JOINT STOCK COMMERCIAL BANK FORUM

JOINT STOCK COMMERCIAL BANK FORUM Independent Auditors Report Financial Statements for the Years Ended 31 December 2005 and 2004

JOINT STOCK COMMERCIAL BANK FORUM TABLE OF CONTENTS Page STATEMENT OF MANAGEMENT S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 i INDEPENDENT AUDITORS REPORT 1 FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004: Income statement 2 Balance sheet 3 Statement of changes in equity 4 Statement of cash flows 5-6 Notes to the financial statements 7-39

STATEMENT OF MANAGEMENT S RESPONSIBILITIES FOR THE PREPARATION AND APPROVAL OF THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 The following statement, which should be read in conjunction with the independent auditors responsibilities stated in the independent auditors report set out on page 1, is made with a view to distinguishing the respective responsibilities of management and those of the independent auditors in relation to the financial statements of Joint Stock Commercial Bank Forum (the Bank ). Management is responsible for the preparation of the financial statements that present fairly the financial position of the Bank at 31 December 2005 and 2004, the results of its operations, cash flows and changes in equity for the years then ended, in accordance with International Financial Reporting Standards ( IFRS ). In preparing the financial statements, management is responsible for: selecting suitable accounting principles and applying them consistently; making judgements and estimates that are reasonable and prudent; stating whether IFRS have been followed, subject to any material departures disclosed and explained in the financial statements; and preparing the financial statements on a going concern basis, unless it is inappropriate to presume that the Bank will continue in business for the foreseeable future. Management is also responsible for: designing, implementing and maintaining an effective and sound system of internal controls throughout the Bank; maintaining proper accounting records that disclose, with reasonable accuracy at any time, the financial position of the Bank, and which enable them to ensure that the financial statements of the Bank comply with IFRS; maintaining statutory accounting records in compliance with the legislation and accounting standards of Ukraine; taking such steps that are reasonably available to safeguard the assets of the Bank; and detecting and preventing fraud and other irregularities. The financial statements for the years ended 31 December 2005 and 2004 were authorized for issue on 28 August 2006 by the Management Board. i

ЗАТ Делойт енд Туш ЮСК ZAT Deloitte & Touche USC Бізнес-центр Київ-Донбас Business Center Kyiv-Donbas вул. Пушкінська, 42/4 42/4, Pushkinska St. Київ 01004 Kyiv 01004 Україна Ukraine Тел. / Tel.: +38 (044) 490 9000 Факс / Fax: +38 (044) 490 9001 www.deloitte.com.ua INDEPENDENT AUDITORS REPORT To the Shareholders and the Management Board of the Joint Stock Commercial Bank Forum : We have audited the accompanying balance sheets of the Joint Stock Commercial Bank Forum (hereinafter the Bank ) as of 31 December 2005 and 2004 and the related income statements, statements of changes in equity and cash flows for the two years then ended. These financial statements are the responsibility of the Bank s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with International Standards on Auditing. Those Standards require that we plan and perform the 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Bank as of 31 December 2005 and 2004, and the results of its operations and its cash flows for the two years then ended, in accordance with International Financial Reporting Standards. 28 August 2006

JOINT STOCK COMMERCIAL BANK FORUM INCOME STATEMENT FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 (in Ukrainian Hryvnias and in thousands) Notes Interest income 4, 26 337,985 212,385 Interest expense 4, 26 (198,111) (116,438) NET INTEREST INCOME BEFORE PROVISION FOR IMPAIRMENT LOSSES ON INTEREST BEARING ASSETS 139,874 95,947 Initial recognition of financial instruments (1,660) (295) Provision for impairment losses on interest bearing assets 5 (36,797) (46,267) NET INTEREST INCOME 101,417 49,385 Net gain on operations with investment securities 2,697 968 Net gain on foreign exchange operations 6 7,783 6,961 Fee and commission income 7, 26 34,975 26,190 Fee and commission expense 7 (2,838) (3,090) Other income 1,168 386 NET NON-INTEREST INCOME 43,785 31,415 OPERATING INCOME 145,202 80,800 OPERATING EXPENSES 8, 26 (108,093) (54,536) OPERATING PROFIT 37,109 26,264 Provision for impairment losses on other transactions 5 (3,233) (1,487) PROFIT BEFORE INCOME TAX 33,876 24,777 Income tax expense 9 (9,632) (6,430) NET PROFIT 24,244 18,347 2

JOINT STOCK COMMERCIAL BANK FORUM BALANCE SHEET AS OF 31 DECEMBER 2005 AND 2004 (in Ukrainian Hryvnias and in thousands) Notes ASSETS: Cash and balances with the National Bank of Ukraine 10 260,671 153,424 Loans and advances to banks, less allowance for impairment losses 11 914,676 348,055 Loans to customers, less allowance for impairment losses 12, 26 2,389,479 1,219,223 Investments available-for-sale, less allowance for impairment losses 13 10,731 8,795 Investments held-to-maturity, less allowance for impairment losses 13-1,880 Tangible and intangible assets, less accumulated depreciation and amortization 14 141,395 50,225 Current income tax assets 398 117 Deferred income tax assets 9-915 Other assets, less allowance for impairment losses 15 20,094 34,313 TOTAL ASSETS 3,737,444 1,816,947 LIABILITIES AND EQUITY LIABILITIES: Loans from the National Bank of Ukraine 16 64,220 141,728 Loans and advances from banks 17 810,468 356,859 Customer accounts 18, 26 2,172,436 1,029,617 Debt securities issued 19 15,852 2,288 Other borrowed funds 20 238,226 14,436 Current income tax liabilities 38 879 Deferred income tax liabilities 9 3,097 - Other liabilities 21 15,974 6,648 3,320,311 1,552,455 Subordinated debt 22, 26 32,001 22,845 Total liabilities 3,352,312 1,575,300 EQUITY: Paid-in and registered share capital 23 288,744 188,744 Additionally paid-in share capital 23 36,328 30,000 Revaluation reserve 17,591 4,858 Retained earnings 42,469 18,045 Total equity 385,132 241,647 TOTAL LIABILITIES AND EQUITY 3,737,444 1,816,947 3

