ANNUAL REPORT 2005 - Lukoil

FINANCIAL ACCOUNTS
members of the Group's management and Board of Directors. The Company used an independent valuation in the determination
of the selling price. The transaction was structured to be completed in two phases. The first phase, representing
the sale of 78% of the Group's ownership interest for $169 million was completed on September 22, 2004. The
second phase, in which the Group was to sell its remaining 21% ownership interest in the Bank for $45 million, was
expected to be completed by the end of June 2007. The Group recognized an impairment loss of $35 million in relation
to this transaction during 2004. In December 2005 the Group and the buyer cancelled the contract related to the second
phase. Subsequently, in December 2005, the Group made a public auction for the sale of its remaining 21% ownership
interest in the Bank and entered into a contract with the bidder, the same related party, at a selling price of $33 million.
This transaction is expected to be completed by the end of June 2006. The Group recognized an additional impairment
loss of $12 million during 2005.
As of December 31, 2005 the carrying value of the Group's investment in the Bank is $33 million and is included in
"Investments" in the consolidated balance sheet.
In April 2003 a Group company completed the sale of its 10% interest in the production sharing agreement operated by
the Azerbaijan International Operating Company for net $1,337 million cash, resulting in the recognition of a net gain of
$1,130 million during 2003. This gain is included in the "Exploration and production" operating segment and "International"
geographical segment in Note 23 "Segment information."
NOTE 11. SHORT-TERM BORROWINGS AND CURRENT PORTION OF LONG-TERM DEBT
As of
December 31, 2005
As of
December 31, 2004
Short-term borrowings from third parties 315 875
Short-term borrowings from related parties 1 18
Current portion of long-term debt 537 372
Total short-term borrowings and current portion of long-term debt 853 1,265
Short-term borrowings are primarily payable in US dollars and are unsecured. The weighted-average interest rate on shortterm
borrowings from third parties was 5.6% and 5.0% per annum as of December 31, 2005 and 2004, respectively.
NOTE 12. LONG-TERM DEBT
As of
December 31, 2005
As of
December 31, 2004
Long-term loans and borrowings from third parties (including loans
from banks in the amount of $4,107 million and $1,878 million
as of December 31, 2005 and 2004, respectively) 4,233 2,276
Long-term loans and borrowings from related parties 65 14
3.5% Convertible US dollar bonds, maturing 2007 94 380
7.25% Russian ruble bonds, maturing 2008 208 216
Capital lease obligation 74 95
Total long-term debt 4,674 2,981
Current portion of long-term debt (537) (372)
Total non-current portion of long-term debt 4,137 2,609
148