Chairman’s letter To Shareholders, Clients, And Business ... · Management Improvement 80 Franchise Development 85 Charity & Sponsorship 88 Development Priorities 90 ... the top

Chairman’s letter To Shareholders, Clients, And Business Partners 58

Major Performance Indicators In 2001 60

Business Profiley 65

Gazprombank & Gas Industry 77

Management Improvement 80

Franchise Development 85

Charity & Sponsorship 88

Development Priorities 90

Financial Statements 93

Reference Information 104

Gazprombank2001 Annual Report

I am pleased to present Gazprombank's 2001 annualreport to you. Established in 1990 as an industry's specializedbank, Gazprombank has grown hugely sincethen. Last year Gazprombank made anotherimportant step on its way to becominga universal bank of national significance.Gazprombank consistently improves the qualityof its services and expands their range, keepingin line with the world's leading banks.n addition to gas industry enterprises, which areGazprombank's major strategic business partners, our clients now compriseRussia's major foreign trade and insurance companies, pension funds, andleading enterprises of the domestic industry. The number of the Bank's smalland medium-sized corporate customers has also increased significantly.The fact is also that more and more private customers give credenceto Gazprombank. As a result, in 2001 the Bank joined with confidencethe top three Russian banks in respect of individual customers' deposits.Year 2001 is characterized by relative stabilization of the Ruble, declininginterest rates and growing competition in the banking sector. As a result,Gazprombank paid special attention to efficiency of its operations.This focus implies new higher standards of corporate governance, introductionof more effective risk and cost management mechanisms, higher transparencyof the Bank for shareholders and clients and more emphasis on InternationalAccounting Standards. A significant stepin that direction is Gazprombank's reorganization into a joint-stock bank, thattook place in 2001.

Chairman’s LetterTo Shareholders, Clients,

And Business Partners

Gazprombank is a well-recognized bank outside of Russia. It is successfullydoing business not only with a large number of Russian companiesand banks, but also by many leading international financial institutions.One proof is the recent successful placement of Gazprombank's Eurobondson international capital markets. The placement was organized with the help ofseveral leading European banks.In 2001 Moody’s Investors Service confirmed Gazprombank's ratings, whichare the highest that a Russian bank can currently have,while The Banker magazine awarded Gazprombank with The Bankof the Year in Russia award.We thank our shareholders, clients and business partners for their trustin Gazprombank, wish them success and hope for furtherfruitful cooperation.

Yu. I. Lvov,C h a i r m a n o f t h eB o a r d o f M a n a g e m e n t

major performance indicators in 2001


Gazprombank's major performance indicators improved significantly in 2001.

• Pre-tax profit has increased nearly twofold compared to the previous year

to 1.1 billion Rubles, its all-time record;

• Total assets grew 1.4 times to 117.5 billion Rubles;

• Shareholders' equity grew 1.1 times to over 20.1 billion Rubles;

• Charter capital amounts to 13.3 billion Rubles.

Gazprombank's resource base was growing steadily in 2001.During that period, the balances of corporate client accounts grew 1.7 times to 38.3 billion Rubles, while individual clients' deposits grew1.7 times to 9.3 billion Rubles.In 2001 Gazprombank's outstanding customer loans reached59.3 billion Rubles, while its securities portfolio reached 7.1 billion Rubles.

Financial Highlights

61

Charter capital,

billion Rubles

Pre-tax profit,

billion Rubles

Total assets,

billion Rubles

Shareholders' equity,

billion Rubles

Gazprombank's Market Position

According to Russian rating agencies, Gazprombank is one of the leading banksin the Russian banking sector. More specifically, Gazprombank is:Number 2 Russian bank in respect of:• corporate client account balances;

• long-term lending;

• market value of securities kept in its custody.

Number 3 Russian bank in respect of:• total assets;

• individual account holders' deposits.

Number 4 Russian bank in respect of:• plastic card accounts balances.

Number 5 Russian bank in respect of:• shareholders' equity.

Gazprombank accounts for:• 4% of assets and shareholders' funds of Russia's banking system;

• 5% of total outstanding loans granted by Russian banks;

• 13% of outstanding loans originated by Russian banks

for over twelve months;

• 36% of outstanding loans originated by Russian banks

for over three years;

• more than 5% of individual clients' deposits in Russian banks

(Sberbank excluded).

The list of the world's top 1000 banks published in the July 2001 issue of The Bankermagazine contained Gazprombank as Number 415 bank worldwide,Number 156 bank in Europe and Number 3 bank in Central and EasternEurope ranked according to Tier 1 capital.Gazprombank's reliability and stable position has been confirmed by manyRussian rating agencies, more specifically: Reiting – A1 Group (the highest reliability category); Expert – financial strength group 1; Finansy Rossii – A++ (the highest reliability level). International rating agency Moody's Investors Service assigned Gazprombanka foreign currency long-term deposit rating of B1, which equalsRussia's sovereign rating.Gazprombank's Depositary was rated AAA (highest reliability group)by the Financial Research Development Fund under PARTADin its Russian depositary reliability rating.

62


Gazprombank's assets continued to grow in 2001 and increased 1.4 timesto 117.5 billion Rubles. The share of banking assets increased to 70%.As a result, the share of initial operational reserves declined to 15%.In 2001, as ever, lending was the main line of resource allocation forGazprombank, with loans accounting for 64.4% of its assets.Loans were provided mostly to enterprises and organizations,which accounted for 80% of Gazprombank's total outstanding loans. In 2001, Gazprombank's securities portfolio grew from 5% to 7%of its total assets, with significant changes in Gazprombank's trading portfoliostructure. In 2000, Gazprombank's trading portfolio consisted mostlyof government securities. In 2001, its structure changed in favor of corporatesecurities and promissory notes. As a result, their share in Gazprombank'sassets increased to 4%. The structure of Gazprombank's liabilities did not change significantly in 2001,with placements from other lending institutions accounting for 7%of its liabilities and clients' funds accounting for more then 50%, includingindividual account holders' deposits at 7%. Gazprombank's debt instrumentsaccounted for more than 13% of its liabilities. As for borrowing from other banks, the share of loans from non-residentbanks decreased by the end of 2001 because Gazprombank decided to giveup some expensive financial sources. As the balance in customers' currentaccounts increased Gazprombank managed to decline interbank marketborrowings from Russian banks. Other liabilities grew mostly due to an increase in the letter-of-credit coverageand an increase in deferred income on the long-term loans.

Assets And Liabilities Structure

63

Liabilities structure

(average for the year)

1. Term liabilities – 34,8%

2. Demand deposits – 26,6%

3. Shareholders' funds – 19,6%

4. Other liabilities – 19,0%

Assets structure


1. Outstanding loans – 64,4%

2. Initial operational reserves – 15,3%

3. Securities portfolio – 7,3%

5. Other assets – 13,0%

At present, Gazprombank provides banking services to virtually all major enterprisesand institutions of Russia's gas industry, their allied and partner companies,as well as to enterprises from armament, metallurgical, food processingand other industries. To attract new customers, Gazprombank continuously improves its bankingproducts and introduces new specialized ones for its customers, including largeand medium-sized companies, export-geared enterprises and companieswith substantial regional structures. A number of Gazprombank's servicesare very much in demand. They include integrated cash and settlementservices in Russia and abroad, securities management, international transactionsand export and import contract settlement servicing. Considerable efficiency increase in servicing customers based on customizingtheir needs was ensured by its Personal Manager Service. A wide rangeof financial instruments, including expert advice, are available to our customersfor allocation their temporarily uncommitted funds. In 2001, the number of Gazprombank's corporate customers grew by 29%,exceeding 18.6 thousand, while the balances in their accounts grew by 63%.Gazprombank's branch offices provide banking services to about 90%of Gazprombank's corporate customers. In 2001, Gazprombank acquired a number of large-scale customersfrom different industries of the economy, such as: • petrochemical and oil-refining industries – Slavneft, OAO Severnaya Neft,

Korus Group and Far Eastern Alliance;

• metallurgy - éÄé Mechel, éÄé VILS, ZAO Stupino Metallurgical Company;

• military-industrial complex – éÄé Oboronitelnye Sistemy, MKB Fakel,

FGUP Ural Optical and Mechanical Plant, PO Oktyabr;

• food processing industry – ZAO Prodimpex, éÄé Rusagro, Razgulyai Group;

• other industries – Tekhnopromexport Foreign Trading Association,

Ural Electrochemical Plant, FGUP Elektrokhimpribor.

