ОБРАЩЕНИЕ

01&/
+0*/5450$,
$0.1"/: "//6"-
3&1035


.PTDPX 3 CONTENTS

ADDRESS FROM CHAIRMAN OF THE BOARD OF DIRECTORS ...... 2 ADDRESS FROM CEO ...... 4 ABOUT THE COMPANY ...... 6 COMPANY’S BACKGROUND ...... 6 COMPANY’S STATUS QUO IN THE INDUSTRY ...... 6 JOINT STOCK CAPITAL AND COMPANY’S MANAGEMENT ...... 15 JOINT STOCK CAPITAL ...... 15 ADMINISTRATION AND SUPERVISORY AUTHORITIES ...... 15 General meeting of shareholders ...... 15 Board of directors ...... 15 Executive general manager (the sole executive body of the Company) ...... 16 The auditing committee of the Company ...... 16 CORPORATE STRUCTURE ...... 19 Company’s branches ...... 19 The affiliates and dependent companies ...... 20 CORPORATE GOVERNANCE ...... 20 INFORMATION ON MAJOR TRANSACTIONS AND INTERESTED-PARTY TRANSACTIONS ...... 22 KEY PERFORMANCE INDICATORS OF THE COMPANY FOR JULY-DECEMBER 2006...... 23 KEY INDICATORS OF THE COMPANY’S BOOKKEEPING ...... 24 ORGANIZATION OF BOOKKEEPING OPERATION AND ACCOUNTING POLICY ...... 24 FINANCIAL STATUS OF THE COMPANY ...... 24 FIANCIAL STATEMENTS AS OF DECEMBER 31, 2006 ...... 31 AUDITOR’S CERTIFICATE ...... 39 ALLOCATION OF PROFIT AND DIVIDEND POLICY ...... 43 INVESTMENT ACTIVITIS ...... 44 INFORMATION TECHNOLOGIES ...... 47 STAFF AND SOCIAL POLICY. SOCIAL PARTNERSHIP ...... 48 COMPANY’S DEVELOPMENT ...... 55 REFERENCE INFORMATION FOR SHAREHOLDERS ...... 56 QUOTATION OF SECURITIES ...... 56 INFORMATION ON REGISTRAR ...... 56 INFORMATION ON AUDITOR ...... 56 COMPANY’S REQUISITES...... 56

1 ADDRESS FROM THE CHAIRMAN OF THE COMPANY’S BOARD OF DIRECTORS

rently operating staff of JSC TransContainer. At the same time, the staffing of the huge col- lective body of the Company was going on. The processes were quite complicated and sometimes contradictory since they hadn’t had any countertypes. Now, however, the Board of Directors is pleased to report that the Company has successfully managed to commence the independent economic activi- ties. Those who didn’t cope with the tasks or were afraid of difficulties just quit. JSC TransContainer has managed to or- ganize quickly rail and road container shipping by its means. The Company’s market share in the container rail shipping sector came up to 63,4%. Net profit which is traditionally the key figure of any commercial organization came up to 1,44 billion roubles. I hope the company will continue to keep pace and quickstep to new peaks in future. The Company’s successes wouldn’t have been so exciting without a thorough sup- port from the main stockholder – JSC RZD. Therefore, I express gratitude to its manage- ment on behalf of the Board of Directors. The trend of the further activities of the Company is determined by its business plan. Currently TransContainer operates the roll- ing stock and the containers of its own. This means that the Company decides indepen- dently what should be done to raise the ef- ficiency of its operation and, respectively, to increase its profit. Dear shareholders, colleagues, and partners! Currently the main target of the Company is to deserve the right to act as the national- The appearance of TransContainer as an af- scale operator - not only with respect to roll- filiate included into the system of JSC RZD ing stock and containers but container ship- was the direct offshoot of commercializing ping at large. To achieve this, the container the transportation services and reforming the shipping efficiency should be essentially in- railway industry as a major task of realizing creased, and the company should diversify the Transport Strategy pursued by the Rus- its activities. This is the only way to prove that sian Federation. The new company has been the Company has the right to bear the market established to act as a major national con- leader’s title. tainer operator for the benefit of the Russian The growth of the number of services economy. rendered and enhancing their quality is go- The last year was very important one for ing to be the biggest challenge and the most the Company since it was the year of the ambitious project of the next year. To the ef- Company’s foundation and taking shape as fect of this, JSC TransContainer has already an independent Russian unit pretending to started the so-called corporate expansion bear the title of the national operator in the both to the Russian and the external market. container shipping market. In particular, a joint venture between JSC The container shipping business of JSC TransContainer and the Finnish Railways RZD had been developed for about three has been established. Therefore, part of the years - mainly through the efforts of the cur- container shipping volume coming from the

2 ADDRESS

Western Europe through Finnish ports main- containers, and improve the corporate control ly by road – is now handled by railway. More- quality to be able to operate efficiently both over, a network of representation offices is in the domestic and the international market. being established abroad – in particular, in The multi-modal service organization will be the Baltic States, the Ukraine, Byelorus- of paramount importance. It implies render- sia, Uzbekistan, and Kazakhstan. Currently ing container road transport services – both we are making intensive efforts to establish at the expense of the company’s resources a representation office in Germany – with a and as a result of establishing joint ventures view of switching over the flows of cargo by with trucking companies and also rendering directing them through land-based border stevedore services including transshipment terminals, while the agents of TransCon- of cargo in ports based on principles of in- tainer has already started working in China dependent business or partnership business and Korea. Therefore, the whole Russia will relations. become gradually surrounded by the Com- I would like to assure the sharehold- pany’s “outposts”. ers, customers, and partners of JSC Trans- As regards the Russian Federation, the Container that the Company will continue widest network of service centers and front its onward motion on the way of further im- offices is being created inside the country, provements. Time and the results of the first providing customers with the full range of calendar six months of operation of the Com- cargo shipping services. These centers are pany have proved the correctness of the cho- located not in terminals but in city centers, at sen trend of development. enterprises, and in large business centers. The company clearly understands that it Chairman of the Board will have to update its own terminals, proceed of Directors of JSC TransContainer – with purchasing modern rolling stock and S. Babaev

3 ADDRESS FROM THE EXECUTIVE GENERAL MANAGER OF THE COMPANY

• On March 4, 2006, JSC TransContainer passed the state registration as an inde- pendent legal entity; • A competent organization and production structure of the company was established; • Staff resources (exceeding 4 300 people) were transferred from RZD affiliate to the newly-established company; • The bulk of the assets to be added to the authorized capital of JSC TransContainer was accepted as a transfer of ownership from JSC RZD; • The necessary contracts with JSC RZD were concluded; • A number of contracts were renegotiated with clients; • Competitive rates of JSC TransContainer services had been developed and are cur- rently used. This is the first step towards the deregulation of rates in the opponent seg- ment of the market. Great attention has been paid to social is- sues. An efficient system of social protection of employees, aimed at enhancing the mo- tivation of their work, was established in the company. The following agreements and docu- ments have been accepted and are effective at present: • the collective agreement having formalized social safety net of the company’s staff at the level of the one existing for the employ- ees of JSC RZD; Dear shareholders, colleagues, and partners! • the agreement with the non-government pension fund “Blagosostoyanie” concern- In December 2006, JSC TransContainer has ing the additional pension expenses for the finished the sixth month of its independent company’s staff; economic activities as an open joint-stock • packages of documents concerning the company being an affiliate of JSC RZD. corporate support of acquisition of hous- Two main goals were posed for the newly- ing; established legal entity during that initial period: • the provision on newcomers. The first one was taking some steps with The rail fare compensation issues have respect to state registration of the open joint- been sorted out with respect to TransCon- stock company TransContainer and com- tainer employees. Moreover, the issues of mencing its economic activities; organizing summer vacations for their chil- The second one was reaching the per- dren, rehabilitation and recreation of em- formance, financial, and economic indica- ployees and members of their families in tors provided for by the business plan out- health resorts and rest homes pertaining to lining the establishment and development the Russian railway system – have all been of JSC TransContainer, - which had been settled. approved by the Board of Directors of RZD; The execution of the second task is closely The following has been achieved during connected with the realization of JSC Trans- the reporting period within the framework of Container development strategy shaped in the first goal: the business plan outlining the company’s

4 ADDRESS

foundation process. I will remind you of some The entire work with customers will be provisions of the strategy: concentrated in the service centers accord- • creation of a competitive complex logis- ing to the “sole window” principle. tics service implying door-to-door cargo The system of service centers will delivery; also enable one to separate the functions of • creation of a unique work method at termi- sale of services and tertiary industries. nals, in ports, and at border terminals; Besides the above-mentioned steps of • development of transport and logistics cen- corporate development, JSC TransContainer ters network (hubs); is focusing on its own operation know-how • mastering the know-how of container trains improvement issues and the management of (block trains) operation; the carriage rolling stock and the container • establishment of the agent (representation) fleet. network in Russia and abroad. Improving the know-how of the company’s What specific steps have we taken to real- own operation and the management of the ize this strategy? carriage rolling stock and the container fleet At the turn of November 2006, we decided has allowed the Company to achieve a better to establish a joint venture between us and empty-run ratio of platforms as compared to the Finnish railways. The new JV was named that of the entire railway network of Russia in ContainerTransScandinavia and was sup- general. posed to operate on the territory of Finland. Due to all these measures, it has become Its task was not only to provide for day-to- possible even to surpass the business plan day management of the rolling stock of JSC figures describing the financial and economic TransContainer on the territory of Finland but activities of JSC TransContainer in some as- operating as an agent of JSC TransContainer pects, during the first six months of the Com- as well. pany’s operations. A number of agencies in China and South Therefore, the results of the first six Korea have been established and are cur- months of independent economic activities rently operating successfully. of JSC TransContainer are certainly positive In 2006, the main activity concerning the showing that the affiliate has succeeded in establishment of representation offices of the execution of the main parameters of the JSC TransContainer in Latvia and Byelorussia business plan approved by the Board of Di- (Brest) was completed. The representation rectors of RZD. offices in the Ukraine, Uzbekistan, Germany, The successful start of the Company’s and China will be established in the near fu- activities is a good basis for continuing the ture. The same applies to Lithuania, Estonia, onward movement of the Company and the and Kazakhstan. achievement of new positive results. Besides the foundation of its agencies I am quite positive that, due to the current- abroad, JSC TransContainer has commenced ly existing support of our initiatives from the the establishment of its service centers net- controlling company and its management, work in cities of Russia, in places suitable for JSC TransContainer will cope with the tasks customers - including those located on the posed and justify the high confidence of its territory of major industrial enterprises. shareholders, partners, and customers.

