Time is impassive and implacable.

Time breaks up worlds, washes down civilizations their languages and odours, rhythm and motions. And only with an ancient Meissen cup in the hand you wonder at how correctly, not fussily it rests in your hand, and the Grandmas brilliants flow on your neck without withdrawing into their own beauty , but only to accentuate its curve. Piece-things. Things created by somebody for someone. Things not knowing dismal impersonality of stamping. Things telling about worlds and civilizations more than historians surmises. Only things created for you are worth of a free man.

Table of contents

Chairman Address Macroeconomic Situation in Russia in 2002 Development of the Russian Banking System in 2002 Main Results of Sudostroitelny Bank in 2002 Financial Markets. Money Markets Securities Correspondent banking Client Policy Crediting Leasing Collection Plastic Cards Latest Technologies St.-Petersburg Branch Sponsorship Balance Sheet

7 10 13 16 22 23 25 28 30 32 33 36 37 38 39 42

SUDOSTROITELNY BANK annual report 2002

Piece-things. Cognac

Carved facet of the cognac carafe is sparkling with amber and ruby in gleam of fair, and vine ordour of a ripe bunch cut in times immemorial is turning your head. The same way it was floating in the drawing-room of a snow-covered manor 200 years ago, - and muted voices of officers with epaulets embroidered in gold keep living in this ordour, and Heres to Fatherland!" and "Heres to Ladies! you drink together.

Chairman Address

Dear Madams and Sirs!

The year 2002 was very important for the development of Sudostroitelny Bank by the volume of assets and equity capital the Bank was ranked among 50 largest credit institutions of Russia, joined the elite of the national banking business. The new status of the Bank not only opens wide perspectives, but also imposes great responsibility. At the beginning of 90s the Bank development was not coordinated by a purposeful strategy the Bank tactics were aimed at making a good use of the moment and new market opportunities. Today the Bank is not in a position to afford it. We are now facing the task to adhere to an adjusted strategic line based on projected numerical parameters. In order to secure a stable competitive position, the growth rates of basic carrying amounts must exceed average indices in the banking sector. It is really very pleasant for me to inform that judging by the results of 2002 this program was successfully realized. The assets and equity capital of the Bank grew by 2.5 times. In many respects it was possible due to a new positioning of the Bank in the market Sudostroitelny Bank became an active participant of the interbank services market. As a result the number of LORO accounts in 2002 doubled, and balances on those accounts increased by 4 times. The growing confidence of the clients and correspondent banks resulted in a successful issue of own bills of exchange with a maturity date of more than one year. The attraction of long-term resources and the increase in the volume of own funds provided a solid basis for the growth of the credit portfolio. As a result, by the end of the year the credit portfolio increased by almost 3 times. However, even the significant increase in the volume of crediting was not followed by the fundamental change of the Bank policy in this field. Satisfying to the maximum the needs of its clients, the Bank continued crediting the projects that corresponded with the requirement yield-reliability at the most. One of the most important results achieved by the Bank in 2002 was the extension of the services range and the introduction of the latest technologies. Meeting the requirements of the corporate clients the Bank was intensively developing leasing and factoring operations, salary projects with the use of VISA plastic cards, services on effecting customs payments via the customs card system, services on acquiring, and brokerage services in the securities market. An important place in the Bank client policy today occupies the work with private persons. In 2002 the Bank issued plastic cards VISA Gold, VISA Classic and VISA Electron, worked out new types of term deposits, became a correspondent of international money transfer system RIA Envia in Russia. In order to improve the customer service the Department of the customer relations development was created. The achieved results allow us to make plans for the future with confidence. In the coming year Sudostroitelny Bank is going to confirm and consolidate the status of a large universal credit institution. We will seek after further optimization of the existing business-processes, the reduction of risks, development and introduction of new products and services, which correspond to the requirements of the clients, as well as to the international standards of the banking service. In conclusion I would like to express to everyone our clients, partners, and employees my sincere appreciation for the trust and support. The joint efforts of our team allowed the Bank to take the present positions and to become the Bank you know today.
SUDOSTROITELNY BANK annual report 2002

Alexey Golubkov Chairman of the Board

Piece-things. Books

The world broken to pieces comes to life by ordour and things. A Grandma will find a faded rose in Clarissa and put it into Nadsons book, and a ray will slide on a page dropped by tears, and new roses will blossom out in rosary, and sweet smell of young roses will flow together with old books odour, girls dressed in muslin will become ladies clothed in silk and velvetAnd boys cried while reading

Napoleon at St. Helen will put on military uniform and leave for war, but all that will be later, later Both Clarissa and Napoleon wont go to pieces, loose pages like pocket one-day books do and now in the 21st century your daughter will open the heavy volume and find the Grandmas rose there.

Macroeconomic Situation in Russia in 2002

Macroeconomic Situation in Russia in 2002

Analysis of the Russian economy in 2002

In the last year the basic macroeconomic parameters fully corresponded to expectations. A 4% economic growth of all production indices which took place in 2002 had been forecasted a year ago by both the government and most part of independent experts. Such a high accuracy of forecasts is an evidence of stability of the main economic processes. As before the production growth was determined by external demand resulting from a favorable market situation and by an outpacing growth of the domestic demand. The highest growth rates were demonstrated by the fuel industry, non-ferrous metallurgy and food industry. The analysis of the results of economic development during the past several years shows that the established mechanism of economic growth which is mainly based on the export-oriented manufacture of non-deep processing products does not have necessary elements for the fast qualitative improvement of the economy structure and for the raise of the economy effectiveness on the whole. Such economy can provide only moderate growth rates (3-5%) during the next few years and a slow forming of conditions for structural changes which will imply the increase in the share of high-level processing products. Quicker structural changes are also possible, but only as a result of recessions caused by shocks of external demand first of all by a slump in prices for mineral energy resources.

Investments
The increase of investments in fixed capital in 2002 was similar to the one in 2001 with the exception of one important factor the previous year did not experience such a deep recession in January. The annual increase of investments amounted only to 3.2%. Such a low result was achieved exactly because of the January recession which is a record one for the last seven years and was caused by the cancellation of investment privilege on income tax.

Consumer demand
The development of the retail trade turnover was characterized in 2002, as well as in the previous year, by a steady positive growth that provided an average monthly increase of 0.8%. As a result the annual increase amounted to 9.2%. High growth rates of the retail trade turnover during the last 3 years (8.7% in 2000 and 10.7% in 2001) indicate the positive change of the consumer demand factor that provides stability for the production development. Besides, a rapid growth of the consumer demand establishes potential for the acceleration of an economic upturn. However this potential can be realized only if corresponding inducing measures of economic policy are taken, which will be aimed at supporting the internal producers in the competition with the import for consumer demand.

Production
The GDP growth amounted to 4.3% as compared with the previous year. One should note that the main driver for the GDP growth was a higher growth rate of services, that resulted in the increase of their share in the GDP structure in basic prices from 54.8% in January-September 2001 to 57.5% during the same period of 2002. This growth was mostly provided by the growth of market services share that increased from 46.4% to 48.4%. The significant growth of the services share indicates that the internal commodity production was not less important for the excessive demand satisfaction than the import increase. Thus the prospects of the beginning of 2003 look quite promising. The volume of industrial production increased by only 0.6% in December 2002 as compared with the same period of 2001. This is the lowest index for the last three and a half years. As for the industry, the December result is extremely low and indicates the negative break of the industrial production dynamic that took place in the autumn last year. Thus the annual increase of the industrial production amounted to 3.7%.

