the Group reported net profit of USD 1.56 billion, with earnings per shareof USD 111.5 vs. USD 35.2 in 2005.

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

Both operating and net profit of the media business segment increased almost2.5 times. The profit of the petrochemical business contributed almost 50% ofthe Group’s total net profit.

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

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ASSETS AS OF 31 DECEMBER 2006

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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 maintain-ing the Bank’s capital adequacy ratio set by the Central Bank of the RussianFederation. Under the circumstances the Board of Directors adopted a new pro-gram targeting the increase of equity in 2005–2007 and successfully accom-plished its first two stages in the reported year.

The Bank consolidated the minority interests held by its 100% subsidiaryOOO “Novye Finansovye Technologii” and completed an additional place-ment of shares (6.7 million shares). The new shareholding was acquired byNon-State Pension Fund “Gazfond” using pension reserves through its assetmanagement company ZAO “Leader”.

NPF “Gazfond” provides social support to retired gas industry workers and is thelargest Russian non-state pension fund with insurance reserves of approximate-ly 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 anumber of other Gazprombank stock dealings in the secondary market changedthe Bank’s ownership structure, reducing Gazprom’s interest to 41.7%, whileNPF “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 wouldbe a public offering of the Bank’s shares after reorganization into an openJoint-Stock company in 2007. This will allow the shareholders to get a fair mar-ket valuation of their stock that will become a publicly listed market instru-ment and the Bank will be able to further increase its shareholders’ funds tofinance future growth.

F I N A N S OV Y E V E S T IBond. Ruble Bond

№ 2

Agreement with Tekhsnabexport

Left to right: Alexei Kotlov, Igor Rusanov, Alexander Krapotkin, Yegor Pavlov

Gazprombank – first Russianbank to place ruble-denominated three-yearEurobonds totaling RUR10 billion and bearing7.25% annual coupons.ABN AMRO and BarclaysCapital were the leadorganizers.

The success of the Eurobondissue is a clear example of thehigh level of foreign investorconfidence in Gazprombankand is a tribute to the profes-sionalism of the lead agents:ABN AMRO and BarclaysCapital.The bonds received a warmwelcome from investors. Fifty-one bids were received, andthe total subscription exceed-ed the volume of the issue byover 50%. Gazprombank willuse the proceeds to expandits loan portfolio, particularlyby lending to organizationsin fast growing industries:chemicals, petrochemicals,

engineering, food and elec-tricity.It was a deal without prece-dent. The bonds are not onlydenominated in rubles: everytransaction on them, includingcoupon payments, will bemade in rubles.

For the first time foreigninvestors are opening rubleaccounts in international set-tlement systems in order towork with this new instrument.Transactions like these are areal step toward full convert-ibility of the ruble.

Tekhsnabexport, Gazprombankink general agreement on cooperation

The agreement defines themain areas of their coopera-tion, particularly financing forTekhsnabexport’s investmentprograms.Those programs are aimed atboosting exports and expand-ing the market for uraniumproducts, as well as to aug-ment its resource base byinvesting in mining assets andin uranium mining enterprisesin both the CIS and abroad. Inaddition, Gazprombank willprovide consulting on settingup subsidiaries, developingtheir strategy in capital mar-kets and raising capitalization.Working with Gazprombank

will allow Tekhsnabexport todiversify its financing sourcesfor projects to develop nuclearenergy and for the long-termstrategic development of thecompany, as well as optimizingthe current operations of bothorganizations.Gazprombank has been fruit-fully engaged with enterprisesin the nuclear industry since2000, and partnership relationswith Tekhsnabexport havebeen developing since 2002.G a z p r o m b a n k v i e w sTekhsnabexport as a majorclient, a reliable borrower and a partner. In 2006,Gazprombank provided overUSD 1.1 billion in financing toRosatom enterprises. The bank’s credit limit onoperations with Tekhsnabexport

is about USD 350 million withthe possibility of a futureincrease to USD 500 million.G a z p r o m b a n k ’ s c l i e n t sinclude key Rosatom enter-prises: Rosenergoatom, TVEL,Atomstroyexport, as well asprocessing enterprises.T e k h s n a b e x p o r t a n dGazprombank have teamed upon projects to manufactureequipment for Rosatom enter-prises, leasing programs, projects for developing uraniummining enterprises, programs toreplenish working capital at theenterprises and foreign tradefinancing. In addition, the banktogether with Tekhsnabexportand TVEL are participatingdirectly in implementing plansto develop the Uranium MiningCompany.

2007

100 million Dollarsfrom China

Gazprombank, The Export-Import Bank of China in memor-andum of understanding.The memorandum coversfinancing for investment proj-ects in Russia involving theimport of Chinese equipment,technology and associatedservices.

The two banks have nowbegun drafting an agreementon a USD 100-million creditline for Gazprombank, whichmay be increased as funds arespent. The signing of the doc-ument is slated to coincidewith the opening of the Year ofChina in Russia and the Chinese National Exhibitionin Moscow.

Development of cooperationand contacts with Chinesebusiness is a Gazprombankpriority. The bank recentlyopened a representativeoffice in Beijing. It spon-sored the Russian NationalExhibition in November2006, the central event ofthe Year of Russia in China,and underwrote publicationof a Chinese-language ver-sion of a Ministry of Economic Development andTrade Catalogue: “Russianexports: production andtechnology.”The memorandum of under-standing is one more step in realizing Gazprombank’sstrategic mission to developeffective cooperation withChinese governmental andprivate financial institutions.


Gazprombank placeseurobonds totaling USD700 million. The bondsmature in 2010 and bearcoupons paying three-month LIBOR + 0.90%annual rate. DresdnerKleinwort and UBS Invest-ment Bank are the leadagents. The bank will useproceeds from the place-ment to expand its loanportfolio, particularly forlending in fast growingindustries: chemicals,petrochemicals, engineer-ing, food and electricity.

Russian Federal FinancialMarkets Service approvest h r e e - y e a r l i c e n s e f o r G a z p r o m b a n k - A s s e t Management to managesecurities. The move broadens therange of trust managementservices the company canoffer. It can now offer trustmanagement accounts toboth individual and corpo-rate investors.

Razgulyai-Finance placesthird bond issue on MICEXtotaling RUR 3 billion. TheSeries 03 bonds were placedin an open subscription pro-cedure that determined therate of the first coupon.Gazprombank organizedthe issue. A total of 108 bidswere received amounting toover RUR 3.6 billion, withthe annual rate of the firstcoupon ranging from 7.77%to 11.25%. The entire bondissue was sold on the firstday of the placement.

Russky Standart Bankplaces Series 08 rubleb o n d s o n M I C E X .Gazprombank and DeutscheBank organized the place-ment. The entire issue wassold on the first day of theauction. A total of 46 bidsamounting to RUR 7.707 billionwere received, of which 35 bids amounting to RUR 4.852 billion were exe-cuted. The first coupon onthe bonds was set at anannual rate of 8.25% or RUR 41.14 per bond.

Gazprombank named inGlobal Trade Review’s BestDeals of 2006The bank was recognizedfor a project to build afactory to manufacturecorrugated board and cor-rugated packaging inMoscow region’s Dmitrovdistrict.

Gazprombank was able tosecure a EUR 16,925,5776.5-year loan from theCzech Republic’s Komercnibanka a.s., underwritten bythe Czech national exportinsurance agency EGAP.The contractor for the plantconstruction is Czechbuilder UNISTAV a.s.The main challenge of thedeal was that equipmentfor the plant would bemanufactured in a numberof countries: Germany,F r a n c e , S w i t z e r l a n d , A u s t r i a a n d T a i w a n .Gazprombank was able to

agree with the Czech bankand EGAP on a procedurefor reinsuring a portion ofthe risk at the Czech agency.One banking industry analyst said: “Work on this

project laid the basis forfurther development ofcooperation with Czechfinancial institutions inimplementing new, com-plex deals.”

Left to right: Konstantin Limitovsky and Alexei Belous (standing), Alexander Ushkov and MarkPartridge (seated)

Global Deal of the Year

In Keeping with KyotoDresdner Bank, Gazprombankset up joint venture to tradein CO2 emission quotas

The joint venture (JV) willsteer investment towardkey projects to certify car-bon emission quotas underthe Kyoto Protocol, and tobundle them into securi-ties for sale on secondarymarkets.The JV, Luxembourg-reg-istered Carbon Trade &Finance SICAR S.A., wasset up on a parity basis.The European Commissionapproved its creation onDecember 19, 2006. Dresdner Bank is partici-pating in the projectthrough its investmentarm, Dresdner Kleinwort,the leader in Europeantrade in greenhouse gascredits.

The JV, which will not beopen to outside investorsinitially, will operate as anindependent investor.“ D e m a n d f o r n e w , liquid derivatives on the European market in carboncredits is steadily rising,even though the market isalready at record levels,”said Ingo Ramming, thehead of Dresdner’s depart-ment for carbon credittrading. “The new JV willhave the unique opportu-nity to unite DresdnerKleinwort’s cutting-edgeexperience on the carbonq u o t a s m a r k e t w i t hGazprombank's one-of-a-kind experience and influ-ence in ensuring regionalmarket access to theseproducts,” he said. “Themarket in quotas is a com-ponent part of the global

effort to reduce CO2 emis-sions. The new JV is animportant example of therole that financial marketleaders like Dresdner Bankmust play.”“ R u s s i a h a s g r e a t p o t e n -t i a l t o r e a l i z e t h e o p p o r -t u n i t i e s p r e s e n t e d b yt h e K y o t o P r o t o c o l .G a z p r o m b a n k , w i t h i t sb r o a d c l i e n t b a s e i n R u s s i a a n d i t s u n i q u er e l a t i o n s h i p w i t h t h eG a z p r o m G r o u p , i n t e n d sto be among the first tomaster this promising newmarket ,” GazprombankDeputy Chief ExecutiveAlexei Obozintsev said.“With the new JV we willbe able to offer our clientsone-of-a-kind services in capital iz ing on the market in greenhouse gas credits. ”

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News

BUSINESS DEVELOPMENT

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CORPORATE BUSINESS

Gazprombank sees its primary goal in providing up-to-date banking services to its cus-tomers and meeting their growing demand for investment banking products. Among ourcorporate clients are companies working in the front-line segments of the Russian economy,natural monopolies and government-owned companies. Beside traditional service ofmajor 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”

The Bank’s new role in the strategic partnership with Gazprom is to add value to its bank-ing business for the benefit of its main shareholder and principal client. The Bank offersadvanced services to Gazprom Group that may use highly competitive banking productsin every segment of the industry – from production to export. Gazprombank plans to intro-duce new services to support investments in major projects, such as field development,the upgrade of LNG and transportation facilities, and related industries.

We target the expansion of business with Gazprom Group. The Bank will continue to com-pete successfully with its peers for cash flow and transactions in the gas industry. Toensure its success, new product lines are being introduced, including financial advisoryand project finance services; the syndication of large loans; the pooling of funds to supportlong-term investment projects, trade financing and financial risk hedging. In addition, the Bank is enhancing the cash flow management services it provides to Gazprom companies.

The cooperation agreement with Gazprom signed in January 2007 is based on our long-standing and mutually beneficial partnership that gives the Bank a unique competitiveedge as a service provider to Gazprom Group companies. Moreover, the Bank plays animportant role in improving the efficiency of Gazprom’s innovation programs.

The Bank used its successful experience in providing financial and advisory support tomajor international projects in Poland, the Balkan countries, Turkey, the UK, Bulgariaand Ukraine to develop financial and economic mechanisms regulating the participationof independent gas companies in the development of the unified gas network and to prepare proposals on financial participation in the development of pipeline networks for Gazprom’s partners.

Gazprombank serves the majority of syndicated loans issued to Gazprom and acts as itsagent bank and an asset manager. The total amount of Gazprom’s external debt servicesis 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 processedover 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 theNord Stream pipeline project, Shtokman field development, expansion of Kazakhstan gas

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GAZPROMBANK GROUP | Business Development | 2006

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supplies, completion of a gas chemical plant in Novy Urengoy, and the Orenburggazprominvestment program. The Bank also plans to take part in the introduction of cash pay-ments for gas transit across Romania and in carbon emission reduction projects withinKyoto Protocol programs.

COOPERATION DEVELOPMENT WITH STRATEGIC CUSTOMERS

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

In 2006, the Bank focused on increasing cooperation with some of the largest verticallyintegrated 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, theBank 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 thenuclear energy industry and research centers engaged in fundamental and applied studies.

Since 2001, Gazprombank has been working with customers from various segments ofthe engineering sector: defense, automotive, manufacturing, railroad and agriculturalmachinery, among others. Key services offered to these clients include the financing oflarge export contracts, loans and investment services. The Bank also acts as a bond issueorganizer 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 promotespartnership with the Ministry of Transport and its departments and agencies.

The Bank’s strategic goals include the provision of full banking services to petrochemicaland chemical companies. The Bank’s customers include some of the largest companiesand 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 thepower industry, including wholesale and regional generating companies, and network anddistribution companies. The Bank finances their current operations and investment pro-grams, 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”.

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CORPORATE LENDING

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

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

LOAN PORTFOLIO BY INDUSTRY

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Manufacturing

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

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

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

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

In 2006, the Bank launched a new line of business services – factoring. The Bank offersits customers a significant competitive advantage from acceleration of the receivablesturnover, mitigation receivables managing costs, increased sales and client base expan-sion. Since December 2006, the Bank has been actively engaged in factoring activity andexpects 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 relationshipwith its customers; accordingly, the Bank pays special attention to the improvement anddevelopment of these services. In 2006, the Bank’s corporate client base grew by 14% to40,000 customers, while the proportion of non-gas corporate accounts increased from43% 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 functional-ity supporting the preparation and routing of electronic payment documents and providingaccess to such documents from client workstations at any stage of document processing. Over50 holding companies use Gazprombank’s specialized settlement and information services tomaintain over 1,000 accounts with Gazprombank’s branches and correspondent banks.

High is the popularity of the Bank’s financial monitoring services, which provide parentcompanies with timely information on all account transactions, performed by their affili-ates 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 launchedcentralized management of cash-balance pools for group accounts with Gazprombankbranches and correspondent banks giving customers the opportunity to transfer (consol-idate) funds from the accounts of group companies to the master account of the parentcompany, while payments from the accounts of regional subsidiaries are made only uponacceptance by the parent company.

In addition to standard cash and settlement services, customers of Gazprombank haveaccess to the unique high-tech settlement products. In 2006, the Bank successfullyintroduced cash collection services using automated bank deposit vaults at the customerpremises. This service targets trade companies and simplifies the process of cash collec-tion at retail outlets. Another popular product is special electronic settlement services formanagement companies of mutual funds working with specialized depositaries. With theintroduction of this product, the number of client funds tripled over the year.

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PROJECT FINANCE

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

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

The real estate financing portfolio (commercial and residential property developmentprojects) grew to USD 668 million. The Bank financed projects to manufacture modernhigh-tech building materials to assist with the Affordable Housing national project. Its subsidiary, OOO “Gazprombank-Invest”, operates in various real estate markets,managing a development portfolio in excess of USD 0.5 billion in eight Russianregions.

NEW PROJECT FINANCE LOANS IN 2006

Borrower Project description Amount

Exima Group Construction of a modern breeding center 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 hypermarketsHypermarket 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

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In addition to industry diversification, the Bank expanded the geography of its investmentprojects. 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 wasreduced 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 yearend 2006.

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

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

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

n Construction of the “Interconnector” gas pipeline to connect the UK to continentalEurope.

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

n Further diversifying the customer base and building up the portfolio of projects indynamically growing sectors;

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

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

n Developing and launching new structured finance products.

CORPORATE FINANCE

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

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

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The dynamic growth of the corporate finance business is supported by the Bank’s com-mitment to the high quality, flexibility and accessibility of its client services, maintaininghigh commission return and ensuring effective access to the most attractive large projectfor 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); directinvestments; financing of transactions with securities; bridge financing; convertiblebonds and other instruments; assistance with the optimization of banking financing terms and structure.

2. Full range investment banking products focused on financial advisory services (acting as a full-service bank).

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

SYNERGY

Advisory services

Shareholders' funds

Borrowedfunds

CORPORATE FINANCE

Financial advisory services

Acquisition advice

Disposal advice

Joint ventures

Direct investments

Private placements

Capital market advice

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Financial advisory services. Gazprombank provides regular investment and finan-cial advice to Gazprom Group on current international transactions, including theasset swap with BASF, the acquisition of a share in the “Sakhalin-2” project, and thesearch for foreign partners for the joint development of the Shtokman gas field. In2006, the Bank added new projects to its advisory portfolio, including participationin the tender for the exploration and development of license territories in Libya andpartnerships 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 withthe acquisition of a 19.4% share in OAO “Novatek”. This transaction’s value was in excessof USD 2.3 billion.

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

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

n metals;

n mining;

n transportation and logistics;

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

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

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

n industry consolidators;

n regional companies with plans for national expansion;

n companies with a high potential for organic growth;

n companies planning vertical integration;

n primary industry companies holding and managing large assets (focus on projectfinance);

n companies seeking financial support and access to high-quality professionals andconsultants;

n 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.

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

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

n participates in the implementation of intergovernmental agreements on coopera-tion in the civil use of nuclear energy and the development of uranium deposits in Mongolia (jointly with Rosatom);

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

Strategic investments. In addition to efficient client business, the Bank acquires assetsand 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.

The Bank manages major shares in Mosenergo and generating companies that have spunoff from OAO “Mosenergo”. Gazprombank took an active part in the additional share issueorganized by OAO “Mosenergo” to raise funds for the construction of new generating facil-ities and in arranging debt financing for OAO “Mosenergo” and its generating subsidiaries.In 2006, Gazprombank successfully completed a ruble bond issue for OAO “Mosenergo”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).

Petrochemical asset management projects included the Bank’s representation on OAO “SIBUR Holding”'s Board of Directors to improve the company’s performance. In2006, OAO “SIBUR Holding” demonstrated positive growth and strong financial resultsgood enough to fund two dividend payments. The Bank also assisted OAO “SIBUR Holding”with investment projects, acting in a financial advisory capacity.

In 2006, the Bank entered into several transactions to purchase additional equity and debtsecurities of OAO “Gazprom-Media” Holding companies, bringing its total shareholding inmajor TV companies (OAO “NTV-Plus”, OAO “NTV” TV Company, and OAO “TNT-Teleset”) to 100%. Gazprom works with the management of Gazprom-MediaHolding and its subsidiaries to develop and implement a long-term asset strategy focused onboosting their shareholder value. The Bank issued loans and arranged international bondissues 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 EnergyAgency to promote development in the nuclear industry. The Bank will provide commer-cial 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 acceleratedasset growth and consolidation in key Russian industries and the increasing number andsize of M&A transactions. Growing demand for support of M&A transactions will requirea 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.

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CORPORATE FINANCE: FINANCIAL ADVISORY SERVICES

Ongoing

ZGG GmbHAcquisition of 19.4%

in NOVATEK

Financial Advisor Gazprombank

Global Financial Advisoron asset swap deal with BASF

Gazprombank

Ongoing2006

2006

Global Financial Advisoron joint realization of different

business opportunities with Sonatrach

Gazprombank

Ongoing

AdvisorSearch for foreign partners

for Shtokman field development project

Gazprombank

2006

Ongoing

OMZ Atomenergomash

Joint venture project

Financial AdvisorGazprombank

Ongoing

OMZ Metalloinvest

Joint venture project

Financial AdvisorGazprombank

Ongoing

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

Global Financial Advisoron acquisition of controlling stake in

Sakhalin II Project

Gazprombank

App. USD 200,000,000Organized participation in the thirdstage of a tender for the exploration

and development of hydrocarbons in Lybia

Gazprombank

Organizing cooperation with national oil and gas

companies in Lybia, Angola and Equatorial Guinea

Gazprombank

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ACQUISITION AND MANAGEMENT OF LONG-TERMSTRATEGIC INVESTMENTS

AtomstroyexportFinancial Advisor

Belene Nuclear Plant Project (Bulgaria)

Gazprombank

Ongoing

SIBURGlobal Financial Advisor

Gazprombank

Ongoing 2006–2007

Financial Advisor in acquisition of additional share issue in Mosenergo

Gazprombank

USD 2,250,000,000

Undisclosed

USD 250,000,000

Financed the acquisitionof an interest in a major steel

company (a loan secured by shares)

Syndicate member Gazprombank

2006

SibneftegazAcquisition of 51%

in Sibneftegaz on behalf of Gazprom Group

Gazprombank

2006

Soco International plcSale of 4.951% equity interest

Gazprombank

2006

MosenergoProject finance of power plant

construction in the Moscow Region

Gazprombank

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

2006

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FINANCIAL AND STOCK MARKETS

PROPRIETARY TRADING

In 2006, the situation in the Russian money and financial markets was determined bysuch factors as the nominal strengthening of ruble, euro’s increased share in the CBRtwo-currency basket and relatively low interest rates. Gazprombank was a leading partic-ipant 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/RURmarket and was active in both spot and forward transactions. In 2006, the Bank enteredinto three-year forward contracts for a total of USD 1 billion, while its spot portfolioexceeded USD 5 billion. These deals were made mainly with global investment banks ortheir Russian subsidiaries and, accordingly, had a relatively low level of credit risk.

To benefit from surplus liquidity, Gazprombank increased its volumes of lending againstliquid collateral. As for money market transactions, the Bank focused on reverse Repotransactions with third party bonds, shares and promissory notes. The gross income fromreverse 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 morethan 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 sovereignand 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: annualsales 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 Bankmade its first investment in emerging markets’ securities, purchasing domestic bondsissued by the Republic of Brazil.

