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

/KASE, July 18, 00/ - OJSC "Komirbank" (Ekibastuz, official list of securities, category "A") in accordance with the listing requirements provided Kazakhstan stock exchange (KASE) with auditing report of Arthur Andersen (Almaty, Kazakhstan) made on 1999 financial statements of the issuer. Based on the data of an independent auditor, who finished working on the statements on May 10, 2000, following are the results of the bank as of December 31, 1999 (in th. KZT): Indicator 1998 1999 ------------------------------------- --------- --------- Authorized capital (paid) 1,000,000 1,500,000 Number of paid shares 1,000,000 1,500,000 Shareholders' equity 1,007,473 1,463,527 Total assets 1,360,553 3,673,108 Liquid assets 175,892 310,495 Loans and other outflows to the banks 136,523 639,267 Liabilities to other banks 50,000 180,115 Loans and advances to other clients 1,053,712 2,005,176 Liabilities to the clients 293,069 1,708,296 Operating income 245,409 546,350 Total expenses 259,422 536,171 Net income -14,013 10,179 ------------------------------------- --------- --------- Calculated based on the data of the auditing report: ------------------------------------- --------- --------- Return on equity (ROE), % - 0.70 Return on assets (ROA), % - 0.28 ------------------------------------- --------- --------- Auditing of "Arthur Andersen" was carried out in accordance with International accounting standards. Since OJSC "Komirbank" keeps its accounts and financial records based on the Kazakhstani accounting standards, and banking legislature, the auditor had to make a number of adjustments and regroupings to make the articles of the balance sheet in compliance with International accounting standards (IAS). As a result, there are some discrepancies between financial and economic indicators of the company and those of an independent auditor. Based on the data of the auditor, capital sufficiency coefficient equaled 38% as of December 31, 1999, which exceeds 8% minimum set by the Basel agreement. The valuation of the market values of financial instruments (cash, liabilities of credit institutions and liabilities to credit institutions, loans to the clients and less than one month old liabilities to the clients) is considered by the auditor reasonable. Regarding the deals, made by two parties, the auditor notes that they were made on market and bank terms. In December 1999 OJSC "Komirbank" bought all the shares issued by OJSC "Latur Alliance Bank" in exchange for 500,000 its own shares. This deal was regarded as pooling the stakes. Based on IAS #21, financial statements of merging companies, regarded as pooling the stakes, should be rearranged to reflect the joint activities of the companies as if the pooling took place at the earliest date when the financial statements were rearranged. Since until 1999 OJSC "Latur Alliance Bank" did not have an auditing by International standards, financial statements of OJSC "Komirbank" were rearranged as if the merger took place on January 1, 1999. In the opinion of the auditor, except for inability to present rearranged financial statements as it was mentioned above, financial statements of OJSC "Komirbank" give a reliable and objective picture of the bank's financial situation as of December 31, 1999, its financial economic activities and cash flow statements as of indicated date in accordance with International accounting standards published by the International accounting standards committee.