Foreign trade
The volume of export increased slightly in December and almost reached its historical maximum recorded in December 2000 (USD 10.1bn). However, eliminating the influence of the seasonal factor reveals that the export growth rate exceeded substantially the level reached 2 years ago. The export volume in December exceeded USD 9.8bn; at the end of 2000 it was equal to around USD 9bn. Due to the rapid growth in 2002 comparable by its rates to the rehabilitation upturn period in 1999, the export was able to totally catch up with the growth as compared with 2001. The annual volume of export exceeded not only the result of 2001 but also the record result of 2000 USD 105.0bn. According to the State Committee of Statistics (Goskomstat) the volume of export in 2002 amounted to USD 107.2bn that is 4% higher as compared to the previous year. It is also important to mention that the share of non-CIS countries in the export structure keeps up steadily near the mark of 85%.

According to the latest data on the volume of import provided by the Central Bank of Russia its growth stopped in the autumn at the rate of USD 5.4bn per month. Such development is usual for the autumn. One can assume that weakening of the ruble against the euro had a certain restraining impact on import. According to the Goskomstat the volume of import in 2002 amounted to USD 62bn exceeding by 12% the result of the previous year. It is c. 16.7% less than in the record year of 1997. At the same time the volume of import by the end of the year exceeded 70% of its crisis drop in 1998. The annual export surplus decreased, though not significantly. In the estimation of experts the export surplus decreased from USD 48bn to USD 46bn (or from USD 45.7bn to USD 41.5bn as regards to the trade with non-CIS countries). Judging by the international balance of payment, stability of the money market and financial system on the whole, one should not be anxious about the current foreign trade situation since a high safety margin still exists. However one should take into account that the export dynamics is not stable enough to sustain sharp deterioration of the external market situation, first of all in the energy resources markets, while the import is strongly supported by the outpacing growth of the domestic demand. This involves a potential risk of an export surplus decrease. In such situation the proper reaction of the authorities will be to follow a policy of real weakening of the ruble that will naturally ease the negative impact of the external shock. Tariff regulation and introducing import quotas on products of domestic manufacture which are most sensitive to external competition, will make the problem less acute to a certain extent.

Income of the population and unemployment

Real disposal income of the population grew in 2002 by 9% as compared with 2001. Thus for the last three years the real income of the population grew almost by one third and reached the maximum level of 1997. High rates of real income growth imply higher potential for further increase in consumer demand. This is a positive factor for the development of production activities.

Monetary policy
The exchange rate dynamics in 2002 was mostly smooth and monotonous. The US dollar exchange rate was growing by 0.2-0.4% per month, except for July when it didnt change virtually, and December when it declined by 0.2%. The last change is unique. For the first time from the beginning of 90-s the US dollar exchange rate declined in December. Obviously it was determined by the excessive supply of foreign currency caused by both the considerable export surplus and probably the inflow of foreign capital in the form of credits provided to private business. The Bank of Russia was obviously evading the intensive ruble intervention measures to support the US dollar rate. It tried to avoid an excessive money supply as it could cause high inflation in January. As a result the US dollar exchange rate for the last year increased only by 5.5%. This consolidated the real position of the ruble by the end of the year by 10% as compared with the previous year. At the same time 2002 was characterized by a significant consolidation of the euro against the US dollar, and correspondingly against the ruble. The annual growth of the euro exchange rate amounted to 25% which means the real weakening of the ruble by 8% against the euro. This should be considered as a factor restraining the import growth in the previous year, taking into account that a considerable part of the Russian import falls to the share of Eurozone countries. The established rate fixing mechanism, when the state of the foreign currency market is entirely determined by a substantial excess of currency supply over currency demand, determined the further accumulation of gold and foreign currency reserves. As of the end of the year their total volume was equal to USD 47.8bn exceeding the result of the previous year by USD 11.2bn. The accumulated volume of gold and foreign currency reserves is a good safety margin for the whole financial system that allows considering the problem of external debt service for the nearest several years insignificant.

Inflation
The annual increase in consumer prices amounted to 15.1%. This result can be estimated in two ways. On the one hand, the increase in consumer prices in 2002 indicates the tendency of a slow annual inflation decrease. On the other hand, it means that the efforts to keep inflation within the expected limits of 14% in 2002 failed. The rise in prices for services contributed greatly to the annual inflation rate. Tariffs for services rendered to people grew by 36.2% during the year, while the prices for food increased by 11% (excluding fruit and vegetable products by 8.5%), and the prices for non-food consumer goods rose by 10.9%.

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SUDOSTROITELNY BANK annual report 2002

Macroeconomic Situation in Russia in 2002

Development of the Russian Banking System in 2002

The analysis of the Russian stock market in 2002

The results of the Russian stock market in the previous year turned out to be positive, though less impressive than in 2001. During the year the RTS-index increased by 38.08% (in 2001 the growth was 81.49%). The change in the trend was observed several times during the year. Rise in quotations was observed from October 2001 to the middle of May 2002. In the press and analysts comments, the situation was even compared to the year of 1997. The main factor influencing the market was the dynamics of prices for oil and non-ferrous metals. Besides, financial reports and dividend policy of some issuers influenced strongly the prices for their shares. However, starting from the second half of May, right before the George W. Bushs visit to Moscow, the price correction began. It had been expected by specialists for a long time. As a result the quotations were fluctuating within the limits of a wide declining corridor to the middle of August. During that period the Russian stock market became more dependent on the dynamics of international stock markets, first of all American stock markets (the influence of this factor was observed to the end of September). From the end of August to December the market was growing slowly. The main negative events of this period were capture of hostages during Nord-Ost performance on the 24-25th of December and a sale auction of the states stake in Slavneft. The minimal value of the RTS-index in 2002, as well as in 2001, was recorded on the first trading day of the year, and was equal to 267.7 points. The maximum of 425.43 points was reached on the 20th of May. On the 31st of December the RTS-index value was equal to 359.07 points exceeding by 38.08% the result of December 29, 2001.

The total RTS turnover amounted to USD 4236.2m in 2001. 55 228 deals were done in the Russian Trade System during this period.

The trading volume on the main stock exchanges for the year:
Stock exchange 2002 RTS MICEX FBSP (Gazprom) 4236.2 11907.91 1015.34 Volume, USD m 2001 4239.15 18498.82 758.67 Average turnover for the day. USD m 2002 16.94 47.63 4.06 2001 16.89 73.94 3.03

GKO-OFZ market analysis in 2002

A smooth growth of prices in the GKO-OFZ market, which started right after the Presidents election at the end of the March 2000, continued in 2002. This is explained by the fact that the GKO-OFZ market is influenced mainly by the financial situation in Russia, which remained favorable in 2002. In 2002 prices for OFZ of 27th series rose by 0.9-8% (in 2001 the increase in prices was 2.4-14%), and the coupon payments yield amounted to 14.22-16.15% of the price as of the end of 2001 (the same yield in 2001 was equal to 15.35-18.41%). Under the circumstances of import growth and simultaneously of comparatively high prices for oil the yield from investments in OFZ-bonds amounted to 16-24.5% (in 2001 15-25%). An average growth of prices in the OFZ-market made up 3.8% (in 2001 9.4%), average coupon yield 15.6% (16.9%), and average market yield including coupon payments in 2002 19.5% (26.3%).

