ANNUAL REPORT2006

FIRM TRANSGARANT

Contents

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Key events of the year 2006

Competition

Philosophy and ethics of businessObjectives of company Transgarant

Mission of company Transgarant

Board of directorsAffiliated and dependent companies

Industrial parameters of the year 2006Filial network

The new partner - transport group fescoClients and partners

Carriage and traction rolling stockRepair base

WarehousingThe dispatching control and information support

Personnel policyCharity

Consolidated financial reporting by international account-ing standards

The review of the reporting of limited liability company company Firm Transgarant by russian accounting

standardsValue of intangible actives

Investment programFinancial forecasts

Financing of activity of the company

MAIn IndICATORs OF ACTIVITy OF TRAnsgARAnT FOR 3 yeARs

An AddRess MAde By ChAIRMAn OF BOARd OF dIReCTORs And geneRAl dIReCTOR

TRAnsgARAnT TOdAy

RAIl TRAnsPORTATIOn MARKeT

CORPORATe MAnAgeMenT

The BAsIC KInds OF ACTIVITy OF The COMPAny

IndUsTRIAl InFRAsTRUCTURe

PeRsOnnel And sOCIAl POlICy

deVelOPMenT sTRATegy

FInAnCIAl ResUlTs OF ACTIVITy OF gROUP TRAnsgARAnT

lICenses And CeRTIFICATes

COnTACTs And BAnKeRs

page

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Main indicators of activity of Transgarant for 3 years

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IndUsTRIAl PARAMeTeRs

FInAnCIAl PARAMeTeRs

measurement unit 2004 2005 2006 Turnover of goods Billion ton-kilometer 21,17 24,89 24,76loading million tons 19,55 17,98 16,07 Transgarant carriage 10 098 10 324 11 286

Adjusted for affiliated and dependent companies carriage 10 293 11 311 13 374Average range of transportation Km 1082,8 1383,9 1540,9Average number of the personnel person 188 276 328

Proceeds million rbl. 3 099 3 686 4 130Cost price million rbl. (3 155) (2 845) (3 488)eBITdA million rbl. 63 993 872eBIT million rbl. (57) 779 600net profit million rbl. (107) 248 343Authorized capital million rbl. 600 600 880

Quantity of cars in operating as of de-cember, 31st

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An address made by General Director

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geneRAl dIReCTOR OF lIMITed lIABIlITy COMPAny FIRM TRAnsgARAnT

deAR COlleAgUes!

One more year of our activity has passed. Our activity was directed on achievement of an overall objective strengthen-ing of Transgarant positions as the leader of the Russian transportation market. We continue to follow our main cre-do to be always better than our clients expect, to be better than our competitors can be. This year has been reach with bright events. Its results are significant. The company kept on increasing the car fleet, having increased it more than by 9 % - up to 11286 cars. We continue to place the emphasis on a specialized rolling stock, in view of greater pros-pects. There appeared a new type of a rolling stock platforms for transportation of strip which have become leaders in profitableness. Within the year the company actively purchased covered wagons, open-top wagons, platforms for wood transportation, took cement carri- ers and fitting platforms on lease. The important event was Baltic cargo operator sIA Tektrans entering into group Transgarant. Tektrans possesses fleet of 216 large volume specialized gas tanks. Thus, we entered into a new segment of the transport market - transportations of liquefied hydrocar- bon gases, and became able to offer new services to our clients. simultaneously Trans- garant continued a policy of transport business diversification and expansion. We have acquires 75 % shares of a warehouse complex stroyopttorg in Khabarovsk. On the basis of stroyopttorg we are planning to create a universal terminal which will render a complex of services on receipt and sending of cars and containers, processing and storage of car- goes. last year we established a partnership with strong and reliable ally transport group FesCO which is able to provide additional cargo and client base for Transgarant. For our part, we can render our clients the new services including complex cargo delivery not only by railway but also by the sea, and also transshipment in ports. Com-plex transport service has become one of the most important forms of strengthening of our rela-tions with the clients. A bright example of success of such approach to tasks solving was signing the long-term contract on transport service for the 7 years period with the leading manufacturer of pulp-and-paper production in Russia- JsC Mondi Business Paper syktyvkarsky timber industry complex. This contract provides full supply of timber industry complex with railway rolling stock for pickup of finished product. Result of financial activity of the company of the last year was a growth of the consolidated net profit by 38 % (324,8 million roubles), proceeds by 12 % (4,13 billion roubles). Achieve-ments of the Company have been highly estimated by our colleagues railroaders. In november Transgarant was recognized as the best operator of a railway rolling stock of 2006 by the version of a national carrier JsC Russian railways. We would like to express our personal gratitude to all our cli-ents and business partners for trust and support which are the key factor of growth and financial success of the company. Also we would like to thank our em- ployees. We are proud with their professionalism, devotion and ability to fulfill ambitious tasks.

An address made by General Director

s.A.gUshChIn

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Transgarant today

limited liability Company Firm Transga-rant , founded in 1997, renders services on railway transportation of cargoes of industrial purpose and is one of lead-ers of the Russian rail transportation market. The company has partner rela-tions with transport group FesCO which owns 50 % of the company.

16million tonsTurnover of goods of rail transportation of

the Company makes 24.8 billion in ton-km. Annual volume of loading is over than 16 million tons.

The best JsC Russian Railways partner 2006 is a railway vehichles operator in the year 2006.

9

The fleet of a rolling stock of the Company con-sists of universal cars: open top wagons, covered wagons and platforms, and also of specialized cars: pellet carriers, petrol carriers and ammonia tanks, grain carri-ers, fitting platforms, platforms for pipes and wide plates transportation, cement carriers, mineral carriers, refrigerator sections, tanks and tank-containers for

Affiliated companies are on lead positions on the market of big diameter pipes transportation, transportation of perish-able cargoes, liquefied gases and coal.

25liquefied gas transportation. At the mo-ment the company operates with over than 11.6 thousand units, and together with affiliated companies - over 14.6 thou-sand units of rolling stock, 70% of which are the companys own cars. group of the companies owns 4 main-line and 7 diesel-locomotive shunters.

Firm Transgarant performs cargoes trans-portation on 15 of total 17 Russian rail-ways, and also on railways of the CIs countries. The company has branches and representations in 25 cities of Russia and the CIs.

Transgarant today

branches and representations

70the companys own cars

10

Transgarant acquired 75 % shares of Kha-barovsk warehouse complex stroyopt-torg. On the basis of stroyopttorg it is planning to create a universal termi-nal which will render a complex of serv-ices on receipt and sending of cars and containers, processing and storage of cargoes.

Baltic cargo operator sIA Tektrans, trans-porting s liquefied hydrocarbon gases and having a fleet of 216 large (76 m3) spe-cialized tanks has joined the Transgaran companies group.

Transgarant acquired 50 % of Closed Joint-stock Company Universal Transgroup and became a strategic partner of the factory manufacturing specialized plat-forms for big diameter pipes transpor-tation.

The fleet of own cars of limited liability Company Firm Transgarant has ex-ceeded 7000 units.

MARCh JUly

Key events of the year 2006

Transgarant and JsC Mondi Business Paper syktyvkarsky timber indus-try complex, the leading manufac-turer of pulp-and-paper production in Russia have concluded a long-term contract on transport service for the 7 years period.

JsC dalnevostochnoye Morskoye Parokhod-stvo has acquired 50 % of the author-ized capital of limited liability Company Firm Transgarant.

sePTeMBeR nOVeMBeRThe fleet of cars of Transgarant companies

group has exceeded 13 thousand units.Firm Transgarant, was recognized as the

best operator of a railway rolling stock of 2006 by the version of a national carrier JsC Russian railways.

Firm Transgarant has been recognized as the best company-operator on the yugo-Vostochnaya railway.

deCeMBeR

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Rail transportation market

Rail transportation market

Business of the operating companies began to develop since 2003 when a wagon constituent (a payment for using a rolling stock) was formed in railway tariff.

