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

	1999	1998
Ordinary dividends
Proposed and paid during the year	15,735	516,883
Proposed and not paid at year-end (Note 12)	-	120,000
Total dividends	15,735	636,883

Geographical analysis:

The geographical analysis of assets and liabilities at 31 December 1999 is as follows:

	OECD countries				Non-OECD countries		Total
					Azerbaijan Republic	CIS and other countries
Assets
Cash and short-term funds		1,389,321			5,234,412	456,858	7,080,591
Loans and advances to banks		-			466,818	-	466,818
Loans and advances to customers		-			4,630,339	-	4,630,339
Accrued interest and commission income			2,989		74,111	-	77,100
Other assets		34,069			23,119	-	57,188
Premises and equipment		-			520,456	-	520,456
Deferred tax asset, net		-			72,012	-	72,012
Total assets		1,426,379			11,021,267	456,858	12,904,504
Liabilities
Due to banks		-			2,275,943	2,105	2,278,048
Customer accounts		2,412			1,212,240	-	1,214,652
Other borrowed funds		-			481,030	-	481,030
Accrued interest and commission expense				13,018	-	-	13,018
Other liabilities		64,130			194,562	-	258,692
Total liabilities		79,560			4,163,775	2,105	4,245,440
Net position as at 31 December1999		1,346,819			6,857,492	454,753	8,659,064
Net position as at 31 December 1998		1,647,818			4,216,358	77	5,864,253

Currency analysis

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. At year-end, the Bank had balances in Azeri Manat and other currencies (mainly US$).

At 31 December 1999, the Bank had the following currency positions:

	Manat	Foreign currency	Manat equivalent			Total Manat
Assets
Cash and short-term funds	539,118	US$ 1,490,827	6,519,387			7,080,591
Other			22,086
			6,541,473
Loans and advances to banks	-	US$ 106,750	466,818			466,818
Loans and advances to customers	165,886	US$ 1,020,913	4,464,453			4,630,339
Accrued interest and commission income	50,902	US$ 5,991	26,198			77,100
Other assets	14,198	US$ 9,831	42,990			57,188
Premises and equipment	520,456	-	-			520,456
Deferred tax asset, net	72,012	-	-			72,012
Total assets	1,362,572			11,541,932	12,904,504
Liabilities
Due to banks	2,105	US$ 520,453	2,275,943			2,278,048
Customer accounts	505,433	US$ 162,181	709,219			1,214,652
Other borrowed funds	-	US$ 110,000	481,030			481,030
Accrued interest and commission expense	-	US$ 2,977	13,018			13,018
Other liabilities	89,610	US$ 38,665	169,082			258,692
Total liabilities	597,148		3,648,292			4,245,440
Net position as at 31 December 1999	765,424		7,893,640			8,659,064
Net position as at 31 December 1998	2,394,802		3,469,451			5,864,253

The Bank is required to maintain its foreign currency position within the guidelines of the NBAR. Until 1 November 1999, the open currency position limit was 7% of equity as calculated in accordance with Azeri statutory requirements. Effective from 1 November 1999, it was increased to 15%.

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