IMPORTANT NOTICE IMPORTANT: You must read the following before continuing. The following applies to the Offering Memorandum (as defined herein) following this page, and you are therefore advised to read this carefully before reading, accessing or making any other use of the Offering Memorandum. In accessing the Offering Memorandum, you agree to be bound by the following terms and conditions, including any modifications to them any time you receive any information from us as a result of such access. NOTHING IN THE FOLLOWING OFFERING MEMORANDUM CONSTITUTES AN OFFER OF SECURITIES FOR SALE IN THE OR ANY OTHER JURISDICTION WHERE IT IS UNLAWFUL TO DO SO. ANY SECURITIES TO BE ISSUED WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE ‘‘SECURITIES ACT’’), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTION, AND THE SECURITIES MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE OR LOCAL SECURITIES LAWS. THE FOLLOWING OFFERING MEMORANDUM MAY NOT BE FORWARDED OR DISTRIBUTED TO ANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER, AND IN PARTICULAR, MAY NOT BE FORWARDED TO ANY U.S. PERSON (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT) OR TO ANY U.S. ADDRESS. ANY FORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART IS UNAUTHORISED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OF THE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS. Confirmation of your representation: In order to be eligible to view this Offering Memorandum or make an investment decision with respect to any securities, investors must be (i) ‘‘qualified institutional buyers’’ (as defined in Rule 144A under the Securities Act) that are also ‘‘qualified purchasers’’ (as defined in Section 2(a)(51) of the U.S. Investment Company Act of 1940, as amended) or (ii) non-U.S. persons (as defined in Regulation S under the Securities Act) outside the United States who are not acting for the account or benefit of U.S. Persons. By accessing these materials, you shall be deemed to have represented to us that you (i) are a qualified institutional buyer and a qualified purchaser or (ii) are outside the United States and are not a U.S. Person and are not acting for the account or benefit of a U.S. Person. Under no circumstances shall this Offering Memorandum constitute an offer to sell or the solicitation of an offer to buy, nor shall there be any sale of the securities being offered, in any jurisdiction in which such offer, solicitation or sale would be unlawful. Recipients of this Offering Memorandum who intend to subscribe for or purchase the Notes (as defined herein) are reminded that any subscription or purchase may only be made on the basis of the information contained in this Offering Memorandum. The Notes are not eligible for placement and circulation in the Russian Federation, unless, and to the extent, otherwise permitted by Russian law. The information provided in this Offering Memorandum is not an offer, or an invitation to make offers, sell, exchange or otherwise transfer the Notes in the Russian Federation or to or for the benefit of any Russian person or entity. This Offering Memorandum and information contained herein does not constitute an advertisement or an offer of any securities in the Russian Federation. It is not intended to be, and must not be, distributed or circulated in the Russian Federation unless and to the extent otherwise permitted under Russian law. You are reminded that this Offering Memorandum has been delivered to you on the basis that you are a person into whose possession this Offering Memorandum may be lawfully delivered in accordance with the laws of the jurisdiction in which you are located and you may not, nor are you authorised to, deliver this Offering Memorandum to any other person. The materials relating to the Offering (as defined in the Offering Memorandum) do not constitute, and may not be used in connection with, an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requires that the Offering be made by a licensed broker or dealer and the underwriters or any affiliate of the underwriters is a licensed broker or dealer in that jurisdiction, the Offering shall be deemed to be made by the underwriters or such affiliate on behalf of the Issuer (as defined in the Offering Memorandum) in such jurisdiction. This Offering Memorandum has been sent to you in an electronic form. You are responsible for protecting against viruses and other destructive items. Your use of this e-mail is at your own risk, and it is your responsibility to take precautions to ensure that it is free from viruses and other items of a destructive nature. You are reminded that documents transmitted via this medium may be altered or changed during the process of electronic transmission and consequently neither the Far-Eastern Shipping Company PLC (FESCO), the Issuer, any of the the Guarantors (as defined in the Offering Memorandum), Goldman Sachs International, ING Bank N.V., London Branch, Raiffeisen Bank International AG, nor any person who controls any of them nor any director, officer, employee or agent of any of them or affiliate of any such person accepts any liability or responsibility whatsoever in respect of any difference between this Offering Memorandum distributed to you in electronic format and the hard copy version available to you. 3APR201308102131 Far East Capital Limited S.A. (a company incorporated as a societ´ e´ anonyme under the laws of the Grand Duchy of Luxembourg) U.S.$500,000,000 8.00% Senior Secured Notes due 2018 U.S.$300,000,000 8.75% Senior Secured Notes due 2020 Issue Price of the 2018 Notes: 100% Issue Price of the 2020 Notes: 100%

Far East Capital Limited S.A., a company incorporated as a societ´ e´ anonyme under the laws of the Grand Duchy of Luxembourg (the ‘‘Issuer’’), is issuing an aggregate principal amount of U.S.$500,000,000 8.00% Senior Secured Notes due 2018 (the ‘‘2018 Notes’’) and an aggregate principal amount of U.S.$300,000,000 8.75% Senior Secured Notes due 2020 (the ‘‘2020 Notes’’, and together with the 2018 Notes, the ‘‘Notes’’). The Issuer, the Guarantors (as defined herein), the Security Providers (as defined herein), ING Bank N.V., London Branch (the ‘‘Security Agent’’), TMF Trustee Limited as co-security agent (the ‘‘Co-Security Agent’’, and together with the Security Agent, the ‘‘Security Agents’’) and TMF Trustee Limited as trustee (the ‘‘Trustee’’) will enter into a trust deed in respect of the 2018 Notes dated on or about 2 May 2013 (the ‘‘2018 Trust Deed’’) and a trust deed in respect of the 2020 Notes dated on or about 2 May 2013 (the ‘‘2020 Trust Deed’’, and together with the 2018 Trust Deed, the ‘‘Trust Deeds’’). The Security Agent and each of the Guarantors, other than Open Joint Company Commercial Port of Vladivostok (the ‘‘Port of Vladivostok’’ or ‘‘VMTP’’), have entered into a deed of guarantee dated 7 December 2012 (the ‘‘Deed of Guarantee’’), which was confirmed by a deed of confirmation dated 17 April 2013 (the ‘‘Deed of Confirmation’’), to unconditionally and irrevocably on a joint and several basis guarantee the due and punctual payment of all amounts at any time becoming due and payable in respect of the Notes (each, a ‘‘Note Guarantee’’, and together, the ‘‘Note Guarantees’’). VMTP will accede to the Deed of Guarantee no later than 30 June 2013 (or such later date to which the Trustee may in its reasonable discretion agree) at which point it shall become a Guarantor. The Notes will be constituted by the Trust Deeds and will have the benefit of the Note Guarantees. The Issuer will pay interest on the 2018 Notes at an annual rate equal to 8.00% of their outstanding amount and on the 2020 Notes at any annual rate equal to 8.75% of their outstanding amount. Interest on the Notes is payable semi-annually in arrear on 2 May and 2 November of each year, commencing on 2 November 2013. Payments on the Notes (including payments by a Guarantor under each Note Guarantee) will be made without withholding or deduction for or on account of taxes, unless such withholding or deduction is required by law. In the event of any withholding or deduction for or on account of taxes of the Grand Duchy of Luxembourg (‘‘Luxembourg’’), the Republic of Cyprus (‘‘Cyprus’’), Ukraine or the Russian Federation (the ‘‘Russian Federation’’ or ‘‘Russia’’), the Issuer or (as the case may be) a Guarantor will, subject to certain exceptions and limitations, pay additional amounts to the holder of any Note to the extent described under ‘‘Terms and Conditions of the 2018 Notes’’ (‘‘Terms and Conditions of the 2018 Notes’’) and ‘‘Terms and Conditions of the 2020 Notes’’ (the ‘‘Terms and Conditions of the 2020 Notes’’, and together with the ‘‘Terms and Conditions of the 2018 Notes’’, the ‘‘Terms and Conditions of the Notes’’). The Issuer may redeem the Notes in whole but not in part at 100% of the principal amount thereof, plus accrued and unpaid interest, in the event of certain taxation changes and otherwise as described under the Terms and Conditions of the Notes. Unless previously redeemed or purchased and cancelled, the 2018 Notes will be redeemed at their principal amount on 2 May 2018 and the 2020 Notes will be redeemed at their principal amount on 2 May 2020. The Notes will be senior secured obligations of the Issuer and will rank equally in right of payment with the Issuer’s other existing and future senior indebtedness, except as otherwise described under the Terms and Conditions of the Notes. Each of the Note Guarantees will constitute a senior secured obligation of the respective Guarantor and will rank equally in right of payment with all existing and future senior secured obligations of such Guarantor, except as otherwise described under the Terms and Conditions of the Notes. The Notes and the Note Guarantees will also benefit from a security package consisting of security over (i) all of the shares in the Issuer and bank accounts of the Issuer; (ii) all of the shares in each HoldCo Guarantor (as defined herein); (iii) 69.98% of the shares of Far-Eastern Shipping Company PLC (‘‘FESCO’’), representing the HoldCo Guarantors’ interest in FESCO indirectly acquired by Maple Ridge (as defined herein) and Elvy (as defined herein) in December 2012 (see ‘‘Sponsors and Principal Shareholders’’), and other assets of the HoldCo Guarantors; (iv) all of the shares in the Subsidiary Guarantors (as defined herein) to the extent indirectly owned by FESCO; and (v) certain other assets of the Guarantors or Security Providers (as defined herein). See ‘‘Terms and Conditions of the 2018 Notes—2. Status and Note Guarantees’’. AN INVESTMENT IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE ‘‘RISK FACTORS’’ BEGINNING ON PAGE 25. The Notes and the Note Guarantees (together, the ‘‘Securities’’) have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the ‘‘Securities Act’’), and, subject to certain exceptions, may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons (as defined in Regulation S under the Securities Act (‘‘Regulation S’’)). The 2018 Notes may be offered and sold (i) within the United States only to qualified institutional buyers (‘‘QIBs’’), as defined in Rule 144A under the Securities Act (‘‘Rule 144A’’), that are also qualified purchasers (‘‘QPs’’), as defined in Section 2(a)(51) of the U.S. Investment Company Act of 1940, as amended (the ‘‘Investment Company Act’’), in reliance on the exemption from registration under Section 5 of the Securities Act provided by Rule 144A or on another exemption therefrom (the ‘‘2018 Rule 144A Notes’’); and (ii) to certain non-U.S. persons in offshore transactions as defined in and in reliance on Regulation S (the ‘‘2018 Regulation S Notes’’). The 2020 Notes may be offered and sold (i) within the United States only to QIBs that are also QPs, in reliance on the exemption from registration under Section 5 of the Securities Act provided by Rule 144A or on another exemption therefrom (the ‘‘2020 Rule 144A Notes’’, and together with the 2018 Rule 144A Notes, the ‘‘Rule 144A Notes’’; and (ii) to certain non-U.S. persons in offshore transactions as defined in and in reliance on Regulation S (the ‘‘2020 Regulation S Notes’’, and together with the 2018 Regulation S Notes, the ‘‘Regulation S Notes’’). The Issuer and the Guarantors have not been and will not be registered under the Investment Company Act. Prospective purchasers are hereby notified that sellers of the Rule 144A Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a description of these and certain further restrictions on offers, sales and transfers of the Notes and the distribution of this offering memorandum (the ‘‘Offering Memorandum’’), see ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions’’. Application has been made to the Irish Stock Exchange for the approval of this document as listing particulars (the ‘‘Listing Particulars’’). Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List (the ‘‘Official List’’) and trading on the Global Exchange Market (the ‘‘Global Exchange Market’’), which is the exchange regulated market of the Irish Stock Exchange. The Global Exchange Market is not a regulated market for the purposes of Directive 2004/39/EC. This Offering Memorandum constitutes the Listing Particulars in respect of the admission of the Notes to the Official List and to trading on the Global Exchange Market of the Irish Stock Exchange. The Notes will be offered and sold in the minimum denomination of U.S.$200,000 and integral multiples of U.S.$1,000 thereafter. The 2018 Regulation S Notes will initially be represented by interests in a global unrestricted note in registered form (the ‘‘2018 Unrestricted Global Certificate’’), without interest coupons, which will be deposited with a common depositary for Euroclear Bank SA/NV (‘‘Euroclear’’) and Clearstream Banking, societ´ e´ anonyme (‘‘Clearstream, Luxembourg’’), and registered in the name of a nominee, on or about 2 May 2013 (the ‘‘Issue Date’’). The 2018 Rule 144A Notes will initially be represented by interests in a global restricted note in registered form (the ‘‘2018 Restricted Global Certificate’’, and together with the 2018 Unrestricted Global Certificate, the ‘‘2018 Global Certificates’’ and each a ‘‘2018 Global Certificate’’), without interest coupons which will be registered in the name of Cede & Co., as nominee of, and deposited with a custodian for, The Depository Trust Company (‘‘DTC’’) on or about the Issue Date. The 2020 Regulation S Notes will initially be represented by interests in a global unrestricted note in registered form (the ‘‘2020 Unrestricted Global Certificate’’, and together with the 2018 Unrestricted Global Certificate, the ‘‘Unrestricted Global Certificates’’), without interest coupons, which will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg, and registered in the name of a nominee, on or about the Issue Date. The 2020 Rule 144A Notes will initially be represented by interests in a global restricted note in registered form (the ‘‘2020 Restricted Global Certificate’’, and together with the 2018 Restricted Global Certificate, the ‘‘Restricted Global Certificates’’), without interest coupons which will be registered in the name of Cede & Co., as nominee of, and deposited with a custodian for, DTC on or about the Issue Date. The 2020 Restricted Global Certificate and the 2020 Unrestricted Global Certificate are herein referred to as the ‘‘2020 Global Certificates’’ and each a ‘‘2020 Global Certificate’’. The 2018 Global Certificates and the 2020 Global Certificates are herein referred to as the ‘‘Global Certificates’’ and each a ‘‘Global Certificate’’. Beneficial interests in the Global Note Certificates will be shown on, and transfers thereof will be effected only through, records maintained by DTC, Euroclear or Clearstream, Luxembourg (as the case may be) and their respective participants. See ‘‘Clearing and Settlement’’. Individual note certificates in registered form will only be available in certain limited circumstances as described herein.

Joint Bookrunners Goldman Sachs ING Raiffeisen Bank International International

The date of this Offering Memorandum is 24 April 2013. IMPORTANT INFORMATION ABOUT THIS OFFERING MEMORANDUM Each of the Issuer and FESCO accepts responsibility for the information contained in this Offering Memorandum. To the best of the knowledge of each of the Issuer and FESCO (each of which has taken all reasonable care to ensure that such is the case), the information contained in this Offering Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. Each Guarantor accepts responsibility for the information contained in this Offering Memorandum relating to itself and to its Note Guarantee. To the best of the knowledge and belief of each Guarantor (each of which has taken all reasonable care to ensure that such is the case), the information contained in this Offering Memorandum relating to itself and its Note Guarantee is in accordance with the facts and does not omit anything likely to affect the import of such information. This Offering Memorandum does not constitute an offer of, or an invitation by or on behalf of the Issuer, FESCO, the Guarantors, the Joint Bookrunners (as defined in ‘‘Plan of Distribution’’) or the Trustee to subscribe for or purchase any Notes in any jurisdiction where it is unlawful to make such an offer or invitation. The distribution of this Offering Memorandum and the offering of the Notes (the ‘‘Offering’’) in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Memorandum comes are required by the Issuer, FESCO, the Guarantors, the Joint Bookrunners and the Trustee to inform themselves about and to observe any such restrictions. For a description of certain further restrictions on offers and sales of the Notes and distribution of this Offering Memorandum, see ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions’’. No person is authorised to provide any information or to make any representation not contained in this Offering Memorandum and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of the Issuer, FESCO, the Guarantors, the Joint Bookrunners or the Trustee. The delivery of this Offering Memorandum at any time does not imply that the information contained in it is correct as at any time subsequent to its date. Neither the delivery of this Offering Memorandum nor the Offering, sale or delivery of any Notes shall in any circumstances create any implication that there has been no adverse change, or any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer, the Group (as defined herein) or the Guarantors since the date of this Offering Memorandum. None of the Issuer, FESCO, the Guarantors, the Joint Bookrunners, the Trustee or any of its or their respective representatives or affiliates makes any representation to any offeree or purchaser of the Notes offered hereby regarding the legality of an investment by such offeree or purchaser under applicable legal, investment or similar laws. Each investor should consult with its own advisers as to the legal, tax, business, financial and related aspects of the purchase of the Notes. Prospective purchasers must comply with all laws that apply to them in any place in which they buy, offer or sell any Notes or possess this Offering Memorandum. Any consents or approvals that are needed in order to purchase any Notes must be obtained. The Issuer, FESCO, the Guarantors, the Joint Bookrunners and the Trustee are not responsible for compliance with these legal requirements. The appropriate characterisation of the Notes under various legal investment restrictions, and thus the ability of investors subject to these restrictions to purchase the Notes, is subject to significant interpretative uncertainties. No representation or warranty is made as to whether, or the extent to which, the Notes constitute a legal investment for investors whose investment authority is subject to legal restrictions, and investors should consult their legal advisers regarding such matters. No prospective investor should consider any information in this Offering Memorandum to be investment, legal, tax or other advice. Any investment in the Notes does not have the status of a bank deposit and is not within the scope of the deposit protection scheme operated by the Central Bank of Ireland (the ‘‘Central Bank’’). The Issuer is not and will not be regulated by the Central Bank as a result of issuing the Notes. Each potential investor in the Notes must determine the suitability of that investment in light of its own circumstances. In particular, each potential investor should: (i) have sufficient knowledge and experience to make a meaningful evaluation of the Notes, the merits and risks of investing in the Notes and the information contained or incorporated by reference in this Offering Memorandum or any applicable supplement; (ii) have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of its particular financial situation, an investment in the Notes and the impact the Notes will have on its overall investment portfolio;

i (iii) have sufficient financial resources and liquidity to bear all of the risks of an investment in the Notes, including Notes with principal or interest or settlement amount or entitlement payable in one or more currencies, or where the currency for payments of principal or interest or settlement amount or entitlement is different from the potential investor’s currency; (iv) understand thoroughly the terms of the Notes and be familiar with the behaviour of any relevant indices and financial markets; and (v) be able to evaluate (either alone or with the help of a financial adviser) possible scenarios for economic, interest rate and other factors that may affect its investment and its ability to bear the applicable risks. The Notes are complex financial instruments. Sophisticated institutional investors generally do not purchase complex financial instruments as stand-alone investments. They purchase complex financial instruments as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in the Notes, which are complex financial instruments, unless it has the expertise (either alone or with a financial adviser) to evaluate how the Notes will perform under changing conditions, the resulting effects on the value of the Notes and the impact this investment will have on the potential investor’s overall investment portfolio. In connection with the issue of the Notes, Goldman Sachs International (the ‘‘Stabilising Manager’’) (or any person acting on behalf of the Stabilising Manager) may over-allot Notes or effect transactions with a view to supporting the market price of the Notes at a level higher than that which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or any person acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any stabilisation action may begin on or after the date on which adequate public disclosure of the terms of the offer of the Notes is made and, if commenced, may be discontinued at any time and must be brought to an end no later than the earlier of 30 days after the Issue Date of the Notes and 60 days after the date of the allotment of the Notes. The contents of the websites or any other documents of FESCO or of any of its consolidated subsidiaries (FESCO, together with its consolidated subsidiaries, the ‘‘Group’’) or the Guarantors do not form any part of this Offering Memorandum. No representation or warranty, express or implied, is made by the Joint Bookrunners, the Trustee or any of its or their affiliates or any person acting on their behalf as to the accuracy or completeness of the information set forth in this Offering Memorandum. Nothing contained in this Offering Memorandum is, or shall be relied upon as, a promise or representation, whether as to the past or the future. Each person receiving this Offering Memorandum acknowledges that such person has not relied on the Joint Bookrunners, the Trustee or any of its or their affiliates or any person acting on their behalf in connection with its investigation of the accuracy or completeness of such information or its investment decision. Each person contemplating making an investment in the Notes from time to time must make its own investigation and analysis of the creditworthiness of the Issuer, FESCO and the Guarantors and its own determination of the suitability of any such investment, with particular reference to its own investment objectives and experience, and any other factors which may be relevant to it in connection with such investment.