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SUDOSTROITELNY BANK annual report 2002

In 2002 the main indices of the banking system exceeded the level reached before the crisis of 1998: as of December 2002 the ratio of the banking sector assets to the GDP volume amounted to 37.6% as compared to 26.3% in 1998. The total volume of the banking sector assets amounted to RUR 4 015.1bn (c. USD 130bn) that is 21.3% more as compared to the beginning of the year. Banking assets-GDP ratio increased by 3.6% in 2002. However, Russian banking system assets-GDP ratio is still almost 2 times less than the similar index in the countries with emerging economy, and almost 3 times less than in the developed countries. At the same time the number of profitable credit institutions decreased by 16 as compared with the beginning of the year, and the number of unprofitable credit institutions increased by 31. The volume of losses of credit institutions grew by RUR 954.4m up to more than RUR 4bn. The capitalization of the banking system increased: the volume of equity capital of credit institutions amounted to RUR 570.6bn as of the end of 2002 (c. USD 18.5bn), having increased by 20.6% from the beginning of the year. Equity capital-GDP ratio was equal to 5.4%. It increased by 0.4% from the beginning of the year. The number of credit institutions with authorized capital of RUR 300m and more grew by 23 from the beginning of the year and amounted to 156. The number of credit institutions with authorized capital from RUR 150m to RUR 300m increased by 22 and amounted to 119. The volume of credits and other funds provided by banks to non-financial institutions amounted to RUR 1605.8bn or 39.9% of the banking sector assets. From the beginning of the year the volume of credits provided by banks to non-financial institutions increased by 24%. Rapid growth of crediting rates raise the risk of non-payments on banking credits (the so-called bad loans crisis), but this index is still far from the critical point it constitutes only 2.4% in the banks credit portfolios. As of December 2002 the volume of credits to private persons amounted to RUR 145.8bn that is 51% more than at the beginning of the year. The volume of credits to private persons constitutes 3.6% of the banking sector assets.

The volume of deposits of private persons with the banks increased to RUR 984.9bn that is 59.9% more than at the beginning of the year; the deposits constituted 24,2% (+2,7%) of the banking sector liabilities; the ratio of the private persons deposits to the GDP was equal to 9.3% (+1.8%). Thus, one can observe positive changes in the structure of deposits of private persons. In particular, the volume of term deposits have increased and the share of funds on current accounts decreased at the same time. In such a way the share of funds of private persons on current accounts decreased by almost 10% during the year, the share of short-term deposits by 4%. Simultaneously, the share of medium-term deposits rose by almost 2 times. The long term capital formation of credit institutions that is explained by the increase in the share of private persons deposits placed for more than 1 year is not yet accompanied by corresponding changes in crediting periods of the real sector of economy. The state reduced its participation in the banking sphere. As for the banking legislation, the Russian Government, the State Duma and the Bank of Russia considered the opinion of the "financial community" professional participants. The Government and the Bank of Russia accepted the development strategy of the banking sector till 2007 which determines the exact amount of the authorized capital to be registered to establish a bank EURO 5m. This will increase the stability and capitalization of the whole banking system. The document also states that before 2004 all banks must switch to the international accounting standards. Some more decisive steps have been taken. The government approved the bill on the insurance of bank deposits. The currency exchange regulation concept is stated in the bill on foreign currency regulation. Besides, last year the law on the counteraction to the legalization (laundering) of revenues gained by criminal means came into force. The perspectives of the banking sector development for 2003 look positive on the whole. The trend of its capitalization growth is quite stable. A 4-5% economy growth results in the annual increase of the credit volume by 2022%. Provided that the monetary authorities manage the banking sector risks in a careful and balanced way, one could expect a considerable consolidation of the banking system on the whole, business diversification and turn to the real sector of economy.

Piece-things. Hunt

Trigger, blanched by fingers. Game-bag smelling by leather and a bit by a wet dog. There is the same high autumn sky over you, and the report spreads far off, clouds are floating almost like in summer and the gun is adjusted by many hunt generations, who shouldered it the same way.

Main Results of Sudostroitelny Bank in 2002

Main Results of Sudostroitelny Bank in 2002

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SUDOSTROITELNY BANK annual report 2002

The further rapid development of the Bank in 2002 yielded considerable results the Bank is now ranked among 50 largest Russian credit organizations. The Bank assets increased by more than 2.5 times up to RUR 8,493m (Chart 1). This allowed the Bank to acquire greater value in the market and to open new possibilities for itself and its clients. The equity capital rose during the last year also by 2.5 times (up to RUR 1,660m, Chart 2). This made possible to cover most risk assets by own resources. The growth of the resource base was supported by the growth of clients accounts. The 33% increase (up to RUR 2,007m, Chart 3) attained in 2002 exceeds substantially average banking sector indices. It is quite a good result in the view of a high market competition. One should emphasize that the main progress achieved by the Bank in this field is connected with a number of factors including acquisition of several big clients, continuing process of the resource base diversification as regards to the main clients and industries, as well as attraction of long-term resources. A considerable growth in balances of the LORO accounts is also to be noted. Performing regular operations in the interbank market is quite a new area of the Bank activities. The Bank started developing it intensively at the end of 2001 and achieved considerable results already in 2002. A two times increase in the number of LORO accounts and a four times growth of accounts balances (Chart 4) were caused by the change of the Bank position in the banking services market, the growth of clients confidence and an active implementation of the policy aimed at attracting other banks. Successful issue of own bills of exchange for the total sum of RUR 300m with over one year maturity date and the rise in the equity capital resulted in the growth of the credit portfolio, making it the main source of income. During 2002 the credit portfolio increased by more than 3 times and reached RUR 1,842m (Chart 5). The weighted policy of the bank management regarding credit risks made this growth balanced and adequate. The Bank still keeps to the policy of crediting its reliable clients and does not use this tool as the main marketing trick for attracting the new ones. In addition to direct crediting of the real sector of economy Sudostroitelny Bank trades actively in securities. During 2002 the volume of the emissive securities portfolio (state and corporate bonds and shares) as well as the shares traded actively in the over the counter market, was almost doubled and reached RUR 250m (Chart 6). A considerable part of it (over 60%) constitute state securities Russian internal and external liabilities. Taking into account