JOINT STOCK COMMERCIAL BANK FORUM STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 (in Ukrainian Hryvnias and in thousands) Paid-in and registered share capital Additionally paid-in share capital Revaluation reserve Accumulated deficit/ Retained earnings Total equity 31 December 2003 128,744-4,975 (458) 133,261 Increase in paid-in and registered share capital increase 60,000 - - - 60,000 Additionally paid-in share capital - 30,000 - - 30,000 Amortization of revaluation result on tangible assets - - (156) 156 - Deferred tax liability related to depreciation of revalued tangible assets - - 39-39 Net profit - - - 18,347 18,347 31 December 2004 188,744 30,000 4,858 18,045 241,647 Increase in paid-in and registered share capital increase 100,000 (30,000) - - 70,000 Additionally paid-in share capital - 36,328 - - 36,328 Revaluation result on tangible assets - - 17,158-17,158 Amortization of revaluation result on tangible assets - - (180) 180 - Deferred tax liability related to revalued tangible assets - - (4,290) - (4,290) Deferred tax liability related to depreciation of revalued tangible assets - - 45-45 Net profit - - - 24,244 24,244 31 December 2005 288,744 36,328 17,591 42,469 385,132 4

JOINT STOCK COMMERCIAL BANK FORUM STATEMENT OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 (in Ukrainian Hryvnias and in thousands) Notes CASH FLOWS FROM OPERATING ACTIVITIES: Profit before income tax expense 33,876 24,777 Adjustments for: Provision for impairment losses on interest bearing assets 36,797 46,267 Provision for impairment losses on other transactions 3,233 1,487 Amortization of discounts on investment securities (4) - Amortization of discount on debt securities issued 269 - Dividend income - (15) Depreciation charge and amortization of tangible and intangible assets 10,007 4,397 (Gain)/loss on sale of tangible and intangible assets (138) 44 Net change in interest and other accruals 12,682 (2,790) Cash flow from operating activities before changes in operating assets and liabilities 96,722 74,167 Changes in operating assets and liabilities (Increase)/decrease in operating assets: Increase in restricted balances with the NBU (52,748) (19,928) Loans and advances to banks (497,725) (86,094) Loans to customers (1,187,891) (527,919) Other assets 14,242 (728) Increase/(decrease) in operating liabilities: Deposit from the NBU (77,475) 80,582 Deposits from banks 453,820 109,796 Customer accounts 1,127,499 333,516 Other borrowed funds 218,641 7,698 Other liabilities 1,679 (1,406) Cash inflow/(outflow) from operating activities before income taxes 96,764 (30,316) Income tax paid (10,987) (6,715) Net cash inflow/(outflow) from operating activities 85,777 (37,031) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of tangible and intangible assets (84,378) (46,682) Cash received on disposals of tangible and intangible assets 497 111 (Purchase)/proceeds from sale of investment securities (449) 17,686 Net cash outflows from investing activities (84,330) (28,885) CASH FLOWS FROM FINANCING ACTIVITIES: Share capital increase 23 106,328 90,000 Proceeds/(repayment) of debt securities issued 13,284 (13,671) Proceeds from subordinated debt 8,902 22,845 Net cash inflows from financing activities 128,514 99,174 5

JOINT STOCK COMMERCIAL BANK FORUM STATEMENT OF CASH FLOWS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 (CONTINUED) (in Ukrainian Hryvnias and in thousands) Notes NET INCREASE IN CASH AND CASH EQUIVALENTS 129,961 33,258 CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 10 125,534 92,276 CASH AND CASH EQUIVALENTS AT END OF THE PERIOD 10 255,495 125,534 Interest received and paid by the Bank during the year ended 31 December 2005 amounted to UAH 325,905 thousand and UAH 193,504 thousand, respectively. Interest received and paid by the Bank during the year ended 31 December 2004 amounted to UAH 201,920 thousand and UAH 110,366 thousand, respectively. 6