CompetitionThe main competitors of the company are: novaya Perevozochnaya companiya evrosib, dalnevostochnaya Transport-

naya gruppa and others.The companies-operators can be divided into two groups. The first group consists of companies created at large extracting

and industrial enterprises. such companies are focused, first of all, on transport needs of parent structures. Accord-ingly, their business volume directly is connected with of activity of the parent company. Their additional advantage is their own car fleet which is being on balance of the parent company, and availability of financial resources for freight cars purchasing. Typical representatives of this group are: UKOs-Transservice, Joint-stock Company lukOIl-Trans, RusalTrans, Fintrans (group ylym Pulp ), forwarding companies Minudobreniya , spetsTsisterny (AK sibur). The second group includes companies whose primary main activity is rendering of transportation services.

limited liability Company Firm Transgarant is of the second type of the transport companies-operators. A basis of this business is the maximal orientation to needs of the market. A flexible work with the client and diversification of the transported cargoes makes independent operators steady against changes in conjuncture of cargoes transportation markets and tariff policy.

Protection of private operators is provided by Ministries of Transport and Federal Antimonopoly service which supervises activity of JsC Russian railways as an infrastructural monopolist.

development of the operating companies made it possible to increase a car fleet and meet requirements of the domestic industry in export of goods.

InFORMATIOn Railroad tariffs are established by the Price-list 10-01 Tariffs for cargoes transportations and infra-

structure services which are carried out by the Russian railways (the Tariff regulation No 1, parts 1 and 2) which was approved by the decision of the Federal Energy commission of the Russian Federa-tion from June, 17th, 2003 No 47-/5, registered by the Ministry of Justice of the Russian Federation on July, 09th, 2003. Annually tariffs and fees are indexed on average by 9-12 %.

Companies-operators of own rolling stock pay to Russian railways tariff less wagon constituent while billing client with market price for the transportation which is approximately equal to the rates as set by Russian Railway. Thus they receive their margin.

Competitive advantage is the operators opportunity of offering to consignor of goods a necessary type, quality and quan-tity of cars, and also opportunity of performing transportation within the set terms, by the demanded route.

A proprietor of the rolling spends the margin for repair of its cars and for payment of tariff for empty run. Operating companies can reduce costs by means of adjusting of work technology: reducing empty run, creating ring routes of transportations, etc.

Own car fleets of the most operators generally consist of tanks, open-top wagons and platforms. some operators focus on separate types of a rolling stock (BaltTrasservice tanks, novaya Perevozochnaya companiya open top wagons). Other group of operators, alongside with universal fleet, focus on specialized cars. Company evrosib specializes on transportations for timber industries and owns highly specialized cars (chip carriers, pulp-wood carriers etc).

limited liability Company Firm Transgarant has a leading position on the market of pellet-carriers, owns a large fleet of covered wagons and platforms for timber transportation. Affiliated and dependent companies of Transgarant have leading positions in transportations of big diameter pipes and cargoes of Ukrainian ore-metal complex.

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Development strategy

The basic accent in development strategy ac-cent is made on diversification of cargoes and cars fleet. diversification allows re-ducing risks in several directions.

First, activity of the operating companies strongly depends on the tariffs which vary depending on type of the rolling stock, hence, tariff changes for separate type of a rolling stock will not affect the com-pany owning various cars fleet.

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Development strategy

The second factor is a seasonal change of transportations. Transportations by some type of freight cars within a year undergo periods of recession and raising. so, an increase in volume of transpor-tations by open-top wagons and tanks is falls on the winter period (cold season) while transportation by pellet carriers in winter is in recession due to freezing of raw materials. Consignees prefer to create a stock of raw material for the win-ter season, so activity of iron-ore material transportation fall on the summer period. similarly, a recession in transportations by timber platforms falls on autumn-spring because of adverse weather conditions in taiga.

diversified fleet makes possible to avoid sea-sonal recessions in total volume of trans-portations.

diversification of fleet and a cargoes portfolio makes it possible to work with the com-panies of different branches of economy - power, metallurgical, chemical, oil refin-ing, focused both on export, and on home market. Also this reduces risk of reces-sions consequences in separate branches of economics.

Transgarant also plans to expand its pres-ence at those segments of the market where it is required a specialized rolling stock which is not enough now. level for new participants is high enough here, so competitors go to such segments less willingly. The company plans to expand the cars fleet by acquiring a specialized rolling stock.

In terms of containerization Russia is essen-tially behind the main developed coun-tries. In order to solve this problem and strengthen a competition of Russia in the global market of the container trans-portations, it is necessary to carry out a team-work for many participants of the transportation process. First of all, it is re-quired to overcome an existing disbalance in import and export container transpor-tations, increase in container transpor-tations inside of Russia in network of JsC Russian Railways. In our opinion it is one of the main constraints in attrac-tion of the client to the infrastructure of the Russian railways.

development of container transportations is restrained by insufficient quantity of

overland container terminals and logistical centers, as connecting elements between the railway, consignor and consignee.

We do avoid trying to settle this problem. experts of Transgarant have worked out a program for development of the logisti-cal centers and container terminals in the territory of the Russian Federation and CIs countries. This program provides con-struction of several overland terminals in main areas of freight traffic density in the Russian Federation.

philosophy and ethiCs of business

The philosophy and ethics of companys busi-ness is based on open and mutually bene-ficial cooperation with the clients and the partners. This is possible due to profes-sionalism and competence. The company conducts business in fair and friendly way, showing flexibility and optimism.

objeCtives of Compa-ny transgarant

Transgarant (as group of the companies of the railway structure, possessing own brand in structure of multimodal trans-port holding FesCO) should become the most powerful private operator on the market of rail transportation on all space of the railway 1520, who renders services in wholesale and retail sectors with use the widest regional filial and agency network, with priority orienta-tion to the market of transportations by specialized rolling stock (both existing and perspective).

mission of Compa-ny transgarant

Our mission is to provide our clients on all space of railway 1520 with optimum and effective transport component guaran-teeing successful functioning of its busi-ness.

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Corporate management

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sTRUCTURe OF BOARd OF dIReCTORsSmyslov S.R. (chairman) Chairman of Board of directors of limited liability

Company Firm Transgarant

Generalov S.V. President of limited liability Company Promyshlennye investory

Povarenkin S.V. chairman of Board of directors of limited liability Company Promyshlennye

investory , Chairman of Board of directors of JCs FesCO

Ambrosov E.N. general director of JsC FesCO

Gilts U.B. First deputy general director in economy and the finance of JsC FesCO

Gushchin S.A. general director of limited liability Company Firm Transgarant

Falin N.A. First deputy general director of limited liability Company Firm Transgarant

Larina J.V. chief of legal management of limited liability Company Firm Transgarant

BOARd OF dIReCTORs

According to the Charter, a general Meeting of the participants is the superior management body of the society. At present time the sole participant of the company is neteller holdings limited, 50 % shares of which at the moment of drawing up of this report belong to group FesCO. The general management over society, except for the decision of matters referred to the competence of the sole Participant, is carried out by the Board of directors which consists of 8 person. Members of Board of directors of the society are elected by the sole Participant.

limited liability Company Firm Transgarant, being one of the largest in Russia and CIs coun-tries private railway operators, supports well-being of its shareholders, creates attractive working conditions for the personnel and serves interests of its clients. Realizing a high responsibility to our clients, and also to the credit organizations, we conduct measures di-rected to perfection of corporate management system which is a determinative for suc-cessful work in modern conditions.

From the date of its foundation, 1997, limited liability Company Firm Transgarant is the corporate center of the group. Activity of the company is supervised by Board of directors which is formed by general meeting of participants of the Open Company. general director is the sole executive. This post is permanently held by sergey Anatolevich guschin.

Corporate management

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affiliated and dependent Companies

group Transgarant unites 8 affiliated and dependent companies, each of them specializes on the certain direction of works. Activity of all af-filiated companies is coordinated by the head office of limited liability Company Transgarant.