Financial institutions such as the State Regional Generation Fundof the Khanty-Mansi Autonomous District, the Moscow-city Obligatory MedicalInsurance Fund, the Power Industry Non-governmental Pension Fundand other organizations became as well Gazprombank's customersand partners. Last year, the amount of customers' funds trusted to Gazprombank'smanagement grew from US$6.4 million to US$9.3 million.The volume of customers' securities portfolio grew 1.5 timesto 4.8 billion Rubles during the year.

Client Base Growth

Number of the corporate

customers' accounts, thousand

Head office

Number of the corporate

customers' accounts, thousand

Gazprombank branches

64

business profile

Lending to enterprises of the real sector of the economy was one of Gazprombank'spriorities in 2001. The Bank offers a wide range of products and services to its customers.They include investment lending to companies for renovation, reconstructionor expanding their existing facilities, short-term and bill banking lending, overdraftin a customer's bank account. Conjointly with the partner financial companies,Gazprombank provides various types of factoring, leasing and syndicated lendingservices. The Bank provides mortgage and consumer credits to employeesof its corporate clients. As of the start of 2002, Gazprombank's credit portfolio amounted to 59.3 billionRubles, including 52.6 billion Rubles in loans to enterprises and organizations.The overall turnover on loans extended exceeded 340 billion Rubles in 2001.Gazprombank's loan portfolio includes long-term loans to finance gas pipelineprojects needed to increase Russian gas exports to Western, Central and EasternEurope. The Bank began financing the Sosnogorsk gas-processing plantmodernization project (Republic of Komi). High quality of Gazprombank's loan portfolio is provided by the strict observationof credit risk limits established for particular borrowers. As of the end of 2001the share of debt overdue in total outstanding loans accounted for less then 1%.

Gazprombank's loan structure


1. Loans to enterprises and institutions – 78%

2. Loans to individuals – 1%

3. Interbank lending – 19%

4. Bill banking lending – 2%

Lending To Corporate Customers

66

Credit lines, opened to Gazprombank by the world's major banks, provide ampleopportunities to secure clients' contractual obligations through bankingguarantee issuance and letter-of-credit confirmation, as well as to attractmoney for foreign trade transactions financing. As of the end of 2001,Gazprombank's total credit limits reached US$100 million.Despite a twelve-month availability limit on most credit lines, in 2001Gazprombank negotiated up to thirty-month credit lines for foreign tradefinancing with Dresdner Bank and Commerzbank (Germany) and Donau-Bank(Austria).Gazprombank's high international reputation made it possible to become oneof those Russian banks that can get insurance coverage on transactions fromexport insurance agencies such as Hermes (Germany), Nexi (Japan), KUKE(Poland), EGAP (Czech Republic) and the Eximbank (USA). As a result,the importers -Gazprombank's clients - got the possibility to financecommodities purchase for terms of up to five years under favorable conditions.The availability of potential demand for Gazprombank's risks on the partof foreign investors (small and medium-sized European banks, private insurancecompanies and other entities) allowed Gazprombank's correspondent banksmaking transactions at amounts exceeding their limits by means of partial riskredistribution (sale).Gazprombank's network of nostro accounts (78 accounts in all majorcurrencies with 51 foreign banks) ensures Gazprombank's presencein all major financial centers of the world.In 2001, Gazprombank opened accounts with Belgium's Bank BrusselsLambert, the Czech Export Bank, Switzerland's Russian Commercial Bankand Sweden's Svenska Handelsbanken. Gazprombank also establishedcorrespondent relations with the Industrial and Commercial Bank of China(China) and a number of Yugoslavian banks, and signed an agent agreementwith Libyan Wahda Bank. Transactions with all EU countries have beenconverted to euros. The growth of foreign banks opening loro accounts with Gazprombankis one more confirmation of Gazprombank's reputation as a reliable businesspartner. There were 22 loro accounts opened with Gazprombankas of the beginning of 2002.The number of customers' international payments executed by Gazprombankgrew 1.7 times last year.

67

International Transactions

business profile

In 2001, Gazprombank completed unification of the trading environment of the headoffice and its branches. As a result of introduction of the Banking Informationand Dealing System (BIDS) based on the satellite communication systemthe Bank's branch offices were incorporated in the common financialenvironment. Its framework makes it possible in the real-time modeto accomplish funds attraction and allocation transactions, conversiontransactions in all world currencies as well as securities purchase and saletransactions. This also makes it possible to provide Gazprombank's regionalclients with high-quality financial services, irrespective of how far from themajor financial centers they are located.At present, Gazprombank implements a program aimed at connectingits corporate customers to the BIDS, the listing of services, available throughthe system's terminals, is being expanding.Gazprombank is the biggest commercial operator in Russia in the internationaland domestic money markets. The total amount of net credit lineson exchange transactions established for Gazprombank by the leadingWestern banks exceeds US$400 millions. In 2001, Gazprombank's foreignexchange transactions with the world's major currencies amountedto US$31.8 billion, while its money market transactions totaled US$85.5 billion.Gazprombank's foreign-exchange transactions in the domestic foreignexchange market amounted to US$75.2 billion for the past year.In order to use temporarily unallocated capital effectively and maintainits instant liquidity, the Bank is active in the market of short-term interbankloans. In 2001, Gazprombank's turnover on interbank transactions exceeded540 billion Rubles.

Financial Market Transactions

68

business profile

In 2001, Gazprombank carried out securities transactions on all major Russian tradingfloors, including the Moscow Interbank Currency Exchange (MICEX),RTS Stock Exchange, the Moscow Stock Exchange and the St. PetersburgStock Exchange. During that period, Gazprombank's securities transactionsamounted to about 6.7 billion Rubles.Gazprombank is trading in all types of government securities, denominatedboth in Rubles and foreign currencies. Gazprombank's transactions involvingforeign currency denominated securities exceeded US$8 billion (at face value),while its transactions involving Ruble-denominated securities amountedto about 3.7 billion Rubles (including transactions carried outfor Gazprombank's customers at 2.9 billion Rubles).Gazprombank is one of the largest dealers in Gazprom shares, whose ratingsin this market segment are always high and stable. In 2001, Gazprombank'stransactions involving Gazprom shares totaled nearly 5 billion Rubles.Last year, Gazprombank was involved in the organization of tradingin Gazprom shares on RTS floor. In the second half of 2001, the total volumeof trading on RTS amounted to one billion Rubles. Gazprombank has also become Gazprom's paying agent on servicingGazprom's domestic bond issue.In 2001, Gazprombank was one of the most active participants in Russia'spromissory note market. Investments in promissory notes of third partiesincreased more than threefold and exceeded 2.4 billion Rubles.Gazprombank's promissory note portfolio consists mostly of notes issuedby gas-industry enterprises, and, in the first place, Gazprom.In 2001, the domicile program (acceptance for payment) of Gazprom'spromissory notes has begun. The monthly volume of redeemed notesamounts to about 4 billion Rubles. Full implementation of the Gazpromdomicile program would make it possible to speed-up settlements and expandthe range of services provided to holders of Gazprom's promissory notes.

Securities Market Transactions

69

In December 2001, Gazprombank completed its first EUR200 million Eurobond issue forthe term of two years. Gazprombank's Eurobond program was rated at Ba3by Moody's Investors Service.The placement's organizer and lead manager was Deutsche Bank AG.The placement was carried out on behalf of GazInvest Finance B.V.(Netherlands), Gazprombank's 100%-owned subsidiary company.The Program of medium-term borrowings counts on EUR300 million.The program provides debt issuance in various amounts, terms, interest ratesand ways of income payment. The entire issue was placed among foreign investors at face value;the coupon interest rate was set at 9.75% APR.The allocation of Gazprombank's Eurobonds has become a significant eventfor the entire Russian banking system: • It was the first, since the 1998 financial crisis, sizeable borrowing

of a Russian bank in foreign capital market;

• Profitability of the allocated securities for the first time since Russia's crisis

has been under 10%;

• Gazprombank's Eurobonds were among the first securities of Russian issuers

denominated in euros.

