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NCSP GROUP A HARBOR FOR SUCCESSFUL BUSINESS

A HARBOR FOR SUCCESSFUL BUSINESS NOVOROSSIYSK–MOSCOW GROUP NCSP REPORT 2007 ANNUAL ANNUAL REPORT 2007 акваторияA Harbor f orуспешного Success бизнесаful Business CONTENTS GROUP GROUP NCSP 108 45 43 37 34 30 14 12 11 10 8 6 5 2 Network in Global the Novorossiysk Transportation Group the About ANNUAL R Novorossiysk Information Contact and Consolidated Financial Statements Independent Social Governance Corporate forShareholdersInformation Review Companies Group of the Review on Efficiency Focus Investing in Growth Letter Key Director

Operational

from Responsibility

of of

Financial Operational

the

Auditors'

Chairman EP

and

Results OR

Financial

Results Report

T 2007

the

Indicators

Board

and

General NCSP GROUP ABOUT THE GROUP 2 traffic among European ports European among traffic cargo of terms in place sixth occupies Black the of part northeast the in located is port The Novorossiysk. of port the in concentrated are NCSP year-round navigation. R in port deepwater ice-free multimodal, single Group” or “the Group” or NC or Group” “the or Group” “NC as to referred is companies, bunkering NC PJ company service the as well as S Baltic LLC and O PJ S Black 6 in at operator largest the by companies stevedoring of consolidation the of G NCSP The term “bunkering” covers the combination of technological operations connected with providing vessels coming into the port with fuel, water, oil and so forth. so and oil water, fuel, with port the into coming vessels providing 2 S with connected operations technological of combination the covers “bunkering” term 1 The 3 ussia’s sea ports. sea Russia’s through out carried handling cargo around 18% around for accounted share 2007,Group’s the S the Port, Novorossiysk through cargo foreign-trade Russia’s of flow the for R “the Company”. “the or PJ as to referred is group, NC PJ I Port, O Port, PP, PJ S

outhern outhern ussia that maintains the key channel channel key the maintains that ussia J

stevedoring companies working in the the in working companies stevedoring

S S 2006. The Group now unites unites now Group The 2006. ource: R ource: ource: NC ource: S Novorossiysk Port, PJ Port, Novorossiysk S S C Novorossiysk Commercial S Commercial C Novorossiysk C NC I T NCSP C Novorossiysk S C Novorossiysk of this Annual Annual this of text n the P Fleet, which provides towing and and towing provides which Fleet, P P, as the head company of the the of P, company head the as he he S J ea and the Baltic S Baltic the and ea C Novorossiysk Grain Terminal, Terminal, Grain C Novorossiysk S was formed as a result result a as formed was roup pri ussian Maritime Ports Association 2007 report. 2007 Association Ports Maritime ussian S ussia’s S ussia’s C Novoroslesexport ,O C Novoroslesexport S is the largest port operator in in operator port largest the is P, together with its subsidiary its with P, together S 1 P and R P and services. services. ea Gates of the country. country. the of Gates ea ma 2 of all import and export export and import all of r otterdam S otterdam tevedore Company Company tevedore y y outhern basin allowing allowing basin outhern op hip R hip e r S ea Port estimates. Port ea at S C NC C epair Y epair ea, including: including: ea, C NC ions S S ea and and ea P.PJ 3 S . . R S I P, J t is the the is t S eport, eport,

ard ard S P o ea ea S S P C f C C I n

0 50 100 150 200 250 300 350 400 450 0 10 20 30 40 50 60 70 80 90 tons 2007, in mln. turnover cargo by seaports European Largest 2. Diagram tons 2007, in mln. turnover cargo by seaports Russian Largest 1. Diagram

data Group NCSP Source: data Group NCSP Source:

Rotterdam 407 Novorossiysk 78.4 2.5

Primorsk 74.2 Antwerp 183

St.Petersburg 61.3 Hamburg 140

Murmansk 25.40 Marseilles 100

Vysotsk 24.70

Amsterdam 88 Vanino 22.2

Novorossiysk 81 Vostochniy 21.6 Other NCSP Other NCSP Le Havre 79 Tuapse 19.6

Bremen 69 Kaliningrad 15.6

Constance 58 Nakhodka 13.4

ANNUAL REPORT 2007 ABOUT THE GROUP cargoc NCSP 19.4

is Ru hannel ssia % ’ s largest port operator port maintainings largest ke 3

of NCSP shares anthrough IPO in 2007. investors to were offered y foreign - trade trade

NOVOROSSIYSK ACCUMULATES CARGO TRAFFIC FROM THE LARGEST RUSSIAN EXPORTERS

Novorossiysk is located at the relative proximity of Novorossiysk tal Steel Temirtau, Cargill, SUCDEN Diagram 3. Port of Novorossiysk cargo turnover by stevedoring intersection of global transportation companies, 2007, % Port to the world’s primary centers of (Sucres & Denrees), WJ Grain, Glencore, routes connecting Russia with the trade makes it a very convenient point Kazakhmys, Kazzinc and many others. Mediterranean, the Middle East, Africa, for the handling of cargo flowing to and South and Southeast Asia and North Independent from central Russian regions, including NCSP container terminals ness i and South America. The developed Stevedores, 4% the Urals and the Volga as well as are well connected with leading railroad, auto-transport and pipeline NCSP, 96% Central Asia. international container lines like infrastructure of Novorossiysk allows Mediterranean Shipping Company S.A. ul Bus

f NCSP to efficiently exploit the potential Port of Novorossiysk (MSC), CMA CGM, Evergreen, Hapag- of the growing market for export and accumulates cargo traffic from Lloyd, ZIM, ADMIRAL Container lines ess import cargo handling. the largest Russian exporters, includ- Inc. and others. cc

u ing: LUKOIL, Tatneft, Sibneft, NLMK, A group of multimodal port 4% 96% OEMK, Severstal, EvrazHolding, or S terminals permits NCSP to service all Mechel, RUSAL, TNK-BP, TMK, Mit- of the main types of cargo conveyed or f

b by sea, including liquid, bulk, general

ar and container loads. In 2007, the cargo turnover of the NCSP Group amounted The delivery of containers from Southeast Asia to Moscow and other Central Russian cities through A H акватория успешного бизнеса to 79.4 million tons1 and its share of Novorossiysk takes eight days less than by alternative routes through the ports of Rotterdam/Hamburg NOVOROSSIYSK THE GLOBALIN TRANSPORTATION NETWORK the total cargo turnover of Novorossiysk and St Petersburg. Port amounted to 96%.

In 2007, NCSP conducted an initial Source: NCSP Group data public offering (IPO) of 19.4% of its shares on the London Stock Exchange (LSE) in the form of global depositary receipts (GDRs) as well, as on the RTS Diagram 4. NCSP cargo traffic by regions, 2007, % stock exchange in Russia. NCSP’s GDRs are listed on the LSE under NCSP symbol. Ordinary shares are traded on Russian Federation MICEX and RTS exchanges in Russia Australia, 1% under NMTP symbol. Latin America, 3% St-Petersburg North America, 11% Moscow 12% Asia, 16% 11% Africa, 20% Rotterdam 3% Europe, 37% Kazakhstan Other, 12% Europe, 37% Novorossiysk North 20% 37% America, 11%

1% Asia, 16% Shanghai 16% Africa, 20%

Bombay Latin Source: NCSP Group data America, 3%

1 Here and elsewhere, conversion from cubic meters to tons is based on the ratio of 0.55 tons to 1mЗ, and for containers on the ratio of 14 tons to 1 TEU. These ratios are used by NCSP as indicative numbers and based on assumptions that the Group believes to be well-founded. Any lack of accordance between the data and the factual weight of cargo SP GROUP 4 does not have a significant influence on the indicators for revenue and EBITDA, as the calculation of tariff rates and according collections carried out on the relevant cargo is 5 C carried out on the basis of 1m3 and 1 TEU, and not by weight. N ANNUAL REPORT 2007 NCSP GROUP KEY OPERATIONAL AND FINANCIAL INDICATORS 6 Source: pro-forma to 1 According Cargo turnover Net % Margin, EBITDA EBITDA, Revenue, • • • G PROFIT NET NCSP’S results 2007 of Summary 1. Table S rating by Moody’s. by rating by rating national ruAA+ and rating credit BB+ long-term of Assignment U for issue Eurobond M exchanges Russian and Exchange K 2007 in sea by ports ex oil 24% Russian of Russia in № 1seaport uccessful I uccessful ey eve ey

I S Standards Accounting International to according NCSP of Statements Financial Consolidated Audited CEX and R and CEX profit, tandard & Poor’s and Ba1 credit credit Ba1 and Poor’s & tandard 24 U nt

U № S$ mln s U P T o S$ mln on the London S London the O on S S$ mln f 2007: . 1 , S mln tons 1 $ 300 million. $ 300 - % tock tock re • • 2007 in sea by exports 54% by O by operation into launched terminals container and timber Expanded PJ by operation into launched annum per tons million 4 of capacity a with terminal New specialized Novorossiysk grain grain Novorossiysk specialized New cargo № W B

6 54 J S

seaport of C Novoroslesexport . C Novoroslesexport

turnover Y 112.5% IN 2007

Russian № S

C NGT. in

Europe grain 6 %

by 483.4 227.9 79.4 93.7 47.1 • • handling 31% terminal’s main pipeline. terminal’s PJby operation into launched terminal R New liquid cargo and bunkering fuel fuel bunkering and cargo liquid New 2007 in ports 2007 in launched 4 econstruction of of econstruction

new S

31 of C NC

terminals

ferrous S

at P.

Russian S

metals heskharis oil oil heskharis    4 112.5%  % 74.3% 91.4% 1.7%

ANNUAL REPORT 2007 KEY OPERATIONAL AND FINANCIAL INDICATORS 18 % 7

of total cargo traffic is handled by NCSPGroup.seaports through

Russian NCSP GROUP LETTER FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS AND

8 GENERAL DIRECTOR trade. foreign Russia’s from demand growing the meeting and implementation the of NC of effectiveness the to testimony a is this of All goals, result. financial outstanding an deliver also but operational the achieve Port. to only not able Novorossiysk of were We history entire the in year successful most the was it exaggeration, 2007. for Group Without o compared to last year, the consolidated revenue of NC of revenue G consolidated the year, last to compared o C growth of 112%. 112%. of growth U reached profit net and EB million. w is It Dear A RO presents the consolidated annual report of the of report annual consolidated the presents f NCSP ha lexa f Dir Wi UP increased by 74.3% during the year to U to year the during 74.3% by increased UP ir S th P’s strategy directed at growing shareholder value value shareholder growing at directed strategy P’s i man th p th ect nde ou I

TDA grew by 91.4% to reach U reach to 91.4% by grew TDA t S a ors o incr r r hareholders t f P icu

the onoma sing ea la Bo r pri S $ 93.674 million, representing representing million, 93.674 $ a

the volume of cargo handling handling cargo of volume the r r de that the ma the that de e d nk o S $ 227.9 million ,

n P S a $ 483.4 483.4 $ artners and and artners g eme S n P t G Igor the Company during the the during Company the in shareholders became who and shareholders its been previously had who investors, foreign and Russian the by Commercial and Novorossiysk of strategy the prospects in future placed faith great the justify results share of high-margin cargo in the total cargo turnover. turnover. cargo total the in cargo high-margin of share the growing and specialization of level their increasing on afocus with subsidiaries its of activities operational of optimization the and business the of restructuring NC year, Last year. previous the during out carried consolidation of operations. benefits the on capitalize its to was 2007 in of task key The efficiency the in growth ensuring of goal long-term strategic the on based is business ene p is It T he tahe

r l Vi al a c ino r Dir t t f ic S icu P’s management concentrated on the the on concentrated management P’s C v ect the devel the or la olleagues r or or ly p I P O lea . . to state that these these that state to sing op me n of the Group’s the t of , S eaport eaport

LETTER FROM THE CHAIRMAN OF THE BOARD ANNUAL REPORT 2007 OF DIRECTORS AND GENERAL DIRECTOR diversification of t ach NCSP ieved and sees great potential in t in great potential sees and ieved

does not intend to stop wit stop to intend not does 9 h of 5,808 thousand tons (up 42% compared to 2006). 2006). to (up compared 42% tons thousand 5,808 of level arecord reached handling grain and 2006) to (up compared 55% TEU 261thousand to increased R Novorossiysk Port. Port. Novorossiysk of capacity handling the of modernization and capacity of throughput expanding at aimed program investment our implementation active the to move and discounts, optimize tariff to existing us previously eliminate policy, pricing our allowed also assets of consolidation The complex at O at complex implemented at PJ at implemented at terminals PJ at terminal wheat a by U by NC allowed end year by goals increase in net profit for the year. year. the for profit net two-fold in than more increase a by reflected was expenditures over control increasing and reduction cost on work time, same whole. whole. benefit and economy, regional to contribution NC for advantages with evident Along the diversification. regional through development further for potential great sees and date to achieved logistics infrastructure. and infrastructure. railroad, logistics road-transport, includes which project, large-scale this for study afeasibility develop to tender NC so do To project. state Hub development Transport Novorossiysk the and program ment NC of integration seamless achieve to order in government Russian the with interaction effective shareholders, investors and partners for constructive constructive for partners and investors shareholders, export-import operations. operations. clients export-import our of efficiency the increase and in term, long growth the value shareholder into translate will turn regions. in This other in applied successfully be can in Novorossiysk business effective an building of experience the us that convince 2007 of results The operator. single a markets from various in services high-quality of obtain range to wide a able be will who clients, our for benefits nificant sig bring also will markets regional other to Group the epair Y epair e b T I To W NCSP S he succ he we have completed 4 new modern terminals: terminals: modern 4new completed have we n 2007 e w $ 206.4 million as compared to last year. At the the At year. last to compared as million 206.4 $ day, on u ard terminals. Container handling for the year year the for handling Container terminals. ard ou does not intend to stop with what has been been has what with stop to intend not does siness like to take the opportunity to thank our our thank to opportunity the take to like ld O J S e J e o S C I ss C Novoroslesexport and a bunkering bunkering a and Novoroslesexport C PP. A technical upgrade program was program upgrade PP. Atechnical f the G f the f S u C NC C l i S C NGT, container and timber timber and container NGT, C m S p I roup P and and P t will also make a significant significant a make also will t leme h S S P to increase its revenues revenues its increase to P P itself, the expansion of of expansion the itself, P w ’ O s priori n S J tat S P has entered the the entered has P C Novorossiysk Novorossiysk C h of all tactical tactical all of ion at h t e regional e i S e h R P invest is is s ussia as a as ussia as been as

S - - hip hip and fruitful cooperation which has enabled the the NC of development enabled successful has which cooperation fruitful and future. future. the in results better even of form the in upon capitalized be will plans, investment our of implementation our of successful further the with combination in efficiency business, the increasing and assets integrating of course the in gained have we which experience the I Directors of Board the of Chairman Alexander Ponomarenko, G Y r o g ours sincerely, l a r e n e V i l D i o n r o t c e r i v , S P. We are convinced that that P. convinced We are

NCSP GROUP oil Crude products Petroleum Containers Source: 1 I Projects Bunkering Containers

C Timber Containers Grain Projects: Completed argo n addition to capacity in operation. in capacity to n addition projects investment of Review 2. Table data Group NCSP

INVESTING

Under

IN GROWTH Implementation: 10 CONTIN NCSP’ DIVERSIFICATION completed: completed: U of a total cargo. high-margin mostly handling the on concentrate to Port Novorossiysk million. 2006 t 2006 the future. the in growth rapid for foundation strong a lay to and Port Novorossiysk of capacity handling cargo expand and upgrade progr and business development. NC for conditions R the in boom investment continuing and hub, transport strategic largest Russia’s of status the by multiplied • • E x ussian economy create very favorable favorable very create economy ussian p The reconstruction of a container container a of reconstruction The To I Therg la three million cubic meters; meters; cubic million three of acapacity with NLE at terminal timber the of reconstruction The TEU; thousand 350 of acapacity with NLE at terminal e n c ve day ted f ted is estimated at U at estimated is o 2011 I am ts implementation will allow implementation ts s tme , four investment projects for for projects investment , four S of the Group aims to to aims Group the of DEVELOP s STRATEGIC $ 203.6 million have been been have million $ 203.6 or e- n U sc e t progr S trade growth growth trade ign ING P’s further growth growth further P’s ale (Sheskharis) NCSP in M am f am ve s COMPANY ARKET tme or S G $ 700 roup CP I NCSP

nt BSC NGT NLE NLE NLE IPP IPP

EXPANSION million, are now under way: under now are million, U of atotal worth projects, • • • • • • • planning stage include facilities for for facilities include stage planning The construction of a complex for for complex a of construction The In TEU. thousand 500 to terminal container NLE of expansion Capacity TEU; thousand 300 B at terminal container a of construction The tons; million 15 by capacity its S the of reconstruction The tons; million one of capacity a with gasoline of handling the The f costs. operational reducing while processed being is cargo which at speed the increasing is equipment modern of acquisition The tons; thousand I at fuel bunkering of transshipment the for aterminal of construction The tons; at NGT with a capacity of four million The construction of a grain terminal heskharis oil terminal to increase increase to terminal oil heskharis nvestment add mln US$ o PP with a capacity of 648 648 of acapacity with PP i ll tion tons 15,000,000 130.1 M TE 300,000 69.2 TE 350,000 86.4 tons 4,000,000 82.6 tons 648,000 19.8 14.8 tons 1,000,000 35.7 o TE 500,000 20 wing ENVISION PLANS ENT S , ,

EXPANSION projects in the the in projects

C with a capacity of of acapacity C with

ve AND S s $ 255 $ 255 tme C m 3 mln. apacity apacity

nt after after REGIONAL U U U 1 3 S Baltic the acquiring by market west North- Russian high-value the entered NC when 2006, in made business. its of diversification NC for development ity be increased to one million TEU. million one to increased be may capacity which terminal, container NC and tons), (4 million cargos bulk tons), (4 million oil fuel of transshipment of growth through acquisitions. through growth of opportunities consider will and facilities port consolidate to continue will Group the end To this diversification. regional and expansion market continuing devel tevedore Company. Company. tevedore expansion, another key area of of area key another expansion, NCSP’S NCSP’S was direction this in step first The Al deongsi n ha op me s nt t r ate p ns la S gic P is geographical geographical P is dl envision envision S ing P successfully P successfully

c ap a c S - P

ANNUAL REPORT 2007 акватория успешного бизнеса Source: 0 10 20 30 40 50 60 70 U 2006-2007, employee, 5. Diagram

Data Group NCSP FOCUS

89% ON EFFICIENCY Growth

2006 32.5

revenue ths S$ 11

per

2007 61.3 development. development. further for potential significant unlock to and Russia in operator port largest NC allowed This company. holding diversified single a into Port Novorossiysk at companies stevedoring of anumber consolidated towing and bunkering. and towing including services, sea-port of range NC of specialization the of expansion the was Y services. its of efficiency and quality the significantly increase to able was port the efforts, these to Thanks service. client and work of standards common introduced and competition, internal eliminated operations, NC functions, Having concentrated management frequently overlapping services. with operators port multimodal independent as competed previously had who stevedores of specialization increase to was stage first the at goal primary The program. restructuring NC offered, services of volume and scale processes. business of unification through general in operations port boost and efficiency labor increase to as well as risks and costs in reduction possible maximum the gain to opportunity an gave This market. the of segments all in efficiently operate to capacity the has and marketplace changing a in flexible extremely be can that abusiness build to strategy integral an implement and develop to it allowed and scale of economies of advantages NC provided t position in the market. market. the in position competitive a securing to key the is this sector transportation the in companies For scale. large the on business of consolidation is economy Russian O grow will NCSP t et another significant achievement achievement significant another et n u S e o T Wi P carried out an integrated integrated an out P carried he s he rnover S th the f the r f the P and the ability to provide full full provide to ability the and P y n S e S P with all of the the of all with P rgi incr e P optimized subsidiaries’ subsidiaries’ optimized P S c P to become the the become to P e e n of consolidation consolidation of s s ea trends in the the in t trends I n 2006, NC 2006, n e in the the in S P h e s e in 2007. in at Novorossiysk Port. Port. Novorossiysk at flows cargo consolidate to helped which discounts, tariff existing previously NC Group’s EB Group’s the costs operational of reduction and policies, pricing of review turnover, total the in cargo high-margin of share service at the port. port. the at service of quality and capacity throughput increase which facilities handling new launch the by as well as cargo, of types particular handling in subsidiaries of specialization increasing by played is process this in role important An metals. and timber grain, products, petroleum containers, as such turnover, cargo overall the in cargo high-margin of share the increasing at aimed tasks NC allowed strategy the of stage first the of oil andpetroleumproducts,general cargo grain, mineralContainers, fertilizers, ИППNLE NCSP S S ar As T Group NCSP the in companies of Specialization 1. Chart h P used the opportunity to eliminate eliminate to opportunity the P used P to concentrate on achieving achieving on concentrate P to he succ he are of of are e I

Containers, timber 47.2% to grew margin TDA su e lt o ss IPP НсзТ f f incr O u n the other hand, hand, other the n implementation implementation l Petroleum products, h liquid fertilizers ig ea h- the the sing NGT НЛЕ

profit cargo in totalcargoin profit

Specialized grain terminal compared to last year. last to compared as employee per revenue in increase 89% an to led 2007 in reductions staff certain with together technology handling cargo existing of improvement NSRY Б СК The

General cargo, intro repair and servicing of vessels d F NCSP НЗ uc leet tion Т

Towing, bunkering and new of нм BSC Ф л о тп т Containers NCSP GROUP REVIEW OF OPERATIONAL RESULTS 12 one of the largest ports in Europe. in ports largest the of one R in position leading its confirmed Port Novorossiysk turnover, cargo Novorossiysk. of Port the at cargo all of 96% handled R in transshipment export-import all of 18% some for accounting tons, 79.4 million to amounted 2007 in Group the by handled cargo of volume The unaffected. virtually remained turnover cargo NC 2007, in works renovation and expansion capacity products, and grain. grain. and products, petroleum containers, as such cargo, high-margin of volumes new attract to aims Group the efficiency, operational improving of strategy the with line in time, same the At exports. of structure the replicates part most the for that cargo of range adiversified with works NC 2011. through 16.3% of rate annual average an by grow will trade ussian seaports, including: seaports, Russian at transshipped cargoes different of volume total the of share significant Global Global to According trade. international Russia’s in growth the of is a reflection Port Novorossiysk through passing Baltiysk. of Port and Novorossiysk of Port the of PJ of results operational the of overview Th gro I • • • n n ussia and maintained its status as as status its maintained and ussia Group The ports. maritime ussian is I D More than 50% of grain and sugar sugar and grain of 50% than More T leum products export. export. products leum petro 11% of and oil 24% crude of transshipment; metals ferrous non- and ferrous of 31% 28% and in transshipment n 2007,NC S he t he

e 2007 s C NC C spi e I nsight nsight c u o tion te h te S tal v p a P and its subsidiaries in in subsidiaries its and P

I ug tacon ins nc. nc. t S o m P accounted for a for accounted P I e v n terms of 2007 2007 of terms n l S h R u P’s total total P’s ussia’s foreign foreign ussia’s R o of cargo cargo of me o e cargot e ussian ports; ports; ussian l u u me a short short a nted to 79.4 to nted m R ussian ussian of of s S P - u 1 0 10 20 30 40 50 60 70 80 1% 2% 2% 2%

Petroleum rnover of of rnover % 2006-2007, turnover cargo of structure the of Dynamic 7–8. Diagram 6. Diagram

2007, % seaports, Russian at 7% 5% 5% 3%

products.