10050

BRAnCh esTABlIshMenT TRAnsgARAnT UKRAInA

effect in the authorized capital 100 %The basic direction of activity of the company is carrying out of forwarding

services in the territory of Ukraine. The company owns 748 pellet carri-ers, 213 open-top wagons and 10 cement carriers. The main clients are donetskstal, Uzhny gOK, Volontsement| and Khartzyzsky trubny zavod.

JOInT-sTOCK COMPAny UnIVeRsAl TRAns-gRUPP effect in the authorized capital 50 %

Primary activity of Joint-stock Company Universal Transgrupp is transportation by Russian and CIs countries railways network by own platforms for big diameter pipes and special wide sheet (strip). The company owns 762 specialized platforms for pipes transportation and is the biggest carrier of big diameter pipes on the market. Com-pany also owns 20 specialized platforms for transportation of large-format sheet products. now the basic directions of transportations are big diameter pipes transportation from Khartzyzsky pipe factory, Chelyabinsky tube-rolling mill and Vyksunsky metallurgical plant to main pipe-lines which are under construction (the main consumers: Rosneft, Transneft and severgazprom), and also delivery of strip to Vyksunsky metallurgical plant

OPen COMPAny TRAnsgARAnT- VOsTOKeffect in the authorized capital 45 %

The company carries out transportation and forwarding services on the dalnevostochnaya railway and is one of the largest forwarders of coal. Also the company is the largest member in the market of perishable cargoes transportations. The company operates with 882 open-top wagons, 382 wagons of which are its own ones. The company owns 225 refrigerator units, 60 fitting platforms for trans-portation of refrigerated containers and also the main diesel locomo-tive of series 2Te10U.

45%

%

%

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sIA TeKTRAnseffect in authorized capital 100 %

The company focuses on transportations of liquefied hydrocarbon gases by Russian Federation, Kazakhstan and Baltic railways network. The company owns fleet of 216 big volume (76 3) specialized tanks.

OPen COMPAny ReMOnTnAyA TRAns-PORTnAyA KOMPAnIyAeffect in the authorized capital 100 %

The company renders services on repair, maintenance and alteration of rolling-and traction stock and also carries out development of infrastructural projects of the head company. now the company is completing a construction of wheel workshops in stary Oskol. The company also intends to build two modern wagon depots within two years.

JsC KMAzheldORTRAnseffect in the authorized capital 99 %

The company renders services on transportation service for organizations and the enterprises at the station Kotyol of the yugo-Vostochnaya railway.

JsC sTROyOPTTORgeffect in the authorized capita l 75 % + 1 share

On the basis of a warehouse complex stroyopttorg a creation of the uni-versal terminal which would render a complex of services in sphere of rail transportations including reception and sending of cars and con-tainers, processing and storage of cargoes is planned. The warehouse complex is located in Khabarovsk, close to a federal highway Vladivos-tok-Khabarovsk. The total area of the complex makes 9.8 hectares.

OPen COMPAny TRAnseVROAzIyAeffect in authorized capital 51 %

The basic direction of activity of the company is rendering forwarding serv-ices in the territory of Kazakhstan and of the countries of Central Asia.

100

99100

7551

%

%

%

%

%

Corporate management

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Basic kinds of activity of the company

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limited liability Company Firm Transgarant is the versatile transport company carrying out a steady business, both in the field of car-goes transportations of cargoes, and in allied industries. The com-pany offers to clients a range of the services providing guaranteed cargoes delivery:

services on cargoes transportation by companys own rolling stock;Forwarding service for the enterprises at cargoes transporting;Multimodal transportations and the organization of cargoes trans-

shipment in ports;lending a companys own rolling stock;The operative dispatching control over cars moving;Offering complex services to consignors and consignees:

scheduling and cars fleet management; Improving of technological process of loading and a unloading; settlements with JsC Russian railways and with its structural

divisions; Organization of rout dispatches and shipments.

MAIn COMPeTITIVe AdVAnTAges OF OUR COMPAny ARe As FOllOWs

long-term experience and competence of management and experts of the company;

existence of own rolling stock fleet which has the stable tendency to increase;

The widest fleet of qualitative and technological specialized cars;The developed network of branches and representatives in 25 cities of

Russia and CIs countries;Well arranged business-processes and technologies;Own resource on maintenance service of cars fleet;Well arranged cooperation with JsC Russian Railways and with ad-

ministrations of railways of CIs and Baltic countries;Financial stability allowing to use flexible financial schemes of pay-

ment for rendered services.

Basic kinds of activity of the company

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industrial parameters of the year 2006The main direction of business for Transgarant is cargoes transportation by own and

rented cars. In 2006 the company continued the policy of strengthening of the lead-ing position on the transportation service market of Russia and CIs countries. The turnover of goods of the group made with 24.8 billion ton-kilometers, loading - 16 million 66 thousand tons.

CARgOes lOAdIng InTO CARs OF TRAnsgARAnT FleeT

2005 2006 % Total, including 17 984,1 16 066,7 -10,7% Iron-ore raw material 7 777,9 5 838,9 -24,9%Coal 3 537,5 2 623,4 -25,8%sulfur 1 872,1 1 704,6 -8,9%Metal 463,2 1 222,1 2,6 timesCrushed rock 744,6 851,9 14,4%Mineral oil 876,5 822,8 -6,1%Wood 762,8 739,1 -3,1%Industrial goods 175,1 402,8 2,3 timesFoodstuffs 131,3 283,5 2,1 timesPipes 19,4 267,2 13,8 timeFluxes, limestone for fluxing 324,5 250,5 - 22,8%Paper 114,6 216,8 89,2%nonferrous metals 12,7 180,2 14 timessulfuric pyrites 136,1 155,7 15,1%Alumina 518,4 135,8 -73,8%Mineral fertilizers 0,0 127,3 Other 517,4 244,1 -52,8%

16,06million tons 10+%carload shipment

decrease in loading by 10.7 % is connected with gradual transition from mass sending routes to carload shipment of highly remunerative cargoes. In particular, because of significant reduction in fleet of pellets carriers (on 16.3 %) and hoppers (grain carriers) transportations of iron-ore raw material and alumina have decreased by 24.9 % and 73.8 % corresponding-ly. decrease in volumes of loading was also affected by great volume of scheduled repair of cars which increased almost 1.5 times. Therefore the part of fleet has temporarily fallen out of the commercial turnover.

Reduction of volumes of loading in these types of rolling stock reflects the tendency of gradual transition of the company to transportations of highly remunerative cargoes. so, the year was marked with rapid growth of carload shipments of consumer goods by the covered rolling stock more than in 2,5 times. share of carload and group shipments in structure of Transgarant transportations has increased almost by 10 %.

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CARgO RelATIVe densIsITy

iron-ore raw material 36,3%

coal 16,3%

sulfur 10,6%

metal 7,6%

crushed rock 5,3%

mineral oil 5,1%

wood 4,6%

industrial goods 2,5%

foodstuffs 1,8%

pipes 1,7%

other 8,2%

Alongside with development of transportations covered cars, Transgarant actively devel-oped other highly remunerative spheres of transportations. enering of the Baltic company sIA Tektrans owning 216 gas tanks into the group Transgarant has allowed to increase transportations of liquefied gas in 8.1 times. Another new direction was steel pipes trans-portation (growth 13.8 times) and strip by new type of a rolling stock platforms for strip transportation. Alongside with above mentioned transportations of metal increased (in 2,6 times), crushed rock by 14 %, sulfuric pyrites on 15 %.

Transition to transportations of highly remunerative cargoes had positive effect on of the profit-able rate.

The parameter of average range of the transportation, influencing on profitableness of the car has increased by 11,5 % - up to 1542 km.

Basic kinds of activity of the company

shARe OF CARlOAd shIPMenT In TOTAl AMOUnT OF lOAdIng

year 2005

one carriage way 31,2%

route way 68,8%

year 2006

one carriage way 40,8%

route way 59,2%

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ChelyabinskSaratov

filial networK stable and steady development of group Transgarant is provided by the wide filial network in Russia and CIs countries. The company has its branches and representatives in 25 cities of Russia and CIs. It allows to work actively on 15 of 17 Russian railways belonging to system of JsC Russian railways, and also on railways of the CIs countries.