Executive General Manager of JSC TransContainer – P. Baskakov

5 ABOUT THE COMPANY

COMPANY’S BACKGROUND displays good results of current activities “The Center for cargo container traffic and is facing very optimistic prospects of TransContainer” has been established first development. as an affiliate and then in the form of a sub- The core of the Company’s activities is sidiary – open joint-stock company JSC rendering the container cargo transpor- RZD . The company has been established tation services for customers of all types in the tideway of the worldwide tendency of on the entire territory of Russia and C.I.S. increasing the container shipping volume. Shipping operations imply using both the The target was to create the appropriate Company’s containers and those belonging conditions for competitive-oriented pricing to consignors. The main clients of the Com- in the sphere of container traffic in the Rus- pany are represented by enterprises and sian and the international markets. organizations of metallurgical, chemical, In March 2003, the State-owned institu- and mechanical industries as well as con- tion Center for cargo container traffic was sumer goods-producing companies etc. founded under the auspices of the Ministry The Company renders the door-to-door of Railways of Russia (HQ TransContainer delivery service for its main customers. of the Ministry of Railways of Russia). In To be able to provide a high-quality October 2003, an affiliate of JSC RZD – the door-to-door transportation, the Company Center for cargo container traffic Trans- had to develop a truck fleet of its own, since Container – was founded on the basis of the rendering this kind of service on terms of above-mentioned state institution. outsourcing does not seem possible. On March 4, 2006 the open JSC Center The availability of the widest network of for cargo container traffic TransContainer container terminals owned by JSC Trans- was founded based on the assets of JSC Container allows the Company not only to RZD affiliate Center for cargo container perform shipping operations of its own but traffic TransContainer. offer such services as terminal handling The newly-founded Company commenced and storage of containers. The heavy defi- its independent economic activities. cit of these high-quality services on the Russian transport and logistics market ac- ПОЛОЖЕНИЕ ОБЩЕСТВА counts for the possibility and the necessity COMPANY’S POSITION IN THE of an intensive development of this trend by INDUSTRY the Company. In particular, the Company is JSC TransContainer is running 20 affiliates interested in the development of port con- that include container terminals located at tainer terminals in the regions supposed to 48 railway depots of all the 17 railways – be the most prospective ones (Nakhodka i.e., on the entire territory of Russia. Taking (Vostochny), Novorossiysk, the Baltic re- into account the geographical position of gion. The Company is also interested in the affiliates and the network of terminals, taking part in operation and construction of as well as the largest fleet of containers major logistics centers. and fitting platforms, the Company is cur- Forwarding services is an important rently the largest rail operator engaged in trend of the Company’s activities. Current- container shipping in Russia. The Company ly it is emerging. The forwarding includes freight handling operations at railway de- pots; confirming paper work; delivery of MAJOR ACTIVITIES cargo from Customer’s warehouse to exit station; ocean freight; information support. • Organization of container cargo shipment along the domestic and As it was stated above, the company is foreign traffic routes running 20 affiliates (including three main- • Transportation and forwarding tenance centers) to ensure an efficient • The full range of transportation services including sales of through economic activity. The branch network of service according to door-to-door delivery principle. JSC TransContainer comprises all the rail- way directions of the Russian Federation,

6 ABOUT THE COMPANY each affiliate having a branching network of agencies and consisting of sectors. COMPANY STRUCTURE

To organize railway traffic, truck shipment • Company’s affiliates – 20 (including three maintenance enterprises) of cargo, paper work and terminal handling • The network of agencies and representation offices, including of cargo a number of customer service foreign ones centers were established. • The Company’s staff: 4 550 people

Development of container shipped in containers. This figure is antici- shipping pated to reach 70 % in 2010, which attests The leading edge of containers is their to the big efforts from shipping compa- commonality and mobility. Commonality is nies, forwarding agencies, and consignors unified geometry. Containers can be easily improving the know-how of international transshipped from vessels to flatcars, then transportation. The containerization growth to trucks and vice versa. That’s why con- rate exceeds the one of the world trade by tainer shipping is also called multimodal 2% - 3%. The annual rate of growth of the transports. The multimodal nature of ship- world trade, in its turn, is outrunning the ping makes cost reduction possible. The growth of GDP of the respective countries cargo handling time can also be cut down. by the same 2% - 3%. Moreover, using containers can provide for a better safety of cargo. Container shipping in Russia. The intensive development of container Currently experts characterize the con- shipping market started at the turn of the tainer traffic market as a rapidly develop- 50-ies. This kind of shipping became es- ing one. pecially popular 15-20 years ago after the The cargo turnover in the Russian con- basic infrastructure for handling large con- tainer market increased by 24,9% in 2006 tainer numbers had been developed. – from 1,92 million TEU to 2,40 million TEU. The average growth rate of container At year-end 2006, the container cargo shipping volume worldwide reached 8,5 % turnover in Russia has increased by 45,8%, in 1980-2005. It is expected to reach the reaching 3,88 million TEU - taking into ac- level of 6,6% in 2006 – 2015.1 count the total volume of cargo coming to Currently more than a half of container Russia, plus the domestic rail traffic vol- transportable cargo volume worldwide is ume on aggregate. The high-capacity con- tainer traffic volume has increased by 6.3 % in 2006 – from 1,74 million to 1,85 mil- 1 UN Regional Shipping and Port Development Strategies (Container Traffic Forecast), 2005 lion TEU.

The background of JSC TransContainer

5IF
NBOBHFNFOU
PG
+4$
3;%
IBT
BDLOPXMFEHFE
UIF
QPTJUJWF
SFTVMUT
PG
UIF
GJSTU
TJY
NPOUIT
PG
JOEFQFOEFOU
FDPOPNJD
%FDFNCFS
 BDUJWJUJFT
CZ
UIF
BGGJMJBUF
PG
+4$
5SBOT$POUBJOFS
PQFSBUJOH
JO
UIF
GJFME
PG
DPOUBJOFS
USBGGJD

+VMZ
 #FHJOOJOH
PG
JOEFQFOEFOU
FDPOPNJD
BDUJWJUJFT
PG
+4$
5SBOT$POUBJOFS

.BSDI
 5IF
0QFO
+PJOU4UPDL
$PNQBOZ
5SBOT$POUBJOFS
QBTTFE
UIF
4UBUF
SFHJTUSBUJPO

%FDFNCFS
 5IF
#PBSE
PG
%JSFDUPST
PG
+4$
3;%
IBT
GPVOEFE
B
QBDLBHF
PG
EPDVNFOUT
HPWFSOJOH
UIF
GPVOEBUJPO
UIF
BGGJMJBUF
s
+4$
5SBOT$POUBJOFS

"QSJM
 5IF
#PBSE
PG
%JSFDUPST
PG
+4$
3;%
IBT
FTUBCMJTIFE
UIF
DPODFQU
PG
GPVOEBUJPO
PG
BO
BGGJMJBUF
PG
+4$
3;%
JO
UIF
GJFME
PG
DPOUBJOFS
USBGGJD
s
PO
UIF
CBTJT
PG
SFGPSNJOH
UIF
BGGJMJBUF
5SBOT$POUBJOFS

'FCSVBSZ
 #FHJOOJOH
PG
UIF
GPSNBUJPO
PG
UIF
BGGJMJBUFPXOFE
OFUXPSL
PG
DPOUBJOFS
UFSNJOBMT
JO
DBSHPGPSNJOH
DFOUFST
PG
3VTTJB

+BOVBSZ
 #FHJOOJOH
PG
UIF
GPSNBUJPO
PG
BHFODZ
OFUXPSL
JO
DBSHPGPSNJOH
DFOUFST
PG
3VTTJB

%FDFNCFS
 'PSNBUJPO
PG
UIF
OFUXPSL
PG
UIF
BGGJMJBUFoT
[POBM
EFQBSUNFOUT
FNCSBDJOH

SBJMXBZT
PG
3VTTJB

0DUPCFS
 'PVOEBUJPO
PG
BO
BGGJMJBUF
PG
+4$
3;%

$FOUFS
GPS
DBSHP
DPOUBJOFS
USBGGJD
5SBOT$POUBJOFS

5IF
GPVOEBUJPO
PG
B
TUBUFPXOFE
JOTUJUVUJPO
$FOUFS
GPS
DBSHP
DPOUBJOFS
USBGGJD
VOEFS
UIF
BVTQJDFT
PG
UIF
.JOJTUSZ
PG
3BJMXBZT
.BSDI
 PG
UIF
3VTTJBO
'FEFSBUJPO
)2
p5SBOT$POUBJOFS
PG
UIF
.JOJTUSZ
PG
3BJMXBZT
PG
3VTTJBq

7

)FMTJOLJ 4U
1FUFSTCVSH 5BMMJOO :BSPTMBWM 3JHB :FLBUFSJOCVSH ,SBTOPZBSTL 7JMOJVT .PTDPX /J[IOZ
/PWHPSPE 7JMOJVT /PWPTJCJSTL ,BMJOJOHSBE 4BNBSB $IFMZBCJOTL $IJUB #SFTU *SLVUTL*SLVUTL 7PSPOF[I 4BSBUPW ,IBCBSPWTL #FSMJO ,JFW "TUBOB

3PTUPWPO%PO :V[IOP4BLIBMJOTL

5BTILFOU

#FJKJOH

4FPVM 5PLZP

r


CSBODIFT
PG
+4$
5SBOT$POUFJOFS
r


SFQSFTFOUBUJWF
PGGJDFT
BCSPBE



DPWFS
UIF
FOUJSF
3VTTJBO
SBJMXBZ
OFUXPSL r


JOUFSOBUJPOBM
BHFODJFT r


BHFODJFT
PGGJDFT
JO
3VTTJB r

KPJOU
WFOUVSF

8 ABOUT THE COMPANY

)FMTJOLJ 4U
1FUFSTCVSH 5BMMJOO :BSPTMBWM 3JHB :FLBUFSJOCVSH ,SBTOPZBSTL 7JMOJVT .PTDPX /J[IOZ
/PWHPSPE 7JMOJVT /PWPTJCJSTL ,BMJOJOHSBE 4BNBSB $IFMZBCJOTL $IJUB #SFTU *SLVUTL*SLVUTL 7PSPOF[I 4BSBUPW ,IBCBSPWTL #FSMJO ,JFW "TUBOB

3PTUPWPO%PO :V[IOP4BLIBMJOTL

5BTILFOU

#FJKJOH

4FPVM 5PLZP

r


CSBODIFT
PG
+4$
5SBOT$POUFJOFS
r


SFQSFTFOUBUJWF
PGGJDFT
BCSPBE



DPWFS
UIF
FOUJSF
3VTTJBO
SBJMXBZ
OFUXPSL r


JOUFSOBUJPOBM
BHFODJFT r


BHFODJFT
PGGJDFT
JO
3VTTJB r

KPJOU
WFOUVSF

9 immaturity of the Russian logistics market PROPERTY COMPLEX is an essential prerequisite for the further development of the Company. • high-capacity containers: 44 008 • medium-duty containers: 116 058 Risks. • platforms: 20 694 The economic performance of the Company • maintenance centers: 3 is influenced by both domestic risks and ex- • container terminals at 48 railway depots posure hazards. In a general sense, risk is a possibility of occurrence of circumstances bringing about uncertainty and failure to Experts forecast the turnover growth of obtain the anticipated results of making the the Russian container market by about 30% rifle. Risk also implies a possibility of suffer- this year, reaching 5 million TEU. ing damage. The most essential exposure Experts believe that the container turn- hazards of JSC TransContainer are listed over growth rate will hardly slow down in below. the years coming. The external turnover of container trade in Russia will reach 7-8 mil- Industry risk lion TEU. This is the risk connected with cyclical fluc- The main factors that determine the tuations, life-cycle stages, venture opera- container traffic volume in Russia are the tions, and other features typical of actual Russian export and import growth rates and production branches. At present, sector the level of their containerization. The ex- demand is growing rapidly. Therefore, the port cargoes containerization percentage main danger for the Company is related not in Russia is 5-7% from the total volume of to attracting job volumes but to the neces- export cargoes to be containerized, while sity of boosting the production capacity ac- the respective average figure worldwide is cording to the dynamics of the market. 50 – 60%. Therefore, the Russian container traffic Risk of inefficient tariff regulation market has a good growth potential. That’s The terminals of JSC TransContainer are at- why the container shipping segment is by tributed to the “common good” infrastruc- right one of the most prospective ones in ture. Therefore, the rates are controlled by the Russian economy in terms of attracting State. The State also sets the limits for the investments. infrastructure component of railroad rates. The approach to rate forecasting “from The market power of JSC above” in macro-economical scale some- TransContainer in the container times fails to take into account the features shipping market of competitive situation between different JSC TransContainer is the leader of the modes of transport in regions and in ship- Russian market of container transportation ping various classes of cargo. Thus, the by railroad. The company is facing strong market players believe that the transit ship- prospects of development. ping decline in 2006 was caused by abor- The following factors account for the tive decisions in the field of state-controlled leading positions of the Company in the pricing. Russian container market: • The largest pool of containers Risk of inefficient customs regulation • The largest fleet of platforms International transportation makes quite • The most extensive network of container an essential share in the total spectrum of terminals operations by JSC TransContainer. It de- • Vast experience in the field of container pends on regulations governing importa- traffic tion and exportation of goods, established • The extensive client base by laws of the Russian Federation and the • The traditional support from the control- adjacent countries. Changes of customs ling company – JSC RZD duties and vehicle inspection procedures The Company has significant advantag- exercise a strong influence on stability and es in the market, the level of threats from volume of flows of cargo on the Far East outside being relatively low. Moreover, the borders of Russia.