Sugar 74 illion tons illion NCSP 12% 10% 11% 10%

9% 2 7%

M ineral

Grain 54 in

the

fertilizers. NCSP

total Ferrous metals 31

volume Containers. 56% 58%

Non-ferrous

metals 28 of

cargoes

Crude oil 24

transshipped Source: 2007 Source: 2006 1% Timber, 2% Sugar, 2% Timber, 2% Sugar, 56% Petroleum, 10% metals, Ferrous 12% products, Petroleum 7% Grain, 5% Containers, 9% Other, 58% Petroleum, 11% metals, Ferrous Petroleum 5% Grain, 3% Containers, 7% Other, 1 11 Data Group NCSP Data Group NCSP

2 10 products,

3 6 10%

ANNUAL REPORT 2007 REVIEW OF OPERATIONAL RESULTS AS VOL PJ at terminal grain high-speed new a of NC existing by out carried was transshipment grain of portion large 2007. A in turnover cargo NC 7.3%of for accounted Grain 2006. to compared 42% than more of growth representing tons, thousand 5,808 of level record the TEU. 261thousand reached containers of in handling handling in NC program. program. expansion capacity refitting technical its of framework the in terminals efficient highly new, four launched to 55%. 55%. to amounted volumes in growth the where NC by shown The launch of the new terminal will will terminal new the of launch The reduced. not were 2007 in handled timber of volumes terminal, timber NLE at on going works expansion and reconstruction Despite year. the for revenues Group of 6% brought and turnover cargo the of 1.4% to tons. 1million of capacity handling product petroleum and year per tons thousand 648 of acapacity with fuel bunkering of transshipment the for I new the of capacity the through achieved be will growth Further 2007. in Group the of turnover cargo the of 11.6% approximately represented which tons, million 9.24 reached oil, fuel and fuel diesel including handling, CONTAINER B high-margin cargo. I cargo. high-margin processing for facilities stevedoring specialized and capacity throughput S S C NGT at the end of 2007 will allow allow will 2007 of end the at C NGT The n ha T T a is NCSP Timbe P to strengthen its leading position position leading its strengthen to P he v he he s he I n absolute terms, the handling handling the terms, absolute n o t r rong l R

u S c dl ussian grain export. export. grain ussian of petroleum products products petroleum of me UM P’s container business, business, container P’s S c argo P’s capacity. The launch launch The capacity. P’s t ing i e developing its its developing vely s of grain reached reached grain of n 2007, NC t gro INCREASEDES B am PP terminal terminal PP ted oun S U was was wth P’s total total P’s SINESS S S 13 P

evidence that NC that evidence aclear is This services. additional of sales and cargo of types different handling by earned were 65% other the while revenues, Group’s the of 35% for revenues. NC of structure changing the in rginma in the future. future. the in goal this pursue continually will Group the and balanced, more become has year. year. previous in 58% to compared turnover NC total of 56% to amounted I structure. revenue its of subsequently, and, mix cargo Group’s the on diversification tinuing Novorossiysk. in NLE at capacity container of (B Company S Baltic LLC the by operated region, Northwest the in one including terminals, container new of launch the load. atest as handled were cargo this of tons thousand Bags. Big in cement cargo, of type new handling The mid-term plans of NC of plans mid-term The flows. cargo growing with up keep to expansion capacity and service client of improvement further target strategically accompanying data and the factual weight of timber cargo does not have a significant influence on the indicators for revenue and EB and revenue for the indicators the on between influence accordance of lack asignificant have Any not does founded. cargo well are timber of weight believes Group factual the the and that data accompanying assumptions on based and one 1TEU, per 14 tons indicative of an as us a ratio by on used based is out carried is TEU of relationship this time translation same the table, at this of purposes the For purposes. informational for presented is tons in cargo of volume weight. 3 The not meter, cubic by out carried are collections according and rates tariff of calculation according collections are carried out by TEU, not weight. not TEU, by out carried are collections according EB and revenue for indicators the on influence asignificant have not does cargo timber of weight factual the and Any data founded. well are accompanying the believes Group between the that accordance of assumptions lack on based and one aratio on based indicative out an as us by carried used is is cargo timber of relationship this time meters same cubic of the at meter, 1 cubic per translation tons 0.55 table, of this of purposes the For purposes. informational for presented is tons in cargo of volume 2 The 1 I volumes of timber to 3 million m 3million to timber of volumes future increase to Group the allow year. year. the total cargo handling of NC of handling cargo total the of 10.2% for accounted and tons million 8.07 reached 2007 in metals ferrous n calculating this figure, internal cargo flows between NC between flows cargo internal figure, this calculating n G G T T L H he he v he a roup ro s OWED s t yea w

e c cargo has been reflected reflected been has cargo o Y 55% IN 2007 s ing I n 2007 crude oil accounted accounted oil crude 2007 n l ’ S s I u ha n 2007 some 185.7 185.7 some 2007 n C), and further expansion expansion further C), and devel r me o me , NC ng ha S P revenue structure structure P revenue e r

f ha S n 2007 crude oil oil crude n 2007 s r STRONGEST P also began began P also e o op efle me n f h S dl P envision envision P nt ig tevedore tevedore ing S c S h- P cargo cargo P plans plans t con S P. P

3 per per - S 4% P and its subsidiary enterprises was excluded. excluded. was enterprises subsidiary its and P

GROWT Source: % 2006-2007, cargo, of type by revenue of 9. Breakdown Diagram 6% Data Group NCSP 7% H 10% 11% 17%

10%

(weight) Timber metals Ferrous General 569 1356 Cement metals Scrap concentrate iron-ore and ore Iron sugar Raw cargo chemical other and (weight) Containers Containers Other cargos Perishable ingots in iron Cast metals Non-ferrous meters) (cubic Source: M Grain cargos Dry oils Seed Liquid Petroleum oil Crude cargos Liquid Including: T (TE 35% otal cargo turnover cargo otal ineral U thousands) Volume 3. Table 2007 in Group NCSP

fertilizer Data Group NCSP

fertilizers

I cargos TDA, as the calculation of tariff rates and and rates tariff of calculation the as TDA,

products

cargo 2

10% Other, 35% Petroleum, 17% metals, Ferrous 11% Grain, Petroleum 7% Containers, 6% Timber, 4% Sugar, 3

processed

, 1 , tons thousand

products,

by I

TDA, as the the as TDA,

44,289 54,689 79,398 10,782 10,271 the 2,002 5808 3656 3656 8073 9237 1901 1101

438 984 366 199 152 261 797 410 10% 62

NCSP GROUP COMPANIES BALTIC SEA OF THE GROUP Baltiysk 14 7 Kaliningrad PORT NOVOROSSIYSK SEA RuSSIAN FEDERATION 3

wharf

th wharf

th wharf BLAC

West Mole K

No.1

SEA pier Wide

No.2

pier Wide

East Pier 1 East Mole 15 5

NCSP

Oil

Sector vessels of BSC NSRY IPP NCSP products containers servicing and repair general fertilizers liquid products petroleum general oil fertilizers mineral grain containers

and

petroleum

cargo cargo 1 7 5 3

terminal FLEET NGT NLE bunkering towing specialized timber containers

grain NCSP

6 4 2 NCSP GROUP A Harbor for Successful Business 13.5 terminals. terminals. cargo general and liquid terminals, container products, petroleum and oil for terminals includes Port. Novorossiysk in largest the is infrastructure Company’s NC the of company head the and Port Novorossiysk in stevedore largest the is NCSP PJSC T new equipment installed on the on installed equipment new the on with oils of transshipment and products, viniculture liquid of transshipment handling, containers soft for technologies new introduced and developed Company The wagons. railway and vessels processing to technologies NC (+42% 2006). by grain and 2006) to (+50% compared containers by demonstrated was growth, year year, on strongest The cargo. liquid other of tons thousand 365 and products, petroleum liquid and cargo chemical of tons thousand 10,034 oil, crude of tons sand thou 44,289 cargo, dry of tons sand .17,716 including tons; thousand thou NC 1% 1% erritory of the port the of erritory PJSC S S Source: 2006 mix, cargo NCSP 10. Diagram T the yea the During P in 2007 amounted to 72,405 72,405 to amounted 2007 P in P continued to master new new master to continued P he c he m 5% 2% .

11 a Data Group NCSP berths for li for berths t rgo 10% 11% 8%

urno N S P Group. The P Group. r ovorossiysk

ve , PJ :

of PJr of 87.4 q S uid cargo uid C I t hectares 16 S C - 63% - , total length length total . time for processing one wagon one processing for time average The day. per wagons 109.6 was speed loading daily average while day, per wagons 469.5 was 2007, in rate unloading cargo export daily average The company. the of terminals dry-cargo, the at processed were cargo import and export with wagons thousand 211 than more containers. heavy-tonnage for processes storage and transshipment its improved Pier. East Average time for the unloading of a standard wagon. astandard of unloading the for time 1 Average of LLC Baltic Baltic LLC of of 72.65% Terminal, Grain Novorossiysk of Novorossiysk 2007 was reduced by 6.1%. 6.1%. by reduced was 2007 the Group’s business and was was and business Group’s the restructuring on concentrated of PJ of 85.68% PJ 2007 of end the Baltic the and Port, S Novorossiysk of Port the at assets service and stevedoring consolidation

42 O S I I berths total extending for for extending total berths J continued continued NCSP PJSC n 2007 2007 PJSC NCSP PJSC n 2007 S o C Novoroslesexport , 65.18% of of 65.18% , Novoroslesexport C me 1,980 ve 1,980 me I O n addition, PJ addition, n J S S S S 2.85 C NC C tevedore Company. Company. tevedore C C hip hip 8% Other, 63% oil, Crude 11% products, Petroleum 9% metals, Ferrous 5% Grain, 2% Sugar, 1% Containers, 1% metals, Non-ferrous I PP, and a 50% share share 50% a PP,and S R km S S C NC C epair epair P Fleet, 91.38% 91.38% Fleet, P ss ea as well. By By well. as ea , C maximum depth depth maximum el S

P owned owned P C NC C and and s ard, 99.99% 99.99% ard, ommercial

S 1 in in P

ea ea 8.44

km for container handling. PJ handling. container for center service new a with together constructed were trucks container for bridge weight a and parking buffer a 2007 in project expansion terminal NC PJ of turnover cargo or operations current on effect no have facility the on out carried works construction All tons. 90,000-110,000 of deadweight a with tankers accept to able be will which berth, second a of construction and berth operating the of renovation include works The year. per tons the of capacity throughput the increase will project the of implementation The improvements. efficiency and safety as well as upgrade, equipment terminal, oil the of reconstruction U totaled investments where terminal, of reconstruction PJ subsidiaries. its of capacity the and capacity, throughput own its expand to view a with program investment its implementing consistently 1% 2% 24.2 S S $ 130.1 million. The project covers covers project The million. 130.1 $ . S C NC C Source: 2007 mix, cargo NCSP 11. Diagram p As

Ove S 27 P. P. m heskharis terminal by 15 million million 15 by terminal heskharis 8% 3% berths for dry cargo dry for berths the cours r the a S Data Group NCSP P was working on the the on working was P r t o 13% container container f NCSP 7% 8% S heskharis oilheskharis of the year year the of e

S S ea ea C NC C S , total length length total S P 61% C P ort ort container volumes. container in breakthrough to lead and day), per containers 450 to (up twofold speeds handling increased already measures These equipment. efficient and ful power more of favor in machines lift-and-carry and transshipment of fleet its update to continued thousand TEU to some 1 million TEU. 1million some to TEU thousand 150 current from terminal container its of capacity throughput the increase to project a considering is company the growth market container future port. the of security and safety improved significantly has This berths. the on and area port in installed was system Also in 2007 aCCT 2007 in Also take the adva the take To 5.09 km , 8% Grain, 3% Sugar, 2% Containers, 1% metals, Non-ferrous 5% Other, 61% oil, Crude 13% products, Petroleum 7% metals, Ferrous maximum depth depth maximum monitoring V monitoring n ta

g of of e

ANNUAL REPORT 2007 PJSC Novorossiysk Commercial Sea Port and t NCSP 1980

h ist e h h ead co ead e largest stevedore in stevedore largest e 17 m pan vessels y of G NCSP

handled in 2007. at NCSP’s berths ro Novorossi u p y sk P ort ort NCSP GROUP A Harbor for Successful Business Panamax class container ships ships container class Panamax accept to NLE expect we result, a As performed. were works dredging and engineering hydraulic certain vessels incoming for deadweight maximum To increase roads. access and area, storage berths, including renovated, was infrastructure port existing NLE, at upgrade terminal U totaled facilities these T B T OJSC and expediting services. expediting and transportation operations, warehouse including range of services, additional and anda cargos, provides perishable handles ferrous and metals, non-ferrous The company andalso fiberboard. timber, packaged including plywood, wood, and processed containers (NLE) is handling Novoroslesexport to 3.0 million m million 3.0 to timber terminal capacity was expanded upgraded to 350,000 TEU, while the 2007, container terminal capacity was competitive market position. Thus in projects in order to strengthen its resources on implementing its investment were concentration of andefforts erritory of the port the of erritory he cor he erth depths from from depths erth Source: 2006. mix, cargo Novoroslesexport 12. Diagram p As T he key ta key he a e b Data Group NCSP r t o 31% usin 3 f con s . Capital investments in 13%

k e s f NOVOROSLESEXPORT of ss N or ta S 5.6

in $ 101.2 million. $ 101.2 : LE in 2007 e

65 m to to m r

hectares 18 13.9 56% m .

M .

11 ax • • • • • 2008. of quarter second the in beginning TEU 5,000 to up carrying • to 2001.8 thousand m thousand 2001.8 to amounted timber processed of handling The TEU. thousand 5.1 by expectations exceeded This 2006. to compared as TEU thousand 90.1 to amounted and 50.1% by increased handling container tons, million 2,608 comprised and 2006 against 13.3% by grew turnover cargo total While increased. handling container of volume the launched, ity capac new the to thanks and reduced, not was turnover 2007, in cargo works loading and unloading equipment: equipment: unloading and loading new in rubles million 550 some vested berths with a total length length total a with berths . vessel tonnage vessel D m/c tons. 20 Factory), Crane (Troitsky cranes bridge Lemmens 6 trucks; MAZ 18 tons; 45 Ferrari 5 tons; m/c 41 crane, double-cantilevered ( gantry mounted rail 1 ZMPC m/c 41 tons; cranes, ( gantry tyred rubber 2 ZMPC m/c 41 tons; loaders, tainer L 2 ZMPC ship-to-shore ( ship-to-shore 2 ZMPC a e s spi t yea te ma te R the co r the eachstacker loaders, m/c loaders, eachstacker 13% Other, 56% Timber, 31% Containers, jor ex : 3

in 2007. in m 58,000 p p a S a nsion T n

S y in ) con tons

R R - TG) MG) MG) - 1.42 . - km reaches 3,731m reaches space warehouse refrigerated NLE’s platforms. container 66 of capacity unloading front total a with tracks unloading and loading four has terminal volume of 12,000m of volume handling timber daily average yields which cars, gondola 69 of capacity unloading front total a with tracks unloading and loading five possesses terminal timber The capacity. transport road day per trucks 100 and tracks railroad 7.5 on-site of km infrastructure: transportation developed a operates NLE processing. cargo fast guarantee personnel experienced and infrastructure, technical developed access, railroad berths, dedicated . Source: 2007. mix, cargo Novoroslesexport 13. Diagram L a rg e s Data Group NCSP t or 42% 2 . a g 3 e a . The container container The . 16% r

ea,

42%

Containers, 16% Other, Timber,

42%

ANNUAL REPORT 2007 OJSC NOVOROSLESEXPORT AND PROCESSED TI NOVOROSLESEXPORT 350 thous per and

year

TEU 19 M BER

SPECIALI throughput container in 2007. reconstruction of its Z INES H

terminal ANDLING CONTAINERS

capacity

OJSC

NLE

after

the

completion

NCSP GROUP A Harbor for Successful Business of UAN liquid fertilizer per year. per fertilizer liquid UAN of tons thousand 850 and fuel, bunkering of tons 648,000 to up fuel, diesel of tons million 4.3 to up handle to allows use in capacity Throughput fertilizers. liquid and products petroleum including cargo, liquid handling for IPP T OJSC IPP Hub can accumulate up to 100 wagons. wagons. 100 to up accumulate can Hub R Novorossiysk to connected vessels. displacement tons 47 to up thousand accepting I for operations unloading and Loading own. its of berth no have but line, coast the of vicinity immediate the PP are provided by NC by provided are PP erritory area erritory is a high technology complex complex technology high a is Source: 2006. mix, cargo IPP 14. Diagram IPP fa 18% Data Group NCSP l ci i tie s hectares : 9.9 are located in in located are S R

P’s berths berths P’s ailroad tracks tracks ailroad ailroad ailroad 82% 20 . M ax vessel tonnage . vessel thousand m thousand 107 to up batches in cargo accumulate to allow procedures handling Current Pip’s volumes amounted to 309.13 309.13 to amounted Pip’s volumes U to I services. bunkering provide to began I access, railroad direct with complex bunkering new of completion the with I tons. thousand 850 to 84% by increased volumes fertilizer liquid and tons, million 4.2 to times 6.5 almost grew products petroleum turnover. I years, recent in capacity production nvestments in this project amounted amounted project this in nvestments PP has successfully grown its cargo cargo its grown successfully has PP T S hroug $ 19.8 million. By end of 2006 2006 of end By million. 19.8 $ S ince 2002, the handling of of handling the 2002, ince 3 h the p ex . 18% oil Diesel U : 47,000 tons 82% AN, n August 2007,n August a nsion

of its its of . PP PP tons of UAN transshipment. UAN of tons thousand 796.58 and transshipment, fuel diesel of tons 3,789.5 thousand fuel, bunkering of tons thousand terminal, which are now in design. design. in now are which terminal, afuel-oil and terminal products petroleum a of construction the include Source: Fu 2007. mix, cargo IPP 15. Diagram t ur 16% Data Group NCSP e devel 7% op me

n t s at at I PP PP 78% 7% fuel, Bunkering 78% oil, Diesel U 16% AN,

ANNUAL REPORT 2007 OJSC IPP IPP 19.8

IS AM million ODERN TER

US$ 21 M investment complex arailroad with link completed in 2007. INAL FOR H ANDLING OIL PROD

the

construction U AND LIQ CTS

a U

new ID FERTILI

bunkering Z ERS NCSP GROUP A Harbor for Successful Business M R in handling grain for complex fastest the is Today NGT 72 in hours. vessel Panamax-class a load can terminal the at installed equipment handling grain high-speed The tons. 70 to up thousand displacement with vessels accept can U to amounted project this in investment of volume total The year. per tons million four of capacity a with (NGT) Terminal Grain Novorossiysk operation. test into put been has Terminal Grain 2007, of end the Novorossiysk By PJ by terminal grain specialized a of NC for 2007 of O T PJSC N and aspiration units. units. aspiration and galleries, surface conveyors, bucket with towers elevator grain equipment, weighting and loading tons, thousand 120 of capacity total a with reservoirs steel 10 of consisting facility storage grain a includes terminal new The ships. on it load and batches, in grain clean trucks, and railroad gr use of the complex in the future. the in complex the of use maximum expect to us allow terminal, new the of characteristics technological S Black the through export grain in specializing shippers erritory area erritory ussia. ussia. n ax e o ain It It T A con he n he vessel dimensions . vessel is f the m f the and oil-bearing crops by by crops oil-bearing and de ew dee ew ve sign ni S os e P was the completion completion the was P n ed t ed : 7.2 hectares p t i t l wate ea and superb superb and ea m oc ovorossiysk G ovorossiysk S o por $ 82.6 million. million. 82.6 $

at r r te e for for ion ta c m 256 : length e n r i ve ve results t results m 22 in . M S al al C ax vessel tonnage . vessel M capacity Storage capacity Design discharge Trucks discharge Railroad speed loading Vessel design Project throughput aximum m 40 beam ., features technical NGT 4. Table Diagram Diagram

5% 8% 3% 2005 17. 16. works Construction 2008. for capacity NGT Contracted Schedule Project Terminal Grain Novorossiysk m 13.2 draft loaded ., tons : 70,000 15% 18% and installation Equipment rain T rain

delivery 20% 31% 2006 .

erminal Aston Cargill Grain Exim S.A. Valars Trading Rias &Finance Trade Agrico Glencore month per tons 550,000 annum per tons 4 mln. day per tons 20,000 day per wagons 180 day per trucks 230 2007 tons 120,000 operation Test

ANNUAL REPORT 2007 PJSC Novorossiysk Grain Terminal CO CAPACIT M OF SPECIALI PLETION 72 hours Y IS A

M ONG O 23 new at the high-speed terminal. grain vessel standard U R KE Z TER ED GRAIN Y AC H M IEVE

loading IN 2007ENTS M INAL WIT H H 4

M time ILLION

for TONS

Panamax

PER Y EAR

class NCSP GROUP A Harbor for Successful Business ship repairs ship N S T OJSC NOVOROSSIYSK SHIP REPAIR YARD thousand tons of cargo. of tons thousand 450 to up company in the south of of south the in company I handling. cargo year-round of capable Y (NSR maintenance. maintenance. and building, ship repair, ship including services of arange offering cargo turnover. cargo total its of 94.07% to metals brought N operations. of type profitable most its as metals, of handling on concentrated NC 2007 in specialization, stevedores’ increasing of framework tons. thousand 3,036.4 2007 cargo. cargo. of type the on depending wagons, 190 and 100 between unloading while ships, on day per tons thousand 12 N allows capacity Available alocomotive. and tracks railroad 13 seawall; berthing mof 899 some and 7.3from 11.7 meters to ranging depth with berths equipped o space totals 73,000m totals space thousand tons. tons. thousand 93 or 68.4% to amounted operations import its in cement of volume total the year, the For containers. soft in cement the Navy. Navy. the for services repair ship provided and Federation, Russian the of Defense of Ministry the with work to continued with NC with contracts under were these of eight N by repaired were vessels 25 Group. the members other to distributed is power excess some and capacity, generation own its by met fully are t is also the largest ship repair repair ship largest the also t is erritory area erritory hip repair berth depth berth repair hip SRY includes several specially specially several Y includes f NSR o v Y NSR T I the r the During Y NSR began handling handling began Y n 2007, NSR orossi he t he ceased handling bulk cargo and and cargo bulk handling ceased increased by 3.3% reaching reaching 3.3% by increased I is a large multimodal port port multimodal alarge ) is ts covered and open storage storage open and covered ts S P Fleet. I P Fleet. r ’ ’ s c s po a nss y a s : t rgo we

k Sh k 160,000 h to load load to SRY n 2007, N the hectares 28 : over ip r e por me ip urno

eq , which houses houses , which

r n I R n the the n t e uir tons t t ussia, ussia, p ing RY p co ve a

: eme ir from from SRY m r in SRY .

24 e Y p rio a , n lex lex r

t d s 4.5 d,

. T m to to m otal length of berthing seawall berthing of length otal 8.5 Source: 2007. mix, cargo NSRY 19. Diagram Source: 2006. mix, cargo NSRY 18. Diagram m .

M Data Group NCSP Data Group NCSP ax . vessel tonnage for transshipment for tonnage vessel

94.07% 84.96% more than 1.7 than : more 15.04% 5.93% km :

50,000 . T ransshipment berth depth berth ransshipment tons 9.63% 3.06% .