Moscow

St.-Petersburg

Cherepovets Syktyvkar

Ekaterinburg

OrskAstrakhan

VoronezhMariupol

Omsk

Alma-Ata

Kishinev Kiev

Donetsk

Stary OskolDnepropetrovsk

Riga

VOlUMes OF lOAdIng On RAIlWAys

Road of loading 2005 2006 %yugo-Vostochnaya 4 234,5 3 605,7 -14,8%sverdlovskaya 3 088,4 2 578,8 -16,5%Privolzhskaya 1 876,1 1 711,8 -8,8%Vostochno-sibirskaya 1 487,5 1 674,2 12,6%yuzhno-Uralskaya 1 104,5 1 554,1 40,7%dalne-Vostochnaya 1 898,0 1 354,0 -28,7%Moskovskaya 1 307,8 1 020,2 -22,0%Octyabrskaya 1 004,5 604,2 -39,9%severnaya 672,2 523,0 -22,2%Krasnoyarskaya 616,1 455,0 -26,1%severo-Kavkazskaya 142,2 235,5 65,6%zapadno-sibirskayu 363,7 206,5 -43,2%CIs 181,0 543,7 3 Total 17 984,5 16 066,7 -10,7%

Zheleznogorsk

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Irkutsk

KrasnoyarskKomsomolsk on Amur

Khabarovsk

Nakhodka

central officeMoscow

branchVoronezh

representative officeCherepovets

Kemerovo

Basic kinds of activity of the company

affiliated (dependent) enterpriseKiev

Basic volume of loading falls on yugo-Vostochnaya, sverdlovskaya, Privolzhskaya and yuzhno-Uralskaya railways. In 2006, in spite of the general reduction in loading, an increase in transportation volumes took place on Vostochno-sibirskaya, yuzhno-Uralskaya and seve-ro-Kavkazskaya railways. due to development of carload shipment, volumes on railroads have even grown.

VOlUMes OF lOAdIng On RAIlWAys

Road of loading 2005 2006 %yugo-Vostochnaya 4 234,5 3 605,7 -14,8%sverdlovskaya 3 088,4 2 578,8 -16,5%Privolzhskaya 1 876,1 1 711,8 -8,8%Vostochno-sibirskaya 1 487,5 1 674,2 12,6%yuzhno-Uralskaya 1 104,5 1 554,1 40,7%dalne-Vostochnaya 1 898,0 1 354,0 -28,7%Moskovskaya 1 307,8 1 020,2 -22,0%Octyabrskaya 1 004,5 604,2 -39,9%severnaya 672,2 523,0 -22,2%Krasnoyarskaya 616,1 455,0 -26,1%severo-Kavkazskaya 142,2 235,5 65,6%zapadno-sibirskayu 363,7 206,5 -43,2%CIs 181,0 543,7 3 Total 17 984,5 16 066,7 -10,7%

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MAIn COMMeRCIAl PARTneRs And ClIenTs

Enterprises of mining and smelting com-plex

JsC Metallurgical Complex Azovstal, JsC Al-metyevsky pipe factory, JsC Amurmetall , JsC Ashinsky metallurgical plant, JsC Beloretsky Metallurgical Complex, JsC Volzgsky pipe factory, JsC Vyksunsky metallurgical plant, JsC zaporozhstal, JsC West-siberian Metallurgical Com-plex (zsMK), JsC Moscow Pipe Plant, JsC novokuznetsky Metallurgical Com-plex, JsC novo-lipetsky Metallurgical Complex, JsC nizhne-Tagilsky Metal-lurgical Complex, JsC Taganrogsky Met-allurgical Plant, JsC Tulachermet, JsC Pashiysky Cement0Metallurgical Plant, JsC Pervouralsky niovotrubny Plant, JsC Chelyabinsky Metallurgical Complex, JsC Chusovskoy Metallurgical Plant, JsC Chelyabinsky zink Plant , JsC Chelyab-insky electro-Metallurgical Complex, JsC Vysokogorsky ore mining and processing enterprise, JsC Kachkanar-sky ore mining and processing enterprise Vanadium, JsC Korshunovsky ore min-ing and processing enterprise, JsC leb-edinsky ore mining and processing enter-prise, JsC Mikhaylovsky ore mining and processing enterprise, JsCUchalinsky ore mining and processing enterprise

Fuel and energy complex JsC Irkutskenergo, JsC Priargunsky in-dustrial mining-chemical association, JsC sibarian Coal Power Company, JsC Khabarovskenergo, JsC nK yakutugol, JsC AK yakutskenergo

Construction complexJsC Belgorod cement, JsC Borovichsky flux complex, JsC Plant reinforced con-crete constructions 1, JsC Katavsky ce-ment , JsC Quartz , JsC Promstroyinvest , JsC novokievsky crushed stone factory,

JsC Reka, JsC Cerebryakovtsement , JsCsatkinsky crushed stone factory, JsC Torgovy dom nerud Invest(group of companies MAgnesIT), JsC Topkinsky tsement , JsC Ulyanovsktsement, JsC Uraltsement

Petroleum production and oil-and-gas in-dustry Branch Astrakhanburgaz, JsC Moscow petroleum refinery, Orenburggazprom, joint-stock company Pavlodarsky petro-leum chemical plant, JsC siburgazservis, JsC Tatneft-Moskvanefteprodukt, JsC Tomskgazprom

Chemical industry enterprisesJsC Astrakhangazprom, JsC Azot (Be-rezniki), JsC nAK Azot (novomoskovsk), JsC nizhnekamsky tyre factory , JsC FosAgro, JsC Khimprom (Volgograd).

Nonferrous metallurgy enterprises JsC Kuznetskiye ferrosplavy, sUAl, RUsAl, JsC UgMK-holding, JsC Uzhuralnikel

Timber industryJsC joint venture Arkaim, JsC dalles-prom, JsC Kondopoga, JsC Kronostar, JsC Monsi Business Paper syktyvkarsky woodworking complex, JsC Rimbunan hijau International, UPM-Kymmene.

Food industryJsC Baltic, Joint-stock Company Con-diter-Kursk, JsC Melnik, JsC agrarian and industrial complex Khleb Altaya

Also, we render transportation services to over than 300 enterprises of a various level and various industrial spheres. We are grateful to all our clients for cooperation.

Clients and partnersTransgarant has created the first class loyal client base, which is one of

key components of companys success and the most valuable asset.

25

One of the key events in history of Open Com-pany Firm Transgarant in 2006 was pur-chase of 50 % of Open Company Firm Transgarant authorized capital by trans-port group FesCO.

Transport group FesCO is the largest national intermodal transport operator uniting sea, railway, motor transporta-tion and stevedore service on groups own terminals in the largest ports of Rus-sia and CIs. The company has wide office networks all over the world. The group operates with 67 ships, (mainly container vessels), and provides transportations between Russian ports and the countries of Asian-Pacific region. The company owns large sea terminals in main indus-trial regions of Russia.

Collaboration with this partner opens for Transgarant new horizons of develop-ment of transportation business The com-pany has got an opportunity of rendering complex transport service on delivery of a cargo from door to door which includes delivery by railway transport, transship-ment in ports and transportation by the sea under the uniform door-to-door rate. Besides, Transgarant has got an opportunity of active developing of highly remunerative directions of containers transportations. For this purpose fitting platforms fleet platforms increased in 2.2 times in 2006. It is planned to bring this number up to 4 thousand units by 2010.

a new partner transport group fesCo

Basic kinds of activity of the company

26

Industrial infrastructure

existance of own industrial base is one of key components of success and independent position of Transgarant in the transport market. during the years of development group Transga-rant has created its own material and technical basis which allows independent providing transportations, repair of cars and storage of goods.