NOTICE TO RESIDENTS OF THE RUSSIAN FEDERATION Information contained in this Offering Memorandum is not an offer, or an invitation to make offers, sell, purchase, exchange or transfer any securities in the Russian Federation, and does not constitute an advertisement or offering of any securities in the Russian Federation. The securities referenced in this Offering Memorandum have not been and will not be registered in the Russian Federation or admitted to public placement and/or public circulation in the Russian Federation and are not intended for ‘‘placement’’ or ‘‘circulation’’ in the Russian Federation except as permitted by Russian law.

NOTICE TO UNITED KINGDOM RESIDENTS This document is only being distributed to and is only directed at (1) persons who are outside the United Kingdom or (2) to investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the ‘‘Order’’) or (3) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as ‘‘Relevant Persons’’). The Notes are only available to,

ii and any invitation, offer or agreement to subscribe, purchase or otherwise acquire such Notes will be engaged in only with, Relevant Persons. Any person who is not a Relevant Person should not act or rely on this document or any of its contents.

NOTICE TO UNITED STATES INVESTORS The Notes and the Note Guarantees have not been registered, approved or disapproved by the U.S. Securities and Exchange Commission (the ‘‘SEC’’), any state securities commission in the United States or any other U.S. regulatory authority, nor have any of the foregoing authorities passed upon or endorsed the merits of the Offering or the accuracy or the adequacy of this Offering Memorandum. Any representation to the contrary is a criminal offence in the United States. The Notes and the Note Guarantees have not and will not be registered under the Securities Act, and the Notes may be sold in the United States only to QIBs in reliance on Rule 144A who are also QPs. This Offering is being made in the United States in reliance upon an exemption from registration under the Securities Act for an offer and sale of the Notes which does not involve a public offering. In making your purchase, you will be deemed to have made certain acknowledgments, representations and agreements. See ‘‘Plan of Distribution’’ and ‘‘Transfer Restrictions’’. This Offering Memorandum is being provided (1) to a limited number of investors in the United States that the Issuer reasonably believes to be QIBs as defined in Rule 144A that are QPs within the meaning of the Investment Company Act for informational use solely in connection with their consideration of the purchase of the Notes and (2) to investors outside the United States who are not U.S. persons and are not acting for the account or benefit of U.S. persons in connection with offshore transactions complying with Rule 903 or Rule 904 of Regulation S. Prospective purchasers are hereby notified that sellers of any Rule 144A Note may be relying upon the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.

NOTICE TO NEW HAMPSHIRE RESIDENTS NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A LICENCE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES (‘‘RSA 421-B’’) WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, OR TRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.

AVAILABLE INFORMATION So long as any Notes are outstanding and are ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) under the Securities Act, the Issuer will, during any period in which it is neither subject to Section 13 or 15(d) of the U.S. Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’) nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, provide to any holder or beneficial owner of such restricted securities or to any prospective purchaser of such restricted securities designated by such holder or beneficial owner or to the Trustee for delivery to such holder, beneficial owner or prospective purchaser, in each case upon the request of such holder, beneficial owner, prospective purchaser or the Trustee, the information required to be provided by Rule 144A(d)(4) under the Securities Act. So long as any of the Note Guarantees are ‘‘restricted securities’’ within the meaning of Rule 144(a)(3) under the Securities Act, the respective Guarantor will, during any period in which it is neither subject to Section 13 or 15(d) of the Exchange Act nor exempt from reporting pursuant to Rule 12g3-2(b) thereunder, provide to any holder or beneficial owner of the Notes or to any prospective purchaser of the Notes designated by such holder or beneficial owner or to the Trustee for delivery to such holder, beneficial owner or prospective purchaser, in each case upon the request of such holder, beneficial

iii owner, prospective purchaser or the Trustee, the information required to be provided by Rule 144A(d)(4) under the Securities Act.

REFERENCES Unless the context otherwise requires, references to ‘‘we,’’ ‘‘us’’ and ‘‘our’’ refer to the Group. References to the ‘‘Sponsors’’ refer to Summa Group and TPG, collectively. References to the ‘‘Associates’’ refer to Open Joint Stock Company ‘‘TransContainer’’ (‘‘TransContainer’’) and Closed Joint Stock Company ‘‘Russkaya Troika’’ (‘‘Russkaya Troika’’), collectively.

iv FORWARD-LOOKING STATEMENTS Certain statements in this Offering Memorandum are not historical facts and are ‘‘forward looking’’ within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. This Offering Memorandum contains certain forward-looking statements in various locations, including, without limitation, under the headings ‘‘Overview’’, ‘‘Risk Factors’’, ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and ‘‘Business’’. We may from time to time make written or oral forward-looking statements in reports to our shareholders and in other communications. Examples of such forward-looking statements include, but are not limited to: • statements of our plans, objectives or goals, including those related to products or services; • statements of future economic performance; and • statements of assumptions underlying such statements. Forward-looking statements that may be made by us from time to time (but that are not included in this Offering Memorandum) may also include projections or expectations of revenue, income (or loss), earnings (or loss) per share, dividends, or other financial items or ratios. Words such as ‘‘believes’’, ‘‘anticipates’’, ‘‘expects’’, ‘‘estimates’’, ‘‘intends’’ and ‘‘plans’’ and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements. By their very nature, forward-looking statements involve inherent risks and uncertainties, both general and specific, and risks exist that the predictions, forecasts, projections and other forward-looking statements will not be achieved. You should be aware that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements. These factors include: • the prevailing global and domestic economic environment; • inflation, interest rate and exchange rate fluctuations; • our ability to finance our anticipated capital expenditures through the global capital markets, revenue from operations or otherwise; • the effects of, and changes in, governmental policies, including those of the Government of the Russian Federation (the ‘‘Government’’); • the effects of competition in the geographic and business areas in which we conduct operations; • the effects of changes in laws, regulations, taxation or accounting standards or practices; • our ability to maintain and increase market share for our products and control expenses; • the condition of ageing infrastructure in Russia; • our ability to successfully implement any of our business strategies; • technological changes; • the effects of international and domestic political events on our businesses; • our success in identifying other risks to our business and managing the risks of the aforementioned factors; and • those described in the part of this Offering Memorandum entitled ‘‘Risk Factors’’, which should be read in conjunction with the other cautionary statements that are included in this Offering Memorandum. This list of important factors is not exhaustive. When relying on forward-looking statements, you should carefully consider the foregoing factors and other uncertainties and events, especially in light of the political, economic, social and legal environment in which we operate. Such forward-looking statements speak only as of the date on which they are made. Accordingly, we do not undertake any obligation to update or revise any of them, whether as a result of new information, future events or otherwise except as otherwise required by applicable law. We do not make any representation, warranty or prediction that the results or events anticipated by such forward-looking statements will be achieved or occur, and such forward-looking statements represent, in each case, only one of many possible scenarios and should not be viewed as the most likely or standard scenario.

v TABLE OF CONTENTS IMPORTANT INFORMATION ABOUT THIS OFFERING MEMORANDUM ...... i FORWARD-LOOKING STATEMENTS ...... v PRESENTATION OF FINANCIAL AND OTHER INFORMATION ...... 1 CURRENCIES AND EXCHANGE RATES ...... 3 ENFORCEABILITY OF JUDGMENTS ...... 4 OVERVIEW ...... 6 OVERVIEW OF THE OFFERING ...... 19 RISK FACTORS ...... 25 USE OF PROCEEDS ...... 76 CAPITALISATION ...... 77 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA ...... 78 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 89 DESCRIPTION OF CERTAIN INDEBTEDNESS ...... 115 INDUSTRY ...... 133 BUSINESS ...... 145 DIRECTORS AND MANAGEMENT ...... 184 RELATED PARTY TRANSACTIONS ...... 192 SPONSORS AND PRINCIPAL SHAREHOLDERS ...... 194 DESCRIPTION OF THE ISSUER AND GUARANTORS ...... 195 TERMS AND CONDITIONS OF THE 2018 NOTES ...... 203 TERMS AND CONDITIONS OF THE 2020 NOTES ...... 271 SUMMARY OF THE PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM ...... 273 REGULATORY OVERVIEW ...... 276 TAXATION ...... 296 TRANSFER RESTRICTIONS ...... 310 PLAN OF DISTRIBUTION ...... 314 CLEARING AND SETTLEMENT ...... 317 CERTAIN U.S. EMPLOYEE BENEFIT PLAN CONSIDERATIONS ...... 321 LEGAL MATTERS AND INDEPENDENT AUDITORS ...... 323 GENERAL INFORMATION ...... 324 INDEX TO THE FINANCIAL STATEMENTS ...... F-1

vi PRESENTATION OF FINANCIAL AND OTHER INFORMATION Presentation of Our Financial Information Our audited consolidated financial statements as of and for the years ended 31 December 2012 and 2011 (the ‘‘2012 Financial Statements’’) and as of and for the years ended 31 December 2011 and 2010 (the ‘‘2011 Financial Statements’’, and together with the 2012 Financial Statements, the ‘‘Financial Statements’’) have been prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’) as issued by the International Accounting Standards Board (‘‘IASB’’). The Financial Statements are included in this Offering Memorandum on pages F-2 through F-110. The U.S. Dollar (as defined herein) is the presentation currency for the Financial Statements. Financial figures in the Offering Memorandum are shown in millions of U.S. Dollars and rounded to the nearest million (unless otherwise indicated). We include information in this Offering Memorandum regarding our Adjusted Revenue, EBITDA, Adjusted EBITDA, Pro Forma Cash and Cash Equivalents, Pro Forma Adjusted Net Interest-Bearing Debt, Pro Forma Adjusted Gross Interest-Bearing Debt, Pro Forma Adjusted Interest Expense and Adjusted Net Assets, which are not financial measures specifically defined under IFRS. See ‘‘Selected Consolidated Financial and Other Data—Other Financial Data (non-IFRS)’’. These measures are unaudited, may not be comparable to other similarly titled measures of other companies and are not measurements under IFRS or other generally accepted accounting principles, and they should not be considered in isolation from, or as substitutes for, the information contained in the Financial Statements. For a reconciliation of Adjusted Revenue to revenue, and EBITDA and Adjusted EBITDA to net income, see ‘‘Selected Consolidated Financial and Other Data’’.

Presentation of Financial Information on the Issuer and Guarantors The Issuer is a special purpose vehicle established for the purpose of raising capital through the issuance of debt securities. Because it was incorporated on 4 April 2013, it has not yet prepared any financial statements, and no financial statements of the Issuer are included in this Offering Memorandum. In addition, no separate financial statements of any of the Guarantors are included in this Offering Memorandum. The Financial Statements include both Subsidiary Guarantors and non-guarantor subsidiaries (the ‘‘Non-Guarantor Subsidiaries’’). The Subsidiary Guarantors include the Partially-Owned Subsidiary Guarantors, which consist of the Port of Vladivostok, upon accession, in which FESCO directly and indirectly owns 95.577% of the shares, and TEK MetizTrans, in which FESCO indirectly owns 99.99% of the shares. The Subsidiary Guarantors (excluding VMTP) together generated EBITDA of U.S.$257 million, representing 104% of the Group’s total consolidated EBITDA for the year ended 31 December 2012 and had net assets of U.S.$631 million, representing 41% of the Group’s total consolidated net assets as at 31 December 2012. The Non-Guarantor Subsidiaries of FESCO (including, for this purpose, VMTP) together generated EBITDA of U.S.$35 million for the year ended 31 December 2012, representing 14.2% of the Group’s total consolidated EBITDA, and had net assets of U.S.$834 million, representing 54% of the Group’s total consolidated net assets as at 31 December 2012. The Subsidiary Guarantors (including VMTP) together generated EBITDA of U.S.$283 million, representing 115% of the Group’s total consolidated EBITDA for the year ended 31 December 2012 and had net assets of U.S.$880 million, representing 57% of the Group’s total consolidated net assets as at 31 December 2012. The Non-Guarantor Subsidiaries of FESCO (excluding, for this purpose, VMTP) together generated EBITDA of U.S.$9 million for the year ended 31 December 2012, representing 4% of the Group’s total consolidated EBITDA, and had net assets of U.S.$585 million, representing 38% of the Group’s total consolidated net assets as at 31 December 2012. There are no Subsidiary Guarantors which individually comprised greater than 20% of the EBITDA or net assets of the Group as of and for the year ended 31 December 2012, except the following: • Limited Liability Company ‘‘Firm ‘‘Transgarant’’ (‘‘Transgarant’’), which accounted for U.S.$105 million, or 42%, of the Group’s EBITDA in 2012 and U.S.$286 million, or 19%, of the Group’s net assets as of 31 December 2012; and

1 • Closed Joint Stock Company ‘‘Vladivostok Container Terminal’’ (‘‘VKT’’), which accounted for U.S.$60 million, or 24%, of the Group’s EBITDA in 2012 and U.S.$205 million, or 13%, of the Group’s net assets as of 31 December 2012. Because FESCO itself is not an obligor on the Notes and its Non-Guarantor Subsidiaries (excluding, for this purpose, VMTP) represent approximately 38% of our total consolidated net assets, the Financial Statements may be of limited use in assessing the financial position and results of the obligors of the Notes.

Information Derived from Third Parties We have obtained certain statistical and market information that is presented in this Offering Memorandum on such topics as the Russian economy in general and related subjects from publicly available data (such as information contained on official websites and in publications of the Government and various state agencies of the Russian Federation and its constituent entities or mass media sources). Operational and financial data with respect to our Associates were obtained from the public disclosures of TransContainer and Russkaya Troika, respectively. We also include certain market data derived from reports prepared by Morcenter and INFOLine. We confirm that such information has been accurately reproduced and that, so far as we are aware and are able to ascertain from information published by such sources, no facts have been omitted which would render the reproduced information inaccurate or misleading.

Rounding Certain figures in this Offering Memorandum have been subject to rounding adjustments; accordingly, figures shown for the same category presented in different tables may vary slightly, and figures shows as totals in certain tables may not be an arithmetic aggregation of the figures that precede them.

Currency In this Offering Memorandum: ‘‘RUB’’ or ‘‘Rouble’’ means the lawful currency of the Russian Federation; ‘‘U.S. Dollar’’, ‘‘USD’’ or ‘‘U.S.$’’ means the lawful currency of the United States; and ‘‘EUR’’, ‘‘Euro’’ or ‘‘g’’ means the lawful currency of the EU.

Contact Information FESCO is an open joint stock company incorporated under the laws of the Russian Federation. We are registered in the Unified State Register of Legal Entities under principal state registration number 1022502256127. Our registered office is located at Serebryanicheskaya Naberezhnaya, 29, business centre ‘‘Serebryaniy gorod’’, 2nd floor, Moscow, 109028 Russia. The telephone number of our registered office is +7 (495) 926 8000. Our Internet address is www.fesco.ru.

2 CURRENCIES AND EXCHANGE RATES The following tables show, for the periods indicated, certain information regarding the exchange rate between the Rouble and the U.S. Dollar, based on the official exchange rate quoted by the Central Bank of Russia (the ‘‘CBR’’). These rates may differ from the actual rates used in the preparation of the Financial Statements and other financial information appearing in this Offering Memorandum.