10 ABOUT THE COMPANY

Risk of inefficient antitrust control of JSC TransContainer activities from NJMMJPO
U State      The Company is closely supervised by the    Federal anti-trust policy service (FAS),    since its market share is quite high. Since    the current situation implies that the mar-   ket structure has not been established in    the aspect of container shipping operators,  and the interaction between the players is  not up and running, - the Company may come within antitrust legislation provisions  in some cases – as FAS believes. Reclama-  tions may not always be substantiated but        the intervention of state institutions can lim- it the efficiency of the Company’s activities Cargo volume loaded into high-capacity containers at the railways of - i.e., extension of some services volume by Russia the Company, or its activities in the field of pricing. COMPETITORS

Crucial domestic risks Interspecific competition

The risk of discrepancy between the Maritime transport state of facilities and the current Ocean transport can be objectively as- demand. sessed as the most dangerous competitor The cargo handling equipment of container in transit shipping (it provides for more than terminals is badly worn. This keeps down 98% of the entire sales volume between the the terminals’ efficiency. Lack of 40-feet Asia-Pacific Region and EU). The main rea- container handling equipment is also per- son is that regions being the most prospec- ceived, while their number is constantly tive in terms of occurrence of flows of cargo growing. are more inclined to sea ports. The current market of deep sea con- Risk of inefficient investment planning tainer shipping features some clear-cut JSC TransContainer has been established tendencies since 2003, which promote the on the basis of the assets owned by the af- competitive recovery of this kind of trans- filiate of JSC RZD. The formation of facilities port: and the development of an efficient logistics • The growth of supply that can be observed have not been completed as yet. As a result, in two aspects: the current shipping volumes performed by the Company should not be regarded as es- Six months’ figures describing the market share of jsc transcontainer tablished ones. Otherwise this would create as of 2006 obstacles to precise forecasting of shipping volumes and selling auxiliary services of the )JHIDBQBDJUZ 5SBOTQPSUBUJPO Company. This, in its turn, would hamper to DPOUBJOFS
USBOTQPSUBUJPO
PG
IJHIDBQBDJUZ determine the real demand for containers, CZ
UIF
$PNQBOZoT
PXO
DPOUBJOFST
PG
UIF SPMMJOH
TUPDL $PNQBOZoT
PXO fitting platforms, and cargo handling equip- ment. The Company’s slippage in terms of 
 
 upgrading facilities and capacity addition may lead to the Company’s lagging behind the average market values.

To decrease the above-stated domestic risks, the Company is upgrading its production facilities, improving its marketing and analytic activities, and the 
 
 financial planning.

11 a) container shipping lines increasing Russkaya Troika (“Russian Troika”), JSC their freight tonnage; Trans-Siberian Inter-modal Service, LTD b) Development of port complexes. Russotra, closed JSC Fintrans, LTD MMK- • The integration process running within Trans. the framework of the linear process in the At the same time, neither of the above- system of interrelationship between ship- mentioned companies is able to compete ping lines. with JSC TransContainer as of to-day. However, these companies operate in the Road freight transport market quite successfully. They are invest- Road freight transport is the most serious ing heavily into their rolling stock and ap- threat in export-import carriage. This is parently will be able to somewhat deprive connected with a few factors: TransContainer of competitive edge in con- • increasing length of haul; tainer shipping market – provided container • insignificant volumes of commercial transportation of fitting platforms is cost- batches shipped; efficient. • the underdevelopment of the container In the short run (before 2007-2008), a cargo-handling system on the territory of serious improvement of the performance Russia; of international ocean carriers is expected • the flexibility and precision of road haul- – mainly due to realization of the vertical age. integration strategy. The major ocean ship- ping and stevedore companies spread their Competition in railway sector activities over the adjacent links of the sup- Currently the following rail companies own- ply chain – mainly through establishment ing dedicated rolling stock of their own, of forwarding companies or gaining in their operate as competitors of TransContainer equity shares. The implementation of inte- in the container shipping market: closed gration strategy will allow the Company to company Eurosib SPb-Trans, LTD Magis- set a much higher level of servicing freight tral Container Lines, JSC Firma “Transga- owners. rant”, JSC F.E.Trans, JSC Far East Trans- Similar integration-oriented tendencies port Group, JSC Sovintrans, closed JSC can be traced in the activities of the larg- est operators of container terminals. At the SWOT analysis of JSC TransContainer same time, the major forwarding companies invest their own funds or raised money into the development of the so-called “rear” ter- 8FBL
BTQFDUT 4USPOH
BTQFDUT minals. This would allow them to extend the r
)JHI
XFBS
BOE
UFBS
PG
SPMMJOH
r
&YUFOTJWF
HFPHSBQIJD
BSFB sphere of services, improving their quality. TUPDL
BOE
DPOUBJOFST r
5IF
MBSHFTU
GMFFU
PG
DPOUBJOFST

The analysis of the international con- r
6OEFSEFWFMPQNFOU
PG
MPHJTUJDT
QMBUGPSNT
BOE
UIF
IJHIFTU
OVNCFS
tainer shipping market shows that the UFDIOPMPHJFT PG
UFSNJOBMT Company’s main task at the current stage r
5IF
FTUBCMJTIFE
FYUFOTJWF
DMJFOU
CBTF of container traffic development is extend- r
5IF
BDDVNVMBUFE
FYQFSJFODF
JO
ing the scope of functions performed by DPOUBJOFS
TIJQQJOH
NBSLFU JSC TransContainer. Namely, the Compa- r
5IF
USBEF
NBSL
DFMFCSJUZ ny should pass the limit of its faculties as a mere container cargo-shipping company and reach the level of a multi-modal car- rier and container fleet operator. In par- 5ISFBUT 1PTTJCJMJUJFT ticular, the company should bear in mind r
(SPXUI
PG
DPOUBJOFS
USVDLJOH
r
7FSUJDBM
JOUFHSBUJPO
BOE
JODMVTJPO
that a wide system of terminal and depot WPMVNFT
JO
3VTTJB PG
DPOUBJOFS
BSFBT
JOUP
UIF
QSPDFTT
complexes is currently being developed r
(SPXUI
PG
DPOUBJOFS
GMFFS
BOE
DPOUSPM
TZTUFN QMBUGPSNT
PXOFE
CZ
QSJWBUF
r
%FWFMPQNFOU
PG
NVMUJNPEBM
within the RZD network. It should establish FOUJUJFT USBOTQPSU
CZ
JODSFBTF
PG
DPOUBJOFS
distribution points on the territory of Rus- r
&OUSZ
PG
GPSFJHODPOUSPMMFE
SPBE
USBOTQPSU
GBDJMJUJFT sia – to consolidate and distribute trade DPNQBOJFT
JOUP
UIF
3VTTJBO
r
%FWFMPQNFOU
PG
GPSXBSEJOH
flows. DPOUBJOFS
USBGGJD
NBSLFU TFSWJDFT r
5IF
FYJTUJOH
UBSJGG
QPMJDZ
PG
4UBUF The Company’s development should be oriented towards diversification and exten- sion of its business under the auspices of

12 ABOUT THE COMPANY

TransContainer brand. A scheme implying Fitting platform fleet distribution among main operators1 the only individual player performing at each shipping stage in the absence of a common +4$
„5SBOT$POUBJOFS” 
 
 
 integrator - is not efficient. On the contrary, +4$
3;%” 
 a stable and reliable complex service pro- 
 +4$
„'JSNB
vided by a single operator looks attractive 5SBOTHBSBOU” 
 to major freight owners in the international $+4$
„'JOUSBOT 
 market. It is a good prerequisite for attract- $+4$
„&WSPTJC
ing freights to through transportation on the 41#5SBOT Russian railways. 
 +4$
%75( Implementation of the above-mentioned steps would allow the Company to con- $+4$
3VTTLBZB
USPJLB +4$
'&5SBOT solidate its positions in the international 
 market, providing competitive edge and -5%
¥¥£«SBOT essentially raise the earning yield and capi- 
/PU
UBLJOH
BDDPVOU
PG

$*4
SBJMXBZ
BENJOJTUSBUJPO
GMFFU
SVOOJOH
BDSPTT
UIF
SBJMXBZT
PG
3VTTJB talization level.

13         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





4U
1FUFSTCVSH











 5IF
CSBODI
BU
UIF
0DUPCFS
SBJMXBZ

14

 JOINT-STOCK CAPITAL AND THE COMPANY MANAGEMENT BODIES JOINT-STOCK CAPITAL AND THE COMPANY MANAGEMENT BODIES

JOINT-STOCK CAPITAL The body checking the finances and busi- The authorized capital of JSC TransCon- ness operations of the Company is the Audit- tainer has been formed by way of payment ing Committee of the Company. of stocks by the founders of the Company – JSC RZD and the autonomous non-com- General meeting of shareholders mercial organization (ANCO) Center for rail- The general meeting of shareholders is the way restructuring implementation support supreme control body of the Company. The (Autonomous non-commercial organization principal shareholder of the Company is JSC Zheldorreforma). RZD owning (100% - 1) of the Company’s As a contribution to the authorized capi- shares. 1 (one) share belongs to ANCO Cen- tal, JSC RZD presented its fitting platform ter for railway restructuring implementation and container fleet, part of container termi- support. nals, production facilities providing for repair of containers, as some money necessary to The Board of Directors support the beginning of economic activities The Board has overall charge of the Compa- by the Company. ny’s activities – except for the issues attrib- One stock owned by ANCO Zheldorrefor- uted to the jurisdiction of the General meeting ma is paid up by cash resources. of shareholders by the Federal law On joint- The authorized capital amounts to 13 stock companies. 894 778 thousand of roubles. The autho- Neither the Chairman of the Company, nor rized capital has been split up into 13 894 the members of the Board of directors pos- 778 ordinary registered uncertified shares, sess any shares of the Company. with the par value 1 000 (one thousand rou- No remunerations (refund of charges) ble) each. have been paid to the Chairman and mem- The authorized capital of JSC TransCon- bers of the Board of directors in 2006. The tainer includes the par value of shares distrib- size of payments at year-end 2006 have been uted among the founders as follows: 100% - 1 determined according to “Provision on pay- share is owned by JSC RZD; 1 share is owned ments of remunerations and recompenses by ANCO Zheldorreforma. to members of the Board of directors of JSC The Company owns the assets on inde- TransContainer”, - approved by an extraordi- pendent balance. It owns, uses, and disposes nary General meeting of shareholders of JSC of its property according to the announced TransContainer. According to this Provision, goals of its activities, taking into account the any sum of remunerations and compensa- limitations set by the Company’s Statutes and tions depends on the following: the net profit the respective regulatory legal acts of the amount made during the accounting period, Russian Federation. sales profit growth during the accounting The Company pledges against its liabili- period, the sum of profit used for dividend ties by all of its assets. payout. The sum of remunerations depends

MANAGEMENT BODIES Share of participation of JSC TransContainer in the authorized capital According to the Company’s Statutes, the as of December 31, 2006 management and control bodies of JSC TransContainer have been established to NAME OF STOCKOWNER NUMBER OF INTEREST provide for the Company’s operation. SHARES IN SHARE The management bodies of the Company CAPITAL are the following: 1. The general meeting of shareholders; JSC Russian Railways 13 894 777 99,99999 2. The Board of Directors; ANCO Zheldorreforma 1 0,00001 3. The Executive General Manager.