CARs

A peculiarity of Transgarant development strategy is focus on a specialized rolling stock which allows to enter the transportations markets of high profitability. In 2006 the company for the first time acquired 65 platforms for strip transportation. Also there was an increase in fleet of cement carriers (growth 89 %), mineral carriers (growth 42 %), gas tanks (growth 12,5 %). By the end of year the company purchased 146 fitting platforms (growth - 2.2 times).

At the same time, Transgarant has reduced its pellets carrier fleet to 16.4 % and grain carriers - to 77 % due to withdrawal of expensive rented cars. A hopper-batcher fleet has been com-pletely cut off. This reflects the tendency to gradual reduction of transportations of bulk cargo.

CAR FleeT sTRUCTURe

Quantity of cars Quantity of cars +/- as of December, 31st, 2005 as of December, 31st, 2006 TOTAL 10 324 11 286 962 Universal cars 5 838 7 514 1 676 Open top wagons 4 360 4 774 414 Covered wagons 932 1 710 778 Platforms 546 699 153Specialized cars 4 486 3 772 -714 Pellet cars 2 889 2 415 -474 Tanks (oil and petrol) 614 593 -21 Tanks (for petroleum gas carriages) 216 234 18 Tanks (ammonia) 100 100 0 grain cars 296 68 -228 Fitting platforms 120 266 146 Platforms for transporting large sheets 0 65 65 Cement cars 112 212 100 Mineral cars 70 100 30 Refrigerator sections 50 50 0 dump cars 19 0 -19

27

The acquired specialized rolling stock is of the greatest profitableness in Transgarant fleet. By the results of the year the best profitableness is noted for strip transportation platforms, gas and ammonia tanks. stable profitableness within the year was also shown by pellets carriers with 24.7 % of total profit.

simultaneously the Transgarant continued to acquire universal cars. In particular, the covered cars fleet has increased in 1.8 times. Also 153 universal platforms have been acquired.

In whole in 2006, Transgarant cars fleet increased by 9,3 % and made 11 thousand 286 units. A share of own cars in comparison with 2005 grew by 7,9 percentage items and made 67 % (rent 33 %). It is necessary to note, that, in connection with purchase of cars with a greater service life cars, a share of non-working fleet increased ( 2,6 % growth) because of necessity of carrying out of overhaul reconditioning. however Transgarant is planning to acquire mainly new cars.

specialized cars

universal cars

Open top wagons 42.3%

Covered wagons 15.2%

Platforms 6.2%

CAR FleeT sTRUCTURe as of december, 31st, 2006

Industrial infrastructure

Pellet cars 21.4%

Tanks (oil and petrol) 5.3%

Fitting platforms 2.4%

Tanks (for petroleum gas carriages) 2.1%

Cement cars 1.9%

Mineral cars 0.9%

Tanks (ammonia) 0.9%

Platforms for transporting large sheets 0.6%

grain cars 0.6%

dump cars 0.4%

28

starting from 2004, Transgarant has been carrying out a Program of creation of own locomotive fleet. At the moment the group Transgarant uses 4 main-line diesel locomotives. The measures provided by the Program have impl-proved a service level and efficiency of rolling stock management.

Areas diesel locomotives routes are sever-naya, yugo-Vostochnaya and dalnevos-tochnaya road.

2TE10UNo 0038

2E116No 708

2E10UNo 0110

2TE10No 2019

1990daugavpils KR-1 03.02.0410d100

1990TCh Winter R-3 30.09.0410d100

1984R Voronezh KRP 28.09.041-9dg

1981R Poltava KRP 13.10.041-9dg

A series of the loco-motive

last repair

year of release

engine

lOCOMOTIVes

dATA OF lOCOMOTIVe FleeT

A series of the loco-motive

last repair

year of release

engine

Transgarant also owns diesel-locomotive shunters providing bringing and taking away the cars on the companys lines in stary Oskol and Chelyabinsk.

29

Industrial infrastructure

repair basedevelopment of own repair shops is one

of priority segments in Transgarant business. There exist a great demand on repair services for a cargo rolling stock alongside with deficiency of supply. This is the reason of fast growth of prices for these kinds of works. Besides, the exist-ence of own repair shops creates tech-nological safety of business when all railway infrastructure is concentrated in natural monopoly JsC Rossiiskie zheleznye dorogi.

The basic repair division of the group is Open Company Remontnaya Transportnaya Kompaniya. It renders services on repair, maintenance and revision of rolling and traction stock. The company is complet-ing construction of car-wheel workshops in stary Oskol. Also it is planned to build two modern wagon depots in two years.

At the moment the Remontnaya Trans-portnaya Kompaniya uses cars prepa-ration point at station Aksarayskaya- 2 (Privolzhskaya railway ). In the property there is railway station Pervoozernaja in-frastructure of which will be developed for maintenance of freight cars coming to Chelyabinsky metallurgical complex.

Other company of the group - JsC KMAzhel-dortrans (Belgorod region) carries out a servicing of own cars at station Kotyol of the yugo-Vostochnaya railway.

30

dispatChing Control and information support

The structure of the Company includes own dispatching center carrying out moni-toring of movement of cargoes in round-the-clock mode. On the basis of the dis-patching center the services of duly and operative informing clients about loca-tion of the sent cargoes are offered. It al-lows to monitor movement of the cargo at all stages of transportation, carry out the control over submission of a rolling stock for loading, shipment and promo-tion of loaded cars on all railways of Rus-sia and CIs countries.

Intensive automation of business-processes on the basis of the integrated software products creates a base for more effec-tive work of managers of the company and contributes to operative taking of administrative decisions. Workplaces in the company are equipped with modern computer equipment. The developed system of telecommunications allows all structural divisions of the company to work in operative mode. Own de-partment of software development and support contributes to the best adapta-tion of the software to the specificity of works, peculiarities of technological processes. A program complex allowing operative tracing a transportation proc-ess, settling accounts with clients and partners, monitoring technical state of own and rented car fleet is in effect in the Company. At the same time, the compa-nys task is to maximum possible extent to get employees rid off routine work, by means further optimization and automa-tion of technological processes, improve-ment of a control system on the basis of the advanced information technologies.

31

Industrial infrastructure

warehousing Transgarant pays special attention to devel-

opment of own warehouse facilities. ex-istence of warehouse terminal facilities network will allow to offer clients new logistical solutions on optimization of cargo delivery.

In order to solve these tasks Transgarant has acquired 75 % shares of Khabarovsk warehouse complex stroyopttorg. On the basis of stroyopttorg it is planning a creation of the universal terminal which will render a complex of services on re-ceipt and sending of cars and containers, processing and storage of cargoes.

32

Personnel and social policy

One of the basic conditions of successful development of the railway transport company is creation of effective system of mutual relations inside the firm.

Personnel policy of Transgarant is directed on adaptation of corporate and organi-zational structure to the companys strategy. It contributes to increase of labour productivity, creation of hR of management system with high corpo-rate culture, to growth of the mutual re-sponsibility of employees and employer, support of initiative at all levels.

Company management clearly understands that the human resource is the base of the future economic success. Therefore a special attention is paid to creation of the stable and professional collective, able to achieve the best results. employ-

ee turnover in the company is minimal.human resource management in 2006 was

conducted as follows: - Improvement of remuneration and motiva-

tion of labour; - Analysis of labour processes and losses of

working hours in structural divisions;- Improvement of selection and allocation of

personnel;- Regular carrying out of diagnostics of so-

cial-psychological climate in structural divisions of the company.

personnel poliCy

33

The most important aspect of social activity of Transgarant is the charitable help to in-mates of Childrens homes and boarding schools, handicapped people, large fami-lies, educational institutions and medical establishments for children-orphans.

A charitable fund Alye Parusa acts as coordi-nating center of works in this direction. The fund was founded four years ago. In 2006 it was transferred total 1,8 million to the fund. The fund organizes excur-sions and trips to the large industrial en-terprises and historical places of Russia, sponsors summer holidays for children, renders material support to inmates and graduates of boarding schools.

last year the Fund has transferred significant money resources to Miassky special chil-drens home, zlatoustovsky childrens homes and some boarding schools locat-ed in Moscow area, Voronezh and Kursk areas. Besides within the Charitable pro-gram From kind hands with love, cush-ioned and cabinet furniture, books, sta-tionery and developing games have been transferred to sponsored childrens homes and boarding schools.

