Saint-Petersburg Commercial Bank “Tavrichesky” (joint-stock) (стр. 2 )

Bank “Tavrichesky” (j.-s.)

Cash Flow Statement

Financial statements for the year ended December 31, 2006

(in thousand rubles)

	2006	2005
Cash flow from operating activities
Interest gained	960,846	908,615
Interest paid	(492,133)	(460,697)
Earnings after profit or loss-priced fair value AFS assets transactions expenses	2,415	8,814
Earnings after forex transaction expenses	48,052	34,717
Commission gained	109,082	69,445
Commission paid	(9,223)	(4,068)
Other operating profits	14,449	30,708
Operating costs paid	(335,490)	(299,512)
Profit tax paid	(33,657)	(22,286)
Cash received from (used in) operation before changes in operating assets and liabilities	264,341	265,736
(Gain) loss from operating assets and liabilities
Net (gain) loss from reserves accounts required by the Central Bank	(5,822)	(9,807)
Net (gain) loss from profit or loss-priced fair value assets	3,208	9,265
Net (gain) loss from assets in other banks	(164,128)	(161,393)
Net (gain) loss from accounts payable and receivable	(1,177,193)	(619,152)
Net (gain) loss from other assets	77,274	(78,072)
Net gain (loss) from other banks’ assets	(145,983)	360,009
Net gain (loss) from clients’ assets	1,748,281	(496,493)
Net gain (loss) from debt securities in issue	(67,918)	550,304
Net gain (loss) from other liabilities	2,107	(105)
Net cash received from (used in) operating activities	534,167	(179,708)
Cash from investing activities
AFS assets purchase	(74,619)	-
Proceeds from AFS assets realization (and redemption)	7,373	26
Fixed assets purchase	(15,544)	(29,963)
Proceeds from fixed assets sale	3,570	39
Dividends gained	236	87
Cash received from (used in) investment	(78,984)	(2, 811)
Cash from financing activities
Dividend payments	(53,315)	(7,200)
Cash received from (used in) financing activities	(53,315)	(7,200)
Central Bank rates change effect on money and cash-equivalent items	(9,751)	(5,119)
Net gain (loss) in amounts of money and other liquid assets	392,117	(221,838)
Money and cash-equivalent assets by the beginning of the year	1,813,609	2,035,447
Money and cash-equivalent assets by the end of the year	2,205,726	1,813,609

The accompanying notes form an integral part of the annual accounts

Notes to Annual Accounts 2006

(in thousand RUR))

Note 1 – Main Operation Areas

Saint-Petersburg Commercial Bank “Tavrichesky” (joint-stock) (hereinafter referred to as Bank) was established in April 1993 as a public corporation in compliance with the legislation of the Russian Federation. The Bank operates on the Central Bank-granted General Charter for conducting banking operations # 2304 dated Aug. 25, 1997. Besides that, the Bank holds a number of licenses issued by the Federal Commission for Funds and Stock Exchange in December 2000 viz. the license for brokerage activities, license for dealing activities, fund management operation license and depositary license.

The Bank is a general-purpose credit body to conduct overall license-based banking transactions, with the exception of trust management activities.

By the end of 2006 the Bank reported to have 7 branches: Sosnovoborsky (town of Sosnony Bor, Leningrad region), Pechorsky (town of Pechora), Kingiseppsky (town of Kingisepp, Leningrad region), Murmansky (city of Murmansk), Moscow City (in Moscow), Irkutsky (city of Irkutsk) and Syktyvkarsky (town of Syktyvkar). In 2006 the Bank chose to close its Novgorodsky branch due to low returns.

The Bank’s domicile is at 39 Radishcheva Street, St. Petersburg, Russia, 191123.

The Banking Supervision Committee of the Central Bank of Russia ruled that Bank “Tavrichesky” (j.-s.) meets the national savings insurance system requirements. This was the reason behind its inclusion into the National banking deposit insurance register in November 2004.

In 2006 the average number of the Bank’s employees rose to 412 people as opposed to 383 people in 2005.