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

To improve the efficiency of proprietary trading in financial markets, Gazprombank con-tinued to optimize its payments and correspondent relations and added almost 40 newbanks 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.

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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 vari-ety of deposit products, promissory notes and deposit certificates issued by the Bank. Inaddition, 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 74billion, while the average daily balance for debit operations totaled USD 5.5 billion. TheBank developed and launched a wide range of transactions with derivatives, mainly ashedging instruments. The total amount of client transactions with derivatives (net ofinterbank deals) approximated USD 3 billion.

In addition to standard derivatives (forward contracts, options), the Bank offers speciallystructured products best suited to current risk management requirements that have beendeveloped in strict compliance with Russian legislation and Russian financial and taxaccounting rules governing the treatment of forward transactions.

To make its services more competitive, the Bank re-engineered its approach to brokerageservices in the securities market and introduced a single-window procedure for brokerageagreements. This innovative technology made it possible for the Bank to take part in thesale of Rosneft shares to a wide range of private investors.

The total amount of brokerage operations increased 3.8 times year on year to exceed USD 5 billion. The market value of the Bank’s aggregate client portfolio was USD 1.4 billionat year-end against USD 0.5 billion in 2005. The total number of customers using the Bank’sbrokerage services grew sevenfold to more than 10,500 corporate and private accounts.

BROKERAGE OPERATIONS IN THE ORGANISEDSTOCK MARKET IN 2001–2006

2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.05

2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.15

2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.36

2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .0.44

2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1.34

2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . .5.08

Total amount (USD billion)

0 1 2 3 4 5 6 7

|40|


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 percent-age points

In 2006, Gazprombank was appointed sole arranger of the first Russian mortgage-backedsecurities issue for a total of RUR 3 billion. The underlying pool of mortgage deedsbelonged 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 ofUSD 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 securiti-zation 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 andarranged four syndicated loans for Russian and CIS banks, as well as loans forOAO “Pipe metallurgy company” and OOO “Inpromleasing”.

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

CAPITAL MARKETS

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

n domestic and international bond issues;n securitization;n syndicated loans for financial institutions and corporate borrowers;n initial public offerings.

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

GAZPROMBANK IS No. 1 IN THE RUSSIAN DEBT CAPITAL MARKET

|41|


Instrument Date Amount Maturity Rate

Syndicated loan April USD LIBOR 6 m +to refinance 2005 debt 2006 500 million 3 years 0.5%

Domestic bond issue February RUR2006 5 billion 5 years 7.10%

Subordinated loan to finance June USDthe Bank’s capital requirements 2006 300 million 5 years 7.97%

Domestic bond issue November RUR 7 years, 6.54%2006 5 billion 1 year exit

Finally, the Bank issued foreign currency promissory notes for a total of USD 286 millionin western capital markets.

In 2006, Gazprombank expanded its operations in equity capital markets and co-managed the initial public offerings (IPO) of two Russian companies – OAO “Rosneft” and Cherkizovo Group. In OAO “Rosneft”'s largest Russian IPO, Gazprombank outrankedall other lead managers in terms of bookbuilding, having generated 29% of the totaldemand and 75% of demand for the Russian ruble tranche.

The Bank sees its priority short-term objectives in this business segment to be boosting itsECM operations, offering structured deals (including asset securitizations), pursuing its owndebt program and strengthening its positions in the Russian investment banking market.

ASSET MANAGEMENT

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

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

The Bank developed a variety of asset management products based on the most popularstrategies, such as trust accounts for corporate clients (Non-State Pension Funds, insur-ance companies, corporate treasuries) and high net worth individuals, collective investmentproducts and international investment funds. Today customers can select from 14 Russianand 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 net-work in Moscow. In 2007, this option will be rolled out to the regions.

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

BORROWINGS IN 2006

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CUSTODIAN SERVICES

The Gazprombank Depositary Center (Depositary) offers depositary account services toowners of securities, asset managers and specialized depositaries. The Depositaryprovides services to more than 600,000 Gazprom shareholders across Russia andmaintains depositary accounts for non-residents and sub-depositaries. The liberal-ization 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 numberof client portfolios at the MICEX and RTS after the liberalization of the Gazpromstock market. The high speed at which shares are transferred without involving anyregistrars and the broad range of available cost management options to suit anyinvestment strategy has made Gazprom stock an absolute market leader in terms of2006 trade volumes.

Gazprombank successfully acted as custodian of Gazprom’s ADRs under an agree-ment with the Bank of New York (United States). As a result of their efforts, stockprices in the domestic and international markets were aligned in the shortest timepossible. Gazprombank proved its effectiveness as a custodian bank and was highlyappraised by international investors and business partners.

Gazprombank ranks first among Russian depositaries in terms of the market valueof its processed securities. The amount of its client assets more than doubled yearon 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 ofissuers – by 11%. The total number of equity securities in customer accountsincreased by one-third.

In 2006, the Depositary continued to develop new depositary technologies and corpo-rate products. Gazprombank increased the number of its regional depositary officesby more than 30% to a total of 136 outlets. In addition, the Bank used the custodianservices 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 rightsunder the mortgages kept in its custodian network. Having unified the contractbase for its mortgage programs, the Bank began to roll out its full-scale custodianand depositary products for close-ended mortgage investment funds. As a result ofits focused custodian business development, the Bank registered and acceptedinto 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, includingthe issue of Russian depositary receipts, participation in highly promising securi-ty loan projects with leading Russian stock exchanges and supporting the infra-structure of market trading in hydrocarbons and hydrocarbon products. Otherpriority objectives include improving security income payment procedures,upgrading existing depositary technologies and further improving depositary andcustodian services.

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RUBLE BONDS – 2006 DEALS

Mechel7-year Ruble bonds (02 series) with

annual coupon of 8.4%

RUR 5,000,000,000

Lead manager Gazprombank

Cherkizovo Group5-year Ruble bonds (01 series) with


RUR 2,000,000,000


SIBAKADEMBANK3-year Ruble bonds (03 series) with


RUR 3,000,000,000


Alliance Oil Company5-year Ruble bonds (01 series) with


RUR 3,000,000,000


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

Moscow September 20, 2006

Moscow Regional Mortgage Agency

5-year Ruble bonds (01 series) withannual coupon of 7.99%

RUR 3,000,000,000

Lead managerGazprombank


Mosenergo5-year Ruble bonds (01 series) with


RUR 5,000,000,000



GazprombankRuble bonds (01 series) with annual

coupon of 7.1%

RUR 5,000,000,000Due on 27 January 2011


Russian Standard BankRuble bonds (06 series) with annual

coupon of 8.1%

RUR 6,000,000,000Due on 09 February 2011


Moscow February 2, 2006 Moscow February 15, 2006

MosenergoRuble bonds (02 series) with annual

coupon of 7.65%



Moscow March 2, 2006

Serov Steel PlantRuble bonds (01 series) with annual

coupon of 8.75%



Russian Utility SystemsRuble bonds (01 series) with annual

coupon of 9.7%

RUR 1,500,000,000Due on 14 April 2009


ACBK-Invest5-year Ruble bonds (03 series) with


RUR 1,500,000,000


Moscow March 3, 2006 Moscow April 18, 2006 Moscow April 20, 2006Москва 18 апреля 2006

Организатор

Выпуск рублевых облигаций сер. 01с купонным доходом 9,7% годовых

1 500 000 000 рублей Погашение 14 апреля 2009 г.

Газпромбанк

Российские Коммунальные Системы

Москва 7 сентября 2006



3 000 000 000 рублей Срок обращения - 5 лет


ОАО «Московское областноеипотечное агентство»

Москва 01 марта 2005


Выпуск рублевых облигацийс купонным доходом 8,99% годовых

3 000 000 000 рублейПогашение 03 марта 2008 г.


Банк «Русский Стандарт»

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Russian Standard Bank


RUR 5,000,000,000


Mosobltrastinvest


RUR 3,000,000,000


Moscow September 26, 2006 Moscow September 27, 2006

Karusel Hypermarket Chain


RUR 3,000,000,000



OGK-55-year Ruble bonds (01 series) with


RUR 5,000,000,000


FSC UES5-year Ruble bonds (04 series) with


RUR 6,000,000,000


Moscow October 5, 2006 Moscow October 12, 2006

SIBAKADEMBANK5-year Ruble bonds (05 series) with


RUR 3,000,000,000


Moscow October 24, 2006

SIBUR Holding7-year Ruble bonds (01 series) with


RUR 1,500,000,000


Parnas-M5-year Ruble bonds (02 series) with


RUR 1,000,000,000


Moscow Pledge Bank3-year Ruble bonds (01 series) with


RUR 800,000,000


Promtractor-Finance5-year Ruble bonds (02 series) with


RUR 3,000,000,000


M.Video-Finance5-year Ruble bonds (01 series) with

annual coupon of 10%

RUR 800,000,000


Moscow November 21, 2006

Moscow November 23, 2006Moscow November 22, 2006

Moscow November 15, 2006Moscow October 24, 2006

Gazprombank7-year Ruble bonds (02 series) with


RUR 5,000,000,000


Moscow November 29, 2006

Москва 01 марта 2005


Выпуск рублевых облигацийс купонным доходом 8,99% годовых

3 000 000 000 рублейПогашение 03 марта 2008 г.


Банк «Русский Стандарт»

Москва 24 октября 2006



3 000 000 000 рублей Срок обращения - 5 лет


Промтрактор-Финанс

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TMK

Syndicated loan

USD 150,000,000Due in 2.5 years with 1 year option

Senior Lead ManagerGazprombank

TNT-Teleset

4-year LPN issue

USD 60,000,000


Inpromleasingг

5.5-year syndicated loan

USD 41,350,000

Mandated Manager Gazprombank

Belgazprombank1-year syndicated loan

EUR 5,000,000USD 14,000,000



RosEuroBank

1-year syndicated loan

USD 53,000,000


International Bank of Azerbaijan - Moscow

1-year syndicated loan

RUR 300,000,000


Moscow December 2006 Минск September 14, 2006

Moscow December 2006 Moscow October 5, 2006 Moscow July 22, 2006

SYNDICATED LOANS, CLN/LPN2006 DEALS WITH GAZPORMBANK AS SYNDICATE MEMBER

FSC UES3-year Ruble bonds (05 series) with


RUR 5,000,000,000


OGK-35-year Ruble bonds (01 series) with

annual coupon of 7%

RUR 3,000,000,000


Moscow December 5, 2006 Moscow December 5, 2006

INITIAL PUBLIC OFFERINGS (IPO)

Минск сентябрь 2006


Синдицированный кредит

5 000 000 EUR14 000 000 USD

Срок кредита - 1 год


АО «Белгазпромбанк»

Москва 6 июля 2006


Синдицированный кредит

300 000 000 рублей Срок кредита - 1 год


Международный БанкАзербайджана - Москва

USD 10,800,000,000

Rosneft

IPO

Co-ManagerGazprombank

2006

USD 251,000,000

Cherkizovo Group

IPO listed at LSE

Co-Lead ManagerGazprombank

2006

2006

Ко-менеджер

Первичное публичное размещение акций

10 800 000 000 USD


ОАО НК «Роснефть»

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RETAIL BUSINESS

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

The Bank’s approach is to offer a standard product range, harmonize its bankingtechnologies and pursue a flexible pricing and marketing policy adjusted to specificregional requirements. To reduce the cost of its products and services, the Bankrelied on its partners’ distribution channels – retail chains, car dealers and realestate agencies.

LENDING PROGRAMS

In 2006, the retail lending market entered a stage of explosive growth. Gazprombank’spolicy focused on qualitatively diversifying its loan portfolio, minimizing credit risksand 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 thebanking 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 loansto approx. 4,000 borrowers. The Bank processed over 6,500 overdraft lending appli-cations.

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 monitor-ing procedures as well as the professional underwriting of borrowers and collateral tomaintain constant control over the eventual growth of bad debt.

The Bank promoted partnership relations to boost its retail loan portfolio. During theyear, it signed approx. 600 agreements with car dealers and launched a number ofregional 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 realestate companies and is now implementing a consumer lending program secured withgoods 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).


|47|

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

n financial risk insurance for investments in housing development projects;

n life insurance for borrowers under mortgage programs;

n car insurance for car loans with subsidized interest rates;

n insurance for individuals purchasing consumer goods.

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

DEPOSITS AND MONEY TRANSFER SERVICES

Gazprombank is an active participant in the retail deposit market, offering a broad selec-tion of efficient and competitive savings options tailored to customer needs that meet current liquidity, yield and security requirements and ensure growth and accumulation ofcustomer funds.

In 2006, retail deposits grew 1.6 times to USD 2.9 billion, higher than the averageindustry growth rates. Ruble-denominated deposits contributed 80% of total retailaccounts.

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

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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 ofdirect or portfolio investments in real estate as well as financial advisory for investmentsin 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 partnersthat offer professional asset management, real estate, tax planning and consulting serv-ices 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 bank-ing and financial services and consistently adapts its products to meet new customerrequirements. Gazprombank opened a Call Center to furnish special customer needs andget feedback on a number of issues and introduced an information help desk to ensurethat 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 81regions of Russia under payroll projects with Gazprombank and its correspondent banks.In 2006, it added 950 corporate customers to its payroll project portfolio, bringing thetotal client base to more than 3,400 organizations. For customer convenience, the Bankinstalled nearly 1,700 ATMs, over 1,680 cash desks and more than 5,500 POS terminals.

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

As of year-end 2002 2003 2004 2005 2006

ATMs 498 699 946 1,264 1,695

Cash-desks 307 618 933 1,313 1,683

POS terminals 738 1,441 2,532 3,705 5,58

* Jointly with partner banks.

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

Nearly 90% of ATMs have been upgraded to offer additional functions, including pay-ments for telecommunication and paid-TV services, instant money transfers betweencard accounts and utility payments. In 2006, the Bank’s network of self-service ATMswith Cash-In functionality grew by 73%. The total amount of cash credited to cardaccounts exceeded RUR 600 million.

Total payments through ATMs and bank terminals exceeded USD 44 million. In 2006,over 26,000 customers used the “Telecard” mobile phone system to get access to infor-mation on their financial transactions. In cooperation with VISA Int., the Bank intro-duced the option to transfer funds from a Gazprombank card to any VISA card issuedby other banks.

BANKING CARD BUSINESS

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RETAIL BUSINESS OUTLOOK

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

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

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

n Develop and introduce new deposit products: pension and housing deposits andspecial pension deposits for NPF “Gazfond”; launch a pension card program forpension payments, including access to pension account information usingGazprombank cards.

n Launch the issue of microchip cards; implement banking technologies that protectagainst on-line fraud.

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

n Extend ATM functionality to the processing of payments for shares in mutualinvestment funds and transfers to brokerage accounts for the purchase of equitysecurities.

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

F I N A N S OV Y E V E S T IHitting the Black

Sea Coast

№ 3

Stipends for Students

Man as Capital

Left to right: Vyacheslav Gainochenko, Valeriya Galshenko, Mariya Kotovskaya, Yury Kats, Dmitry Zauers, Olga Klimova and Anatoly Malakhov

Gazprombank begins pro-gram to expand network onRussia’s Black Sea coast

At the first stage of the pro-gram in 2007, Gazprombankwill open three new branches

in Novorossiysk, Tuapse andTemruk, to join the existingbranch of its regional affiliatein Sochi. Automated self-service banking offices willbegin operating in Anapa,Gelendzhik and Adler. The

bank will also install a networkof ATMs throughout thecoastal area.“Krasnodar territory is now oneof Russia’s fastest growingregions,” said Olga Kazan-skaya, First Vice-President andMember of the Board.“We are seeing significantgrowth in investment activityand a substantial increase indemand for banking servicesthat offer quality and conven-ience, both among organiza-tions and individuals.”“By expanding Gazprombank’spresence in Krasnodar territo-ry, particularly on the BlackSea coast, we are aiming at ourtraditional corporate clients –who are stepping up their oper-ations in the region – as wellas a host of local companies andof course, residents and vaca-tioners in the resort towns.”

Gazprombank awards stipendsat Russia’s leading educationalinstitutions

The 20 stipend recipients, thewinners of a competitive selec-tion process, received theircertificates and Visa bankcardsfrom Gazprombank First Vice-President Sergei Razdobudko,the Head of Personnel Depart-ment. The stipends amount toUSD 1,200 annually.“Working with young peopleis a key element of our com-prehensive program for corpo-rate training and professionaldevelopment in 2006–2008,”Razdobudko said. “That is noaccident, because in order topreserve and build on itsachievements, the bank has toconstantly keep in mind thepromising, inspiring youngergeneration, to work out spe-

cial programs to adapt anddevelop ‘newbies’ and toenable them – in every waypossible – to identify theirpotential and then to maximal-ly achieve it. We value profes-sionalism and the ability towork as part of a team and tomeet the challenges of a rapid-ly growing bank. Gazprom-bank today is over 5,500 high-

ly qualified specialists andmanagers, about two-thirds ofwhom work at branches in theRussian regions. The stipendrecipients in future mightserve an internship atGazprombank and begin theircareers there,” Razdobudkosaid. Candidate selection washeld in the fall of 2006. Stu-dents from a number of lead-ing educational institutionswere recommended, includingMoscow State University, theFinance Academy under theauspices of the Government ofthe Russian Federation,Moscow State Institute of International Relations(MGIMO), the PlekhanovRussian Academy of Econom-ics, the Higher School of Eco-nomics, Moscow AviationInstitute and Moscow Instituteof Physics and Technology.

Vnesheconombank, Gazprom-bank, International MoscowFinance-Banking School hostinterbank conference: “Manas capital. The technology ofmanagement and assessingefficiency”

Nikolai Korenev, Gazprom-bank’s Deputy Chairman, gavethe opening address at the con-ference in Moscow. He dis-cussed the implementation ofpersonnel management at thebank, noting that every com-pany that hopes to become aleading business focuses firstand foremost on improving itssystem of managing humancapital.Many of the speakers stressedthat any plan for managinghuman resources is primarily aplan for managing assets. Despitea severe shortage of qualified per-sonnel (and the shortage is worstin the banking sector, due to itstraditional human resources“conservatism”), the bankingsector is optimistic. The practiceof identifying career paths helpsto sustain employees in crisis sit-uations, they said. One theoryholds that if managers show theylove their work, clients will beinfected by their enthusiasm –and will be more loyal to thebank.In the closing address, SergeiRazdobudko, First Vice-Presi-dent, Head of Gazprombank'sPersonnel Department, whotalked about designing salaryschedules and motivating per-sonnel, highlighted the pro-gram of incentives for managers and specialists. Razdobudko, also discussedthe comprehensive targetedprogram for corporate trainingand personnel motivation.Over 150 people – employeesat Russia’s biggest banks,financial analysts and experts –attended the conference.

2007

Left to right: Sergei Razdobudko and GrigoryPlotnikov with a stipend recipient


Gazprom bank unveilsIpoteka Plus, a new mort-gage lending programthat provides addit ionalfunds to mortgage holdersto f inance construction,instal lat ion and f i t outwork needed to completethe building. Under theprogram, borrowers whopurchased their homeswith a Gazprombank loanand who have a goodrepayment history canreceive up to 50% of theoriginal amount, securedby the property.

Gazprombank signs up for Finance Technology Center’s banking system ,running on the Oracleplatform. Gazprombankwill soon install SettlementCenter , a subsystem ofFTC’s flagship product, toautomate inter-bank andinter-branch settlements.Gazprombank has over470 affiliates serving indi-viduals and corporateclients.

Gazprombank inks creditagreement with Germanbank consortium tofinance equipment pur-chases from Europeanmanufacturers under theguarantee of the relevantnational insurance agen-c i e s . T h e a g r e e m e n t with АКА Ausfuhrkredit-Gesellschaft mbH, whichdoes not l imit the totalamount of borrowing, willenable Gazprombank toreceive long-term financ-ing on import contractsfor its investment projectsand programs.

Gazprombank sponsorsequestrian events, worksto save Russian horsebreed. Gazprombank’sassistance aims to pre-serve a national treasure:the Orel Trotter horsebreed, which is on theverge of disappearing.The breed stock todaynumbers no more than1,000.

News

Gazprombank approves USD100 million four-year creditline for Northern Wharf, a leading Russian shipbuilder.

The proceeds will financeshipbuilding programs under

foreign defense exportorders. The loan wasapproved based on Sever-naya Verf’s preliminaryRussian-standard financialsfor 2006, and fits with thebank’s strategy of providing

financing in the nationaleconomy’s critical indus-tries, especially the defenseindustry, said GazprombankVice-President AndreiSmirnov, Head of the Strate-gic Clients Department.

Left to right: Sergei Yezhovkin, Alexander Kaznacheyev, Andrei Smirnov

USD 100 Million for Severnaya Verf

Urals Operators Dial GazprombankGazprombank wins tender to lend 3 billion rubles to Uralsvyazinform during a period of 5 years.

Uralsvyazinform is thetelecommunications operatorin the Urals area, with opera-tions in the Kurgan,

Sverdlovsk, Tyumen andChelyabinsk regions, Permterritory and the Khanty-Mansii and Yamalo-Nenetsautonomous districts. Thecompany serves over 3.7 mil-lion fixed-line subscribers,4.5 million mobile communi-cations subscribers and

140,000 broadband internetclients.Uralsvyasinform has chartercapital of RUR 4.816 billion.About 13% of shares are tradedon exchanges abroad in theform of ADR/GDR. The com-pany’s capitalization currentlystands at USD 2.2 billion.