M ax . vessel tonnage for for tonnage vessel 1.26% 1.12% 3.95% 1.75% 0.20% from 7.3 : from 5.93%: Other, 94.07% metals, Ferrous Other, 84.96% metals, Ferrous

m to 13.3 m to 0.20% metals, Non-ferrous 1.75% Other, 1.12% Fertilizer, 9.63% Other, 1.26% Fertilizer, Cement, 3.95% metal, Scrap

15.04%:

3.06% m

ANNUAL REPORT 2007 OJSC NOVOROSSIYSK SHIP REPAIR YARD NOVOROSSI CARGO H 3036 thousand ANDLING SERVICES Y

tons SK S 25 H IP REPAIR Y cargo ARD IS

turnover

A U NIVERSAL of NSR

PORT

OFFERING Y in 2007. Y EAR-RO U ND NCSP GROUP A Harbor for Successful Business NC with fuel, oil supplies vessels and water. and which towingprovides services in operating companies F NCSP 7 hp 5,000 to 225 from capacity offering tugboats 23 L PJSC FLEET NCSP environmental services. and supervision, fire safety provides loading and unloadingperforms works, and supplies, passengers transports bunkering and towing, NC Besides towing services. and other port providing fullPort range of Novorossiysk company in of the Port service perform canting operations in crowded crowded in operations canting perform to them allows which steering, helical azimuthal with equipped are vessels These 2002-2003. in built were which of nine hp, 5,000 to 225 from ranging capacity a with tugboats, maneuverable modern of consists fleet the of core The vessels. 60 argest towing fleet in R in fleet towing argest bunkering boats with a capacity of of capacity a with boats bunkering S I P isFleet the only independent 2007, NCSP F n 2007, NCSP is one of towage the largest leet operated operated leet R ussian ports, ports, ussian S P Fleet P Fleet ussia 26 , including including: removal, Waste m services, Fire-fighting amounted to 160,370 tons. tons. 160,370 to amounted services bunkering of volume The 2007. in ships to delivered was water S Novorossiysk. of Port the at services bunkering of 19% NC Today, water. and fuel with vessels of bunkering and 2007, towing were weather conditions. any in time any work to prepared and condition technical proper in maintained are vessels All collectors. waste-water and collectors, waste and oil boats, harbor ships, bunkering NC operations. handling oil for fire-protection provide to ability them gives which equipment, fire-fighting of range full with equipped are tugboats The conditions. weather any in assistance provide and waterway, port’s the of conditions Source: m Towing, T thousands tons water, Drinking thousands tons fuel, Bunkering ype of S of ype 250 S m thousand waste, Liquid 2006-2007 Fleet, NCSP of activities of types primary of Indicators 5. Table Mos m thousand waster, Solid P Fleet provides approximately approximately provides Fleet P to to Data Group NCSP : t dema 3 ervices million 3,000 S tons P also operates operates also P n ded s ded ome 22,468 tons of of tons 22,468 ome . S

peciali 3 million . e 3 r 3

v ic z ed fire ed e in in s - fighting vessel fighting base allowed NC allowed base tons. 250 and 650 of capacity a with carriers oil two and , tons thousand 1.5 of capacity a with vessels 3 tons, thousand 3 of capacity a with vessels 2 including ships, bunkering self-propelled seven with Port, Novorossiysk in largest 15,296 m 15,296 to amounted removed waste ship of surroundings. immediate its and port the at services management waste offers and cargo, hazardous handles spills; other and oil up cleans services, emergency Novorossiysk. in companies bunkering among leader liquid waste, and 2,899m and waste, liquid and oil rags). oil and plastics waste, dry waste, (food waste T NCSP F NCSP he b he un 3 , including 12, 407 m 407 12, , including also provides provides also leet ke I n 2007, the total volume volume 2007, n total the S . is the the is fleet ring

uch a strong material material strong a uch S P Fleet to become the the become to Fleet P 3 of solid solid of 3 of of on the Black and Azov seas in general. general. in seas Azov and Black the on but Novorossiysk, in only not services bunkering and towing in leadership long-term secure to Fleet NCSP E x is t c ing 133.5 148.2 487.5 2006 12.4 27.5 3.3 a p a ci ty all ty o w s 466.9 129.3 160.4 2007

12.3 22.5 2.9

ANNUAL REPORT 2007 PJSC NCSP FLEET IS FLEET NCSP OF TOWING, B 19 % U

T NKERING AND OT 27 H E

ONL was handled by NCSPFleet. of Y Y CO

bunkering M PAN H SERVICES ER PORT Y Y IN

NOVOROSSI

Port Y SK

of OFFERING

Novorossiysk

F U LL

RANGE

2007 NCSP GROUP A Harbor for Successful Business trailers and containers. containers. and trailers automobiles, heavyweight, oversized, including cargos, roll-on handled and terminal ferry passenger and auto I annually. TEU thousand 85 process to capacity the offers it today of As 2006. April in operation into put was company the of terminal container The Baltiysk. of port the at handling C period, in February 2008. February in period, B in NC potential, expansion huge its as well as business, B of growth rapid consideration into Taking zone. free-trade a is which growing container shipments, and on growingshipments, container This onwas oneconditioned, hand, by in the Northwest success its of continuation alogical was business container market of of market container attractive the enter to and regions, other into business Group’s diversify to is acquisition this behind rationale S NCSP T B LLC n 2003-2006 B 2003-2006 n erritory area erritory tevedore Company (B Company tevedore o mp B T Source: 2006. mix, cargo BSC 20. Diagram S he B he SC’ C to 100% after the reporting reporting the after 100% C to acquired a 50% share of Baltic Baltic of share 50% a acquired a n s ex y Data Group NCSP alt 27% specializes in container container in specializes S p Steved ic P consolidated its share share its P consolidated a S con in nsion C was operating an an operating was C : altic S

12.5 K aliningrad aliningrad S

C) in 2006. The The 2006. C) in hectares or e R egion. egion. ta S 28 R C’s C’s in egion, egion, e 73% .

r 2

berths tevedore C tevedore for shippers. shippers. for conditions favorable most the creates which cargo, of delivery and formalities of handling timely the ensure to firms expediting and agent as well as inspections, veterinary and sanitary with along terminal, the at located are offices guard border and Customs 1,440 m 1,440 covered a and simultaneously, wagons 10 accepting branch railroad direct a is There countries. other and Poland Lithuania, Germany, from ships passenger receives and storage, B the channel all the way up to and operation, saves the time of passing Baltic S of at entrance the the very convenient location ofis extremely these rivals. closest which set B advantages, the other hand, by a ofhost competitive of 303 vessels called at the port. port. the at called vessels 303 of total A people. 50,000 comprised traffic Passenger TEU. 61 thousand totaled ea Channel in the ice-free part ofea Channel the part in the ice-free S C offers mooring services, cargo cargo services, mooring offers C I B , B n 2007 total length length total e S side ea, which allows year-round 2 warehouse for general cargo. cargo. general for warehouse s

tacon O S ne of the most important ne of the important most C’s container turnover turnover container C’s 27% Other, 73% Cotainers, in 465 e S r C apart C from its apart m K S n ha aliningrad aliningrad . weden, weden, K

B aliningrad. aliningrad. erth depth up to to up depth erth

dl ing , ompany

4% estimated at U at estimated are investments Total 2008. in begin will works Construction completed. was project the of stage 2007, development of end the By year. per TEU thousand B of pacity ca throughput the upgrade to project NC region, Northwest the of market containers growing the by offered opportunities Wi Source: 2007. mix, cargo BSC 21. Diagram th the v the th 10.5 Data Group NCSP S S P is now implementing a implementing now P is C container terminal to 300 300 to terminal container C m . S

M i $ 69.2 million. million. $ 69.2 ew t ew ax . vessel tonnage vessel o ta

p gr 96% eat

- :

20,000 tons . 96% Cotainers, 4% Other,

ANNUAL REPORT 2007 LLC BALTIC STEVEDORE COMPANY OF GRO NCSP CO BALTIC STEVEDORE 300 thousand TEU per year POLAND Baltiysk BALTIC SEA U P 29

terminal the expansion M Kaliningrad PAN

Y IS throughput

project. H LLC E RuSSIAN FEDERATION

FIRST

BSC

REGIONAL

after

the

LIThuANIA capacity

DIVERCIFICATION implementation

the

PROJECT of

the container NCSP GROUP REVIEW OF FINANCIAL RESULTS 30 Adjusted EBITDA M EBITDA investment program. program. investment and expansion Group’s the under launched terminals new by contributed U 2007. Another U for accounted companies subsidiary consolidated 47%. reached margin deriving synergies from consolidation. from synergies deriving and cargo, high-margin on focusing performance, and capacity boosting by value market creating of strategy our up back and made we progress NC of history the in successful most the were EBITDA Revenue debt Net profit Net rates for certain cargos, as well as for for as well as cargos, certain for rates tariff increased for accounts 2007 in growth revenue total the of million U U 74.3%by from EB time, same the At 119.6%. by profit operating and 118.12%, by profit gross 74.33%, by grew Group the of revenue year, consolidated last against increase mln US$ NCSP’S Source: capacity. port’s of expansion and modernization the 2 AU NC of reporting financial in reflected 1 I services of Cost debt/EBITDA Net projects investment in expenditure Capital S n analysing the financial indicators for 2006-2007, it is important to take into account that the results of the work of the consolidated stevedore companies began to be be to began companies stevedore consolidated the of work the of results the that account into take to important is it 2006-2007, for indicators financial the n analysing I $ 483.4 million. O million. $ 483.4 TDA increased by 91.4% and EB and 91.4% by increased TDA NCSP’ W Dynamic 6. Table Fin S $ 19.4 million increase in EB in increase million $ 19.4 S h

Audited P Group. They testify to the the to testify They P Group. a i cargo turnover did not not did turnover cargo 2007 le argin nci s r

al r al Consolidated eve

S reven S S $ 87.6 2H in million e $ 277.3 to million $ 63.3 million was was million $ 63.3 nu su f these recently recently f these grew grew 2007 e in S

lt of ome U ome

Financial s o

main I TDA was the result of a correction in non-capitalized expenses connected with implementation of the large-scale investment plan directed at at directed plan investment large-scale the of implementation with connected expenses non-capitalized in acorrection of result the was TDA S P from the 2H 2006. 2006. 2H the from P f 2007 S u

financial $ 55.5 55.5 $

Statements es increased b increased es

I TDA TDA

indicators of

NCSP the total cargo turnover of the Group. the of turnover cargo total the in cargo high-margin of share increased costs reduction implemented by NC by implemented reduction costs program targeted a of result a as 15% approximately by fell resale, for fuel on expenditure and consolidation of effect the 2007, in without services of cost the Therefore, 47million). U (approximately resale for fuel of that conditioned subsequent purchase 2007 in terminal bunkering new the of launch the and costs) in million 60 U around added (which 2006 June in subsidiaries of consolidation by driven primarily was growth Cost 255.7 million. 47.9%by U from revenues. than pace slower to reduce insurance costs. costs. insurance reduce to allowed 2007 in program management risk- the of implementation Effective thousand by the end of 2007. of end the by thousand U reached and 89% by increased employee per revenue result a As 7%. by staff reduce to managed and operations its optimized Group the

for W C os

h 2007 i

le r le in t o

according 2007. f s 505.6 172.9 277.3 119.1 117.4 2006 eve 43% 44.1 4.2 e S r 1 nu

$ 172.9 million to U $ 172.9 to million v

to ic e

International e were growing, growing, s were y S grew at a much much a at grew s $ 61.3 61.3 $

74% I t increased increased t

Accounting S 483.4 255.7 in 470.6 227.9 247.3 2007 $ 82.8 93.7 47% S 2.1 S S P. $ $

Standards. 2007 margin increased to 47% to 2007. in increased margin 112.5% from U from 112.5% by in 2007, amounted to U to 2007,in amounted company the of results operational the reflects accurately more which G million. The increase of U of increase The million. calls for adequate capacity expansion. expansion. capacity adequate for calls which port, the at handling container in growth further predict consultants Group’s cargo. of types profitable most the of one is which segment, container by demonstrated was growth U to EBD capacity. port’s of expansion and modernization at aimed program investment major the of implementation the to linked expenditures capitalized non- in changes from results million U U from 91.4% by U at stood and 2006 with comparison in 29.5% by fell expenditures S S roup $ 227.9 million. Adjusted EB $ 227.9 Adjusted million. $ 82.8 million. $ 82.8 NCSP’ Ag I S 2007 NCSP’ n 2007 $ 93.7 million. a ’ ins s C I EB s n C hange (34.6) (35.0) t th 108.8 206.1 82.8 49.6 TDA et pro et S ba is I

$ 119.1 million to to million $ 119.1 S n 2007 the highest highest the n 2007 in 2007 increased increased 2007 in $ 44.1 million million $ 44.1 capital capital s f c i S k increased t increased $ 247.3 groun S $ 19.4 $ 19.4 hange I TDA, TDA, (29.5%) 112.5% d (6.9%) 74.3% 91.4% 47.9% I TA , %

ANNUAL REPORT 2007 REVIEW OF FINANCIAL RESULTS 0 50 0 0 1 0 5 1 0 0 2 0 5 2 0 0 10 0 20 0 30 400 0 0 5 Th U bridge, EBITDA 2006-2007 23. Diagram U bridge, revenue 2006-2007 22. Diagram

e financialres NCSP Source: NCSP Source: EBITDA 2006 2006 Revenue

Group Group 119.1

data, data, Consolidation

accounts accounts 277.3 Consolidation 31

according according

42.4 u lts for 2007 were t Tariffs, changes and cargomix

to to

Russian Russian

mln S$ volumes, mln S$

Accounting Accounting 87.6

53.8 Tariffs, and cargomixchanges New Projects

Standards Standards

volumes,

for for

2007. 32.0 2007.

EBITDA Adjusted 55.5 New projects h

247.3 ine best t Correction

63.3 1 2007 Revenue (19.4) EBITDA 2007 h e h istor 227.9 483.4 y of t 6.9% from U from 6.9% 2008-2009. in implementation to 2007 in stage design through forward leaped passed projects container while 2009-2011, until delayed were projects Certain program. investment NC within expenditure of redistribution a about brought This Ba1. Ba1. NC upgraded agency ratings Moody’s 2007 on rates interest of reduction and bank, UniCredit from credit syndicated three-year a issue, Eurobonds year five of help the with debt long-term of share the increased NC improved. significantly quality its U to 2007 to 7.18% on January 1, 2008. 1, 7.18% to 2007 January on 1, January on 8.52% from portfolio credit its on interest-rate calculated average the reduce and borrowing of cost the reduce to company the allowed ratings of assignment The Ba1. of rating credit long-term a assigned Moody’s R a and BB+ of rating credit a long-term agencies. ratings international leading the from 2008. 1, January of as 87% to 2007 1, January of as 4.3% from grew Group the of debt total the in debt unsecured of share The 8.18%. to 9.25% from ussian national scale rating of of rating scale national ussian S NCSP’ I S n 2007, NC P’s Eurobonds rating from Ba2 to to Ba2 from rating Eurobonds P’s $ 470.6 million. At the same time, time, same the At 470.6 $ million. S s n h tandard&Poor’s assigned S $ 505.6 million in 2006 2006 in million 505.6 $ was reduced by by reduced was debt et e G S P obtained ratings ratings obtained P S ro berbank credits credits berbank S P’s major major P’s u p R uAA+. uAA+. I S n P NCSP GROUP A Harbor for Successful Business 4% NCSP/NLE IPP IPP NCSP NCSP NCSP NCSP T

NCSP/NLE I NLE NLE erminal n 2007 EBDITDA increased b Cost 24. Diagram 2007. in tariffs in 7.Table Changes 1% Tarrif U 1 Tarrif Source: Data Service Tariff Federal Source: Tarrif U 2 Tarrif 6% Data Group NCSP S S $ per container. $ per $ per cubic meter. cubic $ per 7% 3% 5% 5%

of 20-foot containers incl. moving within port within moving incl. containers 20-foot U fuel Diesel non-packed flat rolled loose, • pipes including: materials, raw metals, Non-ferrous oil Crude products Petroleum export Cement C • laden 40-foot containers incl. moving within port within moving incl. containers 40-foot • empty cargo dangerous with • laden • laden plywood chipboard, Fiberboard, materials timber Packaged • empty cargo dangerous with • laden fertilizer liquid AN argo

services

12% 10% 21% 32

breakdown, 26% 2

2006.

3% costs, 4% Other, 1% services, Third-party &administrative General 6% Leasing, 7% Repairs, 10% Insurance, 12% resale, for Fuel Amortization, Wages, 1 1 U M : : 5% tax, social nified y 91% 5% aterials,

26%

21% 3% 2007. breakdown, services of Cost 25. Diagram 3% 3% 2007 31.12. 01.01.2007 Source: 208/181.5 161.2/149 4% 4% 124/135 160/165 108/85 74/65 Data Group NCSP 8.2 2.3 4.3 3.5 17% 6% 3% 2 1 0 9

22%

T , ariff 10.5 270 270 115 115 210 210 1.2 5.3 9.5 2.6 2.7 7.8 10

U 36% S$/ tons tons 3% Other, 2% Leasing, 3% Services, 4% Insurance, 6% Repairs, 17% Depreciation, Wages, 36% resale, for Fuel 10.12.2007/27.12.2007 10.12.2007/27.12.2007 10.12.2007/27.12.2007 10.12.2007/27.12.2007 10.12.2007/27.12.2007 10.12.2007/27.12.2007 M U 4% tax, social nified 3% aterials,

22% D ate of tariff tariff of ate 03.08.2007 03.08.2007 07.03.2007 07.03.2007 07.03.2007 07.03.2007 27.12.2007 27.12.2007 change

ANNUAL REPORT 2007 REVIEW OF FINANCIAL RESULTS 0 10 20 30 40 50 60 70 80 90 100 IN 2007 WAS NCSP ASSIGNED BB+ STARDARD AND &POOR’S BA1 RATING B U 2006-2007, trend, profit Net 26. Diagram Source: Standards.

Audited

Consolidated 2006 44.1

Financial Growth 112.5% 33

Statements

of mln S$

NCSP

according 2007 93.7

International

LONG-TER

Accounting Y M OOD 0 25 50 75 100 M M % 2006-2007, rates, interest and debt net of 27. Dynamic Diagram Source: Standards. Accounting International to CREDIT Y ’S

Audited mln 506 US$ 1.01.2007 8.52% 4.3%

Consolidated

RATING

Financial mln 483 US$

1.07.2007 Statements B 56.4% 7.80% Y

NCSP

according 470 mln US$ 1.01.2008 7.18% 87.0% Secured U nsecured

debt,

debt NCSP GROUP INFORMATION FOR SHAREHOLDERS 34 Morgan Chase Bank, N.A. N.A. Bank, Chase Morgan agreement between PJ between agreement depositary under issued Certificates the the I the during offered GD ticker. ”NMTP” under exchanges the on traded “NC the London London the nominal value of R of value nominal a with shares ordinary 19,259,815,400 (GD receipts depositary Global exchanges. L on traded are NC of U R with accordance and as of December 31, 2007. 31, December of as and tal S London ( offering public initial an conduct to company stevedoring Russian first the became shares. O shares. (GD receipts depositary global of form the in NC Company. the of shareholders the by shares ordinary the 19.4% of offered were R

Troika-Dialog and Morgan S Morgan and Troika-Dialog were placement the of organizers The S London the on listing a obtained receipts depositary global NC shares. ordinary of form the in GD of form the in sold was capital charter the of 14.199% offering, public the of result As share. GD one for S eporting S eporting T ussia. I Russia. in exchange S stock $ 10.471 million. The charter capital capital charter The 10.471 $ million. S S T S I IPO capital P R R R S of the Company did not change change not did Company the of n N he si he o s), as well in the form of ordinary ordinary of form the in s), well as s) of the Company are traded on on traded are Company the s)of egulation egulation P” ticker, and ordinary shares are are shares ordinary and ticker, P” hare P hare hareholder erformance S of NC of 19.4% me P is fully paid up and divided into into divided and up paid fully is P o I tock Exchange (L Exchange tock P ffering price was U was price ffering vembe ze o ze and U R and O tandards it amounted to to amounted it tandards S ) of its shares on the the on shares its ) of tock Exchange under under Exchange tock S R P securities were offered offered were P securities rice rice S S f the c f the T and and ussian Russian on E and S I r 2007, NC nternational Financial Financial nternational and M and S U P $ 0.256 for one one for $ 0.256 R 0.01 each. were certified by by certified O were R R tock Exchange. Exchange. tock ule 144A Master Master 144A ule S s and 5.177%s and S ha

C NC P shares shares P I CEX stock stock CEX r S tanley. tanley. E) and the the and E) te S S S $ 19.2 $ 19.2 r c P P and JP JP P and I nvestors nvestors n S a P’s P’s pi R s - one GD one of 2007, price of the end the By price. GD per U was price closing day First 2007. 2, November on commenced amounted to U to amounted share per profit diluted and base Thus shares. 19,196,480,589 to amounted 2007 in circulation in shares in 2006). in value growth. growth. value shareholder long-term ensure to order in development further in earnings vest rein to need the and capital, invested on profit receiving in shareholders of interests the between balance the ing observ of principle the upon built is program that is now under way,NC under now is that program investments and expansion scale I annually. dividends U some paying of Tr A T D Source: capital shareholder of Structure 28. Diagram T he d he he C he ve ividend ividend ad R was U R was r , 8.3% higher than the offering offering the than higher , 8.3% o ing a o Data Group NCSP i v g m i e nu de p 50.1%

a S S f G n n $ 20. $ 0.0049 (U 0.0049 $ S P d po mbe has a history ahistory y has $ 10 million in in $ 10 million D olicy olicy n view of alarge- of n view R L the s on l r o ic

y o f NCSP S S f NCSP $ 20.8 $ 20.8 $ 0.0023 0.0023 $ S

S - E P

29.9% -

20% IRR aminimum imply program investment its of framework the in Group the by undertaken projects New development. business in reinvested be will profits company’s of portion significant a while range, same the in stay to payments dividend future expects after they are announced. announced. are they after days 60 than later no place takes and rubles Russian in made is dividends of S of Meeting General Annual the by approved and Directors of Board the by defined are R S from place take will dividends of 2007. for payment The payments dividend for rubles 356,306,583.9 of allocation the for Directors of Board the by proposal the approved 2008, NC S of Meeting General eptember 1, 2008, in the amount of of amount the in 2008, 1, eptember U R S of 20%. 20%. of Di A r 0.0185 per share. share. per 0.0185 P, which took place on June 12th, 12th, June on place P, took which v e ide so n l hareholders. The payment payment The hareholders. ds u t 29.9% p ion

p 20% Federation, Russian 50.1% Limited, Kadina shareholders, Minority aid hareholders of of hareholders a to shareholders shareholders to ss

by the the by ed

ANNUAL REPORT 2007 INFORMATION FOR SHAREHOLDERS LONDON EXC STOCK NCSP methods of risk analysis were accepted. accepted. were analysis risk of methods I transparency. higher to leading introduced were reporting management of standards Unified management. risk of aspects key over control strengthening and bodies, executive and governance of authority the expanding by system governance corporate its NC 2007 in practices, and mitigate their impact. to prevent unexpected negative situations management makes every possible effort Group’s situation. financial and which have an impact on its operations risks internal and external faces inevitably management allow NC allow management Li R 2007, in U LSE on price GDR 29. Diagram O i To ngoing isks ke a ke m 0 5 10 15 20 25 Source: pro n

y b WAS

ve ris ve i n addition advanced advanced n addition usin data Exchange Stock London mpro e 02.11

k-ma NCSP ss veme S T S P developed developed P P to analyze analyze P to H n E n a t

s FIRST eme 35

in risk risk in 09.11 n t H

R ANGE IN NOVEM higher commodity prices, and not to an an to not and prices, commodity higher to due more is this trade, foreign Russian of value the in rise significant volumes. handling NC consequently, and, export down driving decrease, may commodities these for demand the deteriorate, conditions economic if result, a As markets. export key in and globally both conditions, economic general in changes to sensitive are demand and exports which commodities, certain of handling by generated is revenues premiums. insurance including costs, various reduce helps turn, in management, risk Effective business. the on impact their reduce to measures taking while them monitor and evaluate, measure, risks, of spectrum full 16.11 U S$ Although recent years have seen a seen have years recent Although Group’s of part significant A volatility demand Export SSIAN 23.11

STEVEDORE 30.11 BER 2007 S P’s P’s 07.12

CO is such that appreciation in real terms terms real in appreciation that such is costs and revenues our of mix The rate. CB the at equivalent rouble the or lars, U in incurred are expense, interest including costs, other while roubles, in incurred are costs, transportation and labour including costs, direct our of majority The customers. international U in and customers Russian our for rate Russia of Bank Central the at roubles in invoices provide we U in determined are of the Group. Group. the of operations the on impact limited a have only will this volumes physical on based NC As substantial. less be will volumes in change while prices, commodity export affect negatively foremost, and first may, A deterioration in economic conditions volumes. commodity actual in increase O volatility rate Exchange M ur tariffs for stevedore services services stevedore for tariffs ur 14.12 PAN Y Y 21.12 S dollars, although although S dollars, P tariff rates are are rates tariff P TO

COND dollars for for S dollars 28.12 S dol U R - CT impact NC impact negatively would which volumes cargo in disruption to lead potentially could infrastructure transportation Russia’s oil. crude and fertilizer, liquid UAN metals, timber, containers, including cargoes, of anumber for approved were rates tariff new 2007 in Also services. related and stevedoring for rates permitted maximum the charge now and discounts, tariff material most 2007, of half reduced we rates. proposed adjust not will or increase tariff for applications FT that NC request. upon so does it rule a as but initiative, own its FT costs. or demand increased for compensate to FT with rates higher approve to ability group’s the on as well as services, S Tariff Federal the that rates tariff management. transport automatic and system, railway roads, covers project The government. the to proposed been has that Hub, Transportation Novorossiysk of expansion and modernization for study feasibility a developed has Group The deterioration. physical to due service in disruptions to subject is system railroad Russian down. worn substantially is which pipeline, Transneft owned astate by supplied is port the by handled oil crude of Most prospects. business future and results U the against rouble the of depreciation asignificant by impacted U the against rouble the of appreciation a significant by impacted adversely be would results financial our Accordingly, currency. presentation the to translation upon revenues our to relative costs our in adecrease in result to tends terms real U the against rouble the of depreciation while revenues our to tive rela costs our in increase an in result to U the against rouble the of ervice allows to charge for regulated regulated for charge to allows ervice

AN A continuing deterioration of of deterioration continuing A Poor transportation infrastructure NC Tariff regulation S S P profits depend on maximum maximum on depend P profits will always promptly approve approve promptly always will

IPO S may review tariff rates on on rates tariff review S may P’s financial condition, its its condition, financial P’s dollar and positively positively and S dollar

S ON P cannot guarantee guarantee cannot P S dollar. in S dollar tends S dollar I n the first first the n S

- NCSP GROUP A Harbor for Successful Business November through February. February. through November from typically surges storm strong and weather stormy to subject is S Black the on conditions weather adverse to due year, each days afew for generally time, to time from operations unloading and loading prospects. and operations of results condition, financial Group’s affect adversely could event, catastrophic other or spill oil accident, environmental or maritime any congestion, severe continued or ones, existing of severance or passage, I Port. the to them through passing in significantly delayed be can ships backlogs, or weather bad of cases in and congested, severely and narrow S ‘‘Turkish the (together, Dardanelles the S the Bosphorus, the through pass which of most Port, the from and to cargo customers’ our transport to lines shipping mposition of new restrictions on ships’ ships’ on restrictions new of mposition traits’’). The Turkish Turkish The traits’’). The port may suspend vessel vessel suspend may port The Sea Black the on Adverse weather conditions NC Straits Turkish the in Increased congestion S P business depends on on depends P business ea of Marmara, and and Marmara, of ea S traits are are traits ea, which which ea, S uch uch 36 the future, as well as potential legal legal potential as well as future, the in applied regulations environmental stricter of possibility the exclude NC However, regulations. applicable all with complies fully Group the today, of As legislation. and and regional environmental regulations NC railroad. by in brought timber of unloading the for operation into put was gallery crane roofed 2007, in another expansion terminal timber Novoroslesexport of part As winds. high in wagons of ing R S Novorossiysk at gallery crane aroofed of construction the completed NC assets, existing in investments capital for program a of part as and, Group’s financial condition. NC disrupt or delay could which vessels, cargo or space warehouse available of shortage backlogs, in result could conditions weather adverse of period extended An Port. the at berthed vessels for operations unloading and loading our delay can conditions weather adverse epair Y epair S R Stricter environmental regulations I n 2007, in order to reduce this risk, risk, this reduce n 2007, to order in P, are regulated by various federal federal various by P, regulated are ussian port operators, including including operators, port ussian ard which enables unload enables which ard S P operations or affect affect or P operations S P cannot cannot P hip hip - S P consequences, NC consequences, their remediate and accidents such any I results. financial Group’s impact negatively could which period, remediation or repair the during NC disrupt could facilities our within or Port damage. material or environmental for payments compensation and fines as well as violations, of resolution measures, compliance extra with associated costs additional in result parties. third or government the by initiated action around the Port. However, NC However, Port. the around and in spills liquid other or oil for services containing and cleaning and zones shelter to vessels transferring as such Port, the at services emergency of number a provide which vessels, of other environmental damage. environmental other or Port the of contamination facilities, our to damage without incidents such resolve to able be will we that guaranty S A serious accident or oil spill at the the at spill oil or accident A serious accidents other and Spills P’s business and operations operations and business P’s S uch events may may events uch n order to prevent prevent to n order S P maintains a fleet afleet P maintains S P cannot cannot P