Medium-TermBorrowing Program

70

Gazprombank Eurobond

placement structure

1. Germany – 28%

2. France – 3%

3. Italy – 28%

4. Austria – 3%

5. Great Britain – 18%

6. Eastern Europe – 4%

7. Switzerland – 6%

8. Spain and Portugal – 5%

9. United States – 5%

The total amount of funds raised on Gazprombank's promissory notes and certificatesof deposits was 218 billion Rubles, US$210 million and EUR206 millionin 2001. The average daily balances grew by 59% to 13 billion Rubles. Gazprombank's high credit ratings, as well as timely repaymentof the previously issued debt, made it possible for Gazprombank to raisemoney on promissory notes up to US$24 million in the international capitalmarkets. The number of Western financial institutions acceptingGazprombank's notes increased. Early discounting transactionswere also practiced.

Gazprombank's debt securities

business profile

Gazprombank started operations in the precious metal market since 2000. However,just in 2001, the volume and efficiency of its precious metal transactionsincreased significantl y, earning Gazprombank about 100 million Rubles.During that period, Gazprombank sold 6.5 tons of gold (including 0.7 tons soldto foreign buyers), 3.1 tons of silver and 0.26 tons of platinum and palladium.Last year, Gazprombank signed loan agreements with 14 mining companies,8 precious metal refining enterprises, 15 jewelry enterprises and 25 banks(among them were 14 General Agreements on Common Termsof Transactions). Loans to mining companies amounted to 0.5 billion Rubles,that ensured the delivery of 2.6 tons of gold to Gazprombank. Gazprombank concluded precious metal account maintenance and servicingagreements with the world's leading operators on the precious metal market,including Commerzbank (Germany), Credit Suisse First Boston(Switzerland-USA) and Standard Bank London (Great Britain).In 2001, Gazprombank began selling precious metal bullionsto individual clients.Gazprombank's plans for the future include participation in the precious metaldeposit development projects in the Republic of Sakha-Yakutiaand the development of precious metal containing non-ferrousmetal deposits in other parts of Russia.

Precious Metal Transactions

71

In 2001, the amount of transactions settled by Gazprombank's clearing systemgrew 2.7 times.The network of Gazprombank's Russian correspondent banks, which,along with Gazprombank's branches and affiliated banks comprises the regionalsettlement system, has expanded significantly. At year-end Gazprombankhad 30 nostro correspondent accounts with 14 Russian banks and 304 loroaccounts with 114 Russian banks.The volume of specialized settlement and information services also increasedsignificantly. They included subsidiaries' payment acceptance, regional accountson-line management and financial monitoring of subsidiary and relatedcompanies' transactions. Participants in the specialized settlementand information service provision include all of Gazprombank's branches,member banks of the Interregional Banking Group for the Gas Industry,including their branches, and Samara-based Gazbank, which joinedthe system last year. Gazprombank's high-tech settlement system makes it possiblefor the customers to carry out effectively their interregional settlements.For instance, within 2001 Gazprombank's Settlement Center handled about3 thousand clearing transactions at the total volume of 153 billion Rubles.In 2001, more than 3,200 bank money orders of individuals to various partsof Russia and the CIS were accomplished using Gazprombank's branchand correspondent network. One new service introduced last year was bulktransfers in favor of individuals on the basis of a register providedby a customer. The time required for such transactions was reducedto one workday.

Settlement Transactions

72

business profile

Gazprombank is one of the leading banks in the Russian banking system in respectof funds attracted from individual depositors. In 2001, balances in individuals'accounts grew 1.7 times to 9.3 billion Rubles.Last year, Gazprombank implemented a number of measures to improveservices to individual clients and expand their listing. Gazprombank opens alltypes of accounts in Russian Rubles and foreign currencies, including, beginningfrom last year, the Euro. The Bank deals with international travelers' checksand makes money transfers (with or without opening a bank account)within Russia, to CIS and other foreign countries.Gazprombank provides to individual clients with cash and settlement servicesin Rubles, US dollars or euros, mortgage and consumer loans, depositaryservices and storage vaults. In addition, Gazprombank sells gold bullionsand provides consulting services to individual clients.Other services available to Gazprombank's individual clients include Russianand international plastic cards and related supplementary productssuch as insurance, discount programs, calling cards etc.

Retail banking

73

Retail deposits

dynamic,

million Rubles

In 2001, Gazprombank successfully developed its non-cash settlement systembased on bank cards. The geography of the system was considerably expanded: for the year thenumber of regions where the service was available increased to 54 from 31.Gazprombank is now one of the top five bank card issuers in Russia.At year-end, Gazprombank had marketed more than 437 thousandinternational and Russian plastic cards, among them, more than 140 thousandVISA cards. The balances in plastic-card accounts totaled 2.1 billion Rubles. Gazprombank is one of the largest acquirers among Russian banks.At the beginning of the current year, its acquiring network included around340 ATMs and about 600 point-of-sail (POS) terminals. International card service has become one of the priority linesof Gazprombank's plastic card business. Gazprombank issues plastic cardsof the world's major international payment systems, VISA Int. and Europay Int.,and markets the American Express credit cards. In addition, cardholders enjoya wide range of related products and services available for them,such as discount and calling cards, international student certificatesand insurance policies from Sogaz Insurance Company.In 2001, Gazprombank completed its VISA product certificationas well as certification of its system for Europay Int. plastic card issuanceand acquiring. In addition, Gazprombank established business relations,on attractive terms, with more than 30 agent banks located in Moscowand Russia's regions. Gazprombank also supported them in acquiring VISA Int.and Europay Int. membership. In 2001, Gazprombank updated the software and hardware platformfor its main processing center, what resulted in creation of the foundationfor further quantitative and qualitative improvement of servicesto plastic-card holders. An originator of the United Payment System of the CIS Countries (UPSC),Gazprombank was registered as the UPSC's principal member in 2001.It also assumed the role of the system's clearing bank. Gazprombankwas an active participant in the pilot phase of the UPSC project,launched in December 2001. The project was presented at the exhibitiondedicated to the CIS' tenth anniversary. It was very much appreciatedby government delegations, leading politicians and business peoplefrom CIS countries.

Bank cards

74

business profile

Gazprombank's network of depositaries was established in 1995. At present,it includes 49 depositaries, 31 of which are operating at Gazprombank'sbranches and head office, while 18 are based at Gazprombank's partner banks,including those that are members of the Interregional Banking Group for theGas Industry. In addition, the network includes 31 remote terminals that clientscan use to send orders to depositaries and get their depo account statements. In 2001, Gazprombank's depositaries maintained more than950 thousand depo accounts and held more than 10 billion securities,such as government securities, promissory notes, bonds and shares,including 8.9 billion Gazprom shares. During that period, Gazprombank carried out 200 thousand depo accounttransactions totaling 13.4 billion Rubles (a 45% increase over 2000).That increase was due to an improvement in brokerage services,acquisition of new customers and an increase in securities trading.For customer convenience, Gazprombank actively used its Depositary-Clientsystem, which made it possible for the clients to give orders throughGazprombank's remote terminals. In 2001, Gazprombank's bill depositaries maintained more than 1,200 depoaccounts and kept about 4 thousand Ruble-denominated promissory notesworth 20 billion Rubles and 5.5 thousand promissory notes (worth US$118million) denominated in foreign currencies. The number of transactionsinvolving promissory notes amounted to 44 thousand.A holder of a specialized depositary license received in 2000, Gazprombankalso provides depositary services to Russia's non-government pension fundsand unit investment trusts.In 2001, Gazprombank worked out a plan for discounting Republic of Belarus'notes issued in payment for Russian gas supplies, and a plan for discountingRussian companies’ promissory notes held by Ukrainian residents.In addition, the planned transfer and agency agreementwith Ukraine's Privat Bank was drafted.Gazprombank continuously improves the procedure for dividend paymentto clients keeping their securities in Gazprombank's depositaries.In 2001, Gazprombank paid more than 2.7 billion Rubles in dividendsto 541 thousand Gazprom shareholders. The payments were made throughbank money transfers to clients' deposit and cardholder accounts,by money orders or cash provision at Gazprombank's branches.