JOINT STOCK COMMERCIAL BANK FORUM NOTES TO THE FINANCIAL STATEMENTS FOR THE YEARS ENDED 31 DECEMBER 2005 AND 2004 (in Ukrainian Hryvnias and in thousands) 1. ORGANISATION Joint Stock Commercial Bank Forum (the Bank ) is a joint-stock company which was incorporated in Ukraine on 7 December 1993 as closed joint-stock company Lad-Credit Bank and registered by the National Bank of Ukraine (the NBU ) on 31 January 1994. On 28 February 1997 the Bank was renamed to Joint Stock Commercial Bank Forum. The registered office of the Bank is located at: 7 Verkhovnoy Rady Blvd., Kyiv, Ukraine. The Bank s activities are regulated by the NBU and the Bank conducts its business under the license number 62 dated 3 December 2001. The Bank s primary business consists of commercial activities, trading with securities, foreign currencies, originating loans and guarantees, and other banking activities. As of 31 December 2005 and 2004 the Bank had 23 and 11 branches in Ukraine, respectively. The number of employees of the Bank as of 31 December 2005 and 2004 was 1,530 and 856, respectively. As of 31 December 2005 and 2004, the following shareholders owned the Bank: Bank shareholders 2005 % 2004 % ALC SK Provita 65.0 71.1 LLC Elmak 14.8 10.8 The Bank of New York 9.5 - PII LLC Kontinental-Ukraina 6.6 10.5 Others 4.1 7.6 Total 100.0 100.0 Mr. Leonid L. Yurushev and his close family members exercise control over the Bank. These financial statements were authorized for issue by the Management Board on 28 August 2006. 2. BASIS OF PRESENTATION Accounting basis These financial statements of the Bank have been prepared in accordance with International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board ( IASB ) and Interpretations issued by the International Financial Reporting Interpretations Committee ( IFRIC ). These financial statements are presented in thousands of Ukrainian Hryvnias, unless otherwise indicated. The financial statements have been prepared under the historical cost convention, except for the measurement at fair value of investment securities available-for-sale, measurement of buildings at revalued amounts according to International Accounting Standard ( IAS ) No. 16 Property, Plant and Equipment. 7

In accordance with IAS 29 Financial Reporting in Hyperinflationary Economies ( IAS 29 ) the economy of Ukraine was considered to be hyperinflationary during 2000 and prior years. Starting 1 January 2001, the Ukrainian economy is no longer considered to be hyperinflationary and the values of the Bank s non-monetary assets, liabilities and equity as stated in measuring units as of 31 December 2000 have formed the basis for the amounts carried forward to 1 January 2004. Use of estimates and assumptions The preparation of financial statements in conformity with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates that are particularly susceptible to change relate to provisions for impairment losses and the fair value of financial instruments. Functional currency The functional currency of these financial statements is the Ukrainian Hryvnia ( UAH ). The Ukrainian Hryvnia was used as a reporting currency for the purpose of presentation of these financial statements. 3. SIGNIFICANT ACCOUNTING POLICIES Recognition and measurement of financial instruments The Bank recognizes financial assets and liabilities on its balance sheet when it becomes a party to the contractual obligation of the instrument. Regular way purchase and sale of the financial assets and liabilities are recognized using settlement date accounting. Regular way purchases of financial instruments that will be subsequently measured at fair value between trade date and settlement date is accounted for in the same way as for acquired instruments. Financial assets and liabilities are initially recognized at fair value plus, in the case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to acquisition or issue of the financial asset or financial liability. The accounting policies for subsequent re-measurement of these items are disclosed in the respective accounting policies set out below. Cash and cash equivalents Cash and cash equivalents include cash on hand, unrestricted balances on correspondent accounts with the National Bank of Ukraine, advances to banks in countries included in the Organization for Economic Co-operation and Development ( OECD ), except for margin deposits for operations with plastic cards, which may be converted to cash within a short period of time. For purposes of determining cash flows, the minimum reserve deposit required by the National Bank of Ukraine is not included as a cash equivalent due to restrictions on its availability. Loans and advances to banks In the normal course of business, the Bank maintains advances or deposits for various periods of time with other banks. Loans and advances to banks with a fixed maturity term are subsequently measured at amortized cost using the effective interest method. Those that do not have fixed maturities are carried at amortized cost based on maturities estimated by management. Amounts due from credit institutions are carried net of any allowance for impairment losses. 8

Repurchase and reverse repurchase agreements The Bank enters into sale and purchase back agreements ( repos ) and purchase and sale back agreements ( reverse repos ) in the normal course of its business. Repos and reverse repos are utilized by the Bank as an element of its treasury management and trading business. A repo is an agreement to transfer a financial asset to another party in exchange for cash or other consideration and a concurrent obligation to reacquire the financial assets at a future date for an amount equal to the cash or other consideration exchanged plus interest. These agreements are accounted for as financing transactions. Financial assets sold under repo are retained in the financial statements and consideration received under these agreements are recorded as collateralized loan received. Assets purchased under reverse repos are recorded in the financial statements as loans to banks or customers which is collateralized by securities and other assets. In the event that assets purchased under reverse repo are sold to third parties, the results are recorded with the gain or loss included in net gains/(losses) on respective assets. Any related income or expense arising from the pricing difference between purchase and sale of the underlying assets is recognized as interest income or expense. Loans to customers Loans and advances originated by the Bank are financial assets that are created by the Bank by providing money directly to a borrower or by participating in a loan facility. Loans granted by the Bank with fixed maturities are initially recognized at fair value plus related transaction cost. The difference between the nominal amount of consideration given and the amortized cost of loans issued at lower than market terms is recognized in the period the loan is issued as initial recognition adjustment discounting using market rates at inception and included in the income statement as losses on initial recognition of financial instruments. Subsequently, the carrying amount of such loans is adjusted for amortization of the losses on origination and the related income is recorded as interest income within the income statement using the effective interest method. Loans to customers are carried net of any allowance for impairment losses. Write off of loans Loans are written off against allowance for impairment losses in case of uncollectibility of loans and advances and also through repossession of collateral. In accordance with the statutory legislation, loans are written off with the respective decision of the Management Board. Allowance for impairment losses The Bank establishes an allowance for impairment losses of financial assets when there is objective evidence that a financial asset or group of financial assets is impaired. The allowance for impairment losses is measured as the difference between carrying amounts and the present value of expected future cash flows, including amounts recoverable from guarantees and collateral, discounted at the financial asset s original effective interest rate, for financial assets which are carried at amortized cost. If in a subsequent period the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed by adjusted an allowance account. For financial assets carried at cost the allowance for impairment losses is measured as the difference between the carrying amount of the financial asset and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. 9

