SOFAZ Supervisory Board meeting was held on February 16, 2004. The meeting presided over by Mr. Artur Rasizadeh, Prime Minister and Chairman of the Supervisory Board of SOFAZ discussed draft budget of the Fund for 2004 fiscal year.

Pursuant to the Law on Budget System of the Republic of Azerbaijan all expenditures and revenues of the Fund (exclusive of operational expenses and the asset management expenses) are included in the consolidated budget. Taking into consideration that Milli Majlis (Parliament) of the Republic of Azerbaijan approved Oil Fund revenues of 928 720, 4 million manat and expenditures ceiling of 889 000, 0 million manat within the consolidated budget for 2004, the Supervisory Board reviewed the draft budget submitted by the Executive Director of the Fund on Fund operational expenditures, which are not included in the consolidated budget. According to the submitted draft the operating expenses, of the Oil Fund were set to be 5 119, 3 million mantas, while the expenditures for management of the Fund assets by foreign managers to be 9 576, 9 million manats.

The Supervisory Board discussed whether the expenses related to the management of the Funds assets by foreign managers should be reflected in the Oil Fund budget.

Two options were considered. The first option suggested not including the fees payable to the external asset managers for managing the Oil Fund assets in the Fund budget and netting them off the investment portfolio, while regular reporting and publishing them. The second option envisaged inclusion of the aforesaid fees in the budget. As a result of extensive discussions, the Supervisory Board preferred the second option, i.e. to include external management fees in the Oil Fund budget. Thus, the revenues of the 2004 budget of the Fund were to constitute as 928 720, 4 million manat, and the expenditures 903 696, 2 million manat.

Main directions of the Oil Fund assets utilization in 2004 are improvement of socio-economic condition of refugees and internally displaced persons who were forced to flee their native lands as a result of Armenia's policy of ethnic cleansing and aggression against Azerbaijan (230 000, 0 million manat), financing of government portion of AzBTC Co. shareholding obligation in Baku-Tbilisi-Ceyhan pipeline project (9 000, 0 million manat) and transfer to the state budget (650 000, 0 million manat).

The Supervisory Board asserted as satisfactory the draft Budget of the Fund for 2004, main directions of the management of the Fund assets (including investment policy) and draft annual operating expenditures budget and recommended them to be submitted to the President of the Republic of Azerbaijan for approval.

Prime Minister Artur Rasizadeh was re-elected the Supervisory Board Chairman-in-office.