Personnel and social policy

Charity

34

PeRsOnnel OF gROUP TRAnsgARAnT

2004 2005 2006 Total, including: Average number 188 276 328 december, 31st 202 302 352Moscow Office Average number 131 177 218 december, 31st 141 188 230Branches Average number 57 99 110 december, 31st 61 114 122

QUAlITATIVe sTRUCTURe OF WORKeRs OF lIMITed lIABIlITy COMPAny FIRM TRAnsgARAnT

2004 2005 2006 employees (workers) whose age is between 18 and25 years old, % 12% 14% 19%employees (workers) whose age isbetween 26 and 36 years old, % 54% 57% 52%employees (workers) whose age isbetween 37 and50 years old, % 31% 26% 25%employees (workers) whose age isover 50 years old , % 3% 3% 4%Total: 100% 100% 100%Personnel: having elementary and/or average vocational education, % 32% 28% 25%having higher vocational education, 68% 72% 75%

AllOCATIOn OF WORKeRs By CATegORIes FOR yeARs 2004-2006.

Categories of employees 2004 2005 2006 Management 5 8 7directors of departments 15 13 11heads of an medium echelon 44 53 67experts 109 191 218employees 29 37 49

04 05 06AVeRAge WAges FOR lAsT ThRee yeARs 48390 5000836480

35

Financial results of Transgarant group

activity group Transgarant in order to increase pub-

licity of own business has been preparing a consolidated financial reporting ac-cording to the international standards (IFRs). The auditor of the reporting for 2006 was Open Company Moor stevens. Change of international auditor Price-waterhouseCoopers with Open Compa-ny Moor stevens is a desire of the new shareholder to conduct audit of affiliated companies with the uniform auditor.

36

AUdITORs RePORT TO The PARTICIPAnT OF gROUP TRAnsgARAnT

We have conducted audit of attaches consolidated of balance sheet of OOO Firm Transgarant (hereinafter Company) and its branches (hereinafter group) as on december 31 2006, and of corresponding consolidated income and loss statements and also of essential provi-sions of accounting policy and notes to reporting shown on pages 2-29.

ResPOnsIBIlITy OF AdMInIsTRATIOn FOR FInAnCIAl RePORTIng

An administration bears a responsibility for preparation and authenticity of data of the financial reporting in accordance with International Accounting standards. such responsibility in-cludes: development. Implementation and support of systems of internal control necessary for preparation and [presentation of authentic financial reporting, not having essential cor-rupted data obtained as a result of mistake or fraud; choice an application of appropriate accounting policy; calculation of estimated values acceptable for certain situation.

ResPOnsIBIlITy OF The AUdITOR

Our responsibility is to express our opinion regarding the financial reporting, basing on con-ducted audit. We have conducted audit in accordance with International Audit standards. These standard require observance of ethical standards by auditors and also planning and conducting audit to get sufficient confidence in the fact that the financial reporting does not contain any significant corruptions.

Audit includes carrying out procedures necessary for obtaining of audit evidences regarding nu-meric data and notes to financial reporting. Choice of appropriate procedures will be based on expert decision of the auditor, including estimation of risks of significant corruption of financial statements due to financial abuse or mistake. estimation of such risks includes examination of system of internal control over preparation and authenticity of financial statements for the purpose of development of audit procedures, applicable in certain con-ditions but not for expressing an opinion regarding efficiency of system of internal control of the group. Audit also includes estimation of applied accounting policy and validity of assumptions made by the administration, and also estimation of submission of financial reporting in general.

AUdITORs OPInIOn

In our opinion, the attached consolidated financial reporting in all essential aspects authenti-cally reflects a financial state of the group as on 31st of december 2006, and also results of its activity and monetary funds flow within the accounting period in accordance with International Accounting standards.

Consolidated finanCial report in aCCordanCe with iso

OOO MOOR sTIVens

38, sTReMyAnny lAne, MOsCOW, RUssIA, 113093.

April 16, 2007.

37

April 16, 2007.

Financial results of Transgarant group activity

COnsOlIdATed BAlAnCe sheeT as of december 31, 2006 (thousand rubles)

ASSETS Current assets: 2005 2006 Cash and cash equivalents 66,332 219,730loans issued 62,684 206,583loans issued and promissory notes related parties 154,842 31,076Interest receivable - 10,430Accounts receivable third parties 654,267 441,943Accounts receivable and prepayments related parties 113,678 101,848Prepayments third parties 438,062 385,863Value added taxes receivable and recoverable 337,313 308,033Inventories 9,620 50,847Other receivables 35,808 312,912Total current assets 1,872,606 2,069,265non-current assets:Property, plant and equipment 3,827,033 5,050,702Prepayments for non-current assets 182,756 -Other long-term prepayments 6,409 -Investments in associated undertaking 32,898 63,823Total non-current assets 4,049,096 5,114,525Total assets 5,921,702 7,183,790

lIABIlITIes & OWneRs eQUITy

Current liabilities: 2005 2006Accounts payable and accrued expenses third parties 201,834 214,895Advances from customers 316,990 72,365Accounts payable and advances received related parties 25,243 10,952short-term borrowings third parties 1,023,111 1,520,928short-term borrowings related parties 2,029,059 -short-term obligations under finance leases 230,648 468,635Other liabilities 83,553 121,770Total current liabilities 3,910,438 2,409,545Non-current liabilities:long-term borrowings third parties 448,193 2,629,202long-term obligations under finance leases 771,636 719,320deferred tax liability 33,525 44,987Total non-current liabilities 1,253,354 3,393,509Total liabilities excluding net assets attributable to owner 5,163,792 5,803,054Net assets attributable to ownerCharter capital 600,000 880,000Retained earnings 157,910 499,786Total net assets attributable to owner 757,910 1,379,786Minority interests - 950Total liabilities 5,921,702 7,183,790

38

TRAnsgARAnT gROUP COnsOlIdATed sTATeMenT OF InCOMe FOR the year ended 31 december 2006

2005 2006Revenue 3,685,853 4,130,400Cost of sales (2,844,925) (3,487,634)Gross profit 840,928 642,766selling, general and administrative expenses (51,890) (37,559)Other expenses (10,112) (5,079)Operating profit 778,926 600,128Interest expense (445,448) (537,492)Interest income 25,884 30,801share of associates net income 21,963 30,873Result on disposal of fixed assets (6,002) 121,701goodwill written off - 38,789Foreign exchange gain/(loss) (61,296) 206,365Profit before tax 314,027 491,165Taxation (66,381) (148,372)Profit for the year 247,646 342,793Attributable to: equity holders of the parent 247,646 341,659Minority interest - 1,134 247,646 342,793

COnsOlIdATed sTATeMenT OF CAsh FlOWs FOR the year ended 31 december 2006

2005 2006Cash flows from operating activities Profit before taxation 314,027 490,031Adjustments for: depreciation 214,218 298,944(gain)/loss on disposal of property, plant and equipment 6,002 (121,701)Charges to provisions on operating items 14,244 233,100Interest expenses, net 419,564 506,691negative goodwill written off - (38,789)Reversal of investment impairment - (50)Foreign exchange (profit) / loss on non-operating items 61,296 (205,231)share of net results from associates (21,963) (30,873)Operating cash flows before working capital changes 1,007,388 1,132,122Changes in working capital balances: Accounts receivable and prepayments (617,997) 90,782Accounts payable and accrued expenses (70,775) (296,355)Inventory (8,503) (39,434)Other receivables 1,363 (265,699)Other payables (4,800) 28,117