Depositary Services

75

Gazprombank's dynamic growth in 2001 was to a great extent based on introduction ofup-to-date banking and information technology. Last year Gazprombank completed the connection of its regional branchoffices to the united information and dealing system. In addition, we installed and introduced an electronic precious metaland precious stone integrated transaction accounting system. Introductionof a unified bill discounting system also began in 2001. Its implementationin Gazprombank's branches will allow controlling all operations more rapidlyand accurately. Last year, Gazprombank introduced the SWIFT Alliance systemthat improved settlements with correspondent bank in the SWIFT system.The system, including both hardware and software, conforms to the highestinternational standards.Gazprombank continued to improve its D-Star system in order to speed-updepositary transactions, reduce depositary risks and improve the qualityof depositary services. The freshness of the solutions applied is confirmedby Russian patent and trademark agency.Gazprombank modernized the IT system of its main processing center.This will allow to handle more cardholder transactions and increasethe number of locations were plastic cards are accepted. Gazprombank also implements an IT system that will make it possibleto handle, within the framework of a single system, the entire range of servicesto individual clients, including deposit and cash services, client orderimplementation, plastic card services, money orders, foreign exchangeand traveler check transactions, and storage vault services. Last year, Gazprombank certified its IT systems for the conformityto the Class 1G information safety standards of the State TechnicalCommission under the President of the Russian Federation. Gazprombank's Russian and English-language websites as well as websitesof the Bank’s branches provide up-to-date and reliable informationabout Gazprombank's operations in Russia and abroad.

Advanced Banking Technology

76

Gazprombank & gas industry

Banking services to the gas industry enterprises are one of Gazprombank'sstrategic priorities. Working in the interests of Russia's gas industry, Gazprombank implemented anumber of large-scale projects.In particular, Gazprombank:• established one of Russia's largest banking networks embracing Russia's

major gas production, transportation and processing regions;

• established a united settlement system to ensure rapid payment settlements

between gas industry enterprises and their business partners;

• ensured loan financing of gas-field exploitation and gas transportation

development projects;

• ensured integrated banking service of projects aimed at increase in Russian

gas supplies to Western Europe, Turkey and the Balkan states;

• established a wide network of depositaries to provide services to Gazprom

shareholders and holders of other securities issued by gas industry enterprises;

• maintained trading in Gazprom shares, bills of exchange and bonds

in order to ensure the liquidity of the market for Gazprom securities

(including promissory note domicile);

• provided high-quality banking services to gas-industry employees,

pensioners and members of their families, including those living

in remote gas-producing regions;

• introduced a bank card-based payment system ensuring settlements between

gas industry enterprises and employees.

Strategic partnershipwith Gazprom

78

Under the agreements with a number of Russian local governments, Gazprombankparticipates in their joint programs and projects implemented togetherwith Gazprom and acts as a financial and banking consultant.

Gazprombank & gas industry

Gazprombank provides banking services and participates in a number of investmentprojects implemented by Gazprom in some countries in Europe and Asia. Gazprombank's outstanding loans provided to finance Gazprom's foreignprojects now exceed US$1 billion.The most important of these projectsare gas pipeline projects implemented to increase Russian gas supplyto Western Europe, the Balkans and Turkey. In 2001, Gazprombank worked out and implemented a US$40 millionfinancing plan for the second phase of construction of the Trans-Balkangas pipeline's Romanian section and continued to finance the pipelinesection construction in Bulgaria.Gazprombank is servicing more than 90% of Gazprom's long-term loanagreements totaling about US$10.5 billion. Within their frameworkGazprombank maintains about 100 security (escrow) accounts. The efficiency and quality of its services earned Gazprombank a numberof additional contracts with Gazprom. In particular, Gazprombank is servicingGazprom's loan agreements concluded within the frameworkof the Blue Stream project, the Tragaz consortium loan contracts,as well as loans organized by a consortium of Hungarian banksand a consortium led by Moscow Narodny Bank.

Gazprom's Investment Projects

79

management improvement


Gazprombank is continuously improving risk management throughout the entire bankstructure. This implies the establishment of an integrated risk managementsystem based on clear strategic goals, division of responsibilities and effectivemanagement supervision procedures aimed at timely risk identification,assessment, monitoring and elimination. Gazprombank has introducedan effective credit-, market-, operating- and liquidity-risk management system.

Credit risk is the risk that a borrower may default, fully or partially, on its obligationsto return a bank loan or other assets, as well as the risk of the downgradingof the borrower's credit rating. Gazprombank is exposed to credit risks whenit conducts capital- and- stock-market operations and provides commercialloans. Credit risk management is performed within the framework of Gazprombank's approved lending policy with consideration of its lendingand banking service priorities.Gazprombank has a fine-tuned credit risk management mechanism basedon the application of lending criteria and formalized decision-making andlending procedures. Gazprombank's lending criteria are formalized in inherentdocuments relating to lending to particular types of borrowers and loans.Credit risks management is based on the implementation of the credit limitpolicy, which is defined by the Lending Committee and implementedby Gazprombank's structural divisions and branches acting within their powers.Gazprombank's credit limit policy makes it possible to reduce commerciallending risks and risks associated with trade financing and stock- and moneymarket transactions. The maximum risk per particular borrower is determinedon the basis of a special credit standing analysis procedure, assessmentof collateral liquidity and debt servicing history.

Market risk is the risk of possible losses resulting from unfavorable changesin the markets, including changes in exchange and interest rates andin securities prices. Gazprombank assesses market risks using the Value-At-Risk(VAR) model. Using this model, we assess aggregated market risksfor particular market positions, homogenous securities portfolios (GKOs,OFZs, bills of exchange, etc.), and for Gazprombank's entire investmentportfolio. In addition, Gazprombank performs regular market risk monitoring.In particular, risks associated with foreign currency, precious metals,equity investments and government securities portfolio are monitoredon a daily basis. In addition to a market risk probability analysis, Gazprombank carries outStress Testing, which makes it possible to assess losses in the event of "shock"changes in market conditions (Ruble-dollar and euro-dollar rates, share prices,etc.). Possible "shock" changes are determined on the basis of a long-termhistoric data analysis.

Risk Management

81

Market risk reports are regularly submitted to the Gazprombank management.They are used to establish limits on trading and investment operations,as well as in securitization assessment and hedging-decision making.

Day-to-day liquidity risk management is carried out by Gazprombank's TreasuryDepartment. The liquidity management policy comprises cash flowmanagement, short-term borrowing possibility monitoring, off-balance sheetliability monitoring and an emergency plan for a crisis situation.

Operating risk is the risk of possible losses resulting from technology and managementsystem failures, accounting errors, documentation and document flow errors,and human errors. To manage such risks, Gazprombank establishedan effective internal control system operating at various levels of theorganization. A special role is played by Gazprombank's Internal ControlDepartment, which carries out control over operations of Gazprombank'ssubdivisions and branches and observation of operating rules and procedureson a permanent basis.

Gazprombank's management pays special attention to risk management,improvement of risk management techniques and risk management systems.Much attention is paid to integration of various risk management and controlsystems into a single, integrated risk management system.

82


In 2001, significant changes took place in Gazprombank's organizational structure.They were prompted by an increase in the volume of services providedand introduction of new lines of business. Gazprombank's new structure, oriented to meet customers needs,was developed in accordance with the principle of a reasonable balanceof functions and responsibilities between structural elementsof the management system in order to attain strategic goals at minimum costsand acceptable risk levels. In accordance with this principle, three main management functions wereestablished. They include the business management function, business supportfunction and front offices. Such transition implies focus on client needsand products and services that are in demand, as well as active promotionof such demand. The organizational structure of Gazprombank's regionalbranches is being adjusted and optimized in accordance with regionalpeculiarities and client needs. As of the start of 2002, Gazprombank employed 3,100 people, with two-thirds of them working in Gazprombank's branches. The annual increasewas virtually the same in both the head office and regional branches(14.2% and 14.9%, respectively). The average age of Gazprombank employees is under 30. Practically allthe employees have higher education (finance and economics)and the average work experience in the bank of over four years.Gazprombank's human resources policy was aimed at increasing workmotivation and efficiency, and creation of a favorable climate for effectiveteamwork. A personnel training is one of the most important tasks of Gazprombank'spersonnel management policy. In 2001, half of Gazprombank's employeescompleted various training programs.Gazprombank's personnel training program is aimed at improving employeequalification in order to attain Gazprombank's tactical and strategic goals.The program is worked out with particular specialties, as well as theirsignificance for the bank, in mind. In 2001, Gazprombank launcheda two-year training program for candidates for management positionsin Gazprombank's branches.

Organizational DevelopmentAnd Personnel Management

83

Gazprombank ‘sOrganizational Structure

Shareholders' Meeting

Board of Directors

Chairman of Executive Boardof Management

Executive Board of Management

Credit Committee

IT Committee

Risk Management Committee

Assets and Liabilities Management Committee

Deputy Chairman

of the Board of Management

Commercial Banking

Deputy Chairman


Treasury

Deputy Chairman


Investment Banking

Deputy Chairman


Branch Offices and Subsidiaries

Deputy Chairman


Depositary Services

Chief Accountant

Deputy Chairman


Chief Financial Officer

Internal Control Department

Legal Department

Human Recources Department

Information and External Affairs Department

Administrative Department

Security Service (Department)

Risk Management

Department

franchisedevelopment

Gazprombank branches' 2001 performance is characterized by the following figures: • Balance sheet assets grew more than twofold for the year to 23 billion Rubles;

• Aggregated profit grew 1.7 times during the year to 558 million Rubles,

or more than a half of Gazprombank's total profit for the year;

• Outstanding loans to corporate customers grew 2.6 times;

• The average monthly client account balances grew significantly.

In particular, corporate client account balances grew 1.3 times;

individual client account balances grew 1.6 times, while Gazprombank's debt

accounts grew 2.1 times.

Introduction of new services and improvement of banking technology andclient relations attracted a significant number of new clients to Gazprombankbranches. As a result, the number of corporate clients increased 28% in 2001,compared to the start of the year, to nearly 17 thousand, while the numberof individual clients' accounts grew to more than 1,5 million.In addition to 28 branches (Gazprombank's Novosibirsk branch openedin 2001), there are 85 supplementary offices and cash desks that also provideservices to clients. In 2001, Gazprombank opened supplementary officesin Sterlitamak, Salavat, Nizhny Tagil, Nizhnevartovsk, Tobolsk and other cities.Gazprombank pays special attention to the establishment of new branchesin Siberia and the Far East, as well as to completion of its regionalinfrastructure in the Volga region and the Urals. Gazprombank's branchoffices in Barnaul and Omsk are ready for opening, scheduled for the first halfof 2002. A preparation for the reorganization of the Tschaikovskysupplementary office in Perm into a branch has also been completed. Last year, Gazprombank continued expanding the operating capacityof its branches. In particular, the Orenburg and Izhevsk branches movedinto new premises in the center of the cities, while the Rostov-on-Don,Saratov and St. Petersburg branches completed renovation of their offices.

Branch Network

86

Loans to branches’

customers,

billion Rubles

Individual account

holders' deposits,

billion Rubles

Balances in settlement

and current accounts,

billion Rubles

franchise development

The Interregional Banking Group for the Gas Industry (IBGGI) consistingof ten member banks was established in 1999. With significant stakesin the capital of other IBGGI members, Gazprombank plays a leading role in it. IBGGI members, as Gazprom's authorized banks in separate regions of Russiaand the Republic of Belarus, are leading providers of banking servicesto gas-industry enterprises. As of the end of 2001, the IBGGI's regional branchnetwork comprised about 200 offices in 50 Russian regions and the Republicof Belarus. The performance of IBGGI member banks improved in 2001: their assetsgrew 1.5 times, their net assets grew 1.4 times, while their pre-tax profitincreased 1.9 times. Such improvement became possible as a result of the following: • Establishment of a single interregional payment system based on

Gazprombank's Settlement Center to handle corporate clients' cash flows;

• Consolidation of funds for lending to real-sector enterprises;

• Coordination of regional development strategy, cooperation

with local governments;

• Expansion of the integrated non-cash settlement system on the basis

of Gazprombank plastic card introduction;

• Improvement of depositary services to Gazprom securities holders

and other corporate clients on the basis of IBGGI members' depositaries;

• Introduction of up-to-date financial instruments and common

banking technology.

The Interregional Banking Group for the Gas Industry is rapidly growing,attaining its goals and strengthening its position in the marketfor banking services.

Interregional Banking Group For The Gas Industry

87

charityand sponsorship

89

charityº and sponsorship

In 2001, Gazprombank continued its many-year tradition of charitable assistanceand sponsorship within the framework of a number of programsand projects of much social significance.One of the major lines of Gazprombank's philanthropic activities is the supportof the Russian Orthodox Church.Last year, Gazprombank and the Moscow Patriarchate concludedan agreement on the implementation of a number of researches, culturaland educational programs of the Russian Orthodox Church. In accordancewith the agreement, which attached much importance to publishing activities,Gazprombank supported publication of Children's Bible and preparationfor publication of the Orthodox Encyclopedia in many volumes.Gazprombank assisted in organizing the Moscow Chief Priests Exhibitionheld in the Patriarch's Palace in Moscow Kremlin, financed renovationand construction of the Savior and Transfiguration Monastery on the ValaamIsland and a number of cathedrals in the Moscow and Kaluga Regionsand helped to finance renovation of the Synod Residence in Moscow. Gazprombank's charity activities were appreciated and blessed by Patriarchof Moscow and All Russia Alexy II. Gazprombank was also involved in the organization of recreation holidaysfor children from the Saltykovka orphanage, Moscow Region. The Bank provided aid to the Moscow War Veterans Committeeand the Energia Association of Disabled, financed rehabilitation of participantsin the alleviation of the Chernobyl nuclear disaster consequences,and supported the Benefis Fund for Support of Theater People.With Gazprombank's assistance, the Dynamo-Judo Sports Club heldthe World Judo Championship.

developmentpriorities

development priorities

As major Russian major commercial bank, Gazprombank has defined the followingdevelopment priorities:• Widening cooperation with the gas industry and its business partners in Russia

and abroad;

• Gazprombank's development as a world-class, full-service financial institution;

• Creation of a management system conforming to the size of business

and international requirements.

Strategic partnership with the gas industry implies, first of all, an increase in return onbank capital and focus on high-quality banking services to Gazprom, itssubsidiaries and business partners. When developing and improving bankingservices and products for the real-sector enterprises, Gazprombank tailorsthem in accordance with their specifics, including their regional structure,production cycle duration and financing needs. Gas industry enterprises'priority requirements include the following:• Stable loan financing;

• Control over cash flows and the use of funds in accordance with the purpose

on behalf of clients;

• Follow-up of Gazprom's investment projects and loan contracts;

• Maintenance and servicing of trading in Gazprom's and gas industry

enterprises' securities;

• Banking services to shareholders, employees and pensioners of Gazprombank's

corporate customers, including services provided using the industry's

non-cash settlement system.

Gazprombank's further development as a world-class universal bank implies expansionof its international operations, a proactive client policy and rapid expansionin the regions where its shareholders and clients have strategic interests. According to plans, expansion of Gazprombank's international operations

will be achieved through strengthening of partnership relationswith international financial institutions, improvement of Russian exportersand importers financing and the international settlement system,raising competitive capacity of foreign trade financing services,as well as standardization of the banking services and improvementof their quality to international standard in all Gazprombank offices. Gazprombank's client policy will aim for the attraction of new large corporateclients, such as Russia's major exporters and importers in the strategicindustrial sectors, client base diversification through the attraction of smalland medium-sized companies, individual depositors and institutional investors,and proactive promotion of modern products and services, such as client fundsmanagement, large corporate client settlement center services, bankingand dealing system services and others.

91

Gazprombank's regional policy aims for establishment of branches in Russia'sregions that are of strategic interest for its shareholders and currentand potential large-scale corporate clients (Siberia, the Far East), provisionof the widest possible range of high-quality financial services irrespectiveof client's geographical location, expansion of the network of supplementaryoffices in the Moscow Region and strengthening cooperation betweenmembers of the Interregional Banking Group for the Gas Industryin accordance with Gazprombank's regional development policy.

In order to create an efficient management system that will be adequate to the sizeand complexity of Gazprombank's business and meet relevant internationalrequirements, Gazprombank is implementing the following measures:• Effective banking risk management procedures are being introduced;

• Gazprombank's business and structure are brought in line with the main

resource, functional and regional requirements of its shareholders and clients;

• Administrative costs are being optimized, measures to increase borrowing and

reduce borrowing costs are being taken;

• Introduction of value analysis is planned;

• Introduction of International Accounting Standards (IAS) is currently under way.

92

Gazprombank financial statements

Assets1. Cash and accounts with the Central bank of the Russian Federation 13,649,542

2. Government debt securities 2,351,229

3. Placements with credit institutions 24,238,534

4. Trading securities, net (Item 4.1 - Item 4.2) 2,308,770

4.1. Trading securities, book value 2,352,440

4.2. Provision for impairment of securities 43,670

5. Loans and advances to customers 59,302,065

6. Accrued interest receivable, including overdue interest 305,704

7. Leased assets –

8. Provisions for possible loan losses 3,861,435

9. Loans and advances to customers, net (Item 5 – Item 8) 55,440,630

10. Fixed and intangible assets, materials and low-value items 824,561

11. Long-term investments and participations, net (Item 11.1 – Item 11.2) 2,269,672

11.1. Long-term investments and participations, book value 2,381,601

11.2. Provision for impairment of investments and participations 111,929

12. Prepaid expenses 23,573

13. Other assets 16,100,035

14. Total assets (Items 1+2+3+4+6+7+9+10+11+12+13) 117,512,250

Liabilities 15. Loans from the Central Bank of the Russian Federation –

16. Amounts due to credit institutions 6,708,481

17. Amounts due to customers 47,635,625

17.1. including individual customers’ deposits 9,339,299

18. Deferred income 506

19. Debt securities issued 21,554,990

20. Other liabilities 21,432,986

21. Provisions for settlements with debtors, risks and liabilities 62,708

22. Total liabilities (Items 15+16+17+18+19+20+21) 97,395,296

Shareholders' Equity23. Share capital (funds from shareholders / participants)

(Items 23.1+23.2+23.3), including: 13,331,851

23.1. Registered ordinary shares and contributions 13,331,851

23.2. Registered preference shares –

23.3. Unregistered charter capital on non-joint stock banks –

24. Treasury shares repurchased from shareholders / participants –

94

Balance Sheetas of January 1, 2002

Compiled in accordance with

Regulation of the Bank of Russia No. 1051-U of November 15, 2001

"On the published Financial Statements of Credit Institutions and Banking Groups"

thousands of Rubles

25. Share premium –

26. Funds and profit retained by the credit institution;

difference between share and shareholders’ equity 2,621,996

27. Fixed assets revaluation 6,595

28. Profit (loss) for the year 1,103,497

29. Dividends out of the current year profit –

30. Distributed profit, excluding dividends 775,098

31. Undistributed profit (Item 28 - Item. 29 - Item 30) 328,399

32. Expenses and risks effecting shareholders' equity (3,828,113)

33. Total shareholders' equity

(Items 23-23.3-24+25+26+27+31-32 – for profit-making credit institutions)

(Items 23-23.3-24+25+26+27+28-32 – for loss-making credit institutions) 20,116,954

34. Total liabilities and shareholders' equity (Items 22+23.3+33) 117,512,250

Off-Balance Sheet Liabilities35. Irrevocable commitments of the credit institution 14,581,882

36. Guarantees issued by the credit institution 2,844,184


95

Assets Accounts1. Cash –

2. Securities under trust administration 204,025

3. Precious metals –

4. Loans to customers –

5. Funds used for other purposes 1,402,680

6. Settlements on trust management 3,413

7. Accumulated interest (coupon) income paid on interest

(coupon) debt instruments 6,334

8. Current accounts 10,425,151

9. Trust administration expenses –

10. Trust administration loss –

Liability Accounts11. Capital under trust management 12,015,470

12. Settlements on trust management 3,413

13. Accumulated interest (coupon) income received on interest (coupon)

debt instruments –

14. Trust administration income –

15. Trust administration profit 22,720

Trust Management Accountsas of January 1, 2002

thousands of Rubles

Profit And Loss Accountfor the year ended January 1, 2002

96

thousands of Rubles

Interest and similar income from:

1. Placements with banks, including loans, deposits and current accounts 1,110,171

2. Loans and advances to other customers 3,628,489


4. Fixed-income securities 443,450

5. Other sources 9,115

6. Total interest and similar income (Items 1+2+3+4+5) 5,191,225

Interest paid and similar expenses on:

7. Funds borrowed from banks, including loans and deposits 783,819

8. Customers' funds, including loans and deposits 1,313,154


10. Rent payments 82,237

11. Total interest and similar expenses (Items 7+8+9+10) 3,763,118

12. Interest and similar income, net (Item 6 - Item 11) 1,428,107

13. Fees and commission income 985,484

14. Fees and commission expenses 62,688

15. Commission income, net (Item 13 - Item 14) 922,796

Other operating income:16. Income from foreign exchange transactions, including exchange rate differences 30,325,629

17. Income from transactions with precious metals, securities and other

property, including foreign currency, securities and property revaluation results 2,331,356

18. Dividend income 82,621

19. Other current income 1,062,252

20. Total other operating income (Items 16+17+18+19) 3,3801,858

21. Operating income (Items 12+15+20) 36,152,761

Other operating expenses:22. Employee compensation expenses 1,899,912

23. Maintenance expenses 496,434

24. Expenses on foreign exchange transactions,

including exchange rate differences 28,301,404

25. Expenses on transactions with precious metals, securities and property,

including foreign currency, securities and property revaluation results 867,320

26. Other operating expenses 1,607,710

27. Total other operating income (Items 22 + 23 + 24 + 25 + 26) 33,172,780


97

*) The amount of profit tax (item 35) is recorded in the profit and loss account only

for information purposes and is not deducted from profit (loss) for the year, recorded

as Item 37.

28. Net operating income before provisions and extraordinary

income / expenses (Item 21 - Item 27) 2,979,981

29. Change in provisions for possible loan losses 1,805,127

30. Change in provisions for possible impairment of securities 65,350

31. Change in other provisions 6,007

32. Net operating income before extraordinary income / expenses

(Items 28-29-30-31) 1,103,497

33. Extraordinary income less extraordinary expenses –

34. Net operating income after extraordinary income / expenses

(Item 32 + Item 33) 1,103,497

35. Profit tax *) 347,217

36. Deferred profit tax –

36‡. Extraordinary expenses after tax –

37. Profit (loss) for the year (Item 34 - Item 36 - Item 36a) 1,103,497

Cash Flow Statementfor the year ended January 1, 2002

98

thousands of Rubles

I. Cash flows from operating activities

1. Interest income 5,191,225

2. Interest expenses 3,763,118

3. Commission income 985,484

4. Commission expenses 62,688

5. ncome from foreign exchange transactions 4,296,696

6. Income from transactions with precious metals,

securities and other property 2,310,339

7. Expense on foreign exchange transactions 2,516,651

8. Expenses on transactions with precious metals,

securities and other property 865,748

9. Dividend income 82,621

10. Other operating income 1,062,252

11. Other operating expenses 4,004,056

12. Extraordinary expenses after tax –

13. Total income / expenses (Item 13.1 + Item 13.2), including: 2,113,842

13.1. Income / expenses (Item 1 - Item 2 + Item 3 - Item 4 +

Item 5 + Item 6 - Item 7 – Item 8 + Item 9 + Item 10 -

Item 11 - Item 12) ) 2,716,356

13.2. Change in income / expenses (602,514)

14. Payments to budget made from profit, payments for charitable

and other purposes (309,248)

15. Cash flows from operating activities before changes

in operating assets / liabilities (Items 13 + 14) 1,804,594

Change in operating assets16. Government debt securities 193,177

17. Placements with credit institutions (446,696)

18. Trading securities (book value) (2,295,970)

19. Loans and advances to customers (6,080,317)


21. Other assets (3,994,772)

Change in operating liabilities22. Loans from the Central Bank of the Russian Federation –

23. Amounts due to credit institutions (4,625,059)

24. Amounts due to customers 19,207,153

25. Other liabilities 5,412,505

26. Net cash flow from current operations (Item 16 + Item 17 + Item 18 +

Item 19 + Item 20 + Item 21 + Item 22 + Item 23 + Item 24 + Item 25) 7,370,021

27. Net cash flow from operating activities (Item 15 + Item 26) 9,174,615


99

II. Cash flows from investment activities

28. Fixed and intangible assets, materials and low-value items (73,728)

29. Long-term investments and participations, book value (820,598)

30. Net cash flow from investment activities (Item 28 + Item 29) (894,326)

III. Cash flows from financing activities

31. Share capital (funds from shareholders (partners))) 1

32. Treasury shares repurchased from shareholders (partners) –

33. Share premium –

34. Funds and profit retained by the credit institution 175,556

35. Dividends out of the current year profit –


37. Net cash flow from financing activities (Item 31 + Item 32 +

Item 33 + Item 34 + Item 35 + Item 36) 10,559,230

38. Positive / negative revaluation of foreign currency, precious metals

and securities; fixed asset revaluation; accrued and other amounts

not reflected in the financial result 1,333,763

39. Net cash and cash equivalents (Item 27 + Item 30 + Item 37 + Item 38) 20,173,282

40. Cash and cash equivalents at the beginning of the year 11,181,603

41. Cash and cash equivalents at the end of the year (Item 39 + Item 40) 31,354,885

Compliance With Main RequirementsEstablished By Regulatory Documents

Of The Bank Of Russia's as of January 1, 2002

100

1. Actual capital adequacy ratio (Ratio H1, %) 17.9

2. Design value provision for possible loan losses as calculated in

accordance with the Bank of Russia's requirements (thousands of Rubles) 3,861,432

3. Actual provision for possible loan losses (thousands of Rubles) 3,861,435

4. Design value provision for impairment of securities as calculated in

accordance with the Bank of Russia's requirements (thousands of Rubles) 155,599

5. Actual provision for impairment of securities (thousands of Rubles) 155,599

6. Design value provision for possible losses as calculated in accordance

with the Bank of Russia's requirements (thousands of Rubles)

Starting from 01.10.2001 - 20% of the design value provision

Starting from 01.04. 2002 - 50% of the design value provision

Starting from 01.10.2002 - 100% of the design value provision 58,289

7. Actual provision for possible losses (thousands of Rubles) 62,708

Yu. I. Lvov,C h a i r m a n o f t h e B o a r d o f M a n a g e m e n t

G. N. Kozyulina,C h i e f A c c o u n t a n t


The audited annual financial statements are prepared, in all material respects,in accordance with legislation and statutory requirements regulating theaccounting and reporting procedures and the accounting principles generallyaccepted in the Russian Federation. The accuracy of the balance sheet,the profit and loss account, the cash flow statement and the informationon compliance with main requirements of the Bank of Russia is confirmed.Detailed information relating to accuracy of the financial statementsof the credit institution, including the information relating to the above data,is contained in the auditor's report on the financial statements of the creditinstitution as of January 1, 2002.

Closed Joint-Stock Company KPMG

License No. 0213

issued on February 15, 2001

License validity term: three years

License Issuer:

Central Bank of the Russian Federation.

Lukashova, Natalya Victorovna

101

We have audited the accompanying Financial Statements of the Joint-Stock CommercialBank for the Gas Industry “Gazprombank” (closed joint-stock company)(hereinafter the “Bank”), including the balance sheet and the income statementas at 31 December 2001 and for the year then ended. These FinancialStatements were prepared by the management of the Bank basedon the Central bank of the Russian Federation Accounting Rules for CreditInstitutions in the Russian Federation of 18 June 1997 No. 61 (as amended),Directive of the Central bank of the Russian Federation of 13 December 2001No. 1069-U On the Annual Financial Statements of a Credit Institution,Directive of the Central bank of the Russian Federation of 15 November 2001No. 1051-U On the Publication Purposes Financial Statements of CreditInstitutions and Banking Groups, Order of the Central bank of the RussianFederation of 1 October 1997 No. 02-249 On Introduction of the Instruction“On Preparation of Financial Statements” (as amended) and Instructionof the Central bank of the Russian Federation of 1 October 1997 No. 17On Preparation of Financial Statements (as amended).Preparation of the financial statements is the responsibility of the Boardof Management of the Joint-Stock Bank for the Gas Industry “Gazprombank”(closed joint-stock company). Our responsibility is to express an opinionon the truthfulness of these Financial Statements, in all material respects,based on our audit.We conducted our audit in accordance with Federal Law of 7 August 2001No. 119-FZ On audit activity (as amended), Regulation of the Central bankof the Russian Federation of 23 December 1997 No. 10-P On the Procedurefor the Preparation and Submission to the Bank of Russia of an Audit OpinionBased on the Results of an Audit of the Activity of a Credit Institution,Audit Standards approved by the Audit Commission under the Presidentof the Russian Federation on 9 February and 25 December 1996, 22 Januaryand 15 July 1998, 18 March, 27 April, 20 August and 20 October 1999, 11 July2000 (Minutes No. 1, 6, 2, 4, 2, 3, 5, 6 and 1 respectively), Audit Standardsapproved by the Expert Committee on Banking Audit of the Central bankof the Russian Federation, International Audit Standards, and our internalaudit standards.The audit was planned and performed to obtain reasonable assurancethat the Financial Statements are free of material misstatement. Our auditincluded examining, on a test basis, evidence supporting the amountsand disclosures in the Financial Statements. We reviewed a sample of business

OPINIONof the audit firm CJSC “KPMG”

on the Financial Statements

of the Joint-Stock Commercial Bank for the Gas Industry “Gazprombank”

(closed joint-stock company)

for the period from 1 January 2001 to 31 December 2001

102


transactions of the Bank for the compliance with the effective legislationof the Russian Federation solely to obtain sufficient assurance that the financialstatements are free of material mistreatment. We believe that our audit provides a reasonable basis for expressingan opinion on the truthfulness of these Financial Statements.The audited annual Financial Statements are prepared, in all material respects,in accordance with legislation and statutory requirements regulating the accounting and reporting procedure and the accounting principlesaccepted in the Russian Federation. The truthfulness of the attachedbalance sheet and income statement is confirmed.

Moscow, March 22, 2002

N. V. Lukashova,d i r e c t o r , Z A O K P M G

L. V. Zimina,a u d i t o r

103

reference information

LICENSES, AUTHORIZATIONS,CERTIFICATESAND MEMBERSHIPIN PROFESSIONAL ORGANIZATIONS

General License of the Bank of Russia

No. 354, re-registered

on November 13, 2001

Gazprom's authorized bank

for cash-and-settlement service, lending

and other services to the gas industry

enterprises and organizations

License of a professional securities

market agent for specialized depository

activities for investment funds and unit

investment trusts No. 22-000-0-000-21

issued by the Federal Commission for

Securities on December 13, 2000


market agent for depository activities

No. 177-04464-000100 issued

by the Federal Commission for Securities

on January 10, 2001


market agent for dealer activities

No. 177-04280-010000 issued

by the Federal Commission

for Securities on December 27, 2000


market agent for broker activities

No. 177-04229-100000 issued




market agent for securities trust activities

No. 177-04329-001000 issued



License No. 354 of November 13,

2001 for transactions with precious metals

issued by the Bank of Russia

General Licenses for the export

of precious metals issued by the Ministry

of Trade of the Russian Federation:

• gold – No. 027205500924

of March 5, 2001

• silver – No. 027205500925

of March 5, 2001

Registration Certificate issued

by the Central State Assay Office

(operations with precious metals

and precious stones) No. 15367

of December 16, 1999.

State Customs Committee’s

Authorization for the right to act

as a guarantor to customs authorities

No. 142 of April 1, 1999.

Membership Certificate

of the Professional Association

of Registrars, Transfer-Agents

and Depositories (PARTAD)

of September 29, 1994.

Principal Member of VISA International

and Europay International.

Member of the Association of Russian

Banks (ARB).

Participant of the European

Business Congress.

FULL NAMEThe Joint-Stock Bank

for the Gas Industry "Gazprombank" (closed joint-stock close company)

SHORT NAMEJSB Gazprombank (CJSC)

ESTABLISHEDJuly 31, 1990

LEGAL ADDRESSBuilding 1, 16 Nametkina St.,

117420, Moscow

LOCATION63 Novocheremushkinskaya St.,

117418, Moscow

TELEPHONES(095) 719•1763, 913•7474

FAX(095) 719•1686

WEBSITEwww.gazprombank.ru

TELEX412027 GAZ RU

SWIFT CODEGAZPRUMM

REUTERS DEALING CODEGZPM

CORRESPONDENT ACCOUNT30101810200000000823

with OPERU of the Bank of Russia's MainDepartment for Moscow

INN (Taxpayer Identification Number)7744001497

BIK (Bank Taxpayer Identification Number)044525823

OKPO09807684OKONKh

96120

Board Of Directors

Chairman of the Board of Directors: Aleksey B. Miller,

Chairman of the Board of Management, OAO Gazprom

Deputy chairmen of the Board of Directors: Yuri I. Lvov,Chairman of the Board of Management, Gazprombank

Vitaly G. Savelyev, Deputy Chairman of the Board of Management, OAO Gazprom

Mikhail L. Sereda, Head of Staff of Management, OAO Gazprom

Members of the Board of Directors: Alexandr G. Ananenkov,Marina A. Bezrukova,Yuri I. Vazhenin, Yuri R. Vyakhirev,Natalya I. Oleschuk,Petr I. Rodionov

Board of Management

Chairman of the Board of Management:Yuri I. Lvov

Deputy Chairmen of the Board of Management: Evgeniy G. Dubrovin Kirill Y. LevinGennadiy Y. Mescheryakov Alexander I. SobolPavel V. Utkin

