BANK OF BAKU
AUDITORS REPORT AND FINANCIAL STATEMENTS AT 31 DECEMBER 1999

In accordance with the Azeri Law on Banks and Banking Activity, the Bank distributes all profits as dividends or transfers them to reserves (fund accounts) on the basis of financial statements prepared in accordance with Azeri Accounting Rules. The Bank's reserves under Azeri accounting rules at 31 December 1999 are AZM 486,615 (1998: AZM 182,085).

Statutory profits are distributed on a quarterly basis. Transfers to statutory reserves are fully tax deductible under Azeri tax legislation.

Reconciliation to International Accounting Standards of the Bank's reserves and profit before taxation under Azeri accounting rules is given in Note 23.

Note 1 Principal Activities 
Note 2 Basis of Presentation 
Note 3 Significant Accounting Policies 
Note 4 Cash and short-term Funds 
Note 5 Loans and Advances to Banks 
Note 6 Loans and Advances to Customers 
Note 7 Other Assets 
Note 8 Premises and Equipment 
Note 9 Due to Banks 
Note 10 Customer Accounts 
Note 11 Other Borrowed Funds 
Note 12 Other Liabilities
Note 13 Paid-in Capital 
Note 14 Retained earnings / Accumulated Deficit 
Note 15 Fees and Commission Income 
Note 16 Fees and Commission Expense
Note 17 General, Administrative and Other Operating Expenses 
Note 18 Taxation 
Note 19 Dividends 
Note 20 Asset and Liability Concentration 
Note 21 Risk Management 
Note 22 Commitments and Contingent Liabilities 
Note 23 Reconciliation of Azeri Accounting Rules to International Accounting Standards 
Note 24 Related Party Transactions