39

2005 2006Cash provided from operations 306,676 649,533Interest paid (403,563) (596,857)Profit taxes paid (16,843) (108,871)Net cash generated by / (used in) operating activities (113,730) (56,195)Cash flows from investing activities: Purchase of property, plant and equipment (1,384,947) (337,442)Proceeds from sale of property, plant and equipment 20,578 516,366loans repaid 161,402 131,531Acquisition of subsidiaries - (120,751)Acquisition of associate (15) -Proceeds from sales of investments 85 48,628Interest received 25,884 20,371Net cash generated by/(used in) investing activities: (1,177,013) 258,703Cash flows from financing activities: Proceeds from loans payable 8,936,238 8,790,333Repayment of loans payable (7,578,354) (8,231,077)Repayment of lease liability (256,551) (738,820)loans issued and promissory notes purchased (217,526) (151,664)Contribution from owner 438,791 280,000Net cash provided by financing activities 1,322,598 (51,228)Foreign exchange - 2,118Net increase in cash and cash equivalents 31,855 153,398Cash and cash equivalents at the beginning of the period 34,477 66,332Cash and cash equivalents at the end of the period 66,332 219,730

COnsOlIdATed sTATeMenT OF ChAnges In eQUITy FOR the year ended 31 december 2006 (in thousands of Russian Roubles)

Charter Retained Attributable Minority Total capital earnings to owner interest Equity at 1 January 2005 600,000 (89,736) 510,264 - 510,264Profit for the year - 247,646 247,646 - 247,646Balance at 1 January 2006 600,000 157,910 757,910 757,910Profit for the year - 342,793 342,793 - 342,793Contributions from owner 280,000 - 280,000 - 280,000Minority interest at acquisition date - - - 2,084 -Minority interest share of loss - - - (1,134) -Translation difference - (917) (917) - (917)Balance at 31 December 2006 880,000 499,786 1,379,786 950 1,380,736

Financial results of Transgarant group activity

40

+38net profit%

Within the year 2006 the proceeds made 4130 million roubles, which is 12 % more than in 2005. The group has shown growth of incomes (12 %) in 2006. The basic part of incomes has been received from trans-portation services 87 %, 5.7 % - incomes of agents transportation activity, 4,5 % of incomes have been received as a result of operational leasing of rolling stock, and 2.9 % - from other operations.

Value of eBIT has decreased in 2006 year be-cause of the increased cost of repairs and spare parts and amortization. net profit in 2006 year is considerably higher (by 72 % in comparison with 2005) due to and acquiring of Joint-stock Company Uni-versal Transgrupp, and decrease of Us dollar exchange rate in 2006.

Cost of purchase of Joint-stock Company Uni-versal Transgrupp is lower than fair cost of its pure actives for date of purchase by 42 million rubles. Fair cost of the fixed as-sets of Joint-stock Company Universal Transgrupp at date of purchase has been calculated on the basis of the report of Joint-stock Company KPMg independ-ent licensed appraiser.

The most part of obligations of group Trans-garant is expressed in Us dollars. At de-crease of dollar exchange rate in 2006, group Transgarant has received profit from the difference in exchange rates in sum of 206 million rubles.

By december 31st, 2006 assets of group Transgarant have reached 7 183 million rubles. The basic part of assets consists of fixed assets (5 051 million rubles or 70 %; including a rolling stock - 90,3 %), ac-counts receivable (1 165 million rubles or 16 %), issued loans and promissory notes (218 million rubles or 3 %), and also money resources and deposits (207 million rubles or 3 %).

4,130billionrublesProceeds

7, 183billionrublesAssets

Main articles of obligations were: long-term loans (2 629 million rubles or 45 % of to-tal obligations), short-term credits with banks (1 521 million rubles or 26 % of total obligations), long-term and short-term obligations on financial leasing (719 and 469 million rubles accordingly, which in relative figures make 12 % and 8 %).

In 2006 the group acquired in financial leasing 405 open-top cars and 39 pellets-carriers from company BszhV-leasing . Joint-stock Company Universal Transgrupp (50 %) has concluded contracts on pur-chase of specialized platforms for big di-ameter pipes transportation from Joint-stock Company gazprombank leasing (92 platforms) and Open Company leas-ingPromhold (280 platforms).

41

review of the reporting of open Company firm transgarant in aCCordanCe with russian aCCounting standards

The basic financial parameters (million rbl.) 31.12.2003 31.12.2004 31.12.2005 31.12.2006Proceeds 1617 3089 4032 3755gross profit 143 172 483 725Cash flow net profit/loss 48 42 33 424Pure operational CF -6 -14 -297 -266CF from investment activity -556 -805 1556 -148CF from financial activity 583 815 -1243 540Balance Assets, including 1069 3647 4847 5814non-circulating actives, including 597 1535 2702 3238Fixed assets 587 1515 2548 2946Circulating assets, including 472 2112 2145 2576Accounts receivable (up to 12 months) 346 1568 1327 1829liabilities 1015 2951 4117 4380short-term debts 350 1645 3153 1791long-term debts (up to 12 months) 665 1306 964 2589Own assets, including 54 697 729 1434Authorized capital 1 600 600 880Unappropriated balance 54 97 129 554

The company demonstrates sharp increase of profit in 2006 year: the profit has grown more than 13 times. Reduction of in-comes by 6 % for year 2006 was caused by changes in companys police con-cerning contracts. earlier tariffs of Rus-sian Railways were included in incomes and the cost price; since 2006 all new contracts were concluded under new conditions at which payments to Rus-sian Railways were not included in basic calculation. Thus, by 2007-2008 all con-tracts will be concluded on the basis of the new scheme of payments; Russian Railways tariffs will not be included in in-comes and cost price. so this will lead to increase in profitability.

It is necessary to note a following important matter: the rolling stock which is being on balance with the leasing company, according to the Russian standards is not accounted on balance of the organi-zation while according to IAs both roll-ing stock and leasing obligation are to be accounted. The most part of correc-tions introduced into reporting of the

Borrower during the process of reporting transformation is connected with differ-ent account of leasing under the Russian standards of the financial reporting and IAs. Also in accordance with IAs the roll-ing stock which is not put into operation should be regarded as fixed assets, not as material-in-process as it is regarded in Russian accounting.

By december 31st, 2006 amount of assets made 5 814 million rubles (growth by 19 % in comparison with the beginning of 2006 (due to the fixed assets and ac-counts receivable). An increase of ac-counts receivable in general is connected with changes in accounting policy con-cerning accounting of leasing contracts with redemption value. That part of leas-ing payments which is directed to pay-ment for rolling stock redemption value, and also advance payments according to the contract, will be shown in balance as accounts receivable unless according to the contract the cars pass into the own-ership of limited liability Company Firm Transgarant.

Financial results of Transgarant group activity

42

Name Method of an evaluation

Basic stages of evaluation and the assumptions used for definition of value

ApproximateValue of assets

Trade markTransgarant

Revenue approach (a method of exemption of royalty)

Transgarant has got a certificate on registration of the trade mark Transgarant (hereinafter TM) dated March, 17th, 2005, valid till March, 17th, 2015

The estimation of this TM was carried out by means of exemption of royalty, including stages as follows:

Forecasting of the proceeds received from rendering services with use of TM Transgarant during license term. According to a Company Management, total proceeds are generated with use of TM;

The analysis of statistical data concerning rates of the royalty de-manded by the companies, carrying out activity in sphere of freight traffic, for the right of use of TM;

Analysis of the market of cargo rail transportation in Russia and updating of statistical data in view of current state and ten-dencies of development of the market;

Application of the corrected rate of a royalty (0,1 %) to proceeds for determination of a royalty-payments which Transgarant should have paid for TM if it did not own this TM;

discounting of the forecasted future money flows (in view of the profit tax) by means of the rate of discounting, applied to the intangible asset;

Considering that fact, that in future the intangible asset can be amortized on balance of the Customer, at evaluating of the license we have considered the tax privilege resulting from such amortization.