the situation in the global financial markets and the possibility for Russia to get an investment grade in the nearest future, state securities can be considered very reliable and liquid assets. The growth of the Bank bills of exchange portfolio was very significant it increased by almost 8 times up to RUR 618m (Chart 7). The portfolio consists of bills of exchange of the largest reliable Russian companies, mainly of extracting enterprises (Gazprom, TNK, etc.) as well as of the well-known Russian banks (the Savings Bank, Vneshtorgbank, Gazprombank, Trust Bank, Alfa-bank, etc.). Over 80% of the portfolio securities circulated in the over-the-counter market being quite liquid. Sudostroitelny Bank also maintains high liquidity due to considerable balances on NOSTRO correspondent accounts: by the end of 2002 they were equal to RUR 4,115m (Chart 8). Such an increase in the volume of operations has certainly affected the results of the Bank activities. In 2002 the Bank profit amounted to RUR 23,8m, thus exceeding the result of 2001 by more than 10 times; and retained earnings were equal to RUR 21,5m, exceeding the previous year result by more than 15 times (Chart 9). The above indicated figures show only the profit reflected in the accounts, whereas the Bank provision which can be considered a deferred profit also grew substantially. It amounted to nearly RUR 210m as of the end of 2002 exceeding the volume at the beginning of the year by more than 2 times (Chart 10). Thus the total profit of Sudostroitelny Bank from the beginning of its activities to the end of 2002 constituted RUR 250m including all its reserves and provision. In addition to the shareholders capital this is a guarantee of stability and reliability of the credit institution. Sudostroitelny Bank is developing very intensively in accordance with the worked-out strategy. The net profit growth in the last year was mainly caused by the increase in net operational revenues and optimal growth of nonoperational costs. The net operational revenues (according to the Bank methodology) increased by more than 1.7 times up to RUR 178m in 2002. At the same time (as it has already been mentioned above) their main part constituted revenues from crediting. During 2002 the volume of credits increased by over 2.5 times up to RUR 133m making up 75% of net operational profit of the Bank (Chart 11). Such a considerable increase in the field of crediting of the real sector of economy has become possible due to a number of macroeconomic factors: improvement of the investment climate in Russia, eco-

Main Results of Sudostroitelny Bank in 2002

Main Results of Sudostroitelny Bank in 2002

nomic growth, stabilization of national currency exchange rate, decrease of inflation, positive surplus of the foreign trade balance of Russia and some others. At the same time the Bank continued developing and consolidating its market position trading actively in securities. During 2002 the Bank gained almost RUR 100m of its net income from this market sector having exceeded the result of the previous year by almost 2.5 times (Chart 12). At the same time the Bank investments were properly diversified. This allowed to reduce the risks and to draw stable profit. It is important to note that the Bank management exercises effective control over the expenses. Therefore the total non-operational costs of the Bank increased by only 2.2 times up to RUR 38,8m during 2002. One should emphasize that most of these expenses were connected with the personnel, marketing and advertising that corresponds fully to the strategy of the Bank regarding its market share growth. To summarize one can say for sure that Sudostroitelny Bank takes a strong position in the Russian banking market and possesses high potential for the further development.

Sudostroitelny Bank in Russian Ratings as of January 01, 2003

- 41st by the volume of net assets; - 48th by the volume of equity capital; - 12th by the assets growth; - 22nd by the equity capital growth; - 2nd by the volume of USD exchange deals in the System of Electronic Trading of the Moscow Interbank Currency Exchange /SELT MICEX/ in 2002

Development of Basic Financial Indices in 2002

- total assets increased by more than 2.5 times and amounted to RUR 8 493m as of January 1, 2003; - equity capital increased by 2.5 times and reached RUR 1 660m; - volume of clients accounts balances and issued bills of exchange increased by 33% and reached the level of RUR 2 007m; - correspondent accounts balances rose by 4 times and amounted to RUR 3 823m.; - total credit portfolio volume increased by almost 3 times (up to RUR 1 842m);

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SUDOSTROITELNY BANK annual report 2002

Piece-things. China

h!, - said an artist on opening the window and looking at diamond rime smelting on a yellow leaf The sun is hurrying through the mist. Ah! Kuznetsovski service comes to life in the morning yellow leafs on white ground, decorated by the artists hand. The service is standing on your table and coffee in it has never had time to get cold. And you always strive after the cup, so fragile and graceful, on its saucer, so suitable for hand.

Financial Markets. Money Markets

Securities

In 2002 Sudostroitelny Bank significantly increased the volume of operations and became one of the active participants in all sectors of the Russian interbank market. In accordance with the development strategy for 2002 the Bank was intensively broadening cooperation with various financial and credit organizations in the interbank market. As a result during the last year the total number of counterpart-banks increased by 2 times and exceeded 150. This allowed the Bank to improve considerably the quality of liquidity management. At the same time the regular analysis of the financial position of the counteragents made it possible to minimize risks and to adjust the established credit limits in time. During the last year the Bank consolidated its position as an active foreign exchange operator at the Moscow Interbank Currency Exchange (MICEX). From January to December 2002 Sudostroitelny Bank occupied the second place among the leading forex operators with respect to the total volume of USD exchange deals. The Bank is also a

market-maker in the over-the-counter foreign currency market. It regularly performs arbitrage operations, provides quotations for all kinds of market instruments with narrow spread. As a result of appropriate foreign exchange activities of the Bank, Sudostroitelny Bank dealer Sergey Danilov was ranked among 10 best forex dealers in Russia of 2002 (according to the traditional competition poll of the Moscow International Currency Association). The Bank also consolidated its position in the market of interbank credits. The number of counterpart-banks which obtain credits on the security of counter deposits and high-liquidity securities increased. At the same time there rose the number of direct credit lines opened in favor of Sudostroitelny Bank with other banks, that reflects growing confidence of counterpart-banks. Furthermore in 2002 the Bank performed operations in the international FOREX market selling currency to counterpart-banks and buying it on behalf of the clients.

Operations with securities have always been an important part of the Sudostroitelny Bank activities. The basis of the Bank portfolio is comprised of instruments with adequate reliability and high liquidity. First of all these are ruble and currency nominated Russian governmental bonds which possess good liquidity and high reliability. During 2002 the Bank increased investments in these instruments (Chart 13). During 2002 the Bank portfolio of corporate bonds extended significantly. Most of them are characterized by both high liquidity and appropriate yield. Much attention was paid to the analysis of issuers reliability as well as to the diversification of investments. As a result the list of issuers by the end of 2002 was extended to 30. The total volume of investments in this market sector grew by more than two times in 2002 (Chart 14). At the same time the Bank purchased bills of exchange of well-known market issuers mostly banks. This sector grew by more than 4 times and the investment volume exceeded RUR 600m (Chart 15). The portfolio structure of Sudostroitelny Bank is shown in Chart 16. Besides, the Bank trades in shares in the Moscow Interbank Currency Exchange (MICEX) using the system of remote access. To meet the wishes of its clients and partners, in 2003 the Bank will be ready to provide the possibility of Internet-trading to its clients. The new service will allow the clients to get on-line access to trading in the main Russian stock exchanges. Within the framework of the program accepted by the Bank and aimed at providing the full range of services in the financial markets to the clients, in December 2002 the Bank received the license of the professional securities market participant for depositary operations, issued by the Federal Commission for the Securities Market. Own depositary and Internet-trading possibility will allow the clients to minimize their costs and raise the effectiveness of their operations. Moreover the Bank has obtained more opportunities to use securities as a mechanism of a guarantied fulfillment of obligations by its counterpart-banks regarding operations in the money market. The Bank clients can now use not only bills of exchange but also other securities to cover their credit

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SUDOSTROITELNY BANK annual report 2002

Securities

Correspondent banking

lines. REPO-operations have allowed the Bank, on the one hand, to satisfy the clients needs in short-term resources, and on the other, to increase profitability in the volatile market. Besides, the Bank performs operations on managing clients securities portfolios and related funds, carries out collection operations and operations on domiciliation of other issuers securities. High profitability of the Bank from operations in the stock market during 2002 is explained in many respects by high professionalism of the securities department specialists. They have more than 8 years of the financial markets expertise that enables them to render any consulting services to the clients as regards to this rapidly developing market.