15 also on the number of actual sessions of the cluded between him and the Company after Board and on how actively each member of his nomination. the Board took part in its sessions. No transactions were recorded between No transactions have been recorded between the Executive general manager and the Com- the above-mentioned members of the Board pany within the accounting period. of directors and the Company during the ac- No actions whatsoever were brought against counting period. the Executive general manager of the Company. No actions were brought against any members of the Board if directors. The auditing committee of the Company Executive general manager Ivanov, Oleg – Chairman of the auditing com- (the sole executive body of the mittee, Head of the Management and auditing Company) center Zheldorcontrol of JSC RZD; He manages the operating performance of Agafontseva, Olga – Chief audit execu- the Company and is accountable to the Gen- tive exercising finance and materials control eral meeting of shareholders and the Board of for JSC RZD within the framework of Manage- directors of the Company. ment and auditing center Zheldorcontrol of The executive general manager of JSC JSC RZD; TransContainer is Baskakov Peter. Glazkova, Tatyana – deputy head of the The executive general manager possess- section engaged in financial and economic es no shares of the Company. planning of fellow affiliates and associated The criteria and the size of remuneration companies’ activities, subordinated to the fel- due to the Executive general manager are low affiliates and associated companies con- stated by the contract of employment con- trol department of JSC RZD;

The Board of Directors of JSC TransContainer

Babaev, Salman

• Born 01.09.1955. Graduated from the Khabarovsk Institute of railroad service engineers in 1978. Railway engineer specializing in railway operation. • His working career started in 1978 when he worked as a yardmaster mate at the railway depot Komsomolsk-on-Amur pertaining to the Far-Eastern railroad. Then he worked as a station duty officer, a yard master of the depot Komsomolsk-Sortirovochny of the Far- Eastern railroad, and as a traffic controller of the Komsomolsk dept. • 1980-1982: as engineer-in-chief, general yardmaster of the Komsomolsk-Sortirovochy depot. • 1982-1986: as General yardmaster of the Khabarovsk-2 depot, and as general division superintendent of the Khabarovsk dept. pertaining to Far-Eastern Railroad. Chairman of the Board • 1987 – 1997: the Urgalsk division superintendent of the Baikal-Amur Mainline, as the first of Directors, deputy head of the Baikal-Amur Mainline, Heas of the Baikal-Amur Mainline. Vice-President of • 1997-1998: as the first deputy chief of the Far-Eastern railway. JSC RZD • 1998-1999: the first deputy chief of the North Caucasus railroad. • 1999-2002: deputy head of the Moscow railroad – head of the railroad centre of the premium transportation service, deputy head of the Moscow Railroad. • In 2002, took charge of the Center of the premium transportation service operating under the auspices of the Ministry of Railways of Russia. • 2002 – head of the Privolzhskaya railroad. • 2003 – Vice-President of JSC RZD, Head of premium transportation service. • August 2005 – Vice-President of JSC RZD.

16 JOINT-STOCK CAPITAL AND THE COMPANY MANAGEMENT BODIES

Macheret, Dmitry

Deputy chairman, Head of the market research dept. of JSC RZD.

• Born October 20, 1968. Graduated with merit from the Moscow Institute of railroad service engineers (MIIT). • 1989-1992: engineer of the technical research sector of the Moscow Institute of railroad service engineers. • 1992-1998: as the associate professor of the Chair Economics of transport and the Chair Economics and management of transport of the Moscow State University of communications. • 1998-2003: deputy head of the Economy Department of the Ministry of Communications and Transport of Russia. • Head of the Department of market research from 2003.

Fedulov, Gleb

Member of Board of Directors, Head of the Department of fellow subsidiaries and associated companies of JSC RZD.

• Born in 1969. Graduated from the Chelyabinsk State University, trained as an economist. From 1991 worked in the Property Management Committee, the Property Fund, the Federal Commission on Securities in Chelyabinsk. • In 1999 took charge of a department of the Ministry of transport and communications of Russian Federation. In 2002, appointed an advisor of the Chairman of the Government of the Russian Federation. • He has been working as Head of the Department for managing fellow subsidiaries and associated companies of JSC RZD.

Baskakov, Peter

• Born March 4, 1961. In 1986, graduated from the Moscow railroad service engineers (MIIT), trained as rail shipping process manager. • On graduating from the Institute he held an appointment of division superintendent of the Podolsk intersectoral enterprise of the industrial rail transport of ther Ministry of Communications and Transport of Russia. In 1988, he became a senior foreman of cargo handling jobs of the enterprise. • 1989 – 1993: worked at the Podolsk depot of the Moscow railroad (MZD), having started as a station duty officer, - and then was raised to the general yardmaster. After that worked as the general yardmaster of the Moscow-Tovarnaya-Kurskaya depot. • Took the position of a deputy head of the railroad center of the premium transportation Member of the Board service in 1999. He became Chief of the cargo container shipping organization of Directors, CEO of department in 2000. JSC TransContainer. • From October 2002 to 2006: took the position of a deputy head of General Office “The premium transportation service center” of the Ministry of Railways of Russia. From March, 2003 to September, 2003 worked as managing director of the General Office Center for cargo container traffic of the Russian Federation. • From March, 2006 – CEO of JSC Center for cargo container traffic “TransContainer”.

17 Chichagov, Pavel

• Born on April 11, 1953 in the city of Gorky (Nizhny Novgorod). Graduated from the Gorky State University, trained as a “radio physics expert”. • 1975 – 1977: worked as an engineer, for the Gorky scientific research institute subordinated to the Ministry of higher and specialized secondary education. Then worked for the Institute of applied physics of the Academy of Sciences ((Nizhny Novgorod) – first as an engineer and then as a junior research assistant and a research associate. • From 1994 to 1997 he took the position of the Director of the Nizhny Novgorod section of the Economic and Political Research Center. • 1997-1998: as an advisor of the Minister of Railways. Up to 2003 was Head of railway restructuring department of the Ministry of Railways of Russia. Member of the Board • From 2003 to 2006: head of the Corporate construction and restructuring department of Directors, Deputy of JSC RZD. CEO in charge of • From June, 2006: deputy director general of JSC TransContainer in charge of strategic strategic development development. of JSC TransContainer

Starostenko, Vladimir

• Born on September 2, 1948 in the city of Tatarsk, the Tatarsk district of the Novosibirsk region. Finished the Tomsk railway training school in 1968. Graduated from the Novosibirsk Institute of railway transport engineers in 1975, trained as railroad operation engineer. • His job record started in 1966, at the Western Siberian railroad, where he worked as a yard master and civil defense director in parallel. Deputy yardmaster of the railway depot Tatarsk from 1970. • 1975-1976:as an operation supervisor of the Omsk section of the Western Siberian railway. • 1976 – 1980: engineer-in-chief of the Vkhodnaya depot of the Western Siberian railway. Member of the Board • 1980-1983: deputy manager of the Karbishevo-1 depot of the Western Siberian railway. of Directors, Head of • 1983-1990: head of the freight transportation dept., the first deputy head of the Omsk the Moscow Railroad section of the Western Siberian railway. -JSC RZD • 1990-1995: head of the Novosibirsk section of the Western Siberian railway. • 1995-1996: deputy head of the Western Siberian railway, head supervisor of a safety train movement. • 1996-1999: managing director of the Kemerovskaya railroad. Took charge of the Western Siberian railroad in December, 1996 – after the Kemerovskaya railroad was integrated into the Western Siberian one. • On May 29, 1999 was appointed Minister of Railways by the Decree of the President of the Russian Federation. After the resignation of Mr.Stepashin’s government (August, 1999), Mr. Starostenko exercised the functions of Minister of Railways. Appointed Minister of Railways on August 19, 1999 according to the presidential edict. • According to the order from the Chairman of the Government, he was appointed Head of the Moscow railway. • Member of Board of JSC RZD as from 2003. He was awarded with the plaques Honorary railroad man, For faultless labor in the Federal rail transport, Medal of Honor, the Star and the Order of St.Andrew the First-Called, and the medal “150th Anniversary of the military railway service of Russia.”

18 JOINT-STOCK CAPITAL AND THE COMPANY MANAGEMENT BODIES

Zhukov, Victor

• Born January 8, 1959 in Novosibirsk. Graduated from the Novosibirsk Institute of railway engineers, qualified as railway operator in 1982. • 1981-1983: worked as a senior cargo & luggage acceptance operator at the Novosibirsk city head yard of the Western Siberian railway, then as a manager of container section of the depot Novosibirsk-Vostochny. • 1983-1988: as a division superintendent of the Kleschiha depot pertaining to the mechanized cargo handling division of the Western Siberian railway. Then he worked as a deputy yardmaster for the same division. • 1988 – 1997 took the position of the deputy head of the container traffic, freight &commercial operations department of the Novosibirsk section of the Western Siberian Railway (WSR). Member of Board of Then he was raised to the divisional manager of the same unit. After that, he became the Directors, marketing first deputy head of the premium transportation service railway center of WSR. director, head of • 1999 – 2000 – as the Executive Director of closed JSC Transfin (Novosibirsk). market investigations • 2000 – 2001 – Head of the freight and commercial operation service of WSR. and tariff policy of JSC • 2001 – 2003: worked for the general office “Premium transportation service center of the TransContainer. Ministry of communications and transport of Russia” – first as a deputy CEO, production manager, and then as a deputy engineer-in-chief. • In 2003, took the position of the first deputy head of the general office Center for cargo container traffic of the Ministry of Railways of Russian Federation, then as the first deputy head of the Center for cargo container traffic TransContainer operating as an affiliate of JSC RZD. Performed the functions of the top manager of the affiliate for some time. • He has been working as marketing director, market research and tariff policy director of JSC TransContainer since 2006.