Roubles per U.S. Dollar Period High Low average(1) Period End Year 2012 ...... 34.04 28.95 31.09 30.37 2011 ...... 32.68 27.26 29.39 32.20 2010 ...... 31.78 28.93 30.37 30.48 2009 ...... 36.43 28.67 31.72 30.24 2008 ...... 29.38 23.13 24.86 29.38 Month April 2013 (through 22 April 2013) ...... 31.72 30.88 31.31 31.46 March 2013 ...... 31.08 30.51 30.80 31.08 February 2013 ...... 30.62 29.93 30.16 30.62 January 2013 ...... 30.42 30.03 30.26 30.03

(1) The average rates are calculated as the average of the daily exchange rates on each business day (which rate is announced by the CBR for each such business day) and on each non-business day (which rate is equal to the exchange rate on the previous business day). The exchange rate between the Rouble and the U.S. Dollar on 22 April 2013 was 31.46 Roubles per U.S.$1.00. The Rouble is generally not convertible outside Russia. A market exists within Russia for the conversion of Roubles into other currencies, but the limited availability of other currencies may tend to distort their values relative to the Rouble. See ‘‘Risk Factors—Risks Relating to Our Business and Industry—General Risks—We face foreign exchange and inflation risks’’.

3 ENFORCEABILITY OF JUDGMENTS The Issuer’s, FESCO’s and Guarantors’ presence outside the United Kingdom and the United States may limit your legal recourse against the Issuer, FESCO and Guarantors. The Issuer is a company incorporated as a societ´ e´ anonyme under the laws of Luxembourg, FESCO is an open joint stock company incorporated under the laws of the Russian Federation and the Guarantors are incorporated under the laws of Russia, Ukraine or Cyprus. Substantially all of the Issuer’s, FESCO’s and Guarantors’ directors and executive officers named in this Offering Memorandum reside outside the United Kingdom and the United States. All or a substantial portion of FESCO’s and the Guarantors’ assets and the assets of FESCO’s and Guarantors’ officers and directors are located mainly in Russia, Ukraine or Cyprus. As a result, it may not be possible for you to: • effect service of process within the United States or the United Kingdom upon the Issuer, FESCO or Guarantors or any of the Issuer’s, FESCO’s or Guarantors’ directors or executive officers named in this Offering Memorandum; or • enforce, in the U.S. or English courts, judgments obtained outside the U.S. or English courts against the Issuer, FESCO or Guarantors or any of the Issuer’s, FESCO’s or Guarantors’ directors and executive officers named in this Offering Memorandum in any action, including actions under the civil liability provisions of the U.S. securities laws or any state or territory of the United States. In addition, it may be difficult for you to enforce, in original actions brought in courts in jurisdictions located outside the United States or the United Kingdom, liabilities predicated upon the U.S. securities laws or upon English laws. Judgments rendered by a court in any jurisdiction outside the Russian Federation will be generally recognised by courts in the Russian Federation if an international treaty providing for the recognition and enforcement of judgments in civil cases exists between the Russian Federation and the country where the judgment is rendered and/or a federal law is adopted in the Russian Federation that provides for the recognition and enforcement of foreign court judgments. No such treaty for the reciprocal enforcement of foreign court judgments in civil and commercial matters exists between the Russian Federation and certain jurisdictions (including the United Kingdom and the United States), and no relevant federal law on enforcement of foreign court judgments has been adopted in the Russian Federation. In the absence of an applicable treaty, enforcement of a final judgment rendered by a foreign court may still be recognised by a Russian court on the basis of reciprocity, if courts of the country where the foreign judgment is rendered have previously enforced judgments issued by Russian courts. While Russian courts have recently recognised and enforced English court judgments on these grounds, the existence of reciprocity must be established at the time the recognition and enforcement of a foreign judgment is sought, and it is not possible to predict whether a Russian court will in the future recognise and enforce on the basis of reciprocity a judgment issued by a foreign court, including an English court. Even if an applicable international treaty is in effect or a foreign judgment might otherwise be recognised and enforced on the basis of reciprocity, the recognition and enforcement of a foreign judgment will in all events be subject to exceptions and limitations provided for in Russian law. For example, a Russian court may refuse to recognise or enforce a foreign judgment if its recognition or enforcement would contradict Russian public policy. The Notes, the Trust Deeds, the Guarantees and the Paying Agency Agreements (as defined herein) each provide that any non-contractual obligations arising out of or in connection with them will be governed by English law and will provide for disputes, controversies and causes of action brought by any party thereto to be settled by arbitration in accordance with the rules of the LCIA (formerly the London Court of International Arbitration) (the ‘‘LCIA Rules’’). The place of such arbitration shall be London, England. The Russian Federation and the United Kingdom are parties to the United Nations (New York) Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the ‘‘New York Convention’’). Consequently, Russian courts should generally recognise and enforce in the Russian Federation an arbitral award from an arbitral tribunal in the United Kingdom on the basis of the rules of the New York Convention (subject to qualifications provided for in the New York Convention and compliance with Russian procedural regulations and other procedures and requirements established by Russian legislation).

4 The Arbitrazh Procedural Code of the Russian Federation (the ‘‘Arbitrazh Procedural Code’’) sets out the procedure for the recognition and enforcement of foreign arbitral awards by Russian courts. The Arbitrazh Procedural Code also contains an exhaustive list of grounds for the refusal of recognition and enforcement of foreign arbitral awards by Russian courts, which grounds are broadly similar to those provided by the New York Convention. The Arbitrazh Procedural Code and other Russian procedural legislation could change, and other grounds for Russian courts to refuse the recognition and enforcement of foreign courts’ judgments and foreign arbitral awards could arise in the future. In practice, reliance upon international treaties may meet with resistance or a lack of understanding on the part of a Russian court or other officials, thereby introducing delay and unpredictability into the process of enforcing any foreign judgment or any foreign arbitral award in the Russian Federation. Furthermore, any arbitral award pursuant to arbitration proceedings in accordance with the LCIA Rules and the application of English law to the relevant documents and any non-contractual obligations arising out of or in connection with them may be limited by the mandatory provisions of Russian laws relating to the exclusive jurisdiction of Russian courts and the application of Russian laws with respect to bankruptcy, winding up or liquidation of Russian companies. All above considerations regarding the enforceability of foreign court judgments in the Russian Federation essentially also apply to enforceability of the same in Ukraine. For description of the risks relating to your ability to enforce court judgments against the Issuer, FESCO or Guarantors or any of their directors and executive officers, see ‘‘Risk Factors—Risks Relating to Russia—The difficulty of enforcing court decisions and the discretion of state authorities in enforcing claims could prevent investors in the Notes from obtaining effective redress in court proceedings’’.

5 OVERVIEW The following overview should be read in conjunction with, and is qualified in its entirety by reference to, the more detailed information in this Offering Memorandum and our Financial Statements included elsewhere in this Offering Memorandum. Investing in the Notes involves a high degree of risk. The information set out under ‘‘Risk Factors’’ should be carefully considered. Certain statements in this Offering Memorandum include forward-looking statements which also involve risks and uncertainties as described under ‘‘Forward-Looking Statements’’.

General Description of the Group We are one of the leading independent transportation and logistics companies in Russia with operations in the ports, rail, integrated logistics and shipping businesses. Our diversified but integrated asset portfolio enables us to unite nearly all of the links in the intermodal transportation value chain and to provide door-to-door logistics solutions that are tailor-made to the needs of our clients in Russia and abroad. The majority of our assets are located in the Russian Far East, enabling us to capitalise on growing trade volumes between Russia and . In 2012, we generated revenue of U.S.$1,197 million, Adjusted Revenue of U.S.$1,172 million and Adjusted EBITDA of U.S.$279 million. Since 2002, our key strategy has been to strengthen our position as one of Russia’s leading providers of intermodal transportation and logistics services with a particular focus on container transportation. Our well-invested asset base allows us to offer our clients fully integrated supply chain solutions. Our operations are grouped into four divisions—Ports; Rail; Liner and Logistics; and Shipping—which are supported by a corporate centre in Moscow and non-divisional service companies. • Ports Division: Our Ports Division manages our portfolio of port facilities and container terminals at the Port of Vladivostok, one of the largest ports in Russia, in terms of capacity and cargo volumes handled. The Port of Vladivostok, in which we have full operational control, is one of the major gateways in the Russian Far East and is well-situated to capitalise on growing trade flows between Russia and Asia, particularly of containerised and non-containerised cargo and automotive imports and metals and other commodities exports. The Port of Vladivostok handles goods arriving by sea, rail and road, benefiting from convenient access to the Trans-Siberian railway and to roads leading into the city of Vladivostok. By connecting the assets of our Rail Division, Liner and Logistics Division and Shipping Division, our terminals at the Port of Vladivostok represent a critical link in the logistics value chain, which enables us to deliver intermodal transportation services to our customers. • Rail Division: Our Rail Division operates our freight rail transportation business under the Transgarant brand, as well as our inland dry terminal in Khabarovsk. As of 31 December 2012, we operated a fleet of 16,194 railcars under the Transgarant brand, of which we owned 14,975 railcars. Our Rail Division also manages a majority of the fleet of Russkaya Troika, our 50-50 joint venture with OJSC ‘‘Russian Railways’’ (‘‘Russian Railways’’). Russkaya Troika owns 1,574 platforms, which are used to transport containerised cargo by regular block trains on the Moscow-Vladivostok, Moscow-Novosibirsk, Moscow-Yekaterinburg and Moscow-Nakhodka routes, as well as on block trains between the Baltics and Central Asia. In 2012, a majority of Russkaya Troika’s fleet was involved in operations managed by our Rail Division and directly serviced our projects. • Liner and Logistics Division: Our Liner and Logistics Division manages our container lines and forwarding and logistics business, operating a variety of sea (both international and cabotage), intermodal and refrigerated liner services to ports in the Russian Far East, , Asia and . Our liner services are integrated with the services of our other divisions, including cargo handling at ports and onward delivery by rail, thereby offering our customers a ‘‘one-stop shop’’ for the transportation of their products under a single bill of lading. Our Liner and Logistics Division also operates Dalreftrans (as defined herein), the only specialised reefer cargo terminal in the Russian Far East and itself a provider of refrigerated container transport, and performs certain agency functions, such as customs clearance, on behalf of our clients. Through our Liner and Logistics Division, as of 31 December 2012, we held 35,926 containers, with a capacity of 56,446 TEUs. • Shipping Division: Our Shipping Division is mainly engaged in ship ownership and management and operates primarily as a support centre for our Liner and Logistics Division, to which it charters-out ships and provides vessel agency services. As of 31 December 2012, we owned a fleet of 26 vessels. In 2013, we disposed of four vessels, and we also expect to sell our two ice-breaking

6 transportation vessels by the end of the year, representing a total capacity for the six vessels of 59,009 DWT. The table below sets forth certain financial information of each of our divisions for 2012:

For the year ended 31 December 2012 Revenue Adjusted Revenue Adjusted EBITDA U.S.$ (in % of U.S.$ (in % of U.S.$ (in % of Division millions) total(1) millions) total(1) millions) total(1) Ports ...... 178 13.8 206 16.3 98 32.1 Rail ...... 347 26.9 347 27.5 167 54.8 Liner and Logistics ...... 623 48.3 623 49.3 43 14.1 Shipping ...... 141 10.9 87 6.9 (3) (1.0) Intra-group/corporate ...... (92) — (92) — (26) — Total ...... 1,197 100.0 1,172 100.0 279 100.0

Note: (1) excluding intra-group/corporate See ‘‘Selected Consolidated Financial and Other Data’’ for a reconciliation of Adjusted Revenue to revenue, and EBITDA and Adjusted EBITDA to net income.

Competitive Strengths We believe our key strengths include:

Unique integrated intermodal transport operator in Russia With more than 130 years of experience in the transportation sector, we are one of the leading, privately- owned transportation and logistics companies in Russia with strategically integrated operations in the ports, rail, liner and logistics and shipping businesses. Our diverse asset portfolio and world-wide network of sales offices enable us to unite nearly all of the links in the intermodal transportation value chain, connecting Asia and the Far East, Russia and Europe. As a result, we are able to provide our clients with a full range of sophisticated, integrated, door-to-door logistics solutions, including cargo transportation and freight forwarding services such as delivery by rail or sealiner, cargo handling at ports and pick-up and delivery by truck, all under a single bill of lading. Integrated operations and asset ownership enable us to increase the speed and efficiency of cargo transportation, which we believe positions us favourably with respect to domestic competition as well as competing deep sea trade routes from Asia to Russia and Europe. Because we own much of the asset base required to provide integrated transportation solutions, including a sizable fleet of containers and railcars, ports facilities and shipping vessels, we have a distinct competitive advantage over many forwarding companies who do not have their own transportation assets and thus must rely on third parties to provide them. We also offer our customers essential complementary services, such as route planning and optimisation, customs clearance, storage and cargo tracking. Our integrated service offering is flexible and can be tailor-made to the specific and evolving needs of our clients in Russia and abroad.

Strong position to benefit from structural growth in the container transportation market The Russian container market has historically been one of the fastest growing segments in the Russian transportation market, and we expect this trend to continue in the future. Container volumes grew at 5.0 times the real growth rate of Russian GDP between 2003 and 2012, and total Russian port container volumes grew from approximately 879,000 TEUs in 2003 to 5,061,566 TEUs in 2012, a CAGR of 22%, according to Morcenter. Notwithstanding this growth, containerisation levels in Russia are significantly lower than in developed countries, and comparable emerging markets, such as Brazil and China, suggesting significant growth opportunities. In 2010, container penetration in Russia was 25 TEUs per thousand persons, compared to 180 TEUs per thousand persons in Germany, 138 TEUs per thousand persons in the U.K., 135 TEUs per thousand persons in the U.S., 83 TEUs per thousand persons in China and 42 TEUs per thousand persons in Brazil, according to UNCTAD and Morcenter. Reflecting growing consumer and industrial spending as well as continued container penetration in the Russian market, container handling at ports is expected to grow at a 11.5% CAGR between 2011 and 2015, according to

7 Russian Railways, and container transportation by rail is expected to grow at a 7.5% CAGR between 2012 and 2020, according to TransContainer. We are well-positioned to benefit from increasing containerisation levels in Russia. Our operations in the Far East are strategically located in close proximity to key Asian markets, such as China, Japan and South Korea. We hold a sizable market share in container trade on certain of our sea lines between Asia and Russia, with our China Line accounting for approximately 26% of the market share along its route in 2012 based on management estimates. As a result of our five regularly-scheduled cabotage lines, we also hold a substantial share of the container transportation market on Far East cabotage lines. In addition, we benefit from captive capacity across the multi-modal chain, including the container gateway at the Port of Vladivostok, and possess an extensive fleet of containers and platforms. As of 31 December 2012, we held 35,926 containers with a capacity of 56,446 TEUs and owned 2,571 platforms, and we own a 50% share in Russkaya Troika, which manages 1,574 platforms, most of which are used in our transportation value chain. We operated dedicated container block train services, currently dispatching on average eight block trains per week from Moscow to points in Siberia and the Far East, including Vladivostok, Novosibirsk and Khabarovsk, and 8.5 block trains per week from Vladivostok to Moscow and Novosibirsk and have expanded our offering of container sea liner services. Currently, we operate five sea lines across Asia, three lines to Europe and two sea lines to the United States. We believe that our strong position in the container trade market between Russia and Asia and along Far East cabotage routes, together with our extensive portfolio of container assets, puts us in an ideal position to take advantage of the anticipated growth in the Russian container transportation market. Diversified business across products, markets and customers with an established presence in certain niche markets. We operate a diversified business across the entire transportation value chain, which allows us to mitigate cyclical weaknesses in isolated transportation end markets. Alongside our core container operations, we maintain a balanced portfolio of services with significant exposure to other cargoes, which we believe increases the resilience of our operations. In 2012, for example, bulk cargo turnover equaled 2,953 thousand tonnes and container turnover equaled 456,146 TEUs at the Port of Vladivostok. The Rail Division also has a well-balanced portfolio, with coal, iron ore and construction materials accounting for 44.5%, 25.0%, 8.1%, respectively, of the division’s non-containerised freight volumes in 2012. Container volumes handled by the Rail Division totaled 148,872 TEUs in 2012. We also benefit from balanced exposure among the markets we serve. In 2012, 23.1% of the cargo throughput of our Liner and Logistics Division was delivered to domestic markets (including intermodal transportation services within Russia), with shipments to China, Europe and South Korea accounting for 35.2%, 14.8% and 14.7%, respectively, of throughput. Our broad and diverse customer base limits our exposure to a particular customer or industry. In 2012, we served over 1,500 customers, representing an attractive mix of freight forwarders, retail and industrial customers. In 2012, the five largest customers of our Ports Division accounted for 13% of the Ports Division’s revenue, and the five largest customers of our Rail Division accounted for 38% of the Rail Division’s revenue. We are also an established player in certain niche markets. We maintain a leading position in the transportation of coal in the Yakutia region, one of the fastest growing coal exploration markets in Russia. We operate our own train formation in Yakutia, consisting of two main-line diesel locomotives, as well as a fleet of railcars operated on behalf of third parties. We also operate a seven kilometre railway spur, adjacent to the Neryungri coal-fired power station to which we deliver coal, under a long-term lease from Russian Railways. Because of our management of this railway branch and the deliveries we make along the spur to various important facilities in the region, we believe we have an incumbent and defendable market position in the coal transportation market in Yakutia. As measured by freight turnover at the Neryungri-Freight Station and Neryungri-Passenger Station, we believe our share of the coal transportation market in Yakutia was approximately 44% in 2012. In addition, we are among the largest railcar operators in Ukraine, providing services to a core set of clients, such as ArcelorMittal, with which we maintain strategic relationships. We are transforming our Shipping Division to focus on support services for our Liner and Logistics Division and to take advantage of certain niche markets. Following our repositioning of the Shipping Division, our fleet will consist primarily of icebreakers, ice-class vessels and container and general purpose vessels, which we believe to be the most attractive niche markets in the shipping industry. As of 31 December 2012, 13 of our remaining 26 vessels were operated under the Russian flag, which

8 provides a key competitive advantage in Russia, where operating under the Russian flag is a requirement in the provision for cabotage services.