Children Draw MozartWinning pictures in “ChildrenDraw Mozart” contest exhibit-ed at Salzburg Festival

Children at Russia’s art spe-cialty schools participated inthe competition as part of theOpen Europe initiative, whichkicked off in May 2006 with afestival of children’s creativityin Baden, Austria.The exhibit first toured severalEuropean cities before return-ing to Mozart’s homeland forthe celebration of the 250thanniversary of the legendarycomposer’s birth.

The opening of the exhibitionwas attended by OpenEurope’s initiators and organ-izers: Gazpromexport and its partners Gazprombank, Austria’s OMV, Casinos Austria AG and the publicorganization Blick nach Europa. Later in Moscow and Viennaabout 170 children aged 6-15 –from Russia, Austria and else-where – showed off their tal-ents in folk and classical musicand dance.For the children the festivalwas first and foremost a holi-day, an excursion to a beautiful

corner of Europe with concerts,awards and meetings with theirpeers. The combination of free-dom, travel, meeting newfriends and creativity transmit-ted the feeling of Open Europeto the young participants.The festival organizers andsponsors, which included thelargest power companies inEurope, aimed to promote anatmosphere of openness, ofcooperation in internationalculture and the humanities, tofulfill the event’s motto: “Fromenergy for heating to warmingchildren’s hearts.”

№ 3

SUSTAINABLEDEVELOPMENT MANAGEMENT

3

Gazprombank’s sustainable financial and operating results are contingent upon the qual-ity of management, compliance with corporate governance standards, business continuitystrategies 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.

CORPORATE GOVERNANCE DEVELOPMENT

Gazprombank’s system of corporate governance includes overall management of theBank’s activities through the General Meeting of Shareholders and the Board of Directorsin cooperation with the Management Board, its Chairman and other Bank’s executives.The system is focused on:

n setting up strategic goals, ways to achieve them and monitor execution;

n maintaining the balance between the interests of shareholders, the Board, themanagement of the Bank, its creditors, customers, and other stakeholders;

n staff motivation;

n compliance with the Russian legislation, the Bank’s charter and internal docu-ments.

The efficiency of the Bank’s decision-making system is evidenced by the following statistics: in 2006 Gazprombank held three General Meetings of Shareholders, 26 meetingsof the Board of Directors, and 57 meetings of the Management Board of the Bank.

In 2006, the Board of Directors considered over 60 issues of topical significance ranging fromsuccessful domestic and international public borrowing programs, further development ofrelationship with Gazprom to capital increases, and the improvement of internal control.

In addition to current financial policy, priorities in asset and liability management and issuesto be submitted to the Board, the Bank’s Management Board regularly reviews matters ofstrategic development, both generally and in specific business areas (including retail andinvestment 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 sen-ior and top management. The Bank is completing a Strategic Management and DisclosureHandbook and the Project Management Concept.

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

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GAZPROMBANK GROUP | Sustainable development management | 2006

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RISK MANAGEMENT AND INTERNAL AUDIT

In 2006, the Board of Directors approved a risk management policy based on a centralizedrisk 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 andinternal controls of its operations.

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

The credit risk management system used by the Bank includes credit limits setting forgroups of borrowers broken down by products and terms of lending. The Bank’s headoffice continuously monitors the compliance of the Bank branches with applicable limits.Other critical system elements include monitoring and controlling interest and principaldebt settlement (including the security of pledge) and concentration of risks and exposureon major corporate borrowers.

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

Value-At-Risk (VAR) methodology is used to assess regular market risks for different typesof 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 itsfinancial obligations fully and in due time, while achieving its target level of profitability.

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

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

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detect and register risk events and their consequences, an integrated assessment of oper-ational risk and the estimation of the level of funds required, as well as allowing disasterplanning and business recovery procedures for emergency situations.

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

The key issue in the improvement of the comprehensive risk management and capital dis-tribution system is the aggregation of legal, reputational and compliance risks. Thisapproach will help the Bank to reach a new management decision level, including thoserelating to decisions on managing assets, liabilities, profitability and risks.

The internal audit system provides the Bank’s management bodies with instruments of comprehensive control over the banking risk management system, the distribution of authority in the banking and other transactions together with information security.

The system relies on an internal control culture – a combination of moral and ethical val-ues, professional standards, and a corporate culture which enhances the awareness ofthe critical importance and need for internal audits based on operational continuity, inde-pendence, impartiality, and professional competence.

Since 1996, Gazprombank has been audited by major international audit companies.ZAO Deloitte and Touche CIS has been Gazprombank’s auditor since 2002. In accordancewith the Bank’s Charter, its activities are also audited by a Revision Commission electedat the General Meeting of Shareholders.

HUMAN RESOURCE POLICY AND PERSONNEL MANAGEMENT

Gazprombank’s HR policy aims at building a highly qualified and united team. The funda-mental HR policy objectives are to streamline the organizational structure, promote professional development, improve the remuneration and incentives system, implementmore efficient HR techniques and methods, and to preserve and enhance corporate culture.

Gazprombank’s efforts to develop and diversify its business and expand its network ofbranches and supplementary offices were accompanied by planned increases in the number of staff, which by year-end totaled 5,800 employees.

The Bank streamlined its corporate governance system in line with business developmentpriorities, as follows:

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

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

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n introduction of a separate remote banking unit;

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

The motivational policy is based on the new system of incentives and remuneration thatpresupposes building a clear hierarchical classification of employee positions, the marketvalue of similar positions and dependence of salaries on such factors as the scope ofresponsibility, workload and performance. The Bank has also introduced a long-termmotivation 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 employ-ees. 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 pro-gram includes a broad range of insurance, medical services, benefits and compensations,and additional pension insurance offered to the Bank’s employees. Over a 100 Bankretirees have already benefited from additional non-government pensions.

The Bank has been consistently promoting a corporate culture focused on uniting theBank’s personnel and strengthening its team spirit. The Bank regularly hosts team-building events including sports competitions, contests, and parties, and takes care ofpensioners 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 retailbusiness development and comprehensive services to corporate clients in strategic indus-tries). In 2006, two new branches were added to the branch network: in Krasnoyarsk andIrkutsk. In early 2007, the Bank opened branches in Kemerovo and Samara, bringing thetotal 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 thetotal number of offices now exceeding 190. Finally, the Bank opened a representativeoffice 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

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

The agreement also provides for further specialization through the development of retailmortgage and consumer lending, as well as SME lending. The subsidiaries and affiliatedbanks are strengthening their positions in the regions by expanding their client base andproduct range and through introducing new financial instruments, while Gazprombankassists in their development through capital contributions. The Group’s mid-term devel-opment plans focus on increasing the banks’ share in specialized regional markets andimproving their capitalization and profitability.

IT development programs include the preparation of migration to a new, more advancedbanking platform and regular upgrades to the existing IT systems. The Bank has anadvanced, reliable and highly efficient computer center that supports the corporate dataprocessing system, shared data archives, LAN and telecommunication/telephone networks.

Priority areas include retail banking automation, and remote and specialized banking forlarge corporate accounts, including Internet access to Bank services. In 2006, the Bankexpanded its regional network of self-service outlets and actively promoted Internet banking services.

Much effort was invested into front-office systems, including the system of credit rating of individual borrowers and Treasury/call center applications. The implementation of the multifunctional office automation system (Company Media) has had a positive effecton the Bank’s corporate culture.

SOCIAL RESPONSIBILITY

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

n the Bank actively supports the development of key domestic industries and theimplementation of national projects;

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

n our policy of business transparency ensures availability of operational results toour shareholders, partners and clients and reflects our commitment to marketdiscipline.

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.

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The Bank has always placed great emphasis on supporting orphans. The Bank’s projectsinclude assistance to the Priozersk boarding school, Ardatov, Sortavala and Saltykovorphanages, 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 com-mittees 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 TrusteeBoard of the Monastery of the Saviour’s Transfiguration (Spaso-Preobrazhenskiy) ValaamMonastery and donates funds for the restoration of churches and monasteries. The Bankalso 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, MarinaTsvetaeva Museum, the Pushkin State Museum of Fine Arts, and the Chekhov Art TheaterSchool.

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

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

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

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F I N A N S OV Y E V E S T IRUR 15.3 billion

in ProfitAgreement with Novoship

№ 4

A Diplomatic Affair

Left to right: Wolfgang Skribot, Sergei Grishenko, Salavat Razbayev, AlexanderGarankin

Gazprombank Q1 pretaxprofit up 128% to 15.3RUR billion

Gazprombank reportedsubstantial improvementsin key financial indicatorsfor Q1 2007:• gross assets rose 44% to

RUR 1,304.2 billion• loans rose 42% to RUR

646.9 billion, and• corporate customer ac-

counts increased 139% toRUR 725.1 billion.

“Prof i t growth was aresult not only of steadyearnings flows from lend-ing operations, but fromoperations on the securi-t ies market, despite thevolat i l i ty of the latter ,”one bank official said.

Gazprombank, OAO Novoshipsign cooperation agreement

The agreement sets out the keyareas of interaction betweenthe companies in implement-ing Novoship’s developmentprogram, focusing on expan-sion of specialized tankertransportation to provide Rus-sian oil and gas companies themost favorable transportationoptions for oil and products,delivered with a high standardof reliability and quality.In the agreement, Gazprombankexpresses its readiness tofinance projects targeted atdeveloping Russia’s shippingcompanies and increasing theRussian transport fleet’s shareof export shipments. It alsopledges to assist in implement-ing these projects by serving asfinancial consultant andinvestor. The bank is also ready

to finance construction andmodernization of oil terminalsat major ports on the Black Seaand the Sea of Azov. N o v o s h i p r e c o g n i z e sGazprombank as a priority

partner in developing andimplementing programs to pro-vide project financing services,financial and investment consulting and organization ofsyndicated financing.

Gazprombank hosts corporatepresentation for foreign officials

The presentation was attendedby top officials from the con-sulting divisions, economicdepartments and trade mis-sions attached to foreignembassies in Russia and by offi-cials from several major compa-nies and banks operating inRussia, as well as the heads ofdepartments and units at theMinistry of Foreign Affairs.The presentation at theBaltschug Kempinski Hotel inMoscow took place as the bank

steps up its operations in worldcapital markets and expandsoperations with leading inter-national investors and lendingand financial institutions. Themeeting was devoted to thebank’s operating results for2006 and preliminary indicatorsfor the Q1 2007.Deputy Chairmen AlexanderSobol and Alexei Obozintsevreported on Gazprombank’splace and role in the GazpromGroup and the Russian bankingsystem. They also discussedvarious business areas, thehigh-tech services on offer andnew financial products. Theybriefed attendees in detail onthe bank’s current operationson world financial markets, itsexpansion plans and the majorinternational deals completedor planned for the near future. Foreign officials at the presenta-tion said they were impressed byinformation on Gazprombank’sparticipation in major Russian

and international gas sectorprojects and the expansionplans for the bank and its net-work of affiliates.“In 2006 Gazprombank reportedrecord pretax profit of RUR 19.4billion rubles. Its assets rose 70%on the year and are now nearRUR 730 billion. Bank capitalmore than doubled to over RUR89 billion,” Sobol noted in hisreport. “The main positive fac-tors impacting development ofthe banking sector are: a favor-able macroeconomic climate inRussia, rising confidence inbanks and growth in demand forbanking services on the part ofboth companies and the public,increasing diversification of thebanking business, more profes-sionalism and better manage-ment, and the move to interna-tional accounting standards andbusiness development plan-ning.”Obozintsev noted that “as of the end of March this year,

Gazprombank has establishedcorrespondent relations with over739 financial institutions aroundthe globe. A total of 57 Nostroaccounts have been opened at 45 banks, including the leadingclearing banks in Europe, the U.S.and Asia. Over 200 foreign banksare Gazprombank counteragentsfor financing international tradeoperations. Gazprombank willcontinue working with state agen-cies and development banks. Thebank is currently accredited bythe majority of the leading exportinsurance agencies and exim-banks in Europe, America andAsia. Memorandums of under-standing were signed in2005–2007 with Japan Bank for International Cooperation,MEHIB – Hungarian ExportCredit Insurance and The Export-Import Bank of China.” Obozintsevalso recalled this year’s upcomingroad shows and corporate presen-tations to be held at leading worldfinancial centers.

2007 г.

Mikhail Rybin


Gazprombank’s St. Petersburgbranch approves credit limits for companies in the Uralmash-Izhora Group (OMZ): USD 10 million for Izhorskiye Zavody and USD 4 million each for OMZMining Equipment and Engi-neering and OMZ-Special Steels.The two-year loans will be usedto replenish working capitaland finance current operations.Gazprombank is also currentlydeveloping a project to financeconstruction of an electric-arcfurnace (DSP–120) at IzhorskiyeZavody. The first stage of theproject will require investment ofabout USD 50 million. ForpostManagement is OMZ’s leadingshareholder. Gazprombank is itsstrategic financial partner.

A Wholly OwnedSubsidiary

Gazprombank acquires 52.2%stake in OAO Morion (St. Petersburg) from the EBRDMorion is a world leader in pro-duction of high-tech piezoelec-tric instruments used to stabi-lize and separate frequenciesin control systems as well asnavigational, radar and meas-uring systems. “Acquisition ofthe Morion stake, a worldleader in precision quartz fre-quency stabilization and sepa-ration instruments, is part ofthe bank’s strategy for invest-ing in high-tech Russian busi-nesses applying the latest sci-entific developments andoccupying a leading positionon the world market,”Gazprombank Deputy ChiefExecutive Ilya Yeliseyev said.The stake had been managedby Germany’s Quadriga CapitalRussia.

MIEL-Novostroiki, Gazprombankroll out joint mortgage lendingprogramHome buyers can now obtainan apartment at 10.5% intereston U.S. dollar loans and at 12% on ruble loans, based on a10% down payment.The special offer can be used tobuy apartments in a wide rangeof prices.

NewsC l i e n t a s s e t s h e l d i n Gazprombank’s depositarynetwork top RUR 4.17 trillion

“We have been working underthe liberalized market inGazprom shares for over ayear,” said Vice-PresidentVladimir Tatsii, the Head of the Depositary Center.“Gazprombank’s establishedmechanisms for working withdepositary receipts (Bank ofNew York) is our pledge ofsuccessful operation of theprogram on Gazprom Level 1ADRs which foreign investorsare seeing.”“Growth in the number of client-owned Gazpromshares nominally held by Gazprombank – over 20% inthe latest year – reflects morethan just complete compliancewith the criteria for foreign custodian banks (Rule 17f–5).”“The depositary’s orientationon the client was especiallyclear during the ‘public’ IPO,when we worked not only withour own depositors, but alsowith a significant number ofclients with more modestinvestment portfolios, whoswitched to us from otherdepositaries,” Tatsii said. Left to right: Veniamin Fyodorovich, Vladimir Tatsii, Irina Aldyakova, Marina Tikhomirova, Olga

Chernyshev, Vladimir Melentyev and Alexander Klimanov

RUR 4.17 trillion in Client Assets

First Place in Ruble ObligationsCbonds ranks Gazprombankfirst among ruble bond organ-izers, underwriters

The bank was also ranked firstby the National SecuritiesMarket Association, whichunites all Russian banksengaged in securities trading,based on the results for thefirst nine months of 2006.C b o n d s r e p o r t e d t h a t Gazprombank organized 27 bondissues totaling RUR 65 billion in2006, meaning that one out ofevery seven Russian corporatebonds on the ruble market lastyear was managed byGazprombank. In the last threeyears the bank was involved ina total of 98 bond issuesexceeding RUR 330 billion.Gazprombank is the leader in

issuance of bonds bearingcoupons with interest lowerthan 8% annually, of which itplaced bonds from nine issuerstotaling over RUR 36 billion. The bank is also moving intothe market to organize equityfinancing. Gazprombank wasthe leader by volume in plac-ing Rosneft shares during lastJuly’s IPO on MICEX and theLondon Stock Exchange, andtook part in organizing the IPOfor the Cherkizovo Group.“The bank also successfullyplaced Russia’s first-ever issueof mortgage-backed bonds,”Deputy Chairman Alexei Obozintsev said. “We demon-strated that mortgage securitiescan be issued in Russia, that themarket is already there.”Despite the novelty of the

securities and a fairly difficulttime for the market, the issuewas fully placed among a widenumber of Russian and for-eign investors, at a yield of7.28% annually. The transac-tion has given Russian issuersan effective new instrumentfor refinancing their mortgageportfolios.“This deal practically provesthat the ruble has become con-vertible – both de jure and defacto,” Obozintsev said.“Investors now have Russianrubles on their books. Theyknow how to work with them,they monitor the exchangerate, interest rates, etc. It is afirst step toward the rubleeventually becoming a globalreserve currency. It is now inthe realm of possibilities.”

№ 4

GAZPROMBANKGROUP

FINANCIAL INFORMATION

4

GAZPROMBANK GROUP | Independent Auditors’ Report | 2006

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ZAO Deloitte & Touche CISBusiness Center “Mokhovaya”4/7 Vozdvizhenka St., Bldg. 2Moscow, 125009, RussiaTel: +7 (495) 787 0600Fax: +7 (495) 787 0601www.deloitte.ru

INDEPENDENT AUDITORS’ REPORTTo the Shareholders and the Board of Directors of the Joint-Stock Bank of the Gas IndustryGazprombank (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 “consolidatedfinancial statements”) for the year then ended, and a summary of significant accounting policiesand other explanatory notes.

Management’s responsibility for the financial statements

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

Auditor’s responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on ouraudit. We conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance whether the consolidated financial statements are free from materialmisstatement.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’sjudgement, including the assessment of the risks of material misstatement of the consolidatedfinancial statements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation and fair presentation of the consoli-dated financial statements in order to design audit procedures that are appropriate in the circum-stances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s inter-nal control. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of accounting estimates made by management, as well as evaluating the over-all presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basisfor our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, thefinancial position of the Group as of 31 December 2006, and its consolidated financial performanceand its cash flows for the year then ended in accordance with International Financial ReportingStandards.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 2007Moscow

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Notes 2006 2005(restated)

Interest income 1,260,360 739,520Interest 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 8 883,151 359,599Dealing profits, net 9 494,624 503,335Fees and commissions income 10 278,716 168,069Profit from available-for-sale investments, net 17 205,276 93,724Profit from foreign exchange, net 162,387 49,002Dividend income 21,415 38,958Other operating income 70,571 30,766Non 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) 2,803Non interest expense (4,916,270) (782,630)

Profit from operations 2,013,709 711,358

Income from associates 17 60,967 11,809Profit 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 1,330,775 457,347Minority interest 226,888 91,043

1,557,663 548,390

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

CONSOLIDATED FINANCIAL STATEMENTSConsolidated 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)

Andrey I. AkimovChairman of the Board

27 June 2007

Signed on behalf of the Management Board:

Alexander I. Sobol Deputy Chairman ofthe Board

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GAZPROMBANK GROUP | Gazprombank Group Consolidated Financial Statements | 2006

27 June 2007

Consolidated balance sheets as of 31 December 2006 and 2005

(thousands of U.S. Dollars )




Notes 31 December 31 December2006 2005

ASSETSCash and due from the Central Bank of the Russian Federation 13 2,907,450 1,069,751Due from credit institutions, net 14 7,237,682 2,882,823Securities at fair value through profit or loss 15 2,346,425 1,637,666Loans to customers, net 16 11,583,990 7,401,093Available-for-sale, net and investments in associates 17 2,496,550 1,090,514Trade receivables, net 18 540,846 463,559Inventories, net 19 672,894 450,157Property, equipment and intangibles, net 20 2,447,399 1,971,390Goodwill 21 619,333 552,651Other assets, net 22 815,898 534,855Total assets 31,668,467 18,054,459

LIABILITIESAmounts owed to credit institutions 23 2,979,652 2,140,252Amounts owed to customers 24 11,447,091 7,217,013Subordinated deposits 24 688,832 607,519Certificated debts 25 5,454,543 1,566,445Eurobonds issued 25 2,613,738 2,065,800Income tax liabilities 12 345,358 258,648Other liabilities 26 1,489,115 1,281,843Total liabilities 25,018,329 15,137,520

EQUITYShare capital 27 1,160,857 907,057Share premium 27 1,061,899 –Treasury stock 27 (84,343) (84,343)Foreign currency translation reserve 3 (c) 297,283 (32,300)Fair value reserve 3 (g) 549,417 162,581Retained earnings 28 2,929,985 1,368,648Total equity attributable to the Group’s shareholders 5,915,098 2,321,643Minority interest 735,040 595,296Total equity 6,650,138 2,916,939

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

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Consolidated statements of changes in equityfor the years ended 31 December 2006 and 2005

(thousands of U.S. Dollars )


27 June 2007



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

Share Share Treasury Foreign Fair Retained Equity Minority Totalcapital premium stock currency value earnings attributable interest equity

translation reserve to the Group’sreserve shareholders

31 December 2004 907,057 – (10,632) 131 8,940 450,711 1,356,207 – 1,356,207Acquisition of subsidiaries – – – – – 536,259 536,259 504,253 1,040,512Net profit – – – – – 457,347 457,347 91,043 548,390Fair value adjustment of available-for-sale investments – – – – 111,850 – 111,850 – 111,850Disposal of available-for-sale investment – – – – 42,112 – 42,112 – 42,112Treasury 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 2,916,939Acquisitions of subsidiaries – – – – – (71,881) (71,881) (68,429) (140,310)Net profit – – – – – 1,330,775 1,330,775 226,888 1,557,663Share capital issue 253,800 1,061,899 – – – – 1,315,699 – 1,315,699Fair value adjustment of available-for-sale investments – – – – 447,637 – 447,637 – 447,637Disposal of available-for-sale investment – – – – (60,801) – (60,801) – (60,801)One-off income from the parent company (Note 28) 367,806 367,806 367,806Dividends 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 – 329,58331 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

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Consolidated cash flow statementsFor the years ended 31 December 2006 and 2005

(thousands of U.S. Dollars)

Notes 2006 2005CASH FLOWS FROM OPERATING ACTIVITIESInterest received 1,130,897 729,830Fees and commissions received 243,652 157,784Interest paid (739,447) (433,072)Fees and commissions paid (37,858) (27,978)Dealing profits, net 352,327 272,548Profit from available-for-sale investments and assets held for sale, net – 93,724Foreign exchange gains, net 114,284 32,194Media business operating profit, net 534,598 187,078Petrochemical business operating profit, net 692,989 –Other operating income 304,907 30,766Salaries and employment benefits (355,459) (257,566)Administrative expenses and other operating expenses (240,867) (160,070)Cash flows from operating profits before changes in operating assets and liabilities 2,000,023 625,238

(INCREASE)/DECREASE IN OPERATING ASSETSObligatory reserve with the Central Bank of the Russian Federation (88,192) (55,064)Due from credit institutions (2,318,208) (157,227)Securities at fair value through profit or loss (395,461) 305,974Loans to customers (3,500,160) (2,103,374)Other assets (96,459) (147,488)

INCREASE/(DECREASE) IN OPERATING LIABILITIESAmounts owed to credit institutions 679,493 321,726Amounts owed to customers 3,436,062 2,342,746Other liabilities (186,525) (71,843)Net cash flows from operating activities before profit taxes (469,427) 1,060,688Income taxes paid (593,379) (229,540)Net cash flows from operating activities (1,062,806) 831,148

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

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Consolidated cash flow statementsFor the years ended 31 December 2006 and 2005

(thousands of U.S. Dollars)(continued)


27 June 2007



Notes 2006 2005CASH FLOWS FROM FINANCING ACTIVITIESShare capital issue 253,800 –Share premium 1,061,899 –Treasury stock purchased – (73,711)Certificated debts 3,586,928 250,071Euro-commercial papers issued 528,690 –Eurobonds issued – 1,000,000Eurobonds redeemed – (178,155)Syndicated loans 23 52,554 244,404Subordinated 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

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Notes to Consolidated financial statementsfor 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:

n the parent company – Joint-stock Bank of the Gas Industry Gazprombank (Closed Joint-stock Company) (the “Bank”),

n the group of companies owned by OAO “SIBUR Holding” (SIBUR Holding Group –the “SHG”),

n the group of companies owned by OAO “Gazprom Media” and ZAO “PRT-1”(Gazprom Media Group – the “GMG”),

n other smaller companies and banks.