Maskaeva, Natalya – deputy head of the 4. The JSC TransContainer branch at the financial budgeting section of the Corporate Gorkovskaya (Gorky) railway: 603011, Finance Department of JSC RZD; 51 October Revolution Street, Nizhny Polyansky, Yuri – first deputy head of Novgorod, Russia the Planning and budgeting department of 5. The JSC TransContainer branch at the JSC RZD. South-Eastern railway: 394036, 18 Revo- The remuneration amounts due to the lution Ave., Voronezh, Russia. members of the auditing committee are calcu- 6. The JSC TransContainer branch at the lated according to the “Provision on paying re- North-Caucasian railway: 344001, 1/2 Pri- munerations and recompenses to members of vokzalnaya Square, Rostov-on-Don, Russia. the auditing committee of JSC TransContainer, 7. The JSC TransContainer branch at the approved by the extraordinary General meet- Kuibyshev railway: 443030, 5 Uritsky ing of shareholders of JSC TransContainer. Street, Samara, Russia. 8. The JSC TransContainer branch at the CORPORATE STRUCTURE Privolzhskaya railway: 410031, 8 Mosk- ovskaya Street, Saratov, Russia. Sister companies 9. The JSC TransContainer branch at the The Company has the central headquarters Sverdlovsk railway: 620014, 7 Chelyusk- and the following branches: incev Street, Yekaterinburg, Russia. 1. The JSC TransContainer branch at the Oc- 10. The JSC TransContainer branch at the tober railway: 191011, Ostrovsky Square South-Ural railway: 454005, 61 Zwilling 2, St. Petersburg, Russia. Street, Chelyabinsk, Russia. 2. The JSC TransContainer branch at the 11. The JSC TransContainer branch at the Moscow railway: 107140, 20 Krasnoprud- Western Siberian railway: 630004, 3 Kom- naya street, Moscow. somolsky Ave., Novosibirsk, Russia. 3. The JSC TransContainer branch at the 12. The JSC TransContainer branch at the Severnaya (Northern) railway: 150000, 8 Krasnoyarsk railway: 660028, 16 Novaya Coorerativnaya Street, Yaroslavl, Russia. Zarya Street, Krasnoyarsk, Russia.

19 13. The JSC TransContainer branch at the ment, its Board of Directors, shareholders, Eastern Siberian railway: 664025, 29 5th and all concerned parties. Furthermore, the Army street, Irkutsk, Russia. JSC TransContainer corporate governance 14. The JSC TransContainer branch at the determines the tools of formulating the goals Zabaikalskaya railway: 672092, 34 Lenin- to be attained by the Company, determining grad Street, Chita, Russia. the ways and means of achieving these goals 15. The JSC TransContainer branch at the and the means of checking the Company’s Far-Eastern railway: 680000, 12 Funze activities. Therefore, the Company’s man- Street, office 14, Khabarovsk, Russia. agement has to consistently implement inter- 16. The JSC TransContainer branch at the Sakh- national standards of corporate governance alin railway: 693000, Yuzhno-Sakhalinsk, 78 into corporate practice. Communistichesky Ave., office 115. 17. The JSC TransContainer branch at the Foundations. Documents. Kalinigrad railway: 236039, 1Kievskaya JSC TransContainer is striving to observe the Street, Kalinigrad, Russia. Corporate Code of Conduct approved at the 18. The JSC TransContainer branch – the session of the Government of the Russian Gryazinsk container factory: 399055, 1 Federation that took place on November 28, Stancionnaya Street, Gryazi, the Lipetsk 2001 (Minutes No.49) and recommended for region, Rusia. application by the Instruction No.421/r from 19. The JSC TransContainer branch – con- FCSM (Federal Commission for the Securi- tainer repair depot Likhobori at the Mos- ties Market) of the Russian Federation, issued cow railway: 125438, 6 Packhouse high- 04.04.2002 and entitled “Recommendation way, Moscow. for applying Corporate Code of Conduct”. 20. The JSC TransContainer branch – the con- The corporate governance of JSC Trans- tainer repair depot Shahunya at the Gorky Container is based on the respect for the railway: 606910, 10 Depovskaya Street, rights and legitimate interests of its share- Shahunya, the Nozhegorodsky region. holders. The main work on the establishment of The JSC TransContainer activities are JSC TransContainer representation offices based on the following principles within the in Latvia and Byelorussia (Brest) was per- framework of the corporate governance es- formed in 2006. The Company’s representa- tablishment: tion offices are to be opened in the Ukraine, 1. The rights of shareholders (the corporate Uzbekistan, Germany (Berlin), China (Beijing governance system should defend the and Shanghai), and in Lithuania, Kazakhstan, shareholders’ rights); and Estonia at an early date. 2. Equal attitude towards the shareholders The existing branches and the represen- (the corporate governance system should tation offices being established are not legal provide for the equal attitude towards all entities. They are provided with the assets the shareholders including minor and for- owned by JSC TransContainer. eign ones); 3. The role of persons concerned in the Com- Wholly-owned subsidiaries and pany management (the corporate gover- associated companies nance system should acknowledge the In November 2006, the Board of Directors legal rights of persons concerned and pro- of JSC TransContainer decided to estab- mote the active cooperation between the lish a joint venture described in the follow- Company and all the persons concerned ing table: to provide for the accrual of social wealth, The above-mentioned joint venture has creating new jobs, and achieving the busi- been established with a view of rendering ness solvency of the corporate sector. complex service in the field of container traf- 4. Disclosure and transparency of informa- fic, operating on export, import and transit tion (the corporate governance system routes between Russia and Finland. should provide for a timely disclosure of trustworthy and authentic information on all CORPORATE GOVERNANCE essential aspects of the Company’s opera- The Adminisatration of JSC TransContainer tion – including the data on the Company’s considers corporate governance as a system financial condition, results of activity, the of relations between the Company’s Manage- owners, and the management structure).

20 JOINT-STOCK CAPITAL AND THE COMPANY MANAGEMENT BODIES

5. The obligations of the Board of Directors agency). Depending on the results, the ac- (the Board should provide for the strate- tion plan will be developed, aimed at improv- gic control of business, an efficient su- ing the quality of the Company’s corporate pervision of the managers’ activities etc. governance to the level corresponding to the The Board of Directors is accountable to one of companies featuring positive corpo- the shareholders and the Company as rate governance. a whole. The document database of the corporate governance includes the regulatory legal acts of the Russian Federation, the regulatory and guidance materials of JSC RZD as well as some internal regulatory documents of the Company. In December, 2006 the Company had ap- proved a number of internal documents gov- erning the way of establishment and checking authorities and supervision bodies’ activities. Those documents included, in particular, the Provision on the enabling procedures and conducting the General meeting of sharehold- ers of JSC TransContainer, the Provision of the Board of Directors of JSC TransContain- er, the Provision on the Auditing committee of JSC TransContainer, the Provision on paying remunerations and recompenses to members of the Board of Directors of JSC TransCon- tainer, the Provision of paying remunerations and recompenses to members of the Auditing committee of JSC TransContainer. To enhance the investment appeal and create the appropriate conditions for en- larging capitalization, the Company thinks expedient to reach a high corporate gover- nance rating. Some diagnostics of the corporate gov- ernance level is scheduled for 2007 in JSC TransContainer. The diagnostics will be based on the methods of the National rat- ing of corporate governance RID-Expert-RA (Russian institute of Directors – Expert raiting

Table 1.

Name Location Sphere of Authorized Par value Ownership interest of JSC action capital of a share TransContainer (thousand (Euro) Euro) Thousand Thousand % Euro rouble

Oy Helsinki, Container 150 500 75 2 663 50,0 TransContainer Finland railroading sales, Scandinavia Ltd) marketing, and organization – except for transportation of cargo

21 INFORMATION ON MAJOR other transactions coming under the order TRANSACTIONS of approval of major transactions according AND INTERESTED-PARTY to the Statutes of a joint-stock company; TRANSACTIONS • concluded four bargains acknowledged as In 2006, JSC TransContainer: the interest-based ones according to the • didn’t conclude any bargains acknowl- Federal Law On joint-stock companies. The edged as major ones by the Federal Law On data on such transactions are shown in the joint-stock companies. Neither did it do any Table below:

Table 2.

Cosignatories Subject of contract Date Sum of Contract (thousand rouble)

JSC TransCreditBank General agreement on placing deposits 15.11.2006 –

JSC TransCreditBank Cooperation agreement with mortgage 24.11.2006 – credit lending of employees of JSC TransContainer

Gryaze-Orlovsky repair factory – a branch Purchase and sale of materials and parts 01.12.2006 10 233,68 of JSC RZD

JSC RZD (TransContainer JSC RZD) The movable assets (motor transport) lease 29.12.2006 115,59 contract

22 KEY INDICATORS

KEY PERFROMANCE INDICATORS OF THE COMPANY JULY-DECEMBER 2006

JSC TransContainer has started indepen- JSC TransContainer dominates in operat- dent economic activities successfully. Ac- ing fitting platform fleet as well. 584 thou- cording to six months’ figures, the Company sand of large-capacity containers have has transported 382 thousand high-capacity been transported on the fitting platforms company-owned containers in 20-feet equiv- belonging to JSC TransContainer in twenty- alent (TEU). This came up to 41% from the to- foot equivalent units. This makes 63% from tal high-capacity container traffic performed the general network-wide index. across the railway network of Russia.

Shipping volume of large-capacity Shipping volume of large-capacity containers containers on fitting platforms


 


$POUBJOFS
GMFFU
PXOFE
5PUBM CZ
+4$
5SBOT$POUBJOFS 

5&6 0O
GJUUJOH
QMBUGPSNT 

5&6 5PUBM PXOFE
CZ 

5&6
+4$
5SBOT$POUBJOFS 

5&6

23 KEY INDICATORS OF COMPANY’S ACCOUNTING CONTROL

ORGANIZATION OF cording to the requirements of the above- BOOKKEEPING AND stated normative documents. ACCOUNTING POLICIES Accountancy in the Company’s branches FINANCIAL CONDITION OF THE is performed by bookkeeping departments COMPANY managed by controllers. The accounting The financial position of JSC TransContainer staff compiles ledgers, tax ledgers, and in- is absolutely stable. The Company is quite ternal financial reports based on the data solvent and possesses the equity basis suf- submitted by sectors, agencies, terminals, ficient to provide for the necessary business and service centers. Then the above-stated mobility level. documents are submitted to the bookkeep- The circulating funds of the Company’s ing office of the apex unit of the Company. own made up 4,3 b of roubles as of the end The Company’s accounting control com- of 2006. plies with the accountancy regulations ac- The assets of JSC TransContainer con- cepted in the Russian Federation according sist of circulating funds by 35,2 %. The non- to the Federal law On accountancy No 129- current or immobilized assets in the form federal statute (FS) passed 21.11.1996, of fixed-capital assets and construction in - Provisions on accountancy approved by progress constitute 64, 8% of all the Com- Orders from the Ministry of Finance and ef- pany’s assets. fective as of 31.12.2006, by Order No. 67n As regards quasi money normally imply- of the Ministry of finance of Russia issued ing short-term financial investments and 22.07.2003 On the forms of accountancy of monetary means, their share is 10,2% which organizations, and by other effective statu- is quite tangible. The asset mix and struc- tory acts of the Russian Federation govern- ture are shown on the chart below. ing the Russian bookkeeping. The liabilities for 90% consist of the The Company has developed and ap- sources of funds of the Company’s own. proved the accounting policies for 2006 ac- The leverage ratio is only 10%. Therefore,

Asset mix and structure of JSC JSC TransContainer liabilities portfolio and TransContainer as of December 31, 2006 structure as of December 31, 2006

 
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
 


 
 


'JYFE
BTTFUT'JYFE
BTTFUT 3FDFJWBCMFT
3FDFJWBCMFT
0XOFSTIJQ
0XOFSTIJQ
DBQJUBM -POHUFSN
-POHUFSN
*OWFOUPSZ
TUPDLT
*OWFOUPSZ
TUPDLT
DBQJUBM GJOBODJBM
GJOBODJBM
BOE
DPTUT
BOE
DPTUT
1BZBCMFT1BZBCMFT JOWFTUNFOUT¾ JOWFTUNFOUT¾ 4IPSUUFSN
4IPSUUFSN
3FUBJOFE
3FUBJOFE
$POTUSVDUJPO
JO
$POTUSVDUJPO
JO
GJOBODJBM
GJOBODJBM
FBSOJOHTFBSOJOHT QSPDFTTQSPDFTT *OWFTUNFOUT*OWFTUNFOUT %FGFSSFE
UBY
%FGFSSFE
UBY
.POFZ
.POFZ
BTTFUT
BTTFUT
SFTPVSDFTSFTPVSDFT