The determination of the allowance for impairment losses is based on an analysis of the risk assets and reflects the amount which, in the judgment of management, is adequate to provide for losses incurred. Provisions are made as a result of an individual appraisal of risk assets for financial assets that are individually significant, and an individual or collective assessment for financial assets that are not individually significant. The change in the allowance for impairment losses is charged to profit and the total of the allowance for impairment losses is deducted in arriving at assets as shown in balance sheet. Factors that the Bank considers in determining whether it has objective evidence that an impairment loss has been incurred include information about the debtors or issuers liquidity, solvency and business and financial risk exposures, levels of and trends in delinquencies for similar financial assets, national and local economic trends and conditions, and the fair value of collateral and guarantees. These and other factors may, either individually or taken together, provide sufficient objective evidence that an impairment loss has been incurred in a financial asset or group of financial assets. It should be understood that estimates of losses involve an exercise of judgment. While it is possible that in particular periods the Bank may sustain losses, which are substantial relative to the allowance for impairment losses, it is the judgment of management that the allowance for impairment losses is adequate to absorb losses incurred on the risk assets. Securities held-to-maturity Securities held-to-maturity are debt securities with determinable or fixed payments. The Bank has the positive intent and ability to hold them to maturity. Such securities are carried at amortized cost, less any allowance for impairment plus accrued coupon income. Amortized discounts are recognized in the interest income using the effective interest method over the period to maturity. Investments available-for-sale Investments available-for-sale represent debt and equity investments that are intended to be held for an indefinite period of time. Such securities are initially recorded at fair value. Subsequently the securities are measured at fair value, with such re-measurement recognized directly in equity. The Bank uses quoted market prices to determine the fair value for the Bank s investments availablefor-sale. If such quotes do not exist, management use appropriate valuation techniques. Interest earned on investments available-for-sale is reflected in the income statement as interest income on investment securities. When there is an objective evidence that such securities have been impaired, the cumulative loss is removed from equity and recognized in income statement for the period. Reversals of such impairment losses on debt instruments, which are objectively related to events occurring after the impairment, are recognized in income statement for the period. Reversals of such impairment losses on equity instruments are not recognized in income statement. Tangible and intangible assets Buildings held for use in supply of services, or for administrative purposes, are stated in the balance sheet at their revalued amounts, being the fair value at the date of revaluation, determined from marketbased evidence by appraisal undertaken by professional appraisers, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Revaluations are performed with sufficient regularity such that the carrying amount does not differ materially from that which would be determined using fair values at the balance sheet date. Any revaluation increase arising on the revaluation of such buildings is credited to the tangible assets revaluation reserve, except to the extent that it reverses a revaluation decrease for the same asset previously recognized as an expense, in which case the increase is credited to the income statement to the extent of the decrease previously charged. A decrease in carrying amount arising on the revaluation of such buildings is charged as an expense to the extent that it exceeds the balance, if any, held in the tangible assets revaluation reserve relating to a previous revaluation of that asset. 10

Depreciation on revalued buildings is charged to expense. The tangible assets revaluation reserve is amortized over the estimated useful life of the revalued asset, and amortization is transferred directly to retained earnings. Tangible assets other than buildings and intangible assets acquired after 1 January 2001 are stated at cost less accumulated depreciation and amortization and any recognized impairment loss. Tangible and intangible assets, acquired before 1 January 2001 are carried at historical cost restated for inflation less accumulated depreciation and amortization and any accumulated impairment loss. Depreciation and amortization is charged so as to write off the cost or valuation of assets, other than properties under construction, over their estimated useful lives, using the straight-line method, on the following bases: Buildings 2% Computers and office equipment 10-25% Motor vehicles 25% Furniture and fittings 10-25% Intangible assets 25% Depreciation of assets under construction commences when the assets are put in use. Leasehold improvements are amortized over the life of the related leased asset or, if shorter, over the term of the related lease. Expenses related to repairs and renewals are charged when incurred and included in operating expenses unless they qualify for capitalization. Impairment loss The carrying amounts of tangible and intangible assets are reviewed at each balance sheet date to assess whether they are recorded in excess of their recoverable amounts, and where carrying values exceed this estimated recoverable amount, assets are written down to their recoverable amount. An impairment is recognized in the respective period and is included in operating expenses. After the recognition of an impairment loss the depreciation charge for tangible fixed assets is adjusted in future periods to allocate the assets revised carrying value, less its residual value (if any), on a systematic basis over its remaining useful life. Operating leases Leases of assets under which the risks and rewards of ownership are effectively retained with the lessor are classified as operating leases. Lease payments under operating lease are recognized as expenses on a straight-line basis over the lease term and included into operating expenses. 11

