BANK OF BAKU
AUDITORS REPORT AND FINANCIAL STATEMENTS AT 31 DECEMBER 2001

• Auditors Report
• Balance Sheet
• Statement of Income
• Statement of Cash Flows
• Statement of Changes in Shareholders Equity

Notes to the Financial Statements

Note 1 Principal Activities 
Note 2 Significant Accounting Policies 
Note 3 Use of financial instruments 
Note 4 Cash and short-term Funds 
Note 5 Loans and Advances to Banks 
Note 6 Loans and Advances to Customers 
Note 7 Investment securities held-to-maturity 
Note 8 Other Assets 
Note 9 Intangible assets 
Note 10 Premises and Equipment 
Note 11 Due to Banks 
Note 12 Customer Accounts
Note 13 Other Borrowed Funds 
Note 14 Other Liabilities 
Note 15 Paid-in Capital 
Note 16 Retained earnings
Note 17 Dividends 
Note 18 Fee and commission income 
Note 19 Fee and commission expense 
Note 20 General, administrative and other operating expenses 
Note 21 Taxation 
Note 22 Commitments and contingent liabilities 
Note 23 Reconciliation of Azerbaijanian Accounting Rules to International Accounting Standards 
Note 24 Related party transactions 
Note 25 Post balance sheet events

We have audited the accompanying balance sheet of Bank of Baku (the Bank) at 31 December 2001, and the related statements of income and of cash flows for the year then ended. These financial statements are the responsibility of the Banks management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with International Standards on Auditing. Those standards require that we plan and perform our audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Bank of Baku at 31 December 2001 and the results of its operations and its cash flows for the year then ended in accordance with International Accounting Standards.

Without qualifying our opinion we draw attention to the following issue:

As discussed in Note 1, the Azerbaijan economy has shown progress in achieving a lower rate of inflation, stable exchange rates and sustainable growth in recent years. However, the economy is largely dependent on oil prices and all sectors of the economy, including the banking sector, might be affected by fluctuations in oil prices.

7 May 2002

Balance Sheet at 31 December 2001
(Amounts are expressed in thousands of Azeri Manat)

These financial statements have been approved for issue by the Board of Directors on 5 March 2002 and signed on its behalf by Mr. Ruslan F. Muhammedli, Chairman of the Board of Directors, and Mrs. Marina Tedeyeva, Head of Accounting Department.