ANNUAL REPORT 2007 акватория успешного бизнеса CORPORATE GOVERANCE 37 NC S Black the on hub transportation international an operating ala As shareholder value in the future. future. the in value shareholder maximizing for foundation astrong lay NC enable management business effective with coupled transparency, information maintaining shareholders, its of interests legal and rights the S markets. international on and Russia in requirements legal applicable observing while management of levels all at practices business best the apply to aims Group The governance. corporate of standards high by live the charter, and internal regulations. regulations. internal and charter, the NC in reflected been have which regulations, U other and Exchange S London as well as companies, public on legislation Russian with complied system governance Committee and H and Committee Audit The Directors: of Board the on NC by adopted were Code Governance I R investors. and shareholders with dialogue efficient an establishing on focused Group the governance corporate over the last few years. few last the over introduced principles management key I Director. General and Board Executive S NC at bodies governance corporate key The reporting. corporate internal of preparation regular and transparency full authority, of division the on based departments between interaction of system delineated acarefully assumes Group the by applied governance nformation and a Corporate aCorporate and nformation n 2007, NC hareholders, Board of Directors, Directors, of Board hareholders, trong commitment to protecting protecting to commitment trong S S governance governance corporate of P I St T 2007, the G n 2007, the P takes on the responsibility to to responsibility the on P takes P Board of Directors consolidating consolidating Directors of P Board he pr he S rinciples rinciples S ri P’s core documents, including including documents, core P’s P are the General Meeting of of Meeting General the P are rg v t ing e pu a S egulations on I on egulations c P created two Committees Committees two P created t ic o i bl R & of corporate corporate e of m co ic roup pro applicable K applicable emuneration emuneration m its its ve ’ corporate s corporate nsider nsider p a n y tock tock ea, ea, S P to P to Company. the of accounts financial approves and I the and Director General appoints Commission, Audit the and Directors of Board the elects S of Meeting General I dividends. of payment and profit of distribution the Company, the of reorganization the capital, charter the in in-crease/decrease an Charter, the to additions and changes introducing as such Company, the to relation in issues fundamental S of NC of body transactions. party related and documents listing approving I for prepared company the as regulations internal and Charter the to amendments and changes approving were Meetings Extraordinary the of agenda the on issues main The voting. absentee of form the in conducted S of Meetings General I Meetings. S of Meeting General Annual the to of the Board of Directors is to ensure ensure to is Directors of Board the of function important An bodies. executive of work the of oversight and activity financial its over control Company, the of strategy development the formulating include Board the of responsibilities of Meetings General NC of activity management general the out Commission were established. were Commission Audit internal and Department I activity financial and business Group’s the over control To enhance director. independent an by headed each Committee hareholders are Extraordinary General General Extraordinary are hareholders of S of G M T D of B T

hareholders, which resolves resolves which hareholders, he h he he Bo he S oard oard eneral M eneral ings eet P in the periods between the the between periods the P in hareholders hareholders irectors ig S n 2007 six Extraordinary Extraordinary six n 2007 a he P is the General Meeting Meeting General the P is r d o held in addition addition in held s t go ndependent auditor, auditor, ndependent f Dir eeting eeting S hareholders also also hareholders ve nternal Control Control nternal hareholders were were hareholders hareholders. The The hareholders. n addition, the the n addition, e rn c t a carries ors nc P O e , (see p. 38). p. (see persons: following the included it 2007 31, December of as year, and the through unchanged remained Dir Committee. H and Committee Audit the committees: advisory two has Directors of Board the present At legislation. Russian to according directors independent to belong which of five seats, seven of consists NC vote. majority S of Meeting General Annual the after meeting board first the at elected is Directors of Board the of of Meeting General Annual next the until lasting S of Meeting and interests of NC of interests and rights the of observance consistent the M NCSP Bo NCSP e c embe t ors S rs are elected by the General General the by elected are hareholders. The Chairman Chairman The hareholders. aterm for hareholders a r

o d o S f the the f R P Board of Directors Directors of P Board & & S f Dir P shareholders. shareholders. P hareholders by by hareholders R emuneration emuneration Bo e a c r t d d ors

o f

NCSP GROUP A Harbor for Successful Business transport maintenance. transport inmarine adegree with Far-East inthe Academy Engineering Maritime Nevelsky Admiral the from graduated Mr. Davydenko body. K research Mortsentr-TE of director General the was he 2004, From 1997 to Transportation. of Ministry the to advisor an as served he in2004-2005, this, to R and S R the of Ministry Transportation the I R and Marine R the of Head the been has he 2005, S in2006. Directors of Board R the Education Ministry of Education of Academic Degrees and Titles of the S by certified Management of Academy S the from ineconomics Ph.D. institution. Mr. Ponomarenko holds I President of the 2000 to 2004 he was the 5 OF T companies of NC of companies member for Director of Board the of Ponomarenko also acts as Chairman of TP 2004, he has also been President S 2006. since Chairman its been Board of Directors in 2003 and has nstitute of Corporations research n 2005, Mr. Davydenko worked at at worked Mr.n 2005, Davydenko tate Policy Department for Marine Marine for Department Policy tate ussian Federation as Head of the the of Head as Federation ussian Mr. Davydenko joined the the joined Mr. Davydenko Member of the Board of Directors of Board the of Member A Mr. Ponomarenko joined the Directors of Board the of Chairman A D P upreme Commission on on Commission upreme lexa lexa ono avyde S ussian Federation. ussian ussian Federal Agency for for Agency Federal ussian iver Transportation. Prior Prior Transportation. iver

I nvestment Company. Mr. ma n n H de de n r k e iver Transportation. Transportation. iver E 7M r r o n

A A I k nternational S . . o P Group. From From P Group. EM V ice 38 tate tate BERS OF T ince ince ince ince of Humanities. Humanities. of the of President S 2006. in Directors of Board the I Moscow the from graduated He Board. Management its of member R Caucasus O R at positions management various held he O R of President V appointed also was he when in2006 Directors of Board 1988 he became a member of the the of member a became he 1988 in Association, History European V elected engineering. inrailway a degree at the Moscow S Moscow the at lectures also he present, At degree. Law of Doctor holds and University K from graduated K of Prosecutor General the as 2005, S to 2002 November S of city in the Prosecutor General Deputy First the as worked he 2002, 1997 to S I the of head as and Directors of Board the of a Member nstitute of R of nstitute ince 2007 he has been the the been has he 2007 ince ervice of NC of ervice J J S S Mr. Chubaryan joined NC joined Mr.Chubaryan Member of the Board of Directors Directors of Board the of Member A Mr. V Directors of Board the of Member Voro V as both served has Mr. Uliyanov Directors of Board the of Member Ul V Ch C including Head of the North North the of Head C including 2006 and 1992 Between C. rasnodar R rasnodar lad lad lexa i u ya bar H orobiev has joined the the joined has orobiev i i b no m m ice President of Modern Modern of President ice n i E BOARD OF DIRECTORS ARE INDEPENDENT ev ev ir ir de yan v ailways and was a was and ailways G. ailway Transport with with Transport ailway B S r ussian R ussian ochi and from from and ochi ussian R ussian . P since 2006. From 2006. P since O. O. egion. Mr. Uliyanov Mr. Uliyanov egion. I n 1973, he was 1973, n was he S tate Law Academy. Academy. Law tate uban S uban tate University University tate nternal Control Control nternal eptember eptember ailways ailways ailways ailways ice ice tate tate S P’s P’s University. Moscow the from history D.in Ph. holds Mr.Chubaryan of Historians of Committee National the of Chairman Deputy of post the occupies he present, At of Academy Norwegian the of member aforeign in 1996, R I History General General Director of of Director General economics. in D Ph. a holds S R Mr. 2001. since positions various occupied he where Administration, K the of Head Deputy First the as serves also He 2006. in Directors of Board Committee for Historical Historical for Committee the of a member been S I Moscow the from graduated Mr.Parfenov Authority. Port Novorossiysk of R of Director General Acting as 2006. in authority, management port state Cooperatives. Consumer for University Moscow nternational nternational ince 1990, Mr. Chubaryan has has Mr. Chubaryan 1990, ince tate Agriculture University, and and University, Agriculture tate ussian Academy of S of Academy ussian emezkov graduated from from graduated emezkov osmorport and Deputy Head Head Deputy and osmorport Mr. Mr. Parfenov was appointed appointed was Mr.Parfenov Member of the Board of Directors Directors of Board the of Member Pa Yuri Directors of Board the of Member A Remezk lexa r R fe

V emezkov joined NC joined emezkov S . no n ince 2003 he served served he 2003 ince de o v S v R r rasnodar region region rasnodar tate University of of University tate

elations and the the and elations A . nstitute of the the of nstitute R osmorport, a osmorport, ciences and, and, ciences I nternational nternational S ciences. ciences. S S ciences. ciences. tate tate K R S uban uban ussia. ussia. P’s P’s NC of members three includes Committee The earnings. shareholder and value market company’s maximizing of goal the pursue them help to management and Directors of Board the for schemes S C at least once every quarter. quarter. every once least at necessary, whenever meets Committee Audit The bodies. executive over control financial enforcing in Directors of Board the assists Committee Audit the that Besides procedures. reporting financial improving for guidelines develops and Company, the of accounts financial reviews auditor, independent the of selection I Directors. of Board the to body advisory NC of members Three Company. the of activity financial the over control increasing with tasked S in established serve on the Committee: the on serve • • • • • • t prepares recommendations on on recommendations t prepares eptember 2007 to develop motivation motivation develop to 2007 eptember i omm S Mr. Chubaryan Chairman of the the of Chairman Mr.Chubaryan T Committee. Mr. R Committee; the of –Member Mr. Parfenov Committee; T B the C Committee. Mr. R Committee; Mr. V Committee; H Mr. Chubaryan – Chairman of the the of Chairman – Mr.Chubaryan P Board of Directors: of P Board he Au he Au he R & Rem & R ommittees on on ommittees ttee ttee orobiev – Member of the the of –Member orobiev emezkov – Member of the the of –Member emezkov emezkov – Member of the the of –Member emezkov d d oard of D of oard i i was also formed in in formed also was t C t C un S eptember 2007. I eptember o o P Board of Directors Directors of P Board e mm mm r at i i is an an is ttee been has ttee ion irectors t is t is

ANNUAL REPORT 2007 CORPORATE GOVERANCE S of Meeting General Extraordinary an by adopted were Board Executive R management. operational of functions the performs which body executive collective a expires in 2010. 2010. in expires Director General the of term current The basis. unlimited an on reappointed be can and years five of term a for appointed is Director General The R the and charter, the Companies”, Public the to according body executive asingle of role the fulfills who the General Director (CE Director General the the General Meeting of of Meeting General the by passed resolutions executes Board Executive Director. General the from recommendations of basis the on Directors of Board the by appointed are the General Meeting of of Meeting General the to reports Board Executive company. the within departments various of coordinates and procedures, business execution, develops and implements budget and programs operational monitors Directors, of Board the and and the Board of Directors. Directors. of Board the and hareholders on S on hareholders egulations on the General Director. Director. General the on egulations NCSP E NCSP E E E xe xe xecutive cu cu t t xe i i ve Bo ve ve ve cu egulations on the the on egulations Bo t eptember 3, 2007. 3, eptember i B a a ve Bo ve r r oard R is chaired by by chaired d is d membe d S S ussian law “ law ussian O hareholders hareholders hareholders hareholders ) of NC of ) a r is d is 39 S rs P,

O n MANAGEM management and economics. economics. and management in adegree with Transport Maritime the S the from also and maintenance, transport marine in adegree with Engineers Transport Marine of honors from the O the from honors with graduated He economics. I of the Board of Directors of O of Directors of Board the of NC of PJof Directors of Board the of Chairman OOO Portinvest of Director Mr. V present, At Economics. for Director and Director General Deputy First the as 2005, to 1999 from then, Economics of Director as worked he 1999, to 1996 From Company. the of Director General appointed PP. S Mr. V Mr. V General Director l Vi I gor P since 1996, in 2005 he was was he 2005 in 1996, P since S ilinov also serves as General General as serves also ilinov tate R tate C NC ino ilinov holds a Ph.D. in in aPh.D. holds ilinov ilinov has been with with been has ilinov

E S v . esearch I esearch P Fleet, and a member amember and P Fleet, OF GRO NCSP ENT dessa I dessa nstitute for for nstitute nstitute nstitute , the , the J S C Financial and Economics I Economics and Financial All- the from economics in adegree received he 2006 in and maintenance, systems electrical S Marine Novorossiysk the from O of Director General the as served 2007, to 2004 he from then, O of Engineer Chief the was Mr. Bolotov 2004, and 2000 2007. May Between since NC of Director General Deputy tate Academy with a degree in in adegree with Academy tate J S Mr. Bolotov has served as as served has Mr. Bolotov General Director Deputy First D Bo C I m PP. I l i t o r U t n 1997 he graduated graduated he n 1997 y y o P v A .

J S C I PP, ussian Russian nstitute. nstitute. S P degree in accounting and auditing. auditing. and accounting in degree Balkarsky K from and dielectrics and semi-conductors in degree R K Mr. 2004-2005. in Accountant Chief the of Deputy First was then NC as worked he 2004 until 1999 From 2005. NC of Accountant Chief adio Technical I Technical adio achan graduated from the Minsk Minsk the from graduated achan Mr. K Accountant Chief K Ge a r c ha ma achan has served as as served has achan S n n tate University with with University tate I. I. S P’s Accountant and and Accountant P’s nstitute with a with nstitute abardino- S P since P since NCSP GROUP A Harbor for Successful Business MANAGEM in 1992. 1992. in law at K at law in diploma a received Mr.Borovok Novorossiysk Marine Marine Novorossiysk at Department Legal the of Head the as worked he 2003 to 2002 I S Moscow the from and 1986 Caucasus North the for Court Arbitration Federal the in ajudge as served Mr. Borovok 2002, and 1997 NC of Department Legal the of Director was he 2003, June since appointment, this to of NC of S Business of Director nstitute of nstitute Boro E Mr. Borovok has served as as served has Mr.Borovok Support Business of Director d S u P since April 2007. Prior 2007. Prior April since P uban S uban a r v R d d o I egion, then, from from then, egion, nternational nternational k V . tate University in in University tate OF GRO NCSP ENT S P. Between P.Between S upport upport hipping. hipping. R elations elations 40 tate tate holds a Ph.D. in economics. in aPh.D. holds S and Economic Moscow the from Mr. K 1996. since Chairman Deputy First and 2005, to 2003 from Bank General Russian of Board Executive the of Chairman was he this to Prior Moscow. in office representative NC of Director appointed also NC V ice President for S for President ice tatistics I tatistics S Mr. K Strategy for President Vice V K P since 2005. 2005. since P lad aya ayashev has served as as served has ayashev U s i m nstitute in 1985 and and 1985 in nstitute hev ayashev graduated graduated ayashev P ir

A .

I n 2007 he was was he 2007 n trategy of of trategy S P of NC of Federation. Federation. the of Government the of Economy National of Academy the from MBA received she mathematics. applied in I Physics Engineering Moscow the from graduated Chibinyaeva Ms. R S Planning and Analysis I R of director financial the as worked she 2004, as as nstitute in 1992 with a degree degree a with 1992 in nstitute Economic the headed she 2003 n U V S Ms. Chibinyaeva has served served has Chibinyaeva Ms. Vice President for Finance for President Vice Ch T ice President for Finance Finance for President ice AL Management Company. Company. Management AL at S i P since August 2005. 2005. August since P i b a in n a P. a yaeva yaeva GB Commercial Bank. Bank. Commercial GB R ervice at at ervice ussian ussian I n 2005 2005 n I n the Plekhanov Plekhanov the and 1996 in mathematics applied S the from graduated economics in 1997. in economics in diploma a with Academy President for for President served as as served he this to Prior 2004. August since I nvestment Company. Mr. Company. nvestment tate University with a degree in in degree a with University tate Oley P. Pavel Mr. O Vice Vice President for Investments leynik has served as V as served has leynik ni V ice President of TP of President ice k I nvestments of NC of nvestments R ussian Economics Economics ussian S imferopol imferopol O leynik leynik S ice ice S P

ANNUAL REPORT 2007 CORPORATE GOVERANCE MANAGEM contest for public recognition. public for contest T regional a in nomination the of ‘Man named was Antoniyan maintenance. machine power in diploma a with 1985 in Academy Engineering Maritime Novorossiysk the from graduated He agency. expediting R of Director General I of Director General was he 2004 to 1997 From 2004. January since Novoroslesexport of Director General as mportpishcheprom mportpishcheprom Ant Ge Mr. Antoniyan has served served has Mr. Antoniyan Novoroslesexport Novoroslesexport OJSC of Director General Y ear’ in the ‘Best Manager’ Manager’ ‘Best the in ear’ org oni y y yan A I . n 2004, Mr. 2004, n OF GRO NCSP ENT O ostrans LLC LLC ostrans J O S J C, and and C, S V C 41 F General Director of Navy’. ‘Distinguished Y Federation of Novorossiysk. Mr. is the and holds Doctor of Law degree. He the of faculty Law the from graduated Bakery Plant. Mr. General Director at Novorossiysk I Director. and then as First Deputy General S PJat 2007.April S aryshev was awarded medals for for medals awarded was aryshev S ea Port, first as S as first Port, ea B’ and ‘300 K Ya Se Mr. IPP OJSC of Director General S uban V C Novorossiysk Commercial Commercial C Novorossiysk r rg ice President of the Football Y y aryshev aryshev has as served s n 2002, he served as as served he n 2002, U ey N. N. ey S hev tate University in 2001, ince 2003, he worked worked he 2003, ince P Y S ears of the ervice inervice the Y ecurity Director Director ecurity aryshev aryshev O J S C I PP since R ussian ussian K GB- Doctor Engineering degree. degree. Engineering Doctor I maintenance. machine power in a diploma with Academy Engineering Maritime Novorossiysk the from O V the O Director of of Director General Deputy First as served January 2004. 2004. January since Terminal Grain Novorossiysk PJ of Director General as J J S S Mr. Petrenko has served served has Mr.Petrenko Novorossiysk Grain Terminal Terminal Grain Novorossiysk PJSC of Director General Mi Pet C. Mr. Petrenko graduated graduated Mr.C. Petrenko was he 2002 to 1997 From C. ice President of Novoship Novoship of President ice kha r e n i I mportpishcheprom mportpishcheprom l l k V o . n 2006 he received received he n 2006 I n 2002-2004 he he 2002-2004 n S C years of the Honorary Marine Flee Worker, 300 o state honorary awards, including machine maintenance. Holds number Academy with a diploma in power Novorossiysk Maritime Engineering Mr. Bairamov graduated from the served as Deputy General Director. company in 1982. From 1994 to 1998 Y Director of Novorossiysk Golden S Golden Bairamov was honored with the Transportation Worker. ard since 1998. He first joined the Mr. Bairamov has been General Novorossiysk Ship Repair Yard Repair Ship Novorossiysk OJSC of Director General B Se air rg tar public order. public tar am ey ey R ussian Navy, Honorary o T v . I n 2007 Mr. S hip R epair NCSP GROUP A Harbor for Successful Business MANAGEM engineering and construction. and engineering in degree a with University R for Director as worked he 1997-2002From 2002. December S Baltic LLC of Director General the the I Caucasus. North the in Gazprom and Gazkomplektimpeks Baltgazstroikomplekt, for Director aR as worked times various at Mr. Batov Previously administration. city Nalchik of Department Market Consumer R in agency n 1980, he graduated from from graduated he n 1980, tevedore Company since since Company tevedore epublic, served as Head of of Head as served epublic, Mr. Batov has served as as served has Mr.Batov Stevedore Company Baltic LLC of Director General S B K u at abardino-Balkarsky abardino-Balkarsky lta o v K n abardino-Balkarsky abardino-Balkarsky

H A R . O UE epresentative epresentative OF GRO NCSP ENT trading S trading epresentative epresentative R S tate tate A 42 O NC PJ of Directors of Board the joined 1997, in has and Fleet PJ of Director General a degree of Doctor of economics. of Doctor of a degree holds Mr. Faydysh Economics. and O British from finance in degree a received S Novorossiysk the from graduated tate Marine Academy, in 2000 2000 in Academy, Marine tate S Mr. Faydysh was appointed appointed was Mr.Faydysh NCSP Fleet PJSC of Director General I F S. gor P Fleet in 2002. 2002. in Fleet P pen University for Finance Finance for University pen U P aydy s h I n 1994, he he 1994, n S C NC C

S S C P • • • and I and Commission Audit the by fulfilled NC at audit and control approved in S in approved R the and charter, the Companies”, Public “O law the by defined is Commission Audit the of authority The members. its and Group the of activity financial the over control internal of function the company. the of bodies executive and Directors of Board the by supervised are They documents. internal relevant and charter the by regulated are departments these Commission of NC of Commission bodies. executive other in positions hold or Directors of Board the of members be cannot Commission Audit the of Members members. S of Meeting General the by annually members: members: hareholders and consists of five five of consists and hareholders egulations on the Audit Commission Commission Audit the on egulations and and Deputy Head of the Department Department the of Head Deputy E. Nadezhda TP of Department Planning NC of Marine the of I I T I Tatiana Tatiana T T o As R ndustrial CJ Corporation United at Administration nvestment nternal he Au he he f he he nternal Control S Control nternal oman N. Zinovyev, Head of of Head Zinovyev, N. oman Au f the e f the S unc A P, Head of the Budget and and Budget the P, of Head d d S udit udit i i . . t C t C eptember 2007. eptember V t nukova, Head Head nukova, ions n o ission omm K C R d o mm rasivicheva, rasivicheva, S epresentative epresentative ontrol P consisted of five five of P consisted

o the Audit Audit the f 2007 ervice. Both Both ervice. executes executes ission f f S P are are P in te S S rn is elected elected is C; S pecialist pecialist ; al al O ffice ffice n S R under both accounts these of integrity the control to and subsidiaries, its and Group the in preparations accounts financial of process the monitor to is and and the Board of Directors. Directors. of Board the of Committee Audit the and Director General to directly reports which NC within body independent an is and Directors of Board the of resolution a by created was the General Meeting of of Meeting General the by appointed is auditor The accounts. annual its verify to auditor independent NC reporting, financial its of reliability and objectivity • • Touche C Touche and Deloitte is auditor Company’s the present At Directors. of Board the from recommendations of basis the on tandards ( tandards ussian Accounting Accounting ussian Natalya A. Zavoloka, Head of the the of Head Zavoloka, A. Natalya TP Director Financial and President Budgeting Department of NC of Department Budgeting R Moscow the of Director Deputy and Finance for President I I Inte Tatiana P. Chibinyaeva, V P.Tatiana Chibinyaeva, Federation; Russian the of Transport of Ministry and Marine for Agency Federal the of Accounting and Financing of n order to ensure the maximum maximum the ensure to n order I ndependent ndependent epresentative epresentative nternational Financial Financial nternational S ; R rn IS iver Transport under the the under Transport iver CJ al troCon I F S S RS P engages a qualified qualified a engages P C. C. ). ). O S ffice of NC of ffice tandards ( tandards A S I l Se uditor ts key task task key ts hareholders hareholders ice ice R S r eporting eporting P, v S ic S P; P; R P. e A V

