Auditing report on 1999 financial statements of OJSC "Temirbank" (Kazakhstan)

/KASE, May 30, 00, Galina Chudinova, Galina Tsalyuk/ - According to the listing requirements, OJSC "Temirbank" (Almaty, official list of securities, category "A") provided Kazakhstan stock exchange (KASE) with auditing report of "Arthur Andersen" (Almaty, Kazakhstan) made by 1999 financial statements of the issuer. Based on the data of an independent auditor, who finished working on the report on March 24, 2000, following are the results of the issue as of December 31, 1998 and 1999 (in th. KZT): Indicator 1998 1999 -------------------------------------- ---------- ---------- Authorized capital (announced) 1,000,000 1,400,000 Treasury stock 4,474 4,474 Outstanding shares 995,526 995,526 Shareholders' equity 1,317,820 1,292,359 Total assets 5,403,488 9,176,708 Total liquid assets 783,173 1,202,860 Funds and loans granted (net) 2,217,484 2,126,095 Liabilities to the banks and credit institutions 1,389,843 2,344,158 Loans and advances to the clients (net) 2,020,813 5,198,564 Liabilities to the clients 2,635,146 5,443,591 Income from operating activities 1,256,359 1,635,604 Total expenses 1,067,409 1,516,647 Net income 188,950 73,957 -------------------------------------- ---------- ---------- Calculated on the basis of auditing report: Return on equity (ROE), % 14.34 5.72 Return on assets (ROA), % 3.50 0.81 Earnings per share (EPS), KZT 189.41 75.42 Price earnings ratio (P/E) - 13.80 Book value of a share, KZT 1,323.74 1,298.17 -------------------------------------- ---------- ---------- "Arthur Andersen" has conducted its auditing in accordance with International accounting standards. Since OJSC "Temirbank" keeps its accounts and makes its financial statements in accordance with the Kazakhstani accounting standards, as well as with the banking legislature, instructions and regulations of the National Bank of Kazakhstan (NB RK), the auditor had to make a number of corrections and regroupings of the articles to make the financial statements of the bank in conformity with the requirements of International accounting standards. As a result, there are some noticeable discrepancies in financial ratios calculated by the data of the company and that of independent auditor. By the data of the auditor, capital sufficiency ratios as of December 31, 1998 and 1999, calculated in accordance with the requirements of NB RK and International requirements, exceeded the minimum level - at least 8% of the assets weighed at risk levels. Capital sufficiency ratios, calculated by international requirements, as of December 31, 1998 and 1999 equaled 38% and 17%, respectively. Based on the data of the auditing report, volume of loans granted to the clients increased 148.8% relative to 1998, reserve for the coverage of possible losses on granted loans was increased by 81.7%. Financing of private companies in 1999 equaled 99.8% of total volume, state - 0.2%, corresponding figures of 1998 - 99.5% and 0.5%. In 1999 loans granted to the clients were distributed among the sectors of the economy in the following proportion (in parentheses comparable figures in 1998): wholesale trade - 38.6% (24.0%) of total volume, production - 16.6% (4.4%), agriculture - 15.3% (1.3%), food - 10.6% (6.8%), construction, transportation and communication - 5.4% (1.2%), loans to private persons - 5.3% (12.2%), energy - 1.7% (3.9%), textile - 3.2% (0%), others - 1.8% (445.7%). In the opinion of the auditor, financial statements of OJSC "Temirbank" give a reliable and objective picture of the company's financial situation as of December 31, 1998 and 1999 in all respects, as well as that of its results and cash flows as of indicated dates in accordance with International accounting standards.