Taxation Income tax expense represents the sum of the current and deferred tax expense. The current tax expense is based on taxable profit for the year. Taxable profit differs from net profit as reported in the income statement because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Bank s current tax expense is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realized. Deferred tax is charged or credited in the income statement, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Ukraine also has various other taxes, which are assessed on the Bank s activities. These taxes are included as a component of operating expenses in the income statement. Deposits from banks and customers, debt securities issued Customer and bank deposits and debt securities issued are initially recognized at fair value, which amounts to the issue proceeds less transaction costs incurred. Subsequently amounts due are stated at amortized cost and any difference between net proceeds and the redemption value is recognized in the income statement over the period of the borrowings using the effective interest method. Provisions Provisions are recognized when the Bank has a present legal or constructive obligation as a result of past events, and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate of the obligation can be made. Share capital Share capital issued till 1 January 2001 is recognized at cost restated on effect of hyperinflation. Share capital issued since 1 January 2001 is recognized at historic cost. 12

Retirement and other benefit obligations In accordance with the requirements of the Ukrainian legislation, the Bank withholds amounts of pension contributions from employee salaries and pays them to the state pension fund. In addition such pension system provides for calculation of current payments by the employer as a percentage of current total disbursements to staff. Such expense is charged in the period the related salaries are earned. Upon retirement all retirement benefit payments are made by pension funds. In addition, the Bank has no post-retirement benefits or other significant compensated benefits requiring accrual. Recognition of income and expense Interest income and expense are recognized on an accrual basis using effective interest method. Interest income also includes income earned on investments. Fee and commission income includes loan origination fees, loan commitment fees, loan servicing fees and loan syndication fees. Loan origination fees, if significant, are deferred (together with related direct costs) and recognized as an adjustment to the loan s effective yield. Where it is probable that a loan commitment will lead to a specific lending arrangement, the loan commitment fees are deferred, together with the related direct costs, and recognized as an adjustment to the effective interest rate of the resulting loan. Where it is unlikely that a loan commitment will lead to a specific lending arrangement, the loan commitment fees are recognized in profit and loss over the remaining period of the loan commitment. Where a loan commitment expires without resulting in a loan, the loan commitment fee is recognized in profit and loss on expiry. Loan servicing fees are recognized as revenue as the services are provided. Loan syndication fees are recognized in the profit and loss when the syndication has been completed. Other income is credited to income statement when the related services are provided. Foreign currency translation Monetary assets and liabilities denominated in foreign currencies are translated into Ukrainian Hryvnia at the appropriate spot rates of exchange ruling at the balance sheet date. Foreign currency transactions are accounted for at the exchange rates of the NBU at the date of the transaction. Profits and losses arising from these translations are included in net gain on foreign exchange operations. Rates of exchange The exchange rates at year-end used by the Bank in the preparation of the financial statements are as follows: 31 December 2005 31 December 2004 UAH/1 US Dollar 5.050000 5.305400 UAH/1 EUR 5.971625 7.217466 Offset of financial assets and liabilities Financial assets and liabilities are offset and reported net on the balance sheet when the Bank has a legally enforceable right to set off the recognized amounts and the Bank intends either to settle on a net basis or to realize the asset and settle the liability simultaneously. In accounting for a transfer of a financial asset that does not qualify for derecognition, the Bank does not offset the transferred asset and the associated liability. 13

Adoption of new and revised International Financial Reporting Standards In the current year the Bank has adopted all of the new and revised Standards and Interpretations issued by the International Accounting Standards Board (the IASB ) and the International Financial Reporting Interpretations Committee ( IFRIC ) of the IASB that are relevant to its operations and effective for accounting periods beginning on 1 January 2005. The adoption of these new and revised Standards and Interpretations has resulted in changes to the Bank s accounting policies in the following areas that have affected the amounts reported for the current or prior years: IAS 24 (revised) Related party disclosures the Standard broadens the criteria for identification of related parties and changes certain related party disclosures; IAS 39 (revised) Financial instruments: recognition and measurement the Standard requires that gains and losses from fair value measurement of available-for-sale financial assets are presented directly in equity. In accordance with transitional provisions of IAS 39 (revised), the Standard has been applied retrospectively. At the date of authorization of these financial statements, the following Standards and Interpretations were in issue but not yet effective: IFRS 7 Financial Instruments: Disclosures ; Amendment to IAS 19 Employee benefits Actuarial Gains and Losses, Group Plans and Disclosures ; Amendment to IAS 39 Cash Flow Hedge Accounting of Forecast Intragroup Transactions ; Amendment to IAS 39 The Fair Value Option ; Amendment to IAS 39 and IFRS 4 Insurance contracts Financial Guarantee Contracts ; Amendments to IFRS 1 First-time Adoption of International Financial Reporting Standards ; IFRIC 4 Determining whether an Arrangement contains a Lease ; IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies ; IFRIC 8 Scope of IFRS 2. The management is currently assessing the impact of the adoption of these new and revised Standards and Interpretations in future periods. Reclassifications Certain reclassifications have been made to the financial statements as of 31 December 2004 and for the year then ended to conform to the presentation as of 31 December 2005 and for the year then ended. Most significant reclassifications relate to: presentation of UAH 14,436 thousand as other borrowed funds instead of customer accounts due to nature of this liability; presentation of UAH 914 thousand as interest expense instead of fee and commission expense due to the nature of this expense and classification of fee and commission expense; presentation of UAH 812 thousand as interest income instead of fee and commission income due to the nature of this income and classification of fee and commission income; the Bank has excluded the amount of UAH 65,134 thousand representing the minimum reserve with the NBU, from cash and cash equivalents. As a result of these changes respective balance of cash and cash equivalents has changed from UAH 190,668 thousand to UAH 125,534 thousand. 14