Well-invested asset base in markets with high capital intensity We own and operate a diverse, but integrated, asset portfolio. We own most of our key operating and infrastructure assets, which allows us to capture value across the entire transportation chain, reduce our dependence on third party providers and provide guaranteed high quality services to our customers. We believe that the high capital intensity of the transportation business serves as a natural barrier to entry and supports the sustainability of our market position. As of 31 December 2012, our total tangible non-current assets had a total balance sheet value of U.S.$994 million, including U.S.$585 million of liquid rolling stock and vessels. Over the past three years, we invested more than U.S.$325 million on acquiring and maintaining our tangible non-current asset base, thereby creating a strong platform for future growth with a relatively limited need for additional capital expenditures to execute on our growth strategy.

Ports Division In March 2012, we obtained full operational control over the Port of Vladivostok, which offers a full range of stevedoring, storage, bunkering and related ports services. The Port of Vladivostok is well-situated in the Far East Basin to capitalise on growing trade flows between Russia and Asia, particularly of containerised and non-containerised cargo and automotive imports and metals and other commodities exports. In 2012, the Port of Vladivostok accounted for approximately 35% of container throughput in the Far East Basin, according to Morcenter. Since acquiring control, we have also started the reorganisation of the Port of Vladivostok, so that all stevedoring operations at the port are handled by a single operator and VKT becomes fully integrated into the port’s corporate structure. We believe that this reorganisation, which is expected to be completed in 2013, will allow us to further leverage the synergies that exist between the Port of Vladivostok and our rail, shipping and liner and logistics assets.

Rail Division We own approximately 92.5% of our fleet of 16,194 cars as of 31 December 2012. Our rolling stock, which had a net book value of U.S.$498 million as of 31 December 2012, has an average age of 11.3 years, compared to a Russian market average age of 14.8 years, according to INFOLine. Our relatively new fleet allows us to keep our maintenance costs low and our fleet operational for longer periods. In addition, we operate our own railway station in Chelyabinsk, which provides us with extra storage and parking capacity for our railcar fleet and functions as a repair depot for routine maintenance of our railcars and locomotives, thereby reducing our dependence on Russian Railways or other third- party providers for such services. We also operate an inland container terminal at Khabarovsk, which we are in the process of reconstructing and expanding. The Khabarovsk Terminal handles container and non-container cargo arriving by rail and truck and also maintains storage facilities for containers, timber, metal, oil and other products. The Khabarovsk Terminal had a storage capacity of approximately 18,000 m3 as of 31 December 2012, and has an annual throughput capacity of 30,000 TEUs of containerised cargo. The Khabarovsk Terminal plays an important role in our plans to develop a network of inland rail container terminals that is designed to lessen our dependence on other terminal operators.

Liner and Logistics Division As of 31 December 2012, we held 35,926 containers with a capacity of 56,446 TEUs. The net book value of our container units was U.S.$34 million as of 31 December 2012. Our Liner and Logistics Division also operates Dalreftrans, the only specialised reefer cargo terminal in the Russian Far East and itself a provider of refrigerated container transportation volumes.

Shipping Division As of 31 December 2012, we owned a shipping fleet of 26 vessels with a total capacity of 0.3 million DWT, including 13 Russian-flagged vessels that we deploy on relatively high-margin cabotage lines. Our fleet as of 31 December 2012, which consisted of 14 container ships, four timber carriers, four roll on-roll off (‘‘Ro-Ro’’) carriers, two bulk carriers/dry cargo ships and two icebreaking transportation vessels, had a net book value of U.S.$87 million.

9 Attractive and historically high cash generative financial profile We have generated a growing EBITDA margin since 2010, and have achieved pre-expansion capex cash flow conversion, i.e., Adjusted EBITDA less maintenance capital expenditures and changes in trade working capital as a percent of Adjusted EBITDA, of 94%, 91% and 99% for the years ended 31 December 2012, 2011 and 2010, respectively. The Rail Division and Ports Division, which collectively accounted for 87% of our Adjusted EBITDA in 2012 (excluding intra-group/corporate transactions), have achieved solid profitability due to strong fundamentals of the underlying markets and a number of strategic initiatives we have undertaken in recent years. The Ports Division recorded an Adjusted EBITDA margin, i.e., Adjusted EBITDA as a percentage of Adjusted Revenue, of 48% in the year ended 31 December 2012, compared to 38% and 35% in the years ended 31 December 2011 and 2010, respectively. The strong Adjusted EBITDA margins generated by the Ports Division are in large part due to the consolidation of all stevedoring activities at the Port of Vladivostok after we acquired full control over the port in March 2012 and the ongoing integration of VKT, which was historically treated as a distinct business unit, into the corporate structure of the Port of Vladivostok. Both of these developments have allowed us to leverage cost synergies through the reduction of employees and other overhead costs. We believe that there is scope for a further increase in efficiency of our Ports operations as we progress with the integration of VKT into the Port of Vladivostok and further optimise the Port of Vladivostok’s operations. The Rail Division recorded an Adjusted EBITDA margin of 48% in the year ended 31 December 2012, compared to 43% and 26% in the years ended 31 December 2011 and 2010, respectively. The improving margins in our Rail Division are a function of increasing rates, the changing cargo mix towards higher margin container transportation, the optimisation of our fleet structure and the renegotiation of operating lease contracts at the end of 2012, which has resulted in more attractive and flexible leasing terms. The optimisation of our fleet structure reflects a strategic shift away from relatively more expensive rented-in railcars towards a largely owned fleet. For example, as of 31 December 2012, rented-in railcars accounted for only 7.5% of our total railcar fleet, compared to 26.2% as of 31 December 2010. As part of our optimisation programme, we have also replaced many of our older and less efficient railcars with newer railcars. The strong growth and margin profile of our core operating divisions indicates our commitment to maintaining a high quality asset base and a lean, efficient and flexible cost structure. As part of our commitment to an efficient and flexible cost structure, we have also disposed of ships and reduced headcount in our Shipping Division. In 2013, we plan to further reduce headcount in our Shipping Division and Ports Division to adjust for the changed scope of our operations. We also benefit from significant free cash flow potential in light of our limited maintenance capital expenditure requirements and the discretionary nature of our expenditures. From 2010 to 2012, we made total capital expenditures of U.S.$306 million, of which U.S.$252 million related to growth expenditures and U.S.$54 million related to maintenance capital expenditures. We believe these previous investments have helped us to establish a well-capitalised asset base and as a result we expect our capital expenditure requirements to remain relatively low in the near term, thereby potentially unlocking significant free cash flow resources. In 2013, we expect our capital expenditures to be approximately U.S.$60 million (of which approximately U.S.$25-30 million is expected to be maintenance capital expenditures), which is consistent with previous years. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources—Capital expenditures’’.

Highly experienced management team and committed Sponsors with significant industry experience We have an experienced and highly-qualified team of senior management with an average of 16 years of relevant experience in the transportation and infrastructure industry. Our management team has a proven track record of managing our business through the cycle, as demonstrated by the restructuring measures taken during and after the recent economic downturn. We have put into place a leaner cost structure by lowering our fixed costs through selective headcount reductions and the restructuring of our railcar fleet. In 2008, for example, we rented-in an average of 4,326 railcars, many of which were rented-in pursuant to inflexible and expensive lease terms, compared to an average of 1,219 cars rented-in in 2012. At the same time, we have managed to secure more attractive and flexible lease terms for our current portfolio of rented-in cars. During and after the downturn, we have refocused our business on serving high quality clients, thereby minimising our credit risk and enabling us to manage our working capital more effectively. Our management team has also implemented measures to improve the efficiency of our operations by fostering deeper integration among our divisions and altering our

10 business mix, such as by acquiring a controlling stake in the Port of Vladivostok in March 2012, which allowed us to optimise our cargo handling business and contributed to the U.S.$14 million increase in the Ports Division’s Adjusted EBITDA in 2012 compared to 2011. Our management team also reduced our exposure to the global shipping market in an effort to focus on niche, high margin shipping operations, such as cabotage and icebreaking. Since 2008, we have also prioritised the structurally more attractive container transportation market by increasing our rail container volumes from approximately 59,000 TEUs in 2008 to 149,000 TEUs in 2012. In addition, Russkaya Troika, our equity investee, transported approximately 116,000 TEUs in 2012. These changes have enabled us to reduce our exposure to the more mature and competitive bulk cargo market, which in 2012 started to experience an oversupply of railcars and a decline in rates. We also enjoy a strong and transparent working relationship with the Sponsors, who possess substantial management and industry experience. Summa Group, which exercises significant management control over us, is a strategic investor that plays an active role in the operational management of its companies and focuses on adding long-term value to its investments. Summa Group also possesses substantial relevant industry experience as it, together with its principal shareholder, is currently involved in the management of the Novorossiysk Commercial Sea Port, Russia’s largest and Europe’s third largest port operator in terms of cargo turnover, according to Morcenter. We believe that cooperation with Summa Group could provide us with access to the strategically important Black Sea market, where we are currently not actively present. TPG, which has certain rights in respect of the oversight of our business, is a leading platform with more than U.S.$54.5 billion under management and significant experience managing levered companies and improving their financial metrics and cash flows. The Sponsors support our long-term growth strategy, including our plans to expand our presence in the container market, and we intend to leverage the Sponsors’ managerial expertise and any potential operating synergies that may exist with the other portfolio companies of the Summa Group to realise our strategic vision.

Strategies Our key strategies include:

Continue growing an integrated container transportation business platform Our key strategic objective is to become an integrated national leader in the container logistics market, capturing domestic, international and transit flows and benefiting from the high-growth container market in Russia. We intend to marshal the resources of our diverse asset base in order to capitalise on growing container flows between Russia and Asia. We intend to complete the integration and reorganisation of our port facilities by the end of 2013, which we believe will allow us to improve the port’s operational efficiency and debottleneck the port’s infrastructure, thereby increasing port container throughput to approximately 650,000 TEUs by 2017. We plan to leverage our network of container terminals, including the Port of Vladivostok, which benefits from convenient access to the Trans-Siberian Railway, and the Khabarovsk Terminal, which has an annual throughput capacity of 30,000 TEUs of containers, to provide our customers with cost-effective, intermodal transportation services. We are currently the second largest Russian rail container transportation operator by volume and third largest by fleet size according to INFOLine. Since 2008, we have prioritised the structurally more attractive container transportation market by increasing our container volumes from aproximately 59,000 TEUs in 2008 to 149,000 TEUs in 2012. In addition, Russkaya Troika, our equity investee, transported approximately 116,000 TEUs in 2012. We are among the pioneers in block train services in Russia and have recently increased the frequency of our container block train services, currently dispatching on average eight block trains per week from Moscow to points in the Russian Far East, and intend to further develop this service as well as increase the frequency of such trains, which are in high demand from our customers and generate premium margins for us in light of the priority treatment given to such trains by Russian Railways. Operating block trains significantly expands our potential customer base and reduces our dependence on large industrial clients, increasing the resilience of the business to downturns. We also intend to expand the international sea lines offered by our Liner and Logistics Division to capitalise on growing container flows and to further integrate our Liner and Logistics Division with the

11 services of our other divisions, including cargo handling at ports and onward delivery by rail, in order to provide our customers with integrated logistics solutions.

Strengthen niche positioning outside containers Although the container market is a core priority for us, we are also an established player in certain niche markets. Going forward, we intend to maintain our leading positions in these niche markets and selectively expand into new businesses. For example, we maintain a leading position in the transportation of coal in the Yakutia region, one of the fastest growing coal exploration markets in Russia, where we operate our own train formation, a fleet of railcars on behalf of third parties and a seven kilometre railway spur, adjacent to the Neryungri coal-fired power station to which we deliver coal. In addition, we are one of the largest railcar operators in Ukraine providing services to a core set of clients, including leading metal and mining companies such as ArcelorMittal, with which we maintain strategic relationships. We are one of the largest owners of pellet hoppers in Russia. These specialised railcars are in high demand from Russian and Ukrainian metallurgy players. As these railcars are mostly used for transportation of hot metal inside steel plants, we rent out a majority of these railcars to a number of Russian and Ukrainian steel companies at attractive rates. In the Rail Division we own a diverse fleet of railcars that we intend to optimise over time by focusing on the niche segments above and disposing of certain railcars or swapping them for a specialised fleet that we focus on, such as platforms, gondola cars and mineral hoppers. For example, in 2012, we disposed of 427 grain hoppers to Fintrans Group. We intend to leverage our experience in these niche markets to expand selectively into new businesses. For example, with acquisition of control over the Port of Vladivostok we have attained control over bunkering operations in the port which we consider to be an attractive growth opportunity. We intend to invest approximately U.S.$7.0 million in increasing bunkering capacity to 750,000 tonnes per annum by 2014.

Deepen integration of businesses We believe that there is growing demand for integrated logistics services in Russia. We are one of the leading independent transportation and logistics companies in Russia, and one of the few service providers that has a diverse asset base and world-wide network of sales offices in order to provide our clients with sophisticated, tailor-made logistics solutions in a cost effective manner. We believe that our ability to bundle and cross-sell our services will provide opportunities to provide better services to our customers and generate higher margins. We plan to complete the reorganisation of the Port of Vladivostok by the end of 2013, which we believe will allow us to further leverage the synergies that exist between the Port of Vladivostok and our rail, shipping and liner and logistics assets. We have transformed our Shipping Division into a support centre that services our Liner and Logistics Division and certain niche markets. We disposed of 21 vessels in 2012 and plan to dispose of an additional six vessels in 2013, four of which have already been sold, constituting the majority of our bulk and general cargo ships. Following these disposals, our fleet will be heavily skewed towards icebreakers, ice-class vessels and container and general purpose vessels, which we believe to be the most attractive niche markets in the shipping industry. We also intend to leverage our relationship with Summa Group, which, given its expertise in infrastructure management, will enable us to deepen the integration of our Group businesses and capture any potential operating synergies that may exist with other portfolio companies of Summa Group, including potentially expanding into the strategically important Black Sea market, where we do not currently have a significant presence.

Maintain a lean and efficient cost structure We are focused on maintaining and improving our cost competitiveness. Since the financial crisis, we have undertaken a significant restructuring of the business that included changes in our business mix, rebalancing client and cargo portfolio and operational restructuring. We have downsized low margin shipping operations and increased our high margin ports business, increased our share of the relatively

12 more profitable container transportation business and higher margin services such as block trains. We have also reduced our fixed costs base by reducing our rented-in railcar fleet, optimising our geographic footprint in Russia and reducing headcount. As a result, our Adjusted EBITDA margin has increased from 20% in 2010 to 24% in 2012. In March 2012, we obtained full operational control over the Port of Vladivostok, which offers a full range of stevedoring, storage, bunkering and related ports services, and, in 2012, accounted for approximately 35% of container throughput in the Far East Basin, according to Morcenter. Full operational control enables us to complete the integration of VKT into the Port of Vladivostok and the reorganisation of the port’s assets, which we plan to accomplish by the end of 2013. As part of this reorganisation, we intend to minimise the number of stevedoring operators at the Port of Vladivostok and continue to reduce overhead costs, including further cutbacks in personnel, which we expect will enhance the port’s operational efficiency and allow us to more effectively leverage the synergies that exist between the Port of Vladivostok and our rail, shipping and liner and logistics assets.

De-lever balance sheet over time and maintain a strong liquidity position We intend to continue our focus on generating strong cash flow and reducing our leverage through liquidity and cash flow management. Through our active cash flow management and our moderate maintenance capital requirements, combined with our flexibility to postpone strategic capital expenditures when required, we have been able to achieve strong cash flow conversion. We intend to actively manage our indebtedness towards a target net leverage of 2.0-2.5x that we believe is adequate for our business in the long term. We intend to manage our leverage position through the selective growth of our business, the optimisation of operations and a disciplined and demand-driven capital expenditure programme. We plan to operate with a significant cash balance, in line with our current level, which we believe, when allied with our prudent working capital management, will address our liquidity needs going forward and provide an important ‘‘through the cycle’’ cash buffer for our business.

Sponsors and Principal Shareholders In December 2012, Mr. Ziaudin Magomedov, the controlling shareholder of Summa Group, and entities controlled by Mr. Mark Garber, one of the principal shareholders of the GHP Group, indirectly acquired 49.99% and 23.76%, respectively, of the shares of FESCO. Also in December 2012, TPG acquired certain rights in respect of oversight of the FESCO business and an indirect economic ownership interest of 17.5% in the Group from the 49.99% interest indirectly acquired by Mr. Magomedov. See ‘‘Sponsors and Principal Shareholders’’. The acquisitions were funded by a mixture of debt and equity, including the HoldCo Facility and the OpCo Facility (as defined herein). Summa Group is a diversified private investment holding company with assets in a broad range of sectors, including transport and logistics, infrastructure, engineering and construction, oil and gas, metals and mining, telecom, agriculture and utilities. Summa Group’s portfolio companies employ more than 10,000 people in almost 40 regions of Russia and abroad. Summa Group is a strategic investor that plays an active role in the operational management of its portfolio companies, enhancing corporate governance and management practices, improving financial discipline and prioritising socially responsible behavior. Summa Group has significant expertise as an operator of infrastructure assets in Russia, in particular, through its investment in the OJSC ‘‘Novorossiysk Commercial Sea Port’’ (‘‘NCSP’’). NCSP operates the Novorossiysk Port on the Black Sea, as well as a stevedore operation specialising in container cargo at the Baltiysk Port on the Baltic Sea. TPG is a leading private equity platform with more than U.S.$54.5 billion under management and is part of a U.S.$60 billion global investment business with cross-platform collaboration. TPG has a long-standing global presence in North America, Asia and Europe and over the years has developed a broad set of capabilities that support multiple investment strategies as well as significant in-house operations with over 50 operating professionals. TPG’s deal partners have on average 13 years of private equity experience, combined with an average tenure of eight years with the company. TPG has substantial business experience in Russia, with investments in retail, banking and commercial real estate, as well as transportation. TPG’s investments in Russia include Lenta, a leading Russian retailer, VTB, the second largest financial institution in Russia in terms of assets, and White Square/White Gardens, a prime Class A office complex in the center of Moscow.