The parent company of the Group – Gazprombank (the “Bank”) was established as a lim-ited liability partnership in 1990. In November 2001 the Bank changed its legal form to aclosed joint-stock company. The Bank possesses a general banking license and a licensefor operations with precious metals from the Central Bank of the Russian Federation (the “CBR”), and licenses for securities operations and custody services from the FederalStock Market Commission.

The Bank is the third bank in the Russian Federation in terms of assets and equity(source: Interfax Information Agency), providing a broad array of banking services tomany of Russia’s leading corporations and government entities including, in particular,OAO “Gazprom” and the OAO “Gazprom” Group, as well as to individual clients. The Bankis a universal financial institution and its principal activities include commercial lending,trade finance, deposit taking, domestic and international settlement services, depositaryand custodian services, project finance, private equity activities, capital market services,foreign exchange and securities trading, asset management, structured finance and bro-kerage 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 groupof companies involved in the following principal activities primarily undertaken in theRussian Federation: refining, processing and distribution of petrochemical products andproduction and distribution of tires. The Group obtained control over 75% minus oneshare of SHG in November – December 2005 as a result of the acquisition of the newlyissued OAO “SIBUR Holding” ordinary shares from other Gazprom Group companies.

Gazprom Media Group (the “GMG”) is a Russian media group of companies, the principal activ-ities 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 holdingcompanies – OAO “Gazprom-Media” and ZAO “PRT-1” (together with its subsidiaries known asthe 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 ManagementBoard of the Bank on 27 June 2007.

b) Acquisitions

During the year ended 31 December 2006 the Group made several acquisitions of addition-al stakes in consolidated subsidiaries of SHG and GMG from third party minority share-holders. Also, the Group commenced several business combinations by acquiring control-ling stakes in various companies primarily in telecommunications (GMG). Goodwill onthese 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 – 4,097ZAO 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 – 8,275OOO 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 – 1,037ZAO 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 – 2,227OOO 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 15,636OOO 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 complet-ed 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 December2006 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 theGroup and controlled the majority of seats in the Council of the Bank. A substantial por-tion 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 theGroup’s transactions are linked with the requirements of the OAO “Gazprom” Group anddetermination of pricing of transactions with the OAO “Gazprom” Group is undertakenin conjunction with other OAO “Gazprom” Group companies. See also Note 32.

NOTE 2 – BASIS OF PRESENTATION

a) General

The consolidated financial statements have been prepared in accordance with Interna-tional Financial Reporting Standards (IFRS) issued by the International Accounting Stan-dards Board and are presented in thousands of U.S. Dollars.

The Bank, SHG, GMG and other subsidiaries domiciled in the Russian Federation main-tain their books of account and prepare statements for regulatory purposes in accordancewith Russian accounting and banking legislation and instructions (RAL). Foreign sub-sidiaries of the Group prepare their financial statements in accordance with Internation-al Financial Reporting Standards (IFRS). The accompanying consolidated financial state-ments are based on the statutory records, which are maintained under the historical costconvention. At each reporting date Group members make appropriate adjustments andreclassifications to their unconsolidated statutory financial statements for the purpose offair presentation in accordance with IFRS. The accompanying consolidated financialstatements have been prepared based on those financial statements.

Management is responsible for the preparation of the consolidated financial statementsthat present fairly the financial position of the Group as of the reporting date, the resultsof its operations, cash flows and changes in equity for the reported periods in accordancewith IFRS.

The preparation of financial statements in conformity with IFRS requires management tomake estimates and assumptions that affect the reported amounts of assets and liabili-ties and disclosures of contingent assets and liabilities at the date of the financial state-ments and the reported amounts of revenues and expenses during the reporting periods.

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Actual results could differ from those estimates. Key assumptions concerning thefuture and other key sources of estimation uncertainty at the balance sheet date,that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year include assets thatare measured at amortized cost or cost less allowance for impairment losses. Theseinclude due from credit institutions, loans to customers, available-for-sale invest-ments and other assets. The estimation of allowance for impairment losses involvesan exercise of judgment. It is impracticable to assess the extent of the possibleeffects of key assumptions or other sources of uncertainty on these balances at thebalance sheet date.

b) Functional and presentation currency

Following the adoption of revised IAS 21 “The Effects of Changes in ForeignExchange Rates” (IAS 21) from 1 January 2005 the Group has re-assessed theunderlying events and circumstances that define functional (measurement) curren-cy 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 state-ments should be the Russian Ruble. Prior to 2005 the Group’s functional currencywas the U.S. Dollar.

Following the requirements of revised IAS 21 the effect of the change in the function-al currency is accounted for prospectively starting from the date of the change. All ofthe Group’s opening balances as of 1 January 2005 were translated into the newfunctional currency – the Russian Ruble – using the prevailing Ruble/Dollarexchange 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 theconvenience of users of these financial statements. See Note 3 (c) for details of currencytranslation techniques.

c) Accounting for the effects of hyperinflation

Until 1 January 2003 the Russian Federation met the criteria of a hyperinflationaryeconomy 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 theRussian Ruble as the functional currency of their financial statements (the compa-nies named in Note 1(b)), applied the provisions of IAS 29. IAS 29 requires that thefinancial statements prepared in the currency of a hyperinflationary economy bestated 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 aretreated as the basis for the carrying amounts in the financial statements of thesesubsidiaries.

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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 companiesthat 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 tobenefit from its activities. The purchase method of accounting is used for acquired busi-nesses unless they are classified as assets held for sale or are acquired from a parent orentities under common control. Companies acquired or disposed of during the year areincluded in the consolidated financial statements from the date of acquisition or to the date of disposal.

Intercompany balances and transactions including intercompany profits and losses areeliminated. The consolidated financial statements are prepared using uniform account-ing policies for like transactions and other events in similar circumstances.

The portion of the net assets and the post acquisition profit or loss of a subsidiary attribut-able to equity interests that are not owned, directly or indirectly, by the Group is present-ed as minority interest in the consolidated financial statements of the Group. In the caseof purchase of previously recorded minority interests in consolidated subsidiaries the difference, if any, between the carrying amount of a minority interest and the amount paidto acquire it is recorded in the equity. Dividends paid to minority shareholders decreasethe carrying amount of minority interests recorded in the equity.

Investments in associated companies where the Group exercises a significant influence(generally investments of between 20% to 50% in a company’s equity) are accounted forby using the equity method unless they are classified as assets held for sale. When theinvestee incurs losses the Group recognizes its share of losses until the carrying amountof the investment is reduced to nil. Recognition of further losses is discontinued.

b) Acquisition of subsidiaries from a parent or entities undercommon control

Acquisitions of subsidiaries from a parent or entities under common control are accountedfor by using the predecessor cost accounting method. The assets and liabilities of a sub-sidiary purchased from a parent or entities under common control are consolidated into theGroup’s financial statements using their carrying amounts in the IFRS financial statementsof predecessor owner, i.e. using their “predecessor cost”. As a result, when the Group pur-chases a group of entities, the goodwill arising from the original acquisitions of entities thatare parts of the purchased group is included in the Group’s consolidated financial state-ments 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 (includingthe 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 periodend, 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 thetransaction. Non-Ruble denominated monetary items included in the period end balancesheet are translated at the exchange rate prevailing at the period end.

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

If foreign subsidiaries or foreign associates, whose operations are not considered integralto the operations of the Group, have functional currencies that are different from thefunctional currency of the Group (the Russian Ruble), the resulting exchange differencesarising from translation to Rubles of their financial statements (in the case of a sub-sidiary) 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 aretranslated at the closing rate at the date of the balance sheet; income and expenses foreach profit and loss account are translated at exchange rates prevailing on the date of thetransactions; all resulting exchange differences are recognized in Foreign currency trans-lation reserve in the Group’s equity.

The U.S. Dollar/Ruble exchange rate in the Russian Federation ranged from 26.33 Rublesper U.S. Dollar at 31 December 2006 to 28.78 Rubles per U.S. Dollar at 31 December2005. The Russian Ruble is not freely convertible currency in the majority of countriesoutside of the Russian Federation; furthermore, certain limitations for currency exchangeand 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 theeffective interest method. Interest income earned on debt securities at fair value throughprofit or loss is recognized as part of the Group’s interest income. Revenue on equityinvestments is recognized only to the extent of dividends received and adjustment for fairvalue. Commissions and other banking income and expense are recognized when therelated transactions are completed as the majority of Group’s operations are mostly ofshort-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 discountswhen broadcasting or publishing of the related advertisement occurs. Revenue from sell-ing of programming rights is recognized net of VAT and discounts when all of the following

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conditions are met: sale of the related rights can be confirmed; programs are completeand delivered to clients or ready for delivering; license agreement period has started andclients 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 similarcompulsory payments. Related revenues are measured at the fair value of the consid-eration received or receivable. When the fair value of consideration received cannot bemeasured reliably, the revenue is measured at the fair value of the goods or servicesgiven up.

e) Recognition and derecognition of financial instruments

The Group recognizes securities at fair value through profit or loss and available-for-saleinvestments on the date it commits to purchase the assets (trade date). Held-to-maturityinstruments and originated loans and receivables are recognized on the day they aretransferred to or originated by the Group (settlement date).

A financial instrument is derecognized when the Group loses control over contractualrights that comprise that asset. This occurs when the rights are realized, expire or are surrendered. A financial liability is derecognized when it is extinguished – that is, whenthe obligation specified in the contract is discharged, cancelled, or expires.

Available-for-sale investments and securities at fair value through profit or loss that aresold are derecognized and corresponding receivables from the buyer for the payment arerecognized as of the date the Group non-recourse commits to sell the asset (trade date).Held-to-maturity instruments and originated loans and receivables are derecognized onthe day they are transferred by the Group or repaid (settlement date).

f) Due from credit institutions

In the normal course of business, the Group lends or deposits funds for various periodswith other credit institutions. Such amounts are categorized as loans originated by theGroup 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 usedto 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:

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

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

The classification of investments in securities is determined by management at the timeof 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 fairvalue though profit or loss and available-for-sale securities are measured as follows:

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

n Available-for-sale investments are subsequently measured at fair value based onquoted bid prices, weighted average prices for the period or present value of futurecash flows. Unrealized gains and losses arising from changes in the fair value arerecognized directly in equity (fair value reserve), except for impairment losses andforeign exchange gains and losses. Realized gains and losses arising from the saleof 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-saleinvestments is not determinable they are accounted for at cost or amortized costless 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 individend income when a dividend is declared.

All purchases and sales of securities classified as at fair value through profit or loss oravailable-for-sale investments that require delivery within the time frame established byregulation or market convention (“regular way” purchases and sales) are recognized attrade 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 arecategorized as securities at fair value through profit or loss or amount due from creditinstitutions or loans to customers depending on their economic substance. Promissorynotes 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, utilizesrepurchase and reverse repurchase agreements with securities. Repurchase agreements

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(repo agreements) are accounted for as financing transactions. As such, the related secu-rities are recorded in the Group’s accounts and the related payable is included as anamount due to credit institutions (regardless of whether the counterparty is a credit insti-tution or other financial organization). Any related expense arising from the pricingspreads for the underlying securities is recognized as interest expense and accrued overthe 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 relatedincome arising from the pricing spreads for the underlying securities is recognized asinterest income over the period that the related transactions are open using the effectiveinterest method. Securities under reverse repo agreements are not recognized in the financial statements.

j) Derivatives

The Group enters into derivative financial instruments for trading purposes. Derivativesare initially recognized at fair value, which is normally the transaction price (i.e. the fairvalue of the consideration given or received for them), and subsequently are measured attheir fair value. Fair values are obtained from quoted market prices (if available) or areestimated using appropriate valuation models and available market prices. Since at pres-ent there is a very limited market for derivatives in the Russian Federation, the fair valueof the foreign currency derivative position is calculated based on the exchange rate effective as of the reporting date.

The realized dealing profits from derivatives and unrealized changes in the fair value ofderivative contracts are included in the profit and loss account in the appropriate captionaccording to the nature of the underlying asset, i.e. as profit or loss from foreign exchange(in the case of foreign exchange or bullion derivatives) or as dealing profit or loss fromsecurities (in the case of derivatives with securities).

k) Loans to customers

Loans to customers include loans granted by the Group by providing money directly to theborrower and loans purchased from other financial institutions where the Group intendsto 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 attribut-able to the granting or purchase of the loan and are subsequently measured at amortizedcost. Expenses incurred in securing a loan, such as legal fees, are treated as part of thecost 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 thedifference between the carrying amount and the recoverable amount, being the presentvalue 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 thebalance sheet date. These have been estimated based upon historical patterns of losses in each component, the credit ratings allocated to borrowers and reflectingthe 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 occurringafter the write-down, the release of the allowance is credited to the provision for impair-ment losses in the profit and loss account.

Loans are regarded as “non-performing” if either the loan has been in default as to pay-ment of principal or interest for 90 days or more. Loans are considered “contractuallyoverdue” when a borrower fails to make a scheduled payment of principal or interest formore 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 theconsideration given/received, and are subsequently measured at amortized cost. A pro-vision for impairment of trade receivables is established if there is objective evidencethat the Group will not be able to collect all amounts due according to the original termsof receivables. The amount of the provision is the difference between the carryingamount 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 originationof 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’scarrying amount will be recovered through a sale transaction rather than through con-tinuing use. Such sale transaction shall be principally completed within one year fromthe date of classification of an asset as held for sale. Events or circumstances mayextend the period to complete the sale beyond one year. An extension of the period doesnot preclude an asset from being classified as held for sale if the delay is caused byevents or circumstances beyond the Group’s control.

Assets held for sale are measured at the lower of its carrying amount and fair valueless costs to sell. If the fair value less costs to sell of an asset held for sale is lowerthan its carrying amount, an impairment loss is recognized in the profit and lossaccount as loss from assets held for sale. Any subsequent increase in an asset’s fairvalue less costs to sell is recognized to the extent of the cumulative impairment lossthat 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 theGroup’s share of the net identifiable assets of the acquired subsidiary at the date of acqui-sition. Goodwill is tested annually for impairment and carried at cost less accumulatedimpairment losses.

Any excess of the Group’s share of the net identifiable assets over the cost of an acquisi-tion 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 balancesheet when there is a legally enforceable right to set off the recognized amounts and thereis an intention to settle on a net basis, or realize the asset and settle the liability simulta-neously.

p) Fair value of financial instruments

Fair value is the amount at which a financial instrument could be exchanged in a currenttransaction between willing parties, other than in a forced sale or liquidation, and is bestevidenced by a quoted market price.

The estimated fair values of financial instruments have been determined by the Group usingavailable market information, where it exists, and appropriate valuation methodologies,as described in accounting policies for the financial instruments that are carried at fairvalue as prescribed by IAS 39 “Financial instruments: recognition and measurement”.However, judgment is necessarily required to interpret market data to determine the esti-mated fair value. As described in more detail in Note 33(i), the Russian Federation exhibitssigns of an emerging market and has a relatively small volume of activity in its financialmarkets. While management has used available market information in estimating the fairvalue of financial instruments, the market information may not be fully indicative of thevalue that could be realized in the current circumstances.

According to IAS 32 “Financial instruments: disclosure and presentation” the Group isrequired to disclose estimates of fair value of financial instruments even if they are carriedat amortized cost as prescribed by IAS 39. Such instruments include: loans and advancesto 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 fairvalue of such instruments may be not possible. Management estimates their fair value byapplying valuation techniques, which are based on discounting future projected cashflows of such instruments using current market rates for respective financial instruments. Also, the fair value of assets and liabilities maturing within one year aredeemed to be approximated by their amortized cost. The estimated fair values of financialinstruments 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 accumulateddepreciation (amortization) and any accumulated impairment losses. Furthermore,the historical cost of property, equipment and intangibles of the subsidiaries, thatused the Russian Ruble as the functional currency of their financial statementsduring the period when the Russian Federation met the criteria of a hyperinflationaryeconomy (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 esti-mated useful economic life of the asset. The economic lives are as follows:

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

Assets under construction are not depreciated. Depreciation of these assets will beginwhen 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 ofimpairment of property, equipment and intangibles. If any such indication exists, themanagement estimates the recoverable amount, which is determined as the higher ofan asset’s fair value less costs to sell and its value in use. The carrying amount isreduced 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 isreversed if there has been a change in the estimates used to determine the asset’svalue in use or fair value less costs to sell.

Years

Buildings 20-100Office equipment 3-20Leasehold improvements Over expected life of the leaseProgramming rights See belowSoftware and other intangible assets 3-10

Number of airings Amortization rate

1 airing 100%2 airings 65% – at the first; 35% – at the second3 airings 50% – at the first; 30% – at the second;

20% – at the third

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r) Bullion in vault

The Group enters into operations with bullion for trading purposes. Bullion in vault ismeasured 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 ordinarycourse of business as inventories. Inventories are measured at the lower of cost and netrealizable value. The cost of inventories held by the Group comprises all costs of purchaseincluding purchase price, duties and other taxes, transportation and other costs directlyattributable to acquisition. The Group recognizes the amount of any write-down of inventories to net realizable value and all losses of inventories as an expense in the periodthe write-down or loss occurs.

t) Operating and financial leases

The Group enters into operating lease agreements as a lessee. The total payments madeunder operating leases are charged to the profit and loss account on a straight-line basisover the period of the lease.

Where the Group is a lessee in a lease, which transferred substantially all the risksand rewards incidental to ownership to the Group, the assets leased are capitalized inproperty, plant and equipment at the commencement of the lease at the lower of thefair value of the leased asset and the present value of the minimum lease payments.Each lease payment is allocated between the liability and finance charges so as toachieve a constant rate on the finance balance outstanding. The corresponding rentalobligations, net of future finance charges, are included in other liabilities. The interestcost is charged to the income statement over the lease period using the effective interest method. The assets acquired under finance leases are depreciated over theiruseful life or the shorter lease term if the Group is not reasonably certain that it willobtain 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 inthe 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 fairvalue less transaction costs that are directly attributable to the acquisition or issue of

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the financial liability. Subsequently amounts due are stated at amortized cost and anydifference between the carrying amount and the redemption value is recognized in theprofit and loss account over the period of the borrowings using the effective interestmethod. If the Group purchases its own debt, it is removed from the balance sheet and thedifference between the carrying amount of a liability and the consideration paid is includ-ed in net interest income.

w) Certificated debts and Eurobonds issued

Certificated debts represent promissory notes, certificates of deposit and bonds issued bythe Group to domestic customers. Eurobonds represent internationally traded Euro Medium Term Notes and Loan Participation Notes issued by the Group. They areaccounted 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 aredeclared. Dividends for the year, which are declared after the balance sheet date, aretreated 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 astreasury stock shown as a deduction from total equity. Gains and losses on sales of ownshares 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 parvalue 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 obligationas 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 itssubsidiaries are located and is based on the results reported in the profit and lossaccounts of the Bank and its subsidiaries prepared under statutory tax legislation.Deferred income taxes are provided on temporary differences between the tax base of anasset or liability and its carrying amount in the balance sheet. The tax base of an asset orliability is the amount attributed to that asset or liability for tax purposes. Deferredincome tax assets and liabilities are measured at the tax rates that are expected to applyto the period when the asset is realized or the liability is settled.