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ANNUAL REPORT 2007 акватория успешного бизнеса SOCIAL RESPONSIBILITY 43 OF T ENS NC every at effect into put and signed been bonuses and other material incentives. incentives. material other and bonuses of arange as well as re-training, and education benefits, social of provision conditions, working safe and proper guarantees agreement collective The rights. employees’ guarantees and relations labor and social regulates which document afundamental is provide training and development op development and training provide to responsibility the on take we turn, technology. modern with up keep to knowledge and skills their develop to them expects and employees sional portunities for every employee. every for portunities employee potential. develop and management, resource human improve training, professional provide levels, wage proper maintain to NC services. quality and development business intensive guarantees workforce professional highly since crucial, is everyone for conditions working proper ensuring and personnel its of potential the developing that NC people. 7,882 round at stood employees of number average standards. these with comply to obliged are subsidiaries and ISO including protection, worker and safety professional environmental protection, quality, of standards international applies Group the conduct business region. the of residents and employees its both of well-being the supporting and climate business favorable fostering by region the of development economic and social facilitating as responsibility this sees Group The developments. business any underlying principle key a is responsibility social SOCIAL T H S S 9001:2000, 9001:2000, NCSP att NCSP C A Personnel bel NCSP P subsidiary. Collective agreement agreement Collective P subsidiary. O P undertakes a number of efforts efforts of number a undertakes P E t the e t the o H lle

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n - t s NCSP GROUP A Harbor for Successful Business ECOLOGICAL POSSIBLE ALL RISKS AND T situations. life-like in staff rescue train and plans action emergency develop to Authority Port Novorossiysk and Department R Emergency Novorossiysk with N response. and prevention accident and protection, environmental safety, work of charge in agencies and authorities state relevant the with partnership close in implemented and developed equipment. mental environ other and facilities removal dust of checks regular performing and T in Novorossiysk and K and Novorossiysk in community local and business between adialogue foster to environment, social and business in both improvements facilitate to them expect we programs, charity and sponsorship Developing strategy. Group’s the of principles key the of one is it as responsibility social corporate of standards high as a whole. whole. a as CS H and and NCSP C N P conducts regular join exercise exercise join regular conducts P E GRO CS haritable haritable P’s environmental program is is program environmental P’s S consiste ponsorship ponsorship U INVEST P’S A n rasnodar R rasnodar ctivities ctivities tly maintains maintains escue escue egion egion 44 - M school, and aC and school, S the including colleges, and schools professional of number and with ships T charitable regional annual the to contributor for the Group. N Group. the for and youth facilities. youth and orphanages for funds collecting tect’ Dance ing S C Disabled the C teenagers. and children for activities cultural and sports promoting programs of projects. N projects. charitable and sponsorship our to central are generation younger the of organizations. organizations. public and institutions medical and educational groups, disadvantaged socially to support include These residents. city’s for standards life ing improv and generation younger the helping on focus programs charity tate Marine Academy, a vocational avocational Academy, Marine tate kipper S kipper hildren hildren WH ARE PROJECTS DEVELOPED ENT E T H O he G he d ealth a ealth rthodox rthodox uc S at ailing S ailing roup ports Development Development ports C hildren O hildren CS R a is ion lub. N lub. marathon ‘ V marathon egular aid is provided to to provided is aid egular C n P supports a numbers numbers a supports P ivil engineering college. college. engineering ivil hildren’s hildren’s CS d soci ’ sponsorship and and sponsorship s chool, and S and chool, CS P entered partner P entered rphanage, the the rphanage, no P is a regular regular a is P engagement engagement al the C S enter, the the enter, ave and Pro and ave r priority port C enter, enter, - - H - E I - Novorossiysk S Novorossiysk from supported institutions. institutions. supported from graduates recruits willingly Group The operations. port high-tech for cialists C include These city. the in institutions by N by entirely funded was House Maternity Novorossiysk of renovation capital Thus territory. adjacent and buildings the and works maintenance and repair with institutions these helps and supplies, and equipment medical of curement pro sponsor may Group The House. Maternity Novorossiysk and No.1 program for the city, N city, the for program particular, N particular, I infrastructure. city’s the on works upgrade and repairs funds and ment become a local attraction. alocal become since has which embankment, main N with program joint a runs college The M ity Hospital No.1, No.1, Hospital ity CS NCSP p As PACT ON T CS P to preparation workers and spe and workers preparation P to P. a also supports some medical medical some supports also r t o CS f i P renovated the city’s city’s the renovated P ocial S ocial t s soci C hildren’s Hospital Hospital hildren’s ecurity Depart ecurity CS H P supports supports P aid aid al E ENVIRON TAKINGILE ACCO INTO n - - - M ENT

U NT

ANNUAL REPORT 2007 Independent Auditors’ Report Consolidated Independent Auditors’ Report For the Year Ended 31 December 2007 45 PU AND CO BLIC MM

S U ERCIAL

BSIDIARIES JOINT

Financial

STOCK SEA

PORT

CO M

PAN

Statements Y Y NOVOROSSI Y SK

S S S S E E N N I I S S U U B B Public Joint Stock Company L L U U F F S S Novorossiysk Commercial Sea Port S S E E C C C C U U and Subsidiaries S S R R O O Statement of Management’s Responsibilities Independent Auditors’ Report F F R R O O for the Preparation and Approval of the Consolidated To the Shareholders of Public Joint Stock Company Novorossiysk Commercial B B Sea Port: R R A A Financial Statements for the Year Ended We have audited the accompanying consolidated financial statements of Public Joint Stock Company H H Novorossiysk Commercial Sea Port and its subsidiaries (the “Group”), which comprise the consolidated A A 31 December 2007 balance sheet as at 31 December 2007, and the consolidated income statement, consolidated statement of changes in equity and consolidated cash flow statement for the year then ended, and a summary of sig - nificant accounting policies and other explanatory notes. The following statement, which should be read in conjunction with the independent auditors’ responsibili - ties stated in the independent auditors’ report set out on pages 2-3, is made with a view to distinguishing the respective responsibilities of management and those of the independent auditors in relation to the con - Management’s responsibility for the consolidated financial statements solidated financial statements of Public Joint Stock Company Novorossiysk Commercial Sea Port and its Management is responsible for the preparation and fair presentation of these consolidated financial state - subsidiaries (the “Group”). ments in accordance with International Financial Reporting Standards. This responsibility includes: designing, Management is responsible for the preparation of the consolidated financial statements that present fairly implementing and maintaining internal control relevant to the preparation and fair presentation of financial the consolidated financial position of the Group as at 31 December 2007 and the consolidated results of statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. its operations, cash flows and changes in equity for the year then ended, in accordance with International Financial Reporting Standards (“IFRS”). In preparing the consolidated financial statements, management is responsible for: Auditor’s responsibility Selecting suitable accounting principles and applying them consistently; Our responsibility is to express an opinion on these consolidated financial statements based on our audit. Making judgments and estimates that are reasonable and prudent; We conducted our audit in accordance with International Standards on Auditing. Those standards require Stating whether IFRS has been followed, subject to any material departures disclosed and explained in that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance the consolidated financial statements; and whether the consolidated financial statements are free from material misstatement. Preparing the consolidated financial statements on a going concern basis, unless it is inappropriate to An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in presume that the Group will continue in business for the foreseeable future. the consolidated financial statements. The procedures selected depend on the auditor’s judgment, includ - ing the assessment of the risks of material misstatement of the consolidated financial statements, whether Management is also responsible for: due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to T T Designing, implementing and maintaining an effective system of internal controls throughout the Group; the Group’s preparation and fair presentation of the financial statements in order to design audit proce - R R O O Maintaining statutory accounting records in compliance with local legislation and accounting standards dures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the P P in the respective jurisdictions in which the Group operates; effectiveness of the Group’s internal control. An audit also includes evaluating the appropriateness of ac - A A counting policies used and the reasonableness of accounting estimates made by management, as well as E E Maintaining proper accounting records that disclose, with reasonable accuracy at any time, the finan - evaluating the overall presentation of the consolidated financial statements. S S cial position of the Group, and which enable them to insure that the consolidated financial statements of L L We believe that the audit evidence we have obtained is sufficient and appropriate to provide A A the Group comply with IFRS; a basis for our audit opinion. I I C C Taking such steps to safeguard the assets of the Group; and R R Preventing and detecting fraud and other irregularities. E E Opinion M M The consolidated financial statements for the year ended 31 December 2007 were approved and autho - In our opinion, the consolidated financial statements present fairly, in all material aspects, the consolidated M M financial position of Public Joint Stock Company Novorossiysk Commercial Sea Port and its subsidiaries as O O rised for issue on 21 April 2008 by: C C at 31 December 2007, and of its consolidated financial performance and its cash flows for the year then K K ended in accordance with International Financial Reporting Standards. S S Y Y I I I.E. Vilinov G.I. Kachan 21 April 2008 S S Chief Executive Officer Chief Accountant Moscow, Russia S S O O R R O O V V 46 47 O O N N S S S S E E N N I I S S U U

B Consolidated Income Statement B Consolidated Balance Sheet L L U U F F

S for The Year Ended 31 December 2007 S at 31 December 2007 S S E E

C Notes Year ended Year ended C Notes Year ended Year ended

C 31 December 31 December C 31 December 31 December U in thousands of US Dollars, except earnings per share 2007 2006 U in thousands of US Dollars 2007 2006 S S R R O O F F

R Revenue 6 483,380 277,277 R Assets

O Cost of services 7 (255,709) (172,897) O Non-Current Assets: B B

R R Property, plant and equipment 15 755,451 664,166

A Gross profit 227,671 104,380 A Goodwill 16 490,077 456,856 H H Mooring rights and other intangible assets 17 14,836 14,195

A Selling, general and administrative expenses 8 (73,098) (33,979) A Investments in securities and other financial assets 18 15,863 12,903 Operating Profit 154,573 70,401 Non-current VAT recoverable 998 11,095 Share of profit of associates - 3,065 Spare parts 6,585 4,840 Investment income 9 1,061 4,542 Deferred tax assets 12 3,078 4,079 Finance costs 10 (44,793) (22,703) 1,286,888 1,168,134 Foreign exchange gain 34,776 5,391 Current Assets: Other expenses, net 11 (15,165) (3,578) Inventories 19 7,875 6,581 Excess of Group’s interest in net assets acquired over consideration Trade and other receivables 20 71,184 65,155 paid on acquisition of subsidiaries 2,956 618 Investments in securities and other financial assets 18 3,999 23,470 Cash and cash equivalents 21 66,660 37,037 Profit Before Income Tax 133,408 57,736 149,718 132,243 Income Tax 12 (39,734) (13,647) Total Assets 1,436,606 1,300,377

Profit For The Year 93,674 44,089 Equity And Liabilities Attributable to: Equity: Equity shareholders 93,713 44,469 Share capital 22 10,471 10,366 Minority interest (39) (380) Share premium 10,063 - 93,674 44,089 Foreign currency translation reserve 80,045 32,533 Earnings per share Retained earnings 630,650 569,024 T T R R Weighted average number of ordinary shares in issue during the year 19,196,480,589 19,124,483,167 Equity Attributable to Shareholders of the Parent 731,229 611,923 O O Basic and diluted earnings per share (US Dollars) 0.0049 0.0023 Minority Interest 38,883 41,734 P P Total Equity 770,112 653,657 A A E E Non-Current Liabilities: S S L L Long-term debt 23 508,189 482,297 A A I I Retirement benefit obligation 24 8,181 6,451 C C Deferred tax liabilities 12 77,304 71,751 R R I.E. Vilinov G.I. Kachan E E 593,674 560,499 Chief Executive Officer Chief Accountant M M Current Liabilities: M M Short-term debt 23 30,426 60,400 O O C C Trade payables 25 17,481 7,086 K K Other payables and accruals 26 24,913 18,735 S S Y Y 72,820 86,221 I I S S Total Equity And Liabilities 1,436,606 1,300,377 S S O O R R The notes on pages 8 to 52 form an integral part of these consolidated financial statements. The notes on pages 8 to 52 form an integral part of these consolidated financial statements. O O V V 48 49 O O N N S S S S E E N N I I S S U U

B Consolidated Statement of Changes B Consolidated Cash Flow Statement L L U U F F

S in Equity for the Year Ended S for The Year Ended 31 December 2007 S S E E C C C C

U 31 December 2007 U Notes Year ended Year ended

S S 31 December 31 December

R R in thousands of US Dollars 2007 2006

O Note Share Share Foreign Retained Attributable Minority Total O F capital premium currency earnings to share- interest F R translation holders of R O in thousands of US Dollars reserve the parent O Cash flows from operating activities B B

R R Cash generated from operations 27 228,713 123,178 A A

H Balance at 1 January 2006 10,464 - (18,200) 543,884 536,148 - 536,148 H Income tax paid (49,987) (18,770) A Effect of translation A Interest paid (40,413) (21,316) into presentation currency --50,733 - 50,733 1,321 52,054 Employee benefits paid (525) (236) Net income recognised Net cash generated by operating activities 137,788 82,856 directly in equity --50,733 - 50,733 1,321 52,054 Profit for the year ---44,469 44,469 (380) 44,089 Cash flows from investing activities Total recognized income Proceeds from disposal of property, plant and equipment 5,742 1,715 and expense ---44,469 95,202 941 96,143 Payments for property, plant and equipment (93,992) (99,812) Dividends ---(10,624) (10,624) - (10,624) Proceeds from disposal of securities and other financial assets 24,494 34,593 Minority interest of subsidiaries Payments for securities and other financial assets (5,669) - acquired -----40,793 40,793 Acquisitions of subsidiaries, net of cash acquired (6,663) (537,610) Buy-back of ordinary shares (98) --(8,705) (8,803) - (8,803) Acquisitions of minority interest in existing subsidiaries (25,130) - Balance at 31 December 2006 10,366 - 32,533 569,024 611,923 41,734 653,657 Proceeds from disposal of subsidiaries, net of cash disposed (260) - Effect of translation into Proceeds from disposal of short-term investments - 61,183 presentation currency --47,512 - 47,512 2,850 50,362 Loans given to employees (779) - Net income recognised Interest received 1,689 - directly in equity --47,512 - 47,512 2,850 50,362 Purchases of long-term deposits (1,368) - Profit for the year ---93,713 93,713 (39) 93,674 Net cash used in investing activities (101,936) (539,931) Total recognized income and expense ---93,713 141,225 2,811 144,036 Cash flows from financing activities T T Dividends 13 ---(11,295) (11,295) - (11,295) Proceeds from long-term borrowings 423,261 521,007 R R Other distributions Repayments of long-term borrowings (430,443) (60,318) O O P P to shareholders 13 ---(489) (489) - (489) Dividends paid (11,584) (10,205) A A Increase of ownership Buy back of ordinary shares (818) (3,507) E E S S in subsidiaries ---(19,495) (19,495) (5,636) (25,131) Proceeds from sale of treasury shares 10,178 - L L Distribution to shareholders (489) - A A Disposal of subsidiaries -----(26) (26) I I Repayments of obligations under finance leases - (521) C C Buy-back of ordinary shares (10) --(808) (818) - (818) R R Issue form treasury stock 115 10,063 --10,178 - 10,178 Net cash (used in)/from financing activities (9,895) 446,456 E E Balance at 31 December 2007 10,471 10,063 80,045 630,650 731,229 38,883 770,112 Net increase/(decrease) in cash and cash equivalents 25,957 (10,619) M M Cash and cash equivalents at the beginning of the year 37,037 43,915 M M O O Effect of exchange rate changes on cash and cash equivalents 3,666 3,741 C C Cash and cash equivalents at the end of the year 66,660 37,037 K K S S Y Y I I S S The notes on pages 8 to 52 form an integral part of these consolidated financial statements. The notes on pages 8 to 52 form an integral part of these consolidated financial statements. S S O O R R O O V V 50 51 O O N N S S S S E E N N I I S S U U B B Notes to the Consolidated Financial L L U U F F S S Statements for the Years Ended S S E E C C C C U U 31 December 2007 and 2006 S S R R (In Thousands Of Us Dollars) O O Public Joint Stock Company Fleet of NCSP (“Fleet”) F F Fleet is a maritime tug and towing company. It provides most of the tug and towing and other services for R R O O ships and other maritime vessels at and around the Novorossiysky Port (the “Port”). B B 1. GENERAL INFORMATION In addition, it provides emergency services such as transferring vessels to shelter zones during emergen - R R A A cies, provides cleaning and containment services for oil or other liquid spills in and around the Port and H H Public Joint Stock Company Novorossiysk Commercial Sea Port (“NCSP”) was founded in 1845. NCSP provides hazardous material response and waste management services pursuant to its agreement on A A was transformed from a state-owned enterprise to an open joint stock company in December 1992. water use with Kubanskoye Basin Department of Krasnodar Kray under the Russian Ministry of Natural Re - NCSP’s principal activities include liquid and bulk cargo transhipping services, storage, sea vessel servic - sources. ing and passenger transit. NCSP and its subsidiaries (the “Group”) primarily operate in the Russian Federa - tion. On 14 June 2006, NCSP purchased controlling stakes in subsidiaries in which it previously had Open Joint Stock Company Novorossiysk Shipyard (“Shipyard”) minority interests. The principal activities and the significant entities of the Group as of 31 December 2007 Shipyard performs cargo transhipment. The Shipyard also operates large ship repair facilities in the Black were as follows (Note 35): Sea. It is able to operate all year-round and is one of the few facilities in the Black Sea available to service the Russian naval fleet.