13 GHP Group is a financial group with activities in wealth management, real estate investment, direct investments, M&A advisory and financial consulting services. GHP Group was established in 2012 after the division of the business from Fleming Family & Partners, a global financial services and asset management group. GHP Group manages a broad portfolio of direct investments in real estate and other sectors and has extensive experience in emerging markets, as well as the metals and mining and infrastructure industries. See ‘‘—Competitive Strengths—Highly experienced management team and committed Sponsors with significant industry experience’’ for further discussion of our Sponsors.

Trading Update In the first three months of 2013, we continued to see significant growth in our container related business driven by the high demand for our services. Outside of containers, we have experienced weaker bulk and general cargo volumes across our divisions. Growth in our container related business was primarily driven by increases in intermodal transportation volumes in our Liner and Logistics Division and throughput in our Ports Division. Although our Rail Division has been negatively impacted by softness in the Russian rail market during the first three months of 2013, we expect Russian rail volumes and turnover to improve over the course of the year. In line with our strategy to continue downsizing and refocusing our Shipping Division, we disposed of four vessels and acquired two new vessels, which will serve on our Liner and Logistics Division’s routes, during the first three months of 2013.

Issuer The Issuer was incorporated in Luxembourg on 4 April 2013 as a wholly-owned indirect subsidiary of FESCO. The Issuer is a special purpose vehicle established for the purpose of raising capital through the issuance of debt securities. The relationship between the Issuer and FESCO, the sole shareholder of the Issuer, is governed by the articles of association of the Issuer and Luxembourg law.

Corporate and Financing Structure The following diagram depicts, in simplified form, our corporate and financing structure after giving effect to the offering of the Notes and the application of the proceeds therefrom as described under ‘‘Use of Proceeds’’. The diagram does not include all of our entities, or all debt obligations thereof. For further information, please refer to ‘‘Terms and Conditions of the 2018 Notes’’, ‘‘Terms and Conditions of the 2020 Notes’’ and ‘‘Description of Certain Indebtedness’’.

Issuer A Principal Sponsors Shareholder of GHP Group HoldCo Guarantors

Unrestricted Subsidiary Maple Ridge Ltd Elvy Ltd

100% 100%

Wiredfly Intermediate Investments HoldCo Ltd (2) Guarantors (1) 49.99% 23.75%

FESCO

Far East Subsidiary Non-Guarantor 2018 Notes offered hereby (1) (4) Capital OpCo Facility Guarantors (3) Subsidiaries Halimeda 2020 Notes offered hereby Limited S.A. 14APR201312243131

(1) The Notes will be general obligations of the Issuer and will be guaranteed by the Guarantors. The Notes will be secured by first-priority liens over the Collateral (as defined in ‘‘Terms and Conditions of the 2018 Notes—2. Status and Note Guarantees—2.4 Notes Security’’. The Collateral will also be pledged to secure the OpCo Facility on a pari passu basis and the Guarantors under the Notes will also guarantee the OpCo Facility. The Collateral will consist of security over (a) all of the shares in the Issuer and the Issuer’s bank accounts; (b) all of the shares in each HoldCo Guarantor; (c) 69.98% of the shares

14 in FESCO, representing the HoldCo Guarantors’ interest in FESCO indirectly acquired by Maple Ridge and Elvy in December 2012 (see ‘‘Sponsors and Principal Shareholders’’), and other assets of the HoldCo Guarantors; (d) all of the shares in the Subsidiary Guarantors to the extent indirectly owned by FESCO; and (e) certain other assets of the Guarantors and Security Providers. See ‘‘Terms and Conditions of the 2018 Notes—2. Status and Note Guarantees’’ for further information on the Note Guarantees and the collateral securing the Notes. (2) The Collateral also comprises 100% of the shares in Wiredfly (as defined herein), an intermediate Cypriot holding company which owns 49.99% of outstanding shares of FESCO. On or prior to 31 May 2013, Wiredfly will be subdivided such that there will be two intermediate Cypriot holding companies each individually holding less than 25% of the outstanding shares in FESCO (the ‘‘Wiredfly Reorganisation’’). Pledges over 100% of the shares in each such intermediate holding company will form part of the Collateral from the date of the Wiredfly Reorganisation. (3) Subsidiary Guarantors (including VMTP) accounted for 106.1% of our Adjusted EBITDA for the year ended 31 December 2012 and 73.0% of our Adjusted Net Assets as of 31 December 2012. FESCO will not provide any guarantee in respect of the Notes. (4) Halimeda International Limited (the only material asset of which is its 23.7% interest in publicly listed rail operator OJSC TransContainer) and its subsidiaries are unrestricted subsidiaries under the Notes and are consequently not subject to the restrictive covenants of the Notes. See ‘‘Terms and Conditions of the 2018 Notes’’.

15 Summary Financial Information The following summary financial information presents selected historical financial information as of and for the years ended 31 December 2012, 2011 and 2010. With the exception of the sections entitled ‘‘Other Financial Data’’ and ‘‘Pro-Forma Data’’, this information has been extracted without material adjustment from our Financial Statements. This summary financial information should be read in conjunction with ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and our Financial Statements included elsewhere in this Offering Memorandum.

CONSOLIDATED INCOME STATEMENT DATA

Year ended 31 December 2012 2011 2010 (U.S.$ million) Consolidated Income Statement Revenue ...... 1,197 1,029 800 Operating expenses ...... (793) (680) (544) Gross profit before depreciation and amortisation ...... 404 349 256 Depreciation and amortisation ...... (100) (82) (73) Administrative expenses ...... (157) (133) (99) Impairment (loss)/reversal on tangible fixed assets, net ...... (96) (47) 39 Loss on disposal of tangible fixed assets ...... (2) — (5) Bad debt charge ...... (2) (6) (4) Other (expenses)/income ...... (24) 1 7 Profit from operating activity ...... 23 82 121 Interest expense ...... (53) (45) (54) Foreign exchange gain/(loss) ...... 1 15 (2) Result on disposal of investments ...... ——420 Other financial income/(expenses), net ...... 5 1 (14) Share of profit of equity accounted investees ...... 45 7 6 Profit before income tax ...... 21 60 477 Income tax expense ...... (38) (31) (21) (Loss)/Profit for the year ...... (17) 29 456 Attributable to: Owners of the Company ...... (20) 19 449 Non-controlling interests ...... 3 10 7

CONSOLIDATED BALANCE SHEET DATA

Year ended 31 December 2012 2011 2010 (U.S.$ million) Total non-current assets ...... 2,203 1,881 1,384 Total current assets ...... 477 453 729 Total Assets ...... 2,680 2,334 2,113 EQUITY AND LIABILITIES Total equity ...... 1,532 1,441 1,527 Total non-current liabilities ...... 774 561 363 Total current liabilities ...... 374 332 223 Total liabilities ...... 1,148 893 586 Total equity and liabilities ...... 2,680 2,334 2,113

16 CONSOLIDATED CASH FLOWS DATA

Year ended 31 December 2012 2011 2010 (U.S.$ million) Cash flows from operating activities ...... 169 172 141 Net cash (used in)/generated from investing activities ...... (383) (573) 779 Net cash generated from/(used in) financing activities ...... 206 88 (441) Cash and cash equivalents at 1 January ...... 232 556 82 Cash and cash equivalents at 31 December ...... 232 232 556

OTHER FINANCIAL DATA (non-IFRS)

Year ended 31 December (Unaudited) 2012 2011 2010 (U.S.$ million) Ports Division ...... 206 219 172 Rail Division ...... 347 308 209 Liner and Logistics Division ...... 623 567 430 Shipping Division ...... 87 159 160 Intra-Group eliminations ...... (92) (82) (58) Total Adjusted Revenue(1) ...... 1,172 1,171 913

(1) See ‘‘Selected Consolidated Financial and Other Data’’ for a reconciliation of Adjusted Revenue to total revenue for the Group and the Ports Division and Shipping Division for the years ended 31 December 2012, 2011 and 2010. Year ended 31 December (Unaudited) 2012 2011 2010 (U.S.$ million) Ports Division ...... 98 84 61 Rail Division ...... 167 133 55 Liner and Logistics Division ...... 43 51 63 Shipping Division ...... (3) 5 19 Intra-Group/Corporate Division ...... (26) (29) (18) Total Adjusted EBITDA(1) ...... 279 244 180

(1) See ‘‘Selected Consolidated Financial and Other Data’’ for a reconciliation of Adjusted EBITDA to net income for the Group and for each of its divisions for the years ended 31 December 2012, 2011 and 2010.

PRO FORMA DATA (non-IFRS)

Year ended 31 December (Unaudited) 2012

Pro Forma Cash and Cash Equivalents(1) (U.S.$ million) ...... 215 Pro Forma Adjusted Gross Interest-Bearing Debt(2) (U.S.$ million) ...... 1,192 Pro Forma Adjusted Net Interest-Bearing Debt(3) (U.S.$ million) ...... 976 Pro Forma Adjusted Interest Expense(4) (U.S.$ million) ...... 99 Pro Forma Adjusted Net Interest-Bearing Debt/Adjusted EBITDA ...... 3.5x Adjusted EBITDA/Pro Forma Adjusted Interest Expense(5) ...... 2.8x

(1) Pro Forma Cash and Cash Equivalents are cash and cash equivalents adjusted to give effect to the Offering and related use of proceeds. (2) Pro Forma Adjusted Gross Interest-Bearing Debt consists of adjusted gross debt (excluding the U.S.$140 million margin loan incurred by Halimeda (an Unrestricted Subsidiary as defined in the Terms and Conditions of the 2018 Notes)) adjusted to give effect to the Offering and related use of proceeds.

17 (3) Pro Forma Adjusted Net Interest-Bearing Debt consists of Pro Forma Adjusted Gross Interest-Bearing Debt, net of Pro Forma Cash and Cash Equivalents. (4) Pro Forma Adjusted Interest Expense represents the annual interest expense on Pro Forma Adjusted Gross Interest-Bearing Debt. For the purposes of this calculation, amounts being used for repayment of other indebtedness (as set forth under ‘‘Use of Proceeds’’) have been allocated to certain pre-acquisition indebtedness and the OpCo Facility according to our current refinancing plans. The allocation to specific facilities is subject to revision and, accordingly, Pro Forma Adjusted Interest Expense could be higher or lower depending upon the other indebtedness ultimately repaid. (5) For the purposes of this calculation, amounts being used for repayment of other indebtedness (as set forth under ‘‘Use of Proceeds’’) have been allocated to certain pre-acquisition indebtedness and the OpCo Facility according to our current refinancing plans. The allocation to specific facilities is subject to revision and, accordingly, Pro Forma Adjusted Interest Expense, and therefore the ratio of Adjusted EBITDA/Pro Forma Adjusted Interest Expense, could be higher or lower depending upon the other indebtedness ultimately repaid.

18 OVERVIEW OF THE OFFERING The following overview of the Offering should be read in conjunction with, and is qualified in its entirety by the Terms and Conditions of the Notes, the Note Guarantees and the Trust Deeds constituting the Notes.

Issuer: ...... Far East Capital Limited S.A., a company incorporated as a societ´ e´ anonyme under the laws of Luxembourg, having its registered address at 13-15, avenue de la Liberte´ L-1931 Luxembourg, and is in the process of being registered with the Luxembourg Trade and Companies Register (Registre de commerce et des societ´ es´ Luxembourg) under number B176472. Issue: ...... U.S.$500,000,000 aggregate principal amount of 8.00% Senior Secured Notes due 2018. U.S.$300,000,000 aggregate principal amount of 8.75% Senior Secured Notes due 2020. Guarantors: ...... Remono Shipping Company Limited (‘‘Remono’’); Fesco Ocean Management Limited (‘‘FESCO Ocean Management’’); Limited Liability Company ‘‘FESCO Integrated Transport (‘‘FIT’’); Transgarant; Dalreftrans Co., Ltd. (‘‘Dalreftrans’’); Subsidiary Enterprise ‘‘Transgarant-Ukraine’’ (‘‘Transgarant Ukraine’’); and Limited Liability Company ‘‘FESCO Rail’’ (‘‘FESCO Rail’’), VKT; Limited Liability Company ‘‘TEK MetizTrans’’ (‘‘TEK MetizTrans’’) and, upon accession, VMTP (the ‘‘Subsidiary Guarantors’’). On an adjusted basis, the Subsidiary Guarantors, including VMTP, collectively generated 106.1% of our Adjusted EBITDA for the year ended 31 December 2012, and collectively held 73.0% of our Adjusted Net Assets as at 31 December 2012. The shares of the Subsidiary Guarantors that are not owned by FESCO are non-material. All Subsidiary Guarantors are controlled by FESCO and are fully consolidated into our consolidated financial statements. FESCO exercises control over the financial and operational policies of each of the Subsidiary Guarantors. Maple Ridge Limited (‘‘Maple Ridge’’) and Elvy Limited (‘‘Elvy’’) (the ‘‘TopCo Guarantors’’). Calamita Trading Limited (‘‘Calamita’’); Mirihia Holdings Limited (‘‘Mirihia’’); Rikima Holdings Limited (‘‘Rikima’’); Vovosa Co Limited (‘‘Vovosa’’) and Wiredfly Investments Limited (‘‘Wiredfly’’) (the ‘‘Intermediate HoldCo Guarantors’’, and together with the TopCo Guarantors, the ‘‘HoldCo Guarantors’’, and together with the Subsidiary Guarantors, the ‘‘Guarantors’’). Security ...... The Notes and the Note Guarantees will also benefit from a security package consisting of security over (i) all of the shares in the Issuer and bank accounts of the Issuer; (ii) all of the shares in each HoldCo Guarantor; (iii) 69.98% of the shares of FESCO, representing the HoldCo Guarantors’ interest in FESCO indirectly acquired by Maple Ridge and Elvy in December 2012 (see ‘‘Overview—Sponsors and Principal Shareholders’’), and other assets of the HoldCo Guarantors; (iv) all of the shares in the Subsidiary Guarantors to the extent indirectly owned by FESCO; and (v) certain other assets of the

19 Guarantors or Security Providers. See ‘‘Terms and Conditions of the 2018 Notes—2. Status and Note Guarantees’’. Security Providers: ...... Sian Participation Corp. (‘‘Sian’’); Merbau Synergy Limited (‘‘Merbau Synergy’’); Eustacia Finance Limited (‘‘Eustacia Finance’’); Limited Liability Company ‘‘M-Port’’; Limited Liability Company ‘‘National Container Company’’; Tryreefer Shipping Company Limited (‘‘Tryreefer Shipping’’) and Kalentio Trading Limited (the ‘‘Security Providers’’). Issue Price: ...... 100% of the principal amount of the Notes. Maturity Date: ...... 2 May 2018 (in the case of the 2018 Notes). 2 May 2020 (in the case of the 2020 Notes). Issue Date: ...... 2 May 2013. Trustee: ...... TMF Trustee Limited. Security Agents: ...... ING Bank N.V., London Branch and TMF Trustee Limited. Principal Paying and Transfer Agent: ...... Citibank, N.A., London Branch. Registrar: ...... Citigroup Global Markets Deutschland AG. Interest: ...... Interest on the Notes will be payable semi-annually in arrear on each interest payment date (being 2 May and 2 November in each year and commencing on 2 November 2013). Form and Denomination: ...... The Notes will be issued in registered form, in denominations of U.S.$200,000 and multiples of U.S.$1,000 in excess thereof. The Notes will be represented by Global Note Certificates. The Global Note Certificates will be exchangeable for Notes in individual form in the limited circumstances specified in the Global Note Certificates. Initial Delivery of Notes: ...... On or before the Issue Date, the Unrestricted Global Certificates shall be registered in the name of a nominee of, and deposited with a common depositary for, Euroclear and Clearstream, Luxembourg, and the Restricted Global Certificates shall be registered in the name of Cede & Co. as nominee of, and deposited with a custodian for, DTC. Status of the Notes: ...... The Notes will constitute senior secured obligations of the Issuer which rank pari passu and ratably without preference among themselves and at least equally with all other present and future senior secured obligations of the Issuer, except as described in the Terms and Conditions of the Notes. Note Guarantees: ...... Each of the Note Guarantees will constitute a senior secured obligation of the respective Guarantor and will rank equally in right of payment with all existing and future senior secured obligations of such Guarantor, except as otherwise described in the Terms and Conditions of the Notes. Use of Proceeds: ...... The aggregate net proceeds of the issuance of the Notes are expected to be approximately U.S.$796 million after deducting from the gross proceeds the fees and commissions of the Joint Bookrunners. Certain other expenses associated with the Offering, including legal fees and travel and certain other out-of-pocket expenses, are expected to be paid by FESCO after the Offering and are expected not to exceed U.S.$5 million.