In response to the growing demand of the clients for fast and quality settlements Sudostroitelny Bank extended significantly its correspondent network. During 2002 the Bank established new relations with 31 credit institutions, thus providing the clients with new possibilities of getting high quality banking services and expanding the geography of their business. Main correspondent banks of Sudostroitelny Bank are Deutsche Bank Trust Company Americas (main account), Deutsche Bank AG, Raiffeisen Zentralbank Oesterreich AG, Raiffeisen-Centrobank AG (main account), Union Bank of California International. This allows Sudostroitelny Bank to maintain the high level of service and carry minimum operational risks. In 2002 Sudostroitelny Bank took new positions in the interbank services market. Developing a universal correspondent network and presenting a wide range of competitive banking products enabled Sudostroitelny Bank to become a settlement bank for a great number of its counteragents and to attract new counterpart-banks for cooperation. In 2002 the Bank opened correspondent LORO accounts for 29 banks, that exceeds the result of the previous year by 2 times. This was possible due to the established high reputation of the Bank in the interbank market, efficient organization of service for correspondent banks and use of the latest technologies. Real-time account management using the Internet bank-client system SBANK.RU allowed the correspondent banks to make settlements for their clients in a more efficient and operative way; favorable dollar transfer rates, a prolonged operational banking day, as well as possibility of intraday overdrafts were decisive factors for concluding partnership agreements with Sudostroitelny Bank. Besides, being one of the market-makers in the foreign exchange market enabled the Bank to offer to its clients favorable exchange rates. Stable financial position, growth of main economic indices of the Bank and informational openness determined the considerable increase of the number of counterpart-banks as regards to the interbank operations. In 2002 the Bank concluded 69 general agreements on cooperation in the interbank market, and average daily correspondent accounts balances increased by more than 4 times. The progress achieved in the interbank settlements sector allows making plans for the future with confidence. The worked-out strategy of the Bank regarding the development of correspondent relations implements further improvement of the settlement services quality with respect to the established correspondent relations, introduction of new banking products, extension of the correspondent relations network and gradual development of the Bank activities in the regions of Russia and near foreign countries.

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SUDOSTROITELNY BANK annual report 2002

Piece-things. Cigar

The cigar, put into the box by a Cuban born in 1980, smells like the cigar, rolled on the thigh of a mulatto girl of the year 1800: of coffee, of dusk, of rum and of a casual filibuster from the schooner "Bloody Mary", Admiral Nelson or another one-eyed were those who drowned it ten years after the mulatto and the filibuster had met. The same, fingers stirs, unique for centuries, the same rumba rhythm and moist breath of the ocean, saving the leaf from premature death.

Client Policy

Client Policy

Clients are one of the main assets for Sudostroitelny Bank. The Bank tries to improve its infrastructure in accordance with the clients needs and to renew its information and resource base for maximum support of their businesses. Any financial product of the Bank is elaborated for each customer with a view of his personal demands and business peculiarities. Thus, the Bank renders unique services to its clients. Each client feels attention towards him and his problems irrespective of his banking account and business field. Although corporate clients remain a priority direction of the Bank activities, its working principles apply to private persons as well. According to marketing researches Sudostroitelny Bank has a reputation of a reliable partner among its clients. The Bank seeks not only to maintain a high level of quality of the services rendered but also to make a special atmosphere of mutual respect and confidence in relations with the clients. Such approach of the Bank to the customer service makes it possible that the clients allow the Bank to participate in their business plans not only in the financial part of the business but also in production and service areas. Close cooperation with the partners, individual work with potential clients, operative decision-making process and information openness determine the stable growth of Sudostroitelny Bank client base. In 2002 the number of accounts opened with the Bank increased substantially: a number of corporate accounts grew by 40%; a number of personal accounts - by more than 10%. At the same time during the year there was a steady rise in clients accounts turnover and balances by the end of the year the increase in average daily account balances amounted to 33% and exceeded RUR 2bn. The success of the Bank in this field is explained by the acquisition of a number of new big clients, by the diversification of the resource base as regards to main clients and industries, as well as by the increase in the volume of the attracted long-term resources.

Sudostroitelny Bank pays much attention to improving the quality of the banking service and developing the range of services rendered. In 2002 several important services were introduced. The Bank joined the "Customs card" system and started effecting customs payments by using a special microprocessor card. Besides, the Bank became an Associate member of the VISA International payment system, issued own cards VISA Gold, VISA Classic and VISA Electron, and launched the so-called "salary projects", i.e. started rendering services to its clients connected with salary payment at their enterprises by means of these cards. For both corporate clients and private persons the Bank afforded an opportunity to open new kinds of deposits, including euro deposits. Sudostroitelny Bank has always been taking leading positions in the Russian market regarding the introduction of the latest technologies and offering new banking products. The SBANK.RU internet-banking system developed and introduced by the Bank experts is considered today one of the best by the quality of online-services rendered and the number of clients using it. The system allows opening an account and operating it via the Internet irrespective of the client location. At the same time it provides the multilevel information protection. Extensive functional opportunities, simplicity and convenience of the system determine the growth of the clients number and the expansion of the client base geography. The high-quality banking service, progressive and competitive settlements and information technologies attract new remote clients, whose businesses involve extracting and processing of gold and other precious metals. Taking into account the clients needs and favorable prospects for the gold market development, Sudostroitelny Bank took decision about entering into the precious metals market. Therefore the Bank started preparing the necessary documentation and elaborating

new banking products to be in a position to serve clients of this business sector. Sudostroitelny Bank client policy in 2003 is aimed at extending the range and improving the quality of the banking services and products offered to corporate clients; introducing new financing possibilities, including project and trade financing; performing the functions of a finance operator and expert in projects on extracting and processing precious metals; increasing the volume of card acquiring services rendered. An important component of the Bank plans for 2003 is the extension of the banking service provided to private persons. Having analyzed the needs of existing and potential clients, and the situation in the Russian financial market, the Bank took decision to develop the private banking sector. This line of the activities is intended for the clients whose tight time schedule does not allow them to place efficiently their free capital and to control its movement regularly. The Bank takes this function upon itself. Already now the Bank serve a large number of clients in this area: businessmen, public representatives, art figures and well-known sportsmen.