24         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





,BMJOJOHSBE











 5IF
CSBODI
BU
UIF
,BMJOJHSBE
SBJMXBZ

25

         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





.PTDPX











 5IF
CSBODI
BU
UIF
.PTDPX
SBJMXBZ

26

 KEY INDICATORS the Company is actually independent from ness not sticking to excessive borrowings outside investors and has a high level of au- (the “normal” payables is a usual phenom- tonomy. enon for the current business). The financial An important feature of the liabilities is soundness of the Company is guaranteed the retained earnings value being a source as of December 31, 2006. Inventory carry- of the Company’s self-finance. The retained ing costs are possible without any creditors’ earnings come up to 1,44 b roubles, or 8,5% equities. of all of the Company’s own funds. Liquidity of balance. The balance li- The liabilities of JSC TransContainer and quidity is absolute since all the liabilities of their structure are described by the figures the Company are covered by the respective of the chart below: sources of repayment. Generally, the com- Financial soundness of the Compa- parison between the Company’s assets and ny. The external manifestation of the Com- liabilities reveals a major cash overage to- pany’s solvency is its financial soundness, ward the settlement of the Company’s liabili- i.e. the ability to cover inventory stocks and ties as of 2006 – coming up to 8,6 b roubles. losses by the sources of the Company’s The most important factor to assess own and by debt financing. Depending on the liquidity level is the Company’s work- what sources are used to cover the current ing capital availability index. It is calculated assets requirement and whether it is cov- as the difference between the Company’s ered at all, the so-called three-dimensional own funds and long-term creditors’ equity index is determined, characterizing the type and the value of non-circulating funds. The of financial soundness. According to the value of the working capital of the Compa- balance data, the storage requirement and ny’s own can also be determined as the dif- the spending need of JSC TransContainer ference between the total of all the current with 4,2 b roubles overage is covered by assets and the total of the current liabilities the Company’s own sources without stick- according to balance. The balance data ing to any debt finances (payables). With the shows that the equity working capital of the established structure of the Company’s as- Company has come up to 4,3 b roubles. sets and the shaped sources of finance, the Therefore, the liquidity and the solvency three-dimensional index of financial sound- of JSC TransContainer are absolute. ness shows that the financial condition of Profitability indices. The main posi- the Company is absolutely stable. tive effect from the Company’s activities is The assets-to debt ratio and the struc- achieved as various kinds of profit (gross ture of assets established in JSC TransCon- profit, sales profit, net profit). This was re- tainer and reflected by the above-stated flected by quite high indices of sales profit- ratios, enable the Company to maintain the ability and the main activities (production) business mobility and to finance the busi- profitability. Within the period of account,

Financial stability indices of JSC TransContainer

Index Rational values interval As of the end 2006

Equity (independence) ratio 0,5 - 0,8 0,9

Financial stability index 0,5 - 0,8 0,9

Leverage – 0,11

Debt-to-assets ratio of Company 0,2 - 0,5 0,10

Financing ratio – 9,05

Liquidity coverage ratio exceeding or equal to 0,1 0,72

Resources resilience ratio exceeding or equal to 0,2 - 0,5 0,28

Current assets/fixed assets ratio – 0,54

27 JSC TransContainer balance liquidity ratios

Ratio Rational values interval As of the end 2006

Working capital ratio 1,0 - 2,0 3,54

Acid test ratio exceeding or equal to 1 3,47

Absolute liquidity ratio exceeding or equal to 0,2-0,5 1,02

Overall liquidity ratio exceeding or equal to 1 2,27

these indices came up to 35,4% and 54,7 %, indices of the Company’s activities were respectively. high enough. The above-stated factors do Therefore, the financial position of JSC not imply any risk of investments to be made TransContainer in 2006 was characterized into the business, and predetermine the as “absolutely stable”. The main efficiency growth of capitalization of the Company.

28          KEY INDICATORS

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





/J[IOZ
/PWHPSPE











 5IF
CSBODI
BU
UIF
(PSLPWTLBZB

(PSLZ
SBJMXBZ

29

         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





:BSPTMBWM











 5IF
CSBODI
BU
UIF
4FWFSOBZB
/PSUIFSO
SBJMXBZ

30

 KEY INDICATORS

ACCOUNTING REPORTING AS OF December 31, 2006 Balance sheet as of December 31, 2006 Codes Form No.1 according to All-Russia classifier of management documentation 0710001 Date (year, month, date) 2007.03.30 Organization JSC Container cargo Shipping center TransContainer According to All-Russia Nomenclature of business and organizations (OKPO) 94421386 Taxpayer identification number Reg.No. 007708591995 Kind of activity Railway transport According to All-Russia classifier of economic activities 60.10 Form of incorporation/dorm of ownership Open joint-stock companies According to all-Russia classifier of forms of ownership (OKOPF) 47/41 Measurement unit thousand rouble According to All-Russia classifier of measurement units 384/385 Whereabouts (address) 643, 107228,00, 12 Novoryazanskaya St., Moscow

As to the beginning Adjustment at Asset Index code of the fiscal year fiscal year-end 1 2 3 4 I. FIXED ASSETS Intangible assets 110 – – Capital assets 120 – 10 932 612 Building in progress 130 – 85 608 Income yielding investments into tangible assets 135 – – Long-term financial investments 140 – 2 663 Deferred tax assets 145 – 9 238 Other fixed assets 150 – – Total, according to Section I 190 – 11 030 121 II. CURRENT ASSETS Inventory stocks 210 – 83 640 including: raw materials, staff 211 – 59 425 and other similar materials rearers and fatteners 212 – – unfinished production costs 213 – – ready-made products 214 – 2 305 and goods for resale shipped goods 215 – – deferred expenses 216 – 21 875 other reserves and expenses 217 – 35 Input value added tax 220 – 43 280 Non-current non-delinquent accounts 230 – - receivable including buyers and customers 231 – – Current non-delinquent accounts receivable 240 – 4 145 507 including buyers and customers 241 – 903 731 Short-term financial investments 250 – 1 150 000 Cash 260 – 579 317 Other current assets 270 – – Total according to Section II 290 – 6 001 744 BALANCE 300 – 17 031 865

31 Opening Closing Liabilities Index code balance balance

1 2 3 4 III. CAPITAL AND RESERVES Authorized capital stock 410 – 13 894 778 Own shares bought from shareholders 411 – Added capital 420 – – Surplus 430 – – including: the inventory stock formed according to Law 431 – – inventory stock formed according to founding 432 – – documents Retained profit (uncovered loss) 470 – 1 441 971 Total according to Section III 490 – 15 336 749 IV. FIXED LIABILITIES Debt and borrowing 510 – – Deferred tax liabilities 515 – 3 755 Other fixed liabilities 520 – – Total according to Section IV 590 – 3 755 V. CURRENT LIABILITIES Debt and borrowing 610 – 11 Payables 620 – 1 690 248 including: suppliers and contractors 621 – 158 464 debt to Company’s staff 622 – 31 258 debt to state extra-budgetary funds 623 – 16 917 sales and taxes payable 624 – 130 204 other creditors 625 – 1 353 405 Debt to participants (founders) in terms 630 – – of distribution of income Future income 640 – 1 102 Provisions for liabilities and charges 650 – – Other current liabilities 660 – – Total according to Section V 690 – 1 691 361 BALANCE 700 – 17 031 865

32          KEY INDICATORS

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





3PTUPWPO%PO











 5IF
CSBODI
BU
UIF
/PSUI$BVDBTJBO
SBJMXBZ

33

         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





7PSPOF[I











 5IF
CSBODI
BU
UIF
4PVUI&BTUFSO
SBJMXBZ

34

 KEY INDICATORS

REFERENCE on values recorded Index code: Opening balance Closing balance on off-balance-sheet accounts

1 2 3 4

Leased fixed assets 910 – 1 419 126 leasing included 911 – 605 150

Material assets impounded 920 – –

Goods taken on commission 930 – –

Written off receivables from insolvent debtors 940 – –

Bearer debentures received 950 – –

Bearer debentures given out 960 – –

Housing resources depreciation 970 – –

Depreciation of external improved objects 980 – – and similar ones

Intangible assets received to be used 990 – –

Assets with useful life exceeding 12 months, taken into account as materials and supplies 995 – 15 819 inventories, - subject to manufacture

Registered high-security forms 995 – 2

Property subject to operation, with the useful life not 995 – 5 258 exceeding 12 months

35 Appendix to the Order 67 of the RF Ministry of Finance, issued July 22, 2003 (taking into account the Order No. 475/102 of the RF Goskomstat (State Committee of the RF for statistics) and the RF Ministry of finance, - issued November 14, 2003, - and altered as of 18.09.06 under No 115 n) Profit and loss account For the year 2006 Codes Form No.2 according to All-Russia classifier of management documentation 0710002 Date (year, month, date) 2007 03 30 Organization JSC Container cargo Shipping center TransContainer According to All-Russia Nomenclature of business and organizations (OKPO) 94421386 Taxpayer identification number Reg.No. 007708591995 Kind of activity Railway transport According to All-Russia classifier of economic activities (OKVED) 60.10 Form of incorporation/dorm of ownership Open joint-stock companies / The Russian property mixed with a share of Federal property According to all-Russia classifier of forms of ownership (OKOPF) 47 41 Measurement unit: thousand rouble According to All-Russia classifier of measurement units 384/385

Index For the year Year-on-year to date name code

1 2 3 4

Income and costs related to usual kinds of activities Sales proceeds from selling goods, products, services (minus the VAT, excise taxes, and similar 010 5 833 873 — compulsory payments) 011 — — Cost of goods, products, works and services sold 020 (3 771 443) ( — )

021 ( — ) ( — )

Gross profit 029 2 062 430 — Business expenses 030 ( — ) ( — ) Management expenses 040 ( — ) ( — ) Sales profit (negative profit) 050 2 062 430 — Other income and expenses Interest receivable 060 5 — Due interest 070 (3 457) ( — ) Income from participation in other organizations 080 — — Other revenue 090 55 354 — 091 — — Other expenses 100 (44 383) ( — ) 110 — ( — ) Before-tax income (loss) 140 2 069 949 — Deferred tax assets 141 9 238 — Deferred tax liabilities 142 (3 755) ( — ) Current profit tax 150 (633 410) ( — ) BNVD 180 (51) ( — ) Net profit of the period of account 190 1 441 971 — REFERENCE INFORMATION Fixed tax liabilities (assets) 200 135 788 — Basic earnings (loss) per share 201 0 — Diluted earnings (loss) per share 202 0 —

36         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





4BSBUPW











 5IF
CSBODI
BU
UIF
1SJWPM[ITLBZB
SBJMXBZ

37

         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





4BNBSB











 5IF
CSBODI
BU
UIF
,VJCZTIFW
SBJMXBZ

38

 KEY INDICATORS

COMPANY AUDITOR’S REPORT The report is addressed to the shareholders of JSC Center for cargo container traffic “TransContainer” and is performed according to the accounting reporting of JSC JSC Center for cargo container traffic“TransContainer” based on the bottom line of 2006.