As a result of performance of the procedures above described, estimated cost of TM Transgarant is 960 thousand Us dollar

960 thousand Us dollarsRemaining Useful Time - 8.4 years

software Cost-is-no-object approach

Transgarant has got three program modules developed by its own forces and being a highly specialized product:

hardware and software module Vagonnik - the program con-tains characteristics of a rolling stock and allows to carry out control over service yard of the company;

hardware and software module dispatcher - the program allows to trace a location of cars of the company and to monitor of their moving. This program has interactive communication with database of Russian Railways and carries out informa-tion interchange several times a day;

Agreement - the program unites the modules connecting op-erational activity of the company with its financial activity. In particular, Agreement simplifies system of calculations with clients on results of the rendered services, connects data on expenses for repair of a rolling stock and purchase of spare parts with actual results of repair activity, etc.

150 thousand Us dollars

value of intangible assetsJoint-stock Company KPMg has conducted a work on evaluation of basic intangible assets of

company Transgarant, including its branches in accordance with requirements of the In-ternational Accounting standards.

43

finanCial foreCastsThe table below shows the forecast of the basic financial parameters of the income statement

of the Company for years 2007-2009 (million rbl.). The forecast is based on an estimation of activity of existing actives and does not consider effect from purchase of new companies:

The FOReCAsT OF The BAsIC FInAnCIAl PARAMeTeRs OF The InCOMe sTATeMenT OF The COMPAny FOR years 2007-2009 (million rbl.)

2007 2008 2009 Proceeds from sales, including 6 394,8 7 434,1 8 642,5 Incomes from realization of transportations 6 152,5 7 170,7 8 358,0 Incomes from rent of the rolling stock 207,6 226,5 244,7 Incomes of agent activity 34,8 36,9 39,8gross profit 1 933,0 2 570,4 3 379,2sales profit 1 296,3 1 848,1 2 251,9net profit 473,2 776,1 1 241,7

dATA On TAx PAyMenT By lIMITed lIABIlITy COMPAny FIRM TRAnsgA-RAnT FOR years 2005 2006.

2005 2006 % Total, including 226 932 050 310 233 040 136,7%Taxes and duties 184 955 895 247 855 527 134,0%Taxes for Fund Of a Payment 41 976 154 62 377 513 148,6%Property tax 41 152 350 58 296 722 141,7%Profit tax 19 544 388 98 421 676 503,6%Value-added tax (VAT) 50 902 278 61 400 190 120,6%

investment programlimited liability Company Firm Transgarant will continue to make investments in rolling

stock, including, specialized one. The investment budget for 2007 makes 2 274 million rbl. now it is observed the tendency of increase of share of own cars and replacement of rented ones. In 2003 own cars made about 30 %, but in 2006 they make more than 60 % already, and in 2007 their share will be over 70 %. The main accent in the investment program of 2007 is made on purchase of 1 100 new cars, value of the acquired rolling stock will make 1 709 million rbl.

It is planned to acquire:500 cement carriers300 fitting platforms300 open-top cars

It is planned to spend 565 million rubles for infrastructural projects, development of a regional network and head office.

Financial results of Transgarant group activity

44

expected fast growth of proceeds from sales (incomes from realization of transportations) in 2007-2009 is connected with putting into operation of significant amount of acquired roll-ing stock (year 2007 1 100 units, 2008 1 500 units, 2009 1 800 units). Thus, within 2007-2009, average annual growth of own rolling stock fleet will make 10 - 15 %. Besides this planning model provides growth of tariffs by 8 % (during last 4 years the tariffs grew on average by 11 %). The presented scenario is neither optimistic, nor pessimistic, but optimal one, taking into account how fast the company will acquire rolling stock and place it into operation.

Financing sources for the developing business of the Company are both own (100 % of earned profit is re-invested) and borrowed funds.

high credit status of limited liability Company Firm Transgarant is confirmed with success-ful cooperation with number of big Russian and foreign banks and leasing companies, in including: Open society Vneshtorgbank , Open society savings bank of the Russian Fed-eration, Joint-stock Company gazprombank, Joint-stock Company Bank societe general Vostok , limited liability Company hansa leasing, Brunswick Rail leasing.

A successful partnership with the above listed financial organizations has allowed to increase crediting limit and to lower rates of attraction of credit resources.

finanCing of Companys aCtivity

The TABle shOWs The FOReCAsT FOR The MAIn FInAnCIAl PARAM-eTeRs OF PROFIT And lOss sTATeMenT In 2007-2009, million rubles

Parameters Dec. 2007 Dec. 2008 Dec. 2009 non-circulating assets, including 5 399 6 569 8 046 Fixed assets 5 176 6 346 7 823Circulating assets, including 1 873 1 979 2 097Accounts receivable (up to 12 months), including by VAT 1 429 1 494 1 436Own funds, including 1 993 2 764 3 999 Authorized capital 880 880 880 Unappropriated balance 1 113 1 884 3 119Debt funds, including 5 279 5 784 6 143 long-term loans 3 669 4 684 5 160 short-term loans 1 226 711 584 Bills payable 384 389 399

The table shows a forecast of main industrial results of the Company by types of production during years 2007-2009. This forecast is also made on the base of planned parameters of already available assets and does not account effect from purchase of new companies:

FOReCAsT OF MAIn IndUsTRIAl ResUlTs

Parameter 2007 2008 2009 Car fleet, average annual 11 581 13 029 14 970 Including: own fleet 7 879 9 327 11 268 rented fleet 3 702 3 702 3 702

45

Licenses and certificatesCertificate of Ministry of Railways of Russia on giving to limited liability Company Firm Transgarant a status of company - operator in transportations of cargoes.

license of Ministry of Railways of Russia granting right of execution of cargoes trans-portation by rail.

license of Federal service on supervision in transport sphere of Ministry of Transport of Russia on the right of conducting activity on maintenance and repair services for rolling stock at a railway transport.

Licenses and certificates

ContactsFull name:limited liability Company Firm Transgarant

Abbreviated name:OOO Firm Transgarant

legal address:127299, building 1, house 5, Kosmonavta Volkova street, Moscow

Postal address:105005, 4th floor, Building 1, house 24, Radio street, Moscow.

Telephones no:+7(495) 739-12-43

Fax:+7(495) 739-12-42

e-mail address:info@transgarant.com Web site: www.transgarant.com

46

BRAnChes

st.-Petersburg director of branch Ivanov Victor sergeevich Address: 3rd floor, entrance 2, house 22, zvenigorodskaja street. telephone: (812) 438-15-75 fax: (812) 315-73-03 e-mail: uvarova@tgc.spb.ru

Astrakhan director of branch dzhasenov Koblan demeuovich Address: 416154, Post ets, station Aksarajskaja 2 station,Krasnoyarsk area, Astrakhan regiontelephone: (8512) 32-77-05e-mail: af_transgarant@mail.ru

Voronezh director of branch surin dmitry ValerevichAddress: 394030, 3rd floor, house 26a, studencheskaja street. telephone/fax: (4732) 59-39-50e-mail: info@transgarant.vrn.ru

ekaterinburgdirector of branch Parachuk svetlana IvanovnaAddress: 620014, office 21, house 2/5, Chelyuskincev street, ekaterinburgtelephone/fax: (343) 373-70-35 / 36e-mail: Parachuk@ekb.transgarant.com

Chelyabinsk director of branch Vladimirov Igor VladimirovichAddress: 454091, house 84, svobody street, Chelyabinsk, telephone: (351) 265-93-80Fax: (351) 265-93-81e-mail: info@chel.transgarant.com

Krasnoyarsk director of branch Krivulin Victor sergeevichAddress: 660021, house 21, Vokzalnaja street. telephone: (3912) 68-11-24, 59-52-00Fax: (3912) 59-50-83e-mail: transgarant_003@rambler.ru

Irkutskdirector of branch Bobkov Andrey ViktorovichAddress: 664039, Irkutsk, house 1, Furye street.telephone: (3952) 203-183Fax: (3952) 203-151e-mail: transgarant@irk.ru

Khabarovskdirector of branch stolypin denis VladimirovichAddress: 680000, office 208, house 46, Turgeneva street, Khabarovsk telephone: (4212) 41-01-46 / 48 / 49 Fax: (4212) 41-01-47 e-mail: stolypin@tg.khv.ru

7 (495) 739-1243 www.transgarant.com

7 (495) 739-1243+ www.transgarant.com

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