SUBSIDIARIES BY COUNTRY OF INCORPORATION Nature of business Open Joint Stock Company Novoroslesexport (“Timber Export”) Timber Export provides cargo handling, shipping and storage services for the export of the timber, con - tainerised cargo and non-ferrous metals. Russian Federation OJSC IPP Stevedoring and storage services Public Joint Stock Company Novorossiysk Grain Terminal (“Grain Terminal”) PJSC Fleet of Novorossiysk Commercial Sea Port Tug and towing services Grain Terminal was established for the construction and operation of a new grain storage and shipment OJSC Novorossiysk Shipyard Stevedoring and marine vessels repair services terminal in the western part of the Tsemesskaya bay. OJSC Novoroslesexport Stevedoring and storage services PJSC Novorossiysk Grain Terminal Stevedoring and storage services Limited Liability Company Baltic Stevedores Company (“Baltic Stevedore”) LLC Baltic stevedores company Stevedoring and storage services Baltic Stevedore is a stevedoring company operating the car-ferry, cargo and passenger terminal OJSC NPK Zarubezhneft Owns land for future construction of tranship - of the Baltiysk port in Kaliningrad Region. ping terminals T T R R O O Cayman Islands P P NR Air Ltd. Transportation services 2. BASIS OF PRESENTATION A A E E S S The consolidated financial statements of the Group have been prepared in accordance with International L L A A Novorossiysk Port Capital S.A. (“Novorossiysk Capital”) was created as a special purpose entity during fi - Financial Reporting Standards (the “IFRS”), which includes standards and interpretations approved I I C C nancial year 2007 and was used as a vehicle for the issuance of loan participation notes. by the International Accounting Standards Board (the “IASB”), including International Accounting Stan - R R Russian companies of the Group (except for LLC Baltic stevedores company) are located in the Eastern dards and interpretations issued by the International Financial Reporting Interpretations Committee (the E E sector of the Black Sea in Tsemesskaya bay. “IFRIC”) which replaced the Standing Interpretations Committee. M M NCSP is the largest stevedore of the Group and the holding company. It has three cargo-loading districts In preparing these consolidated financial statements, management complied with existing standards and M M O O (Western, Central and Eastern), the Sheskharis oil terminal, the technical support base and the passenger interpretations that are effective or available for early adoption at the Group’s IFRS annual reporting date, C C terminal in Novorossiysk. NCSP has six significant subsidiaries, the primary activities of which are as follows: 31 December 2007. K K S S Y Y Standards and interpretations effective in current period I I Open Joint Stock Company IPP (“IPP”) S S IPP is a liquid-cargo processing enterprise. Starting from 2007 IPP also provides bunkering services. In the current year, the Group has adopted all new International Financial Reporting Standards and inter - S S O O pretations issued by International Financial Interpretation Reporting Interpretation Committee that are R R O O V V 52 53 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O mandatory for adoption in the annual periods beginning on or after 1 January 2007. Adoption of these Standards and interpretations in issue but not yet adopted F F standards and interpretations did not have any effect on the financial performance or position of the Group; At the date of authorisation of these consolidated financial statements, other than the Standards adopted R R O O however give rise to additional disclosures. by the Group in advance of their effective dates (as described above) the following Interpretations were in B B issue but not yet effective: R R A A The principles effects of these changes are as follows: H H STANDARDS AND INTERPRETATIONS Effective for annual periods beginning A A IAS 1 Presentation of Financial Statements (amendment) on or after This amendment requires the Group to provide new disclosures to enable users of the financial statements to evaluate the Group’s principle objectives; policies and procedures for managing capital (Note 33). IAS 1 Presentation of Financial Statements (amendment) 1 January 2009 IFRS 7 Financial Instruments: Disclosures IAS 27 Consolidated and Separate This standard introduces new disclosures that enable users of the financial statements to evaluate Financial Statements the significance of the Group’s financial instruments and the nature and extent if risks arising from those fi - (amendment due to revision of IFRS 3) 1 July 2009 nancial instruments. The new or expended disclosures are included in the consolidated financial state - IAS 28 Investments in Associates ments. (amendments due to revision of IFRS 3) 1 July 2009 The following interpretations issued by IFRIC are also effective for the current period IFRIC 8 IAS 31 Investments in Joint Ventures Scope of IFRS 2; IFRIC 9 Reassessment of Embedded Derivatives; and IFRIC 10 Interim Financial Report - (amendments due to revision of IFRS 3) 1 July 2009 ing and Impairment. The adoption of these interpretations has not led to any changes in IAS 32 Financial Instruments: Presentation the Group’s accounting policies or disclosures provided in the financial statements. (amendment) 1 January 2009 IFRS 2 Share-based Payment Early adoption of Standards and Interpretations (amendment) 1 January 2009 In addition, the Group has elected to adopt the following standards in advance of its effective date: IFRS 3 Business Combinations IAS 23 (Revised) Borrowing Costs (effective for accounting periods on or after 1 January 2009); and (revised on applying the acquisition method) 1 July 2009 IFRS 8 Operating Segments (effective for accounting periods on or after 1 January 2009). IFRIC 11 Group and Treasury Share Transactions 1 March 2007 IFRIC 12 Service Concession Arrangements 1 January 2008 T T The revisions to IAS 23 have had no impact on the Group’s accounting policies. The principal change to IFRIC 13 Customer Loyalty Programmes 1 July 2008 R R O O the Standard, which was to eliminate the previously available option to expense all borrowing costs when IFRIC 14 IAS 19 The Limit on a Benefit Asset, P P incurred, has no impact on these consolidated financial statements because it has always been the Minimum Funding Requirements and their Interaction 1 January 2008 A A E E Group’s accounting policy to capitalise the borrowing costs incurred on qualifying assets. S S IFRS 8 is a disclosure Standard which has resulted in a designation of the Group’s reportable segments L L A A (see Note 5), but has had no impact on the reported results or financial position of the Group. The impact of adoption of these standards and interpretations in the preparation of the consolidated finan - I I C C cial statements in future periods is currently being assessed by management; however no material effect R R on the Group’s accounting policies is anticipated. E E M M M M O O C C K K S S Y Y I I S S S S O O R R O O V V 54 55 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O 3. SIGNIFICANT ACCOUNTING POLICIES Any differences arising from acquisition of additional non-controlling interests in subsidiaries between car - F F rying values of net assets attributable to acquired interests and consideration paid are either added to ad - R R O O Basis of presentation ditional paid-in-capital, if positive, or charged to retained earnings, if negative. B B R R Investments in associates A A The financial statements have been prepared in accordance with International Financial Reporting Standards. H H An associate is an entity over which the Group has significant influence and that is neither a subsidiary nor A A Basis of consolidation an interest in a joint venture. Significant influence is the power to participate in the financial and operating The consolidated financial statements incorporate the financial statements of NCSP and its subsidiaries policy decisions of the investee but is not control or joint control over those policies. (Note 35), from the date that control effectively commenced until the date that control effectively ceased. The results and assets and liabilities of associates are incorporated in these consolidated financial state - Control is achieved where the Company has the power to govern the financial and operating policies of an ments using the equity method of accounting. entity so as to obtain benefits from its activities. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost Special purpose entities (“SPE”) are those entities created to satisfy specific business needs of the Group as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any and the Group has the right to the majority of the benefits of the SPE, or is exposed to risks associated with impairment in the value of individual investments. Losses of an associate in excess of the Group’s interest activities of the SPE. SPEs are consolidated in the same manner as subsidiaries when the substance of in that associate (which includes any long-term interests that, in substance, form part of the Group’s net in - the relationship indicates that the SPE is controlled by the Group. vestment in the associate) are not recognised. The assets and liabilities of all subsidiaries are measured at their fair values at the date of acquisition. Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabil - The results of subsidiaries acquired or disposed of during the year are included in the consolidated income ities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of The financial statements of subsidiaries are prepared for the same reporting period as those of NCSP; the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in profit or loss. policies used by them into line with those of the Group. Profit and losses resulting from transactions with associates are eliminated to the extent of the Group’s in - All intra-group balances, transactions, and any unrealised profits or losses arising from intra-group trans - terest in these associates. actions, are eliminated on consolidation. Minority interests in the net assets (excluding goodwill) of consolidated subsidiaries are identified sepa - Goodwill rately from the Group’s equity therein. Minority interests consist of the amount of those interests at the date Goodwill arising on the acquisition of a subsidiary or jointly controlled entity represents the excess of the of the original business combination and the minority’s share of changes in equity since the date of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities T T combination. Losses applicable to the minority in excess of the minority’s interest in the subsidiary’s equity and contingent liabilities of the subsidiary recognised at the date of acquisition. Goodwill is initially R R O O are allocated against the interest of the Group except to the extent that the minority has a binding obliga - recognised as an asset at cost and is subsequently measured at cost less any accumulated impairment P P tion and is able to make an additional investment to cover the losses. losses. If the Group’s interest in net fair value of the identifiable assets, liabilities and contingent liabilities A A E E of the subsidiary exceeds the cost of the acquisition the difference is recognised immediately in profit or S S Business combinations loss. L L A A Acquisitions of subsidiaries and businesses are accounted for using the purchase method. The cost of For the purpose of impairment testing, goodwill is allocated to each of the Group’s cash-generating units I I C C the business combination is measured as the aggregate of the fair values (at the date of exchange) of as - expected to benefit from the synergy of the combination. Cash-generating units to which goodwill has R R sets given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange for been allocated are tested for impairment annually, or more frequently when there is an indication that the E E control of the acquiree, plus any costs directly attributable to the business combination. The acquiree’s unit may be impaired. If the recoverable amount of the cash-generating unit is less than carrying amount of M M identifiable assets, liabilities and contingent liabilities that meet the conditions for recognition under IFRS the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the M M O O 3 “Business Combinations” are recognised at their fair values at the acquisition date, except for non-cur - unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset in C C rent assets (or disposal groups) that are classified as held for sale in accordance with IFRS 5 “Non-cur - the unit. An impairment loss recognised for goodwill is not reversed in a subsequent period. K K rent Assets Held for Sale and Discontinued Operations”, which are recognised and measured at fair value On disposal of a subsidiary the attributable amount of goodwill is included in the determination of the profit S S Y Y I I less costs to sell. or loss on disposal. S S The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the The Group’s policy for goodwill arising on the acquisition of an associate is described under ‘Investments S S O O net fair value of the assets, liabilities and contingent liabilities recognised. in associates’ above. R R O O V V 56 57 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O Non-current assets held for sale Foreign currencies F F Non-current assets and disposal groups are classified as held for sale if their carrying amount will be re - In preparing the financial statements of the individual entities, transactions in currencies other than the en - R R O O covered principally through a sale transaction rather than through continuing use. This condition is re - tity’s functional currency (foreign currencies) are recorded at the exchange rates prevailing on the dates of B B garded as met only when the sale is highly probable and the asset (or disposal group) is available for the transactions. At each balance sheet date monetary assets and liabilities denominated in foreign cur - R R A A immediate sale in its present condition. Management must be committed to the sale, which should be ex - rencies are translated at the exchange rates prevailing at the balance sheet date. Non monetary items car - H H pected to qualify for recognition as a completed sale within one year from the date of classification. ried at historical cost are translated at the exchange rate prevailing on the date of the transaction. A A Non-current assets (and disposal groups) classified as held for sale are measured at the lower of their pre - Exchange differences are recognised in profit or loss in the period in which they arise as a component of vious carrying amount and fair value less costs to sell. other income or expense except for exchange differences which relate to assets under construction for fu - ture productive use, which are included in the cost of those assets where they are regarded as an adjust - Functional and presentation currency ment to interest costs on foreign currency borrowings. The functional currency of NCSP and each of its subsidiaries, except for NR Air Ltd, is the Russian Rouble (“RUR”). The functional currency of NR Air Ltd is the US Dollar (“USD” or “US Dollar”). Revenue recognition The presentation currency of the consolidated financial statements is the US Dollar. Management consider Revenue is recognised when it is probable that the economic benefits associated with the transaction will that the USD is a more relevant presentation currency for international users of the consolidated financial flow to the Group, delivery has occurred, services have been rendered or construction works are fully com - statements of the Group. pleted, the amount of the revenue can be measured reliably, persuasive evidence of an arrangement exists The translation from RUR (functional currency of the Group) into USD (presentation currency) is performed and the collectibility of the revenue is reasonably assured. in accordance with the requirements of IAS 21 The Effect of Changes in Foreign Exchange Rates, as de - scribed below: The Group’s revenue is derived as follows: All assets and liabilities, both monetary and non-monetary, are translated at closing exchange rates at (i) Liquid, dry bulk cargo, general cargo and containers transhipment services include loading and un - the dates of each consolidated balance sheet presented; loading of oil and oil products, grain, mineral fertilizes, chemicals, containers, timber and timber products, All income and expenses in each consolidated income statement are translated at the average ex - metal products (slabs, tubing, rolled metal and others), sugar, and other cargo; change rates for the years presented; (ii) Fleet services include tag, towing and other fleet services; All resulting exchange differences are included in equity and presented separately as an effect (iii) Ship repair services mostly represent all types of vessel repairs and maintenance in docks; of translation into presentation currency; and (iv) Other services include passenger transit, vessel rent and other services provided at the Port. In the consolidated statement of cash flows, cash balances at the beginning and end of each year pre - sented are translated at exchange rates at the respective dates. Revenue is recognised when the cargo-transhipment services are accepted by the customers (which is T T Equity balances were converted to USD at the rate in effect on 1 January 2005, the date of transition to typically after the loading or unloading of cargo, as defined by the sales terms), or when the services are R R O O IFRS. provided to the customer. P P Interest income is accrued on a time basis, by reference to the principal outstanding and at the effective in - A A Rates of exchange E E terest rate applicable, which is the rate that exactly discounts estimated future cash receipts through the S S The exchange rates used by the Group in the preparation of the consolidated financial statements are as expected life of the financial asset to that asset’s net carrying amount. L L A A follows: Dividend income from investments is recognised when the Group’s rights to receive payment have been I I C C 31 December 31 December established. R R 2007 2006 The Group’s recognises revenues net of Value Added Tax (“VAT”). E E M M Leasing M M O O Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks C C Year-end rates and rewards of ownership to the lessee. All other leases are classified as operating leases. K K Assets held under finance leases are recognised as assets of the Group at their fair value at the inception S S RUR / 1 US Dollar 24.5462 26.3311 Y Y I I Average rates for the year ended of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to S S RUR / 1 US Dollar 25.5770 27.1920 the lessor is included in the balance sheet as a finance lease obligation. Lease payments are allocated be - S S O O tween finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on R R O O V V 58 59 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O the remaining balance of the liability. Finance charges are charged to finance costs, unless they are directly the employees are entitled to one-time retirement benefits of 10% of final salary for every year worked for F F attributable to qualifying assets, in which case they are capitalised in accordance with the Group’s general the eligible companies of the Group on attainment of a retirement age of 55 for women and 65 for men. R R O O policy on borrowing costs (see below). Also post-retirement benefits are provided to these employees amounting to RUR 500 (USD 0.02) per B B Operating lease payments are charged to profit or loss on a straight-line basis over the term of the relevant month depending on the employee’s actual years of services and qualifications. R R A A lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on H H a straight-line basis over the lease term. A A Income tax Borrowing costs Income tax expense represents the sum of the tax currently payable and deferred tax. It is calculated using Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, tax rates that have been enacted or substantively enacted by the balance sheet date. which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their in - Current tax tended use or sale. Current tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported Transaction costs associated with the issuance of a debt instrument are recorded as a reduction of in the income statement because it excludes items of income or expense that are taxable or deductible in the debt liability, and are amortised to interest expense over the term of the related debt. In any period in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current which the debt is redeemed, the unamortised costs relating to the debt being redeemed are expensed. tax is calculated using tax rates that have been enacted or substantively enacted at the balance sheet date. All other borrowing costs are recognised in profit or loss in the period in which they are incurred. Deferred tax Employee benefits Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the fi - Defined contribution plans nancial statements and the corresponding tax bases used in the computation of taxable profit, and is ac - The Group’s Russian subsidiaries are legally obliged to make defined contributions to the Russian Federa - counted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all tion State Pension Fund. taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that The Group’s contributions to the Russian Federation State Pension Fund relating to defined contribution taxable profits will be available against which deductible temporary differences can be utilised. Such assets plans are charged to income statement in the period to which they relate. and liabilities are not recognised if the temporary differences arise from goodwill or from initial recognition In the Russian Federation all state social contributions, including contributions to the Russian Federation (other than in a business combination) of other assets and liabilities in a transaction that affects neither the State Pension Fund, are collected through a unified social tax (“UST”) calculated by the application of taxable profit nor the accounting profit. a regressive rate from 26% to 2% of the annual gross remuneration of each employee. UST is allocated to Deferred tax liabilities are recognised for taxable temporary differences arising on investments in sub - T T three state social funds, including the Russian Federation State Pension Fund, where the rate of contribu - sidiaries and associates, except where the Group is able to control the reversal of the temporary difference R R O O tions to that fund vary from 20% to 2%, depending on the annual gross remuneration of each employee. and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax as - P P Contributions to defined contribution retirement benefit plans are recognised as an expense when employ - sets arising from deductible temporary differences associated with such investments and interests are only A A E E ees have rendered service. recognised to the extent that it is probable that there will be sufficient taxable profits against which to utilise S S the benefits of the temporary differences and they are expected to reverse in the foreseeable future. L L Defined benefit plans A A The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to I I C C For defined benefit retirement benefit plans, the cost of providing benefits is determined using the Pro - the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the R R jected Unit Credit Method, with actuarial valuations being carried out at each balance sheet date. Amount asset to be recovered. E E of actuarial gains and losses are recognised in total amount in the period in which they occur. Past service Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled M M cost is recognised immediately to the extent that the benefits are already vested, and otherwise is amor - or the asset realised. M M O O tised on a straight-line basis over the average period until the benefits become vested. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current assets C C The retirement benefit obligation recognised in the balance sheet represents the present value of the defined against current tax liabilities and when they relate to income taxes levied by the same taxation authority and K K benefit obligation as adjusted for unrecognised past service cost, and as reduced by the fair value of plan as - the Group intends to settle its current tax assets and liabilities on a net basis. S S Y Y I I sets, if any. Any asset resulting from this calculation is limited to unrecognised actuarial losses and past serv - Current and deferred taxes are recognised as an expense or income in the consolidated income state - S S ice cost, plus the present value of available refunds and reductions in future contributions to the plan. ment, except when they relate to items credited or debited directly to equity, in which case the tax is also S S O O The Group has defined benefit plans for employees of NCSP and some of its subsidiaries. Under the plans, recognised directly in equity, or they arise from the initial accounting for a business combination. R R O O V V 60 61 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O In case of a business combination, the tax effect is taken into account in calculating goodwill or determin - struction as well as costs of purchase of other assets that require installation or preparation for their use. F F ing the excess of the acquirer’s interest in the net fair value of the acquirer’s identifiable assets, liabilities Depreciation of these assets, on the same basis as for other property assets, commences when R R O O and contingent liabilities over the cost. the assets are put into operation. Construction-in-progress is reviewed regularly to determine whether its B B carrying value is fairly stated and whether appropriate provision for impairment is made. R R Property, plant and equipment A A Assets held under finance leases are depreciated over their expected useful lives on the same basis as H H The Group has adopted IFRS for the first time effective 1 January 2005. The Group has elected to utilise owned assets or, where shorter, the term of the relevant lease. A A exemptions available for first-time adopters under IFRS 1 and has recorded property, plant and equipment The gain or loss arising on the disposal or retirement of an asset is determined as the difference between at fair value (deemed cost). The valuations were performed by an independent appraiser as of 1 January the sales proceeds and the carrying amount of the asset and is recognised in profit or loss. 2005. After that date the property, plant and equipment are stated at deemed cost less accumulated de - preciation and impairment losses. Mooring rights and other intangible assets Property, plant and equipment acquired through acquisitions of subsidiaries are recorded at fair value on Intangible assets acquired separately are reported at cost less accumulated amortisation and impairment the date of the acquisition, as determined by an independent appraiser. losses. Amortisation is charged on a straight-line basis over their estimated useful lives. The estimated Additions to property, plant and equipment are recorded at cost. Cost includes expenditure that is directly useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect attributable to the acquisition of the items. Subsequent costs, including overhaul expenses, are included in of any changes in estimate being accounted for on a prospective basis. the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable Mooring rights and other intangible assets acquired in a business combination are identified and recog - that future economic benefits associated with the item will flow to the Group and the cost of the item can nised separately from goodwill where they satisfy the definition of an intangible asset and their fair values be measured reliably. can be measured reliably. The cost of such intangible assets is their fair value at the acquisition date. Capitalised cost includes major expenditures for improvements and replacements that extend the useful Subsequent to initial recognition, mooring rights and other intangible assets acquired in a business combi - lives of the assets or increase their revenue generating capacity. Repairs and maintenance expenditures nation are reported at cost less accumulated amortisation and impairment losses, on the same basis as in - that do not meet the foregoing criteria for capitalisation are charged to income statement as incurred. tangible assets acquired separately. Depreciation is charged so as to write off the cost or valuation of assets, other than land and property Amortisation of mooring rights and other intangible assets is charged to profit or loss. Amortisation under construction, over their estimated useful lives, using the straight-line method. The estimated useful is charged on a straight-line basis over the estimated useful lives of these assets (approximately 20 years). lives, residual values and depreciation method are reviewed at each year end, with the effect of any The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, changes in estimate accounted for on a prospective basis. with the effect of any changes in estimate being accounted for on a prospective basis.

Number of years Impairment of tangible and intangible assets excluding goodwill T T At each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to R R O O determine whether there is any indication that those assets have suffered an impairment loss. If any such P P Buildings and constructions 15-50 years indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the A A E E Machinery and equipment 8-20 years impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, S S Marine vessels 4-20 years the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. L L A A Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, I I Aircraft 15 years C C Vehicles 5 years the estimated future cash flows are discounted to their present value using a pre-tax discount rate that re - R R flects current market assessments of the time value of money and the risks specific to the asset. E E Office and other equipment 3 years If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying M M amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An M M O O Properties in the course of construction for production, rental or administrative purposes, or for purposes impairment loss is recognised immediately in profit or loss. C C not yet determined, are carried at cost, less any recognised impairment loss. Cost includes, for qualifying Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) K K assets, borrowing costs capitalised in accordance with the Group’s accounting policy. Depreciation of these is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount S S Y Y I I assets, on the same basis as other property assets, commences when the assets are put into operation. does not exceed the carrying amount that would have been determined had no impairment loss been S S Construction in progress comprise costs directly related to the construction of property, plant and equip - recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recog - S S O O ment including an appropriate allocation of directly attributable variable overheads that are incurred in con - nised immediately in profit or loss. R R O O V V 62 63 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O Inventories The financial asset forms part of a group of financial assets or financial liabilities or both, which is managed F F Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials and, and its performance is evaluated on a fair value basis, in accordance with the Group’s documented risk man - R R O O where applicable, direct labour costs and those overheads that have been incurred in bringing the invento - agement or investment strategy, and information about the grouping is provided internally on that basis; or B B ries to their present location and condition. Cost is calculated using the weighted average method. Net re - It forms part of a contract containing one or more embedded derivatives, and IAS 39 permits the entire R R A A alisable value represents the estimated selling price less all estimated costs of completion and costs to be combined contract (asset or liability) to be designated as at FVTPL. H H incurred in marketing, selling and distribution. A A Financial assets at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or loss. Financial assets The net gain or loss recognised in profit or loss incorporates any dividend or interest earned on the finan - Investments are recognised and derecognised on a trade date where the purchase or sale of an invest - cial asset. Fair value is determined in the manner described in note 32. ment is under a contract whose terms require delivery of the investment within the timeframe established by the market concerned, and are initially measured at fair value, plus transaction costs, except for those Held-to-maturity investments financial assets classified as at fair value through profit or loss, which are initially measured at fair value. Bills of exchange and debentures with fixed or determinable payments and fixed maturity dates that the Financial assets are classified into the following specified categories: Group has the positive intent and ability to hold to maturity are classified as held-to-maturity investments. Financial assets as at fair value through profit or loss (“FVTPL”); Held-to-maturity investments are recorded at amortised cost using the effective interest method less im - Held-to-maturity investments; pairment, with revenue recognised on an effective yield basis. Available-for-sale (“AFS”) financial assets; and Loans and receivables. AFS financial assets Listed shares and listed redeemable notes held by the Group that are traded in an active market are classi - The classification depends on the nature and purpose of the financial assets and is determined at the time fied as being AFS and are stated at fair value. Fair value of AFS is determined as follows: of initial recognition. The fair value of AFS financial assets with standard terms and conditions and traded on active liquid markets are determined with reference to quoted market prices; and Effective interest method The fair value of other AFS financial assets are determined in accordance with generally accepted pric - The effective interest method is a method of calculating the amortised cost of a financial asset and ing model based on discounted cash flow analysis using prices from observable current market transac - of allocating interest income over the relevant period. The effective interest rate is the rate that exactly dis - tions. counts estimated future cash receipts through the expected life of the financial asset, or, where appropri - ate, a shorter period. Gains and losses arising from changes in fair value are recognised directly in equity in the investments T T Income is recognised on an effective interest rate basis for debt instruments other than those financial as - revaluation reserve with the exception of impairment losses, interest calculated using the effective interest R R O O sets designated as at FVTPL. rate method and foreign exchange gains and losses on monetary assets, which are recognised directly in P P profit or loss. Where the investment is disposed of or is determined to be impaired, the cumulative gain or A A E E Financial assets at FVTPL loss previously recognised in the investments revaluation reserve is included in profit or loss for the period. S S Financial assets are classified as at FVTPL where the financial asset is either held for trading or it is desig - Dividends on AFS equity instruments are recognised in profit or loss when the Group’s right to receive pay - L L A A nated as at FVTPL. ments is established. I I C C A financial asset is classified as held for trading if: The fair value of AFS monetary assets denominated in a foreign currency is determined in that foreign cur - R R It has been acquired principally for the purpose of selling in the near future; or rency and translated at the spot rate at the balance sheet date. The change in fair value attributable to E E It is a part of an identified portfolio of financial instruments that the Group manages together and has a translation differences that result from a change in amortised cost of the asset is recognised in profit or M M recent actual pattern of short-term profit-taking; or loss, and other changes are recognised in equity. M M O O It is a derivative that is not designated and effective as a hedging instrument. C C Loans and receivables K K A financial asset other than a financial asset held for trading may be designated as at FVTPL upon initial Trade receivables, loans, and other receivables that have fixed or determinable payments that are not quoted S S Y Y I I recognition if: in an active market are classified as loans and receivables. Loans and receivables are measured at amortised S S Such designation eliminates or significantly reduces a measurement or recognition inconsistency that cost using the effective interest method less any impairment. Interest income is recognised by applying the S S O O would otherwise arise; or effective interest rate, except for short-term receivables when the recognition of interest would be immaterial. R R O O V V 64 65 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O Cash and cash equivalents Financial guarantee contract liabilities F F Cash and cash equivalents comprise cash balances, cash deposits and highly liquid investments with ma - Financial guarantee contract liabilities are measured initially at their fair values and are subsequently meas - R R O O turities of three months or less, those are readily convertible to known amounts of cash and are subject to ured at the higher of: B B an insignificant risk of changes in value. The amount of the obligation under the contract, as determined in accordance with IAS 37 Provisions, R R A A Contingent Liabilities and Contingent Assets; and H H Impairment of financial assets The amount initially recognised less, where appropriate, cumulative amortisation recognised in accor - A A Financial assets, other than those at FVTPL, are assessed for indicators of impairment at each balance dance with the revenue recognition policies set out above. sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows Financial liabilities of the investment have been impacted. For financial assets carried at amortised cost, the amount of the Financial liabilities are classified into the following specified categories: impairment is the difference between the asset’s carrying amount and the present value of estimated fu - Financial liabilities at FVTPL; and ture cash flows, discounted at the original effective interest rate. Other financial liabilities. The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an al - Financial liabilities at FVTPL lowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Financial liabilities are classified as at FVTPL where the financial liability is either held for trading or it is des - Subsequent recoveries of amounts previously written off are credited against the allowance account. ignated as at FVTPL. Changes in the carrying amount of the allowance account are recognised in profit or loss. A financial liability is classified as held for trading if: With the exception of AFS equity instruments, if, in a subsequent period, the amount of the impairment loss It has been incurred principally for the purpose of repurchasing in the near future; or decreases and the decrease can be related objectively to an event occurring after the impairment was It is a part of an identified portfolio of financial instruments that the Group manages together and has a recognised, the previously recognised impairment loss is reversed through profit or loss to the extent that recent actual pattern of short-term profit-taking; or the carrying amount of the investment at the date the impairment is reversed does not exceed what the It is a derivative that is not designated and effective as a hedging instrument. amortised cost would have been had the impairment not been recognised. In respect of AFS equity securities, any increase in fair value subsequent to an impairment loss is recog - A financial liability other than a financial liability held for trading may be designated as at FVTPL upon initial nised directly in equity. recognition if: Such designation eliminates or significantly reduces a measurement or recognition inconsistency that Derecognition of financial assets would otherwise arise; or T T The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset The financial liability forms part of a group of financial assets or financial liabilities or both, which is man - R R O O expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset aged and its performance is evaluated on a fair value basis, in accordance with the Group's documented P P to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of owner - risk management or investment strategy, and information about the grouping is provided internally on that A A E E ship and continues to control the transferred asset, the Group recognises its retained interest in the asset basis; or S S and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and It forms part of a contract containing one or more embedded derivatives, and IAS 39 Financial Instru - L L A A rewards of ownership of a transferred financial asset, the Group continues to recognise the financial asset ments: Recognition and Measurement permits the entire combined contract (asset or liability) to be desig - I I C C and also recognises a collateralised borrowing for the proceeds received. nated as at FVTPL. R R Financial liabilities at FVTPL are stated at fair value, with any resultant gain or loss recognised in profit or E E Financial liabilities and equity instruments issued by the Group loss. The net gain or loss recognised in profit or loss incorporates any interest paid on the financial liability. M M Classification as debt or equity Fair value is determined in the manner described in Note 32. M M O O Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the C C substance of the contractual arrangement. Other financial liabilities K K Other financial liabilities, including loans and borrowings, are initially measured at fair value, net of transac - S S Y Y I I Equity instruments tion costs. Other financial liabilities are subsequently measured at amortised cost using the effective inter - S S An equity instrument is any contract that evidences a residual interest in the asset of an entity deducting all of its li - est method, with interest expense recognised on an effective yield basis. S S O O abilities. Equity instruments issued by the Group are recorded at the proceeds received, net of direct issue costs. R R O O V V 66 67 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O Effective interest method 4. CRITICAL ACCOUNTING JUDGEMENTS AND F F The effective interest method is a method of calculating the amortised cost of a financial liability and R R O O of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly dis - KEY SOURCES OF ESTIMATION UNCERTAINTY B B counts estimated future cash payments through the expected life of the financial liability, or, where appro - R R A A priate, a shorter period. In the process of applying the Group’s accounting policies, management is required to make judgements, H H estimates and assumptions about the carrying amounts of assets and liabilities that are not readily appar - A A Derecognition of financial liabilities ent from other sources. The estimates and associated assumptions are based on historical experience The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, and other factors that are considered to be relevant. Actual results may differ from these estimates. cancelled or they expire. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting es - timates are recognised in the period in which the estimate is revised if the revision affects only that period Provisions or in the period of the revision and future periods of the revision affects both current and future periods. Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, and it is probable that the Group will be required to settle that obligation, and a reliable estimate Key sources of estimation uncertainty can be made of the amount of the obligation. The following are the key assumptions concerning the future, and other key sources of estimation uncer - The amount recognised as a provision is the best estimate of the consideration required to settle tainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying the present obligation at the balance sheet date, taking into account the risks and uncertainties surround - amounts of assets and liabilities within the next financial year. ing the obligation. Where provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows. Allowance for trade and other receivables The allowance for trade and other receivables is based on management's evaluation of the volume of the Dividends declared receivables outstanding, past experience and general economic conditions. Dividends paid to shareholders are determined by the board of directors and declared and approved at the annual shareholders’ meeting. Useful lives of assets Dividends and related taxation thereon are recognised as a liability in the period in which they have been The useful economic lives of the Group’s assets are determined by management at the time the asset is declared and legally payable. acquired and regularly reviewed for appropriateness. The Group defines useful lives of its assets in terms of Accumulated profits distributable by the Group’s entities are based on the amounts available for distribu - the assets' expected utility to the Group. This judgment is based on the experience of the Group with simi - tion in accordance with the applicable legislation of the jurisdictions where each entity operates and as re - lar assets. In determining the useful life of an asset, the Group also follows technical and/or commercial T T flected in the statutory financial statements of the individual entities of the Group based on calendar obsolescence arising on changes or improvements from a change in the market. R R O O reporting years (years ending 31 December). These amounts may differ significantly from the amounts cal - P P culated on the basis of IFRSs. Impairment of goodwill A A E E Determining whether goodwill is impaired requires an estimation of the value in use of the cash-generating S S Taxation units to which goodwill has been allocated. The value in use calculation requires the entity to estimate the L L A A The Group is subject to income tax and other taxes. Significant judgement is required in determining the future cash flows expected to arise from the cash-generating unit and a suitable discount rate in order to I I C C provision for income tax and other taxes due to the complexity of the tax legislation of the Russian Federa - calculate present value. R R tion where the Groups’ operations are principally located. There are many transactions and calculations for E E which the ultimate tax determination is uncertain. The Group recognises liabilities for anticipated tax audit Income tax M M issues based on estimates of the whether additional taxes will be due. Where the final tax outcome of these The Group is subject to income taxes in different jurisdictions on the territory of the Russian Federation and M M O O matters is different from the amounts that were initially recorded, such differences will impact the amount of abroad. Significant judgment is required in determining the provision for income taxes. There are many C C tax and tax provisions in the period in which such determination is made. transactions and calculations for which the ultimate tax determination is uncertain. The Group recognises K K liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where S S Y Y I I the final tax outcome of these matters is different from the amounts that were initially recorded, such differ - S S ences will impact the income tax and deferred tax provisions in the period in which such determination is S S O O made. R R O O V V 68 69 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O Deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer Other Group operations mainly comprise passenger transit, other services provided at the Port and resale of F F probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be energy and utilities to external customers. Neither of these services constitutes a separate business segment. R R O O utilised. The estimation of that probability includes judgments based on the expected performance. Vari - Information regarding the Group’s reportable segments as at 31 December 2007 and for the year then B B ous factors are considered to assess the probability of the future utilisation of deferred tax assets, including ended is presented below. Comparative information as at 31 December 2006 and for the year then ended R R A A past operating results, operational plan, expiration of tax losses carried forward, and tax planning strate - could not be reliably produced by the management of the Group. H H gies. If actual results differ from that estimates or if these estimates must be adjusted in future periods, the A A financial position, results of operations and cash flows may be negatively affected. Stevedoring Fleet Ship repair Other Adjustments Consolidated and eliminations Allowance for slow-moving inventory Allowances for slow-moving inventories are made to reduce excess inventories to their estimated net real - izable values, as necessary. A change in customer demand for inventory is the primary indicator for reduc - tions in inventory carrying values. The Group records inventory allowances based on historical experiences Segment revenue with customers, the ability to utilise inventory in other programs, the ability to redistribute inventory back to Third parties 418,011 46,102 4,024 15,243 - 483,380 the suppliers and current and forecasted demand for the inventory. Inter-segments 19,775 103 335 12,361 (32,574) - Total revenue 437,786 46,205 4,359 27,604 (32,574) 483,380