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2002

Crediting

Crediting

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SUDOSTROITELNY BANK annual report 2002

In 2002 corporate crediting remained one of the key activities of Sudostroitelny Bank. The volume of the credit portfolio increased by almost 3 times and reached RUR 1 842m. At the same time the increase in the volume of credits was accompanied by an adequate control over credit risks. While determining the form and payment terms of crediting the Bank paid much attention to the valuation of the financial position of the client and its main contractors, to the development prospects of the clients business, to the liquidity of assets pawned. While determining the value of products or property pledged the Bank always considered the market situation as regards to these products and property. The strict control over the crediting process was reflected in the structure of the Bank credit portfolio: most part of credits (45%) was given on the security of property, 25% on the security of securities and 30% - on the security of a guarantee. As in the previous year, in 2002 the basis of the credit portfolio consisted of the credits provided to companies. They constituted 94% of the credit portfolio. The Bank credited corporate clients mainly for the following purposes: financing of working capital, production equipment modernization, export and import operations, production and sale of consumer goods. For the most part credits were given in the currency of the Russian Federation (about 70% of the total volume of credits in 2002). The structure of the credit portfolio changed to a certain extent as regards to the terms of crediting. The volume of short-term credits provided to trade organizations for the purposes of working capital financing increased substantially (up to 22% of the total amount of credits). It is connected with the considerable increase of the trade operations volume of some clients of the Bank. As before, the medium-term loans (from 181 days to 1 year) constitute the most part of the amount of all credit resources provided 35%. The growth of the credit portfolio and changes in its structure resulted in the financial year in increase of the interest revenues of the Bank.

The development strategy of the Bank credit activities is aimed at extending the network of clients which are credited by the Bank head office and the branch in St. Petersburg. In 2002 the Bank improved "traditional" forms of crediting and extended the range of services through developing new forms of crediting. Today the Bank offers to its clients a wide range of credit products: - Crediting of trade operations, crediting of investment projects aimed at business development and modernization; - Short-term overdraft crediting in case of insufficient resources on the account; - Opening, execution and advising of letters of credit, and providing bank guarantees; - Crediting of technological equipment leasing, as well as factoring operations

Leasing

Collection

In 2002 Sudostroitelny Bank was intensively developing leasing operations. The largest projects in the financial year involved acquiring the equipment for a factory producing printing presses (Smolensk), acquiring the fleet of railway cars for one of the Russian transport companies (Moscow). Besides, the Bank financed projects on leasing of shop equipment for a chain of stores, polygraph, food-processing and computer equipment. As of the 1st January, 2003, the amount of leasing contracts concluded (the volume of leasing payments of clients from the moment of concluding leasing contracts till their expiration in 2003-2009) is more than RUR 287m, that exceeds the result of the previous year by 3.3 times. In 2002 the Bank concluded leasing contracts for the sum of more than RUR 200m.

A modern collection service is a distinctive feature of Sudostroitelny Bank. A high level of the specialists qualification contributed to an intensive development of this area in 2002. The resource base of the service includes special equipped armored cars, all necessary communication facilities, and a professional escort guard. The routes of collection cover the whole Moscow region. The main collection services of Sudostroitelny Bank include: - 24-hour collection of cash and its immediate transfer to the clients account (on the same day); - delivery of cash and securities on the clients request; - money delivery for payroll payments with the selection of bank notes of the required nominal value; - escort of companies cashiers and forwarding agents using special transport; - free collection of slips from acquiring services, etc. A high level of efficiency and quality of services rendered by the collection service, and one of lowest tariffs in Moscow were highly appreciated by the Bank clients. During 2002 the number of clients using the collection services regularly increased by 7 times.

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SUDOSTROITELNY BANK annual report 2002

Piece-things. Silver

Silver never dies. But it becomes alive only in the masters hands. And then silver gets a sound: languishing dark Shakherizadas songs, bell ligature of Solovey or strict and splendent accord of fugue in D Minor. You will find your silver and it will never turn black and every evening your, just your music will be heard off the damask table-cloth.

Plastic Cards

Latest Technologies

In 2002 Sudostroitelny Bank as an Associate member of the VISA International payment system started issuing own cards VISA Electron, VISA Classic and VISA Gold. Paying much attention not only to the quantity but also to the quality of services the Bank offered to its cardholders a number of additional services. For its regular clients the Bank issues real credit cards VISA Classic and VISA Gold with individually fixed credit limit. The credit is granted as a permitted overdraft: by the lack of own resources the client can make use of the resources of the Bank. Holders of all types of cards can manage their accounts at any time from any place of the planet, and receive full information on all operations using the SBANK.RU internet-banking system. Credit card holders can also find out any information regarding their credit indebtedness and interests Sudostroitelny Bank is one of the first Russian banks that started rendering a new service sending SMS messages on the cardholders mobile phone to inform him of the card payment limit. The cardholder can be a subscriber of any Russian or foreign mobile telecommunication operator. This service is rendered free of charge. There is a discount program granting the holders of the Sudostroitelny Bank plastic cards a discount for the purchase of goods and services by enterprises participating in the program. VISA Gold cardholders are offered free insurance in one of the largest American insurance companies AIG-RUSSIA.

One of the most important events in the development of the Bank plastic cards program was the issue of VISA GOLD cards to the management and players of the Professional Hockey League of the RF, and VISA Classic salary cards to the Bank employees and a number of clients. In December the Bank paid annual interests charged monthly on balances of cards special accounts. As a result at end of 2002 the total volume of balances of cards special accounts amounted to RUR 8,96m. Average monthly card accounts turnover in the forth quarter of 2002 made up RUR 1,55m. In 2002 the Bank also began issuing and servicing customs cards for legal entities. The annual customs cards turnover amounted to RUR 55,8m. In 2002 Sudostroitelny Bank became a registered Acquiring agent in the VISA International payment system. The Bank offers acquiring services to more than 80 trade-services enterprises. As of the end of the year the monthly turnover with regards to these enterprises amounted to RUR 32,3m. For the purposes of accounting for its acquiring clients the Bank offers a special service the possibility of viewing all card transactions for any time period via internet-banking system SBANK.RU. Among the Bank clients in the field of acquiring are such companies as Orchidee Sauvage, Bustier, Caligula, Baltman, Econika-style and others. In 2003 the Bank is planning to issue VISA corporate cards and starting intensive promotion of salary projects into the market.

The introduction and development of the latest technologies is an indispensable condition for successful activities of a modern commercial bank. In this area Sudostroitelny Bank has always been one of the leaders in the national market. The SBANK.RU internet-banking system, which was developed and introduced by the bank experts is considered today one of the best in the market. This can be confirmed by a high quality of the on-line service and a great number of clients using it. The system allows opening a bank account and managing it via the Internet irrespective of time and location of the client. SBANK.RU provides a multi-level protection of all information. The installation of the system does not require any special software or technical adjustment. It is simple and convenient in use. Functional possibilities of the SBANK.RU system are quite extensive. The system allows the client to perform control over all its accounts transactions, provides access to operational information. All this enables the Bank to attract new clients and expand the geography of the client base. By the end of 2002 more than 60% of the clients started using the SBANK.RU system. The number of users increased by 3.5 times. The number of logins was growing steadily during the year and finally it increased by almost 3 times: in the 4th quarter of 2002 the logins number was greater than in the year 2001 on the whole. The number of documents processed by the system grew by 1.7 times. The SBANK.RU system is developing steadily: its functional possibilities and the range of services are extending. In 2002 Sudostroitelny Bank issued own plastic cards. For the cardholders a new service was introduced. The clients can now control their card transactions and inquire information about their account balances via the internet-banking system. On request the clients can receive on their mobile phones sms-messages informing of the card payment limit. For the purposes of accounting by the clients which use acquiring services, the Bank offers an opportunity of viewing all card transactions in SBANK.RU for any indicated period of time.
SUDOSTROITELNY BANK annual report 2002