20 The aggregate net proceeds from the issuance of the Notes will be used to repay outstanding amounts in connection with certain acquisition debt of the Sponsors and a portion of the outstanding pre-acquisition debt of the Group and the payment of fees and expenses in relation thereto. See ‘‘Use of Proceeds’’. Withholding Taxes: ...... All payments on the Notes by or under the Note Guarantees by or on behalf of the Issuer or the Guarantors will be made free and clear of, and without deduction or withholding for or on account of, any present or future taxes, duties, assessments or governmental charges of whatsoever nature, unless such withholding or deduction is required by applicable laws or regulations. If any such withholding or deduction for or on account of taxes of a Tax Jurisdiction (see ‘‘Terms and Conditions of the 2018 Notes—7. Taxation’’) is so required, the Issuer or (as the case may be) the Guarantors shall (subject to certain exceptions and limitations) pay such additional amounts as will result in the receipt by the Noteholders of such amounts as would have been received by them in respect of such Notes or Note Guarantees if no such withholding or deduction had been made or required to have been made. See ‘‘Terms and Conditions of the 2018 Notes—7. Taxation’’. Optional Redemption for Taxation Reasons: ...... The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, at 100% of the principal amount thereof together with accrued and unpaid interest to the date fixed by the Issuer for redemption and additional amounts then due or which will become due as a result of the redemption, if the Issuer or a Guarantor is or would be required to pay additional amounts (subject to certain conditions) as a result of any change in, or amendment to, the laws or regulations of Luxembourg, Cyprus, Ukraine or the Russian Federation occurring on or after the Issue Date. See ‘‘Terms and Conditions of the 2018 Notes—5. Redemption and Purchase—5.3 Redemption for Changes in Taxes’’. Optional Redemption: ...... At any time prior to 2 May 2016, we may redeem up to 40% of the aggregate principal amount of the 2018 Notes originally issued using the proceeds of certain equity offerings, at the redemption price of 108.00% of the principal amount of the 2018 Notes redeemed, plus accrued and unpaid interest and additional amounts, if any, to the date of redemption. See ‘‘Terms and Conditions of the 2018 Notes—5. Redemption and Purchase—5.2 Redemption at the Option of the Issuer’’. At any time prior to 2 May 2017, we may redeem up to 40% of the aggregate principal amount of the 2020 Notes originally issued using the proceeds of certain equity offerings, at the redemption price of 108.75% of the principal amount of the 2020 Notes redeemed, plus accrued and unpaid interest and additional amounts, if any, to the date of redemption. See ‘‘Terms and Conditions of the 2020 Notes’’. At any time prior to 2 May 2016, we may redeem, at our option, some or all of the 2018 Notes then outstanding at a redemption price equal to 100% of the principal amount of such Notes plus accrued and unpaid interest and additional amounts, if any, to the applicable redemption dates plus the applicable ‘‘make whole’’ premium. At any time on or after 2 May 2016 and prior

21 to 2 May 2017, we may redeem, at our option, some or all of the 2018 Notes then outstanding at a redemption price equal to 104.00% of the principal amount of such 2018 Notes plus accrued and unpaid interest and additional amounts, if any, to the applicable redemption dates. At any time on or after 2 May 2017, we may redeem some or all of the 2018 Notes then outstanding at a redemption price equal to 102.00% of the principal amount of such 2018 Notes plus accrued and unpaid interest and additional amounts, if any, to the applicable redemption dates. See ‘‘Terms and Conditions of the 2018 Notes — 5. Redemption and Purchase — 5.2 Redemption at the Option of the Issuer’’. At any time prior to 2 May 2017, we may redeem, at our option, some or all of the 2020 Notes then outstanding at a redemption price equal to 100% of the principal amount of such 2020 Notes plus accrued and unpaid interest and additional amounts, if any, to the applicable redemption dates plus the applicable ‘‘make whole’’ premium. At any time on or after 2 May 2017 and prior to 2 May 2018, we may redeem, at our option, some or all of the 2020 Notes then outstanding at a redemption price equal to 104.3750% of the principal amount of such 2020 Notes plus accrued and unpaid interest and additional amounts, if any, to the applicable redemption dates. At any time on or after 2 May 2018 and prior to 2 May 2019, we may redeem some or all of the 2020 Notes then outstanding at a redemption price equal to 102.1875% of the principal amount of such 2020 Notes plus accrued and unpaid interest and additional amounts, if any, to the applicable redemption dates. At any time after 2 May 2019, we may redeem some or all of the 2020 Notes then outstanding at a redemption price equal to 100% of the principal amount of such 2020 Notes plus accrued and unpaid interest and additional amounts, if any, to the applicable redemption dates. See ‘‘Terms and Conditions of the 2020 Notes’’. Covenants: ...... The Terms and Conditions of the Notes contain restrictions on or impose requirements to be complied with when conducting certain activities of the Issuer, the Guarantors, FESCO and certain of our subsidiaries, including, without limitation: • pay dividends on or redeem or repurchase share capital or make other distributions; • prepay subordinated debt or make restricted payments and investments; • incur or guarantee additional debt and issue ; • create liens to secure indebtedness without at the same time creating liens to secure the Notes; • create restrictions on the ability of certain subsidiaries to pay dividends or make transfers of assets to the Issuer, Subsidiary Guarantors or FESCO; • merge, consolidate or sell, assign, transfer, convey or otherwise dispose of all or substantially all of their assets; • enter into transactions with affiliates; • sell assets, including shares of any restricted subsidiary of FESCO; and

22 • guarantee other debt of the Issuer or of a Guarantor without also guaranteeing the Notes. The Trust Deeds governing the Notes will also require the HoldCo Guarantors to operate as passive holding companies, subject to a number of exceptions. Each of these covenants are subject to a number of important limitations and exceptions as described under ‘‘Terms and Conditions of the 2018 Notes—3. Covenants’’ and, in relation to Asset Sales, under ‘‘Terms and Conditions of the 2018 Notes— 5. Redemption and Purchase—5.5 Redemption at the Option of the Noteholders upon an Asset Sale’’. Ratings: ...... It is expected that the Notes will be rated B+ by Fitch Ratings Ltd. (‘‘Fitch’’) and BB by Standard & Poor’s Credit Market Services Europe Ltd. (‘‘S&P’’). Credit ratings included or referred to in this Offering Memorandum have been issued by Fitch and S&P, each of which is established in the EU and registered under Regulation (EC) No 1060/2009, as amended (the ‘‘CRA Regulation’’). As such, each of Fitch and S&P is included in the list of credit rating agencies published by the European Securities and Markets Authority (the ‘‘ESMA’’) on its website in accordance with the CRA Regulation. A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation. Similar ratings on different types of notes do not necessarily mean the same thing. The ratings do not address the likelihood that the principal on the Notes will be prepaid, paid on an expected final payment date or paid on any particular date before the legal final maturity date of the Notes. The ratings do not address the marketability of the Notes or any market price. Any change in the credit ratings of the Notes or the Group could adversely affect the price that a subsequent purchaser will be willing to pay for the Notes. The significance of each rating should be analysed independently from any other rating. Ratings of the Notes or the Group by Fitch and S&P are not necessarily indicative of the ratings that may in the future be issued in respect of the Notes or the Group, either by Fitch or S&P or by any other rating organisation. Listing: ...... Application has been made to the Irish Stock Exchange for the Notes to be admitted to the Official List and trading on the Global Exchange Market. The Global Exchange Market is not a regulated market for the purposes of Directive 2004/39/EC. Selling Restrictions: ...... The Notes are subject to selling restrictions in the United Kingdom, the United States and the Russian Federation. See ‘‘Plan of Distribution’’. Transfer Restrictions: ...... The Notes and the Note Guarantees have not been and will not be registered under the Securities Act and, subject to certain exceptions, the Notes may not be offered or sold within the United States. The Notes may be sold in other jurisdictions only in compliance with applicable laws. See ‘‘Transfer Restrictions’’ and ‘‘Plan of Distribution’’. Governing Law: ...... The Notes, the Trust Deeds, the Note Guarantees and the paying agency agreement relating to the 2018 Notes and the paying agency agreement relating to the 2020 Notes (together, the ‘‘Paying Agency Agreements’’) and any non-contractual

23 obligations arising out of or in connection with them shall be governed by and construed in accordance with English law and contain provisions for arbitration in London, England. Security Codes: ...... 2018 Regulation S Notes: Common Code: 092033490 International Security Identification Numbers (‘‘ISIN’’): XS0920334900 2018 Rule 144A Notes: Common Code: 092071251 ISIN: US307322AA57 CUSIP: 307322 AA5 2020 Regulation S Notes: Common Code: 092033503 ISIN: XS0920335030 2020 Rule 144A Notes: Common Code: 092071308 ISIN: US307322AB31 CUSIP: 307322 AB3 Clearing Systems: ...... Euroclear and Clearstream, Luxembourg (in the case of the Regulation S Notes) and DTC (in the case of the Rule 144A Notes). Yield: ...... The annual yield of the 2018 Notes when issued is 8.00%. The annual yield of the 2020 Notes when issued is 8.75%. Risk Factors: ...... An investment in the Notes involves a high degree of risk. See ‘‘Risk Factors’’.

24 RISK FACTORS Prospective investors should consider carefully the risks set forth below and the other information contained in this Offering Memorandum prior to making any decision to invest in any Notes. Each of the risks highlighted below could have a material adverse effect on our business, operations, financial condition or prospects, which in turn could have a material adverse effect on the amount of principal and interest that investors will receive in respect of the Notes. In addition, the value of the Notes could decline due to any of these risks, and investors could lose some or all of their investment. Potential investors should note that the risks described below are not the only risks we face. We have described only the risks we consider to be material. However, there may be additional risks that we currently consider not to be material or of which we are not currently aware, and any of these risks could have the effects set forth above.

RISKS RELATING TO OUR BUSINESS AND INDUSTRY General Risks Our results of operations and financial condition have been and could continue to be adversely affected by variations in domestic and international macroeconomic conditions. We operate in a cyclical industry, and our operations, whether in ports, rail or liner and logistics, are dependent on the demand for container and freight transportation services, which, in turn, is closely tied to, and affected by, the macroeconomic climate both globally and in Russia, including, in particular, the dynamics of GDP and disposable income in Russia, demand for consumer goods in Russia and Russia’s international trade activities. Cargo throughput and container volumes at port facilities in Russia, including the Port of Vladivostok, and freight rail volumes in Russia are highly sensitive to changes in macroeconomic conditions both in Russia and globally. Demand for our liner and logistics services is particularly dependent on the volume of containerised trade between Russia and Asia. For example, between 2003 and 2008, the total annual container volume handled in Russian ports grew with CAGR of 33.8% from approximately 879 thousand TEUs to over 3,773 thousand TEUs, compared with Russian GDP real CAGR 7.1% during the same period, according to the Federal State Statistics Service of the Russian Federation (‘‘Rosstat’’). In 2009, Russian GDP declined year-on-year by 7.9%, according to Rosstat, and annual container volumes in Russian ports decreased by 33.3%, according to Morcenter, and freight rail turnover in Russia fell by 11.9%, according to Rosstat. Demand for our liner and logistics services also declined in line with declines in industrial production, consumer spending capacity and international trade that took place in 2008 and 2009. The global economic downturn impacted our customers, including car manufacturers, pulp producers and consumer goods companies, resulting in a decline in demand for railway container transportation services and a significant decrease in container imports. As the Russian economy recovered in 2010, 2011 and 2012, growing by an average of 4% per year, according to Rosstat, total annual container volumes in Russia increased by 26%, according to Morcenter, and freight rail turnover expanded by an average of 6.0% per year, according to Rosstat. A deterioration in macroeconomic conditions in Russia or of Russia’s key trading partners could cause the demand for containerised cargo and commodities to decline, resulting in less demand for container and freight transportation, as well as liner and logistics, services, including cargo handling at ports and sea, rail and intermodal transportation services. Our rail operations are dependent on container transportation volumes, and therefore are particularly susceptible to economic volatility and fluctuations in consumer demand. Indeed, any economic downturn that reduces consumption and our customers’ overall spending capacity could have a material adverse effect on our business, financial condition, results of operations or prospects. Furthermore, any delay in, or obstruction of, the further liberalisation of the markets from which we receive cargo or to which cargo passing through our port facilities is shipped or the imposition of new trade barriers, such as rail, road and other tariffs, minimum prices, export subsidies and import restrictions or duties, in Russia or globally could lead to lower growth or a decline in the volume of Russian and world trade, and, consequently, to a decline or slower growth in worldwide and Russian annual container handling. A sustained depreciation of the Rouble against the U.S. Dollar and other major currencies would also likely result in a decline in container imports, and thus to less demand for our services.

25 We encounter competition from other companies in our ports, rail and liner and logistics operations. We encounter competition in nearly all of our business operations, particularly as a result of increases in capacity, whether through the development of new ports, growth in the number of railcars or containers on the market or the introduction of new, or further development of existing, modes of transport.

Ports Division We face competition from other ports located in the Far East Basin that have container and/or bulk cargo handling capacity, including the Vostochniy Port, Nakhodka Port, Vanino Port and Vladivostok Sea Fishing Port (‘‘VSFP’’). We compete mainly on service quality, pricing and the ability to provide clients with supplemental, value-added services. As a result, the general scarcity of capacity in the Far East Basin in recent years has stimulated the development of plans for new terminals and the expansion of existing terminals, including the conversion of general cargo terminals to container terminals. The introduction of new capacity by our competitors could result in intensified price competition between us and other providers of port services, and lower capacity utilisation at individual terminals. In addition, the container terminal industry has in recent years experienced, and continues to experience, significant consolidation. In 2012, the Port of Vladivostok held a 35% share in the market for container handling in the Far East Basin, with the Vostochny Port, VSFP and Korsakov holding market shares of 30%, 11% and 8% respectively, according to Morcenter. As of 31 December 2012, Global Ports’ Vostochnaya Stevedoring Company (‘‘VCT’’) located at the Vostochny Port had a container throughput capacity of 550,000 TEUs, the second highest among the container ports in the Far East Basin, according to company data. We compete with other terminal operators that may be larger and have greater financial resources than us, and which may be able to invest more heavily or effectively in their facilities or withstand price competition. Consolidation between competitor container ports and container shipping companies, as well as further consolidation among shipping companies due to continuing cost pressures or otherwise, could also have the effect of reducing the number of shipping customers available to us and increasing the access that our competing ports have to the major shipping lines. Major shipping lines, such as Mediterranean Shipping Company, S.A. (MSC), Evergreen and CMA CGM, operate their own terminals in some countries, and if they were to seek to expand these operations and purchase existing Russian terminals or partner with our competitors to obtain greater access to Russian terminals, as Maersk has with its joint venture with the Vostochnaya Stevedoring Company, competition may intensify in the Russian container handling market. Furthermore, greater consolidation among our shipping line customers will likely enable such customers to exercise greater bargaining power when negotiating with us. This, in turn, may require us to lower the prices we charge for our ports services, which, in turn, may have a material adverse effect on our business, results of operations, financial condition or prospects.

Rail Division The Russian freight rail transportation market has become increasingly competitive in recent years, in large part as a result of the deregulation of the rail industry and the decline in the share of the overall railcar fleet owned by Russian Railways. We continue to face significant competition from Russian Railways and its subsidiaries, including Federal Freight Company (formerly, Freight Two) and TransContainer, in which we own a 23.7% stake (see ‘‘Business—Associates—TransContainer’’). However, as a result of industry deregulation, we also face competition from independent transportation companies, such as UCL Rail (formerly called Freight One), Globaltrans, NefteTransService and Novotrans and, to a lesser degree, from shippers that maintain their own fleet of railcars, such as SUEK, Mechel, Gazprom and Eurochem. See ‘‘Business—Operations—Rail Division—Competitive Environment’’ and ‘‘Industry—Rail Transportation—Competitive Landscape’’. In recent years, freight rail transportation operators in Russia have purchased large numbers of new railcars in response to factors such as deregulation, increases in demand for freight rail transportation, the relatively high age of the Russian railcar fleet and reduced efficiency of the Russian railway system. In particular, there has been an increase in the quantity of gondola cars on the market, which represent a significant share of our fleet in operation. See ‘‘Business—Operations—Rail Division—Key Assets— Rolling Stock’’. The increase in the number of railcars on the market, particularly of gondola cars, has led to excess capacity, downward pressure on prices and a reduction in average speeds across the rail network. A continuing oversupply of railcars on the market could negatively affect the prices we charge

26 for our rail transportation services, which, in turn, could have a material adverse effect on our business, results of operations, financial condition or prospects. With effect from November 2012, empty run tariffs payable to Russian Railways were unified into a single tariff (subject to certain exceptions), regardless of the type of cargo last transported. As railcar operators will no longer be motivated to transport cargo with a lower tariff part way along a return journey to minimise the empty run costs, the efficiency of railcar utilisation in Russia may improve. Such improved efficiency may further increase competition in the Russian rail industry and increase downward pressure on prices. In addition, there is a trend toward consolidation in the railcar market. Increased consolidation in the railcar industry may result in competition from competitors with more resources and better access to clients as well as the emergence of more competitors with sufficient scale to compete with us. Increased competition may lead to adverse changes in the prevailing pricing conditions for rail services, which could materially affect our profitability.

Liner and Logistics Division Our Liner and Logistics Division faces competition in the logistics, and particularly container transportation, markets in Russia from a number of large Russian transportation companies, as well as smaller freight forwarding and logistics companies transporting containers by rail and trucks and providing other services. In the Russian rail container market, we compete primarily with TransContainer, Modul, FinTrans and VSK. Historically, TransContainer, in which we currently own a 23.7% stake (see ‘‘Business—Associates—TransContainer’’), has held a dominant position in the market, accounting for 50% of total rail container volumes in 2012 and 59% of total platforms as of 31 December 2012, according to INFOLine. Although rail transport continues to be the leading mode of containerised freight transportation in Russia in terms of volumes shipped, it is increasingly facing competition from other modes of transport. For example, the Government is developing a plan to improve the Russian highway system to foster short- and medium-distance truck transport. There are also various initiatives for the development of sea, river and air transport, which in certain cases may be seen as cheaper or faster alternatives to rail transport. While we believe our diversified portfolio of intermodal transportation assets puts us in good position to benefit from any of these initiatives, the level of competition in the container transportation industry may nevertheless significantly increase.