Segment results 5. SEGMENT INFORMATION Operating profit/(loss) 178,144 8,974 (2,640) (28,920) (985) 154,573 Unallocated The Group has adopted IFRS 8 Operating Segments in advance of its effective date, with effect from 1 Janu - Investment income 1,061 ary 2007. IFRS 8 requires operating segments to be identified on the basis of internal reports about compo - Finance costs (44,793) nents of the Group that are regularly reviewed by the chief operating decision maker in order to allocate Foreign exchange gain 34,776 resources to the segment and to assess its performance. In contrast, the predecessor Standard (IAS 14 Seg - Other expenses, net (15,165) ment Reporting) required an entity to identify two sets of segments (business and geographical), using a risks Excess of Group’s interest in net assets acquired and rewards approach, with the entity’s ‘system of internal financial reporting to key management personnel’ over consideration paid on acquisition of subsidiaries 2,956 serving only as the starting point for the identification of such segments. As a result, following the adoption of Profit before tax 133,408 T T IFRS 8, the identification of the Group’s reportable segments have been identified and presented. R R Income tax expense (39,734) O O Profit for the year 93,674 P P Services from which reportable segments derive their revenues A A E E In prior years, segment information reported externally was analysed on the basis of the types of services Segment assets S S provided by the Group’s operating divisions. The Group operated in a single operating segment, which is Inter-segment assets 32,900 20,088 2 2,832 (55,822) - L L A A composed of the stevedoring services and other related services. The revenues from the transhipping Other segment assets 1,573,162 21,147 10,488 30,941 (199,132) 1,436,606 I I C C services constitute substantially all revenues. All significant assets, production and management and ad - Total assets 1,606,062 41,235 10,490 33,773 (254,954) 1,436,606 R R ministrative facilities are located in the city of Novorossiysk, the Russian Federation. E E However, information reported to the Group’s chief operating decision maker for the purposes of resource Segment liabilities M M allocation and assessment of segment performance is more specifically focussed on the category of M M Inter-segment liabilities 52,819 227 1,108 1,668 (55,822) - O O stevedoring services provided. Other segment liabilities 648,878 2,204 4,061 2,394 8,957 666,494 C C The Group’s reportable segments under IFRS 8 are therefore as follows: Total liabilities 701,697 2,431 5,169 4,062 (46,865) 666,494 K K Stevedoring services (liquid and bulk cargo transhipping services, including bunkering and storage S S Y Y I I services); Other segment information S S Fleet services; and Depreciation and amortisation 46,325 554 891 1,944 - 49,714 S S O O Ship repair services. Capital expenditures 115,259 787 552 216 - 116,814 R R O O V V 70 71 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O Geographical information 7. COST OF SERVICES F F The most of the Group entities operate in one principal geographical area - the Eastern sector of the Black R R O O Sea in Tsemesskaya bay. The Novorossiysk Capital and NR Air, registered on the territory of the Luxemburg B B and Cayman Islands respectively, do not constitute separate segments due to insignificant amount of op - Year ended Year ended R R 31 December 31 December A A erations. The Group’s revenue from external customers (location of the external customers) by geographi - H H 2007 2006 cal location is detailed below: A A Year ended 31 December Fuel 90,390 20,857 2007 Payroll 56,383 42,406 Depreciation and amortisation 44,058 36,590 Repairs and maintenance 14,669 12,566 Revenue Unified social tax 10,845 7,917 Export 344,833 Insurance 10,549 18,093 Russian Federation 138,547 Raw materials 7,994 9,142 Total 483,380 Subcontractors 7,758 2,467 Rent 5,535 10,027 Energy and utilities 1,124 5,725 Other 6,404 7,107 6. REVENUE Total 255,709 172,897

Year ended Year ended 31 December 31 December 2007 2006 T T Stevedoring services 418,011 244,746 R R O O Fleet services 46,102 22,369 P P Ship repair services 4,024 4,032 A A E E Vessel rent - 2,742 S S Other 15,243 3,388 L L A A Total 483,380 277,277 I I C C R R E E M M M M O O C C K K S S Y Y I I S S S S O O R R O O V V 72 73 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O 8. SELLING, GENERAL AND ADMINISTRATIVE 9. INVESTMENT INCOME F F R R O O EXPENSES Year ended Year ended B B 31 December 31 December R R 2007 2006 A A H H Year ended Year ended A A 31 December 31 December 2007 2006 Interest income on deposits 1,025 4,117 Discount of long-term debt - 371 Coupon income 27 54 Payroll 25,846 10,491 Other 9- Depreciation and amortisation 5,656 2,046 Total 1,061 4,542 Taxes other than income tax 7,466 6,752 Professional services 5,979 2,379 Charity 4,375 3,374 Unified social tax 2,826 1,066 10. FINANCE COSTS Rent 2,276 261 Year ended Year ended Security services 2,166 1,657 31 December 31 December Bank charges 2,140 990 2007 2006 Repairs and maintenance 1,775 358 Raw materials 1,657 94 Travel and representation expenses 1,586 461 Interest on borrowings 36,532 22,666 Change in allowance for slow-moving inventory Loss on early extinguishment of debts 6,025 - and doubtful receivables 1,420 413 Other 2,236 37 Communication expenses 782 88 Total 44,793 22,703 T T Other 7,148 3,549 R R Total 73,098 33,979 O O P P A A E E 11. OTHER EXPENSES, NET S S Certain reclassifications of prior year amounts have been made to conform with the current year presentation. Year ended Year ended L L A A 31 December 31 December I I C C 2007 2006 R R E E M M M M Loss on disposal of property, plant and equipment 13,471 3,931 O O Gain on disposal of shares of Investsberbank and PFS - (740) C C Other 1,694 387 K K S S Total 15,165 3,578 Y Y I I S S S S O O Certain reclassifications of prior year amounts have been made to conform with the current year presentation. R R O O V V 74 75 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O 12. INCOME TAX The movement in the Group’s deferred taxation position was as follows: F F R R Year ended Year ended O O Year ended Year ended 31 December 31 December B B 31 December 31 December R R 2007 2006 A A 2007 2006 H H A A Net deferred tax liability 67,672 41,274 Current tax expense 41,962 18,712 Deferred tax benefit (2,228) (5,065) Deferred tax benefit (2,228) (5,065) Deferred tax liability acquired on acquisition of subsidiaries 2,905 26,905 Total 39,734 13,647 Deferred tax asset disposed of sale of subsidiaries 860 - Effect of translation into presentation currency 5,017 4,558 Net deferred tax liability 74,226 67,672 Russian income tax is calculated at 24% of the estimated assessable profit for the year based on stand alone accounts. Deferred taxation is attributable to the temporary differences that exist between the carrying amounts Year ended Year ended of assets and liabilities for financial reporting purposes and the amounts used for tax purposes. The tax ef - 31 December 31 December fects of temporary differences that give rise to deferred taxation are presented below: 2007 2006 Year ended Year ended 31 December 31 December 2007 2006 Profit before tax 133,408 57,736 Tax at the statutory rate of 24% 32,018 13,857 Charity 1,050 810 Loss on disposals of property, plant and equipment 1,052 - Deferred tax assets Compensations to employees 792 719 Allowance for doubtful receivables 577 27 T T Effect of other expenses that are not deductible in determining taxable profit 4,822 2,592 Allowance for slow-moving inventories 975 351 R R Investment valuation 831 1,674 O O Release of deferred tax on subsidiary acquisitions - (4,331) P P Total 39,734 13,647 Vacation accruals 695 715 A A Loss carry forward - 1,312 E E S S Total 3,078 4,079 L L A A I I C C Deferred tax liabilities R R Difference in depreciable value of property, plant and equipment 72,655 66,226 E E Mooring rights 3,254 3,260 M M M M Long-term debt 199 1,174 O O Other adjustments 1,196 316 C C Less: valuation allowance - 775 K K S S Total 77,304 71,751 Y Y I I Net deferred tax liability 74,226 67,672 S S S S O O R R Certain reclassifications of prior year amounts have been made to conform with the current year presentation. O O V V 76 77 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O 13. DIVIDENDS AND DISTRIBUTIONS 15. PROPERTY, PLANT AND EQUIPMENT F F R R O O Dividends declared in 2007 and 2006 were 11,295 and 10,624, respectively. The total amounts of dividends COST B B Land Buildings Machinery Marine Aircraft Vehicles Office Construc- Total paid during 2007 and 2006 were 11,584 and 10,205, respectively. Also, in 2007 the Company has paid for R R and and vessels and tion in A A certain expenses of shareholders. This was recorded as a distribution to shareholders in amount of 489. construc- equipment other progress H H tions equipment A A

14. EARNINGS PER SHARE 1 January 2006 - 146,311 119,591 66,765 - 3,882 18,442 6,044 361,035 Acquisition Basic and diluted earnings per share for 2007 and 2006 have been calculated on the basis of the net profit of subsidiaries 8,411 72,907 47,017 3,786 24,418 3,950 16,676 56,203 233,368 for the year and the weighted average number of common shares in issue during the year, which excludes Additions 21 17,422 14,112 876 409 614 28,843 48,237 110,534 treasury stock. Disposals - (1,929) (2,343) (1,079) - (418) (1,196) - (6,965) The calculation of basic and fully diluted earnings per share is based on the following information: Effect of translation into presentation Year ended Year ended currency - 13,558 11,059 6,180 - 348 1,678 563 33,386 31 December 31 December 2007 2006 31 December 2006 8,432 248,269 189,436 76,528 24,827 8,376 64,443 111,047 731,358 Reclassification (1,835) (23,315) 26,448 (146) - 7,452 (8,604) --

Profit attributed to shareholders of the parent company 93,713 44,469 Reclassified at Weighted average number of shares during the year 19,196,480,589 19,124,483,167 31 December 2006 6,597 224,954 215,884 76,382 24,827 15,828 55,839 111,047 731,358 Basic and diluted earnings per share (US Dollars) 0.0049 0.0023 Additions - 4,394 7,997 --3,959 2,368 98,096 116,814 Acquired on acquisition of subsidiaries 13,139 ----63506 13,654 T T R R Transfer - 30,214 7,085 --465 446 (38,210) - O O Disposals - (10,189) (1,362) (3,282) - (771) (542) (26,020) (42,166) P P A A Disposal of subsidiary ------(735) - (735) E E Effect of translation S S L L intopresentation A A I I currency 1,034 17,384 16,277 5,416 1,805 1,306 4,186 9,022 56,430 C C R R 31 December E E 2007 20,770 266,757 245,881 78,516 26,632 20,793 61,565 154,441 875,355 M M M M O O C C K K S S Y Y I I S S S S O O R R O O V V 78 79 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O 15. PROPERTY, PLANT AND EQUIPMENT 16. GOODWILL F F R R COST O O B B ACCUMULATED Land Buildings Machinery Marine Aircraft Vehicles Office Construc- Total R R At 1 January 2006 - DEPRECIATION A A and and vessels and tion in Additional amounts recognised from business combinations 442,393 H H construc- equipment other progress A A tions equipment Effect of translation into presentation currency 14,463 At 31 December 2006 456,856 Effect of translation into presentation currency 33,221 1 January 2006 - (4,029) (16,012) (4,176) - (415) (2,060) - (26,692) At 31 December 2007 490,077 Depreciation charge - (7,847) (19,357) (4,807) (801) (765) (4,551) - (38,128) Carrying amount Disposals - 75 482 348 - 91 323 - 1,319 31 December 2006 456,856 Effect of translation 31 December 2007 490,077 into presentation currency - (629) (2,108) (535) (27) (61) (331) - (3,691)

Allocation of goodwill on cash generating units as of 31 December 2007 was as follows: 31 December 2006 - (12,430) (36,995) (9,170) (828) (1,150) (6,619) - (67,192) Reclassification - 1,493 (449) 47 - (1,213) 122 -- Grain Terminal 193,448 Timber Export 156,114 Reclassified at Fleet 88,150 31 December 2006 - (10,937) (37,444) (9,123) (828) (2,363) (6,497) - (67,192) IPP 33,649 Charge for the year - (12,237) (21,723) (4,975) (1,704) (2,689) (5,186) - (48,514) Shipyard 15,234 Disposals - 489 582 818 - 89 108 - 2,086 Baltic Stevedore 3,482 Acquired on acquisition Total 490,077 of subsidiaries ------Disposal of subsidiary ------247 - 247 Effect of translation T T into presentation currency - (1,291) (3,227) (839) (131) (281) (762) - (6,531) 17. MOORING RIGHTS AND OTHER INTANGIBLE R R O O At 31 December 2007 - (23,976) (61,812) (14,119) (2,663) (5,244) (12,090) - (119,904) P P Carrying value ASSETS A A E E At 31 December COST S S 2006 6,597 214,017 178,440 67,259 23,999 13,465 49,342 111,047 664,166 L L Balance as of 1 January 2006 857 A A At 31 December I I Amounts of mooring rights recognised from business combinations: C C 2007 20,770 242,781 184,069 64,397 23,969 15,549 49,475 154,441 755,451 R R Fleet 664 E E Shipyard 5,252 M M As of 31 December 2007 construction in progress included 18,834 (2006: 28,981) of advances paid for Timber Export 7,591 M M O O property, plant and equipment. Property, plant and equipment with carrying value of 35,111 (2006: Software and other additions 232 C C 120,932) were pledged to secure bank overdrafts and loans granted to the Group (Note 23). The carrying Effect of translation into foreign currency 529 K K value of machinery and equipment under a finance lease at 31 December 2007 and 2006 amounted to S S Balance as of 31 December 2006 15,125 Y Y I I 1,567 and 998, respectively. The total amount of capitalised interest expenses for the year ended 31 De - Software and other additions 787 S S cember 2007 and 2006 amounted to 6,211 and 2,118, respectively. Effect of translation into foreign currency 1,325 S S O O Certain reclassifications of prior year amounts have been made to conform with the current year presentation. Balance as of 31 December 2007 17,237 R R O O V V 80 81 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R Accumulated amortisation and impairment O O During the year ended 31 December 2007 Investenergo extinguished two non-interest bearing short-term F F Balance as of 1 January 2006 (368) loans amounting 21,285. R R Amortisation charge (508) O O Promissory notes consist of Sberbank promissory notes amounted to 3,259 with maturity on demand and B B Effect of translation into foreign currency (54) interest rate 7.5%. R R Balance as of 31 December 2006 (930) A A The fair value of investments in shares of unlisted companies OJSC City Park and OJSC Office Centre H H Amortisation charge (1,200) Pokrovsky cannot be measured reliably. Management believes that based on internal analysis there were A A Effect of translation into foreign currency (271) no indicators of impairment loss and the cost of these investments is the most appropriate basis to carry Balance as of 31 December 2007 (2,401) those assets at the balance sheet date. Carrying value as of 31 December 2006 14,195 All shares of OJSC City Park owned by the Group which are carried at cost (amounting to 5,500 as of 31 Carrying value as of 31 December 2007 14,836 December 2007) are pledged as security for obligations under loan agreement between OJSC City Park and OTP Bank Plc. Term deposits consist of Sberbank deposit amounted to 1,426 with maturity 29 December 2009 and inter - Mooring rights represent mainly the rights under long-term leases from the State of hydrotechnical infra - est rate 6.5%. structure (e.g. berths and piers).

19. INVENTORIES 18. INVESTMENTS IN SECURITIES AND OTHER 31 December 31 December FINANCIAL ASSETS 2007 2006 31 December 31 December 2007 2006

Raw materials and low value items 9,451 7,088 Fuel 877 1,084 Goods for resale 1,257 913 Current T T Other 143 151 R R Financial assets carried at amortised cost O O Less: allowance for slow-moving inventories (3,853) (2,655) Promissory notes 3,259 380 P P Total 7,875 6,581 A A Investenergo loan (Note 29) - 21,285 E E Vnesheconombank bonds (“Min-fin bonds” or “OVGVZ”) - 1,805 S S L L Other 740 - A A I I Total current 3,999 23,470 C C R R E E Non-current M M Available-for-sale investments (unquoted) M M Office centre Pokrovsky 8,250 7,691 O O C C City Park 5,500 5,129 K K Financial assets carried at amortised cost S S Y Y Deposits 1,426 - I I S S Loans issued 687 83 S S Total non-current 15,863 12,903 O O R R O O V V 82 83 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O 20. TRADE AND OTHER RECEIVABLES Included in the Group’s receivable balance are debtors with a carrying amount of 6,451 (2006: 5,499) F F which are past due at the respective reporting date and which the Group still considers recoverable (i.e. R R O O but not impaired). The Group does not hold any collateral over these outstanding balances. The weighted 31 December 31 December B B average age of these receivables is less than 45 days (2006: 45 days). No credit limits are set for the cus - R R 2007 2006 A A tomers. H H Movement in allowance for doubtful trade and other receivables: A A 31 December 31 December VAT recoverable 26,997 24,480 2007 2006 Trade accounts receivable (RUR) 12,068 6,484 Trade accounts receivable (USD) 11,197 13,348 Other taxes receivable 9,983 13,320 Advances to suppliers 3,468 4,555 Balance at the beginning of the year 2,536 1,074 Other receivables and prepayments 10,075 5,504 Acquisitions through business combinations - 1,321 Less: allowance for doubtful receivables (2,604) (2,536) Recognised in the income statement 2,797 1,155 Total 71,184 65,155 Amounts written-off as uncollected (968) (9) Amount recovered during the year (1,974) (1,148) Effect of translation into presentation currency 213 143 The average credit period for the Group’s customers is 25 days. During this period no interest is charged Balance at the end of the year 2,604 2,536 on the outstanding balances. Thereafter, interest may be charged at 3% rate per month on the outstanding balance. The Group has provided fully for all receivables over 365 days because historical experience is such that receivables that are past due beyond 365 days are generally not recoverable. Trade receivables Included in the allowance for doubtful debt are individually impaired receivables with outstanding balances and other receivables between 25 and 365 days are provided for based on estimated irrecoverable of 2,051 (2006: 1,048) which have been placed under liquidation. The Group does not hold any collateral amounts, determined by reference to past experience and are regularly reassessed based on the facts over these outstanding balances. and circumstances existing as of each reporting date. Ageing of impaired trade and other receivables: Before accepting any new customer, the Group uses an internal credit system to assess the potential cus - T T tomer’s credit quality. Of the trade receivables balance at the end of the year, the Group’s five largest customers 31 December 31 December R R 2007 2006 O O (individually exceed 3% of the total balance) represent 77% (2006: 49%) from the outstanding balance. P P The summary below shows the outstanding balances of top five counterparties at the respective balance A A E E sheet dates: S S L L Customer location 31 December 31 December A A less than 45 days 62 397 I I 2007 2006 C C 45-90 days 6- R R 90-180 days 481 172 E E 180-360 days 4 919 M M M M Thereafter 2,051 1,048 Axial Marine Services LTD Limassol, Cyprus 9,287 8,240 O O Total 2,604 2,536 C C OOO Chernomorskaya Buksirnaya Company Novorossiysk, Russia 5,486 - K K OOO Morservis group Novorossiysk, Russia 1,623 1,086 S S Y Y OOO Trans Oil Service Novorossiysk, Russia 744 - I I Certain reclassifications of prior year amounts have been made to conform with the current year presentation. S S OOO Ruskon Novorossiysk, Russia 703 403 S S Total 17,843 9,729 O O R R O O V V 84 85 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O 21. CASH AND CASH EQUIVALENTS 23. DEBT F F R R O O Interest Maturity 31 December 31 December B B 31 December 31 December Rate Date 2007 2006 R R 2007 2006 A A H H A A

Long-term Current accounts in RUR 20,032 21,264 Unsecured bank loans (USD) Current accounts in USD 2,836 14,739 Loan participation notes 7% May 2012 294,741 - Bank deposits 43,790 1,029 IMB + Bank Austria Creditanstalt LIBOR + 1.6% July 2010 117,219 - Cash in hand 25 Total 66,660 37,037 Secured bank loans Sberbank (USD) 8.2% August 2011 40,335 21,903 Sberbank (USD) 8.2% November 2010 17,804 17,400 Bank deposits at 31 December 2007 mainly represent deposits with Investsberbank and Vneshtorgbank Sberbank (USD) 8.2% June 2010 9,268 13,924 with 5% - 7% interest that mature before 31 March 2008. Sberbank (USD) 8.2% September 2011 7,800 2,076 Current accounts in USD as of 31 December 2007 and 31 December 2006 included 1,160 and 5,800 of Sberbank (USD) 8.0% March 2010 6,350 - cash to guarantee a letter of credit respectively. The letter of credit is opened with Open Joint Stock Com - Sberbank (USD) 8.2% December 2011 3,624 4,300 pany Commercial Savings Bank of the Russian Federation (“Sberbank”), a related party, according to the agreement dated 30 June 2006 with Shanghai Zenhua Port Machinery Co. Ltd for purchase and construc - Sberbank (USD) 8.2% July 2011 3,043 7,173 tion of transhipment equipment. The letter of credit matures on 31 January 2008. Sberbank (USD) 8.0% December 2009 2,520 5,040 IMB (USD) 8.95% September 2011 2,365 3,025 Sberbank (USD) 8.2% August 2011 1,700 1,700 Sberbank (USD) 8.2% December 2011 1,420 1,685 22. SHARE CAPITAL Sberbank (USD) 8.8% June 2009 - 388,000 T T Loans from related parties 0.1%-6% 2008-2012 - 14,146 R R O O The share capital of the Group consists of 19,259,815,400 shares authorised, issued and outstanding with Other - 1,925 P P a par value of 0.000375 USD. Authorised share capital at par is 7,846. Total long-term 508,189 482,297 A A E E At 31 December 2007, the outstanding share capital of the Group was 10,471 (2006: 10,366). S S During 2007, the Group repurchased its own shares at nominal value of 10. Short-term L L A A On 8 November 2007, the Group was admitted to the listing on LSE with the Offering of 3,375,156,114 Or - Current portion of long-term loans 29,650 57,551 I I C C dinary Shares of NCSP in form of Shares and Global Depository Receipts. Loans from related parties - 2,094 R R Other - 227 E E M M Current portion of finance lease liability 776 528 M M O O Total short-term 30,426 60,400 C C K K Total debt 538,615 542,697 S S Y Y I I S S S S O O R R O O V V 86 87 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O On 17 May 2007, the Group, through a newly formed consolidated special purpose entity, Novorossiysk The Group borrowings are repayable as follows: F F Port Capital S.A., issued 7% loan participation notes due 2012 (the ‘‘Loan Participation Notes’’) in an ag - R R 31 December 31 December O O gregate principal amount of USD 300 million. The Group applied the proceeds of the Loan Participation 2007 2006 B B Notes to repay a portion of the outstanding principal amount of the Sberbank loan. R R A A Interest on the Loan Participation Notes is payable semi-annually on 17 November and 17 May of each H H year, commencing on 17 May 2012. The Loan Participation Notes are subject to provisions, including rep - A A resentations and warranties, covenants, undertakings and events of default, including change of control, Due within three months 11,600 7,869 negative pledge and cross-default provisions. Violation of the change of control provisions can result in the Group being required to repay the Loan Participation Notes at 101% of par value. Due from three to six months 8,740 14,082 In July 2007, the Group entered into an agreement for a 118,000 syndicated term loan facility (the “Facil - Due from six months to twelve months 10,086 38,449 ity”) provided by CJSC International Moscow Bank and Bank Austria Creditanstalt AG. The Group drew 30,426 60,400 down the Facility in full on 19 July 2007, and used the proceeds to repay a portion of the outstanding prin - Due in 2009 and 2010 years 213,835 445,522 cipal amount of the loan under the Sberbank loan. Due in 2011 and 2013 years 294,354 36,775 The Facility is unsecured. The outstanding principal amount must be repaid in full at final maturity, 17 July Total 538,615 542,697 2010, and may be prepaid in whole or in part on 10 business days’ notice in 5.0 thousand increments above a minimum prepayment of 10.0 thousand. Amounts prepaid or repaid under the Facility may not be As of 31 December 2007, the average effective borrowing rate was 7.26%. Most of interest rates are fixed reborrowed. The Facility bears interest at a rate of one month US dollar LIBOR plus 1.60% (declining to at the contract date, and thus expose the Group to fair value interest rate risk. All leases are on 1.40%, if the Group obtains a rating of Baa3 (or the equivalent) by Moody’s (or an equivalent rating a fixed repayment basis and no arrangements have been entered into for contingent rental payments. agency), and principal repayments and accrued interest are payable monthly. Certain reclassifications of prior year amounts have been made to conform with the current year presenta - The Group is subject to certain financial covenants measured which are to be computed as defined in the tion. Facility agreement with amounts in the Group’s IFRS audited consolidated financial statements, including: (i) The ratio of consolidated indebtedness to EBITDA may not exceed 3.5; (ii) The Group’s tangible net worth ratio must be at least 20%; and (iii) The minimum credit rating attributed to the Group by Moody’s must not be lower than Ba3. 24. EMPLOYEE BENEFITS