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St.-Petersburg Branch

Sponsorship

The Sudostroitelny Bank branch in St. Petersburg has been operating since 2000. Its primary aim was further development of the range of services and meeting the needs of clients interested in the market of the North-Western region. However, the successful activities of the branch made it possible to develop its strategy significantly and to attract new clients operating directly in St. Petersburg for cooperation. An important role played the fact that the client policy of the branch is oriented at rendering a wide range of services from money transfers to consulting in the field of the financial policy optimization. Besides, business activity of the branch in the region is based on establishing long-term mutually beneficial relations with business partners that also contributes to the expansion of its client base. As a result the number of clients increased by 57% in 2002 and clients accounts balances grew by 23%. At the same time the volume of foreign currency deposits from private persons doubled. In the internet-banking field the Sudostroitelny Bank branch remains one of the leaders of the North-Western region. In 2002 the number of clients using the SBANK.RU system increased by 3.5 times.

During the last year the branch was actively developing the card acquiring services. As a result the number of shops served by the Sudostroitelny Bank POSterminals rose by 2.5 times. A perspective area of the branch activities in 2002 became provision of collection services to the clients. During the year the collection volume increased by 255%. A new service was introduced for private persons foreign currency remittances via the RIA ENVIA system. One should note that the St. Petersburg branch actively assists the attraction to the region of the Sudostroitelny Bank free resources. During 2002 the credit portfolio of the branch increased by 60%. The previous year results show that the Sudostroitelny Bank branch in St. Petersburg is developing rapidly and integrates firmly in the economy of the Northern capital. At the same time the activities of the branch influence positively the activities of Sudostroitelny Bank on the whole: new possibilities for expanding the client base and extending the range and quality of the Bank services appear.

Sudostroitelny Bank is intensively contributing to the development of professional and amateurish sports. In 2002 the Bank became an official financial partner of the Russian Professional Hockey League. With financial support of the Bank there were realized a number of measures contributing to the popularization of the modern Russian hockey. In December 2002 the hockey match All stars 2002 took place in Omsk. It was the match between combined teams of "The West" and "The East", consisting of the best hockey players of Russian clubs, the demonstration "master-show" contest. For all the players the VISA Gold plastic cards of Sudostroitelny Bank were issued. For the players participating in the closing stage of the Russian Championship, Sudostroitelny Bank instituted a prize For the best play-off player. According to the results of the Russian Hockey Championship of 2002/2003 the prize was awarded to the forward of Lokomotiv (Yaroslavl) A. Kovalenko. In the ceremonial closing of the season Andrey Kovalenko was presented with a memorable silver Cup of Sudostroitelny Bank and a money prize. In March 2003 Sudostroitelny Bank together with the Russian Aeronautics Federation organized unique winter races on heat-balloons. The best aeronauts in the country, including masters of sports Sergey Bazhenov, Mikhail Bakanov and Sergey Voynov, investigator of heat-balloons Lev Mavrin, chairman of the board Leonid Tykhtyaev, took part in the competition, which started by Nizhny Novgorod. Champions of Russia and owners of the Sudostroitelny Bank Aeronautics Cup became Sergey Bazhenov (by the flight distance 345.2 km) and Leonid Tykhtyaev (by the flight time 10 hours 57 minutes). This competition contributed greatly to the development of the Russian aeronautics. In 2002 Sudostroitelny Bank instituted a prize for the best technique, shown in the Russian Championship for traditional karate. The Sudostroitelny Bank Cup was presented to disciple of famous Tadeush Kasianov Maxim Stepanenko, the champion of Russia among adults in the absolute weight category. In June 2002 due to the active support of Sudostroitelny Bank a team of young sportsmen could participate in the international inline-slalom competition, that took place in Bayersbronn.

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SUDOSTROITELNY BANK annual report 2002

Piece-things. Jewelry

Hard icy diamond of wedding ring faithfulness and selflessness. Soft shine of pearls tenderness and gratitude. Jewelry is presented only to the closest: stones can speak. If a stone keep silence, that means it was given by a wrong person.

Balance Sheet as of the 1st January, 2003

Income statement for 2002

No.

Items ASSETS Funds and accounts with the Central Bank of Russia Required provision with the Central Bank of Russia Funds with credit institutions less provision (3.1 3.2) Funds with credit institutions Provision for possible losses Net investments into commercial securities (4.1 4.2) Investments into commercial securities Provision for the securities depreciation and possible losses Loans and advances to clients Provision for possible losses Loans and advances to clients - Net (5-6) Accrued interest (including overdue) Net investments into securities held till maturity (9.1 9.2) Investments into securities held till maturity Provision for possible losses Fixed and intangible assets, household materials, not valuable and high-wear items Net investments into securities for resale (11.1 11.2) Securities for resale Provision for the securities depreciation and possible losses Deferred charges of other operations including/excluding accrued interest Other assets less provision (13.1 13.2) Other assets Provision for possible losses Total assets (1 + 2 + 3 + 4 + 7 + 8 + 9 + 10 + 11 + 12 + 13) LIABILITIES Loans from the Central Bank of Russia Credits from other banks and credit institutions Clients accounts Including personal accounts Deferred income from other operations Issued bills of exchange Other liabilities Provision for possible losses from term investments and off-balance liabilities, and from settlements with debtors regarding transactions with off-shore residents Total liabilities (15 +16 + 17 + 18 + 19 + 20 + 21) EQUITY Authorized capital (Shareholders equity) (23.1 + 23.2 + 23.3), including: Registered common equities Registered preference equities Unregistered authorized capital of non-joint stock credit institutions Treasury stocks, bought out from shareholders Capital surplus Funds and profit at the disposal of the Bank Revaluation of fixed assets Profit (loss) for the accounting period Dividends, charged from the current year profit Distributed profit (excepting dividends) Retained earnings (28 29 30)* Expenses and risks affecting on equity Total equity (23 23.3 24 + 25 + 26 + 27 + 31 32 for profit-making credit institutions), (23 23.3 24 + 25 + 26 + 27 +28 32 for loss-making credit institutions) Total liabilities and equity (22 + 23.3 + 33) OFF-BALANCE LIABILITIES Irrevocable liabilities of the Bank Guarantees issued by the Bank

1. 2. 3. 3.1 3.2 4. 4.1 4.2 5. 6. 7. 8. 9. 9.1 9.2 10. 11. 11.1 11.2 12. 13. 13.1 13.2 14. 15. 16. 17. 17.1 18. 19. 20. 21. 22. 23. 23.1 23.2 23.3 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36.

For the accounting period Thousand rubles 438 893 126 679 3 726 026 3 727 121 1 095 201 386 201 386 0 3 737 344 205 074 3 532 270 771 0 0 0 16 278 46 829 48 749 1 920 1 930 402 258 402 289 31 8 493 320 0 4 511 436 1 786 730 72 898 0 513 968 20 505 2 471 6 835 110 1 660 000 1 660 000 0 0 0 0 14 097 35 23 798 0 2 341 21 457 37 379 1 658 210 8 493 320 4 073 549 46 889

No.

