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									Raiffeisen Bank
       Annual Report 2005
                                                              Content




Content

    Vision, Mission                                       5

    Message from the Chairman of the Supervisory Board    7

    Message from the CEO                                  9

    Report of the Management Board                       11

          Economic Developments                          11
          Financial Results                              12

    Human Resources and Training                         17


    Segment Reports                                      19
          Corporate                                      19
          SME                                            21
          Consumer                                       22
          Treasury / Investment Banking                  24

    Raiffeisen Bank Sh.a., Management Board              26


    Perspective and Future Plans                         27

    Independent Auditors’ Report                         30

    Financial Statements
          Balance Sheet                                  31
          Statements of Income                           32
          Statements of Change in Equity                 33
          Statements of Cash Flows                       34

    About Raiffeisen Banking Group                       61

    Raiffeisen Bank Sh.a., Network                       63

    The Network in Central and Eastern Europe            64

    Addresses and Contacts                               65

    Raiffeisen Glossary                                  70




                                                                   
    Vision, Mission



                                                                                       Vision, Mission




Vision, Mission



Vision

Raiffeisen Bank Sh.a., to be known as the Bank offering the best products and services and
contributing positively to the country.




Mission

• We seek long-term customer relationships.
• We aim to complete the transformation to a customer focused bank and become the best
  (and biggest) bank in Albania.
• As a member of the RZB Group, we cooperate closely with Raiffeisen Zentralbank and the
  other members of the Raiffeisen Banking Group.
• We achieve sustainable and above-average return on equity.
• We empower our employees to be entrepreneurial, to show initiative and we foster their
  development.




                                                                                                    
    Message from the Chairman
    of the Supervisory Board


                                                       Message from the Chairman of the Supervisory Board




Message from the Chairman
of the Supervisory Board
                    On behalf of the Board of Directors of Raiffeisen Bank Sh.a., I am pleased
                    with the results achieved in 2005. This was the first full year under the new
                    Raiffeisen Bank management and one can certainly see the positive effects
                    in the bank.

                    Raiffeisen Bank has performed very well in 2005. Its focus has been to
                    develop and increase lending products and it was – and still is – very
                    successful in all market segments. There are fully functioning marketing and
                    sales units for lending products from the private individual to the largest
                    corporate customer, and the risk management departments to monitor the
                    related risk. As well, our Public Sector unit continues to provide transactional
                    services for all levels of the Government in Albania, as well as processing an
                    estimated 70% of all Government salaries.

                   With an estimated growth of GDP of 5.5 per cent in 2005, an inflation rate
                   below 3 per cent and a stable exchange rate, Albania’s economy continues
                   to improve. The government budget deficit is well within South East European
                   norms, and the current account deficit, while still high, can be explained
by the economy being in transition and developing local production capacity to offset import
needs. The current account deficit is also balanced by a large amount of transfers from abroad,
estimated between € 800 to € 1,000 million per year.

The country’s banking market has developed rapidly in the last two years, many new branches
have been opened, Bancomats were installed and increased lending has taken place, all helping
to improve the economy and bring the country towards regional standards of banking activity. Total
lending increased by 70 per cent in 2005 to almost € 1 billion. Raiffeisen Bank had a 14 per cent
market share in this segment, and we expect to further increase it in 2006. The bank’s lending
portfolio increased from € 7 million in 2004 to € 137 million in 2005. Raiffeisen Bank has retained
its position as the country’s largest bank with an estimated 45 per cent market share of total assets.
However, the bank remains committed to focus on growing customer satisfaction levels.

2005 was a very intense year for both management and staff. All branches are now on-line, 100
Bancomats were installed and over 5,000 days of training were performed. The restructuring
program is nearly complete and a strong local middle management team has emerged.

Raiffeisen Bank continues to support initiatives aimed at improving the image and knowledge of
Albania abroad. Conferences were held and presentations given in order to bring Albania back
into the regional sphere of knowledge and awareness.

I thank the staff and management of Raiffeisen Bank, for an excellent performance in converting
from a pure savings bank to a provider of first class financial services to all customers and
becoming a valuable member of Raiffeisen International Group.




                                                                                    Heinz Hödl
                                                                Chairman of the Supervisory Board




                                                                                                         
    Message from the CEO



                                                                                        Message from the CEO




Message from the CEO

                    Dear Reader;

                    2005 was a transformational year for Raiffeisen Bank Sh.a., I am proud to
                    say that the conversion from a state savings bank to a full service commercial
                    bank is almost complete. In 2005 some accomplishments should be noted;

                    • All 88 branches are now on line
                    • 100 Bancomats have been installed
                    • Over 120,000 Debit cards have been issued
                    • Over 100,000 people now take their salary through the bank
                    • The rebranding to Raiffeisen was successfully accomplished and the
                      name is well respected and trusted in the marketplace
                    • Electronic banking has been installed and used by numerous
                      corporate clients
                    • Restructuring of the branch network has been completed

                      The lending portfolio grew substantially from € 7 million to € 137 million
                      and we expect significant growth in 2006 in all segments of the market. Our
Consumer Banking division has successfully implemented consumer lending on a wide basis
across Albania and for the first time a broad section of the population has access to bank credit.
This is being used to improve their homes and their standard of living. Our mortgage lending is
still in early stages of development but is showing promising developments.

An area of particular focus is the Small Business Segment which has over 40 dedicated lenders in
all major regions in the country backed by centralized management and risk management functions
based in Tirana. We expect significant growth in this sector in 2006 as people feel more comfortable
investing in longer term projects, particularly in the processing and manufacturing sectors.

Our Corporate Segment performed well in developing relationships and granting credits. We
are seeing larger transactions starting to develop as companies build capacity and production
for the growing economy.

While the majority of the transformation process has been achieved we plan additional focus
on improving customer service skills, and additional communication to our customer base. As a
major advertiser Raiffeisen has been instrumental in communicating the idea of banking products
to the general population. The benefit of using banking services and products is starting to be
seen, as demonstrated by our customers who have happily used our Bancomats, taken our
consumer loans and the increasing number of payment transactions through the bank.

The amount of change that has occurred in the bank has been dramatic and our staff have
performed extremely well in adapting and learning new processes and more importantly they
are developing the responsibility and autonomy that will continue to make Raiffeisen Bank Sh.a.
a success. I thank them for their tremendous efforts.
                                                                                      Sincerely




                                                                         Steven Grunerud
                              Chief Executive Officer and Chairman of the Management Board




                                                                                                          
     Report of the Management Board


10
                                                                                                                           Report of the Management Board




                               Report of
                               the Management Board
                               Economic Developments
                               Albania is estimated to have achieved 5.5% GDP growth in 2005. The same figure was
                               achieved as the annual average growth for 2001 to 2005, one of the highest in the region.
                               The expectation for 2006 is for a continuation around 6.6%.

                               The inflation rate remained low at an average of 2.4% for the whole of 2005 and the average
                               rate for 2006 should be between 2.5 to 3%.


Foreign Exchange & Inflation                                                The core interest rate – REPO – was lowered by 25 basis
                                                                            points by the Central Bank of Albania and reached 5% in
8                                                                     144   March 2005. This helps to stop the appreciation of the local
7                                                                     141
                                                                            currency against foreign currency and helps to increase
                                                                            credit in the economy by producing lower foreign currency
6                                                                     138
                                                                            rates. Credit in the economy increased by 70% across all
5                                                                     135   segments compared to 2004. FDI (Foreign Direct Investment)
4                                                                     132
                                                                            inflows during 2005 reached over € 230 million.

3                                                                     129
                                                                                           The signing of the Stabilization and Association Agreement
2                                                                     126                  (SAA) in February 2006 will help increase FDI in 2006
 1                                                                                     123
                                                                                           to more than € 350 million and this will also increase the
                                                                                           amount of lending in the economy. Remittances brought
 0                                                                                     120
                                                                                           from Albanians living abroad reached more than €
Dec-01                     Dec-02                      Dec-03     Dec-04         Dec-05
                                                                                           1 billion or 14% of the GDP and covered 64% of the
               Consumer prices (% yoy)                             ALL/EUR (r.h.s.)
                                                                                           commercial deficit. The inflow of remittances is expected to
Source: Thomson Financial Datastream, WIIW, Raiffeisen Research
                                                                                           continue at the same amount in 2006. In the end of 2005,
                                                    the FX Reserve registered € 1.2 billion or covered 4.6 import months.

                               The volume of the foreign trade was € 2.5 billion for 2005. The annual growth was 9% for
                               exports and 16% for imports. Exports / imports with EU countries represented 89% / 64% of the
                               total exports / imports of the country. The main trade partners remained Italy and Greece due to
                               close geographical position with Albania. Exports / imports with Italy and Greece were 72% /
                               29%, whereas with Greece 10% / 16% of the total exports / imports. Foreign Trade Agreements
                               with South East Europe countries resulted with the increases by 19% for exports and 31.5% for
                               imports of Albania with those countries. In 2006 the volume of the foreign trade will continue to be
                               characterized by the same high proportions with EU countries.

                               The Tourism has generated more than € 700 million revenue in 2005 or 30% more than the
                               export of the goods helped by 21% annual growth of the flux of foreign citizens that visited
                               Albania or by the coming of emigrants for holidays during the year. The climate for tourism is
                               expected to be improved further in 2006.

                               The average foreign exchange rate for 2005 was 124.14 for ALL/EUR and 99.9 for ALL/
                               USD or changed respectively by -2.71% and -2.63% compared with 2004, mainly due to the
                               international movements of EUR/USD rates during the year. The exchange rate USD/ALL in




                                                                                                                                                          11
Report of the Management Board




                        2005 remained strongly correlated with USD/EUR by 78.7% as most of the foreign trades have been
                        with eurozone countries. The macroeconomic stability is expected to continue in 2006. The SAA is a
                        framework for real progress for Albania.




        Financial Results
                        Total assets at the end of 2005 were LEK 202,517,390 thousand (2004: LEK 208,167,490 thousand). The
                        greatest change in 2005 is the emergence of a rapidly expanding loan book which now forms a significant
                        part of the bank’s total assets (LEK 16,879,528 thousand net at the end of 2005). There is also a concomitant
                        reduction in the amounts of securities held and this overall trend is expected to continue into 2006.

        Structure of Balance Sheet Assets (in '000 ALL)


        250,000,000




        200,000,000




        150,000,000




        100,000,000




        50,000,000




         0

                          2002                                2003                                 2004                                2005


                                    Other assets, net                                      Investments held to maturity

                                    Property, equipment and intangible assets, net         Securities available for sale

                                    Loans and advances to customers, net                   Loans and advances to credit institutions

                                    Repurchase agreements                                  Cash on hand and at banks



                        2005 was the first full year for the Bank’s new lending program. Total loans and advances to customers at
                        year end totalled ALL 16,930 million (2004, ALL 933,796 thousand) representing an eighteen fold increase
                        in lending over the year. As in 2005 the Corporate sector represented the highest fraction of the loan book,
                        at 64% - an increase from 47% in 2004. Although the other segments dropped in percentage terms they
                        nevertheless recorded large growths in outstandings with SME increasing by almost 45 fold over the year.

        Structure of Loans to Customers

                                                        2%
                                                                                     14%
                                       20%




                                                                                                  Individual           SME

                                                    64%                                           Corporate            Employees




12
                                                                                                                                 Report of the Management Board




                     During the course of 2005 - the first full year of lending after an absence for 7 years - in addition
                     to recording spectacular percentage increases in the lending book the trend towards shorter term
                     borrowing by our customers has continued from 2004. However the greatest growth has been in the
                     area of medium term loans where a near 250 fold increase was recorded Total lending at the end
                     of 2005 was LEK 16,930,161 thousand (2004:LEK 933,796 thousand).




Loans for the year end 2005 (in ‘000 ALL)
4,500,000

4,000,000

3,500,000

3,000,000


2,500,000


2,000,000

1,500,000

1,000,000


500,000

0

              Overdraft          Short term loans           Medium term loans           Long term loans               Mortgage              Others


                                         Individual           Corporate         SME                Employees




                     As may been seen by far the greatest proportion of the Bank’s liabilities are customer deposits,
                     making up nearly 97% of the bank’s total liabilities at the end of 2005. During 2005 there has
                     been a decrease in the overall liablilities of the bank and this is due to a slight (7%) reduction in
                     customer term deposits over the year as a result of the increasing competition in the market. At the
                     end of December 2005 the bank’s total liabilities stood at LEK 202,517,390 thousand (2004: LEK
                     208,167,490 thousand).



Stucture of balance-sheet liabilities in '000 ALL

250,000,000



200,000,000




150,000,000




100,000,000



50,000,000




0

                          2002                              2003                                      2004                           2005



                                     Shareholder’s Equity                             Due to Customers

                                      Other Liabilities                               Due to Financial Institutions




                                                                                                                                                             1
Report of the Management Board




                            The profile of customer deposits in 2005 shows a movement away from shorter term deposits. This
                            reflects the lowering interest rates in Albania over the course of the year, with customers extending their
                            deposit terms in order to take advantage of the higher rates available. Total deposits have fallen by
                            some 7% over 2005 and this reflects the increasing competition in the market. Total customer deposits
                            at the end of 2005 were LEK 170,741,850 thousand (2004: LEK 183,657,906 thousand).




        Deposits Structure 2005 (in '000 ALL)
        80,000,000

        70,000,000

        60,000,000

        50,000,000

        40,000,000

        30,000,000

        20,000,000

        10,000,000

        0
                     On demand    1 month     3 months     6 months       12 months       13 months   24 months   25 months   36 months


                                                            Foreign currency          In Lek




                            In 2004 the structure of deposits was as follows:




        Deposits Structure 2004 (in '000 ALL)
        90,000,000

        80,000,000

        70,000,000

        60,000,000

        50,000,000

        40,000,000

        30,000,000

        20,000,000

        10,000,000

        0
                     On demand    1 month     3 months     6 months       12 months       13 months   24 months   25 months   36 months


                                                            Foreign currency          In Lek




1
                                                                                                         Report of the Management Board




                       Profit for the year showed a 10% increase in net profit before tax over 2004 to LEK 3,352,332
                       thousand (2004: LEK 3,044,826) which is excellent given that the bank is incurring a high level of
                       costs which are by way of investment in the future. RoE was lower than in previous years but this is
                       due to the higher level of equity needed to satisfy the Central Bank’s lending regulations rather than
                       any intrinsic change in the bank’s profitability.



Profit & ROE (in '000 ALL)

4000

3500                                                                                                                            70.0%

3000

2500                                                                                                                            50.0%


2000

1500
                                                                                                                                30.0%

1000

500                                                                                                                             10.0%

0
                             2002                             2003            2004              2005

                                                    Net Profit before tax         ROE




                       Total administrative expenses for 2005 increased by some 35% over 2004. This increase largely
                       reflects the Bank’s continuing commitment to our customers to maintain and improve the branch
                       facilities with a major refurbishment program together with improved systems and to improve customer
                       service through our ongoing staff training program. Consultancy and legal fees include an amount of
                       LEK 390,560 thousand (2004: LEK 281,367 thousand) for head office management charge.