4. NET INTEREST INCOME Net interest income comprises: Interest income Interest on loans and advances to customers 319,221 198,054 Interest on loans and advances to banks 16,837 12,663 Interest on debt securities 1,927 1,668 Total interest income 337,985 212,385 Interest expense Interest on customer accounts (154,032) (90,363) Interest on loans and deposits from banks (25,322) (19,754) Interest on other borrowed funds (7,467) (1,263) Interest on loans from the NBU (5,382) (4,453) Interest on debt securities issued (1,216) (560) Other interest (4,692) (45) Total interest expense (198,111) (116,438) Net interest income 139,874 95,947 5. ALLOWANCE FOR IMPAIRMENT LOSSES, OTHER PROVISIONS The movements in allowance for impairment losses on interest earning assets, were as follows: Loans and advances to banks Loans to customers Investment securities availablefor-sale Total 31 December 2003 (3,922) (38,480) - (42,402) Recovery/(provision) 2,932 (49,199) - (46,267) Exchange rate differences - (83) - (83) 31 December 2004 (990) (87,762) - (88,752) Provision (6,396) (30,090) (311) (36,797) Write off - 812-812 31 December 2005 (7,386) (117,040) (311) (124,737) 15

The movements in allowances for impairment losses on other transactions were as follows: Investment securities availablefor-sale Other assets Guarantees and other commitments Total 31 December 2003 (293) (66) (1,222) (1,581) Recovery/(provision) 115 (161) (1,441) (1,487) Exchange rate differences - - (14) (14) 31 December 2004 (178) (227) (2,677) (3,082) Recovery/(provision) 119 23 (3,375) (3,233) 31 December 2005 (59) (204) (6,052) (6,315) Allowances for losses on assets are deducted from related assets. Provisions for guarantees and other commitments are recorded in liabilities. 6. NET GAIN ON FOREIGN EXCHANGE OPERATIONS Net gain on foreign exchange operations comprises: Dealing, net 11,655 6,527 Translation differences, net (3,872) 434 Total net gain on foreign exchange operations 7,783 6,961 7. FEE AND COMMISSION INCOME AND EXPENSE Fee and commission income comprises: Fee and commission income: Settlements 14,601 11,842 Foreign exchange operations 9,727 8,344 Off-balance sheet operations 7,866 4,585 Cash operations 1,287 813 Loan servicing 1,221 188 Operations with securities 106 209 Other operations 167 209 Total fee and commission income 34,975 26,190 16

Fee and commission expense comprises: Fee and commission expense: Settlements (1,985) (1,201) Off-balance sheet operations (142) (1,355) Operations with securities (69) (28) Foreign exchange operations (2) (15) Other operations (640) (491) Total fee and commission expense (2,838) (3,090) 8. OPERATING EXPENSES Salary and bonuses 53,398 24,927 Depreciation and amortization 10,007 4,397 Advertising and marketing expenses 6,619 1,983 Operating lease expense 6,559 2,449 Communication expenses 4,671 2,933 Miscellaneous office expenses 4,169 2,273 Insurance expenses 3,033 5,122 Payments to deposit insurance fund 2,945 1,845 Taxes, other than income tax 2,594 1,279 Repairs and maintenance expense 2,286 1,545 Security expenses 2,222 1,110 Business trips 1,370 748 Professional services fees 996 922 Sponsorship and charity 398 429 Other 6,826 2,574 Total operating expenses 108,093 54,536 9. INCOME TAXES The Bank provides for taxes based on the tax accounts maintained and prepared in accordance with and the Ukrainian statutory tax regulations which may differ from International Financial Reporting Standards. The Bank is subject to certain permanent tax differences due to non-tax deductibility of certain expenses and a tax free regime for certain income. Deferred taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. Temporary differences as of 31 December 2005 and 2004 relate mostly to different methods of income and expense recognition as well as to recorded values of certain assets. 17

Temporary differences as of 31 December 2005 and 2004 comprise: Deferred assets: Loans to banks and customers 6,457 3,691 Tax losses carried forward - 202 Other liabilities 2,443 556 Total deferred assets 8,900 4,449 Less valuation allowance (1,000) (556) Total deferred assets, net 7,900 3,893 Deferred liabilities: Securities (2,112) (104) Tangible assets (7,317) (1,962) Other assets (1,568) (912) Total deferred liabilities (10,997) (2,978) Net deferred tax (liabilities)/assets (3,097) 915 Relationships between tax expenses and accounting profit for the years ended 31 December 2005 and 2004 are explained as follows: Profit before income taxes 33,876 24,777 Statutory tax rate 25% 25% Theoretical tax at the statutory tax rate 8,469 6,194 Non-deductible expenses 897 225 Non-taxable income (178) (353) Change in valuation allowance 444 364 Income tax expense 9,632 6,430 Deferred tax (liability)/asset At the beginning of the period 915 893 Deferred tax benefit/(expenses) 233 (17) (Increase)/decrease of tangible assets revaluation reserve (4,245) 39 At the end of the period (3,097) 915 The income tax expenses consist of the following: Current income tax expense 9,865 6,413 Deferred tax (benefit)/expense (233) 17 Income tax expense 9,632 6,430 18