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

The Russian Federation also has various other taxes, which are assessed on the Group’sactivities. These taxes (except value added tax) are included as a component of adminis-trative 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 authoritiesupon collection of receivables from customers. Input VAT is reclaimable against sales VATupon payment for purchases. The tax authorities permit the settlement of VAT on a netbasis. VAT related to sales and purchases which have not been settled at the balance sheetdate (VAT recoverable and deferred VAT payable) is recognized on a gross basis and dis-closed separately as other asset and other liability. Where provision has been made forimpairment of receivables, impairment loss is recorded for the gross amount of the debtor,including VAT. The related VAT deferred liability is maintained until the debtor is writtenoff for tax purposes.

bb) Cash and cash equivalents

The Group considers cash, current account with the Central Bank of the Russian Feder-ation and amounts due from credit institutions with maturity of three months or lesswhen originated to be cash equivalents.

Cash balances with contractual limitations on immediate disposal and overdue amountswere excluded from cash and cash equivalents

cc) Financial guarantees

Financial guarantees issued by the Group represent obligation to pay certain amount toa beneficiary as a compensation of loss, incurred as a result of the payer’s failure to makepayment in specified period in accordance with the original or modified terms of the finan-cial instrument. Such guarantees are initially recognized at fair value. Subsequently theyare 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 theequity instrument at the grant date. Fair value is measured by use of a market quotationor an independent appraisal if the equity instrument is not traded. Further details on howthe fair value of equity-settled share-based transactions has been determined can befound in Note 11.

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The fair value determined at the grant date of the equity-settled share-based payments isexpensed 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 servicesreceived is recognized at the current fair value determined at each balance sheet date.

Share-based payment transactions with cash alternative are structured so that theemployee has the right to choose whether the transaction is settled in equity instru-ments 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-basedpayments. 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 transferreddirectly to equity.

ee) Restatements and reclassifications

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

In 2006 the Group identified errors in measurement of minority interest in net income ofGMG for the year ended 31 December 2005 and carrying value of minority interest inequity 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 2005were restated accordingly.

ff) Effect of adoption of new IFRS

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

Financial Financial Amount of Descriptionstatements caption statements caption reclassification of reclassification

before reclassification after reclassification

Dealing profits realized, net Dealing profits, net 272,548Dealing profits unrealized, net Dealing profits, net 230,787 Changing the presentationOther expenses Administrative and

other expenses (23,137) Changing the presentation

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

Also following standards and interpretations have been published that are manda-tory to the Group’s accounting periods beginning on or after 1 January 2006 or laterperiods and which the Group has not early adopted: Complementary amendmentsto IAS 1 “Presentation of Financial Statements – Capital Disclosures” (effective forannual 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 onor after 1 June 2006).

These new standards, amendments to standards and interpretations are not expected to significantly affect the Group’s financial statements when adopted.

NOTE 4 – SEGMENT REPORTING

The Group’s risks and rates of return are affected predominantly by differences inthe products and services it produces; hence the Group’s primary format for report-ing segment information are business segments. Following the acquisitionsdescribed in Note 1 of these financial statements the Group as of 31 December 2006distinguishes the following three business segments according to IAS 14 “SegmentReporting”: banking, petrochemicals and tires, and media. For additional disclo-sures on types of products and services included in each business segment seeNotes 1, 7 and 8. Prior to the acquisitions made in the second half of 2005 theGroup’s operations were highly integrated and primarily constituted a single indus-try segment, banking. The regional breakdown of the Group’s assets and liabilitiesis presented in Note 31.

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 Consolidatedand tires

Year ended 31 December 2006

PROFIT AND LOSS INFORMATIONNet interest income after provision for losses – external 320,843 (12,631) 11,995 – 320,207Inter-segment net interest income 12,453 (2,541) (9,912) – –Non interest income – external 1,202,840 4,519,005 887,927 – 6,609,772Inter-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 – 2,013,709Income from associate 37,418 23,549 – – 60,967Income 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 SHEETCash and due from the CBR and credit institutions, net 9,948,507 162,238 34,387 – 10,145,132Securities at fair value through profit or loss 2,316,826 91 29,508 – 2,346,425Loans to customers, gross 12,025,312 18,157 10,965 – 12,054,434Allowance 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 – 2,579,339Allowance for impairment losses – available-for-sale investments (59,463) (23,260) (66) – (82,789)Trade receivables, gross 35,658 383,772 210,847 – 630,277Allowances for impairment losses – trade receivables – (71,133) (18,298) – (89,431)Inventories, gross 158,524 524,223 4,460 – 687,207Allowances for impairment losses – inventories – (14,313) – – (14,313)Property, equipment and intangibles, gross 313,996 3,189,764 858,315 – 4,362,075Depreciation and amortization (112,828) (1,380,573) (421,275) – (1,914,676)Goodwill – – 619,333 – 619,333Other assets, net 264,276 486,240 65,382 – 815,898Total 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 – 2,979,652Amounts owed to customers 11,370,411 60,188 16,492 – 11,447,091Subordinated deposits 688,832 – – – 688,832Certificated debts 5,389,819 63,225 1,499 – 5,454,543Eurobonds issued 2,552,909 – 60,829 – 2,613,738All other liabilities 1,151,707 461,573 221,193 – 1,834,473Total segment liabilities 23,920,623 797,687 300,019 – 25,018,329

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Banking Petrochemicals Media Eliminations Consolidatedand tires

Year ended 31 December 2005

PROFIT AND LOSS INFORMATIONNet interest income after provision for losses – external 243,470 – 7,065 – 250,535Inter-segment net interest income 1,331 – (1,331) – –Non interest income – external 878,046 – 365,407 – 1,243,453Inter-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 – 711,358Income from associate – 11,809 – – 11,809Income tax expense (149,505) – (25,272) – (174,777)Net profit 476,465 11,809 60,116 – 548,390

Capital expenditure 42,211 – 227,829 – 270,040

Depreciation and amortization 18,873 – 107,348 – 126,221

BALANCE SHEETCash and due from the CBR and credit institutions, net 3,913,358 13,626 25,590 – 3,952,574Securities at fair value through profit or loss 1,611,781 – 25,885 – 1,637,666Loans to customers, gross 7,615,067 120,929 85,490 – 7,821,486Allowance for impairment losses – loans to customers (303,388) (117,005) – – (420,393)Available-for-sale, gross and investments in associates 1,061,668 147,381 197,686 – 1,406,735Allowance for impairment losses – available-for-sale investments (23,805) (113,239) (179,177) – (316,221)Trade receivables, gross 99,651 493,958 45,675 – 639,284Allowances for impairment losses – trade receivables – (159,397) (16,328) – (175,725)Inventories, gross 54,152 405,320 2,806 – 462,278Allowances for impairment losses – inventories – (12,121) – – (12,121)Property, equipment and intangibles, gross 227,943 2,677,530 581,317 – 3,486,790Depreciation and amortization (96,786) (1,138,470) (280,144) – (1,515,400)Goodwill – – 552,651 – 552,651Other assets, net 94,402 390,245 50,208 – 534,855Total segment assets 14,254,043 2,708,757 1,091,659 – 18,054,459

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

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NOTE 5 – NET INTEREST INCOME

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

NOTE 6 – PROVISIONS FOR IMPAIRMENT LOSSES

Provisions for impairment losses in the consolidated profit and loss account represent thecharge 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 duringthe years ended 31 December 2006 and 2005 was:

2006 2005INTEREST INCOMELoans to customers:– Loans to legal entities 795,705 535,151– Loans to individuals 139,693 54,653

Due from credit institutions 217,658 88,554Debt securities 107,304 61,162

1,260,360 739,520INTEREST EXPENSEAmounts owed to customers:– Amounts owed to legal entities 208,690 108,005– Amounts owed to individuals 96,258 80,206

Certificated debts 210,066 93,260Eurobonds issued 152,976 110,104Amounts owed to credit institutions 143,988 67,025

811,978 458,600Net interest income 448,382 280,920

Due from credit Loans to Total institutions customers allowances

31 December 2004 9,583 275,810 285,393Effect of consolidation of subsidiaries – 132,623 132,623(Recoveries)/provisions charged to profit (228) 30,613 30,385Amounts 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 9,011 420,393 429,404Provisions charged to profit 1,029 127,146 128,175Amounts written off – (116,556) (116,556)Foreign exchange difference from translation to presentation currency (Note 3 (c)) 871 39,461 40,33231 December 2006 10,911 470,444 481,355

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

Allowances for losses on assets are deducted from the related asset. Provisions for otherrisks are recorded in liabilities (see Note 26). In accordance with the statutory legislation,loans may only be written off with the approval of the Council of the Bank and, in certaincases, with the respective decision of the Court.

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

invest-ments

31 December 2004 26,289 – – 478 5,839 32,606Effect of consolidation of subsidiaries 292,614 175,725 12,121 886 3,780 485,126Recoveries of provisions charged to profit (1,739) – – (874) (190) (2,803)Foreign exchange difference from translation to presentation currency (Note 3 (c)) (943) – – (16) (210) (1,169)31 December 2005 316,221 175,725 12,121 474 9,219 513,760Provisions /(recoveries of provisions) charged to profit 32,473 (3,270) 1,402 (122) 10,403 40,886Amounts written off (287,602) (94,284) (370) (56) – (382,312)Foreign exchange difference from translation to presentation currency (Note 3 (c)) 21,697 11,260 1,160 39 1,175 35,33131 December 2006 82,789 89,431 14,313 335 20,797 207,665

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NOTE 7 – PETROCHEMICAL BUSINESS OPERATINGREVENUES AND EXPENSES

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

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

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

Notes 2006PETROCHEMICAL BUSINESS OPERATING REVENUES, NETRubbers and other polymers 1,315,736Other refined products 1,212,879Tires 699,807Products of organic synthesis 556,890Liquefied hydrocarbon and dry gas 390,461Other 375,571Less - Compulsory duties (57,712)

4,493,632PETROCHEMICAL BUSINESS OPERATING EXPENSESMaterials 1,431,677Salaries and other employment benefits 697,780Electricity 465,420Depreciation 20 132,082Processing services of third parties 94,787Gas for own needs 87,342Purchased refinery products 78,498Repairs and maintenance 73,485Expedition costs 67,036Transit and storage costs 37,775Rent expenses 36,374Security expenses 36,153Operating taxes 33,979Other expenses 203,757

3,476,145Petrochemical business operating profit 1,017,487

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NOTE 8 – MEDIA BUSINESS OPERATING REVENUES AND EXPENSES

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

NOTE 9 – DEALING PROFITS, NET

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

Notes 2006 2005MEDIA BUSINESS OPERATING REVENUESAdvertising 632,754 259,945Broadcasting 173,316 67,171Programming rights 30,925 10,616Publishing activities 25,810 14,811Other revenues 20,346 7,056

883,151 359,599MEDIA BUSINESS OPERATING EXPENSESDepreciation and amortization 20 262,625 107,348Salaries and other employment benefits 157,338 64,484Broadcasting services 88,652 34,647Other costs to sell 65,202 19,709Publishing expenses 33,167 19,997Administrative expenses 30,677 15,004Cost of goods sold 13,713 3,522Other expenses 33,776 15,158

685,150 279,869Media business operating profit 198,001 79,730

2006 2005

Fair Sale Total Fair Sale Totalvalue and value and

adjust- redemp- adjust- redemp-ment tion ment tion

Corporate shares 121,244 373,581 494,825 265,129 303,879 569,008Corporate bonds 6,461 (12,889) (6,428) 554 7,256 7,810Russian and Moscow government bonds 4,334 (12,097) (7,763) 3,801 6,964 10,765Derivatives 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:

Commissions on debit/credit cards represent commissions received from the Group’sclients on issue and processing of debit/credit cards and from other financial institutionson acquiring services. Settlements commissions represent commissions received fortransfer 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 theprocessing 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

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

2006 2005

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

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NOTE 11 – SALARIES, ADMINISTRATIVE AND OTHER EXPENSES

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

Salaries for the year ended 31 December 2006 include USD 17,840 thousand that relatesto bonus payments to the Management Board (2005 – USD 20,720 thousand).

In 2005 the Group’s shareholders adopted a formal procedure that determines theamount of annual remuneration payable to the Council of the Bank. As a result, in 2005the Group started to recognize the remuneration of the Council of the Bank on an accru-al basis (i.e. in proportion to the rendering of services). Included in salaries for the yearended 31 December 2006 is the amount of USD 23,297 thousand that relates to theaccrued remuneration of the Council of the Bank (2005 – USD 26,165 thousand accruedand 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 employercalculated as a percentage of current gross salary payments; such expense, included insocial security costs, is charged to the consolidated profit and loss account in the periodthe related compensation is earned by an employee. Also, in 2005 the Bank has set out adefined contribution pension plan for its employees. The Bank has recognized USD 10,124 thousand as an expense for defined contribution plan attributable to servicesprovided 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 paidaccording to Russian tax legislation.

2006 2005

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

Operating taxes 38,079 12,200Occupancy 33,461 21,033Rent 33,423 19,457Professional services 31,307 21,980Business development 26,934 9,953Depreciation and amortization 19,318 18,873Charges to the State Deposit Insurance System 14,850 4,991Communications 13,110 9,749Charity expenses 7,032 3,722Insurance expenses 5,036 5,866Other 47,164 51,119Administrative expenses 269,714 178,943

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Employee share-option plans

In June and November 2006 the Council of the Bank approved two ownership-based com-pensation 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 performanceof the managers. The parameters of the plans follow:

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

Plan 1

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

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

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 norvoting rights.

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 to 15.02.2008 equities 5,184 11,248of Management 31.12.2007 or cashBoard

1(b) members 200,000 25.12.2006 01.01.2008 to 15.02.2009 equities 5,184 11,248of Management 31.12.2008 or cashBoard

1(c) members 200,000 25.12.2006 01.01.2009 to 15.02.2010 equities 5,184 11,248of Management 31.12.2009 or cashBoard

2 senior 400,000 25.12.2006 01.01.2007 to 31.12.2009 equities 5,184 11,248managers 31.12.2009

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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 afterthe grant date. According to the plan, at grant date the managers agreed to purchase theBank’s shares at a price of RUR 5,184 per share and simultaneously issue put options onthe shares to the Group with the same exercise price. The options expire in three yearsand are exercisable only in equities. The shares carry both the rights to dividends and thevoting rights during the three-year period.

The Bank partly subsidized the share purchase under Plan 2 by paying to the managersa special-purpose bonus to cover approximately a half of the share price. The totalamount of the bonus paid is RUR 1,242,700 thousand (USD 45,798 thousand), which isincluded in the salaries expense for the year ended 31 December 2006.

NOTE 12 – INCOME TAX

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

Russian legal entities must individually report taxable income and remit income taxesthereon to the appropriate authorities.

The effective income tax rate differs from the statutory income tax rate. A reconciliation ofthe income tax provision based on the statutory rate with the actual income tax provisionfollows:

2006 2005

Current tax charge 569,065 210,292Deferred tax recovery (71,252) (50,160)Transfer of deferred tax previously recorded directly in equity 19,200 14,645Income tax expense 517,013 174,777

2006 2005

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

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

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

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

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

31 December 31 December2006 2005

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


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

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

A reconciliation of changes in the net balance sheet deferred income tax position duringthe years ended 31 December 2006 and 2005 follows:


Tax effect of taxable temporary differencesProvision for impairment losses 55,908 53,515Property, plant and equipment and intangibles 20,162 15,087Tax losses carry forward 8,267 –Accounts payable 7,653 –Accounts receivable 4,396 –Financial assets through profit or loss 1,833 3,087Accrued expenses 1,625 12,620Assets held for sale – 25,296Other 20,283 16,993Deferred tax asset 120,127 126,598Off-set with deferred tax liabilities (88,531) (97,474)Deferred tax asset, net 31,596 29,124

Tax effect of deductible temporary differencesFair value adjustments (190,961) (76,090)Property, plant and equipment and intangibles (184,641) (161,890)Income from associates (11,887) –Provision for impairment losses (5,936) (38,145)Trade payables (1,875) –Accrued interest and expenses (1,409) (10,928)Other (12,126) (26,858)Deferred tax liability (408,835) (313,911)Off-set with deferred tax assets 88,531 97,474Deferred tax liability, net (320,304) (216,437)

Deferred income tax liability, net (288,708) (187,313)

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

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NOTE 13 – CASH AND DUE FROM THE CENTRALBANK OF THE RUSSIAN FEDERATION

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

As of 31 December 2006 proceeds received by the Group for the ordinary shares issued bythe Bank in December 2006 in the amount of USD 1,315,699 thousand were placed ontime and current accounts with the Central Bank of the Russian Federation. For details ofthe 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:

As of 31 December 2006 38% (USD 2,722,486 thousand) of the gross amounts due fromcredit 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 theamount of USD 1,370,008 thousand relate to placements with Deutsche Bank AG (Ger-many), Rosprombank (Russian Federation) and Vneshtorgbank (Russian Federation).


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


Current accounts 1,287,494 680,847Time deposits 4,968,803 1,089,904Repurchase agreements 992,296 1,121,083

7,248,593 2,891,834Less – Allowances for impairment losses (10,911) (9,011)Due from credit institutions, net 7,237,682 2,882,823

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Included in time deposits placed with credit institutions as of 31 December 2006 is anamount of USD 70,155 thousand (31 December 2005 – USD 70,145 thousand) that rep-resents the following U.S. Dollar denominated subordinated loans granted by the Group:

In the event of bankruptcy, subordinated loans are to be repaid by a borrowing bank onlyafter the settlement of all other liabilities.

As of 31 December 2006 the Bank had USD 30,473 thousand placed on time depositswith foreign banks that represent amounts transferred under letters of credit opened withthe Group (31 December 2005 – USD 13,512 thousand). These placements are covered bycustomer funds blocked on their time deposit accounts.

As of 31 December 2006 and 2005 the maximum credit risk exposure on amounts duefrom credit institutions is limited to USD 7,237,682 thousand and USD 2,882,823 thou-sand, respectively.

Reverse repo agreements represent short-term funding granted by the Group with secu-rities received as collateral. Securities received by the Group under reverse repo agree-ment are not recognized in the Group’s financial statements and are regarded as collat-eral by substance of transaction. According to the regular way of such deals, securitiesreceived under reverse repo agreement may be sold or re-pledged by the Group in theabsence of default by the owner of these securities (counterparty). However, according tothe terms of reverse repo agreements the Group has an obligation to return the sameamount of securities to the counterparty when the transaction is settled. As of 31 December 2006 and 2005 the Group had the following securities received as collater-al under reverse repo agreements.

Bank Notional Origination date Maturity Interest rateamount

Altalanos Ertekforgalmi Bank (Hungary) 60,000 December 1997 December 2007 12 month LIBORBelgazprombank (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

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 52,818Corporate 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

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NOTE 15 – SECURITIES AT FAIR VALUE THROUGHPROFIT OR LOSS

Securities at fair value through profit or loss comprise:

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 marketquotations 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 cor-porate bonds of Russian “blue-chip” enterprises. The annual nominal coupon rates onthese 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 denomi-nated government securities issued and guaranteed by the Ministry of Finance of theRussian Federation (OFZ, Vnesheconombank (VEB) bonds), and municipal bonds issuedand 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 col-lateral under repo agreements (see Note 23). Securities are stated at their estimated fairvalues as of the reporting dates.

Corporate shares pledged as collateral under repo agreements include both, sharesowned 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 benoted that because of the relative illiquidity in the Russian securities markets, the market quota-tions used in valuing the Group’s securities may not be reflective of their net realizable value in anexchange between a willing buyer and a willing seller due to the volume of the Group’s holdings.

31 December 2006 31 December 2005Nominal Carrying Nominal Carrying

value value value value

Corporate shares 21,763 1,161,048 39,531 815,550Corporate bonds 623,452 635,435 538,304 543,577Promissory notes 280,741 285,754 103,474 100,154Russian and Moscow government bonds 251,936 264,188 171,240 178,385

1,177,892 2,346,425 852,549 1,637,666


Corporate shares 1,638,091 32,162Corporate bonds 8,685 50,450

1,646,776 82,612

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NOTE 16 – LOANS TO CUSTOMERS

Loans to customers comprise:

The Group has significant loan exposures to the OAO “Gazprom” Group. As of 31 December2006 such exposures accounted for 23% (USD 2,765,930 thousand) of the gross loan portfolio(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 carryingvalue of the loan as of the dates of its disposal. As a result, as of 31 December 2006 the Group’stotal 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 thousandor 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 theGroup with a residual maturity exceeding 10 years (31 December 2005 – USD 206,264 thousand or33%). As of 31 December 2006 USD 332,030 thousand of the mortgage loan portfolio was securi-tized by the Group by means of several issues of mortgage backed securities. See Note 25 for details.