As of the end of 2006 and in the previous year the Bank stated the following companies and individuals as its shareholders:

Shareholder	2006, %	2005, %
Energotrans Ltd.	17.26%	0.00%
V. M. Fyodorov	16.83%	16.66%
O. Y. Zakharzhevsky	10.42%	0.73%
West Invest Ltd.	8.91%	13.72%
I. V. Kuznetsov	8.42%	0.72%
Plank Ltd.	8.00%	7.47%
Alkor Holding Ltd.	7.14%	11.50%
O. V. Alymov	5.00%	0.01%
Other shareholders (with quotas less than 5%)	18.02%	49.19%
Total	100%	100%

Note 2 – Economic Background to Bank’s Activities

Since 2000 the average year-on-year economic growth rates in Russia have been going up steadily. Outside the calendar and season influences, the average monthly GDP growth rate came to 0.6% throughout 2006. The annual economic growth rates for the period until 2010 will stabilize at 5.9 – 6.2%, according to the Ministry for Economic Development and Trade (MEDT) forecasts. Besides the GDP growth, the monetary authorities have been able to reduce the annual inflation rate (in recent years it has fallen from 20.2% in 2000 to 9% in 2006). By 2010 Russia will see a 6.5% inflation rate, which exceeds the prior forecast, the MEDT predicts.

Despite steep inflation rates, the nominal personal income growth rate overtakes that of the consumer price increase. The nominal ratio of consumer income saw a hike by 23% in 2006 while the average consumer income growth has mounted by 34.2% since 2000.

In 2006 foreign direct investment into the Russian economy has almost doubled from 2005 to stand at USD 28.4bn whereas the general capital flow into the private sector of the economy soared above USD 41.6bn. As of Jan. 1, 2007 the Stabilization Fund capacity reached USD 89.13bn to overtake the figure of the beginning of 2006 by a whopping 89.7%. The Central Bank gold and foreign currency reserves amounted to USD 303bn by 1 Jan., 2007, having pumped up a 66% increase over the year, while the reserves figure has risen twice and a half from the beginning of 2005.

In terms of the Russian national currency’s realized effective weakening rate over 2006, the ruble is reported to have lost 14.1% against the US dollar while on the Euro scale the Russian money sank by 6.2%. Meanwhile, the effective ruble strengthening rate stands at 7.8%. Such a change in the effective ruble rate has brought about a foreign currency loan increase by Russian-owned businesses.

The reason behind the drop in loan costs and service at the global marketplace as well as the consecutive rise in foreign loan numbers has been a Russian credit ratings upgrade initiated by the international rating agencies Standard & Poor’s and Fitch in 2006. Standard & Poor’s agency has upgraded the sovereign foreign exchange rating for the Russian Federation from BBB/stable to BBB+/stable while the sovereign national currency rating has experienced an upgrade from BBB+/stable to A-/stable. Fitch agency has upgraded sovereign Russian ratings from BBB/ stable to BBB+/stable on both scales. Moody’s rating agency had come up with a Russian Federation rating make-over in the previous year, as it upgraded both sovereign ratings from Baa3/positive to Baa2/stable in 2005.[1]

Note 3 – Generally Accepted Accounting Principles (GAAP)

These annual accounts have been prepared in accordance with the IFRS to include all the prior accepted standards and interpretations of the Standing Interpretation Committee and the International Financial Reporting Interpretations Committee (IFRIC). The Bank conducts its accounting in RUR and makes book entries according to the Russian Federation banking legislation. These accounts and records are based on the Bank’s entries, with the amendments required to harmonize the statements along all essential IFRS aspects lines. The major amendments are as follows:

amendments for stating assets at fair value;

amendments for current and deferred taxation-related statements;

amendments for the statement of financial tools amortization cost;

amendments related to the fixed assets fair value;

the indication of inflation effect from non-monetary entries.

The current accounting policy conforms to the policy applied over the prior financial year.

Serious faults found in the accounting period’s figures concerning the accounting entries recognition, appraisal, presentation or disclosure, as mentioned in IAS Amendment 8 “Accounting Policy, Change in Book Appraisals, and Mistakes”, have affected the comparative data as follows:

	Before reassessment	Faults-related bias	After reassessment
Balance sheet as of 31 Dec., 2005
Other assets	70,027	1,013	71,040
Fixed assets	57,559	12,898	70,457
Total assets	8,231,301	13,911	8,245,212
Deferred taxation	449	3,335	3,784
Total liabilities	7,182,771	3,335	7,186,106
Accumulated deficit	(86,622)	10,576	(76,046)
Total ownership capital	1,048,530	10,576	1,059,106
Total liabilities and ownership capital	8,231,301	13,911	8,245,212
Profit and loss Account
Operating expenses	(313,358)	3,449	(309,909)
EBT	32,547	3,448	35,995
Profit tax expenditure	(22,735)	708	(22,027)
Net profit	9,812	4,156	13,968

The Bank did not apply the following IFRS as well as IFRIC interpretations which had not come into effect by the moment of issue: