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Corporate News OAO Oil Company LUKoil The UK Listing Authority included the company's securities in the official list; thus LUKoil obtained a full secondary listing at the London Stock Exchange. All ordinary shares and Level 1 ADRs of the company have been listed. The shares will trade in the form of ADRs. On 6 August the ADRs started to trade at US$ 55 per ADR. As the first Russian company to receive a full secondary listing, LUKoil will be subject to more onerous requirements than those, which currently apply to it as an issuer of securities. The new requirements imply more detailed disclosure of information on the operations of the LUKoil group and regular reporting to the holders of its securities.

Net unconsolidated profits of the oil company calculated by Russian accounting standards amounted to RUR 17.6 billion in the first six months, nearly RUR 2.3 billion more than in the same period of 2001.

RAO UES The company published its RAS financial results. Profits before taxation in Q2 were down to RUR billion, 1.6 times lower than in the same period of 2001 and 3.3 times lower than in Q1 of the current year.

Net profits in the first six months of the current year were RUR 22.7 billion, three times more than in the same period of 2001. Receipts from sales of goods and services were RUR 23.9 billion (first six months of 2001: RUR 16.5 billion). Revenues from subscription fees were RUR 18.9 billion. Production cost amounted to RUR 7.7 billion. Sales profits were RUR 15.2 billion. The holding's total assets exceeded RUR billion.

According to the Vice-Premier of the RF Government Victor Christenko, the project of reorganization of regional power companies will be from now on approved by a government committee on reforms in electroenergetics and not by the RAO UES Board of Directors. Christenko reminded that previously the project of reorganizing regional power companies had been considered by a special group and thereafter submitted to the Board of Directors for approval.

Standard & Poors announced its decision to give RAO UES a Level B long-term credit rating of the issuer for its obligations in the local and foreign currency, with a stable forecast. At the same time S&P gave RAO UES a ruA+ national scale rating. In the opinion of the agency's representatives, the credit ratings reflect the company's dominating positions in the Russian electric power market, its strategic importance for the state.

Besides, it is a reflection of improving financial state and a relatively low level of debt burden: the company's aggregate debt is ca. RUR 58 billion which is less than 9 percent of the holding's total capital.

Over the course of the past three years RAO UES has significantly improved its financial state which resulted in financial result growth, reduction in accounts payable and accounts receivable and elimination of non-monetary settlements.

Mosenergo Another large Russian electric power company, Mosenergo and the European Bank for Reconstruction and Development concluded a US$ 70 million loan agreement. The loan is extended for a five-year term. It will be utilized to reorganize Mosenergo and fund construction of new facilities.

In accordance with the agreement, EBRD will extend US$ 35 million and the second half will be provided by international banks. In its turn, Mosenergo decided to include an EBRD representative in the committee on company reorganization.

According to the Russian accounting standards, the company's loss in the first six months of the current year was RUR 778.3 million as opposed to a profit of RUR 2.7 billion in the same period of 2001. Receipts from sales of goods and services were RUR 23.7 billion (first six months of 2001: RUR 22 billion). The company's gross profits in the first six months dropped almost five times as opposed to the same period of 2001. Sales profits were RUR 1.2 billion (first six months of 2001: RUR 5.6 billion). On 28 August S&P changed the forecast for the long-term credit rating of the company from stable to positive. The reasons for the forecast change were a recent increase in tariffs for heat and electric power and the conclusion of the loan agreement with the EBRD.

OAO Gazprom The company presented its IAS statements for 2001 audited by ZAO PricwaterhouceCoopers-Audit.

According to the IAS statements, the gas company's receipts from sales in 2001 were ca. RUR 620 billion as compared with RUR 642 in the previous year. The main reason for the reduction in receipts was a reduction in the volume of gas sold, reduction in average gas prices and adjustments in the financial statement due to the influence of inflation. It should be noted that the lowering in the receipts from sales was offset by a percent reduction in Gazprom's operating costs. As a result, in 2001 sales profits grew 16 percent and reached approximately RUR 184 billion. The company's profit before taxation was RUR 201 billion in 2001, 10 percent more than in 2000.

Table Dynamics of Foreign Stock Indexes Value Change During the Change Since the As of 23 August Month (%) Beginning of the Year RTS (Russia) 347,39 6,49% 33,59% Dow Jones Industrial Average (USA) 8872,96 1,56% -12,47% Nasdaq Composite (USA) 1380,62 3,94% -30,53% S&P 500 (USA) 940,86 3,21% -18,96% FTSE 100 (UK) 4389,8 3,38% -16,26% DAX-30 (Germany) 3828,26 3,46% -25,81% CAC-40 (France) 3526,09 3,24% -23,75% Swiss Market (Switzerland) 5493,3 5,71% -14,41% Nikkei-225 (Japan) 9867,45 -0,11% -6,40% Bovespa (Brazil) 9676 -0,89% -28,74% IPC (Mexico) 6148,9 2,11% -4,92% IPSA (Chile) 88,07 0,23% -19,28% Strait Times (Singapore) 1531,9 1,56% -5,79% Seoul Composite (Korea) 740,51 3,14% 6,75% ISE National-100 (Turkey) 9349,84 -8,66% -32,16% Morgan Stanley Emerging Markets Free Index 301,536 2,35% -5,00% Foreign Exchange Market In August the Russian foreign exchange market was traditionally quiet. The Rouble-dollar exchange rate changed insignificantly. On 01 August 2002 the official dollar exchange rate was 31.4568 RUR / US$ and on 31 August 2002 the rate was 31.5673 RUR / US$. According to preliminary estimates, the trade volume in the SELT was RUR 120 - 130 billion.

Fig. 7.

2002 31,31,31,31,31,31,31,31,31,31,31,31,31,30,30,30,30,30,30,30,30,60 30,30,50 today 30, tomorrow 30,30,30,30,30,30,30,The Euro / US$ exchange rate stabilized in August approximately at the level of 0.98 US$ / Euro.

/ / to 31.0938 RUR / Euro, i.e. by 0.72 percent.

In August the official RUR / Euro exchange rate experienced an insignificant rise from 30.8717 RUR / 0,0,0,0,0,0,0,0,0,0,0,0,0,0,0,1,1,1,26,26,27,27,28,28,29,29,30,30,31,31,32, 2002 Fig. Fig. Table April May June July August* Month Monthly inflation rate 1,2% 1,7% 0,5% 0,7% 0,1% Inflation rate annualized on the basis of this 15,39% 22,42% 6,17% 8,7% 1,2% month's trend CB RF refinancing rate 23% 23% 23% 23% 21% Annualized yield to maturity on OFZ issues 16,64% 15,61% 14,86% 14,5% 14,5% Volume of trading in the secondary GKO- 11,33 14,98 12,99 9,0 12,OFZ market for the month (RUR billion) Yield to maturity on Minfin bonds at the end of the month (% p.a.) 4th tranche 6,19% 6,05% 6,29% 6,27% 5,5% 5th tranche 9,88% 9,77% 10,43% 11,19% 10,8% 6th tranche 8,80% 9,02% 9,75% 10,3% 9,7% 7th tranche 10,26% 10,11% 10,65% 11,03% 11,1% 8th tranche 8,92% 9,09% 9,55% 9,72% 9,7% INSTAR-MIACR rate (% p.a.) on interbank loans at the end of the month:

Overnight 8,86% 4,09% 14,81% 29,06% 2,6% One week 12,34% 7,08% 22,26% 8,08% 4,8% Official RUR / US$ exchange rate at the end 31,1963 31,3071 31,4471 31,4401 31,of the month Official RUR / Euro exchange rate at the 28,1453 29,3254 31,0792 30,8019 31,end of the month Average annualized growth in RUR / US$ 0,25% 0,36% 0,45% -0,02% 0,4% exchange rate Average annualized growth in RUR / Euro 3,66% 4,19% 6,81% -0,89% 0,72% exchange rate Volume of trading at the stock market in the 468,9 454,1 344,3 407 RTS for the month (US$ million) Value of RTS Index at the end of the month 386,10 391,26 353,79 326,23 Change in value of RTS Index during the 10,08% 1,34% -9,58% -9,22% 2,7% month (%) * Estimates D. Levchenko, D. Skripkin The Real Sector: Factors and Trends The persistent trends towards the expansion of production across all economic sectors and industries determine the current macroeconomic situation. In the 2nd quarter of 2002, there was observed an acceleration of rates of growth across practically all economic sectors and industries. In January through July of this year, the output of products and services of base economic sectors made 4.1 %. The positive dynamics of development base economic sectors and the favorable external economic situation determined the nature of structural shifts in the real sector. The volume of industrial output increased by 3.9 %, construction grew by 2.9 %, and agricultural produce increased by 3.9 % in comparison with the figures registered in January through July of 2001. Infrastructure sectors (trade and communications) most intensively developed in the sector of services. This year, the Russias economy maintains the trend towards the outpacing growth of internal demand as compared with external demand, what was first observed in the 4th quarter of 2000. It shall be noted that while in the first six months of 2001 economic growth was determined by the intensive increase in investment, this year the structure of final demand changes on the impact of the outpacing growth in final household consumption. According to preliminary estimates, the final household consumption increased by almost 4.9 % in comparison with the first half-year of 2001, while rates of growth in investment in fixed assets were at 2.6 %.

A factor behind the expansion of final consumption was a gradual improvement of the social parameters of economic development. In June and July, the growth in real household incomes recovered. In comparison with the respective period of the last year, the increment in the real household incomes made 7.8 %, while real wages and salaries grew by 18.0 % and real gross pensions increased by 20.0 %. In contradistinction to 2001, practically all increase in turnover was determined by the growth in sales of non-food goods. While the retail trade turnover increased by 8.7 % as compared with the figures registered in January through July of 2001, the growth of sales of food products grew by 9.9 % and sales of non-food goods increased by 7.6 %.

The changes in the dynamics of sales across types of goods occurred at the background of increasing share of savings in household incomes. In comparison with indicators observed in July of 2001, the share of savings increased by 0.4 p.p. The amount of Ruble denominated household deposits with crediting institutions grew by 15.9 % and forex denominated deposits increased by 26.2 % as compared with the figures registered early in the year. However, it shall be stressed that this trend is forming at the background of intensifying differentiation of households by the level of incomes and increasing concentration of incomes in the households with high incomes. The Gini coefficient made 0.408 in June of 2002, as compared with 0.registered in the respective period of 2001, while the coefficient of funds increased respectively to 14.2 (as compared with 14.1).

Fig. 1. The share of savings and purchase of foreign currency in household incomes in 2001 through 2002, in % of household incomes 2001/1 3 5 7 9 11 2002/1 3 5 Saving Purchase of foreign currency An analysis of the household income structure in comparison with the first six months of demonstrates a growth in the share of wages and salaries and social transfers. It shall be stressed that this year there is observed a growing gap between the increase in wages and labor productivity. The growth of real wages and salaries considerably outpaces GDP dynamics, although the level of average monthly wages and salaries makes about 80 % of the indicators registered in pre-crisis 1997. The major factor behind the increase in production was the expanding employment. The number of employed in the economy grew by 1.6 million, while the total unemployment decreased by 9.8 % in comparison with 1998 figures. While in 1997 there were registered 7.6 unemployed per vacancy, and in 1999 this indicator made 3.6 unemployed per vacancy, in June of 2001 this figure made 1.3 unemployed per vacancy. As a result, revenues of the economy are redistributed in favor of population at the expense of enterprises, what results in decreasing profitability of production.

In January through May of 2002, profits of major economic sectors made Rub. 441.0 billion. The balanced financial results of large and medium sized organizations across all sectors of the economy decreased by 36.% as compared with the level registered over the respective period of the preceding year (this indicator for industry made 45.4 %). The share of organizations operating at loss increased by 4.7 p.p. in comparison with the figures registered in January through May of 2001 and made 43.2 %. Factors behind the decrease of profitability in industry was falling profitability of export operations and growing costs, including outpacing rate of growth in costs of fuel, electric energy, and wages and salaries.

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