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 enterprises and petrochemical industries 725,210 6.0% 349,788 4.5%Nuclear industry 628,298 5.2% 562,798 7.2%Machine building 462,809 3.8% 302,269 3.9%Electric power industry 416,134 3.5% 350,868 4.5%Leasing 302,952 2.5% 104,667 1.3%Mining 294,733 2.4% 40,002 0.5%Food industry 294,464 2.4% 134,785 1.7%Telecommunications 210,657 1.7% 191,475 2.4%Chemical industry 178,748 1.5% 136,443 1.7%Agriculture 97,046 0.8% 49,941 0.6%Transport 83,608 0.7% 327,821 4.2%Timber industry 79,689 0.7% 33,342 0.4%Shipbuilding 49,397 0.4% 242,363 3.1%Insurance 36,449 0.3% 32,417 0.4%Other 241,145 2.1% 257,308 3.5%

12,054,434 100.0% 7,821,486 100.0%Less – Allowances for impairment losses (470,444) (420,393)Loans to customers, net 11,583,990 7,401,093

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The Group’s loan portfolio has been extended to the following types of enterprises:

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 policyon 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 repre-sents loans collateralized by equity shares which can be sold or re-pledged by theGroup in the absence of default by the borrowers. As of 31 December 2006 theGroup 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 – fromUSD 7,078,926 thousand to USD 7,401,093 thousand).

As of 31 December 2006 and 2005 the maximum credit risk exposure on loans tocustomers is limited to USD 11,583,990 thousand and USD 7,401,093 thousand,respectively.


Private companies, gross 7,765,885 4,420,510Less – Allowances for impairment losses (365,610) (303,413)Private companies, net 7,400,275 4,117,097State controlled companies, gross 2,604,775 2,766,765Less – Allowances for impairment losses (79,349) (96,127)State controlled companies, net 2,525,426 2,670,638Individuals, gross 1,683,774 634,211Less – Allowances for impairment losses (25,485) (20,853)Individuals, net 1,658,289 613,358Loans to customers, net 11,583,990 7,401,093

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a) Investments accounted for at fair value

Investments accounted for at fair value comprise:

As of 31 December 2006 the investment in U.S. Treasury bills with a residual matu-rity less than one year is pledged by the Group as security on time deposits receivedfrom foreign bank in the amount of USD 357,374 thousand (31 December 2005 –USD 357,506 thousand) (see Note 23).

NOTE 17 – AVAILABLE-FOR-SALE INVESTMENTS,NET AND INVESTMENTS IN ASSOCIATES

Available-for-sale investments comprise:


Available-for-sale investments accounted for at fair value 2,082,986 851,627Investments in associates accounted for under the equity method 226,686 31,825Available-for-sale investments accounted for at cost:- Unconsolidated subsidiaries 55,236 326,000- Associates accounted for at cost 34,812 46,645- Other investments accounted for at cost 179,619 150,638

2,579,339 1,406,735Less – Allowances for impairment (82,789) (316,221)Available-for-sale investments, net and investments in associates 2,496,550 1,090,514


Corporate shares and ADRs 1,386,521 343,558U.S. Treasury bills 509,189 357,573Tradable CLNs 103,369 66,369Funds participation shares 83,907 84,127

2,082,986 851,627

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As of 31 December 2006 and 2005 included in corporate shares and ADRs are invest-ments of the Group in OJSC “Mosenergo” (‘‘Mosenergo’’), Russia’s largest regional utilitycompany and the principal supplier of electricity and heat to the Moscow region, andother 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:

The available-for-sale investments above, except for investments in Mosenergo andMosenergo companies, are measured at fair value based on last quoted bid prices. Invest-ments in Mosenergo and Mosenergo companies are measured at the weighted averageprice 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 maynot be reflective of their net realizable value in an exchange between a willing buyer and awilling seller due to the volume of the Group’s holdings.

b) Investments in associates accounted for under the equitymethod

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 2005activity

Group’s Carrying Group’s Carryingholding, % 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% 7,748NIPI Gazpererabotka Research activity Russia 38.0% 5,545 38.0% 4,482Metafraks Methanol production Russia – – 33.5% 19,595

226,686 31,825

Group’s 31 December Group’s 31 December holding, % 2006 holding, % 2005

Mosenergo 10.0% 562,573 6.6% 249,125Moskovskaya 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

1 - These companies were not tradable on the Russian stock-exchange as of 31 December 2005 and wereincluded in available-for-sale investments accounted for at cost. See Note 17 (d).

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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:

In December 2006 the Group acquired a 51% interest in OAO “Sibneftegas”, a Russian oiland gas company, from a third party for total consideration of USD 129,620 thousandbeing the fair value of the Group’s share in net assets of OAO “Sibneftegas” as of the dateof acquisition.

In 2006 the Group started equity accounting for its investment in OOO “Gaztekhleasing”made in September 2001, a Russian company rendering leasing services within OAO “Gazprom” Group, because the results of its operations became material for theGroup’s consolidated financial statements since 1 July 2006. On the date of commence-ment of equity accounting the Group has recognized the excess of the Group’s share of thenet fair value of OOO “Gaztekhleasing” identifiable assets, liabilities and contingent liabilities over the cost of the investment in the amount of USD 32,508 thousand asincome from associate.

The ownership of controlling stakes by the Group in OAO “Sibneftegas” and OOO “Gaztekhleasing” either by virtue of charter agreements or by substance does notconstitute control over operations of the companies, although it does constitute a right ofsignificant influence. Hence the Group regards OAO “Sibneftegas” and OOO “Gaztekhleasing” as associate companies accounted for under the equity method.

In August 2006, the SIBUR Holding Group (SHG) contributed its 33.5 percent interest inOAO “Metafraks”, a methanol producing company, and the methanol producing property,plant and equipment of its consolidated subsidiary OOO “Tomskneftekhim” to the char-ter capital of a newly formed entity OOO “Sibmetakhim”. The carrying value of theseassets was USD 41,586 thousand. At 31 December 2006 the Group had a 66.7 percentinterest 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 assetcontributed equal to USD 68,778 thousand.

OOO “Sibmetakhim” is jointly controlled by OAO “Gazprom” and SHG and is account-ed for under the equity method in these consolidated financial statements. The Grouprecorded 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 inOAO “Metafraks” and the property, plant and equipment representing OAO “Gazprom’s” share of the difference between fair value and the carrying value ofthe assets contributed by the Group.

2 - Profit/(loss) is disclosed from the date of acquisition till 31 December 2006 or for the year then ended.

Name Assets Liabilities Profit /(loss)2

Sibneftegas 787,396 533,238 –Sibmetahim 82,838 17,223 14,927Gaztekhleasing 421,259 385,726 4,910SP Matador-Omskshina 41,795 20,147 2,594NIPI Gazpererabotka 15,050 5,326 1,799

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c) Unconsolidated subsidiaries accounted for at cost

As of 31 December 2006 and 2005, the Group had investments in the following unconsol-idated subsidiaries:

Unconsolidated subsidiaries and associates have not been consolidated with the results of theGroup nor accounted for under the equity method as either the Group does not execute controlor significant influence over some of the subsidiaries and associates, or the effect would notmaterially alter the financial position of the Group as of 31 December 2006 and 2005 or theresults of its operations or cash flows of the Group for years ended 31 December 2006 and 2005.

d) Associates accounted for at cost

As of 31 December 2006 and 2005, the Group has investments in the following associatesaccounted for at cost:

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.



FK Zenit Sports Russia 51.0% 39,621 51.0% 36,247Permskii GPZ Petrochemicals Russia 50.1% 5,072 50.1% 4,640Pansionat Samara Entertainment Russia 75.4% 1,431 75.4% 1,309Raschetno-DepositarnayaKompanya Clearing&Custody Russia 55.0% 1,308 55.0% 1,197Strategicheskie activi Banking Russia 100.0% 1,139 – –Sibur-International Ltd Petrochemicals U.K. 100.0% 1,100 100.0% 1,006Media-Most Telecommunications Russia – –3 78.2% 179,177SeverGazPererabotka Petrochemicals Russia – –3 100.0% 58,369Apparat Upravleniya Management Russia – –3 51.0% 9,089Novokuybishevskaya NHK Petrochemicals Russia – –3 100.0% 23,703Sibur-Neftesbit Petrochemicals Russia – –3 100.0% 5,602Other 5,565 5,661

55,236 326,000



Belgazprombank Banking Belarus 33.9% 10,233 33.9% 9,361Mezhregionteploenergo Utilities Russia 40.8% 5,057 40.8% 4,626Yamal SPG Oil & gas Russia 25.1% 4,557 – –Tambeyneftegaz Oil & gas Russia 25.1% 4,557 20.0% 3,322Dvorec Kulturi Toliatti Entertainment Russia 50.0% 3,801 50.0% 3,477Sportsroyresurs Construction Russia 25.0% 1,899 – –Sibgaztrans Oil & gas Russia 49.6% 1,747 49.6% 1,598Gazenergoprombank Banking Russia – –4 45.2% 13,789SK Regiongarant Financial services Russia – – 35.2% 7,461Specdepozitarii Clearing&Custody Russia – –5 25.0% 1,172Other 2,961 1,839

34,812 46,645

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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, theGroup accounts for the investments in these companies at cost being the fair value assigned to eachcompany as of 1 April 2005 – the date of Mosenergo restructuring. When the five Mosenergo compa-nies become listed on the Russian stock-exchange market they will be re-measured to fair valuebecause their share quotations will become representative. See also Note 17 (a) “Available-for-saleinvestments accounted for at fair value”.

Other investments accounted for at cost also include minor stakes in various Russian companies.

The equity instruments disclosed above (other than those accounted for at fair value) are carried atcost, because they do not have a quoted market price in an active market and other methods of reasonably estimating fair value are unworkable due to the lack of reliable information for discountedcash flow analysis and the absence of comparable quoted companies. It is also currently impossible tocalculate the range of estimates within which fair value of the equity investments is highly likely to lie.

As of 31 December 2006 allowances for impairment losses of USD 82,789 thousand are set upagainst the investments carried at cost (31 December 2005 – USD 316,221 thousand).

The movements of available-for-sale investments and investments in associates during the yearsended 31 December 2006 and 2005 were as follows:

31 December 2004 1,141,727Net effect of adjustments to fair value 147,171Available-for-sale investments purchased 941,654Transfer to assets held for sale (24,703)Effect of consolidation of subsidiaries (43,943)Rights issue of an associate 3,152Available-for-sale investments disposed (1,044,517)Investments acquired as a result of business combination 327,464Foreign exchange difference from translation to presentation currency (Note 3 (c)) (41,270)31 December 2005 1,406,735Net effect of adjustments to fair value 588,996Available-for-sale investments purchased 2,531,979Transfer 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 60,967Dividends from associates (3,200)Rights issue 1,206Amounts 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)) 126,96331 December 2006 2,579,339

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Amounts written off for the year 2006 primarily relate to write-off of the Group’s investment inZAO “Media Most” against the allowance set up in previous reporting periods. This results fromthe 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 amountof 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 82,927thousand; (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:

Trade receivables and prepayments primarily consist of prepayments under raw materi-als purchase agreements and short- and medium-term receivables for petrochemicalproducts marketed and processing services rendered by petrochemical and tires businesssegment of the Group. As of 31 December 2006 the amount of such receivables and pre-payments amounted to USD 383,772 thousand (31 December 2005 – USD 493,958 thou-sand). As of 31 December 2006 the allowance for impairment associated with these assetswas 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:


Trade receivables 294,541 181,564Prepayments and advances 256,714 217,415Other trade receivables 79,022 240,305

630,277 639,284Less – Allowance for impairment losses (89,431) (175,725)Trade receivables, net 540,846 463,559


Refined products 386,471 274,919Property and goods for resale 191,470 98,641Materials and supplies 87,796 83,378Other finished goods 21,470 5,340

687,207 462,278Less – Allowance for impairment losses (14,313) (12,121)Inventories, net 672,894 450,157

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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 2006is 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 busi-ness operating expenses and in the media business operating expenses (see Notes 7, 8).

Subsidiary Land, Machinery, Other Software Assets Totalbuildings transport and under facilities and program- const-

equipment ming rights ructionCOST OF ACQUISITION31 December 2004 23,970 70,458 – 8,444 20,437 123,309Acquisition of subsidiaries (Note 1(b)) 1,302,164 1,265,871 40,932 290,637 339,809 3,239,413Additions 71,346 39,491 683 206,544 42,267 360,331Disposals (245) (6,593) (267) (135,601) (90,291) (232,997)Translation to presentation currency (Note 3(c)) (642) (2,464) 3 580 (743) (3,266)31 December 2005 1,396,593 1,366,763 41,351 370,604 311,479 3,486,790Transfer 2,361 (2,361) – – – –Additions 90,790 311,282 4,422 345,019 56,613 808,126Disposals (24,675) (21,356) (2,034) (151,889) (70,302) (270,256)Translation to presentation currency (Note 3(c)) 132,268 133,584 3,921 40,879 26,763 337,41531 December 2006 1,597,337 1,787,912 47,660 604,613 324,553 4,362,075

ACCUMULATED DEPRECIATION AND AMORTIZATION31 December 2004 1,925 48,137 – 5,553 – 55,615Acquisition of subsidiaries (Note 1(b)) 433,070 784,084 25,247 159,447 – 1,401,848Charge for the period 1,908 23,821 610 99,882 – 126,221Disposals (219) (5,017) (264) (59,393) – (64,893)Translation to presentation currency (Note 3(c)) (95) (2,049) (11) (1,236) (3,391)31 December 2005 436,589 848,976 25,582 204,253 – 1,515,400Transfer 400 (400) – – – –Charge for the period 15,455 147,595 4,440 246,535 – 414,025Disposals (575) (8,407) (884) (153,920) – (163,786)Translation to presentation currency(Note 3(c)) 41,146 83,267 2,490 22,134 – 149,03731 December 2006 493,015 1,071,031 31,628 319,002 – 1,914,676

NET BOOK VALUE31 December 2005 960,004 517,787 15,769 166,351 311,479 1,971,39031 December 2006 1,104,322 716,881 16,032 285,611 324,553 2,447,399

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:

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As of 31 December 2006 the gross carrying amount of fully depreciated property andequipment 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 loansreceived 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:

Following the application of the predecessor cost accounting method (see Note 3(b)), as of 31 December2005 the Group recognized goodwill in the amount of USD 552,651 thousand arising from acquisitions bythe 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 2006no 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:

31 December 2004 –Business combination (Note 1 (а)) 552,65131 December 2005 552,651Business combination (Note 1 (b)) 15,652Foreign exchange difference from translation to presentation currency (Note 3 (c)) 51,03031 December 2006 619,333


Settlements with budget for other taxes 394,475 371,135Derivative financial assets 29 82,708 17,389Receivables from operations with securities 78,353 19,499Current income tax assets 12 51,613 34,187Deferred income tax assets 12 31,596 29,124Accrued income 30,904 –Assets held for sale 28,605 24,703Bullion in vault 5,336 1,849Dividends receivable 2,842 –Receivables from operations with bullion – 5,130Other 109,801 32,313

816,233 535,329Less – Allowance for impairment losses (335) (474)Other assets, net 815,898 534,855

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Included in settlements with budget for other taxes is an amount of USD 326,303 thousandthat represents short-term recoverable VAT primarily relating to activities of petrochemi-cal 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:

The Group has negotiated the price of these assets and terms of their disposal with poten-tial buyers. The sale of 30.8% interest in Atomstroyexport is subject to a formal approvalof the Federal Antimonopoly Service. Subsequent to the balance sheet date the Group dis-posed of its investments in Gazenergoprombank, Sochigazprombank and RosUkrEnergo AG by selling their stocks for USD 22,241 thousand, USD 2,186 thousandand USD 3,110 thousand, respectively.

NOTE 23 – AMOUNTS OWED TO CREDIT INSTITUTIONS

Amounts owed to credit institutions comprise:

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 isthe amount of USD 500,499 thousand that relates to the amounts owed to credit institu-tions under this agreement.

In June 2006, the SIBUR Holding Group (SHG) signed a USD 200,000 thousand syndi-cated credit facility with ABN AMRO Bank N.V. and Citibank N.A., which was fully drawnas 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.



Assets held for sale:Atomstroyexport Construction Russia 30.8% 15,469 53.9% 24,703Gazenergoprombank Banking Russia 30.6% 11,398 30.6% –7

Sochigazprombank Banking Russia 85.3% 866 85.3% –7

RosUkrEnergo AG Gas trading Switzerland 50.0% 39 50.0% –7

Other minor investments 833 –Total assets held for sale 28,605 24,703


Current accounts 44,993 53,908Time deposits 1,184,923 1,367,217Repo agreements 1,049,245 65,899Syndicated loans 700,491 653,228Amounts owed to credit institutions 2,979,652 2,140,252

7 As of 31 December 2005 were recognized as available-for-sale investment accounted for at cost.

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In September 2006, the SHG signed a credit facility for up to USD 31,625 thou-sand with ING Bank Deutschland AG. The Euro-denominated facility will be usedfor acquisition of technological equipment and machinery. The facility bearsinterest 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 tocredit institutions relate to Dresdner Bank AG (Germany). As of 31 December2005 25% (USD 542,006 thousand) of amounts owed to credit institutions relateto Dresdner Bank AG (Germany) and ABN AMRO Bank (Netherlands).

Repo agreements represent short-term funding received by the Group with secu-rities pledged as collateral to credit institutions (see Note 15).

Time deposits received from a foreign bank in the amount of USD 357,374 thou-sand (31 December 2005 – USD 357,506 thousand) are covered by U.S. Treasurybills 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 esti-mated based on the valuation techniques described in Note 3(p) lies in the rangefrom 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:

As of 31 December 2006 current accounts and time deposits of OAO “Gazprom” Groupcomposed 32% (USD 3,694,321 thousand) of the Group’s total amounts owed to cus-tomers (31 December 2005 – 48% or USD 3,442,250 thousand).


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 4,569,802TIME 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 2,647,211Amounts owed to customers 11,447,091 7,217,013

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As of 31 December 2006 and 2005 subordinated deposits comprise:

The following represents amounts, which were blocked by the Group as collateral againstthe 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).

Subordinated deposits of the Group represent time deposits that were placed by cus-tomers according to agreements that include the following terms: (i) original maturity isnot less than 5 years; (ii) customers have no right to claim the deposits before maturity;and (iii) in the event of the Bank’s bankruptcy or default, subordinated deposits are to berepaid only after the settlement of all other liabilities. At the same time, the classificationof deposits as subordinated for the purpose of compliance to Russian statutory legislation(for the calculation of statutory capital adequacy) also needs formal approval of the termsof each deposit agreement by the Central Bank of the Russian Federation (the “registra-tion” of deposit agreements). As of 31 December 2006 subordinated deposits in amount ofUSD 625,492 thousand represent agreements registered by the Central Bank of the RussianFederation (31 December 2005 – USD 523,031 thousand).

As of 31 December 2006 included in subordinated deposits is an amount of 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 depositsbear fixed Ruble interest rates up to 6.5%.

In June 2006 the Group received a 5-year subordinated deposit from an internationalinstitution in the amount of USD 300,000 thousand at a fixed rate of 7.97% per annumwith interest paid semi-annually.

Subordinated deposits mature between 2007 and 2016.

As of 31 December 2006 the fair value of customer and subordinated deposits estimatedbased 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).


Coverage under letters of credit 138,878 85,289Escrow accounts – 54,407Blocked customer accounts 138,878 139,696


State controlled companies 280,595 306,989Private companies 408,237 300,530Subordinated deposits 688,832 607,519

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NOTE 25 – CERTIFICATED DEBTS ANDEUROBONDS ISSUED

Certificated debts issued comprise:

In November 2006, the SIBUR Holding Group issued USD 56,967 thousand ofRuble-denominated redeemable non-convertible documentary bonds each with anominal 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 parvalue. The issue is redeemed in November 2009.

For further details on the maturity profile of the certificated debts portfolio as wellas the information on effective interest rates see Note 31.

As of 31 December 2006 the fair value of certificated debts issued by the Groupestimated based on the valuation techniques described in Note 3(p) and marketquotations lies in the range from USD 5,454,543 thousand to USD 6,544,817thousand (31 December 2005 – from USD 1,566,445 thousand to USD 1,682,542thousand).

As of 31 December 2006 and 2005 Eurobonds issued internationally comprise:


Promissory notes issued 4,852,677 1,506,526Ruble domestic bonds issued 440,576 –Domestic residential mortgage backed securities issued 91,468 –Certificates of deposit issued 69,822 59,919Certificated debts 5,454,543 1,566,445

% Maturity date 31 December 31 December 2006 2005

USD loan participation notes 7.25% October 2008 1,059,500 1,057,804USD euro medium term notes 6.50% September 2015 1,008,585 1,007,996Euro cross-border residential mortgage 1-month December 2046backed 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

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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 borderRMBS issue in the amount of USD 218,644 thousand. As of 31 December 2006USD 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 LimitedResource 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 estimated based on the market quotations was USD 2,655,353 thousand (31 December 2005 – USD 2,064,952 thousand).

NOTE 26 – OTHER LIABILITIES

Other liabilities comprise:

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 inSeptember 2008 (31 December 2005 – USD 592,365 thousand).


Payable on operations with securities 660,548 592,550Trade payables, advances received and settlements with suppliers 220,041 259,218Derivative contracts 29 137,484 52,004Deferred VAT and other operating taxes payable 109,076 175,972Payable to employees 99,140 45,571Accounts payable in respect of acquisition of property, plant and equipment 64,249 –Deferred income 44,789 43,601Provisions for other risks 6, 33 20,797 9,219Other 132,991 103,708Other liabilities 1,489,115 1,281,843

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NOTE 27 – SHARE CAPITAL

The authorized share capital of the Bank comprises 23,331,851 ordinary shares; issuedshare capital comprises 19,997,777 ordinary shares as of 31 December 2006 and13,331,851 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 annual-ly declared and are entitled to one vote per share at annual and other general meetings ofthe Bank’s shareholders.