10. CASH AND BALANCES WITH THE NATIONAL BANK OF UKRAINE Cash and balances with the National Bank of Ukraine comprise: Cash on hand 76,291 35,655 Balance with the National Bank of Ukraine 184,380 117,769 Total cash and balances with the National Bank of Ukraine 260,671 153,424 The balances with the National Bank of Ukraine as of 31 December 2005 and 2004 include UAH 117,882 thousand and UAH 65,134 thousand, respectively, which represent the minimum reserve deposits required by the NBU. The Bank is required to maintain the reserve balance at the NBU at all times. Cash and cash equivalents for the purposes of the statement of cash flows comprise: Cash and balances with the National Bank of Ukraine 260,671 153,424 Advances to banks in OECD countries 112,706 37,244 373,377 190,668 Less minimum reserve deposits with the National Bank of Ukraine (117,882) (65,134) Total cash and cash equivalents 255,495 125,534 11. LOANS AND ADVANCES TO BANKS, LESS ALLOWANCE FOR IMPAIRMENT LOSSES Loans and advances to banks comprise: Loans and advances to banks 641,456 199,624 Correspondent accounts with other banks 280,067 148,712 Accrued interest income on loans and advances to banks 539 709 922,062 349,045 Less allowance for impairment losses (7,386) (990) Total loans and advances to banks 914,676 348,055 Movements in allowances for impairment losses for the years ended 31 December 2005 and 2004 are disclosed in Note 5. As of 31 December 2005 and 2004 the Bank had loans and advances to nine and three banks, totaling UAH 597,425 thousand and UAH 149,864 thousand, respectively, which individually exceeded 10% of the Bank s equity. As of 31 December 2005 and 2004 the maximum credit risk exposure of loans and advances to banks amounted to UAH 922,062 thousand and UAH 349,045 thousand, respectively. During 2005 and 2004 the Bank simultaneously placed with and received short-term funds from Ukrainian banks in different currencies. As of 31 December 2005 and 2004, the Bank placed equivalent of UAH 568,495 thousand and UAH 290,523 thousand, respectively, as deposits with Ukrainian banks, which were received from the same banks (see Note 17). 19

As of 31 December 2005 and 2004 included in loans and advances to banks are guarantee deposits placed by the bank for its operations in the amount of UAH 53,156 thousand and UAH 828 thousand, respectively. 12. LOANS TO CUSTOMERS, LESS ALLOWANCE FOR IMPAIRMENT LOSSES Loans to customers comprise: Originated loans 2,383,217 1,287,664 Repo transactions 90,525-2,473,742 1,287,664 Accrued interest income on loans to customers 32,777 19,321 2,506,519 1,306,985 Less allowance for impairment losses (117,040) (87,762) Total loans to customers, net 2,389,479 1,219,223 Movements in allowances for impairment losses for the years ended 31 December 2005 and 2004 are disclosed in Note 5. Analysis of collateral Loans collateralized by real estate 705,111 485,135 Loans collateralized by liens over receivables 621,661 95,176 Loans collateralized by equipment 329,378 202,533 Loans collateralized by goods in turnover 261,072 216,604 Loans collateralized by other movables 191,953 58,174 Loans collateralized by securities 90,525 21,853 Loans collateralized by cash 32,617 86,349 Loans collateralized by others 221,324 113,240 Unsecured loans 20,101 8,600 Accrued interest income on loans to customers 32,777 19,321 Total loans to customers 2,506,519 1,306,985 The above table summarizes the amount of loans secured by collateral, rather than the fair value of the collateral itself. Analysis by industry Trade 676,560 494,627 Individuals 335,585 92,503 Service 296,168 71,195 Construction 295,372 213,398 Agriculture 225,686 91,674 Mining and metallurgy 204,932 24,209 Transport and communication 100,248 98,805 Machine-building 165,281 56,242 Chemical industry 73,552 60,383 Manufacturing 40,850 30,814 Energy 38,635 27,207 Financial sector 20,013 26,557 Other 860 50 Accrued interest income on loans to customers 32,777 19,321 Total loans to customers 2,506,519 1,306,985 20

As of 31 December 2005 and 2004 the Bank granted loans to 16 clients in both year, totaling UAH 843,955 thousand and UAH 562,882 thousand, respectively, which individually exceeded 10% of the Bank s equity. The carrying amount of loans to customers plus the amount of commitments on credits represent the amount exposed to credit risk in respect of this category of financial instruments. As of 31 December 2005 and 2004 the total maximum credit risk exposure on loans to customers included UAH 2,506,519 thousand and UAH 1,306,985 thousand, respectively. As of 31 December 2005 included in loans to customers are loans granted under reverse repo agreements in the amount of UAH 90,525 thousand, which are collateralized by securities. As of 31 December 2005 and 2004 loans to customers with the carrying amount of UAH 89,133 thousand and UAH 48,791 thousand, respectively, were pledged as collateral to secure the loans received from other banks (Note 17). 13. INVESTMENT SECURITIES LESS ALLOWANCE FOR IMPAIRMENT LOSSES Investment securities comprise of the following: Securities available-for-sale 11,101 8,929 Securities held-to-maturity - 1,880 Investments in non-consolidated subsidiaries - 44 11,101 10,853 Less allowance for impairment losses (370) (178) Total investment securities 10,731 10,675 Movements in allowances for impairment for the years ended 31 December 2005 and 2004 are disclosed in Note 5. Securities available-for-sale comprise: Interest to nominal/share in equity % 2005 Interest to nominal/share in equity % Debt securities: Bonds of Veronika LLC 18% 1,558 - - Bonds of Velyka Kyshenya Finance LLC - - 18% 8,062 Shares: less 10% 9,543 less 10% 867 11,101 8,929 Less allowance for impairment losses (370) (178) Total securities available-for-sale 10,731 8,751 As of 31 December 2005 and 2004 included in securities available-for-sale was accrued interest income on debt securities amounting to UAH 58 thousand and UAH 263 thousand, respectively. As of 31 December 2004 securities held-to-maturity comprise bonds of Shidno-promyslovyj bank Ltd in the amount of UAH 1,880 thousand which matured 24 February 2005. As of 31 December 2004 investments in non-consolidated subsidiaries comprise investments in 90% of shares of Forum Security Ltd in the amount of UAH 44 thousand. 2004 21