Items

For the accounting period Thousand rubles 18 762 145 649 0 19 105 872 184 388 22 419 127 21 688 2 940 47 174 137 214 12 462 15 078 - 2 616 360 200 70 739 39 3 144 434 122 568 720 10 719 26 787 382 745 3 488 12 312 436 051 132 669 105 345 20 3 506 23 798 0 23 798 2 341 0 0 23 798
SUDOSTROITELNY BANK annual report 2002

Interest and similar income 1. Placement of credits, deposits, loans and money on accounts with other banks 2. Loans to other clients 3. Funds provided for leasing 4. Securities with fixed interest rate 5. Other sources 6. Total interest and similar income (1+2+3+4+5) 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 36a. 37. Interest and similar expenses Funds of other banks, including loans and deposits Funds of other clients, including loans and deposits Issued bills of exchange Rental Total interest and similar expenses (7+8+9+10) Net interest income (6 11) Commission income Commission expenses Net commission income (13 14) Other operating income Income from operations with foreign currency, including currency exchange income Income from operations of buying/selling of precious metals, securities and other assets, positive results of revaluation of precious metals, securities and other assets Dividend yield Other current income Total other operating income (16+17+18+19) Total current income (12+15+20) Other operating expenses Payroll Other operating expenses Expenses from operations with foreign currency, including currency exchange expenses Expenses from operations of buying/selling of precious metals, securities and other assets, negative results of revaluation of precious metals, securities Other current expenses Total other operating expenses (22+23+24+25+26) Profit before provisions and unforeseen income/expenses (21 27) Increase of provision for bad and doubtful debts Increase of provision for devaluation of securities Increase of other provision Profit before unforeseen income/expenses (28293031) Unforeseen income after deduction of unforeseen expenses Profit before taxation (32 + 33) Profit tax *) Deferred profit tax Unforeseen expenses after taxation Net profit for the accounting period (34 36 36a)

*) items 29, 30, 31 are to be filled in only by profit-making credit institutions. Trust management operations were not performed

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Cash flow statement for 2002

Information about fulfillment of main requirements (mandatory indicators), specified by normative acts of the bank of russia, as of 1st January, 2003

No.

Items I Cash flow from operating activities: Interest income Interest expenses Commission income Commission expenses Income from operations with foreign currency Income from operations of buying/selling of precious metals, securities and other assets Loss from operations with foreign currency Loss from operations of buying/selling of precious metals, securities and other assets Dividend yield Other operating income Other operating expenses Unforeseen expenses after taxation Total income/expenses (13.1 + 13.2), including: Income/expenses (1 2 + 3 4 + 5 + 6 7 8 + 9 + 10 11 12) Increase of income/expenses Payments to the state budget from income, payments for charity and other purposes Cash flow from operating activities before changes in current assets/liabilities (13 + 14) Changes in current assets Required provision with the Central Bank of Russia Funds with credit institutions Investments in commercial securities Loans and advances to clients Other assets Changes in current liabilities Loans from the Central Bank of Russia Credits from other banks and credit institutions Clients accounts Other liabilities Net cash flow from current operations (16 + 17 + 18 + 19 + 20 + 21 + 22 + 23 + 24) Net cash flow from operating activities (15 + 25) II Cash flow from investment activities Fixed and intangible assets, household materials, not valuable and high-wear items Investments into securities held till maturity Investments into securities for resale Net cash flow from investment activities (27 + 28 + 29) III Cash flow from financial activities Authorized capital (shareholders equity) Treasury stocks, bought out from shareholders Capital surplus Funds and income at the disposal of the Bank Dividends, charged from the current year income Issued bills of exchange Net cash flow from financial activities (31 + 32 + 33 + 34 + 35 + 36) Positive/negative results of revaluation of precious metals, securities and fixed assets; charged funds, not included in the finance result, and other components Net flow of cash (26 + 30 + 37 + 38) Amount of cash and its equivalents as of the beginning of the accounting period Amount of cash and its equivalents as of the end of the accounting period (39 + 40)

Cash flow for the accounting period Thousand rubles 184 388 47 174 12 462 15 078 6 309 66 485 7 922 199 39 3 144 49 818 0 150 029 152 636 -2 607 - 1 054 148 975 - 78 723 -2 166 489 - 129 238 - 2 796 077 367 885 0 3 456 025 728 001 -25 494 - 644 110 - 495 135 - 3 837 66 926 -44 949 18 140 1 000 000 0 0 653 0 38 943 1 039 596 - 51 364 511 237 844 472 1 355 709

Mandatory indicator

Amount or percentage as of the accounting date 24,7 205 074 205 074 5 517 5 517

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 13.1 13.2 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41.

1 2 3 4 5

The indicator of the sufficiency of bank's own resources (capital) (N1, %) The value of an estimated provision for possible losses on loans, calculated in accordance with the requirements specified by normative acts of the Bank of Russia (thousand rubles) The value of set up provision for possible losses on loans (thousand rubles) The calculated value of provision for securities devaluation and possible losses, calculated in accordance with requirements specified by normative acts of the Bank of Russia (thousand rubles) The value of set up provision for securities devaluation and possible losses (thousand rubles)

Chairman of the Board

Golubkov A.K.

Chief accountant

Zubova E.K.

Unconditionally positive conclusion In our opinion, financial (bookkeeping) accounts of Commercial bank "Sudostroitelny Bank" (Limited Liability Company) shows in all existing respects the true financial position as of 1st January, 2003, and results of financial-economic activities for the period from the 1st January, 2002 to the 31st December, 2002 inclusive.

Auditing organization

Limited Liability Company FinExpertiza 002588 06.11.2002 05.11.2007 Ministry of Finance of the Russian Federation Elena A. Trubnikova

License number Date of license issue License expiration date License issuing authorities Name of the director of the auditing organization

- Date of a document certifying the authority of the person, who approved the present accounts - Document certifying the authority of the person, who approved the present accounts

04.01.2003

rder

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SUDOSTROITELNY BANK annual report 2002

Person who approve the present accounts: - Name of person who approve he present accounts - Position - Number of a document certifying the authority of the person, who approved the present accounts

Elena A. Trubnikova General director

Piece-things. Watches

Time is impassive and implacable. Time breaks up worlds, washes down civilizations. But your Grandfathers watch, counting off inexorable time, connects you, your father, your grandfather and that master with an ancient magnifier on his brow, who held time current in his fingers and created for centuries ahead. For son, for grandson, for great-grandson. For your son.

Photos by Vladimir Clavijo-Telepnev

5, Sadovnicheskaya str., Moscow, 115035, Russia Tel.: +7 (095) 777-1121/ 745-9890 Fax: +7 (095) 959-0888 E-mail: common@sbank.ru www.sbank.ru

St.-Petersburg branch Office 6, bld. 25-A, emb. canal Griboedova, St.-Petersburg, 191186, Russia Tel.: +7 (812) 311-2923/ 311-2824 Fax: +7 (812) 312-3426 E-mail: common@spb.sbank.ru

Office in Ivanovo 47a, F. Engels pr., Ivanovo, 153000, Russia Tel.: (0932) 47-1605 Fax: (0932) 47-1605 E-mail: ivanovo@sbank.ru

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