In December 2006 OAO “Gazprom” sold a 24.9% interest in the Bank’s shares to anon-state pension fund “Gazfond” (NPF “Gazfond”). Also in December 2006 the general meeting of shareholders of the Bank approved the increase of the Bank’sshare 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 contribu-tion of RUR 34,556 million (USD 1,315,699 thousand). The difference between thepar 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 treasurystock (31 December 2005 – 1,668,108 shares). 1,000,000 shares out of treasurystock 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 distributablereserves, which are determined by the amount of reserves as disclosed in theaccounts of the Bank prepared in accordance with statutory legislation. As of 31 December 2006, the statutory accounts of the Bank disclosed distributablereserves 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, whichrepresent amounts set aside, as required by the regulations of the Russian Feder-ation, in respect of general banking risks, including future losses and otherunforeseen risks or contingencies.

In June 2006 the general meeting of shareholders of the Bank approved a dividendpayout for 2005 in amount of USD 65,363 thousand (dividend payout for 2004paid in 2005 was USD 55,473 thousand). Also, included in the movement of equi-ty is an amount of USD 18,715 thousand that represents dividends for 2005declared or paid by subsidiary banks Severgazbank, Sibirgazbank, various subsidiaries of GMG and OAO “SIBUR Holding” to their minority shareholders.

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2006 2005BASIC EARNINGS PER SHARE, USD:Net profit for the period, USD 1,330,775,000 457,347,000

Weighted-average number of ordinary shares outstanding during the period 11,937,685 12,982,586Earnings per share, USD 111,5 35,2

DILUTED EARNINGS PER SHARE, USD:Net profit for the period, USD 1,330,775,000 –Weighted-average number of ordinary shares outstanding during the period 11,945,070 –Earnings per share, USD 111,4 –

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 recordeddirectly in equity. During 2006 the Group rendered advisory services and providedfinance to RosUkrEnergo AG (Switzerland).

As of 31 December 2006 the basic earnings per share of the Group were dilutedwith contingently saleable shares held as treasury stock ordinary shares as aresult 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 dilutedearnings per share were as follows:

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Notional principal Fair value of equivalent derivative contracts

DERIVATIVE ASSETSForeign exchange contractsForward contractsAssets foreign 2,590,430 47,481Assets domestic 1,580,500 22,538

BULLION CONTRACTSForward contractsAssets domestic 5,137 68

SECURITIES CONTRACTSOption contractsCall options held - foreign 167,644 9,439Call options held - domestic 55,163 3,160

Forward contractsAssets domestic 34,839 22Total derivative assets 4,433,713 82,708

DERIVATIVE LIABILITIESForeign exchange contractsOption contractsCall options written - foreign (38,790) (920)Put options written - foreign (37,350) (6)

Forward contractsLiabilities foreign (1,676,058) (14,506)Liabilities domestic (1,706,565) (13,387)

BULLION CONTRACTSForward contractsLiabilities foreign (4,950) (255)

SECURITIES CONTRACTSOption contractsCall options written - foreign (236,869) (12,588)Put options written - foreign (610,434) (95,669)

Forward contractsLiabilities domestic (24,629) (153)Total derivative liabilities (4,335,645) (137,484)

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:

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 Europeanput option contracts written to a foreign institution for 46 million ordinary shares of OAO “Gazprom”.

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Notional principal Fair value of equivalent derivative contracts

DERIVATIVE ASSETSForeign exchange contractsForward contractsAssets foreign 599,125 8,765Assets domestic 1,287,032 7,891

Option contractsPut options held - foreign 88,800 607

SECURITIES CONTRACTSOption contractsPut options held - domestic 26,538 –

Forward contractsAssets foreign 58,822 126Assets domestic 711 –Total derivative assets 2,061,028 17,389

DERIVATIVE LIABILITIESForeign exchange contractsOption contractsCall options written - foreign (19,804) (264)Put options written - foreign (19,456) (22)

Forward contractsLiabilities foreign (472,670) (5,314)Liabilities domestic (1,185,935) (7,582)

SECURITIES CONTRACTSOption contractsPut options written - domestic (25,691) (38,590)

Forward contractsLiabilities foreign (111,741) (232)Total derivative liabilities (1,835,297) (52,004)

The Group’s position and fair value of derivatives outstanding as of 31 December 2005 were as follows:

The fair value of the Group’s position in derivatives was calculated as follows:

n Bullion contracts – based on the USD/ounce of gold bullion exchange rate of the London Bullion Market Association effective as of reporting dates;

n Foreign exchange contracts – based on the appropriate official currency exchangerates as of the period end;

n Securities contracts – based on closing bid rates for corporate shares and debtsecurities quoted on Moscow Interbank Currency Exchange (MICEX) and RussianTrading System (RTS) as of the period-end.

The fair value of these transactions is believed to reflect the credit and other types of economic riskfor the Group and therefore no allowance for losses on derivative contracts has been created.

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A significant part of derivative contracts mature within a 3-month period. Subsequent to the balancesheet 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 consolidat-ed cash flow statements comprised:

NOTE 31 – RISK MANAGEMENT POLICIES

Management of risk is fundamental to the banking business and is an essential element of theGroup’s operations. The Group considers risk management and risk controls to be vitally importantaspects of its business operations and management activities, establishing and integrating thesefunctions into corporate organization in the form of continuous process. The Group has set internalstandards of risk transparency as the basis for controlling, limiting and managing risks. The Grouphas established a Risk Management Department, which directly reports to the Management Boardand is responsible for developing methods used to measure risks and for independently measuringand 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 ofwhich 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 descrip-tion 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 topay amounts in full when due. The Group structures the levels of credit risk it undertakesby placing limits on the amount of risk accepted in relation to one borrower or groups ofborrowers. Such risks are monitored on a revolving basis and subject to a quarterly ormore frequent review. The Credit Committee approves limits on the level of credit risk byborrowers on a monthly basis.


Cash on hand 459,220 272,450Current account with the Central Bank of the Russian Federation 948,910 551,121Time 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 1,490,913Cash and cash equivalents 6,508,355 2,940,924

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The exposure to any one borrower including banks and brokers is further restricted bysub-limits covering on and off balance sheet expenses set by the Credit Committee, whichis called once a week. Actual exposures against limits are monitored daily.

Exposure to credit risk is managed through regular analysis of the ability of borrowersand potential borrowers to meet interest and principal repayment obligations and bychanging these lending limits where appropriate. Exposure to credit risk is also managedin part by obtaining collateral and corporate and personal guarantees.

The credit risk exposure on derivatives is managed as part of the overall lending limitswith customers, together with potential exposures from market movements. Collateral orother 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. Guarantees and standby letters of credit, which represent irrevocable assurances that the Groupwill make payments in the event that a customer cannot meet its obligations to third parties, carrythe same credit risk as loans. Documentary and commercial letters of credit, which are writtenundertakings by the Group on behalf of a customer authorizing a third party to draw drafts on the Group up to a stipulated amount under specific terms and conditions, are frequently fully orpartially covered by the funds deposited by customers and therefore bear remote credit risk.

With respect to undrawn loan commitments the Group is potentially exposed to loss in an amountequal to the total amount of such commitments. However, the likely amount of loss is less than that,since most commitments are contingent upon certain conditions set out in the loan agreements.The Group’s credit policy is approved and periodically reviewed by the Management Board.

The geographical concentration of banking assets and liabilities as of 31 December 2006 and 2005 follows:

31 December 2006Russia OECD Other Total

non-OECDASSETSCash and due from the CBR 2,907,450 – – 2,907,450Due from credit institutions, net 4,390,542 2,553,643 293,497 7,237,682Securities at fair value through profit or loss 2,346,425 – – 2,346,425Loans to customers, net 10,139,767 214,828 1,229,395 11,583,990Available-for-sale, net and investments in associates 1,807,747 668,022 20,781 2,496,550Trade receivables, net 540,846 – – 540,846Inventories, net 672,894 – – 672,894Property, equipment and intangibles, net 2,447,399 – – 2,447,399Goodwill 619,333 – – 619,333Other assets, net 700,630 59,215 56,053 815,898

26,573,033 3,495,708 1,599,726 31,668,467LIABILITIESAmounts owed to credit institutions 191,312 2,516,671 271,669 2,979,652Amounts owed to customers 11,201,540 33,219 212,332 11,447,091Subordinated deposits 388,832 300,000 – 688,832Certificated debts 5,174,212 276,617 3,714 5,454,543Eurobonds issued – 2,613,738 – 2,613,738Income tax liabilities 345,358 – – 345,358Other liabilities 1,363,996 124,450 669 1,489,115

18,665,250 5,864,695 488,384 25,018,329Net position 7,907,783 (2,368,987) 1,111,342 6,650,138

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b) Operational risk

Operational risk arises from a failure to control properly all aspects of the documentation, pro-cessing, settlement of, and accounting for, transactions and, more widely, all the hazards towhich the Group is exposed as a result of being in business and of doing business. Losses thatare characterized as operational include, but are not limited to, the following examples: person-nel unavailability or injury; natural disasters; the failure of external accounting systems suchas 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 managedjudgementally 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 overnightdeposits, current deposits, maturing deposits, loan draw downs, guarantees and frommargin and other derivatives settled by cash. The Group maintains liquidity managementwith the objective of ensuring that funds will be available at all times to honor all cash flowobligations 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 ofinterbank and other borrowing facilities that should be in place to cover withdrawals atunexpected levels of demand.

31 December 2005Russia OECD Other Total

non-OECDASSETSCash and due from the CBR 1,069,751 – – 1,069,751Due from credit institutions, net 1,735,922 1,122,886 24,015 2,882,823Securities at fair value through profit or loss 1,637,666 – – 1,637,666Loans to customers, net 5,680,666 1,400,217 320,210 7,401,093Available-for-sale, net and investments in associates 513,743 554,729 22,042 1,090,514Trade receivables, net 463,559 – – 463,559Inventories, net 450,157 – – 450,157Property, equipment and intangibles, net 1,971,390 – – 1,971,390Goodwill 552,651 – – 552,651Other assets, net 501,516 19,748 13,591 534,855

14,577,021 3,097,580 379,858 18,054,459LIABILITIESAmounts owed to credit institutions 487,366 1,596,214 56,672 2,140,252Amounts owed to customers 6,867,198 236,538 113,277 7,217,013Subordinated deposits 607,519 – – 607,519Certificated debts 1,517,614 48,831 – 1,566,445Eurobonds issued – 2,065,800 – 2,065,800Income tax liabilities 258,648 – – 258,648Other liabilities 1,275,768 6,075 – 1,281,843

11,014,113 3,953,458 169,949 15,137,520Net position 3,562,908 (855,878) 209,909 2,916,939

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31 December 2006On Less than 1 to 3 months 1 to Over Total

demand 1 month 3 months to 1 year 5 years 5 yearsASSETSCash and due from the CBR 2,751,048 47,840 65,864 35,270 5,763 1,665 2,907,450Due from credit institutions, net 1,287,897 2,740,284 207,295 2,969,680 27,513 5,013 7,237,682Securities at fair value through profit or loss 710,219 1,636,206 – – – – 2,346,425Loans to customers, net 559,439 1,039,594 1,666,558 3,878,268 3,138,964 1,301,167 11,583,990Available-for-sale, net and investments in associates – – – 509,189 1,800,483 186,878 2,496,550Trade receivables, net – 540,846 – – – – 540,846Inventories, net – – – 672,894 – – 672,894Property, equipment and intangibles, net – – – – 1,343,077 1,104,322 2,447,399Goodwill – – – – – 619,333 619,333Other 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 31,668,467LIABILITIESAmounts owed to credit institutions 56,574 371,875 1,185,773 10,118 1,255,766 99,546 2,979,652Amounts owed to customers 6,473,701 1,521,250 2,094,401 1,121,535 183,267 52,937 11,447,091Subordinated deposits – – 4,133 12,776 565,744 106,179 688,832Certificated debts 194,410 144,392 801,019 3,349,743 553,865 411,114 5,454,543Eurobonds issued – – 59,681 231,186 1,120,329 1,202,542 2,613,738Income tax liabilities – – – 345,358 – – 345,358Other liabilities 114 164,806 67,219 604,880 651,966 130 1,489,115

6,724,799 2,202,323 4,212,226 5,675,596 4,330,937 1,872,448 25,018,329Net position (1,416,196) 3,964,372 (2,178,642) 2,931,809 2,002,865 1,345,930 6,650,138Accumulated gap (1,416,196) 2,548,176 369,534 3,301,343 5,304,208 6,650,138


demand 1 month 3 months to 1 year 5 years 5 yearsASSETSCash and due from the CBR 979,279 34,547 9,131 31,247 13,098 2,449 1,069,751Due from credit institutions, net 697,033 1,519,074 494,726 78,191 83,799 10,000 2,882,823Securities at fair value through profit or loss 1,522,317 105,241 – 7,321 2,787 – 1,637,666Loans to customers, net 123,601 554,061 1,207,887 2,303,768 2,311,411 900,365 7,401,093Available-for-sale, net and investments in associates – – – – 851,627 238,887 1,090,514Trade receivables, net – 58,420 86,907 318,232 – – 463,559Inventories, net – – – 450,157 – – 450,157Property, equipment and intangibles, net – – – – 1,011,386 960,004 1,971,390Goodwill – – – – – 552,651 552,651Other 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 18,054,459LIABILITIESAmounts owed to credit institutions 53,908 377,494 76,543 295,362 1,213,271 123,674 2,140,252Amounts owed to customers 4,563,530 1,013,232 267,803 916,449 384,159 71,840 7,217,013Subordinated deposits – 4,747 3,033 16,823 452,365 130,551 607,519Certificated debts 98,147 120,712 68,242 779,434 391,972 107,938 1,566,445Eurobonds issued – – – – 1,057,804 1,007,996 2,065,800Income tax liabilities – – – 258,648 – – 258,648Other 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 15,137,520Net position (1,393,407) 190,028 1,385,391 1,336,299 176,271 1,222,357 2,916,939Accumulated gap (1,393,407) (1,203,379) 182,012 1,518,311 1,694,582 2,916,939

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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 towithdraw on demand.

Management regards securities at fair value through profit or loss, except for thosepledged under repurchase agreements, as liquid assets available for immediate dis-posal 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 marketinterest rates on its financial position and cash flows. Interest rate risk is meas-ured by the extent to which changes in market interest rates impact margins andnet income. To the extent the term structure of interest bearing assets differs fromthat 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 ofmovements 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 LiabilityManagement Committee.

The table below summarizes the Group’s exposure to interest rate risks. Includedin 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 ormaturity dates.

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demand 1 month 3 months to 1 year 5 years 5 yearsASSETSCash and due from the CBR 2,751,048 47,840 65,864 35,270 5,763 1,665 2,907,450Due from credit institutions, net 1,287,897 3,713,468 212,168 2,001,623 22,513 13 7,237,682Securities at fair value through profit or loss 710,219 1,636,206 – – – – 2,346,425Loans to customers, net 559,439 1,088,163 1,727,211 3,959,830 2,971,912 1,277,435 11,583,990Available-for-sale, net and investments in associates – – – 509,190 1,800,482 186,878 2,496,550Trade receivables, net – 540,846 – – – – 540,846Inventories, net – – – 672,894 – – 672,894Property, equipment and intangibles, net – – – – 1,343,077 1,104,322 2,447,399Goodwill – – – – – 619,333 619,333Other 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 31,668,467LIABILITIESAmounts owed to credit institutions 56,574 373,213 1,201,350 497,113 757,046 94,356 2,979,652Amounts owed to customers 6,473,701 1,521,250 2,094,401 1,121,535 183,267 52,937 11,447,091Subordinated deposits – – 75,638 181,834 431,360 – 688,832Certificated debts 194,410 144,392 801,019 3,349,743 553,865 411,114 5,454,543Eurobonds issued – – 59,681 231,186 1,120,329 1,202,542 2,613,738Income tax liabilities – – – 345,358 – – 345,358Other liabilities 114 164,806 67,219 604,880 651,966 130 1,489,115

6,724,799 2,203,661 4,299,308 6,331,649 3,697,833 1,761,079 25,018,329Net position (1,416,196) 4,984,787 (2,200,198) 1,389,262 2,463,916 1,428,567 6,650,138Accumulated gap (1,416,196) 3,568,591 1,368,393 2,757,655 5,221,571 6,650,138


demand 1 month 3 months to 1 year 5 years 5 yearsASSETSCash and due from the CBR 943,934 61,036 8,319 26,011 24,978 5,473 1,069,751Due from credit institutions, net 697,033 1,523,754 494,726 73,511 83,799 10,000 2,882,823Securities at fair value through profit or loss 1,522,317 105,241 – 7,321 2,787 – 1,637,666Loans to customers, net 123,603 555,640 1,236,170 2,348,017 2,266,189 871,474 7,401,093Available-for-sale, net and investments in associates – – – – 851,627 238,887 1,090,514Trade receivables, net – 58,420 86,907 318,232 – – 463,559Inventories, net – – – 450,157 – – 450,157Property, equipment and intangibles, net – – – – 1,011,386 960,004 1,971,390Goodwill – – – – – 552,651 552,651Other 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 18,054,459LIABILITIESAmounts owed to credit institutions 53,918 377,484 76,543 298,047 1,210,586 123,674 2,140,252Amounts owed to customers 4,563,530 1,013,232 217,984 966,268 384,159 71,840 7,217,013Subordinated deposits – 45,099 219,568 14,671 328,181 – 607,519Certificated debts 98,147 120,712 68,242 779,434 391,972 107,938 1,566,445Eurobonds issued – – – – 1,057,804 1,007,996 2,065,800Income tax liabilities – – – 258,648 – – 258,648Other 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 15,137,520Net position (1,428,760) 182,434 1,246,146 1,320,280 269,798 1,327,041 2,916,939Accumulated 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).

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The Group’s average effective interest rates for the periods ended 31 December 2006 and2005 for monetary financial instruments follow.

31 December 2006 31 December 2005Rubles Foreign Rubles Foreign

currencies currenciesAverage % Average % Average % Average %volume volume volume volume

INTEREST-EARNING ASSETSCredit 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 LIABILITIESCredit 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%

31 December 2006 31 December 2005

Rubles U.S. Euro Other Rubles U.S. Euro OtherDollars Dollars

INTEREST-EARNING ASSETSCredit 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 LIABILITIESCredit 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% – –

The following table summarizes the Group’s effective interest rates as of 31 December2006 and 2005 for monetary financial instruments.

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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 inthe 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 and2005 follows:

31 December 2006Rubles U.S. Dollars Euro Other Total

ASSETSCash and due from the CBR 2,845,349 42,992 18,121 988 2,907,450Due from credit institutions, net 4,543,035 2,096,761 174,088 423,798 7,237,682Securities at fair value through profit or loss 2,194,401 119,782 – 32,242 2,346,425Loans to customers, net 5,973,946 4,260,248 1,293,243 56,553 11,583,990Available-for-sale, net and investments in associates 1,807,746 671,567 17,127 110 2,496,550Trade receivables, net 540,303 543 – – 540,846Inventories, net 672,894 – – – 672,894Property, equipment and intangibles, net 2,447,399 – – – 2,447,399Goodwill 619,333 – – – 619,333Other assets, net 778,314 31,796 – 5,788 815,898

22,422,720 7,223,689 1,502,579 519,479 31,668,467LIABILITIESAmounts owed to credit institutions 1,135,804 1,276,596 364,089 203,163 2,979,652Amounts owed to customers 9,269,803 1,460,773 536,037 180,478 11,447,091Subordinated deposits 115,833 532,150 40,849 – 688,832Certificated debts 4,617,549 825,384 11,610 – 5,454,543Eurobonds issued 8,125 2,300,269 305,344 – 2,613,738Income tax liabilities 345,358 – – – 345,358Other liabilities 1,347,590 125,771 5,235 10,519 1,489,115

16,840,062 6,520,943 1,263,164 394,160 25,018,329Net balance sheet position 5,582,658 702,746 239,415 125,319 6,650,138

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31 December 2005Rubles U.S. Dollars Euro Other Total

ASSETSCash and due from the CBR 989,610 55,301 23,946 894 1,069,751Due from credit institutions, net 1,531,477 1,080,300 243,441 27,605 2,882,823Securities at fair value through profit or loss 1,485,419 150,886 1,361 – 1,637,666Loans to customers, net 3,856,734 3,044,959 408,732 90,668 7,401,093Available-for-sale, net and investments in associates 513,743 502,016 18,433 56,322 1,090,514Trade receivables, net 463,111 448 – – 463,559Inventories, net 450,157 – – – 450,157Property, equipment and intangibles, net 1,971,390 – – – 1,971,390Goodwill 552,651 – – – 552,651Other assets, net 485,289 40,002 46 9,518 534,855

12,299,581 4,873,912 695,959 185,007 18,054,459LIABILITIESAmounts owed to credit institutions 121,573 1,800,786 185,095 32,798 2,140,252Amounts owed to customers 4,960,432 1,514,359 476,185 266,037 7,217,013Subordinated deposits 307,478 250,698 49,343 – 607,519Certificated debts 1,478,215 80,986 7,244 – 1,566,445Eurobonds issued – 2,065,800 – – 2,065,800Income tax liabilities 258,648 – – – 258,648Other liabilities 1,273,364 5,706 2,135 638 1,281,843

8,399,710 5,718,335 720,002 299,473 15,137,520Net 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 partydisclosures”, 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 isneither 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, anyindividual referred to in (d) or (e); or

(g) Post-employment benefit plans for the benefit of employees of the Group, or of anyentity that is a related party of the Group.