The Sberbank Loan was repaid in full from the proceeds of the Loan Participation Notes and Facility, the Unfunded defined benefit plan T T proceeds of the Facility and our own funds, and the loan agreement was terminated in July 2007. R R O O The part of Group’s debt is secured by property, plant and equipment. At 31 December 2007 and 31 De - The most recent actuarial valuation of the defined benefit obligation was carried out as at P P cember 2006, property, plant and equipment with a carrying value of 35,111 and 120,932, respectively, 31 December 2007. The present value of the defined benefit obligation, the related current service cost A A E E were pledged to secure bank overdrafts and loans granted to the Group. and past service cost were measured using the projected unit credit method. S S The principal assumptions used for the purposes of the actuarial valuations were as follows: L L A A I I 31 December 31 December C C R R 2007 2006 Valuation at E E M M M M O O C C Discount rate 8.65% 7.62% K K Expected annual rate of salary increase 6% 5% S S Y Y I I Employees turnover per annum 7% 7% S S Average residual period of work 8 years 8 years S S O O R R O O V V 88 89 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O Amounts recognised in profit or loss in respect of these defined benefit plans are as follows: Movements in the present value of the defined benefit obligations in the current period were as follows: F F R R Year ended Year ended Year ended Year ended O O 31 December 31 December 31 December 31 December B B 2007 2006 R R 2007 2006 A A H H A A Current service cost 238 86 Balance as of 1 January 6,451 2,508 Interest on obligation 634 342 Current service cost 238 86 Actuarial losses/(gains) recognised during the year 580 (145) Interest on obligation 634 342 Past service cost 284 267 Actuarial loses/(gains) recognised during the year 580 (145) Total 1,736 550 Past service cost 283 267 Liabilities assumed in a business combination - 3,278 Benefits paid (525) (236) Effect of translation to presentation currency 520 351 Balance as of 31 December 8,181 6,451 The charge for the year has been included in cost of sales. The amount included in the balance sheet arising from the entity’s obligation in respect of its defined bene - fit plans is as follows: Defined contribution plans Payments to the Russian Federation State Pension Fund amounted to 13,671 and 8,983 for the year 31 December 31 December ended 31 December 2007 and 2006, respectively. 2007 2006

25. TRADE PAYABLES Present value of defined benefit obligation 9,658 8,103 T T Past service cost not yet recognised (1,477) (1,652) 31 December 31 December R R 2007 2006 O O Net liability arising from defined benefit obligation 8,181 6,451 P P A A E E S S L L Trade payables (RUR) 16,604 7,086 A A I I Trade payables (USD) 877 - C C R R Total 17,481 7,086 E E M M M M O O The average credit period on purchase of majority of inventories (e.g. fuel) and substantial portion C C of services (e.g. utility) on the territory of the Russian Federation is 17 days. No interest charge on the out - K K standing balance for trade and other payables during credit period. Thereafter, interest may S S Y Y I I be charged at 9% per month on the unsettled balance. S S S S O O R R O O V V 90 91 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O The table below summarises the maturity profile of the Group’s trade payables and payables for property, 27. CASH FLOW FROM OPERATING ACTIVITIES F F plant and equipment as at 31 December 2007 and 2006 based on contractual undiscounted payments: R R O O B B Year ended Year ended Year ended Year ended R R 31 December 31 December 31 December 31 December A A 2007 2006 H H 2007 2006 A A

Past due 4,974 1,905 Profit for the year 93,674 44,089 Due within three months 10,510 4,534 Adjustments for: Due from three to six months 1,968 197 Depreciation and amortisation 49,714 38,636 Due from six months to twelve months 149 29 Interest expense 36,532 22,666 Due in next financial year 2,500 428 Excess of Group’s interest in net assets acquired over Total 20,101 7,093 consideration paid on acquisition of subsidiaries (2,956) (618) Discount amortisation 1,595 (371) Change in allowance for doubtful receivables 823 7 Change in allowance for slow-moving inventories 597 406 Loss on disposal of property, plant and equipment 13,471 3,931 Share of profit of associates - (3,065) 26. OTHER PAYABLES AND ACCRUALS Gain on disposal of shares - (740) Finance lease charge 293 37 31 December 31 December 2007 2006 Income tax 39,734 13,647 Foreign exchange gain (34,776) (5,391) Change in retirement benefit obligation 1,736 550 Interest income (1,689) - T T Advances received from customers 9,053 3,293 Loss on early extinguishment of debts 6,025 - R R Working capital changes: O O Payroll accruals 6,324 5,966 P P Taxes payable 5,240 3,725 (Increase)/ decrease in inventories (2,825) 252 A A (Increase)/ decrease in trade and other receivables (6,638) 12,563 E E Payables for property, plant and equipment 2,620 523 S S Dividends payable 402 644 Decrease in long-term VAT receivables 10,464 (702) L L Increase/(decrease) in trade and other payables and accruals 22,939 (2,719) A A Other accounts payable and accruals 1,274 4,584 I I Cash flow from operating activities 228,713 123,178 C C Total 24,913 18,735 R R E E M M Certain reclassifications of prior year amounts have been made to conform with the current year presenta - Certain reclassifications of prior year amounts have been made to conform with the current year presenta - M M O O tion. tion. C C K K S S Y Y I I S S S S O O R R O O V V 92 93 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O 28. ACQUISITION AND DISPOSAL OF SUBSIDIARIES 29. RELATED PARTY TRANSACTIONS F F R R O O On 28 June 2007, the Group acquired 100% of the share capital of OJSC NPK Zarubezhneft (“Zarubezh - Related parties are considered to include the ultimate controlling parties, affiliates and entities under com - B B neft”). Details of acquisition are below: mon ownership and control with the Group. The Company, its subsidiaries and associates, in the ordinary R R A A course of their business, enter into various sales, purchases and service transactions with related parties. H H Fair value of net assets Details of transactions between the Group and other related parties are disclosed below. A A of the subsidiary acquired As of the date of approval of these consolidated financial statements of the Group the ultimate beneficiar - ies of the Group were members of the families of Mr. Ponomarenko and Mr. Scorobogatko. A 20% share of the Group is owned by the Federal Agency on Federal Property Management as of the date of approval of these consolidated financial statements. Property, plant and equipment 13,654 Significant balances and transactions with state-controlled entities are considered transactions with related Trade and other receivables 184 parties and are disclosed below. The transactions with these state-controlled entities are primarily the pur - Inventory 370 chase and sales of services. Cash and cash equivalents 2 Material balances with related parties were as follows: Debt (1,395) Other payables and accruals (289) 31 December 31 December Deferred tax (2,905) 2007 2006 Net assets 9,621 Excess of Group’s interest in net assets acquired over consideration paid on acquisition of subsidiaries (2,956) Purchase price 6,665 Loans from related parties Settled in cash (6,665) Long-term Cash acquired with the net assets of subsidiaries 2 Sberbank 123,019 463,201 Net cash outflow on acquisition (6,663) Entities under common control (a) - 4,702 Other related parties - 9,444 T T 123,019 477,347 The net assets of the purchased subsidiary were subject to an independent appraisers’ valuation. Adjust - R R Short-term O O ments were made for the differences between the carrying amount and the fair value of assets, liabilities (a) P P Entities under common control - 680 and contingent liabilities of the acquired subsidiary. A A Sberbank - 57,318 E E Prior to acquisition, the acquired entity did not prepare financial statements in accordance with IFRS. S S Other related parties - 1,359 Hence it was not practicable to determine the carrying amounts of the acquired assets, liabilities and con - L L - 59,357 A A tingent liabilities in accordance with IFRS immediately before the acquisition, and such information is not I I Short-term loans to related parties C C presented in the consolidated financial statements of the Group. (a) R R During May 2007, the Group acquired additional 15.04% of interest in Shipyard and 0.01% of interest in Entities under common control - 21,285 E E Grain Terminal for a cash consideration of 25,131, increasing its ownership to 65.07% and 100%, respec - Other related parties 274 - M M tively. The carrying value of Shipyard and Grain Terminal net assets in the consolidated financial statements Promissory notes M M O O on the date of acquisition of additional interests was 37,710. As a result of this transaction, the Group Sberbank 3,259 - C C recognised a decrease in net assets attributable to minority interest in the amount of 5,636. Excess of con - Short-term deposits K K sideration paid over the Group’s share in net assets acquired in the amount of 19,495 was recognised in Sberbank 1,426 - S S Y Y I I the statement of changes in equity as a decrease of retained earnings. Cash and cash equivalents S S During 2007, the Group sold its 59.98% of PJSC TPS and 50% of LLC Kuban Security Service Sberbank 12,779 17,128 S S O O for 115. Management of the Group considers net assets disposed in this transaction as not significant for a R R separate disclosure in the consolidated financial statements of the Group. (a) Entities owned by the members of the families of Mr. Ponomarenko and O O Mr. Scorobogatko, who are ultimate beneficiaries of the Group. V V 94 95 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O Material transactions with related parties were as follows: Taxation contingencies in the Russian Federation F F The government of the Russian Federation has commenced a revision of the Russian tax system and passed R R O O Year ended Year ended certain laws implementing tax reform. The new laws reduce the number of taxes and overall tax burden on busi - B B 31 December 31 December nesses and simplify tax legislation. However, these new tax laws continue to rely heavily on the interpretation of R R 2007 2006 A A local tax officials and fail to address many existing problems. Many issues associated with practical implication H H of new legislation are unclear and complicate the Group’s tax planning and related business decisions. A A In terms of Russian tax legislation, authorities have a period of up to three years to re-open tax declarations Sales for further inspection. Changes in the tax system that may be applied retrospectively Military divisions 2,340 4,340 by authorities could affect the Group’s previously submitted and assessed tax declarations. Russian Railways 868 416 While management believes that it has adequately provided for tax liabilities based on its interpretation of Transneft 3,800 7,542 current and previous legislation, the risk remains that the tax authorities in the Russian Federation could 7,008 12,298 take differing positions with regard to interpretative issues. This uncertainty may expose the Group to additional taxation, fines and penalties that could be significant. Management estimates total unprovided amount of possible tax risks to be approximately 752.

Other related parties represent affiliates of the ultimate beneficiaries. Interest expense on loans from re - lated parties during 2007 and 2006 amounted to 25,392 and 21,080, respectively. Environmental matters The Group is subject to extensive federal and local environmental controls and regulations. The Group’s management believes that the Group operations are in compliance with all current existing Compensation of key management personnel environmental legislation in the Russian Federation. However, environmental laws and regulations continue For the year ended 31 December 2007 and 2006, the remuneration of the directors and other members of to evolve. The Group is unable to predict the timing or extent to which those laws and regulations may key management was 3,926 and 1,006, respectively. change, or the cost thereby. The remuneration of directors and key executives is determined by the Board of Directors having regard to the performance of individuals and market trends. Russian Federation risk As an emerging market, the Russian Federation does not possess a fully developed business and regula - T T tory infrastructure including stable banking and judicial systems, which would generally exist in a more ma - R R O O 30. COMMITMENTS AND CONTINGENCIES ture market economy. The economy of the Russian Federation is characterised by a currency that is not P P freely convertible outside of the country, currency controls, low liquidity levels for debt and equity markets, A A E E Litigation and continuing inflation. As a result, operations in the Russian Federation involve risks that are not typically S S associated with those in more developed markets. L L A A The Group has a large number of small claims and litigations relating to its operating activities. Manage - Stability and success of Russian economy and the Group’s business mainly depends on the effectiveness I I C C ment does not believe that any of these claims, individually or in aggregate, will have a material adverse im - of economic measures undertaken by the government as well as the development of legal and political R R pact on the Group. systems. E E On 24 November 2006, the Russian Federal Agency on Property management applied to the court M M to impose a penalty on Timber Export. The penalty includes rent payment of 699 and penalty fees M M O O of 503 for the period from 1 January 2006 through 21 November 2006. Timber Export considers Insurance C C the rent amount to be inappropriately high and applied to the court to oblige the Russian Federal Agency As of 31 December 2007, the Group has insurance coverage in respect of potential damage of its major K K on Property management to recalculate rent payments. The court will hear the case upon definition of mar - facilities. The Group does not have any business interruption insurance or any third party liability insurance S S Y Y I I ket value of rented land. in respect of environmental damage. Until the Group obtains comprehensive insurance coverage exceed - S S ing the book value of property, plant and equipment, there is a risk that the loss or destruction of certain as - S S O O sets could have a material adverse effect on the Group’s operations and financial position. R R O O V V 96 97 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O Operating lease arrangements 32. FAIR VALUE OF FINANCIAL INSTRUMENTS F F Operating lease arrangements relate to the lease of land and mooring installations from the Russian State. R R O O These arrangements have lease terms of between 5 and 49 years. All operating lease contracts contain The fair value of financial assets and liabilities is determined as follows: B B market review clauses in the event that the lessee exercises its option to renew. The lessee does not have The fair value of financial assets and financial liabilities with standard terms and conditions and traded R R A A an option to purchase the land and mooring installations at the expiry of the lease period. on active liquid markets are determined with reference to quoted market prices; and H H Non-cancellable operating leases with initial terms in excess of one year are as follows: The fair value of other financial assets and financial liabilities (excluding derivatives) A A are determined in accordance with generally accepted pricing model based on discounted 2008 3,657 cash flow analysis using prices from observable current market transactions. 2009 3,657 Management believes that the carrying values of financial assets (refer to Notes 18 and 20) and financial li - 2010 3,362 abilities (refer to Notes 23 and 25) recorded at amortised cost in the financial statements approximates 2011 3,309 their fair values. 2012 3,309 Thereafter 75,758 Total 93,052 33. RISK MANAGEMENT

Capital risk management

The Group manages its capital to ensure that entities of the Group will be able to continue as a going con - 31. CAPITAL COMMITMENTS cern while maximising the return to the equity holder through the optimisation of the debt and equity bal - ance. The management of the Group reviews the capital structure on a regular basis. As of 31 December 2007, the Group had the following commitments for the acquisition of property, plant Based on the results of this review, the Group takes steps to balance its overall capital structure through the and equipment and construction works: payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the re - demption of existing debt. 31 December 2007 T T Major categories of financial instruments R R O O The Group’s principle financial liabilities comprise loans and borrowings, trade payables and P P other payables and accruals. The main purpose of these financial instruments is to raise finance for A A OJSC IPP 23,170 E E the Group’s operations. The Group has various financial assets such as trade receivables, investments in NCSP 12,782 S S securities and cash and cash equivalents. L L OJSC Novoroslesexport 6,175 A A I I PJSC Novorossiysk Grain Terminal 304 C C R R OJSC Novorossiysk Shipyard 45 E E Total 42,476 M M M M O O C C The above commitments were entered into to enhance of the Groups’ transhipment capacities during the K K following 3-10 years. S S Y Y I I S S S S O O R R O O V V 98 99 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O 31 December 31 December Foreign currency risk F F 2007 2006 Currency risk is the risk that the financial results of the Group will be adversely impacted by changes in ex - R R O O change rates to which the Group is exposed. The Group undertakes certain transactions denominated in B B foreign currencies. The Group does not use any derivatives to manage foreign currency risk exposure, at R R A A the same time the management of the Group is trying to mitigate such risk by managing monetary assets H H Financial assets and liabilities in foreign currency at the same (more or less stable) level. A A Cash and cash equivalents 66,660 37,037 The carrying amount of the Group’s US Dollar denominated monetary assets and liabilities as at Promissory notes 3,259 380 the reporting date are as follows: Loans given 740 - Trade receivables 23,265 19,832 31 December 31 December Total financial assets 93,924 57,249 2007 2006

Financial liabilities Loans and borrowings 537,839 542,169 Financial lease 776 528 Assets Trade payables 17,481 7,086 Trade and other receivables, net 11,627 13,348 Payables for property, plant and equipment 2,620 523 Cash and cash equivalents 1,676 41,142 Total financial liabilities 558,716 550,306 Total assets 13,303 54,490

Liabilities Long term and short term debt (543,880) (542,697) The main risks arising from the Group’s financial instruments are foreign currency, interest rate, credit and Trade payables (877) (388) liquidity risks. Total liabilities (544,757) (543,085) Total net position (531,454) (488,595) T T The table below details the Group’s sensitivity to strengthening of the Russian Rouble against US Dollar by R R O O 10%. The analysis was applied to monetary items at the balance sheet dates denominated in respective P P currencies. A A E E 31 December 31 December S S 2007 2006 L L A A I I C C R R E E M M Profit 48,327 47,967 M M O O C C K K S S Y Y I I S S S S O O R R O O V V 100 101 O O N N S S S S E E N N I I S S U U B B L L U U F F S S S S E E C C C C U U S S R R O O Interest rate risk Liquidity risk F F Interest rate risk is the risk that changes in floating interest rates will adversely impact the financial results of Liquidity risk is the risk that the Group will not be able to settle all liabilities as they are due. R R O O the Group. The Group does not use any derivatives to manage interest rate risk exposure, at the same time The Group’s liquidity position is carefully monitored and managed. The Group has in place a detailed B B the majority of the Group’s financial assets and liabilities are at fixed rates and thus risk is limited. budgeting and cash forecasting process to help ensure that it has adequate cash available to meet its pay - R R A A The table below details the Group’s sensitivity to increase or decrease of floating rate by 1%. ment obligations. H H The analysis was applied to loans and borrowings (financial liabilities) based on the assumptions that The summaries of maturity profile of the Group’s financial liabilities as at 31 December 2007 and 2006 A A amount of liability outstanding as at the balance sheet date was outstanding for the whole year. based on contractual payments are presented in Notes 23 and 25.

31 December 31 December 2007 2006 34. EVENTS AFTER THE BALANCE SHEET DATE

On 11 February 2008 the Group purchased additional 50% of LLC Baltic stevedores company (“BSK”) for Profit or Loss 1,180 - 10,750, increasing Group’s interest to 100%.

Credit risk Credit risk is the risk that a customer may default or not meet its obligations to the Group on a timely basis, 35. INVESTMENTS IN SIGNIFICANT SUBSIDIARIES leading to financial losses to the Group. Before accepting of any new customer, the Group uses an internal credit system to assess the potential SUBSIDIARIES BY COUNTRY OF INCORPORATION Year ended Year ended Year ended Year ended customer’s credit quality. No credit limits are set to the customers. 31 December 31 December 31 December 31 December The summary below shows the turnover and outstanding balances of top five counterparties as at 2007 2006 2007 2006 the respective balance sheet dates and for the period then ended: Ownership % held* Voting rights Customer Turnover Outstanding Turnover Outstanding Russian Federation location balance balance OJSC IPP 72.65% 72.65% 72.65% 72.65% T T R R 31 December 2007 31 December 2006 PJSC Fleet of NCSP 85.68% 85.68% 85.68% 85.68% O O OJSC Novorossiysk Shipyard 65.07% 50.03% 65.07% 50.03% P P OJSC Novoroslesexport 91.38% 91.38% 91.38% 91.38% A A COMINCOM S.A. Geneve, Switzerland 89,457 19 60,442 1,572 E E PJSC Novorossiysk Grain Terminal 100.00% 99.99% 100.00% 99.99% S S AXIAL MARINE SERVICE Limassol, Cyprus 47,498 9,287 22,459 8,240 L L PJSC TPS - 51.83% - 59.98% ООО “Chernomorskaya A A I I LLC Baltic stevedores company 50.00% 50.00% 50.00% 50.00% C C Buksirnaya Kompaniya” Novorossiysk, Russia 23,062 5,489 4- LLC Kuban security services - 25.91% - 50.00% R R MILESEATRANS LTD Delaware, USA 22,175 - 18,672 1 E E OJSC NPK Zarubezhneft 100.00% - 100.00% - INTER-LOGISTICS Bremen, Germany 19,724 48 21,556 215 M M M M Cayman Islands O O Total 201,916 14,843 123,133 10,028 C C NR Air Ltd. 100.00% 100.00% 100.00% 100.00% K K S S Y Y I I S S S S *The ownership is calculated based on the total number of shares owned by O O the Group as of the reporting dates i.e. including preferred shares. R R O O V V 102 103 O O N N NOVOROSSIYSK COMMERCIAL SEA PORT A HARBOR FOR SUCCESSFUL BUSINESS Ca C Em C O O Fo C D C D N N efe efe as ON-C ON-C O O O t t her her r s ei pl NSOLI NSOLI NSOLI h h r r gn oy red red g fl expen in en ow ee UR UR come exch tax tax er ate d be ne DA DA DA fro m RE RE ses, a a l ia T T T , NT NT ng sets n bil ED ED ED fi et op erat e fr ts n LI A iti om et gain SET INCOM B CASH es ABIL pai d AL o AN pe in ITIES S g 10 ra tio FLOW C ac t E E ST ATEMNT 4 Ce 36 co De Th S ns iv i H e n c r ti S t s ET em e a ef o TA TEMNT . in s f li ect d R b c a er o ted mp EC o 2006 f the f arat i nancia l , LAS re i has v clasi e inf be stae orm f en SI icati ati me re FI on on, cla nt s C s sifi is pr fo e suma ATION r e sent the d in ed yea ord ri sed in r Re er end t he c t bel o S l as ed consolid achieve o 20 s w 31 i fic 12 3, : (3,578) 71,751 6 a December 4,079 5,391 (2 36 ) ti A 17 8 compar ons at ft e ed - r fi nancia abil Re 2007. cl ity assificat 2 l staements wit 0 0 h 6 12 2, 94 2 the 68,252 Be 1,813 io for 580 presentaio ns e - - - for the year n us Dif feren e ed nded (1,813) (3,499) (3,578) in 3,499 5,391 (2 36 ) the 23 6 31 ce - - -

ANNUAL REPORT 2007 АКВАТОРИЯ УСПЕШНОГО БИЗНЕСА CONTACT INFORMATION 50 1 14 c i V o H w w R H E O + n a I P R A M E S O P O F + T M E N P S C O F n E A - - - U 7 7 R o S O H p M O C F F Y v m m m K I L d m :X u L n e e P e S O (4 (4 P w. D C N C N E a a a L s s H o C P L R E T T o m R P r i I 9 9 A i i i P e t n A A l l l Y A N r J A o r S J O T : : : e ) 5 ) 5 e S S N H t t m i o e 47 A r L L I r O F - K u h c S Z o c c r p P P L s O n I n i R v N t A A M a . L 7 7 o i K N p o A a i a U E N t n e d O O C t k e D D D D . 3 8 3 8 r v o - . r E M R y . , n i a S A K l Z l S J S J a a r u : P S r t : S t : I y f 5 - 5 - t e @ E R E R o Y V O N t o S o e U H C o i e C C k s T K : k c k f F v t m n t a - 4 - 4 o n e e r I I r n @ i S S S S a N N a n r k v o o P s U 3 o C 4 y I R S R M a M O V O N v n 4 0 . p t p t m n r V E O O , @ m a t ec a O i N s e F F n A K p t m n n a p S S v o of g a T T . t e e r t i O C o H H n n Y S O R o r e of A y E E r r R :W o . N t i E R E R n s s e , v o of M S l t a y i P P I o o Y k s E R E R n o i r s S o c , s K o S S s R s : w, E E y i u N N s k s u R s T T AT AT i a s s , I I 3 V V i a 5 E E , 3 1 O O 9 5 0 F F 10 I F I F 6 0 C C E E 2