Deterioration or insufficient maintenance of Russia’s and Ukraine’s rail and road infrastructure may lead to disruptions in cargo volumes. Russia’s physical infrastructure largely dates back to the Soviet period and in certain respects has not been adequately modernised due to insufficient funding and policy decisions. In some areas, the rail and road networks, as well as the power generation and transmission, communication systems and building stock, are particularly affected. Physical infrastructure in Ukraine, where in 2012 we were one of the largest private railcar operators in terms of rolling stock, is in a similar state. We and our customers depend on Russia’s and Ukraine’s rail and road infrastructure for the timely transportation of cargo. The Russian and Ukrainian railway systems are subject to risks of disruption as a result of the declining physical condition of their rail tracks and facilities, temporary brown-outs of electric current to rail lines, and train collisions or derailments. The highway systems in both countries is similarly subject to risks of disruption as a result of deteriorating physical condition resulting from heavy use, adverse weather conditions, its poor quality and insufficient maintenance. In an effort to improve national infrastructure, the Russian government has been reorganising the nation’s rail system. Although the Rail Reform Programme (as defined in ‘‘Regulatory Overview’’) is nearly complete, there are certain scheduled reforms that have yet to be fully implemented. There can be no assurance that the Russian government will complete all of the reforms contemplated by the Rail Reform Programme due to a prolonged economic downturn or otherwise, which, in turn, may lead to further deterioration of Russia’s physical infrastructure. See ‘‘Regulatory Overview—Rail—Structural Reform of Railway Transportation’’. Furthermore, any programme to modernise the country’s infrastructure may result in increased charges and tariffs that we are unable to pass onto customers and may not produce the desired improvements. The occurrence of any of these factors could have a material adverse effect on our business, financial condition, results of operations or prospects.

27 Failure to meet clients’ expectations due to our reliance on third party service providers that remain outside of our immediate control could damage our client relationships and our business reputation. Our clients rely on us to provide high-quality railcars and containers, as well as reliable and timely shipping, ports and liner and logistics services. For example, in our rail business, we must ensure that a sufficient number of railcars can be delivered to clients upon their request in a timely manner and in accordance with a client’s production cycle and that any railcars provided are of sufficient quality and possess the requisite certifications necessary to avoid delays when dispatching. We may be unable to meet such client expectations due to our reliance on third party service providers that remain outside our immediate control. For example, we rely on Russian Railways for access to and maintenance of rail and locomotive infrastructure. We are also dependent on fuel suppliers for bunkering and third-party rail and ship operators for liner and logistics routes that are not fully serviced by our own asset base. A significant delay in their provision of services could lead to significant business interruptions for, and/or material losses sustained by, our clients. Similarly, damage to goods being transported due to accidents or mishandling could also result in client dissatisfaction with the provision of our services. Failure to meet client expectations due to our reliance on third party service providers that remain outside of our immediate control could lead to a significant loss of client business by us and/or impairment of our business reputation which, in turn, could have a material adverse effect on our business, results of operations, financial condition, prospects or the value of the Notes.

Our business and operations depend on the expertise and experience of our key managers, as well as on our ability to continue to attract, retain and motivate qualified personnel. Our business and operations are dependent on retaining the services of, or promptly obtaining equally qualified replacements for, certain key members of our management team. Although we have employment agreements with these key managers and seek to incentivise them through a share option programme, the retention of their services cannot be guaranteed. Should they decide to leave us, we may find it difficult to replace them promptly with other managers of sufficient expertise and experience. See ‘‘Directors and Management’’. We do not have key-man in place in respect of our senior managers. Our future success will also depend, in part, on our ability to continue to attract, retain and motivate qualified personnel, in particular experienced management, sales and logistics personnel with relevant industry experience in each of our business divisions and employees who possess the requisite technical skill. Competition in Russia for such personnel with relevant expertise is intense, due to the small number of qualified individuals with suitable practical experience in the industries in which we work. The loss of any of our key senior managers, or the inability to attract or retain sufficient qualified personnel for our business operations, could have a material adverse effect on our business, results of operations, financial condition, prospects or the value of the Notes.

We are subject to a wide variety of laws, regulations and licensing requirements which may restrict our ability to carry out our operations or result in substantial compliance costs or administrative penalties. Our operations are subject to extensive laws and regulations governing, among other things, environmental protection, health and safety and the fees that we are permitted to charge for certain of our services, such as the loading, unloading, storage and transportation of cargo, including hazardous materials. See ‘‘Business—Safety and Environment’’ and ‘‘Regulatory Overview’’. Our operations depend on our ability to comply with these laws and regulations as well as the terms and conditions of our licences and also on our ability to obtain, maintain and renew any required permits or licences. A failure to comply with applicable regulations and obtain and maintain the requisite certifications, permits and licences could lead to substantial penalties, including criminal or administrative penalties, other punitive measures and/or increased regulatory scrutiny; trigger a default under one or more of our financing agreements; or invalidate or increase the cost of the insurance we maintain for our various businesses. Additionally, a failure to comply with regulations that affect our staff, such as health and safety regulations, could affect our ability to attract and retain staff. We could also incur civil liabilities, such as abatement and compensation for loss, in amounts in excess of, or that are not covered by, our insurance. For the most serious violations, we may also be forced to suspend operations until we obtain such certifications, permits or licences or otherwise bring our operations into

28 compliance. Changes to existing regulations or the introduction of new regulations, procedures or licensing requirements may impose new and relatively costly requirements on us and may be influenced by political or commercial considerations not aligned with our interests. We may be unable to mitigate the impact of any of these changes or the introduction of any new requirements. There can be no assurance that our existing licences and permits will be renewed, that any new licences and permits for which we apply will be granted or that we will be able to comply with the terms of all applicable licences. There can also be no assurance that any of our current or future licences or permits will not be suspended or revoked on any ground. Any of these circumstances could have a material adverse effect on our business, results of operations, financial condition or prospects.

Our insurance policies may be insufficient to cover all of our losses. Our operations are subject to risks inherent to the freight transportation industry, including property loss or damage, accidents causing death or injury, and environmental damage and pollution, among other risks. We carry insurance for all of our operations in line with market practice in Russia, but we do not carry certain insurance policies common in some of the more developed market economies of North America and Western Europe. For example, contracts entered into by companies within our Ports Division generally provide that in certain circumstances we are liable for damage to or loss of cargo we handle. Our contractual liability for export cargo handling begins when the railcar or truck enters the territory of our ports and ends when the consignment is issued after having loaded the cargo onboard the vessel, and vice versa for import cargo handling. Nevertheless, the insurance we maintain against such liabilities is limited to third party liability insurance against damage to or destruction of the cargo up to its replacement value. In addition, we do not maintain business interruption insurance. Our failure to carry business interruption insurance means that if we suffer an interruption in our ability to operate any of our businesses, there will be no operating revenue from such business operations to pay our obligations in full or on time. Our Shipping Division is subject to certain risks specific to maritime operations, and although we carry hull and machinery, war risks, protection and indemnity and other insurance in line with international standards for such operations, not all risks may be adequately covered and a particular claim may not be repaid. For example, our insurance policies do not cover risks arising from the damage caused by wear and tear, and the damage caused by wilful misconduct of a ship’s crew members. We also have not purchased insurance covering loss of earnings due to delay or detention caused by political unrest, labour strikes, arrest, crew desertion, crew illness, infectious diseases, stowaways, drug seizure and the inability to load or discharge cargo, all of which are considered trading risks. In recent years, insurance companies have increased premiums for certain types of insurance in the shipping industry, primarily for protection and indemnity insurance. In addition, in the event that claims are asserted against us, our vessels could be subject to attachment or other judicial processes, and insurers are not required to provide a letter of guarantee in case of arrest, attachment or detention of a vessel. If any of the uninsured events discussed above were to occur, we could experience significant disruption in our operations and/or requirements to make significant payments, for which we would not be compensated. Furthermore, there can be no assurance that all covered risks are adequately insured against, that any particular claim will be paid or that we will be able to procure adequate insurance coverage at commercially reasonable rates in the future, particularly for operating in harsh weather and ice conditions. For example, more stringent environmental regulations have led in the past to increased costs for, and in the future may result in the lack of availability of, insurance against risks of environmental damage or pollution. In addition, our insurance may be voidable by the insurers as a result of certain actions or omissions by us, such as a failure to maintain certification with applicable maritime self-regulatory organisations. Changes in the insurance markets attributable to terrorist attacks or other hostilities or armed conflict may also make certain types of insurance more expensive or impractical for us to obtain or maintain. In addition, the insurance that may be available may be significantly more expensive than our existing coverage. Any inadequacy in our insurance coverage that precludes us from covering our actual losses or any difficulty we may experience in collecting insurance compensation due to us may have a material adverse effect on our business, results of operations, financial condition, prospects or the value of the Notes.

29 We depend on customs authorities for the timely provision of our transportation services and delivery of goods to our customers. We depend on customs authorities for the timely provision of our transportation services and delivery of goods to our customers in connection with imports to, and exports from, Russia. Imported goods transported in our containers and other cargo require customs inspection, and clearance may be performed with unreasonable delays due to reasons beyond our control. Exports from Russia,whether by rail or ship, are also subject to inspection by the customs officials of the countries which are receiving the cargo. Customs inspections may be delayed for various reasons, including without limitation: (i) strikes by customs officials; (ii) a sharp increase in foreign trade at the terminal in excess of the processing capacity of the terminal’s customs officials; (iii) insufficient funding to modernise customs operations or hire additional customs officials; or (iv) changes in either customs regulations or the implementation of such regulations that increase the bureaucracy involved in customs inspections or require greater scrutiny of goods flowing through the terminal. A slowdown in Russian customs operations at our port facilities could reduce the flow of trade at our terminals would be reduced and the resulting revenue we might earn from providing additional storage and other services would be unlikely to offset the revenue we would lose from the reduced flow of trade. In addition, the delivery of our customers’ products might be delayed, which would encourage them to seek other alternatives to import and export these products more efficiently. If customs operations at foreign ports of call become slower, our containers or vessels may remain idle at such ports for longer-than-expected periods of time. Furthermore, inspection procedures can result in the seizure of contents of our vessels and the levying of fines and other penalties against us. Any of the foregoing could cause our cargo throughput to decrease significantly, complicate our ability to manage the movement of our containers, railcars or vessels or lead to delays in our sea liner services, any of which may have a material adverse effect on our business, financial condition, results of operations or prospects. Furthermore, changes to inspection procedures could also impose additional costs and obligations on our customers and may, in certain cases, render the shipment of certain types of cargo impractical or unprofitable.

Expansion through acquisitions entails certain risks and we may experience problems in integrating and managing new acquisitions. We have in the past expanded, and may in the future continue to expand, our operations through acquisitions. For example, in 2003, we purchased the refrigerated cargo operator and terminal Dalrefttrans, and in 2006-07 we purchased a controlling stake in Transgarant, the core asset in our Rail Division. In March 2012, we acquired an additional 45.57% stake in the Port of Vladivostok, obtaining full operational control over the port as a result. Pursuing an acquisition strategy entails certain risks, including the failure to identify suitable acquisition targets and/or the failure to conduct appropriate due diligence on the target’s operations and/or financial condition, the overvaluation of such target and thus the payment of consideration greater than the acquisition’s market value, the incurrence of significantly higher than anticipated financing-related risks and operating expenses, and the discovery of larger than anticipated or previously undisclosed liabilities. Acquisitions could also place increased pressures on our cash flows, especially if the acquisition is paid for in cash. Additionally, if an acquisition is not completed, it may adversely affect our strategic objectives. If any such risks materialise in conjunction with an acquisition, this could have a material adverse effect on our business, results of operations, financial condition or prospects. In addition, we may experience problems in integrating acquisitions into our business and managing them properly. These risks include failing to effectively assimilate and integrate the operations and personnel of an acquired company into our business, failing to install and integrate necessary systems and controls, including logistics and distribution facilities and arrangements, conflicts between majority and minority shareholders, hostility and/or lack of cooperation from the management of the target and the potential loss of the target’s clients. Any of the foregoing could have a material adverse effect on our business, results of operations, financial condition, prospects or the value of the Notes.

We could face administrative fines if FAS were to conclude that we conducted our business in contravention of the Russian competition law. The Federal Antimonopoly Service (‘‘FAS’’) has determined that our subsidiaries VMTP, LLC ‘‘Vladportbunker’’ (‘‘Vladportbunker’’) and CJSC TET (‘‘TET’’) are natural monopolies in the

30 transportation sphere, which subjects these companies to increased oversight, such as tariff regulation and limitations on investments and acquisitions. FAS has included FESCO and our subsidiary LLC ‘‘FESCO Lines Vladivostok’’ (‘‘FESCO Lines Vladivostok’’) in a list of business entities whose market share exceeds 35% in a particular regional market. FAS has estimated that FESCO holds a share in excess of 65% in the market for cabotage transportation in the coastal areas of the Far-Eastern Federal District and that FESCO Lines Vladivostok holds a share in excess of 50% in the market for heavy-tonnage transportation of containers in the ports of the Magadan region. Due to such market share, FESCO and FESCO Lines Vladivostok may be deemed to have dominant positions in their respective markets. Under Federal Law No. 135-FZ ‘‘On the Protection of Competition’’ of 26 July 2006 (the ‘‘Competition Law’’), a business’ dominant market position does not, in itself, constitute a breach of the Competition Law. However, FESCO and FESCO Lines Vladivostok are subject to certain regulatory restrictions in carrying out their business in the relevant market intended to protect and develop competitive market conditions. As a result of the restrictions applicable to entities having a dominant position in a particular market, the pricing flexibility of FESCO and FESCO Lines Vladivostok in their respective markets is constrained. In particular, their sale prices must be economically justifiable and consistent with market prices. Court or administrative practice on what constitutes an economically justifiable price is varied, and we cannot give any assurance that our rationale for pricing in these markets will be deemed economically justifiable by FAS or a Russian court. For example, in November 2011, FAS held that FESCO Lines Vladivostok acted in concert with Sakhalin Shipping Company to increase tariffs on the Vladivostok-Magadan trade route, ultimately imposing a fine on us of RUB6.3 million. In May 2012, FAS held in a separate matter that FESCO Lines Vladivostok had abused its dominant market position in the Magadan region by fixing unjustified tariffs for its services and as a result imposed on us an administrative fine of RUB562,000. In January 2012, amendments to the Competition Law and related legislation entered into force that changed the methodology of calculating administrative fines for a violation of antimonopoly legislation. The amendments provide that an abuse of a dominant market position that results in a possible restriction of competition in a particular market is subject to a fine of up to a certain percentage of the revenue of the responsible entity from its sales in such market, but not exceeding 2% of the total revenue of the responsible entity. The amendments also provide for certain aggravating and mitigating circumstances which should be taken into account by FAS when determining a fine. Following these amendments, potential consequences of violating the Competition Law have considerably increased. If FAS were to conclude that any of our business has been conducted in a prohibited manner in a particular market, they could impose administrative sanctions on us, which could have a material adverse effect on our business, results of operations, financial condition or prospects. See ‘‘Regulatory Overview—Antimonopoly and Related Regulation’’ for further discussion of antimonopoly regulation in Russia.

Our operations could be adversely affected by natural disasters or other catastrophic events beyond our control or accidents. Our business operations could be adversely affected or disrupted by natural disasters (such as earthquakes, floods, tsunamis, hurricanes, fires or typhoons) or other catastrophic or otherwise disruptive events, including changes to predominant natural weather, sea and climatic patterns, radioactive or other material environmental contamination, an outbreak of a contagious disease, or changes to sea levels, which may adversely affect global or regional trade volumes or customer demand for cargo transported to or from affected areas, and denial of the use of any railway, port, airport, road, shipping service or other means of transport and disrupt customers logistics chains. In addition, we may be exposed to extreme weather conditions such as severe cold periods and ice conditions disrupting activities at our terminals and in the ports in which we operate. The occurrence of any of these events may reduce our business volumes, cause delays in the arrival and departure of vessels or disruptions to our operations in part or in whole, may increase the costs associated with dredging activities, may subject us to liability and may otherwise hinder the normal operation of our terminals or other transportation infrastructure. As an operator of heavy machinery at our ports facilities and on our shipping vessels, we are subject to health and safety risks inherent in the transportation industry, including accidents that occur as a result of operational failures or as a result of the specific materials being transported. In particular, we

31 encounter operating risks in the loading and unloading of cargo, hazardous or otherwise; marine disasters; mechanical malfunctions of any of our equipment; and derailments of rolling stock. There can be no assurance that we would avoid liability as a result of these accidents or that our insurance would cover such accidents. See ‘‘—Our insurance policies may be insufficient to cover all of our losses’’. There also can be no guarantee that such accidents would not lead to material disruptions in our services or that we would not incur reputational damage as a result of any accident. Any of the foregoing could have a material adverse effect on our business, results of operations, financial condition or prospects.

Environmental accidents, such as oil, fuel or chemical spills, expose us to significant potential environmental costs and liabilities. Our operations are subject to various federal, regional and local environmental laws, ordinances and regulations, which establish: (i) requirements for obtaining specific permits and administrative approvals; (ii) certain restrictions and encumbrances on properties held and/or developed; and (iii) liabilities for violations of environmental legislation, as well as for damage caused to the environment, including site contamination. In addition, Russian regulatory authorities exercise considerable discretion in matters of enforcement and interpretation of environmental laws and regulations and the issuance and renewals of environmental permits, and the exercise of such discretion may impose substantial burdens on us. See ‘‘—Risks Relating to Russia—Selective government action could materially adversely affect our business’’. Due to the nature of the transportation industry, our operations face significant environmental risks. For example, the operation of any oceangoing vessel carries with it an inherent risk of marine disasters, such as ships running aground, or other events that may cause severe environmental damage to the areas in which such vessels operate. In particular, the oil and oil products we ship are extremely hazardous to the environment and may spread in the water to distant areas and coastlines, and spills of any such cargo may be very difficult and costly to clean up. Any environmental accidents could also give rise to statutory claims and claims from third parties, such as fishermen, hotel operators or other persons or entities whose businesses are negatively affected by any such accident, and such claims may not be adequately covered by our insurance. See ‘‘—Our insurance policies may be insufficient to cover all our losses’’ and ‘‘Business—Material Litigation’’ for discussion of a lawsuit against us in connection with one of our ships running aground off the coast of Italy in 2007. As a result, environmental mishaps, such as spills of oil, fuel or chemicals, including from our bunkering activities, may expose us to potential costs that far exceed the value of the cargoes carried and the ships on which they are transported. In addition, our ports and other transport infrastructure handle and transport cargo that are hazardous to the environment, which poses a particular risk for our operations given that the Port of Vladivostok is located in the centre of the city of Vladivostok. Accidents in the handling of these materials at our facilities could disrupt our business and operations during any repair or remediation period. There can be no assurance that our compliance with applicable environmental regulations will prevent any such accident or resolve incidents without damage to our facilities, contamination or other environmental damage or reputational damage. In addition, we may be liable for the costs of removal, investigation or remediation of hazardous or toxic substances located on or in a property owned or leased by us. If an accident occurs at any of our facilities, if we violate any relevant environmental laws or regulations or have been deemed to have violated any relevant environmental laws or regulations, or if our compliance with such laws and regulations is challenged, we may incur significant expense in remediating the effects of the accident, remedying any violations, including curing any licence breaches that are triggered by such violations, or defending ourselves in response to any challenges. Any of the foregoing may have a material adverse effect on our reputation, as well as our business, financial condition, results of operations or prospects.