The Group distinguishes between the following categories of related parties: the parentcompany – OAO “Gazprom”, entities with joint control – OAO “Gazprom” subsidiary com-panies, 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 followingtransactions outstanding with the defined categories of related parties:

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31 December 2006 31 December 2005Related 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 2,244,483 554,567Total due from credit institutions, gross 2,271,578 7,248,593 632,782 2,891,834Allowances 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- state controlled companies 429,555 7,042Total securities at fair value through profit or loss (by issuer): 1,468,852 2,346,425 807,742 1,637,666Loans to customers, gross:- entities with joint control 2,238,917 1,896,779- unconsolidated subsidiaries and associates 245,760 230,236- state controlled companies 885,795 1,223,014- key management personnel 9,036 7,140Total loans to customers, gross 3,379,508 12,054,434 3,357,169 7,821,486Allowances for losses, loans to customers (152,325) (470,444) (187,866) (420,393)Available-for-sale investments, gross:- entities with joint control 1,392,135 –- unconsolidated subsidiaries and associates 109,355 404,470- state controlled companies 49,446 81,753Total available-for-sale investments, gross 1,550,936 2,579,339 786,223 1,406,735Allowances for impairment, available-for-sale investments (53,199) (82,789) (307,212) (316,221)Trade receivables and inventories, gross- parent 25,787 –- entities with joint control 127,158 113,680- unconsolidated subsidiaries and associates 2,647 –- state controlled companies 32,775 –Trade receivables and inventories, gross 188,367 630,277 113,680 639,284Allowances 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 477,684 434,446Other assets, gross 506,289 816,233 459,149 535,329Allowances 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 79,453 117,614Total amounts owed to credit institutions 85,457 2,979,652 127,893 2,140,252

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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 53,168Total amounts owed to customers 4,763,480 11,447,091 3,753,091 7,217,013Subordinated deposits:- parent 224,150 255,222- entities with joint control 56,445 51,767Total subordinated deposits 280,595 688,832 306,989 607,519Income tax liabilities: - state controlled companies 345,358 258,648Total income tax liabilities 345,358 345,358 258,648 258,648Other 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 54,858Total other liabilities 756,877 1,489,115 859,443 1,281,843Undrawn loan commitments:- entities with joint control 415,187 238,647- unconsolidated subsidiaries and associates 47,588 5,389- state controlled companies 427,856 426,431Total undrawn loan commitments 890,631 3,425,063 670,467 1,921,541Guarantees 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 950Total guarantees given 385,678 623,103 54,586 181,182Allowances 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 28,537Total letters of credit 239,983 445,985 144,883 261,165Allowances for impairment losses, letters of credit (2,745) (7,128) (908) (3,292)Fiduciary activities- key management personnel 268,054 46,135Total fiduciary activities 268,054 1,840,284 46,135 2,599,255

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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 55,856Total interest income, loans to customers 158,426 935,398 162,460 589,804Interest income, due from credit institution:- unconsolidated subsidiaries and associates – 1,720- state controlled companies 50,629 48Total interest income, due from credit institutions 50,629 217,658 1,768 88,554Petrochemical business operating revenues- entities with joint control 134,920 –- state controlled companies 32,320 –Total petrochemical business operating revenues 167,240 4,493,632 – –Media business operating revenues- parent 13,754 2,861- entities with joint control 334 442- unconsolidated subsidiaries and associates 138 –- state controlled companies 6,482 –Total media business operating revenues 20,708 883,151 3,303 359,599Dealing profits/(losses), net- entities with joint control 20,719 –- key management personnel (20,013) (45,896)Total dealing (losses)/profits, net 706 494,624 (45,896) 503,335Fees and commissions income:- parent 17,883 10,898- entities with joint control 32,562 70,286- unconsolidated subsidiaries and associates 1,306 5,192- state controlled companies 8,468 1,480Total fees and commissions income 60,219 278,716 87,856 168,069Dividend 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 4,484Total dividend income 17,617 21,415 36,427 38,958

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 onbehalf of related parties of the Group.

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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 10,943Total interest expense, amounts owed to customers 116,926 304,948 59,231 188,211Petrochemical 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 32,728 685,150 155 279,869Salaries and employment benefits- short-term employee benefits 83,153 111,281Total 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:


Undrawn loan commitments 3,425,063 1,921,541Guarantees given 623,103 181,182Letters of credit 445,985 261,165

4,494,151 2,363,888

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The Group’s management evaluated the likelihood of probable losses arising from creditrelated commitments and concluded that a provision of USD 15,397 thousand was necessaryas 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 thou-sand) 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 foroffice equipment and branch facilities. Future minimum payments under non-cancelableoperating leases are as follows:


Not later than 1 year 5,371 2,833Later than 1 year and not later than 5 years 10,285 7,287Later than 5 years 18,676 7,774

34,332 17,894

c) Fiduciary activities

In the normal course of its business the Group enters into agreements with clients tomanage their assets with limited right on decision making in accordance with specificcriteria established by clients. The Group may be liable for losses or actions aimed atappropriation of the clients’ funds until such funds or securities are not returned tothe client. The maximum potential financial risk of the Group at any given moment isequal to the volume of the clients’ funds and securities plus/minus any unrealizedgain/loss on the clients’ position. In the judgment of management, as of 31 December 2006and 2005 the maximum potential financial risk on funds accepted by the Group onbehalf of its clients does not exceed USD 684,171 thousand and USD 190,179 thousand, respectively. As of the above dates the maximum potentialfinancial risk on securities accepted by the Group on behalf of its clients does notexceed USD 1,156,113 thousand and USD 2,409,076 thousand, respectively. Assetsaccepted and liabilities incurred under the trustee and depository activities are notincluded in the Group’s financial statements.

d) Capital commitments

In the normal course of business, the Group enters into various contracts for purchase ofprogramming rights, property and equipment, construction and repair works of theGroup’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:

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e) Environmental matters

The enforcement of environmental regulation in the Russian Federation is evolvingand the enforcement posture of government authorities is continually being recon-sidered. The Group (the petrochemicals and tires business segment as affected byenvironmental regulation) periodically evaluates its obligations under environmen-tal 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 currentlevels of enforcement of existing legislation, Management believes that there are noprobable liabilities for environmental damage, which would have a materiallyadverse 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 socialcommitments) contributes to the maintenance and upkeep of the local infrastruc-ture and the welfare of its employees in the areas of its production operations,including contributions towards the construction, development and maintenance ofhousing, hospitals, transportation services, recreation and other social needs. Suchfunding is expensed as incurred.

g) Legal

In the ordinary course of business, the Group is subject to legal actions and com-plaints. Management believes that the ultimate liability, if any, arising from suchactions 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 theGroup’s estimated probable losses in conjunction with the lawsuits in action wereUSD 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 com-plaints. As of 31 December 2006 the contingent liability, if any, arising from suchactions or complaints will not exceed USD 34 million. Management believes thatsuch ultimate liability will not have a material adverse effect on the financial condi-tion or the results of future operations of the Group.


Programming rights 55,596 82,983Property, plant and equipment 1,855,223 393,814

1,910,819 476,797

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h) Insurance

The Bank has obtained an international comprehensive banking risk insurance pol-icy (“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 insur-ance coverage. There is a risk that, until it obtains adequate coverage, the loss ordestruction of certain assets could have a material adverse effect on the Group’soperations and its financial position.

i) Operating environment

The economic conditions in the Russian Federation are characterized by the realGDP growth of around 7%, slowly declining inflation, budget and current accountsurpluses, the significant fall of external debt down to the comfortable level of under11% of GDP and rising foreign exchange reserves. The use of substantial oil rev-enues to repay external debt and build up a stabilization fund will help to safeguardthe public finances in the event of a possible drop in the oil prices. The improved sit-uation was acknowledged in January 2005, when Standard & Poor’s became the lastof the major international rating agencies to award Russia investment grade creditrating.

However, operations in Russia still involve risks that are not typical for developedeconomies. Significant concerns remain that the government is moving too slowly inreforming the economy and legal institutions. The economy’s dependence on the oiland gas sector has been increased by the high export prices of hydrocarbons inrecent years. In the longer term, the economic stability is dependent on the pace ofreforms to boost the real sector of the Russian economy. An acceleration of thestructural reforms, including support for small and medium-sized businesses, fur-ther development of the banking sector and financial market, and administrativereform should improve the long-term growth prospects of Russia.

j) Taxation

The Russian Federation currently has a number of laws related to various taxesimposed by both federal and regional governmental authorities. Applicable taxesinclude value added tax, income tax, and social tax. Implementing regulations areoften unclear or contradictory and few precedents have been established. Often, dif-fering opinions regarding legal interpretation exist both among and within governmentministries and organizations (like the Ministry of Taxes and Levies and its variousinspectorates); thus creating uncertainties and areas of conflict. Tax declarations,together with other legal compliance areas (for example, customs and currency controlmatters) are subject to investigation by a number of authorities, which are enabled bylaw to impose extremely severe fines, penalties and interest charges. These facts cre-ate tax risks in the Russian Federation substantially more significant than typicallyfound in countries with more developed tax systems. Management believes that theGroup is in substantial compliance with the tax laws affecting its operations.

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NOTE 34 – CAPITAL ADEQUACY

The Central Bank of the Russian Federation requires banks to maintain a statutory capi-tal 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 thisbasis 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 cap-ital adequacy as at 31 December 2006 and 2005, calculated in accordance with Basel I Guidelines.

Capital adequacy ratios calculated in accordance with Basel I Guidelines for the bankingsegment of the Group are as follows:


Paid in share capital 1,160,857 907,057Share premium 1,061,899 –Applicable reserves less goodwill 3,013,323 861,935Minority interest 794,726 595,296Tier I Capital 6,030,805 2,364,288Tier II Capital 542,267 666,898Total Capital 6,573,072 3,031,186Adjustments to Tier II Capital (72,467) (105,045)Net available capital 6,500,605 2,926,141Risk 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%


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” sold13,332 shares of the Bank (0.07% of the Bank’s total stock) to NPF “Gazfond” whichbrought 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 payoutfor 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 theCouncil of the Bank to change the legal form of the Bank to an open joint-stock company.

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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 transactionwas 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 shareinterest in OAO “Polief” (terephthalic acid and mylar producer based in the BashkortostanRepublic) 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.

In June 2007 a subsidiary bank of the Group “Sovfintrade” (“SFT”) completed additionalshare issue in amount of USD 43,439 thousand, 100% of which was acquired by the Group. As a result the Group has increased its share in SFT to 72.27%.

Joint ventures

In December 2006, the SHG signed an agreement with “TNK-BP” to form a joint venturein the Tyumen region to process associated petroleum gas. In March 2007 the SHGfinanced its 51% share in the joint venture by contributing its 99.99% interest in its con-solidated subsidiaries “Nizhnevartovskiy GPK”, “Belozerniy GPK” and “TruboprovodnayaCompany”. “TNK-BP” financed its share by contributing USD 88 million in cash.

In February 2007 the SHG also signed a framework agreement with OAO “Novatek” to form a jointventure for production of polypropylene and its derivative products based on production assets ofthe SHG subsidiary “Tobolsk-Polimer”. Under this agreement OAO “Novatek” will supply raw mate-rials and capital investments. The start of joint venture activity is planned for not earlier than 2010.

Borrowings

In February 2007 the Group placed internationally a Ruble-denominated loan participationnotes (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 floatingrate 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 bil-lion 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.

REFERENCE INFORMATION

Astrakhan12–2 Proyezd Vorobyova, Astrakhan,414057 Russia Tel. +7 8512 339459 Head of the branch: Gennady N. Sagunov

Barnaul20 Severo-Zapadnaya st., Barnaul,656037 RussiaTel. +7 3852 361267Head of the branch: Ludmila M. Kulpina

Beloyarsky7a Molodosti st., Beloyarsky, TyumenRegion, 628161 RussiaTel. +7 34670 22177 Head of the branch: Lyubov G. Dorokhova

Bryansk4 Partizan Square, Bryansk, 241011 RussiaTel. +7 4832 745917Head of the branch: Naum S. Khenkin

Volgograd34a Kozlovskaya st., Volgograd, 400074 RussiaTel. +7 8442 930005Head of the branch: Larisa S. Turetskaya

Yekaterinburg55A Radishcheva st. Yekaterinburg,620086 RussiaTel. +7 3432 121601Head of the branch: Anatoliy S. Shakhov

Izhevsk182 Votkinskoye Shosse st., Izhevsk,Republic of Udmurtia, 426039 RussiaTel. +7 3412 750563 Head of the branch: Vyacheslav A.Vasilyev

Irkutsk41 Sverdlova st., Irkutsk, 664011 RussiaTel. +7 3952 283182Head of the branch: Yuri V. Gorshkov

Kemerovo3 Sobornaya st., Zavodskoi District,Kemerovo, 650004 RussiaTel. +7 3842 345090Head of the branch: Nelly D. Morozenko

Kostroma8a Sovetskaya st., Kostroma, 156000 RussiaTel. +7 4942 490900Deputy Head of the branch: Sergei A. Voskresensky

Krasnodar36 Dzerzhinskogo st., Krasnodar, 350051 RussiaTel. +7 8612 103440Head of the branch: Vladislav D. Tsyganesh

Krasnoyarsk87B Akademika Kirenskogo st., Krasno-yarsk, 660041 RussiaTel. +7 3912 745800Head of the branch: Pavel G. Avdeev

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GAZPROMBANK GROUP | Reference Information | 2006

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BRANCHES AND REPRESENTATIVE OFFICES

Lipetsk49a Gagarina st., Lipetsk, 398002 RussiaTel. +7 4742 420101 Head of the branch: Svetlana V. Yefanova

Makhachkala24 Yermoshkina st., Makhachkala, Repub-lic of Daghestan, 367025 RussiaTel. +7 8722 675329 Head of the branch: Abdulatip M. Saypulaev

Nadym53 Orudzheva Naberezhnaya st., Nadym,Tyumen Region, Yamalo-NenetsAutonomous District, 629736 RussiaTel. +7 34995 20020Head of the branch: Olga V. Samokhvalova

Nizhny Novgorod 3/5 Piskunova st., Nizhny Novgorod,603005 RussiaTel. +7 8312 333637Head of the branch: Tamara A. Zhukova

Novosibirsk2 Kavaleristskaya st., Novosibirsk, 630132 RussiaTel. +7 3832 202800Head of the branch: Namzhil N. Urbanayev

Novy Urengoy4 26 Syezda KPSS st., Novy Urengoy, Tyu-men Region, 629300 RussiaTel. +7 34949 45595Head of the branch: Larisa G. Khomyakova

Omsk2 Magistralnaya st., Omsk, 644088 RussiaTel. +7 3812 655869Head of the branch: Yelena P. Kholopova

Orenburg18 Pravdy st., Orenburg, 460000 RussiaTel. +7 3532 733071Head of the branch: Yelena S. Varnavskaya

Perm54 Kommunisticheskaya st., Perm,614000 RussiaTel. +7 3422 375660

Rostov-on-Don20 Prospekt Voroshilovskiy st., Rostov-on-Don, 344006 RussiaTel.: +7 8632 497760Head of the branch: Tatyana Y. Malakhova

Samara191 Galaktionovskaya st., 191 and 190Samarskaya st., Leninsky District, Sama-ra, 443001 RussiaTel. +7 846 337-4849Head of the branch: Ivan M. Babushkin

Saint Petersburg15 Sedova st., Saint Petersburg, 192148 RussiaTel. +7 812 740-5373Head of the branch: Olga V. Dragomiretskaya

Saratov41 Gorkogo st., Saratov, 410012 RussiaTel. +7 8452 442402 Head of the branch: Viktor I. Sverchkov

Stavropol419-2 Lenina st., Stavropol, 355012 RussiaTel. +7 8652 566783Head of the branch: Valeriy V. Kostyukov

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Tomsk52E Pushkina st., Tomsk, 634006 RussiaTel. +7 3822 791027Head of the branch: Vladimir A. Gaga

Tula106 Prospekt Lenina st., Tula, 300026 RussiaTel. +7 4872 333529 Head of the branch: Valeriy V. Kuznetsov

Tyumen62 Respubliki st., Tyumen, 625000 RussiaTel. +7 3452 465191Head of the branch: Vladimir A. Davydov

Ufa138 Mendeleyeva st., Ufa, Republic ofBashkortostan, 450022 RussiaTel. +7 3472 566780Head of the branch: Anatoliy I. Arkhipov

Ukhta25 30-let Oktyabrya st., Ukhta, Republicof Komi, 169400 RussiaTel. +7 82147 47134

Tchaikovsky30 Primorsky Bulvar st., Tchaikovsky,Perm Region, 617760 RussiaTel. +7 34241 64651Head of the branch: Galsina V. Sozinova

Chelyabinsk11B Kalinina st., Chelyabinsk, 454084 RussiaTel. +7 3512 689190Head of the branch: Igor R. Kamenskikh

Schelkovo1-1a Proletarsky Prospekt st., Schelkovo,Moscow Region, 141100 RussiaTel. +7 256 70849Head of the branch: Tatyana I. Romanenko

Yugorsk31 Lenina st., Yugorsk, Sovetskiy District,Tyumen Region, 628260 RussiaTel. +7 34675 20475Head of the branch: Nadezhda V. Dovgomelya

Representative Office in Kazan64 Moskovskaya st., Kazan, Republic ofTatarstan, 420021 RussiaTel. +7 8432 923061Director: Tatyana S. Ryabova

Representative Office in Beijing, China1801, Tower D, Central InternationalTrade Centre, 6A, Jianguomenwai Dajie,Beijing, 100022 ChinaTel. +86 10 65630516Head of the office: Alexander I. Kobin

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Bank %

Belgazprombank, Joint Belorussian-Russian Open Joint-Stock Company 60/2 Pritytskogo st., Minsk, 220121 BelarusChairman: Victor D. BabarikoGazprombank’s shareholding 33.91

OAO “Gazprom”'s shareholding 67.82

Credit Ural Bank Open Joint-Stock Company17 Gagarina st., Magnitogorsk, Chelyabinsk Region, 455044 RussiaChairman: Alexander E. GrabovskyGazprombank’s shareholding 100.00

SEVERGAZBANK, Open Joint-Stock CompanyCommercial Bank for the Development of the Gas Industry in the North3 Blagoveschenskaya st., Vologda, 160001 RussiaChairman: Alexei V. ZhelezovGazprombank Group shareholding 98.30

Sibirgazbank Commercial Joint-Stock Bank Closed Joint-Stock Company1/1 Universitetskaya st., 628400 Surgut, Tyumen RegionChairman: Vladislav V. Novikov-LavrovGazprombank Group shareholding 92.74

Sovfintrade Commercial Joint-Stock Bank Closed Joint-Stock Company14/16 Marksistskaya, st., bld. 1, Moscow, 109147 RussiaChairman: Valery A. SereginGazprombank’s shareholding 60.74

SUBSIDIARY BANKS


LICENSES, PERMITS, CERTIFICATES

n General License of the Bank of Russia No. 354, registration renewed 13 November2001.

n Authorized Bank of Gazprom for settlement and cashier’s services, lending opera-tions and other services to enterprises and organizations of the gas industry.

n Certificate of participation in the Mandatory Deposit Insurance System No. 629 of10 February 2005.

n Certificate of membership in the Professional Association of Registrars, TransferAgents and Depositories (PARTAD) of 29 September 1994.

n Principal Member Status in VISA International and Europay International.

n Licenses of the Federal Commission on Securities:

n for professional dealing activities No. 177-04280-010000 of 27 December 2000;

n for professional brokerage activities No. 177-04229-100000 of 27 December 2000;

n for securities operations No. 177-04329-001000 of 27 December 2000;

n for specialized depositary services to investment funds, unit trusts andnon-government pension funds No. 22-000-0-00021 of 13 December 2000;

n for depositary services No. 177-04464-000100 of 10 January 2001.

n License of the Commission on Commodity Exchanges under the Federal FinancialMarkets Service for futures and option transactions at stock exchanges No. 811 of27 February 2006.

n General licenses of the Ministry of Economic Development and Trade of the Russian Federation:

n for the export of gold – No. LG 0270605507090 of 26 June 2006;

n for the export of silver – No. LG 0270605507091 of 26 June 2006.

n Certificate of special registration by the Russian State Assay Office of the Ministryof Finance of the Russian Federation (operations with precious metals and precious stones) No. 0160000099 of 15 October 2003.

n Notification No. 3 of the Federal Customs Service dated 1 May 2007, certifying thatJSB Gazprombank (CJSC) is included in the Registry of banks and other creditinstitutions authorized to act as guarantors before customs authorities.

n Certificate of registration in the Unified State Register of Legal Entities No. 1027700167110, issued by the Ministry for Taxes and Levies of the RussianFederation on 28 August 2002.

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CONTACT DETAILS

Full name: Joint-Stock Bank of the Gas IndustryGazprombank (Closed Joint-StockCompany)

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., Moscow16 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 theBank of Russia’s Main Department forMoscow

INN

(Taxpayer Identification Number): 7744001497

KPP: 775001001

BIC

(Bank Identification Code): 044525823

OKPO: 09807684

OKVED: 65.12

Documents

Gazprombank Group ANNUAL REPORT · 2018. 8. 12. · Further development of partnership with OAO “Gazprom”: signing new coopera-tion agreement for the period through 2015 (January