Members of the Board of Management: Alexander V. Brinza Andrey L. Von,Victor B. KorytovSvetlana E. Malyuseva

Managerial Bodies

106


Gazprombank shareholders as of January 1, 2002

107

1. OAO Gazprom

2. OOO Volgotransgaz

3. OOO Mostransgaz

4. OOO Yugtransgaz

5. OOO Kubangazprom

6. OOO Lentransgaz

7. OOO Uraltransgaz

8. FGUP SG-Trans

9. OOO Gazexport

10. OOO Gazkomplektimpex

11. OOO Orenburggazprom

12. OOO Permtransgaz

13. OOO Volgogradtransgaz

14. OAO Volgogradneftemash

15. OAO Tsentrgaz

16. OOO Urengoygazprom

17. DOAO Spetsgazavtotrans

18. OOO Tyumentransgaz

19. OOO Tomsktransgaz

20. OOO Kavkaztransgaz

21. OOO Yamburggazdobycha

22. OOO Astrakhangazprom

23. OOO Nadymgazprom

24. OOO Severgazprom

25. DZAO Kostromatrubinvest

26. OOO Surgutgazprom

27. OOO Mezhregiongaz

28. OAO CB Severgazbank

29. OOO New Financial Technologies

Gazprombank Regional Branches

108

Astrakhan: 12-2 Vorobyeva proezd, Astrakhan, 414057Tel.: (8512) 39-20-86

Barnaul:20 Severo-Zapadnaya St., Barnaul, 656037Tel.: (3852) 77-87-18

Beloyarsky: 7a Molodosti St., Beloyarsky,Tyumen Region, 628161 Tel.: (34670) 2-21-77

Bryansk: 4 Partizan Sq., Bryansk, 241011 Tel.: (0832) 74-59-17

Volgograd: 34a Kozlovskaya St., Volgograd, 400074Tel.: (8442) 93-00-05

Ekaterinburg: 55a Radishcheva St., Ekaterinburg, 620086 Tel.: (3432) 12-16-01

Izhevsk: 182 Votkinskoye Shosse, Izhevsk,Republic of Udmurtia, 426039Tel.: (3412) 75-05-63

Kostroma: 9a Sovetskaya St., Kostroma, 156000Tel.: (0942) 31-09-42

Krasnodar: 36 Dzerzhinsky St., Krasnodar, 350051Tel.: (8612) 54-22-46

Lipetsk: 49a Gagarina St., Lipetsk, 398002 Tel.: (0742) 42-01-01

Makhachkala: 24 Yermoshkina St., Makhachkala,Republic of Dagestan, 367025 Tel.: (8722) 67-53-29

Moscow: 41Vernadskogo Prospect, Moscow, 117799Tel.: (095) 430-89-49

Nadym: 53 Orudzheva Emb., Nadym,Tyumen Region, 629736Tel.: (34995) 2-00-20

Nizhny Novgorod: 3/5 Piskunova St., Nizhny Novgorod, 603005 Tel.: (8312) 33-36-37

Novosibirsk: 18 Year 1905 St., Novosibirsk, 630132 Tel.: (3832) 20-28-00

Novy Urengoi: 4, 26th CPSU Congress St., Novy Urengoi,Tyumen Region, 629300Tel.: (34949) 4-06-11

Orenburg: 18 Pravdy St., Orenburg, 460000 Tel.: (3532) 73-30-71

Rostov-on-Don: 80 Sokolova Prospect., Rostov-on-Don, 344024 Tel.: (8632) 34-33-74

St. Petersburg: 15 Sedova St., St. Petersburg, 193148Tel.: (812) 567-61-83

Saratov: 118a Prospect 50-letiya Oktyabrya,Saratov, 410052Tel.: (8452) 37-33-82

Stavropol: 419-2 Lenina St., Stavropol, 355012 Tel.: (8652) 35-95-12

Tomsk: 52e Pushkina St., Tomsk, 634006Tel.: (3822) 65-76-14

Tula: 106 Lenina Prospect, Tula, 300026Tel.: (0872) 33-35-29

Tyumen: 62 Respubliki St., Tyumen, 625026Tel. (3452) 22-84-15

Ufa: 138 Mendeleeva St., Ufa,Republic of Bashkortostan, 450022 Tel.: (3472) 52-28-27

Ukhta: 25 30-letiya Oktyabrya St.,Republic of Komi, 169300 Tel.: (82147) 4-71-34

Tchaikovsky:30 Primorsky Blvd., Tchaikovsky,Perm Region, Russia, 617740Tel. (34241) 6-46-51

Schyolkovo:1-1a Proletarsky Prospect, Schyolkovo,Moscow Region, 141100Tel. (256) 7-08-49Yugorsk:

31 Lenina St., Yugorsk,Tyumen Region, 628260Tel. (34675) 2-04-75


Shareholding In Russian Banks

Investment Commercial Bank "Evropeisky"

39 Kutuzova St., Kaliningrad, 236010

Tel.: (0112) 22-19-00

Joint-Stock Commercial Bank "IntrustBank":

3, Building 1, 5th Monetchikovsky per., Moscow, 113054

Tel: (095) 951-19-26

Open Joint-Stock Commercial Bank "Severgazbank": 3 Blagoveshchenskaya St., Vologda, 160001

Tel.: (8172) 72-70-83.

with branches in:

Closed Joint-Stock Commercial Bank "Sibirgazbank":

12 Svobody Blvd., Surgut, Tyumen Region, 628417

Tel.: (3462) 24-49-89

Commercial Bank "Gazenergoprombank":

P/O Kommunarka, pos. Gazoprovod, Leninsky District, Moscow Region, 142770

Tel.: (095) 428-73-22

with branches in:

Joint-Stock Commercial Bank "Sovfintrade":

14/16, Building 1, Marksistskaya St., Moscow, 109147

Tel.: (095) 912-92-00

with a branch in

Perm

Belgorod

Vidnoye

Voronezh

Kursk

Naro-Fominsk

Pavlovsky Posad

Ramenskoye

Ryazan

Stary Oskol

Tver

Khimki

Orel

Arkhangelsk

Veliki Novgorod

Veliki Ustyug

Vorkuta

Vytegra

Gryazovets

Ivanovo

Kaduy

Kotlas

Nuksenitsa

Sosnogorsk

Syktyvkar

Uglich

Cherepovets

Yaroslavl

BankswithGazprombank's

Shareholding

109

Commercial Bank "Sochigazprombank":

14 Navaginskaya St., Sochi, Krasnodar Region, 354000

Tel.: (6222) 62-01-10

with a branch in

Anapa

Joint-Stock Commercial Bank "Spurt":

2 Spartakovskaya St., Kazan, Republic of Tatarstan, 420107

Tel.: (8432) 38-94-00

Equity Investments In Foreign Banks

Altalanos Ertekforgalmi Bank rt.:H-1055, Hungary, Budapest, Marko Street, 9, Tel.: (36-1) 269-14-73

Belgazprombank:Republic of Belarus, 220121, Minsk, ul. Pritytskogo, 60/2, Tel.: (37517) 259-40-24

110

February Gazprombank's Novosibirsk branch office came into operation.

March Shareholders meeting made a decision to reorganize Gazprombank into a closed joint-stock company.

April The audit firm KPMG completed Gazprombank's 2000 audit in accordance with theInternational Accounting Standards. Gazprombank's capital amounted to US$647 million.

May Aleksey Miller, Chairman of Gazprom's Board of Management, was elected Chairman ofGazprombank's Board of Directors.

July Gazprombank was included in the Banker magazine's list of Top-1000 Banks as one of500 world's banks and one of the three largest banks in Central and Eastern Europe.

August Yuri Lvov was appointed as Chairman of Gazprombank's Board of Management. Moody’s Investors Service upgraded Gazprombank's financial strength rating.

September Gazprombank was awarded the Bank of the Year 2001 in Russia Award by the Bankermagazine. The first audit of Gazprombank's semi-annual accounts was carried out in accordancewith the International Accounting Standards.

November Gazprombank and the Bank of China signed an agreement on cooperation.

December Gazprombank became the first Russian bank that began medium-term borrowing on theEuropean capital market after Russia's 1998 crisis. Moody’s Investors Service assigned ratings of Gazprombank and its Eurobond Programequal to the country ceiling rating for Russia.

2001 Highlights

111

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