AUDIT REPORT ON THE ACCOUNTING REPORTING FROM OPEN JSC CENTER FOR CARGO CONTAINER TRAFFIC TRANSCONTAINER BASED ON THE BOTTOM LINE OF 2006 The audit of the accounting reporting-2006 from open joint-stock company Center for cargo container traffic “TransContainer” (hereinafter referred to as Company) was performed by closed joint-stock company BDO Unicon according to the contract No.10101-15-040/07 concluded according to the decision of the General meeting of the Company’s shareholders approving CJSC BDO Unicon as an official auditor (see Minutes No.1 of the extraordinary General meeting of shareholders as of 15.12. 2006 ).

Brief information on CJSC BDO Unicon CJSC BDO Unicon has been registered by the Inspection Board No.26 of the Ministry for taxes and charges of the Russian Federation, in the Southern administrative district of Moscow. Certificate Series 77 No. 006870804 on making entry into the Uniform State Register of Legal Entities as of 29.01.2003. The entry was assigned main state registration number 1037739271701. Certificate Series 77 No 005694312 on state registration of alterations made to the founding documents of legal entity. The Certificate was issued 25.10.2005 by the inter-district inspectorate No.46 of the Federal Tax Service related to Moscow, - under the state registration number 2057748766139. Whereabouts: 125 Warsaw Highway (Varshavskoye Shosse) building 125, auxiliary building 1, section 11, 117545 Moscow. Telephones: (495) 797 5665. Telephone/fax: (495) 797 5660. E-mail: [email protected] Web: www.bdo.ru CEO: Dubinsky, Andrey CJSC BDO Unicon has the license authorizing it to perform audits. The license has been issued by the RF Ministry of Finance and is effective till 24.02.2007. CJSC BDO Unicon us an independent national auditing firm included into the international BDO network. CJSC BDO Unicon is a corporate member of the professional auditing association, Non- commercial partnership “Institute of professional bookkeepers and auditors of Russia” (IPB of Russia), accredited under the auspices of the RF Ministry of Finance according to the Order No. 152 issued 24.07.2002. The person authorized to sign the audit report is Deputy CEO Kharlamova Natalya Vassilievna. She is entitled to sign the audit report based on the General power of attorney No.2 issued 09.01.2007. The auditor Lancov Alexander – auditing director. He took charge of the financial audit of the Company.

Brief information on JSC Center for cargo container traffic “TransContainer The open Joint-Stock Company Center for cargo container traffic “TransContainer” has been registered on March 04, 2006 by the inter-district inspectorate No.46 of the Federal Tax Service related to Moscow. The Company has been issued the State Legal Entity Registration Certificate series 77, No 009200861. Correspondence address: 6/2 Kalanchevskaya St., Moscow 107174. 1. We have performed the audit of the accounting reporting for 2006 enclosed, on 25 pages: • Balance sheet (Form No.1) – on 3 pages; • Profit-and-loss report (Form No.2) – on 2 pages; • Statement of changes in equity (Form No.3) – on 3 pages; • Cash flow statement (Form No.4) – on 2 pages;

39 • Appendix to Balance Sheet (Form No.5) – on 6 pages; • Explanatory note – on 9 pages. This financial statement has been prepared by the management of the auditing firm according to the norms set by the Federal Law No.129-FS On accounting, passed 29.11.1996 (in the wording that includes the subsequent alterations and supplements). Moreover, the financial statement is based on the Provisions on accounting, the Order No. 67n from the RF Ministry of Finance On accounting reporting forms of organizations, - and other normative acts of the Russian Federation, governing bookkeeping and accounting reporting procedures. The Company CEO – Mr. Baskakov, Peter – is responsible for bookkeeping organization and compliance with the laws of the Russian Federation when performing economic transactions. The controller of the Company, Mr. Kalmikov, Konstantin - is held liable for shaping of accounting policies, the book records, and timely presentation of the complete, true and authentic accounting reporting. Auditor’s duty is to state his views as to whether the accounting reporting submitted is truthful in all material respects. Auditor’s duty is also passing an opinion on whether the accounting records maintenance complies with the laws of the Russian Federation. The purpose of this work was not just stating the complete correspondence of the Company’s activities to the legislation of RF. Neither was it expressing auditor’s opinion on how the Company’s management estimates the efficiency of its activities. Users of financial statements should not construe our opinion as a manifestation of confidence with respect to a continuous and uninterrupted activity of the Company in future. 2. The audit was performed according to the Federal Law No. 119-FS On auditing passed 07.08.2001 and the Federal regulations (standards) of auditing approved by the Federal governmental regulations No. 696 issued 23.09.2002 (as amended), - and according to other audit-governing normative acts, company standards, and auditing techniques. When performing the audit we followed the bylaw (standards) accepted by the accredited professional auditors’ association of IPB of Russia. The audit had been planned and performed so as to reach a reasonable confidence that the accounting reporting had no essential distortions whatsoever. The audit was performed on a test basis and included investigation of test-based proofs confirming the index numbers contained in the accounting reporting and the disclosure of information on financial and economic activities. The audit also included estimation of compliance with the principles and rules of accountancy used when preparing accounting reports, - examination of the main estimated figures received by the Company’s management, and the estimation of the submission of accounting reporting. We believe that the audit performed provides reasons enough for us to claim that the accounting reporting presented was truthful and authentic in all material respects, and that the accounting records maintenance did comply with the legislation of the Russian Federation. 3. In our opinion, the accounting reporting submitted by the Company gives a true and fair view of the financial situation as of December 31, 2006 and the results of financial and economic activities from March 04 through December 31, 2006.

25.04.2007 Deputy CEO N. Kharlamova Certificate of competence No. 025432 (general audit). The Certificate was issued 25.03.1999 by the RF Ministry of Finance based on the decision of the Central certifying and licensing audit commission subordinated to the RF Ministry of Finance. The Certificate validity term was extended for an infinite period of time since 28.03.2002 (Minutes No. 104 of CALAK of the RF Ministry of Finance) Auditor A. Lancov Certificate of competence No. 040070 (general audit). The Certificate was issued 25.03.1999 by the RF Ministry of Finance based on the decision of the Central certifying and licensing audit commission subordinated to the RF Ministry of Finance. The Certificate validity term was extended for an infinite period of time since 28.11.2001 (Minutes No. 104 of CALAK of the RF Ministry of Finance)

40          ABOUT THE COMPANY

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





&LBUFSJOCVSH











 5IF
CSBODI
BU
UIF
4WFSEMPWTL
SBJMXBZ

41

         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





$IFMZBCJOTL











 5IF
CSBODI
BU
UIF
4PVUI6SBM
SBJMXBZ

42

 ALLOCATION OF PROFIT AND DIVIDEND POLICY ALLOCATION OF PROFIT AND DIVIDEND POLICY

The net income retained in the business at bles. The use of the net profit is planned as year-end 2006 is 1 441 971 thousand rou- follows:

Forms of use Sum (thousand roubles)

Allocation to reserve fund 72 098,5

Dividends payable 144 227,8

Sponsoring and charity actions 20 583,0

Payment of remunerations to members of the Board 4 640,0 of Directors and the Auditing committee

Retained earnings 1 200 421,7

43 INVESTMENT ACTIVITIES

According to the investment program of • Computer and server equipment, office JSC TransContainer developed for 2006 ( accessories totaling 81,5 million roubles II semester), the investment financing was – within the framework of information pro- planned to the amount exceeding 708 370 cessing technologies development. thousand roubles (without V.A.T.), - focusing Some contracts were concluded implying on development of the branch network and modernization and improvement of terminal the system of agencies. facilities. Some means were invested into ac- quisition of office premises and participation The following procurement contracts were in joint construction of those for housing the concluded in the II semester of 2006: branch staff at railways – totaling 105,22 mil- • 10 self-propelled reach stackers Kalmar to- lion roubles. taling 140 million roubles; The total sum of the contracts conclud- • The outfitting facilities for the existing car- ed made up 563 420 thousand rouble, with go-handling equipment (automatic sling the supply to be finished in 2007. In view of assemblies and spreaders) totaling about a large volume of the equipment purchased, 17 million roubles; the supply could not have been finished in • Machines and other production equipment full within 2006. The rate of delivery was lim- for the repair units of JSC TransContainer ited by the industrial capacity of manufactur- totaling 12,5 million roubles; ers. According to the accounting statements • Other equipment (fiscal printers, air condi- data for 2006, the main assets acquisition tioners, walkie-talkie sets etc.) totaling 3,0 was financed to the total amount of 361 420 million roubles; rouble. • 103 haulage trucks and 159 drop-frame The leasing program-2006 developed by trailers for transportation of high-capacity JSC TransContainer also provided for leasing containers – totaling 204,2 million roubles. fitting platform models 13-9751 from JSC Fi- This equipment was to be supplied within nanceBusinessGroup totaling 605,15 million the framework of the forwarding services roubles. The lease payments total came up to development strategy; 112,43 million roubles in 2006.

The investment program of JSC TransContainer for 2006 (in million roubles)

Title Planned Sums of contracts Program investments concluded within execution the framework of percentage investment program (with respect to implementation planned volume)

Rolling stock 130,00 – 0 %

Power- hoisting equipment 156,75 157,00 100 %

Road transport 204,20 204,20 100 %

Production equipment and machinery 12,54 12,50 100 %

Other equipment 2,80 3,00 107 %

Capital projects and reconstruction 107,08 105,22 98 %

Computer facilities and electronic equipment 85,00 81,50 96 %

TOTAL 708,37 563,42 80 %

44          ABOUT THE COMPANY

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





/PWPTJCJSTL











 5IF
CSBODI
BU
UIF
8FTUFSO
4JCFSJBO
SBJMXBZ

45

         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





,SBTOPZBSTL











 5IF
CSBODI
BU
UIF
,SBTOPZBSTL
SBJMXBZ

46

 INFORMATION TECHNOLOGIES INFORMATION TECHNOLOGIES

Reforming the container shipping control sys- • to implement the uniform accounting sys- tem, the foundation of JSC TransContainer, tem, the bundled software “1-C Account some alterations to the accounting reporting department 8,0” has been introduced; system and the interaction with information • the record keeping of the condition and systems of JSC RZD, as well as the necessity repairs of the Company-owned containers to ensure the competitive edge claimed for the and rolling stock has been organized; creation of a special “Informational complex • to provide for the operational management system of controlling the main activity of the of the Company-owned rolling stock and Center for cargo container traffic TransCon- containers, the database of JSC TransCon- tainer” (hereinafter referred to as ICS TC). tainer has been created; The following has been done within the • the integration environment has been cre- framework of realizing the function of ICS TK ated, ensuring integration of all subsystems in JSC TransContainer in 2006: of ICS TK and the information systems of • the notion of Order has been introduced with JSC RZD; respect to a package of services, and the • the integration with the information sys- unique form of order has been introduced; tems of JSC RZD has been accomplished • the first stage of the forwarding operations with a view of organizing container shipping automatic control system has been intro- (“wireless” technology, record of leasing duced; relations, check-lists of container ship- • the common base of contracts of the Com- ments); pany has been created; • the design approach to creation and im- • centralization of calculations and financial plementation of information technologies arrangement with JSC RZD has been per- in the Company has been accepted and formed; launched.