14. TANGIBLE AND INTANGIBLE ASSETS, LESS ACCUMALATED DEPRECIATION AND AMORTIZATION Buildings Computers and office equipment Motor vehicles Furniture and fittings Construction in progress Intangible assets At cost/ revalued cost/ cost restated for hyperinflation effect 31 December 2004 31,084 12,824 5,392 10,662 3,886 2,071 65,919 Additions - 14,253 5,151 4,285 60,189 500 84,378 Revaluation 20,122 - - - - - 20,122 Disposals (551) (22) (627) (141) (8) - (1,349) Transfer 21,507 - - - (21,507) - - 31 December 2005 72,162 27,055 9,916 14,806 42,560 2,571 169,070 Accumulated depreciation 31 December 2004 (4,561) (5,395) (2,184) (2,514) - (1,040) (15,694) Charge for the period (1,819) (3,625) (1,646) (2,349) - (568) (10,007) Revaluation (2,964) - - - - - (2,964) Disposals 425 17 469 79 - - 990 31 December 2005 (8,919) (9,003) (3,361) (4,784) - (1,608) (27,675) Net book value 31 December 2005 63,243 18,052 6,555 10,022 42,560 963 141,395 Net book value 31 December 2004 26,523 7,429 3,208 8,148 3,886 1,031 50,225 Buildings include premises occupied by the Bank and leasehold improvements. The carrying value of leasehold improvements as of 31 December 2005 and 2004 is UAH 8,238 thousand and UAH 6,418 thousand, respectively. Buildings owned by the Bank were revalued by independent appraisers as of 1 December 2005. The following methods were used for the estimation of their fair value: discounted cash flow method (income approach), integrated cost estimation method (cost based method), method of sales comparison (comparative approach). For the estimation of the final value, certain weights were assigned to the results obtained using different approaches, depending on the degree to which the estimates met the following characteristics: reliability and completeness of the information, specifies the estimated property and other. As of 31 December 2005 and 2004 tangible assets with a book value of UAH 21,406 thousand and UAH 15,283 thousand were pledged to secure short-term loans received from a Ukrainian bank (Note 17). Total 22

15. OTHER ASSETS, LESS ALLOWANCE FOR IMPAIRMENT LOSSES Other assets comprise: Prepaid expenses 9,085 3,487 Prepayments for assets 7,456 28,874 Accrued income 1,575 573 Materials 1,448 911 Prepayments and receivables on other transactions 596 282 Debtors on operations with securities - 408 Other 138 5 20,298 34,540 Less allowance for impairment losses on other assets (204) (227) Total other assets 20,094 34,313 Movements in allowances for losses for the years ended 31 December 2005 and 2004 are disclosed in Note 5. As of 31 December 2005 and 2004 deferred expenses comprise mainly prepayments for insurance amounted to UAH 7,114 thousand and UAH 2,623 thousand, respectively. 16. LOANS FROM THE NATIONAL BANK OF UKRAINE The main part of loans from the NBU is represented by loans in freely convertible currencies, which have been provided under the EBRD Micro and Small Enterprises and Middle and Small Enterprises financial credit lines bearing an interest rate of LIBOR+3% each. These loans were granted with demand from the Bank to comply with economic indicators as determined by the EBRD. The rest of the loans from the NBU as of 31 December 2005 and 2004 in the amount of UAH 15,143 thousand and UAH 81,500 thousand, respectively, are loans received form the NBU bearing interest rate that equals the NBU s refinancing rate. As of 31 December 2005 and 2004 included in loans from the NBU were accrued interest expense amounting to UAH 480 thousand and UAH 513 thousand, respectively. 17. LOANS AND ADVANCES FROM BANKS Loans and advances from banks comprise: Loans from other banks 578,712 263,031 Correspondent accounts of other banks 231,150 93,011 Accrued interest expenses on loans and advances from banks 606 817 Total loans and advances from banks 810,468 356,859 During 2005 and 2004 the Bank simultaneously placed with and received short-term funds from Ukrainian banks in different currencies (see Note 11). As of 31 December 2005 loans from other banks included loans received from Bankgesellschaft Berlin in the amount of EUR 2,622 thousand (UAH 15,660 thousand) with maturity in 2010, interest rate EURIBOR+1%, which are purposed for financing the export-import transactions of Bank s customers. 23