General and administrative expenses 2005

                                                           2%
                                                         2%
                                                                                        31%
                                                       3%
                                                    5%



                                               6%


                                               6%
      Consultacy and Legal Fee

      Communication Expenses                                                                           Stationery Expenses

      ATM maintenance and servicing expenses                                                           Repair and Maintenance
                                                                                        13%
      Utilities                                          8%                                            Group IT Services

      Marketing Expenses                                                                               Travel Expenses
                                                                      12%   13%
      Expenses for guarantee of Investments                                                            Other




                                                                                                                                        1
     Human Resources and Training


1
                                                                                 Human Resources and Training




Human Resources
and Training
Introduction
We base our success on the quality, quantity and the way services and products are offered to
our customers. We are aware that the success of the bank relies completely on our staff. In this
regard, a major focus has been placed on motivating and satisfying our employees.


Statistics
The company had a total number of 1,092 active employees at the end of 2005, which
indicates a staff increase of approximately 7% compared to the previous year data.

This year’s statistics also indicate an increase of the percentage of staff with a University
Degree; 69% compared to the 63% last year.

The average staff age dropped to 37 from last year’s average age of 40.


Recruitment
Our motto is: “Recruiting the right people, at the right time, at the right place.” In this regard, we
have concentrated on using the right means of recruitment. Different collaboration and recruitment
activities such as participation at job fairs, newspaper job announcements, collaborations with
a recruiting agency could be mentioned. The internship program that Raiffeisen Bank Albania
initiated during 2005 has also been another very effective means of recruitment.


Performance Management
Employees’ performance is fundamental for bank success. Evaluation of staff performance is a
way of assessing their work, providing employees with feedback on their performance, while
understanding their needs. These are the three focal elements of a good performance evaluation.
The year 2005 marked a great improvement in this direction. 2005 included the initiation of
an annual bonus scheme correlated with the employees’ performance assessment.

Next year will present a real challenge in the performance management process. The
management by objectives (MBO) scheme will be initiated for the managerial positions.
Furthermore, in 2006, the managerial staff shall be trained on evaluating employees’
performance.


Training and Development
During 2005, the Bank organized a total of 4,130 training days for 815 out of 1,092
employees. About 95% of the existing staff have completed the Superior Customer Service
Quality (SCSQ) program. Another main focus has been the creation of an internal trainer’s
pool, which is capable of delivering Sales Skills training to the Sales Force.

Developing training packages for newly hired employees was another innovation for 2005.
Such packages were designed for staff in: SME, Loan Centre, the Call Centre and junior
Corporate Staff. Another aspect of last year’s activities was the focus on Management Training
courses.




                                                                                                           1
     Segment Reports


1
                                                                                          Segment Reports




Segment Reports

Corporate

Background

During 2005 the corporate segment continued to generate about 65% of the turnover in the
market among a potential of 300 customers. This number also includes the branches and/or
subsidiaries of multinationals and joint ventures of that size.

The corporate segment accounted for about 54% of the total lending of the bank for 2005 or
approximately 14% of the total market.

We were key lenders in 8 sectors and well diversified in 16 sectors, with a total exposure of €
52 million. We supported other NWBs in their efforts to grow and to maintain the relationship
created by the Central Bank. A typical case was Bulgaria, where we booked about € 40
million from the loan portfolio. We also had a joint project in Kosovo with customers working
on both sides of the border.

During 2005, we established a Contact Desk for Special Missions, NGOs and Supranational
Institutions. This allowed us to establish relationships with about 800 NGOs and actively
approach the supranational institutions, offering unique network coverage and first class
international banking support.

In addition to the salary payments for the Public Sector, we acquired about 2,500 employees
from the private sector.



The major bank for Public Sector

This was the first year with a fully operative unit of professionals entirely dedicated to the
relationship with the Public Sector.

The Corporate Division was directly involved in approaching the government agencies and in
conjunction with other units inside the bank achieve the opening of 97,000 accounts of public
employees.

The payment of salaries electronically allows the bank to credit the accounts of employees with
increasing efficiency and decreasing cost.

In this framework, the re-design and formatting in electronic form of salary payment was a
complementary achievement, which allows the bank to credit accounts in electronic way,
increasing efficiency and decreasing cost.

The relationship with the Government, the major customer of the bank, was re-confirmed
through the renewal of the service contract for the Treasury of Republic for the whole country.




                                                                                                       1
Segment Reports




                  Having the best expertise in the market, we were also able to acquire the Financial Agreement
                  Agent role, for three agreements with the Government of Albania.

                  We were pleased to see borrowing requests from state owned companies and we were able
                  to acquire the first loan to the oil industry, for € 2.5 million.

                  During the year, we maintained more than 50% of the business volume with the largest state
                  owned companies.

                  In addition we established relationships with 20 tender offices of the Government of Albania,
                  satisfying the needs of customers with a full package for tenders at an impressive speed.



                  Key player in Corporate Market

                  The year 2005, was the 1st full year of operation of Raiffeisen Bank Albania (RBAL) as a
                  commercial bank. We were able to establish relationships with 95 Domestic Corporates, of
                  which 31 became borrowers of the Bank, representing € 27 million or 51% of assets volume
                  of this segment.

                  The portfolio reflected the same diversification of the portfolio overall, with exposure to 16
                  industries and a geographical coverage of 8 cities. In terms of customers, 59% of them are
                  based in Tirana and 41% outside Tirana. In terms of assets 66% in Tirana and 34% outside
                  Tirana.

                  We are proud to highlight that in edible oil, steel and metal alloys industries, we became the
                  leader and maintained this position during the whole year.

                  Our unique network of 88 branches and agencies across the country, gave us the possibility to
                  acquire more than 20% of the largest wholesalers’ business, which produced excellent results
                  in FX business as well as fees and commissions.

                  We are pleased to announce that in only 6 months of operation we launched the e-banking
                  service, Multi Cash and immediately acquired 10 clients, who started to use this excellent user
                  friendly software, making the bank accessible 24 hours a day.

                  In full collaboration with the other departments in the Bank, we established Customer Service
                  Desks in 9 major cities. This will provide business customers excellent service meeting their
                  needs and expectations.




20
                                                                                                                                           Segment Reports




                           SME
                           2005 was a very important year for Small and Medium Sized Enterprise (SME)
                           Division. The SME division completed the operations support activities, hired and trained
                           a dedicated team throughout the country and was able to achieve a significant portfolio
                           growth.



                           SME Operations expanded in 8 regional centers

                           Eight SME Business Centers were established in the biggest cities across Albania with a further
                           7 locations having dedicated SME staff. In total 40 Account Managers were hired during the
                           year to serve the needs of the bank’s existing clients and serve the growing number of SME’s.
                           Raiffeisen played a pioneering role in Albania by being the first bank in the country to have a
                           separate division and dedicated trained SME staff located throughout the entire country.



                           A variety of SME products were offered

                           A full range of loan products are now on offer to SME clients with the two most important
                           being the Term Loans and Overdrafts. A Pre-Approved Overdraft product was also launched
                           during the year to existing long standing clients of the bank. The products were designed
                           for investment and working capital purposes. SME companies were classified as those with
                           annual turnover between € 500,000 and € 4,000,000. Loans started at € 50,000 to € 1.2
                           million.



                           The SME portfolio experienced significant growth

                           During 2005 SME assets grew significantly from € 3 million to € 28 million. The borrowing
                           clients increased from 20 to 210 while the banking clients reached 9,000. The quality of
                           the portfolio remained very high with no bad loans and no past dues recorded. This level of
                           growth took the bank from a market position of 16th at the beginning of the year to 2nd at
                           the end of the 2005.


Outstanding Volume and Number of Accounts for SME Portofolio ‘05
                                                                                                                                     30,000,000
250

                                                                                                                                     25,000,000
200

                                                                                                                                     20,000,000

150

                                                                                                                                     15,000,000

100
                                                                                                                                     10,000,000


50
                                                                                                                                     5,000,000


0                                                                                                                                    0
       Jan. 05   Feb. 05   Mar. 05   Apr. 05   May 05     Jun. 05   Jul. 05   Aug. 05      Sep. 05     Oct. 05   Nov. 05   Dec. 05

                                               Number of Accounts                       Outstanding volume




                                                                                                                                                        21
Segment Reports




                  Goals for the current year

                  2006 will be an important year for SME. Raiffeisen will continue its significant presence in
                  the market by taking advantage of its large network base and focusing on energetic sales
                  approach and a fast non-bureaucratic loan application process. A number of new products
                  are also expected to be launched in 2006 including Micro Loans (serving firms with annual
                  turnover of less than € 500,000), Credit Cards for SME businesses, Insurance products and
                  Commercial Mortgages. In 2006, SME Division will grow its portfolio significantly and
                  become the leader of SME banking in the country.




                  Consumer
                  2005 was a year of building foundations for an expanded Consumer Banking business and
                  starting to realize growth in new areas.

                  A large and strategically important salary deposit customer base was acquired, the country’s
                  largest debit card base and ATM network were established and Consumer Loan products
                  were developed and launched. Additionally, the very large and well established Consumer
                  Deposits business was successfully re-launched for improved profitability and cost controls. In
                  all regards, 2005 was an exceptional year for Raiffeisen Consumer Banking.



                  Salary Deposit Customers

                  The Consumer Banking customer base grew by more than 110,000 new customers in 2005.
                  This was primarily a result of a very successful customer acquisition program for Salary Deposit
                  business with the Government Sector.

                  By year end, Raiffeisen had captured the majority of Government employees with almost
                  100,000 new Current Account customers receiving their salaries through our Bank,
                  representing about 60% of the available market.

                  The Salary Deposit customer program is important to the Bank, as these are ideal customers
                  for cross selling other Consumer Banking products and services.

                  This opportunity was leveraged from the start with great success.

                  Over 99,000 Visa Electron Debit cards were issued to this segment and 50,000 Overdrafts
                  opened. This is excellent penetration for such a new customer segment.

                  Debit Cards are key to promoting new banking services such as ATM cash withdrawals and
                  retail purchase payments. Over 3 million transactions were made on the new Raiffeisen ATM
                  network in 2005, far exceeding initial expectations.

                  The Bancomat network tripled in size, from 31 in January to 100 by year end, providing
                  Albanians with unparalleled access to cash withdrawal services 24 hours a day, 7 days a
                  week across the country.




22
                                                                                                              Segment Reports




Consumer Banking Salary Deposit Segment

120,000


100,000


80,000


60,000


40,000


20,000


0

              J     F       M              A   M      J           J    A        S         O      N       D


                                Accounts                  Cards              Overdrafts




                    Set up as credit attached to the Current Account, Overdraft is the most convenient borrowing
                    product for Consumers, allowing individuals to use credit on demand, even through the ATM
                    and their Debit cards. This creates better awareness of the convenience and power of personal
                    credit and will lead to use of other Raiffeisen lending products.

                    By Q’4, over 30% of Overdraft Customers had started using their credit.



                    Consumer Loans

                    In April, Raiffeisen launched Consumer Term Loans to existing Salary Deposit customers, with
                    just over 4,000 Loans sold by Year End.

                    September saw the launch of Consumer Mortgages and opening of a new Mortgage &
                    Loans Center in downtown Tirana. It is estimated that less than 15% of housing purchases are
                    currently financed through banks, so development of the Albanian Consumer Mortgage Market
                    is the key to a successful Raiffeisen program in 2006 and onwards.



                    Deposits

                    Consumer Deposits represents almost € 1.5 billion and the margins earned from these funds
                    are important to the Division’s profitability.

                    With decreasing market interest rates (T-Bills) through most of 2005, significant price changes
                    were needed to keep the Bank on pace with profit expectations for the year.

                    In August, the local currency Term Deposits business was re-launched with lower rates and an
                    important new product.

                    Traditional Term Deposits were maintained for 3, 6 and 12 month terms with the new rates.

                    A more flexible deposit product called Depozita Fleksi was launched which allows depositors
                    to add or withdraw funds from the deposit at any time without restrictions. Interest is paid




                                                                                                                           2
Segment Reports




                  at higher rates as the customer’s deposit amount achieves various thresholds. This product
                  rewards customers for consolidating deposits in one Raiffeisen product while giving them
                  maximum flexibility to manage their funds.

                  For Raiffeisen, the new product balances the Term Deposit business by giving the bank more
                  flexibility in managing liquidity and interest rate changes.

                  The re-launch was very successful in returning the business to expected margins and profitability
                  while increasing customer choice in Deposit products. The lower rates are expected to result in
                  some volume attrition, and by year end the trends were following expectations.



                  The Leader in Consumer Banking

                  At the end of 2005, Raiffeisen Bank was a leader in the Debit Card market and offered
                  customers more Bancomat locations than all the other banks combined in addition to the most
                  extensive Branch network.

                  We continue to be a very strong leader in Deposits and have put in place the foundations for
                  capturing leadership in the Consumer Lending market in the near future as well.

                  2005 was a very successful year in laying the foundations for expansion and growth: a large
                  new customer base; high penetration of cards and overdrafts; a new line of Consumer Loans
                  products and; a robust Deposits business.

                  In 2006, Consumer Banking will grow the lending business significantly while looking to
                  further develop the Salary Deposit Customer base within the Private Sector.




                  Treasury / Investment Banking
                  Fixed Income

                  Raiffeisen Bank continues to be the main dealer in market for securities issued by the
                  government. The bank’s market share has been 45% for the issued Treasury Bills and more than
                  54% for the issued Treasury Bonds. It is the most active bank with a considerable contribution
                  on the local secondary market of Treasury Bills.

                  Compared with 2004 the number of transactions is three times higher and the amount sold is
                  more than doubled. The transactions performed with Corporate and SME clients in the primary
                  and secondary market is another advantage of the bank.
                  Raiffeisen Bank is the first bank licensed as secondary market dealer and registrant of securities
                  issued by the government.



                  Financial Institutions

                  During 2005 Raiffeisen Bank improved relations with correspondent banks inside and outside
                  of the country. Four agreements were signed with Italian banks: Banca Popolare di Sondrio,




2
                                                                                             Segment Reports




SANPAOLO IMI , Banca Sella and Banca Popolare di Milano. These agreements help the
Albanians working and living in Italy to send money to their relatives in Albania at a low cost
and to be clients of our bank in the future for credits or other products that our bank offers.

The cooperation with financial centers around the world (Frankfurt, London, New York, Vienna,
Zurich, Brussels etc) has been fruitful. The bank is committed to exploiting opportunities with
other financial institutions and banks in the world in order to increase the earnings and
generate strong returns on the business potential.



Foreign Exchange

In 2005, Raiffeisen Bank doubled the number of FX transactions with Corporate and SME
clients compared with the previous year. The bank is also pushing the interbank activity and
has maintained close contacts with the Exchange Offices that resulted in increasing the volume
of transactions. The offered spread of the bank for foreign transactions has been one of the
most competitive in the market.



Investment Banking

Investment Banking is another activity of the bank in the market. The consulting services helped
in the process of privatization, buying or selling companies in Albania. Benefiting from the
well-known experience of Raiffeisen Investment AG in Vienna, Raiffeisen in Albania provide a
wide range of services for interested investors.



Cash Management

The cash in the bank is well managed and has been forecasted and maintained at the minimum
level requested to meet the bank needs. It has resulted in the increase of the fund’s reinvestment
opportunities for ALL, EUR and USD.



Money Market

The good investments in the interbank money market have been as a result of the good policy
of the bank. In coordination with Raiffeisen International the bank has invested in corporate
bonds in EUR and USD.



Treasury Reporting & Middle Office

The Treasury Reporting & Middle Office activity is focused on an effective risk management
process that has maintained interest rate risk within prudent levels and regularly monitored risk
profiles. An internal daily limits control system was implemented to covers all dealing room
activities.

Treasury/ Investment Banking is committed to continuously contribute to increasing the profit of
the bank through its wide range of activities.




                                                                                                          2
Segment Reports




                          Raiffeisen Bank Sh.a.,
                          Management Board




                  Robert Wright, Christian Canacaris, Steven Grunerud.




2
                                                                               Perspectives and Future Plans




Perspectives
and Future Plans
In 2006 the Bank will achieve the key strategic objectives we set in April 2004 when Banka e
Kursimeve was purchased whilst at the same time achieving a 38% increase in net profit and
a continued reduction in its cost income ratio.

Our first strategic objective was to grow and diversify our retail customer base beyond our
traditional core business of term deposits and into the full range of retail banking products and
services. We now have over 100,000 public sector employees enjoying the benefits of having
their salaries paid into the Bank. They have access to their accounts through 88 branches and
100 Bankomats all over Albania. Many thousands of these employees also have overdrafts
and loans with the Bank enabling them to enjoy a higher standard of living and improve
their homes. Our focus in 2006 will be in the private sector where we aim to recruit a similar
number of salaried employees. We also plan to launch a private banking service for higher
net worth individuals.

The second key objective was a dramatic increase in asset growth through lending in our
three primary business sectors, private individuals, small and medium sized enterprises (SME)
and corporate organizations. At the end of 2005 our loan portfolio amounted to outstandings
of € 137 million. We plan to more than double our loan volumes in 2006 with a continued
emphasis on prudent quality lending rather than pure quantity. We plan to launch micro loan
products for the lower end of the SME market and in Quarter 4 we will launch credit cards
for private individuals.

Thirdly, we will continue to expand our distribution network by opening 8 new branches
including one site dedicated to private banking customers. This will increase our branch network
to 96 outlets, of which around 45 will be reconfigured to become full service branches offering
the full range of individual and SME products and services. We will continue to expand our
ATM network to 150 machines throughout the country and will also develop a further range
of services available from our Call Centre. This extended distribution network will allow us to
devote more time and resources to customer service and greater value creating business. To
support this we will invest in many thousands of training hours to ensure our staff deliver a
service appropriate to our customers needs and in line with Raiffeisen International values.

The Management Board of Raiffeisen Bank would like to sincerely thank all our customers and
partners for their cooperation and support during the last year. We are totally committed to
meeting your banking requirements and improving our customer satisfaction. We have every
confidence that we will deliver this promise in 2006.




       Robert Wright                   Christian Canacaris                Steven Grunerud

    Business Segments               Treasury and Investments           Chief Executive Officer
     Member of the                       Member of the                  and Chairman of the
    Management Board                   Management Board                 Management Board




                                                                                                          2
     Independent Auditors’ Report
     and Financial Statements

2
                                          Independent Auditors’ Report and Financial Statements




Independent Auditors’ Report and
Financial Statements
For the year ended December 31, 2005




Contents


     Independent Auditors’ Report                                              30


     Financial Statements:
        Balance Sheets                                                         31
        Statements of Income                                                   32
        Statements of Changes in Equity                                        33
        Statements of Cash Flows                                               34

     Notes to the Financial Statements                                     35–59




                                                                                             2
Independent Auditors’ Report and Financial Statements




                                                                                                  Deloitte & Touche sh.p.k.
                                                                                                  Rr. “Murat Toptani”
                                                                                                  Gjergji Center, Kati 8-të
                                                                                                  Tiranë, Albania

                                                                                                  Tel: +355 4 233 883
                                                                                                  Fax: +355 4 233 882
                                                                                                  www.deloitte.com




        Independent Auditors’ Report

        To the shareholder and management of the Raiffeisen Bank sh.a.

        We have audited the accompanying balance sheet of Raiffeisen Bank sh.a. (the “Bank”) as of December 31, 2005
        and the related statement of income, changes in shareholder’s equity and cash flows for the year 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 audit.



        We conducted our audit 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 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
        the Bank as of December 31, 2005 and the results of its operations, cash flows and changes in equity for the year then
        ended in accordance with Article 38 of the Banking Law of the Republic of Albania.



        Without qualifying our opinion, we draw attention to Note 2.2.5 to the financial statements. On January 1, 2005, the
        Bank changed its accounting policy in relation to land and buildings from revalued amount to historical cost using depre-
        ciated replacement cost as an approximate to historical cost. The change in accounting policy has resulted in a reduction
        of the carrying value of “Property, equipment and intangible, net” of LEK 1,347,852 thousand and of “Shareholder’s
        equity” of LEK 1,362,363 thousand. (Note 20).




                 Tirana, Albania
                 February 6, 2006




                                                                                                     Member of
        Audit. Tax. Consulting. Financial Advisory.                                                  Deloitte Touche Tohmatsu




0
                                                                         Independent Auditors’ Report and Financial Statements




Balance Sheets

As at December 31, 2005 and December 31, 2004




 (in LEK ‘000)                                    Note         December 31, 2005             December 31, 2004
 Assets
 Cash on hand and at banks                           3                42,182,031                   44,696,855
 Loans and advances to credit institutions           4                       996,739                           -
 Securities available for sale                      5.1                 5,859,503                    8,021,095
 Investments held to maturity                       5.2              134,600,231                  149,088,941
 Repurchase agreements                              5.3                            -                 2,000,575
 Loans and advances to customers, net                6                16,879,528                       886,249
 Property, equipment and intangible assets, net      7                  1,858,184                    2,798,996
 Other assets, net                                   8                       141,174                   674,779
 Total Assets                                                         202,517,390                  208,167,490
 Liabilities
 Due to financial institutions                       9                  1,415,261                    2,393,841
 Due to customers                                  10                193,639,483                  197,944,161
 Other liabilities                                  11                       603,287                   921,091
 Total Liabilities                                                    195,658,031                  201,259,093
 Shareholder’s Equity
 Share capital                                     12                   4,348,233                    3,194,832
 Revaluation reserve                               12                              -                 1,394,208
 Translation difference                                                  (107,827)                      38,456
 Retained earnings                                                      2,618,953                    2,280,901
 Total Shareholder’s Equity                                             6,859,359                    6,908,397
 Total Liabilities And Shareholder’s Equity                           202,517,390                  208,167,490




The accompanying notes are an integral part of these financial statements.




                                                                                                                            1
Independent Auditors’ Report and Financial Statements




        Statements of Income

        For the years ended December 31, 2005 and 2004




                                                             Note             Year ended                Year ended
                                                                       December 31, 2005         December 31, 2004
                                                                            (in LEK ‘000)             (in LEK ‘000)
          Interest
          Interest income                                     13               13,202,657              14,545,788
          Interest expense                                    14               (7,190,253)              (9,640,652)
          Net interest income                                                    6,012,404               4,905,136
          Fees and commissions
          Fees and commissions income                                                760,150              705,818
          Fees and commissions expense                                               (34,932)              (14,408)
          Net commission income                                                      725,218              691,410
          Gain from disposals of securities                                           44,536               14,936
          Net foreign exchange gain                                                   40,910               97,941
          Other operating income, net                         15                      98,894               23,071
          Deposit insurance premium                           16                 (445,914)               (481,672)
          Operating expenses
          Personnel expenses                                  17               (1,251,926)               (972,310)
          Depreciation and amortisation                        7                     (303,170)           (232,682)
          General and administrative expenses                 18               (1,366,614)             (1,010,859)
          Total operating expenses                                              (2,921,710)             (2,215,851)
          Losses and provisions for doubtful accounts, net                           (202,006)               9,855
          Net profit before tax                                                  3,352,332               3,044,826
          Income tax                                          19                     (776,908)            (763,925)
          Net profit for the year                                                2,575,424               2,280,901




        The accompanying notes are an integral part of these financial statements.




2
     Statements of Changes in Equity
     For the years ended December 31, 2004 and 2003




      (in LEK ‘000)                                           Share capital       Revaluation Reserve   General reserves   Translation difference       Retained earnings             Total
      Balance at December 31, 2003                                    700,000              1,394,208          2,494,832                         -              2,415,594         7,004,634
      Dividend distribution for 2003– from retained earnings in cash          -                     -                  -                            -         (2,415,594)       (2,415,594)
      Transfer of general reserve in share capital              2,494,832                           -       (2,494,832)                             -                   -                 -
      Translation difference                                                  -                     -                  -                 38,456                         -          38,456
      Net profit for the year                                                 -                     -                  -                            -         2,280,901         2,280,901
      Balance as at December 31, 2004                            3,194,832                 1,394,208                   -                 38,456                2,280,901         6,908,397
      Transfer of retained earnings in share capital            1,153,401                           -                  -                        -             (1,153,401)                 -
      Dividend distribution for 2004 from retained earnings in cash           -                     -                  -                            -         (1,127,500)       (1,127,500)
      Reverse of Revaluation Reserve                                          -           (1,394,208)                  -                (11,684)                 43,529         (1,362,363)
      Translation difference                                                  -                     -                  -               (134,599)                            -     (134,599)
      Net profit for the year                                                 -                     -                  -                            -         2,575,424         2,575,424
      Balance as at December 31, 2005                            4,348,233                          -                  -               (107,827)               2,618,953         6,859,359




     The accompanying notes are an integral part of these financial statements.
                                                                                                                                                                                              Independent Auditors’ Report and Financial Statements





Independent Auditors’ Report and Financial Statements




        Statements of Cash Flows
        For the years ended December 31, 2005 and 2004

          (in LEK ‘000)                                            Note                 Year ended           Year ended
                                                                                 December 31, 2005    December 31, 2004
          Cash Flows from Operating Activities
          Net profit for the period before taxation                                     3,352,332            3,044,826
          Non-cash items in the statement of operations
          Depreciation and amortisation                                                   303,170              232,682
          Fixed assets written off                                                         35,732               54,131
          Profit from sale of fixed assets                                                        -                (214)
          Provision for loan losses                                                       200,353               37,175
          Amortisation of securities available for sale                                   (54,980)                        -
          Amortization of investments held to maturity                                 (4,610,538)          (5,394,366)
          Profit from sale of securities available for sale                               (24,455)             (14,936)
          Provision for other debtors                                                       1,653                5,780
          Recovery of provisions for court litigations                                            -            (52,810)
          Interest income                                                             (13,202,657)         (14,545,788)
          Interest expense                                                              7,190,253            9,640,652
          Translation difference                                                         (134,599)              38,456
          Operating cash flows before movements in working capital                      (6,943,736)          (6,954,412)
          Changes in working capital
          Increase in loans and advances to credit institutions                          (996,739)                        -
          Increase in loans and advances to customers                                 (15,945,882)            (502,060)
          Decrease/(Increase) in repurchase agreements                                  2,000,575             (999,424)
          Decrease in other assets                                                        527,888            1,034,133
          (Decrease)/Increase in due to financial institutions                           (978,580)           2,067,422
          (Decrease)/Increase in due to customers                                      (6,886,410)           7,209,166
          Increase/(Decrease) in due to third parties                                      51,659              (29,819)
          (Decrease)/Increase in other liabilities                                       (566,269)             475,675
          Operating cash flows after changes in working capital                        (29,737,494)          2,300,681
          Interest received                                                            13,152,174           14,545,060
          Interest paid                                                                (4,608,521)          (6,473,046)
          Corporate income tax paid                                                      (803,882)            (855,001)
          Net cash (used in)/generated from operating activities                       (21,997,723)          9,517,694
          Cash flows from investing activities
          Purchases of property and equipment                                            (565,381)            (574,800)
          Purchases of intangible assets                                                 (176,496)              84,605
          Proceeds from sale of fixed assets                                                      -                214
          Proceeds from purchase and redemption of securities held to maturity         19,099,248            3,790,481
          Purchases of securities available for sale                                    2,253,028           (7,227,853)
          Net cash generated from/(used in) investing activities                       20,610,399            (3,927,353)
          Cash flows from financing activities
          Dividends paid from retained earnings for the previous year                  (1,127,500)          (2,415,594)
          Net cash used in financing activities                                         (1,127,500)          (2,415,594)
          (Decrease)/Increase in cash during the year                                   (2,514,824)          3,037,673
          Cash and cash equivalents at the beginning of the year        3              44,696,855           41,659,182
          Cash and cash equivalents at the end of the year              3              42,182,031           44,696,855

        The accompanying notes are an integral part of these financial statements.





                                                                              Independent Auditors’ Report and Financial Statements




Notes to the Financial Statements
For the years ended December 31, 2005 and 2004



1. General
The banks name was changed to Raiffeisen Bank Sh.a. on October 1, 2004 from Banka e Kursimeve Sh.a (Savings
Bank of Albania) (the “Bank”). Banka e Kursimeve was established in 1991, from a part of the previous “Insurance
and Savings Institute” entity, to collect deposits from individuals and enterprises, grant and maintain of loans to private
individuals, enterprises and state owned entities and carry out general banking services.

On December 11, 1992, the Bank was registered to operate as a bank in the Republic of Albania, in accordance with Law
No. 7560 “On the banking system in Albania”. The Bank of Albania at that time granted a non-transferable general banking
license for an unlimited time period. On July 27, 1997, the Bank was incorporated as a Joint Stock Company based on
Decision No. 17426 of the Court of Tirana District. The sole shareholder of the Bank was the Ministry of Finance with a paid
up capital of LEK 700 million, which consists of 7,000 shares of LEK 100,000 nominal value each. Based on this decision,
the Bank of Albania updated the license of the Bank to reflect these changes on January 11, 1999.

On April 14, 2004, the Ministry of Finance of Albania sold 100% of the issued and outstanding shares of the Bank to
Raiffeisen Zentralbank Osterreich Aktiengesellshafft (RZB AG). Under the terms of the Share and Purchase Agreement,
the Ministry of Finance of Albania has no further recourse to RZB AG and RZB AG takes on no commitments and
contingencies.

On October 1, 2004 the Bank’s name was legally changed to Raiffeisen Bank Sh.a. and its registered address was
changed to Rr. “Kavajes”, Tirana, Albania.

The Bank operates with a banking network as of December 31, 2005 of 86 service points throughout Albania, which
are managed through 14 Regional Branches.

As at December 31, 2005, the Bank had 1,092 employees (December 31, 2004: 1,026 employees).

Directors and Management as of December 31, 2005 and 2005
 Board of Directors (Supervisory Board)
 Heinz Höedl                                                                                                     Chairman
 Herbert Stepic                                                                                                    Member
 Peter Lennkh                                                                                                      Member
 Angelika Weiss                                                                                                    Member
 Lavdosh Zaho                                                                                                      Member


 Audit Committee
 Angelica Weiss                                                                                                  Chairman
 Johannes Kellner                                                                                                  Member
 Heinz Hödl                                                                                                        Member


 Management Board
 Steven Grunerud                                                                                   Chief Executive Officer
 Christian Canacaris                                                                                               Member
 Robert Wright                                                                                                     Member




                                                                                                                                 
Independent Auditors’ Report and Financial Statements




        Notes to the financial statements (continued)
        For the years ended december 31, 2005 and 2004


        2.       Summary of Significant Accounting Policies
        2.1      Basis of preparation

        The financial statements of the Bank are prepared in accordance with the Article 38 of the Banking Law of the Republic
        of Albania.
        The financial statements have been prepared in Albanian leke (“LEK”), into which all transactions effected by the Bank
        in its operations are converted.
        These financial statements have been prepared under the historical cost convention.



        2.2      Summary of Accounting Policies

        2.2.1 Foreign currencies

        Transactions in currencies other than LEK are initially recorded at the rates of exchange ruling on the dates of the
        transactions. All assets and liabilities denominated in such currencies are retranslated at the exchange rates ruling on
        the balance sheet date. Profits and losses arising on exchange are dealt with in the statement of income. The applicable
        exchange rates (LEK to foreign currency unit) for the principal currencies as at December 31, 2005 and December 31,
        2004 were as follows:


                                                        December 31, 2005                                December 31, 2004
          United States dollar (USD)                                 103.58                                            92.64
          Euro (EUR)                                                 122.58                                           126.35
          British pound (GBP)                                        178.65                                           178.69
          Canadian dollar (CAD)                                       89.11                                            76.92
          Swiss franc (CHF)                                           78.86                                            81.87
          Japan Yen (JPY) (per 100)                                   88.26                                            90.36



        2.2.2 Cash and cash equivalents

        For the purpose of reporting cash flows, cash and cash equivalents are defined as cash, balances with the central bank
        and current accounts with other banks, including the compulsory minimum reserve with the Bank of Albania.

        The compulsory minimum reserve with the Bank of Albania is a required reserve to be held by all commercial banks
        licensed in Albania.


        2.2.3 Investments in securities

        Non-trading investments

        These are classified as follows:
            •    Held to maturity; and
            •    Available for sale





                                                                              Independent Auditors’ Report and Financial Statements




Notes to the financial statements (continued)
For the years ended december 31, 2005 and 2004

Held to maturity

Investments, which have fixed or determinable payments and which are intended to be held to maturity are subsequently
measured at amortized cost using the effective interest method, less provision for impairment in value.

Available for sale

After initial recognition, investments, which are classified as available for sale, are remeasured at fair value. Gains and
losses arising from changes in the fair value of such available for sale investments are included in net profit or loss for
the period in which they arise.

Fair values

For investments traded in organized financial markets, fair value is determined by reference to the relevant stock
exchange quoted market bid prices at the close of business on the balance sheet date.

For investments where there is no quoted market price, a reasonable estimate of the fair value is determined by reference
to the current market value of another instrument which is substantially the same, or is based on the expected cash flows,
or the underlying net asset base of the investment.

Impairment and uncollectibility of financial assets

An assessment is made at each balance sheet date to determine whether there is objective evidence that a financial asset
or group of financial assets may be impaired. If such evidence exists, the estimated recoverable amount of that asset is
determined and any impairment loss, based on the net present value of future anticipated cash flows, is recognized for
the difference between the recoverable amount and the carrying amount as follows:
• For financial assets at amortized cost – the carrying amount of the asset is reduced to its estimated recoverable
    amount either directly or through the use of an allowance account and the amount of the loss is included in the
    statement of income; and
• For financial assets at fair value – where a loss has been recognized directly in equity as a result of the write-down
    of the asset to recoverable amount, the cumulative net loss previously recognized in equity is included in the net profit
    or loss this period.

Repurchase agreements and reverse repurchase agreements

Securities purchased under agreements to resell (reverse repurchase agreements) and securities sold under agreements
to repurchase (repurchase agreements) are generally treated as collaterized financing transactions and are carried at
the amounts of cash advances or received, plus accrued interest.

Securities received under reverse repurchase agreements and securities delivered under repurchase agreements are not
included in the balance sheet or eliminated from the balance sheet, respectively, unless control of the contractual rights
that comprise these securities is relinquished.

Interest earned on reverse repurchase agreements and interest incurred on repurchase agreements is recognized as
interest income or interest expense, over the life of each agreement.

All the repurchase agreements and reverse agreements are with the Bank of Albania, which is the Central Bank of Albania.




                                                                                                                                 
Independent Auditors’ Report and Financial Statements




        Notes to the financial statements (continued)
        For the years ended december 31, 2005 and 2004

        2.2.4 Loans and advances to customers

        Loans to customers granted by the Bank by providing money directly to a borrower are categorised as loans originated
        by the Bank and are carried at the outstanding amount less provisions for impairment. All loans and advances are
        recognised when cash is advanced to borrowers. Apart from general provisions, a provision for loan impairment is
        established if there is objective evidence that the Bank will not be able to collect all amounts due. Provisions are assessed
        with reference to the credit standing and performance of the borrower and take into account the value of any collateral
        or third party guarantees.

        When a loan is uncollectible, it is written off against the related provision for impairment; subsequent recoveries are
        credited to the ‘Losses and allowances for doubtful accounts, net’ line in the statement of income.

        The Bank classifies its loans in the following categories adopting the following loan loss provision rates:


          Type of loans                                                                                             Loss provision
          Standard                                                                                                             1%
          Special Mention                                                                                                      5%
          Substandard                                                                                                         20%
          Doubtful                                                                                                            50%
          Loss                                                                                                              100%


        The Bank stops accruing the interest on loans that are classified as a loss due to the bankruptcy of the customer or due
        to default of the loan agreement. The carrying amount of non-accruing loans represents the amount of the receivable
        decreased by the provision for expected losses. The provision is usually determined as 100% of the receivable value,
        less the amount that the Bank expects to recover from bankruptcy proceedings.

        2.2.5 Property, plant, equipment and intangible assets

        Property (excluding land and buildings), equipment and intangibles asset are stated at historical acquisition cost less
        accumulated depreciation.

        Prior to January 1, 2005, buildings were stated at revalued amounts plus any improvements less any subsequent
        depreciation and subsequent accumulated impairment losses. The revaluations were performed only on buildings using
        independent external experts; the result was confirmed with the independent international appraiser. The result of
        revaluations was reflected in the revaluation reserve.

        On January 1, 2005 the Bank changed the accounting policy in order to restate land and buildings at an amount that
        approximates their historical cost. Accordingly from January 1, 2005 buildings are stated at the depreciated replacement
        cost as at January 1, 2005 plus any improvements carried out, less subsequent accumulated depreciation and any
        subsequent accumulated impairment losses. Land is carried at the value in use at December 31, 2005. Any acquisitions
        made after January 1, 2005 will be stated at cost less accumulated depreciation.

        The change in accounting policy has resulted in a reduction of the carrying value of land and buildings of LEK 1,347,852
        thousand from the previously stated value of LEK 1,748,922 thousand (the revalued amount being a total of LEK 2,129,289
        thousand less accumulated depreciation of LEK 380,367 thousand), the reversal of revaluation reserve and a reduction in the
        translation difference of LEK 11,684 thousand and an increase in retained earnings of LEK 43,529 thousand (see Note 20).





                                                                            Independent Auditors’ Report and Financial Statements




Notes to the financial statements (continued)
For the years ended december 31, 2005 and 2004

2.2.5 Property, plant, equipment and intangible assets (continued)

Depreciation is charged so as to write off the cost of property and equipment over their estimated useful lives, using the
straight-line method beginning in the month when they are put in use, at the following depreciation rates:


 Category                                                                                  Annual Depreciation Rates (%)
 Buildings                                                                                                             5
 Computer equipment                                                                                                   25
 ATM                                                                                                                  25
 Vehicles                                                                                                             20
 Furniture and equipment                                                                                              20
 Intangible assets                                                                                                    25


Land and work in progress is not depreciated.

Gains and losses on disposal of property and equipment are recognized in the statement of income in the period of
disposal.



2.2.6 Due to customers

Amounts due to customers are stated at the amount of principal outstanding. Interest is accounted for on an accrual
basis.



2.2.7 Due to financial institutions

Amounts due to financial institutions are stated at the amount of principal outstanding.    Interest is accounted for on an
accrual basis.



2.2.8 Interest and commissions

Interest income and expense is recognized on an accrual basis.

Commission income on current accounts, cheques, money transfers and other banking transactions are recognized
as income when received. Commissions for origination of loans are deferred and recognized as income over the
life of the loan. Commission expense is debited to expenses when paid.



2.2.9 Taxation

Income tax is calculated at 23% (December 31, 2004: 25%) on taxable income calculated in accordance with Albanian
legislation.




                                                                                                                               
Independent Auditors’ Report and Financial Statements




        Notes to the financial statements (continued)
        For the years ended december 31, 2005 and 2004

        2.2.10 Estimation of fair value

        Because no market exists for financial instruments originated in Albania, fair value estimates are based on judgments
        regarding future expected loss experience, current economic conditions, risk characteristics of various financial
        instruments and other factors. The only financial instruments that are readily marketable are the Bank’s non-Albanian
        investment securities, for which market values are disclosed in Note 5.

        Fair value estimates are based on existing balance sheet financial instruments without attempting to estimate the value of
        anticipated future business and the value of assets and liabilities not considered financial instruments. Significant assets
        and liabilities that are not considered financial instruments include: fixed assets and deposits.

        In general, the Bank’s balance sheet financial instruments have an estimated fair value approximately equal to their book
        value due to either their short-term nature or underlying interest rates, which approximate market rates. The majority of
        financial monetary instruments are either at floating rates of interest or are subject to re-pricing within a year.

        2.2.11 Use of Estimates

        The preparation of financial statements in conformity with Article 38 of the Banking Law in the Republic of Albania
        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 the reported amounts of revenue
        and expenses during the reported period. Actual results could differ from those estimates.

        2.2.12 Comparatives

        Certain amounts in the previous year financial statements have been reclassified to conform to the current year presentation.




0
                                                                          Independent Auditors’ Report and Financial Statements




Notes to the financial statements (continued)
For the years ended december 31, 2005 and 2004


3. Cash on Hand and at Banks

 (in LEK ‘000)                                 December 31, 2005                               December 31, 2004
 Cash on hand                                            2,187,369                                        2,376,482
 Central Bank
 Current account                                        2,252,615                                          182,582
 Deposit account                                                   -                                       450,028
 Statutory reserves                                    19,010,081                                        19,159,288
 Accrued interest on statutory reserves                      8,440                                          12,440
 Total Central Bank                                    21,271,136                                        19,804,338
 Other Banks
 Current accounts
 Resident                                                    5,794                                            4,133
 Non-resident                                             165,338                                          339,145
                                                           171,132                                          343,278
 Deposits
 Resident                                                 368,017                                          740,567
 Non-resident                                          17,877,940                                        21,122,855
                                                       18,245,957                                        21,863,422
 Guarantee accounts                                        306,437                                          309,335
 Cash on hand and at banks                             42,182,031                                        44,696,855


In accordance with the Bank of Albania’s requirement relating to deposit reserves, the Bank is required to maintain a
minimum of 10% of customer deposits with the Bank of Albania as a reserve account.

Current accounts with the Bank of Albania bear no interest. The annual interest rates on term deposits in non-resident
banks as at December 31, 2005 vary from 1.90% to 4.60% (December 31, 2004: 0.98% to 4.57%).




4. Loans and Advances to Credit Institutions

 (in LEK ‘000)                                 December 31, 2005                               December 31, 2004
 Loans
 Non-resident                                             996,739                                                  -
 Loans and advances to credit institutions                 996,739                                                 -


The annual interest rate on loans and advances to credit institutions as at December 31, 2005 is 8.4%.




                                                                                                                             1
Independent Auditors’ Report and Financial Statements




        Notes to the financial statements (continued)
        For the years ended december 31, 2005 and 2004


        5. Investment in Securities
        5.1 Securities available for sale

        Securities available for sale comprise foreign bonds and Government of Albania Treasury Bills. They are detailed by
        issuer as follows:


          Available for sale                                                December 31, 2005          December 31, 2004
                                                                              (in LEK ‘000)                   (in LEK ‘000)
          Foreign bonds
          Listed Commercial Companies                                           2,463,025                       6,992,726
          Listed Banks                                                          3,115,789                            632,262
                                                                                 5,578,814                       7,624,988
          Government of Albania Treasury Bills
          Albanian Government                                                     280,689                            396,107
          Total                                                                  5,859,503                       8,021,095



        The foreign bonds’ lowest Moody’s rating is Baa3, in accordance with the Bank’s policy. Their maturities vary from
        two years to six years.



        5.2 Investments held to maturity

        The investments in securities comprise the treasury bills and bonds of Albanian Government are as follows:


          (in LEK ‘000)                                 December 31, 2005                               December 31,2004
          Treasury bills                                     113,456,904                                     143,620,281
          Government Bonds                                    21,143,327                                        5,468,660
          Total                                               134,600,231                                     149,088,941




2
                                                                         Independent Auditors’ Report and Financial Statements




Notes to the financial statements (continued)
For the years ended december 31, 2005 and 2004

5.2.1 Albanian Government’s Treasury Bills

Treasury bills as at December 31, 2005 relate to zero-coupon treasury bills of the Government of Albania, with
maturities ranging between January 2006 to December 2006, with yields ranging from 5.29% to 9.14% per annum
(December 31, 2004: 7.35% - 9.49%).


 Held to maturity                             December 31, 2005                               December 31, 2004
                                                     (in LEK ‘000)                                   (in LEK ‘000)
 Nominal value of treasury bills                    117,060,242                                     148,497,648
 Unamortized discount                                 (3,603,338)                                     (4,877,367)
 Total                                               113,456,904                                     143,620,281



5.2.2 Albanian Government’s Bonds

Bonds as at December 31, 2005 represent 2-year bonds denominated in LEK issued by the Government of Albania with
coupon rates ranging from 7.50% to 10.30% per annum (December 31, 2004: 9.30% - 13.90%).


 Held to maturity                             December 31, 2005                               December 31, 2004
                                                     (in LEK ‘000)                                   (in LEK ‘000)
 Nominal value of bonds                               20,717,787                                       5,332,637
 Unamortized premium (discount)                           (45,664)                                        11,389
 Accrued interest                                        471,204                                         124,634
 Total                                                21,143,327                                       5,468,660



5.3 Repurchase agreements

There were no repurchase agreements as at December 31, 2005. The repurchase agreements totalling LEK 2,000,575
thousand as at December 31, 2004 relate to repurchase agreements with Bank of Albania with maturities ranging from
2 to 7 days. They bear interest, which varies from 5.25% to 6.50%. Treasury bills with a book value of LEK 2 billion
as of December 31, 2004 are pledged as security for these repurchase agreements.




                                                                                                                            
Independent Auditors’ Report and Financial Statements




        Notes to the financial statements (continued)
        For the years ended december 31, 2005 and 2004


        6. Loans and Advances to Customers, Net
          (in LEK ‘000)                                  December 31, 2005                                December 31, 2004
          Loans and advances to customers, gross                16,930,161                                         933,796
          Provision for loan losses                                  (50,633)                                       (47,547)
          Total                                                  16,879,528                                         886,249


        The classification of outstanding principal and accrued interest of loans by category is as follows:


          Category                                       December 31, 2005                                December 31, 2004
                                                                (in LEK ‘000)                                   (in LEK ‘000)
          Standard                                              16,191,951                                         584,021
          Special mention                                           654,036                                        180,341
          Sub-standard                                                 8,899                                       150,188
          Doubtful                                                   50,291                                           3,703
          Loss                                                       24,984                                          15,543
          Total                                                  16,930,161                                         933,796


        Movements in the provisions for substandard, doubtful and loss loans are as follows:


          (in LEK ‘000)                                    December 31, 2005                              December 31, 2004
          Balance at the beginning of the period                        47,547                                      20,463
          Loan provision expense of the period                          53,566                                      43,460
          Reversal of provision                                        (50,019)                                     (16,406)
          Foreign exchange effect                                          (461)                                         30
          Balance at the end of the period                               50,633                                      47,547


        The interest rates of loans and advances to customers vary from 3.5% to 14% per annum in both 2005 and 2004.





     Notes to the financial statements (continued)
     For the years ended december 31, 2005 and 2004


     6. Loans and Advances to Customers, Net (continued)
     In July 2004, the Bank began a new loan activity with Corporate, Small and Medium Enterprises and Private Individuals.




                                          December 31, 2005 (LEK ‘000)                                                           December 31, 2004 (LEK ‘000)
                         Individual         Corporate               SME        Employees              Total   Individual      Corporate       SME     Employees       Total
      Overdraft             756,222          3,673,398        1,495,687              14,230      5,939,537        10,275        276,223     67,491          3,633   357,622
      Loans
      Short term               9,909         2,311,767             1,094                694     2,323,464               -       139,099           -             -   139,099
      Medium term         1,134,428          4,157,347        1,863,243            122,028      7,277,046               -        20,331      8,897              -    29,228
      Long term                8,188           602,092           41,416                     -     651,696               -              -          -             -         -
                          1,152,525          7,071,206        1,905,753            122,722      10,252,206              -       159,430      8,897              -   168,327
      Mortgage              498,708                    -                -          188,285         686,993       258,476               -          -      147,008    405,484
      Other                   36,911              8,026            6,050                438         51,425         2,363               -          -             -     2,363
      Total               2,444,366         10,752,630        3,407,490            325,675      16,930,161      271,114         435,653     76,388       150,641    933,796
                                                                                                                                                                              Independent Auditors’ Report and Financial Statements






     Notes to the financial statements (continued)
     For the years ended december 31, 2005 and 2004


     7. Property, Equipment and Intangible Assets, Net
      (in LEK ‘000)                                   December 31, 2005                             December 31, 2004
      Property, plant and equipment, net                     1,614,870                                     2,704,624
      Intangible assets, net                                   243,314                                        94,372
      Total                                                  1,858,184                                     2,798,996
                                                                                                                                                                                Independent Auditors’ Report and Financial Statements




      in LEK ‘000                     Intangible           Land and               Computers                 Vehicles               Work              Other           Total
                                          assets           Buildings       Equipment & ATMs                                  in Progress
      Cost
      Balance at January 1, 2005        169,480            2,129,289                    749,633              164,287             378,942           256,286      3,847,917
      Additions                         176,496               24,805                    143,971               45,169             321,049            30,387        741,877
      Disposals                                  -         (1,728,219)                      (924)                    -            (34,591)             (217)   (1,763,951)
      Transfer from work in progres        18,692            109,793                    394,938                      -           (548,239)          24,816                -
      Balance at December 31, 2005         364,668           535,668                   1,287,618             209,456              117,161           311,272      2,825,843
      Accumulated Depreciation
      Balance at January 1, 2005           (75,108)         (380,369)                  (384,043)             (85,918)                     -       (123,483)    (1,048,921)
      Charge for the period                (46,246)           (24,986)                 (175,638)             (18,403)                     -         (33,833)     (299,106)
      Disposals                                  -           380,368                            -                    -                    -                -      380,368
      Transfer                                   -             1,492                       (1,111)                   -                    -           (381)               -
      Balance at December 31, 2005      (121,354)             (23,495)                  (560,792)            (104,321)                    -        (157,697)      (967,659)
      Net Book Value:
      As at December 31, 2005              243,314           512,173                     726,826             105,135              117,161           153,575      1,858,184
      As at December 31, 2004               94,372          1,748,920                    365,590              78,369              378,942           132,803      2,798,996
     As described in Note 2.2.5, as of January 1, 2005, the Bank changed the accounting policy for land and buildings from measuring them at revalued amount to historic cost
     using depreciated replacement cost to establish cost where historic records were unavailable.
                                                                         Independent Auditors’ Report and Financial Statements




Notes to the financial statements (continued)
For the years ended december 31, 2005 and 2004


8. Other Assets, Net
 (in LEK ‘000)                                  December 31, 2005                            December 31, 2004
 Fiscal administration                                              -                                  438,317
 Inventories and prepaid expenses                          67,638                                       96,172
 Leasehold improvements, net                               39,231                                              -
 Income tax receivable                                     12,460                                      111,978
 Moneygram                                                 16,323                                       17,462
 Sundry debtors, net                                         5,522                                      10,850
 Total                                                    141,174                                      674,779


Leasehold improvements, net are as follows:


 (in LEK ‘000)                                  December 31, 2005                            December 31, 2004
 Leasehold improvements, gross                             43,295                                              -
 Accumulated depreciation                                   (4,064)                                            -
 Total leasehold improvements, net                          39,231                                             -



Sundry debtors, net are comprised as follows:


 (in LEK ‘000)                                  December 31, 2005                            December 31, 2004
 Sundry debtors                                            25,031                                       29,219
 Provision for losses from other debtors                   (19,509)                                     (18,369)
 Total Sundry debtors, net                                   5,522                                       10,850



Movements in the provisions for sundry debtors are as follows:


 (in LEK ‘000)                                  December 31, 2005                            December 31, 2004
 Balance at the beginning of the period                    18,369                                       19,152
 Provision expense of the period                             1,653                                             -
 Foreign exchange effect                                         (513)                                     (783)
 Balance at the end of the period                           19,509                                       18,369




                                                                                                                            
Independent Auditors’ Report and Financial Statements




        Notes to the financial statements (continued)
        For the years ended december 31, 2005 and 2004


        9. Due to Financial Institutions
          (in LEK ‘000)                                                       December 31, 2005         December 31, 2004
          Current accounts
          Resident bank and financial institutions                                   1,121,024                   2,259,527
          Non-resident banks and financial institutions                                        -                   132,674
                                                                                     1,121,024                    2,392,201
          Deposits
          Resident bank and financial institutions                                     294,237                          559
          Other accounts with resident bank and      financial institutions                    -                      1,081
          Total                                                                      1,415,261                    2,393,841


        The average interest rate for borrowed funds from financial institutions was 1.7% during 2005 (2004: 1.5%).




        10. Due to Customers
          (in LEK ‘000)                                   December 31, 2005                             December 31, 2004
          Current accounts                                        18,229,493                                     8,901,693
          Deposits                                              173,323,582                                   186,825,512
          Other accounts                                           2,086,408                                     2,216,956
          Total                                                  193,639,483                                   197,944,161


        For current accounts and time deposits the annual interest rates applicable for the various fixed terms during the year
        2005 were:


          (in %)                                          LEK                           USD                             EUR
          Current accounts                      0.25 - 1.50                            0.30                     0.10 - 0.50
          Demand deposits                       0.50 - 2.00                            0.50                     0.10 - 0.50
          Time deposits – 1 month               2.00 - 4.20                      1.70 - 2.90                    1.10 - 1.95
          Time deposits – 3 month               2.30 - 4.40                      1.85 - 3.00                    1.20 - 2.10
          Time deposits – 6 month               2.50 - 5.25                      2.00 - 3.20                    1.30 - 2.25
          Time deposits – 12 month              2.80 - 5.60                      2.35 - 3.40                    1.40 - 2.40
          Time deposits – 24 month              3.00 - 6.80                      2.60 - 3.75                    1.50 - 2.70
          Time deposits – 36 month                                               3.30 - 3.95                    1.70 - 2.90
          Time deposits – 13 month                                                     2.70
          Time deposits – 25 month                                                     3.10





     Notes to the financial statements (continued)
     For the years ended december 31, 2005 and 2004


     10. Due to Customers (continued)
     Balances due to customers by maturity and currency type are as follows:

                                                            December 31, 2005                                    December 31, 2004
      (in LEK ‘000)                              LEK        Foreign currency             Total   LEK           Foreign currency            Total
      Current accounts                   13,302,230                   4,927,263     18,229,493   6,095,950            2,805,743        8,901,693
      Deposits
      On demand                          36,680,159                  2,764,017     39,444,176    8,990,503           3,067,439       12,057,942
      1 month                                30,456                  2,054,008      2,084,464    748,574               682,048        1,430,622
      3 months                           10,556,208                10,388,388      20,944,596    43,651,129         10,797,991       54,449,120
      6 months                           22,859,392                  5,456,595     28,315,987    29,247,948          2,781,942       32,029,890
      12 months                          61,198,829                10,024,087      71,222,916    71,994,762          6,654,581       78,649,343
      13 months                                      -                  61,545         61,545    -                            -                -
      24 months                           7,640,928                    847,030      8,487,958    4,579,797             461,192        5,040,989
      25 months                                      -                    6,856         6,856    -                            -                -
      36 months                                      -                 173,352        173,352    -                            -                -
      Accrued interest on deposits        2,411,502                    170,230      2,581,732    3,094,285              73,321        3,167,606
                                        141,377,474                 31,946,108     173,323,582   162,306,998         24,518,514      186,825,512
      Other accounts
      Guarantee deposits                  1,043,074                    554,977      1,598,051    883,276               552,416        1,435,692
      Cheques in circulation                 16,046                            3       16,049    18,541                       -          18,541
      Dormant customer accounts             195,171                     51,277        246,448    209,600                48,118          257,718
      Other                                 139,491                     86,369        225,860    396,748               108,257          505,005
                                           1,393,782                   692,626       2,086,408   1,508,165              708,791        2,216,956
      Total                             156,073,486                 37,565,997     193,639,483   169,911,113         28,033,048      197,944,161
                                                                                                                                                   Independent Auditors’ Report and Financial Statements





Independent Auditors’ Report and Financial Statements




        Notes to the financial statements (continued)
        For the years ended december 31, 2005 and 2004


        11. Other Liabilities
          (in LEK ‘000)                                  December 31, 2005                                December 31, 2004
          Accrued expenses                                          268,092                                          266,004
          Provision for risk and expenses                           220,539                                            89,257
          Due to third parties                                      102,683                                            51,024
          Other creditors                                            85,278                                            53,591
          Withholding Tax payable                                    62,836                                            67,392
          Deferred income                                            43,834                                                   -
          Due to employees                                           21,305                                            17,697
          Other, net                                               (201,280)                                         376,126
          Total                                                     603,287                                           921,091


        Due to third parties are as below:


          (in LEK ‘000)                                  December 31, 2005                                 December 31,2004
          Fiscal Administration                                      13,128                                                   -
          Credit line for housing                                    88,691                                            50,215
          Other                                                          864                                              809
          Total                                                     102,683                                            51,024


        “Credit line for housing” as at December 31, 2005 and December 31, 2004 refers to the outstanding funds of the
        Albanian Government for three credit lines for housing. The Bank operates as an agent for the Albanian Government
        in the issuing and administration of loans to civil officers and homeless families due to the collapse of pyramid schemes
        in Albania, using credit lines received from the Government and international donors.

        Included in “Accrued expenses” is an amount of LEK 111,478 thousand of accrued premium payable for customers’
        deposits insurance.

        The “Provision for risk and expenses” is comprised as follows:


          (in LEK ‘000)                                                     December 31, 2005             December 31, 2004
          Additional provisions on loans to employees                                           -                     64,454
          Provisions for standard and special mention loans                             210,593                       14,857
          Provisions for litigation                                                       9,946                         9,946
          Total of Provisions for risk and expenses                                     220,539                        89,257




0
                                                                           Independent Auditors’ Report and Financial Statements




Notes to the financial statements (continued)
For the years ended december 31, 2005 and 2004


11. Other Liabilities (continued)
“Additional provisions on loans to employees” refers to additional provisions for the old loans programs to employees
of the Bank. These loans have been additionally provided for in order to reduce the carrying amount to an estimation
of net present value using a discount factor over 10 years equal to the difference between an estimation of the average
lending rate (13%) and the interest on the loans. This provision was reversed in 2005.

The movements in the provision for standard and special mention loans are as follows:


 (in LEK ‘000)                                                       December 31, 2005           December 31, 2004
 Balance at the beginning of the period                                          14,857                        4,737
 Provisions expense for the period                                             259,151                        11,330
 Reversal of provisions for the period                                          (62,345)                       (1,210)
 Foreign exchange effect                                                         (1,070)                             -
 Balance at the end of the period                                              210,593                        14,857


The breakdown of the items included in “Other, net” is as follows:


 (in LEK ‘000)                                                       December 31, 2005           December 31, 2004
 Cheques for collection                                                          17,825                        7,303
 Clearing accounts                                                             (100,180)                    298,690
 Payments in transit                                                           (118,925)                      70,133
 Total                                                                         (201,280)                     376,126




12. Share Capital
During the period January 1 – August 1, 2004 the subscribed capital was LEK 700 million made up of 7,000 common
shares with a nominal value of LEK 100,000 each. The sole shareholder of the Bank was the Ministry of Finance of
Albania.

Subsequent to the share purchase by RZB AG on April 14, 2005, the following steps were taken:

On July 21, 2004, RZB AG transferred its 100 % share in the Bank to RZB AG’s wholly owned subsidiary Raiffeisen
International AG, Vienna, Austria, which therefore is now the holder of 100 % of the issued and outstanding shares of
the Bank.

On August 1, 2004, the Bank’s paid-up share capital was increased, capitalising the retained earnings to give a total of
LEK 3,194,832,285. This was converted to Euros at the exchange rate of 1 Euro to Lek 125.30 giving a total paid-in
share capital of Euro 25,497,462. On October 7, 2004, the Bank’s paid-in capital was increased by the amount of
Euro 9,095,500, resulting in a balance of 34,592,962 Euro (LEK 4,348,232,685).




                                                                                                                              1
Independent Auditors’ Report and Financial Statements




        Notes to the financial statements (continued)
        For the years ended december 31, 2005 and 2004


        12. Share Capital (continued)
        The Revaluation Reserve of LEK 1,394,208 thousand was also converted to Euros on August 1, 2004, at the same
        exchange rate and was therefore Euro 11,126,959. As described in Note 2.2.5, on January 1, 2005, the Bank
        changed the accounting policy for land and buildings from revalued amount to historical cost using depreciated replace-
        ment cost as an approximate to historical cost. This change in policy resulted in the reversal of the revaluation reserve
        of LEK 1,394,208.

        As at December 31, 2005 the subscribed capital of the Bank is EUR 34,592,965 (December 31, 2004: EUR
        25,497,462) made up of 7,000 shares with a nominal value of EUR 4,942 (December 31, 2004: EUR 3,642) each.




        13. Interest Income
          Interest income                                             Year ended                                Year ended
          by category                                          December 31, 2005                          December 31, 2004
                                                                      (in LEK ‘000)                              (in LEK ‘000)
          Bank deposits                                                 1,152,937                                  1,177,696
          Loans and advances                                               567,891                                     54,847
          Investment securities                                        11,481,829                                 13,313,245
          Total                                                         13,202,657                                14,545,788




        14. Interest Expense
          Interest income                                             Year ended                                Year ended
          by category                                          December 31, 2005                          December 31, 2004
                                                                      (in LEK ‘000)                              (in LEK ‘000)
          Banks                                                             63,225                                     24,388
          Customers                                                      7,127,028                                 9,616,264
          Total                                                          7,190,253                                  9,640,652




        15. Other Operating Income, Net
          (in LEK ‘000)                            Year ended December 31, 2005              Year ended December 31, 2004
          Other revenue                                                    125,676                                     24,352
          Other expenses                                                   (26,782)                                     (1,281)
          Total                                                              98,894                                    23,071




2
                                                                        Independent Auditors’ Report and Financial Statements




Notes to the financial statements (continued)
For the years ended december 31, 2005 and 2004


16. Deposits Insurance Premium
Becoming effective on October 18, 2002, the deposits insurance premium rate is 0.5% per annum, payable quarterly
and is calculated as a percentage of the daily average deposit balances up to LEK 700,000 for individuals for the
period October – December of the previous calendar year.




17. Personnel Expenses
 (in LEK ‘000)                           Year ended December 31, 2005            Year ended December 31, 2004
 Salaries                                                       873,079                                 686,814
 Social insurance                                               169,983                                 131,069
 Other personnel costs                                          166,722                                 144,167
 Personnel training                                              42,142                                  10,260
 Total                                                        1,251,926                                  972,310




18. General and Administrative Expenses
 (in LEK ‘000)                           Year ended December 31, 2005            Year ended December 31, 2004
 Consultancy and legal fee                                      418,386                                 350,311
 Communication expenses                                         174,363                                 103,178
 ATM maintenance and servicing expenses                         173,611                                    7,654
 Utilities                                                      167,979                                 103,149
 Marketing expenses                                             107,393                                 123,433
 Expenses for guarantee of investments                           78,596                                  34,402
 Stationery expenses                                             77,932                                  43,034
 Repair and maintenance                                          70,673                                   87,141
 Group IT services                                               42,750                                   19,081
 Travel expenses                                                 30,543                                   41,229
 Other                                                           24,388                                   98,247
 Total                                                        1,366,614                                1,010,859


Included in the “Consultancy and legal fees” is head office management charge totalling LEK 390,560 thousand (2004:
LEK 281,367 thousand).




                                                                                                                           
Independent Auditors’ Report and Financial Statements




        Notes to the financial statements (continued)
        For the years ended december 31, 2005 and 2004


         19. Income Tax
          (in LEK ‘000)                             Year ended December 31, 2005            Year ended December 31, 2004
          Current taxes as originally reported                            771,036                                   761,206
          Taxation expense                                                 771,036                                  761,206


          (in LEK ‘000)                             Year ended December 31, 2005            Year ended December 31, 2004
          Profit before tax                                             3,352,332                                3,044,826
          Tax calculated at rate 23% (2004: 25%)                          771,036                                   761,206
          Non-allowable expenses                                             5,872                                    2,719
          Tax payable                                                     776,908                                   763,925
          Effective tax rate                                                23.18%                                   25.10%




         20. Impact of Changes in Accounting Policy
         Changes in the Bank’s accounting policies during the year are described in detail in note 2.2.5. Those changes did not
         have an impact in the results reported for the year ended December 31, 2005 but had an impact on the retained earn-
         ings, equity carried forward and the balance of Land and Buildings as at January 1, 2005 as follows:

                                                                    Land and         Retained      Translation   Revaluation
                                                                Buildings, net       earnings         Reserve       Reserve
          Balance as at January 1, 2005 brought forward            1,748,922       2,280,901          38,456      1,394,208
          Reverse of revaluation reserve                          (1,394,208)                -               -   (1,394,208)
          Cancellation of translation differences
          arising on revaluation reserve                                     -        11,684         (11,684)               -
          Difference between gross book value
          and the gross replacement cost                               9,021           9,021                 -              -
          Tax effect on increase of retained earnings
          due to differences in cost                                         -         (2,922)               -              -
          Difference between the accumulated depreciation
          calculated on gross book value and replacement cost         37,335          37,335                 -              -
          Tax effect on increase of retained earnings                        -       (11,589)                -              -
          Balance as at January 1, 2005 carried forward              401,070       2,324,430          26,772                -





                                                                              Independent Auditors’ Report and Financial Statements




Notes to the financial statements (continued)
For the years ended december 31, 2005 and 2004


21. Risk Management
Credit Risk
Since May 2004, after the purchase of the Bank by RZB AG, a Credit and Risk Management Division was established
and Credit Manuals and procedures for Corporate, SME and overdraft products for Private Individuals were approved
by the Bank’s Management Board and Board of Directors. Credit Risks are approved by the Credit Committee of the
Bank which operates under procedures and delegations set forth in the Credit Committee Byelaws approved by the
Board of Directors in June 2004.

Interest Rate Risk
The Assets and Liabilities Management Committee of the Bank monitors interest rate risk. The Bank mitigates such risk
by maintaining a significant excess of interest bearing assets over liabilities. The Bank maintains a portfolio of interest
bearing financial assets and liabilities such that the generated net interest income is significantly in excess of operating
requirements that minimises the potential adverse effects of interest rate fluctuations.

Exchange Rate Risk
The Assets and Liabilities Management Committee monitors the Bank’s exposure to exchange rate risk on a continual
basis. The Bank monitors its foreign exchange position for compliance with the regulatory requirements of the Bank of
Albania established in respect of limits on open positions. The Bank seeks to match assets and liabilities denominated
in foreign currencies to avoid foreign currency exposures (refer to Note 27).




                                                                                                                                 
Independent Auditors’ Report and Financial Statements




        Notes to the financial statements (continued)
        For the years ended December 31, 2005 and 2004

        22. Capital Adequacy
        Capital adequacy refers to the sufficiency of the Bank’s capital resources to cover the credit risks and market risks arising
        from the portfolio of assets of the Bank and the memorandum item exposures of the Bank.

        In accordance with the Bank of Albania requirements, the Bank’s risk based capital adequacy ratio was 13.20%
        (December 31, 2004: 20.26%). The Bank of Albania requires maintaining a capital adequacy ratio of at least 12% of
        risk-weighted assets.




        23. Events After the Balance Sheet Date
        There are no significant events after the balance sheet date that may require adjustment or disclosure in the financial
        statements.




        24. Contingencies and Commitments
          (in LEK ‘000)                                Year ended December 31, 2005                           December 31, 2004
                                                    LEK         Foreign currency           Total                        Total
          Bank Guarantees                        8,932               187,007          195,939                    1,029,869
          Letters of Credit                             -            208,018          208,018                      405,823
          Unused credit lines               5,743,648                928,894        6,672,542                               -
          Operating lease commitments            8,829               206,408          215,237                       68,439
          Litigation                             9,946                        -          9,946                        9,946
                                             5,771,355             1,530,327         7,301,682                   1,514,077


        All the above bank guarantees and letters of credit are for periods of less than one year and are collateralized by
        customer escrow deposits.

        Litigation
        At 31 December 2005 the Bank was involved in various claims and legal proceedings of a nature considered normal
        to its business. The level of these claims and legal proceedings correspond to the level of claims and legal proceedings
        in previous years. The management of the Bank believes that the various asserted claims and litigations in which it is
        involved will not materially affect its financial position, future operating results or cash flows, although no assurance can
        be given with respect to the ultimate outcome of any such claim or litigation.





                                                                               Independent Auditors’ Report and Financial Statements




Notes to the financial statements (continued)
For the years ended december 31, 2005 and 2004


25. Related-party Transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence
over the party in making financial and other decisions.

In considering each possible related party relationship, attention is directed to the substance of the relationship and not
merely the legal form.

As at 31 December 2005 and 31 December 2004, transactions made with related parties comprised:


 (in LEK ‘000)                               Year ended December 31, 2005                Year ended December 31, 2004
 Amounts due from banks
 Fully consolidated affiliated companies                           4,899,329                                    7,092,588
 Assets total                                                       4,899,329                                   7,092,588
 Amounts due to banks
 Fully consolidated affiliated companies                                       -                                   45,384
 Other liabilities
 Fully consolidated affiliated companies                               20,820                                              -
 Liabilities total                                                      20,820                                      45,384



 (in LEK ‘000)                               Year ended December 31, 2005                Year ended December 31, 2004
 Interest income
 Fully consolidated affiliated companies                              127,970                                     105,862
 Income total                                                         127,970                                     105,862
 Administrative expenses
 Fully consolidated affiliated companies                             481,225                                       20,670
 Wages, salaries and bonuses
 Directors and management                                              89,280                                      75,521
 Expenses total                                                       570,505                                       96,191




                                                                                                                                  

     Notes to the financial statements (continued)
     For the years ended december 31, 2005 and 2004


     26. Liquidity Risk
     The following table shows assets and liabilities by maturity as at December 31, 2005 (in LEK ‘000):


                                                              Up to one      One to three      Three to six    Six to twelve     One to five        Over five           Total
                                                                 month            months           months            months           years            years
      Assets
                                                                                                                                                                                Independent Auditors’ Report and Financial Statements




      Cash on hand and at banks                            42,182,031                     -                -                -              -                -     42,182,031
      Loans and advances to credit institutions                         -                 -        93,454            166,059      737,226                   -       996,739
      Securities available for sale                         5,859,503                     -                -                -              -                -      5,859,503
      Investments held to maturity                         11,594,195        25,796,446        24,542,196      55,703,842       16,963,552                  -    134,600,231
      Loans and advances to customers, net                     918,224         1,246,234        1,975,765          6,780,874     5,299,321          659,110       16,879,528
      Property, equipment and intangible assets, net                    -                 -                -                -              -       1,858,184       1,858,184
      Other assets, net                                         71,315             30,628                  -                -                  -      39,231        141,174
                                                            60,625,268        27,073,308       26,611,415          62,650,775    23,000,099        2,556,525     202,517,390
      Liabilities and equity
      Due to financial institutions                         1,411,917               3,000              344                  -              -                -      1,415,261
      Due to customers                                     82,193,411        38,150,968        33,434,096      35,849,801        4,011,207                  -    193,639,483
      Other liabilities                                        377,449              5,300                  -         203,652         9,946             6,940        603,287
      Shareholder’s equity                                              -                  -               -   -            -                  -   6,859,359       6,859,359
                                                             83,982,77        38,159,268       33,434,440          36,053,453     4,021,153        6,866,299     202,517,390
      Liquidity risk as at December 31, 2005               (23,357,509)      (11,085,960)       (6,823,025)        26,597,322    18,978,946        (4,309,774)              -
      Liquidity risk as at December 31, 2004                 8,504,082       (23,926,454)       1,033,742          19,093,643      (857,420) (3,847,593)                    -
     Notes to the financial statements (continued)
     For the years ended december 31, 2005 and 2004


     27. Net Currency Position
     The following table summarises the Bank’s net currency position as at December 31, 2005 (in LEK ‘000):



                                                                   LEK                    EUR             USD          GBP      Other            Total
      Assets
      Cash on hand and at banks                          18,802,011              15,124,615       6,950,706       1,265,763    38,936      42,182,031
      Loans and advances to credit institutions                       -             996,739                   -           -          -       996,739
      Securities available for sale                          280,689              2,455,010       3,123,804               -          -      5,859,503
      Investments held to maturity                      134,600,231                          -                -           -          -    134,600,231
      Loans and advances to customers, net                 3,630,341             11,309,352       1,939,819             16           -     16,879,528
      Property, equipment and intangible assets, net       1,858,184                         -                -           -          -      1,858,184
      Other assets, net                                      117,156                  17,443            6,514           61           -       141,174
                                                         159,288,612             29,903,159       12,020,843      1,265,840    38,936     202,517,390
      Liabilities and equity
      Due to financial institutions                        1,158,226                  85,841         169,606         1,581          7       1,415,261
      Due to customers                                  156,073,415              24,344,464      11,900,382       1,282,845    38,377     193,639,483
      Other liabilities                                      790,658                (166,471)         14,446        (25,686)   (9,660)       603,287
      Shareholder’s equity                                 2,618,953              4,240,406                   -           -          -      6,859,359
                                                         160,641,252             28,504,240       12,084,434      1,258,740    28,724     202,517,390
      Net currency position as at
      December 31, 2005                                    (1,352,640)             1,398,919          (63,591)        7,100    10,212                -
      Net currency position as at
      December 31, 2004                                        58,712               (150,587)          65,877        28,179     (2,181)              -
                                                                                                                                                         Independent Auditors’ Report and Financial Statements





Independent Auditors’ Report and Financial Statements




     About Raiffeisen Banking Group


0
                                                                            About Raiffeisen Banking Group




About Raiffeisen
Banking Group
Raiffeisen Bank, Albania is a member of the RZB Group and subsidiary of Raiffeisen
International Bank-Holding AG. Raiffeisen International in turn is a fully consolidated subsidiary
of Vienna-based Raiffeisen Zentralbank Österreich AG (RZB). RZB is the parent company of the
RZB Group and the central institution of the Austrian Raiffeisen Banking Group, the country’s
most powerful banking group with the largest local distribution network.

Founded in 1927, RZB provides the full range of commercial and investment banking services
in Austria and is regarded a pioneer in Central and Eastern Europe (CEE). It ranks among
the region’s leading banks, offering commercial, investment and retail banking services in the
following markets:

   •   Albania                                 Raiffeisen Bank
   •   Belarus                                 Priorbank, JSC
   •   Bosnia and Herzegovina                  Raiffeisen Bank d.d. Bosna i Hercegovina
   •   Bulgaria                                Raiffeisenbank (Bulgaria) EAD
   •   Croatia                                 Raiffeisenbank Austria d.d.
   •   Czech Republic                          Raiffeisenbank a.s.
   •   Hungary                                 Raiffeisen Bank Zrt.
   •   Kosovo                                  Raiffeisen Bank Kosovo J.S.C.
   •   Poland                                  Raiffeisen Bank Polska S.A.
   •   Romania                                 Raiffeisen Bank S.A.
   •   Russia                                  ZAO Raiffeisenbank Austria
   •   Serbia and Montenegro                   Raiffeisenbank a.d.
   •   Slovakia                                Tatra banka, a.s.
   •   Slovenia                                Raiffeisen Krekova banka d.d.
   •   Ukraine                                 JSCB Raiffeisenbank Ukraine and JSPP Bank Aval

Raiffeisen International acts as these banks’ steering company, owning the majority of shares
(in most cases 100 or almost 100 per cent). Furthermore, numerous finance leasing companies
(including one in Kazakhstan) are part of the group. Following the largest IPO in Austria’s
history in April 2005, RZB remains Raiffeisen International’s majority shareholder owning 70
per cent of the capital stock. The remaining 30 per cent is free-float, owned by institutional
and retail investors.

At year-end 2005, 2,443 business outlets covered the CEE-region and more than 43,600
employees attended to 9.7 million customers.

As of year-end 2005, Raiffeisen International’s total assets amounted to € 40.7 billion, up
41 per cent compared with December 2004. Consolidated profit (after minorities) according
to IFRS came to € 382.3 million, an increase of 83 per cent. The return on equity before tax
reached 21.8 per cent and the cost/income ratio improved to 61.6 per cent.

As per 31 December 2005, the RZB Group’s balance-sheet total amounted to € 93.9 billion,
up 38 per cent on the figure for year-end 2004. IFRS-compliant profit before tax amounted
to € 929.9 million, an increase of 34 per cent compared with the same period of 2004. The




                                                                                                        1
About Raiffeisen Banking Group




                                 return on equity before tax was 23.9 per cent and the cost/income ratio improved to 58.9
                                 per cent.

                                 In addition to its banking operations – which are complemented by representative offices in
                                 Lithuania (Vilnius), Moldova (Chisinau) and Russia (Moscow) – RZB runs several specialist
                                 companies in CEE offering solutions, among others, in the areas of M&A, real estate
                                 development, fund management, leasing and mortgage banking.

                                 In Western Europe and the USA, RZB operates a branch in London and representative offices
                                 in New York, Brussels, Frankfurt, Milan, Paris and Stockholm. A finance company in New
                                 York (with representative offices in Chicago and Houston) and a subsidiary bank in Malta
                                 complement the scope. In Asia, RZB runs branches in Beijing (with a representative office in
                                 Zhuhai) and Singapore as well as representative offices in Ho Chi Minh City, Hong Kong,
                                 Mumbai, Tehran and Seoul. This international presence clearly underlines the bank’s emerging
                                 markets strategy.

                                 RZB is rated as follows:

                                    •   Standard & Poor’s           Short-term                 A1
                                    •   Moody’s                     Short-term                 P-1
                                    •   Moody’s                     Long-term                  A1
                                    •   Moody’s                     Financial Strength         C+

                                 www.rzb.at
                                 www.ri.co.at




2
                                                                           Raiffeisen Bank Sh.a. Network




Raiffeisen Bank Sh.a.
Network
Tirana Center                                 Gjirokastra
Street: Kavajës                               Square: “11 Janari” (Qafa e Pazarit)
Phone: ++355      4   253   644/6;            Phone: ++355 84 682 86
          ++355   4   233   396;                       ++355 84 625 97
          ++355   4   224   540
Fax.      ++355   4   230   013;              Saranda
          ++355   4   247   912               Square: 1, Street. “Skënderbeu”
                                              Phone & Fax: ++355 85 24564
Tirana Lindore                                               ++355 85 22306
Street: “4 Dëshmorët” P.13                                   ++355 85 22437
Phone: ++355 4 361757
          ++355 4 361758                      Berat
          ++355 4 361759                      Square: “28 Nëntori”
                                              Phone: ++355 32 32628
Tirana Perëndimore
Kompleksi “ Gintas” Laprakë                   Lushnjë
Phone: ++355 4 357830                         Blvd: “Demokracia”, Square: “Kongresi i Lushnjës”
                                              Phone: ++355 352 2530
Tirana Veriore
Krujë “ L.1”.                                 Lezha
Phone: ++355 511 2304                         Square: “Beslidhja”, Street. Luigj Gurakuqi
                                              Phone: ++355 215 3507
Durrës
Square: 4, Street: “ Skënderbej”, P. 915      Shkodra
Phone: ++355 52 25 505;                       Sq.:”Vasil Shanto”, St. “Çajupi”, Hotel Rozafa
        ++355 52 25 027                       Phone: ++355 22 43171;
                                                       ++355 22 43764
Elbasan
Blvd “Rinia“,                                 Kukes
Square: „Luigj Gurakuqi“, P.18                Square. 5
Phone: ++355 54 55373                         Phone: ++355 24 22279

Korçë                                         Fier
Square: “Fan Noli”, Sky Center                Sq.: “Kastrioti”, St. Brigada e 11 Sulmuese
Phone: ++355 824 3179                         Phone: ++355 34 22231;
Fax.     ++355 82 45870                                ++355 34 22282;
                                                       ++355 34 22502
Vlorë
Square: “Pavarësia”, Street. “Sadik Zotaj”    Burrel
Phone: ++355 33 27381                         Square: “Pjetër Budi”
         ++355 33 27380                       Phone: ++355 217 2893;
         ++355 33 23448                                ++355 217 3014



                      Please, visit our web site: www.raiffeisen.al



                                                                                                      
Raiffeisen Banking Group in Central and Eastern Europe




                         Raiffeisen Banking Group in
                         Central and Eastern Europe
                         RZB is one of the leading bankers in CEE. RZB’s network in CEE operates under the umbrella of Raif-
                         feisen International Bank-Holding AG (Raiffeisen International), which is a wholly owned subsidiary
                         of Raiffeisen Zentralbank.





                                                                                                                    Addresses and Contacts




Addresses and contacts
Raiffeisen International                 Bulgaria                                   Kosovo
Bank-Holding AG                          Raiffeisenbank (Bulgaria) E.A.D.           Raiffeisen Bank Kosovo J.S.C.
                                         18/20 Gogol Ulica, 1504 Sofia              Rruga UÇK 51, Priština
Austria (Head Office)                    Phone: (+359-2) 9198 5101                  Phone: (+381-38) 226 400
Am Stadtpark 9, 1030 Wien                Fax: (+359-2) 943 4528                     Fax: (+381-38) 244 193
Phone: (+43-1) 71 707-3504               SWIFT/BIC: RZBBBGSF                        SWIFT/BIC: RBKOCS22
Fax: (+43-1) 71 707-1377                 www.rbb.bg                                 www.raiffeisen-kosovo.com
www.ri.co.at                             Contact: Momtchil Andreev                  Contact: Oliver Whittle
                                         momtchil.andreev@rbb-sofia.raiffeisen.at   oliver.whittle@raiffeisen-kosovo.com
Contact: Roman Hager
roman.hager@ri.co.at                     74 banking outlets                         29 banking outlets

Banking Network in Central               Croatia                                    Malta
and Eastern Europe                       Raiffeisenbank Austria d.d.                Raiffeisen Malta Bank plc
                                         Petrinjska 59, 10000 Zagreb                71, II-Piazzetta, Tower Road
Albania                                  Phone: (+385-1) 456 6466                   Sliema SLM 16, Malta
Raiffeisen Bank Sh.a.                    Fax: (+385-1) 481 1624                     Phone: (+356) 2132 0942
Rruga Kavajes, Tirana                    SWIFT/BIC: RZBHHR2X                        Fax: (+356) 2132 0954
Phone: (+355-4) 274 912                  www.rba.hr                                 Contact: Anthony C. Schembri
                                                                                    anthony.schembri@rmb-malta.raiffeisen.at
Fax: (+355-4) 230 013                    Contact: Lovorka Penaviæ
                                         lovorka.penavic@rba-zagreb.raiffeisen.at
SWIFT/BIC: SGSBALTX
                                         39 banking outlets                         Poland
www.raiffeisen.al
                                                                                    Raiffeisen Bank Polska S.A.
Contact: Steven Grunerud
steven.grunerud@raiffeisen.al            Czech Republic                             Ul. Piêkna 20, 00-549 Warszawa
87 banking outlets                       Raiffeisenbank a.s.                        Phone: (+48-22) 585 2000
                                         Olbrachtova 2006/9                         Fax: (+48-22) 585 2585
Belarus                                  140 21 Praha 4                             SWIFT/BIC: RCBWPLPW
Priorbank, JSC                           Phone: (+420) 221 141 111                  www.raiffeisen.pl
                                                                                    Contact: Piotr Czarnecki
31–A, V. Khoruzhey Str.                  Fax: (+420)221 142 111                     piotr.czarnecki@raiffeisen.pl
Minsk, 220002                            SWIFT/BIC: RZBCCZPP
                                                                                    83 banking outlets
Phone: (+375-17) 289 9087                www.rb.cz
Fax: (+375-17) 289 9191                  Contact: Lubor Žalman
                                         lubor.zalman@rb.cz                         Romania
SWIFT/BIC: PJCBBY2X
                                         50 banking outlets                         Raiffeisen Bank S.A.
www.priorbank.by
                                                                                    Piata Charles de Gaulle 15
Contact: Olga Gelakhova
olga.gelakhova@priorbank.by              Hungary                                    011857 Bucuresti 3
43 banking outlets                       Raiffeisen Bank Zrt.                       Phone: (+40-21) 306 1000
                                         Akadémia útca 6, 1054 Budapest             Fax: (+40-21) 230 0700
Bosnia and Herzegovina                   Phone: (+36-1) 484 4400                    SWIFT/BIC: RZBRROBU
Raiffeisen Bank d.d.                     Fax: (+36-1) 484 4444                      www.raiffeisen.ro
                                                                                    Contact: Steven C. van Groningen
Bosna i Hercegovina                      SWIFT/BIC: UBRTHUHB                        centrala@raiffeisen.ro
Danijela Ozme 3, 71000 Sarajevo          www.raiffeisen.hu
                                                                                    216 banking outlets
Phone: (+387-33) 287 100                 Contact: Eva Felegyhazi
                                         eva.felegyhazi@raiffeisen.hu
Fax: (+387-33) 213 851
SWIFT/BIC: RZBABA2S                      99 banking outlets
www.raiffeisenbank.ba
Contact: Edin Muftiæ
edin.muftic@rbb-sarajevo.raiffeisen.at

68 banking outlets




                                                                                                                                      
Addresses and Contacts




          Russia                              Ukraine                                   Bulgaria
          ZAO Raiffeisenbank Austria          JSCB Raiffeisenbank Ukraine               Raiffeisen Leasing Bulgaria OOD
          Troitskaya Ul. 17/1                 43, Zhylyanska vul., 01033 Kyiv           Business Park Sofia
          129090 Moskwa                       Phone: (+38 044) 490 05 00                Building 11, 2nd floor, 1715 Sofia
          Phone: (+7-495) 721 9900            Fax: (+38 044) 490 05 01                  Phone: (+359-2) 970 7979
          Fax: (+7-495) 721 9901              SWIFT/BIC: RZBUUAUK                       Fax: (+359-2) 974 2057
          SWIFT/BIC: RZBMRUMM                 www.rbua.com                              Contact: Ekaterina Hristova
                                                                                        ekaterina.hristova@rbb-sofia.raiffeisen.at
          www.raiffeisen.ru                   Contact: Leonid Zyabrev
                                              leonid.zyabrev@rbu-kiev.raiffeisen.at     10 branches
          Contact: Johann Jonach
          jjonach@raiffeisen.ru               39 banking outlets
          27 banking outlets                                                            Croatia
                                              JSPP Bank Aval                            Raiffeisen Leasing d.o.o.
          Serbia and Montenegro               9, Leskova vul., 01011 Kyiv               Froudeova 11a, Siget
          Raiffeisenbank a.d.                 Phone: (+38 044) 490 88 88                10 002 Zagreb
          Bulevar AVNOJ-a 64a                 Fax: (+38 044) 295 32 31                  Phone: (+385-1) 659 5000
          11070 Novi Beograd                  SWIFT/BIC: AVAL UA UK                     Fax: (+385-1) 659 5050
          Phone: (+381-11) 320 2100           www.aval.ua                               Contact: Miljenko Tumpa
                                                                                        miljenko.tumpa@rba-zagreb.raiffeisen.at
          Fax: (+381-11) 220 7080             Contact: Leonid Zyabrev
                                              leonid.zyabrev@rbu-kiev.raiffeisen.at     11 branches
          SWIFT/BIC: RZBJCSBG
          www.raiffeisenbank.co.yu            1,342 banking outlets
          Contact: Oliver Rögl                                                          Czech Republic
          oliver.roegl@raiffeisenbank.co.yu                                             Raiffeisen-Leasing, s.r.o.
                                              Raiffeisen-Leasing
          45 banking outlets                                                            Olbrachtova 2006/9
                                              International
                                                                                        14021 Praha 4
          Slovakia                            Austria                                   Phone: (+420-2) 215 11 611
          Tatra banka, a.s.                   Raiffeisen-Leasing International          Fax: (+420-2) 215 11 666
          Hodžovo námestie 3                  GmbH                                      Contact: Richard Dvorák
                                                                                        dvorak@raiffleas.cz
          811 06 Bratislava 1                 Am Stadtpark 9, 1030 Wien
          Phone: (+421-2) 5919 1111           Phone: (+43-1) 71 707-2966                11 branches
          Fax: (+421-2) 5919 1110             Fax: (+43-1) 71 707-2059
          SWIFT/BIC: TATRSKBX                 Contact: Dieter Scheidl                   Hungary
                                              dieter.scheidl@rzb.at                     Raiffeisen Lízing Rt.
          www.tatrabanka.sk
          Contact: Rainer Franz                                                         Váci utca 81-85, 1139 Budapest
          rainer_franz@tatrabanka.sk          Belarus                                   Phone: (+36-1) 298 8200
          136 banking outlets                 SOOO Raiffeisen Leasing                   Fax: (+36-1) 298 8010
                                              31A, V. Khoruzhey Str.                    Contact: Pál Antall
                                              220002 Minsk                              pal.antall@raiffeisen.hu
          Slovenia
          Raiffeisen Krekova banka d.d.       Phone: (+375-17) 289 9394                 14 branches
          18 Slomškov trg, 2000 Maribor       Fax: (+375-17) 289 9394
          Phone: (+386-2) 229 3100            Contact: Maksim Litisky                   Kazakhstan
                                              marksim.litisky@priorbank.by
          Fax: (+386-2) 252 4779                                                        Raiffeisen Leasing Kazakhstan LLP
          SWIFT/BIC: KREKSI22                                                           Ul. Shevchenko 146, office 12
                                              Bosnia and Herzegovina
          www.r-kb.si                                                                   1st floor, Almaty
                                              Raiffeisen Leasing d.o.o.
          Contact: Zoran Nemec                                                          Phone: (+7-3272) 709 836
          zoran.nemec@r-kb.si                 St. Branilaca Sarajeva 20
                                                                                        Contact: Uwe Fisker
                                              71000 Sarajevo                            Uwe_fisker@rlk.kz
          13 banking outlets
                                              Phone: (+387-33) 254 340
                                              Fax: (+387-33) 212 273
                                              Contact: Belma Sekavic-Bandic
                                              info.leasing@rbb-sarajevo.raiffeisen.at

                                              5 branches





                                                                                                                        Addresses and Contacts




Poland                                         Slovenia                                Singapore
Raiffeisen-Leasing Polska S.A.                 Raiffeisen Leasing d.o.o.               Singapore Branch
Ul. Jana Pawła II 78                           Tivolska 30 (Center Tivoli)             50, Raffles Place #45-01
00175 Warszawa                                 1000 Ljubljana                          Singapore Land Tower
Phone: (+48-22) 562 3600                       Phone: (+386-1) 241 6250                Singapore 048623
Fax: (+48-22) 562 3601                         Fax: (+386-1) 241 6268                  Phone: (+65) 6225 9578
Contact: Marek Balawejder                      Contact: Borut Bozic                    Fax: (+65) 6225 3973
marek.balawejder@raiffeisen.pl                 borut.bozic@raiffeisen-leasing.si
                                                                                       Contact: Rainer Silhavy
52 branches                                    2 branches                              rainer.silhavy@sg.rzb.at


Romania                                        Real-estate leasing                     United Kingdom
Raiffeisen Leasing SRL                         companies                               London Branch
Calea 13 Septembrie 90                                                                 10, King William Street
Grand Offices Marriott Grand Hotel             Czech Republic                          London EC4N 7TW
Sector 5, 76122 Bucuresti                      Raiffeisen Leasing Real Estate s.r.o.   Phone: (+44-20) 7933 8000
Phone: (+40-21) 403 3300                       Olbrachtova 2006/9                      Fax: (+44-20) 7933 8099
Fax: (+40-21) 403 3298                         140 21 Praha                            SWIFT/BIC: RZBAGB2L
Contact: Bernd Künzel                          Phone: (+420-2) 215 11 610              www.london.rzb.at
bernd.kuenzel@raiffeisen-leasing.ro                                                    Contact: Ian Burns
                                               Fax: (+420-2) 215 11 641                ian.burns@uk.rzb.at
17 branches                                    Contact: Alois Lanegger
                                               lanegger@raiffleas.cz

Russia                                                                                 U.S.A.
                                               3 branches
OOO Raiffeisen Leasing                                                                 RZB Finance LLC
Nikoloyamskaya 13/2                                                                    1133, Avenue of the Americas
                                               Hungary
109240 Moskwa                                                                          16th floor, New York, N.Y. 10036
                                               Raiffeisen Inglatan Rt.
Phone: (+7-495) 721 9901                                                               Phone: (+1-212) 845 4100
                                               Akadémia u. 6, 1054 Budapest
Fax: (+7-495) 721 9901                                                                 Fax: (+1-212) 944 2093
                                               Phone: (+36-1) 484 8400
Contact: Jaroslaw Konczewski                                                           www.rzbfinance.com
                                               Fax: (+36-1) 484 8404
jkonczewski@raiffeisen.ru                                                              Contact: Dieter Beintrexler
                                               Contact: Laszlo Vancsko                 dbeintrexler@rzbfinance.com
4 branches                                     lvancsko@raiffeisen.hu

                                                                                       Representative offices
Serbia and Montenegro                          Raiffeisen Zentralbank
                                                                                       in Europe
Raiffeisen Leasing d.o.o.                      Österreich AG
Bulevar AVNOJ-a 45a
                                                                                       Belgium
11070 Beograd                                  Austria (Head Office)
                                                                                       Brussels
Phone: (+381-11) 301 6580                      Am Stadtpark 9, 1030 Wien
                                                                                       Rue du Commerce 20–22
Fax: (+381-11) 313 0081                        Phone: (+43-1) 71 707-0
                                                                                       1000 Bruxelles
Contact: Ralph Zeitlberger                     Fax: (+43-1) 71 707-1715
ralph.zeitlberger@rba-belgrade.raiffeisen.at                                           Phone: (+32-2) 549 0678
                                               SWIFT/BIC: RZBAATWW
                                                                                       Fax: (+32-2) 502 6407
5 branches                                     www.rzb.at
                                                                                       Contact: Helga Steinberger
                                                                                       raiffbxl@raiffeisenbrussels.be
Slovakia                                       China
Tatra Leasing s.r.o.                           Beijing Branch                          France
Tovarenska 10, 820 04 Bratislava               Beijing International Club,Suite 200    Paris
Tel.: (+421-2) 591 93 050                      21, Jianguomenwai Dajie                 9–11, Avenue Franklin Roosevelt
Fax: (+421-2) 591 93 048                       100020 Beijing                          75008 Paris
Contact: Igor Horvath                          Phone: (+86-10) 6532 3388               Phone: (+33-1) 4561 2700
igor_horvath@tatrabanka.sk
                                               Fax: (+86-10) 6532 5926                 Fax: (+33-1) 4561 1606
8 branches                                     SWIFT/BIC: RZBACNBJ                     Contact: David Mollerat
                                               Contact: Andreas Werner                 david.mollerat@fr.rzb.at
                                               andreas.werner@cn.rzb.at




                                                                                                                                          
Addresses and Contacts




          Germany                                 Sweden                                         Zhuhai
          Frankfurt am Main                       Stockholm                                      Hangao Building 2003
          Mainzer Landstrasse 51                  Stureplan 4C                                   Fenghuang South Street 1030
          D-60329 Frankfurt am Main               11435 Stockholm                                Xiangzhou District, Zhuhai
          Phone: (+49-69) 29 92 19-18             Phone: (+43-1) 71 707-1588                     Guangdong Province
          Fax: (+49-69) 29 92 19-22               Fax: (+43-1) 71 707-76 1588                    519000 China
          Contact: Dorothea Renninger             Contact: Daniela Vorbeck                       Phone: (+86-756) 2213 075
          dorothea.renninger@rzb.at               daniela.vorbeck@rzb.at                         Fax: (+86-756) 2213 165
                                                                                                 Contact: Susanne Zhang-Pongratz
          Italy                                   Representative offices in                      susanne.zhang@cn.rzb.at

          Milan                                   America and Asia                               India
          Via Andrea Costa 2
                                                                                                 Mumbai
          20131 Milano                            U.S.A.
                                                                                                 87, Maker Chamber VI
          Phone: (+39-02) 2804 0646               Chicago (RZB Finance LLC)
                                                                                                 Nariman Point, Mumbai 400 021
          Fax: (+39-02) 2804 0658                 10 N. Martingale Road, Suite 400
                                                                                                 Phone: (+91-22) 5630 1700
          www.rzb.it                              Schaumburg, IL 60173
                                                                                                 Fax: (+91-22) 5632 1982
          Contact: Maurizio Uggeri                Phone: (+1-847) 466 1043
          maurizio.uggeri@it.rzb.at                                                              Contact: Anupam Johri
                                                  Fax: (+1-847) 466 1295                         anupam.johri@in.rzb.at
                                                  Contact: Charles T. Hiatt
          Lithuania                               chiatt@rzbfinance.com
                                                                                                 Iran
          Vilnius (Raiffeisen Bank Polska S.A.)
                                                                                                 Tehran
          A. Jaksto Street 12, 01105 Vilnius      Houston (RZB Finance LLC)
                                                                                                 Vanak, North Shirazi Avenue
          Phone: (+370-5) 266 6600                10777, Westheimer, Suite 1100
                                                                                                 16, Ladan Str., 19917 Tehran
          Fax: (+370-5) 266 6601                  Houston, TX 77042
                                                                                                 Phone: (+98-21) 804 6767-2
          www.raiffeisen.lt                       Phone: (+1-713) 260 9697
                                                                                                 Fax: (+98-21) 803 6788
          Contact: Vladislovas Jancis             Fax: (+1-713) 260 9602
          vladislovas.jancis@raiffeisen.pl                                                       Ansprechpartner: Gerd Wolf
                                                  Contact: Stephen A. Plauche                    unico@sayareh.com
                                                  splauche@rzbfinance.com
          Moldova
                                                                                                 South Korea
          Chisinau (Raiffeisen Bank S.A.)         New York
                                                                                                 Seoul
          65 Stefan cel Mare blvd., MD-2001,      1133, Avenue of the Americas
                                                                                                 Leema Building, 8th floor
          Chisinãu                                16th floor, New York, NY 10036
                                                                                                 146-1, Soosong-dong
          Phone: (+373-22) 279 331                Phone: (+1-212) 593 7593
                                                                                                 Chongro-ku, 110-755 Seoul
          Fax: (+373-22) 279 343                  Fax: (+1-212) 593 9870
                                                                                                 Phone: (+822) 398 5840
          Contact: Victor Bodiu                   Contact: Dieter Beintrexler
          victor.bodiu@rzb.md                     dieter.beintrexler@rzb-newyork.raiffeisen.at   Fax: (+822) 398 5807
                                                                                                 Contact: Kun II Chung
                                                                                                 kun-il.chung@kr.rzb.at
          Russia                                  China
          Moscow                                  Hong Kong
                                                                                                 Vietnam
          14, Pretchistensky Pereulok             Lippo Centre, 89 Queensway
                                                                                                 Ho Chi Minh City
          Building 1, 119034 Moskwa               Unit 2001, 20th Floor, Tower 1
                                                                                                 6, Phung Khac Khoan Str., District 1
          Phone: (+7-495) 721 9903                Hong Kong
                                                                                                 Room G6, Ho Chi Minh City
          Fax: (+7-495) 721 9907                  Phone: (+85-2) 2730 2112
                                                                                                 Phone: (+84-8) 8297 934
          www.raiffeisen.ru                       Fax: (+85-2) 2730 6028
                                                                                                 Fax: (+84-8) 8221 318
          Contact: Evgheny Rabovsky               Contact: Edmond Wong
          erabovsky@raiffeisen.ru                 edmond.wong@hk.rzb.at                          Contact: Ta Thi Kim Thanh
                                                                                                 ta-thi-kim.thanh@vn.rzb.at





                                                                                                                   Addresses and Contacts




Investment Banking                           Croatia                                Russia
                                             Raiffeisenbank Austria d.d.            ZAO Raiffeisenbank Austria
Austria                                      Petrinjska 59, 10000 Zagreb            Troitskaya Ul. 17/1
Raiffeisen Zentralbank Österreich AG         Phone: (+385-1) 456 6466               129090 Moskwa
Fixed Income                                 Fax: (+385-1) 456 6490                 Phone: (+7-495) 721 9900
Am Stadtpark 9, 1030 Wien                    www.rba.hr                             Fax: (+7-495) 721 9901
Phone: (+43-1) 71 707-3347                   Contact: Ivan Žižiæ                    www.raiffeisen.ru
                                             ivan.zizic@rba-zagreb.raiffeisen.at
Fax: (+43-1) 71 707-1091                                                            Contact: Pavel Gourine
                                                                                    pgourine@raiffeisen.ru
www.rzb.at
Contact: Christian Säckl
                                             Czech Republic
christian.saeckl@rzb.at                      Raiffeisenbank a.s.                    Serbia and Montenegro
                                             Olbrachtova 2006/9                     Raiffeisen Investment AG
Raiffeisen Centrobank AG                     140 21 Praha 4                         Obiliæev venac 27/II
Equity                                       Phone: (+420) 221 141 863              11000 Beograd
Tegetthoffstr. 1, 1015 Wien                  Fax: (+420) 221 143 804                Phone: (+381-11) 328 1638
SWIFT/BIC: CENBATWW                          www.rb.cz                              Fax: (+381-11) 262 3542
Phone: (+43-1) 51 520-0                      Contact: Martin Bláha                  Contact: Tatjana Terzic
                                             martin.blaha@rb.cz                     riag@eunet.yu
Fax: (+43-1) 513 4396
www.rcb.at
Contact: Eva Marchart
                                             Hungary                                Slovakia
marchart@rcb.at                              Raiffeisen Bank Rt.                    Tatra banka, a.s.
                                             Akadémia útca 6, 1054 Budapest         Hodžovo námestie 3
Raiffeisen Investment AG                     Phone: (+36-1) 484 4400                811 06 Bratislava 1
Advisory                                     Fax: (+36-1) 484 4444                  Tel.: (+421-2) 5919 1111
Tegetthoffstr. 1, 1015 Wien                  www.raiffeisen.hu                      Fax: (+421-2) 5919 1110
Phone: (+43-1) 710 5400-0                    Contact: Gábor Liener                  www.tatrabanka.sk
                                             gliener@raiffeisen.hu
Fax: (+43-1) 710 5400-39                                                            Contact: Igor Vida
                                                                                    igor_vida@tatrabanka.sk
www.riag.at
Contact: Heinz Sernetz
                                             Poland
h.sernetz@riag.at                            Raiffeisen Investment Polska           Slovenia
Subsidiaries und representative offices in   Sp.z o.o.                              Raiffeisen Krekova banka d.d.
Belgrade, Bucharest, Istanbul, Kiev, Mos-    Ul. Piêkna 20, 00-549 Warszawa         Slomškov trg 18, 2000 Maribor
cow, Podgorica, Sofia and Warsaw.            Phone: (+48-22) 585 2900               Phone: (+386-2) 229 3111
                                             Fax: (+48-22) 585 2901                 Fax: (+386-2) 252 5518
Bosnia and Herzegovina                       www.riag.at                            www.r-kb.si
                                             Contact: Marzena Bielecka              Contact: Gvido Jemenšek
Raiffeisen Bank d.d., Bosna i Hercegovina    marzena.bielecka@ripolska.com.pl       gvido.jemensek@r-kb.si
Danijela Ozme 3, 71000 Sarajevo
Phone: (+387-33) 287 100                     Romania                                Ukraine
Fax: +387-33-213 851                         Raiffeisen Capital & Investment S.A.   Raiffeisen Investment TOV
www.raiffeisenbank.ba                        Unirii Blvd. 74                        43, Zhylyanska Str., 01033 Kyiv
Contact: Dragomir Grgic
dragomir.grgic@rbb-sarajevo.raiffeisen.at    030837 Bucuresti 3                     Phone: (+38-044) 490 6898
                                             Phone: (+40-21) 302 0082               Fax: (+38-044) 490 6899
Bulgaria                                     Fax: (+40-21) 320 9983                 Contact: Vyacheslav Yakymuk
                                                                                    vyacheslav.yakymuk@rio-kiev.raiffeisen.at
Raiffeisenbank (Bulgaria) E.A.D.             www.raiffeisen.ro
                                             Contact: James Stewart
18/20 Gogol str., 1504 Sofia                 james.stewart@rzb.ro
Phone: (+359-2) 9198 5451
Fax: (+359-2) 943 4528
www.rbb.bg
Contact: Evelina Miltenova
evelina.miltenova@rbb-sofia.raiffeisen.at




                                                                                                                                     
Glossary




           Raiffeisen Glossary
           Gable Cross                   The international Raiffeisen logo is the Gable Cross. It consists of two stylized
                                         crossed horses’ heads and can be traced back hundreds of years to European folk
                                         traditions. It is a symbol of defense against evil and life’s dangers and can still be
                                         found on rural houses in Central Europe. According to their founder’s objectives,
                                         Raiffeisen’s members have safeguarded themselves against economic hazards by
                                         uniting within the cooperative and therefore chose the Gable Cross as an emblem of
                                         protection under a shared roof. The logo has developed into an internationally well-
                                         known and very positively associated trademark and is in use around the world.

           Raiffeisen Banking Group The Raiffeisen Banking Group (RBG) is Austria’s most powerful banking group.
                                         As per preliminary figures for year-end 2005, RBG’s consolidated balance-sheet
                                         total amounted to approximately € 177 billion. It represents about a quarter of all
                                         domestic banking business and comprises the country’s largest banking network
                                         with nearly 2,300 offices and some 23,000 employees. RBG consists of Raiffeisen
                                         Banks on the local level, Regional Raiffeisen Banks on the provincial level and RZB
                                         as central institution. RZB also acts as the “link” between its international operations
                                         and RBG. Raiffeisen Banks are private cooperative credit institutions, operating as
                                         general service retail banks. Each province’s Raiffeisen Banks are owners of the
                                         respective Regional Raiffeisen Bank, which in their entirety own approximately 88
                                         per cent of RZB’s ordinary shares.

                                         The Raiffeisen Banks go back to an initiative of the German social reformer Friedrich
                                         Wilhelm Raiffeisen (1818-1888), who, by founding the first cooperative banking
                                         association in 1862, has laid the cornerstone of the global organization of Raif-
                                         feisen cooperative societies. Only 10 years after the foundation of the first Austrian
                                         Raiffeisen banking cooperative in 1886, already 600 savings and loan banks were
                                         operating according to the Raiffeisen system throughout the country. According to
                                         Raiffeisen’s fundamental principle of self-help, the promotion of their members’ inter-
                                         ests is a key objective of their business policies.

           Raiffeisen International      Raiffeisen International Bank-Holding AG is a fully consolidated subsidiary of RZB.
                                         It acts as the steering company for the RZB Group’s subsidiaries in Central and
                                         Eastern Europe, above all the Group’s banking and leasing units. RZB is Raiffeisen
                                         International’s majority shareholder owning 70 per cent of the capital stock. The
                                         remaining 30 per cent is free-float, owned by institutional and retail investors. Raif-
                                         feisen International’s shares are traded on the Vienna Stock Exchange.

           RZB                           Raiffeisen Zentralbank Österreich AG (RZB) is the central institution of the Austrian
                                         Raiffeisen Banking Group. Founded in 1927 and domiciled in Vienna, RZB is the
                                         third-largest Austrian bank and a specialist in commercial and investment banking.
                                         As the parent company of the RZB Group, it ranks among Central and Eastern
                                         Europe’s leading banking groups, offering the full scope of commercial, investment
                                         and retail banking services practically throughout the region.

           RZB Group                     The group owned and steered by RZB. Raiffeisen International forms one of the
                                         Group’s main units, acting as holding and steering company for the network of
                                         banks and leasing companies in Central and Eastern Europe.




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