47 STAFF AND SOCIAL POLICY. SOCIAL PARTNERSHIP

The staff policy followed by JSC TransCon- Training and extension course for tainer is aimed at the creation of a high-skilled, qualified personnel is one of the main team-oriented collective body able to solve trends of the Company’s activities. As it was the posed tactical and strategic problems at mentioned above, 4,5 thousand people em- the expense of the following: ployed by the Company today include 24,5 • boosting the professional competency, im- % of those aged under 30. The majority of proving the duty performance and creativity those people pertain to managerial staff. of the Company’s employees; 48,3% of the Company’s employees are pro- • creating conditions favorable to the career fessional people including 29,3% of young path and personal advance of the Compa- people. Many young people are employed, ny’s employees; for instance, in central staff. This exercises a • creating motivating labor conditions ensur- positive impact on their job since it is always ing social welfare; easier and more comfortable for people to • corporate advertising the Company as a realize their faculties if they work in their herd highly competitive employer in the labor mates’ environment. market. The JSC TransContainer chief executives The man power ceiling of the Company pay a great attention to personnel training was 4 550 people as of 31.12.2006. The and retraining issues. Thus, the Company cadre has been formed mainly on the ba- has concluded bilateral contracts with a sis of the branch affiliate Center for cargo number of sector-specialized higher schools container traffic TransContainer of JSC and three colleges in various districts of Rus- RZD. sia, implying target training of experts. This The employee turnover in the second se- was done to attract skilled experts to the mester of 2006 was 5 %. Company.

The qualitative composition of the Company’s employees as of 01.01.2007

All Experts Including: employees those with a those with a secondary higher education vocational education

In percentage terms 48,3 % 64,0 % 35,8 %

According to age

Under 30 24,5 % 29,3 % 32,4 % 24,7 %

30-40 28,4 % 31,7 % 33,5 % 29 %

40-50 30,4 % 27,7 % 24,0 % 33,2 %

Over 50 years of age, in total 16,3 % 11,3 % 10,1 % 13,1 %

Including those of retirement age 2,7 % 2,1 % 1,6 % 2,9 %

By education

Higher 33,6 %

Secondary vocational 22,9 %

48         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





*SLVUTL











 5IF
CSBODI
BU
UIF
&BTUFSO
4JCFSJBO
SBJMXBZ

49

         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





$IJUB











 5IF
CSBODI
BU
UIF
;BCBJLBMTLBZB
SBJMXBZ

50

 STAFF AND SOCIAL POLICY

Moreover, 5 employees of the Company 160 managers and experts have advanced have been awarded by a prestigious MBA their vocational competence from the begin- degree (Master of Business Administration), ning of the year. 450 people will finish refresher having been qualified as “corporate manage- courses and develop their vocational compe- ment in transport”. Following the current-year tence till the end of the year. This is more than plans, a group including 25 heads of major 20 % from the total number of experts. agencies and some reserved yuppies will be The Company’s social policy. An effi- trained according to MBA program (The lo- cient social security protection system aimed gistics and transport business management) at enhancing motivation of the labor of JSC based on the Moscow Institute of transport TransContainer employees has been estab- engineers (MIIT). lished in the Company. The operators of to-day are in desper- The collective agreement has been con- ate need of logistics experts. That’s why the cluded, effective from September 21, 2006. Company is going to finance the training of a The agreement has consolidated social security group of MIIT students expected to be quali- protection of the Company’s employees, mak- fied as experts in “logistics systems and cargo ing it level with the one accepted by JSC RZD. delivery procedures.” The Company also im- The Company has concluded a pension plements the newcomers support program. contract with the non government pension In particular, the program provides for paying fund “Blagosostoyanie” on the non-state pen- a lump-sum grant equal to the newcomer’s sion fund scheme effective with respect to the monthly official rate of pay. Should a new- Company’s employees. The scheme is based comer move to another region of Russia to be on the Provision approved by the Board of Di- employed there, the Company will cover the rectors. respective transportation costs to be borne In October, 2006 the Board of Directors by the newcomer and his family. Moreover, a has adopted a package of documents stating corporate support may be rendered to such the procedure of rendering corporate support an expert to improve his housing conditions. to the Company’s employees acquiring hous- This is normally done by way of selling lodg- ing premises for themselves. The package ing on credit through the conclusion of install- of documents also stipulates the subsidized ment payment transaction with the annual in- rates according to mortgage credit lending terest rate 1%, the first installment being 5% contracts. from the cost of the apartment. Newcomers The Company also compensates railway certainly enjoy all the fringe benefits provided fares to its employees. It takes care of sum- for by the collective agreement. mer vacations of the employees’ children, In 2006, the advanced vocational training providing for recreation and rest of employ- of experts was performed within the frame- ees and their family members in sanatoriums work of the action program on skills devel- and health resorts. opment implemented by JSC RZD. The total The compulsory and the voluntary medical number of people who have undergone the insurance is also accepted in the Company, advanced vocational training within the 2nd as well as industrial accident insurance. semester of 2006 was 101. Social safety net and benefits are consoli- Currently the advanced vocational train- dated in the following documents: ing is performed according to the existing 1. The collective agreement of JSC Trans- agreements concluded between JSC Trans- Container. Container and the Russian Academy of com- 2. The Provision on the non-state pension munications and transport (RAPS) and the fund scheme valid with respect to employ- Siberian State University of communications ees of JSC TransContainer. and transport (SGUPS). The advanced voca- 3. The contracts of collective voluntary medi- tional training is based on the programs ac- cal insurance concluded with JSC Insurance cepted by these higher schools. Company ZHASO and JSC Radonesh. Development of vocational competence of 4. The Provision on the way of railway fare the higher-level top managers (deputy CEOs, compensation due to employees of JSC executive directors in charge of definite trends TransContainer. of business activities, branch managers) is 5. The Provision on allocation and coverage based on ANH and the Higher School of eco- of vouchers entitling the employees of JSC nomics, taking place in other training centers. TransContainer, their family members,

51 and non-working pensioners to visit san- 7. The regulations on rendering corporate atorium-and-spa institutions and health support to employees of the open joint- resorts. stock company Center for cargo container 6. The Provision on subsidized rates spared traffic “TransContainer” acquiring housing to employees of the open joint-stock premises. company Center for cargo container traf- 8. The Provision on newcomer of JSC Trans- fic “TransContainer” for covering inter- Container. est payments according to mortgage loan 9. The target program “The youth of JSC contracts. RZD” (2006 – 1010).

JSC TransContaner employees aged under The share percentage of JSC TransContaner 30, with a higher education employees aged under 30

 
 
  
 
  
 
  
 


 
 
  
 
  
 


8JUI
B
IJHIFS
FEVDBUJPO8JUI
B
IJHIFS
FEVDBUJPO "HFE
VOEFS
"HFE
VOEFS
 8JUI
B
TFDPOEBSZ
8JUI
B
TFDPOEBSZ




 WPDBUJPOBM
FEVDBUJPOWPDBUJPOBM
FEVDBUJPO 
s

s
 )FPQMF
PG
NBTT
)FPQMF
PG
NBTT
PDDVQBUJPOTPDDVQBUJPOT "HFE
PWFS
"HFE
PWFS


52          ABOUT THE COMPANY

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





,IBCBSPWTL











 5IF
CSBODI
BU
UIF
'BS&BTUFSO
SBJMXBZ

53

         

t
 
GMBU
XBHPOT t
 
MBSHFDBQBDJUZ
DPOUBJOFST t

UFSNJOBMT





:V[IOP4BLIBMJOTL











 5IF
CSBODI
BU
UIF
4BLIBMJO
SBJMXBZ

54

 DEVELOPMENT OF COMPANY DEVELOPMENT OF COMPANY

JSC TransContainer is developing within the • modernization of the existing container ter- framework of vertical integration aimed at ex- minals; tending and diversification of business. The • The establishment and development of ma- Company is striving to operate not only as a jor logistics centers (hubs) at big junction mere carrier but as a multi-modal carrier and points. container fleet operator on the basis of es- The operation of these junction points tablishing a terminal and warehouse complex should imply realization of loading-out and system and distribution centers on the entire stacking technology, as well as creating a territory of Russia. Eventually the Company system of linear block trains following a strict should be able to ensure the highest level of “just-in-time” schedule. its competitiveness. No steps aimed at enhancing competi- The Company will, first of all, develop the tiveness and investment appeal of the Compa- aspects that make a carrier the national con- ny can be made without organizing qualitative tainer operator. The top-priority aspect will be corporate governance based on international the establishment of agencies and represen- standards of corporate governance and the tation offices of the Company, not only em- principles of respect for shareholders’ rights, bracing all cargo-producing centers across efficient supervision of the management’s the whole country but including CIS and non- work, and the transparency of the Company CIS countries. achieved through giving true and fair view of One more of the Company’s goals is en- all the essential aspects of the Company’s suring its presence and rendering stevedore functioning. This is exactly the system of cor- services of cargo transshipment in the Rus- porate governance to be created, which is sian ports of Baltic Sea, Black Sea, and Far also one of the central tasks of the Company. East. An intensive work will be continued to Provision of a dynamic growth of the provide for a closed supply chain embracing Company is not possible without the not only container flows but flows of cargo in development of human resources. That’s a more general sense. To achieve this, the why the Company has started to develop the Company’s branches should operate as large Concept of human resources development. fleet of road transport of their own as possi- Realization of the concept will enable the ble. The door-to-door delivery of cargo will be Company to create a system of vocational ensured also in cooperation with independent preparation and continuous training of trucking companies. employees, consolidating Engagement of To achieve the goals announced, the Com- staff and enhancing the motivation of its labor pany should develop its production facilities in and improving the career planning system a proper way. To be a success, the following for managers. All the above-mentioned steps should be taken: aspects will allow creating a positive image of • actively extending the fitting platform and JSC TransContainer as a highly-competitive container fleet; employer in the labor market. Social • acquisition of the up-to-date cargo han- policy aimed at serving the interests of all dling equipment; employees of the Company has always been • purchasing trucks; and remains one of its main tasks.

55 REFERENCE INFORMATION FOR SHAREHOLDERS

QUOTATION OF SECURITIES No quotations of the Company’s securities have been performed within the II semester of 2006.

INFORMATION ON REGISTRAR In 2006, the Company itself was the keeper of the shareholder register.

INFORMATION ON AUDITOR Closed joint-stock company BDO Unicon. Correspondence address: building 125, auxiliary building 1, section 1 Warsaw Highway, 117545 Moscow. Auditing license No. E 000547 issued by the Ministry of Finance of RF 25.06.2002. The license is effective till June 24, 2007.

COMPANY’S REQUISITES

Full name of organization Open Joint Stock Company «Center for cargo container traffic «TransContainer»

Abbreviated name of organization JSC «TransContainer»

Legal address: 12 Novoryazanskaya Street, 107228 Moscow

De facto address: 6/2 Kalanchevskaya Street, 107174 Moscow

Telephone, fax: +7 (495) 262-85-06, fax +7 (495) 262-75-78

Internet address: www.trcont.ru

E-mail address: [email protected]

Tax Payer Id. 7708591995

KPP code 770801001

Settlement account 40702810900000007269 in JSC TransCreditBank, Moscow

Correspondent account 30101810600000000562

RCBIC 044525562

All-Russia Nomenclature of Businesses and Organizations 94421386

All-Russia Classifier of Forms of Ownership 41

General Index of Forms of Ownership 47

National Classifier of Administrative Territorial Entities 45286565000

National Classifier of Government Entities 49014 and Administration

All-Russia Classifier of Economic Activities 60.1

OKTMO 45378000

PSRN (Primary State Registration Number) 1067746341024

56 01&/
+0*/5450$,
$0.1"/: "//6"-
3&1035


.PTDPX 2