We face foreign exchange and inflation risks. The Rouble/U.S. Dollar exchange rate has historically been volatile. Although the Rouble appreciated against the U.S. Dollar during certain periods in the first half of 2011 and in 2012 and maintained a relatively steady value against the U.S. Dollar in the first quarter of 2013, it experienced material depreciation in the recent past. For example, the Rouble depreciated against the U.S. Dollar by almost 40% and against the Euro by nearly 30% from October 2008 to February 2009, due in part to significant declines in the prices of oil and commodities, which are the principal generators of Russia’s export earnings. The CBR used significant amounts of Russia’s foreign currency and gold reserves to support the Rouble, but there can be no assurance that it will be willing or able to continue such support in the future.

32 We are exposed to market risk from changes in foreign currency exchange rates, primarily the Rouble/ U.S. Dollar rate and the Rouble/Euro rate. Generally, our trade transactions with customers outside of Russia are denominated in U.S. Dollars or Euros, while domestic transactions in Russia are denominated in Roubles (although some Rouble-denominated contracts are indexed to the U.S. Dollar). A substantial portion of our revenues and costs, including taxes and tariffs and other operating expenses, are denominated in Roubles. Depreciation of the Rouble against the U.S. Dollar lowers our Rouble-denominated revenue, as well as our Rouble-denominated costs. Rouble depreciation also tends to lead to a decline in Russian imports as it becomes relatively more expensive for Russian consumers to purchase imported products, which would likely have a negative effect on our intermodal and container businesses. Most of our indebtedness is denominated in U.S. Dollars or Euros. Since most of our debt is and will continue to be denominated in U.S. Dollars or Euros and most of our revenue is in Roubles, depreciation of the Rouble against the U.S. Dollar or the Euro will increase the cost of repayment on our U.S. Dollar- and Euro-denominated indebtedness when expressed in Roubles. A Rouble depreciation against the U.S. Dollar also lowers the value of our Rouble-denominated assets in U.S. Dollar terms. This, in turn, may make it more difficult for us to comply with financial ratios. Moreover, a decline in the value of the Rouble against the U.S. Dollar results in a translation loss when we translate our Rouble revenue into U.S. Dollars for inclusion in our audited consolidated financial statements, which would be partially offset by a translation gain when translating our Rouble costs into U.S. Dollars. The Russian economy has also been characterised by high rates of inflation. According to Rosstat, inflation in Russia in 2012, 2011 and 2010 was 6.6%, 6.1% and 8.8%, respectively, as measured by the consumer price index and 5.1%, 12.0% and 16.7%, respectively, as measured by the producer price index. The relatively high rate of inflation in Russia increases our Rouble-denominated costs, for example, our tariff payments, salaries and utility costs, and reduces the value of our Rouble- denominated cash assets, such as our Rouble deposits, domestic debt instruments and account receivable. High Rouble inflation may also adversely affect the domestic demand for our products. The Rouble also remains largely non-convertible outside of Russia. A market exists within Russia for the conversion of Roubles into other currencies, but it is limited in size and is subject to rules limiting or prohibiting such conversion. From 1 August 2008 to 1 April 2012, Russia’s foreign currency and gold reserves decreased from U.S.$596.6 billion to U.S.$513.5 billion, and as of 1 April 2013, amounted to U.S.$526.2 billion. Although Russia’s foreign currency and gold reserves may be sufficient to sustain the domestic currency market in the short term, there can be no assurance that the currency market will not further deteriorate in the medium or long term due to the lack of foreign currency funding available in the global markets. The Government and the CBR may impose burdensome requirements governing currency operations, as they have done in the past. If these restrictions were re-introduced, they could prevent or delay any operations outside Russia that we may want to pursue. Additionally, any delay or other difficulty in converting Roubles into a foreign currency to make a payment or any practical difficulty in the transfer of foreign currency could limit our ability to meet our payment and debt obligations, which could result in the acceleration of debt obligations and cross defaults.

Our management controls and processes are not fully developed and may fail to ensure proper oversight, reporting and control of our business. Our policies, procedures and systems, including management controls and corporate governance practices, are not as sophisticated or robust as those of companies in Western Europe or the United States, and there can be no assurance that they will function effectively or as designed. Failure of our management controls and processes to ensure proper oversight, reporting and control of our operations could have a material adverse effect on our business, results of operations, financial condition and prospects. In particular, we have identified that certain of our internal controls in the area of the financial statement preparatory process are materially weak. In particular, we do not have a fully integrated automated accounting system for financial statement preparation, transformation and consolidation or for the conversion of statutory accounts into IFRS. Each of our subsidiaries prepares separate financial statements under Russian accounting standards for statutory purposes. The preparation of our IFRS financial statements is primarily a manual process that involves the conversion of the statutory financial statements of our subsidiaries into IFRS schedules through accounting adjustments, followed by the consolidation of these financial statements. This process is complicated and time-consuming. If we are unable to maintain adequate financial reporting functions and internal control systems, our business, results of operations, financial condition and prospects may be materially adversely affected.

33 Our information technology systems may fail or be perceived to be insecure. Our business is dependent on the successful and uninterrupted functioning of our information technology systems. These systems are licensed by us and are customised to our needs or delivered to us and maintained according to our needs by third parties under service agreements. We rely on these systems for complex logistical, dispatching and tracking tasks that are critical to our clients’ needs and central to our business. These systems are either licensed to us and then customised to our needs or delivered to us and maintained for our needs by third parties under service agreements. Although we have not experienced any significant failures or interruptions with respect to our information systems in the past, there can be no assurance that such a failure or interruption will not occur in the future. We are currently not insured against any adverse effects from interruptions or failures of our information technology systems. Moreover, the licences for the use of our information technology systems may be withdrawn or invalidated, the service agreements for their use may be terminated or their use may become commercially unattractive, due to the lack of technical support by the relevant developer or otherwise. Any actual or perceived interruptions or failures in our information technology systems may compromise our ability to deliver our services, including railcar leasing services and cargo and container handling services, on a timely basis or at all, and may otherwise lead to a significant loss of client business. If our information technology systems fail, the licence for their use is withdrawn or invalidated or service agreements for their use are terminated or their use becomes commercially unattractive, due to the lack of technical support by the relevant developer or otherwise, and we are not able to obtain the use of equivalent information technology systems and software, this could have a material adverse effect on our business, results of operations, financial condition or prospects. In addition, our business depends on our ability to protect our information technology systems from the intrusion of third parties who may attempt to enter our computer networks through the internet or otherwise. We cannot be certain that we will be able to protect our information technology systems from third party attacks or attempts to gain access to our systems. If such attacks occur, we may encounter theft or destruction of our data. In addition, disgruntled employees may cause similar damage to, or take similar actions with respect to, our information technology systems and data to which they have access or to which they gain unauthorised access. If such damage or theft occurs, it may materially adversely affect our business, results of operations, financial condition or prospects.

Our business and prospects could be materially adversely affected by laws regarding foreign control. Under legislation that came into force in May 2008—Federal Law No. 57-FZ ‘‘On the Procedure for Making Foreign Investments in Business Entities of Strategic Importance for the National Defence and State Security’’, as amended (the ‘‘SIL’’)—and related acts, the Government monitors foreign control and ownership over strategic sectors of the Russian economy. Under the SIL, if a transaction would result in (i) a foreign person (together with its related group of persons) holding over 25% of the voting shares of (or otherwise having certain governance rights over) a strategic company or (ii) a foreign person otherwise having control over a strategic company—for example, by owning over 50% of the voting shares of the parent of the strategic company—then such transaction must be approved by a special Government commission overseeing foreign investments into strategic sectors, chaired by the Prime Minister (the ‘‘SIL Commission’’). Failure to obtain the required governmental approval prior to such an acquisition would render the acquisition null and void. Moreover, the acquisition of 5% or more of the shares of a strategically important company triggers a notification requirement to the FAS. See ‘‘Regulatory Overview—Foreign Investment in Strategic Enterprises’’. Several of our subsidiaries are strategic companies and thus subject to the SIL, including VMTP (which will accede to the Deed of Guarantee), Vladportbunker and TET. Accordingly, the SIL may limit acquisitions of control or ownership of our shares, or those of other group companies that are subject to the SIL, including FESCO as the company that controls such companies. Moreover, there can be no assurance that transfers of ownership interests in FESCO, VMTP, Vladportbunker or TET prior to the acquisition of such interests by FESCO or the Sponsors, as the case may be, have been conducted at all times in accordance with the SIL. A finding that transfers of our shares or the shares of other Group companies were not conducted in accordance with the terms of the SIL could result in the loss of control by the Sponsors or us over the affected shares, as the case may be, which could have a material adverse effect on our business, financial condition, results of operations or prospects or the value of the Notes.

34 We may not realise expected synergies with Summa Group, which exercises significant control over us. In December 2012, Mr. Magomedov, the controlling shareholder of Summa Group, and entities controlled by Mr. Garber, one of the principal shareholders of the GHP Group, indirectly acquired 49.99% and 23.76%, respectively, of the shares of FESCO. As a result of these transactions, Summa Group exercises significant management control over us. See ‘‘Sponsors and Principal Shareholders’’. Summa Group possesses substantial relevant industry experience as it, together with its principal shareholder, is currently involved in the management of the Novorossiysk Commercial Sea Port. One of our strategies is to capture potential operating synergies that may exist with Summa Group’s businesses, such as the Novorossiysk Commercial Sea Port; in particular, we believe that cooperation with Summa Group could provide us with access to the strategic Black Sea market, where we do not currently have a significant presence. See ‘‘Business—Competitive Strengths—Highly experienced management team and committed Sponsors with significant industry experience’’. Nevertheless, there can be no assurance that such synergies exist, or, if they do exist, that we will be able to effectively realise them. We also can provide no assurance that, in the event we do gain increased access to the Black Sea market, such access would have a positive impact on our financial condition or results of operations.

Certain of our directors and officers are also directors of one of our competitors. Two members of our Management Board—Mr. Yury Gilts and Mr. Alexey Grom—currently serve on the board of directors of TransContainer, in which we currently own a 23.7% stake. See ‘‘Business— Associates—TransContainer’’. In addition, three members of our board of directors (the ‘‘Board of Directors’’) and one member of our Management Board have been nominated for election to TransContainer’s board at its next shareholders’ meeting in April 2013. See ‘‘Directors and Management—Interests of Members of the Board of Directors and Management Board’’. TransContainer is one of our direct competitors in the rail container market, in which it holds a substantial position. See ‘‘Business—Operations—Liner and Logistics Division—Competitive Environment’’. As a result, a potential conflict of interest exists between these directors’ and officers’ duties to us and their duties to TransContainer. For example, they could use their influence at TransContainer in a way that is against our interests. They are also in possession of confidential information as it relates to us, and it may be contrary to our interests for any such information to be disclosed to TransContainer or for that information to inform any of the decisions they make as members of our Board of Directors. Any of these potential conflicts of interest, or any other conflicts of interest that may arise in the future, could have a material adverse effect on our business, results of operations, financial condition or prospects.

Risks Relating to Our Ports Division Tariffs for certain services at the Port of Vladivostok have in the past been and may in the future be regulated by the Russian government, and, as a result, the tariffs charged for such services may be subject to a maximum tariff rate unless we receive an exemption from the tariff restrictions or obtain permission to increase the maximum tariff rate. The Port of Vladivostok, like many other Russian seaport operators, is currently classified as a natural monopoly under Russian law, as are our ports subsidiaries Vladportbunker and TET. Although the Federal Tariff Service (the ‘‘FTS’’) removed the Port of Vladivostok from the register of natural monopolies in October 2009, the FTS annulled this order in April 2012, at which point the Port of Vladivostok was reinserted onto the register. This FTS decision was upheld in various subsequent proceedings, most recently in March 2013. See ‘‘Business—Material Litigation’’ for further discussion of the procedural history surrounding this dispute. We are continuing to challenge this ruling and have filed an application with the FTS requesting that the Port of Vladivostok be exempt from the restrictions applicable to natural monopolies, including tariff restrictions. Because we are continuing to challenge the Port of Vladivostok’s status as a natural monopoly, we do not follow the regulated tariffs that the FTS has set for regulated ports services. However, if we were to lose our current challenge, then tariffs for certain of the services our ports facilities provide, including stevedoring services, cargo handling and storage services, would be subject to regulation by FTS. Because these services account for a considerable share of our ports operations, were they to become subject to FTS regulation, our business, results of operations, financial condition or prospects could be materialy adversely affected. In addition, in the event our ports services become subject to regulated tariffs, and we wanted to charge for our services at rates higher than such tariffs, we would have to apply to the FTS for an increase in our

35 maximum tariffs, and such application process may be time-consuming. If our Ports Division were to experience a rapid and/or unanticipated increase in its costs, its profitability may be adversely affected if unless and until increased maximum tariffs are approved. There can be no assurance that the FTS will respond promptly or favourably to any request we make to increase our maximum tariff rates, and accordingly there can be no assurance that the FTS will grant any request we may make, in whole or in part. Any delay in or refusal to grant our request for increased maximum tariffs for any of our regulated ports facilities could have a material adverse effect on our business, results of operations, financial condition or prospects. See ‘‘Regulatory Overview—Ports’’.

During peak times, most of our stevedoring operations operate at or near capacity, and any inability to conduct the operation of these facilities may result in the loss of customers or may incur costs that we are not able to pass on to customers. Handling export cargoes requires us to unload cargoes from railcars, trucks, and other means of ground transportation, transport them to storage (if required), transport them to dockside stevedoring facilities and load them onto vessels. This logistics chain applies in reverse to imported cargoes. During peak times, which for our ports operations, is the second and third quarters of the year, when demand for transporting containerised cargo is generally at its highest, most of our stevedoring facilities are operating at or near their capacity. We expect that global demand for Russian and other CIS exports, and Russian demand for imports, will continue to increase, and through measures to enhance efficiencies, we plan to increase the Port of Vladivostok’s capacity to 650,000 TEUs per year by 2017. However, there can be no assurance that our efficiency improvements will be successful or that they will alleviate any capacity constraints during peak transport times. Difficulties operating our stevedoring facilities efficiently may result in an inability to accommodate our cargo volumes without significantly increasing costs or delays. Among other things, we may have to move excess cargo volumes into storage facilities, and if the capacity of such facilities is exhausted, excess cargo volumes may have to remain on board vessels or ground transportation until storage space becomes available. Congestion as a result of inefficient stevedoring operations may also lead to increased rail demurrage and/or vessel berthing times. Increased costs or delays in shipping through our facilities could cause some expeditors and shippers to transport their goods through other ports, which could adversely affect our results of operations and our growth prospects. To the extent that we are or become unable to pass along storage, demurrage or other such costs to our counterparties, our profitability may be adversely affected. In addition, as is common among ports in the Russian Far East, our operations at the Port of Vladivostok are affected by periods of overcapacity at other points along the transportation chain. For example, in 2012, we experienced certain delays on imports due to overcapacity at local railway stations used by the port for onward delivery of cargo. Sustained overcapacity at transportation infrastructure points outside our control could have a material adverse effect on our business, results of operations, financial condition or prospects.

We lease a significant amount of the berths, piers and certain other real estate required to operate our terminals from governmental agencies, and any revision or alteration of the terms, or any termination or suspension, of these leases could adversely affect our business. We enter into lease agreements with governmental agencies for the berths, piers and certain other real estate that we use in our operations at our ports that are subject to the Federal Law ‘‘On Seaports in the Russian Federation and Introduction of Amendments to Certain Acts of Legislation of the Russian Federation’’ No. 261-FZ dated 9 November 2007, as amended (the ‘‘Seaports Law’’). See ‘‘Regulatory Overview—Ports’’. We hold our births and piers mainly pursuant to long-term leases with terms of up to 49 years, many of which are set to expire between 2058 and 2061. We lease our quays pursuant to either long-term contracts or one- to five-year contracts with unlimited renewal provisions. There can be no assurance that we will be able to renew our material leases in the future, either due to selective government action or otherwise. See ‘‘—Risks Relating to Russia—Selective government action could materially adversely affect our business’’. For example, our lease agreements contain provisions that allow the lessor to terminate upon the occurrence of certain events, such as negligence in maintenance of quay development or failure to meet health, safety and environmental regulations. There can be no assurance that our leases will not be revoked, suspended, amended or renewed on commercially reasonable terms. Any loss of or failure to renew a lease agreement or an increase in rental fees could substantially impair our growth prospects and have a material adverse effect on our business, results of operations, financial condition or prospects.

36 Current operations and future expansion of our Ports Division may depend on the construction of new quays, dredging of existing quays and canals and maintenance of quay drafts, which are governed by port and other governmental authorities and are outside of our control. Our ability to operate and expand our ports depends on the construction of new quays, dredging of existing quays and access channels and the continuous maintenance of our quay drafts. In addition, in order to accommodate the large vessels that we anticipate we will need to service as trade expands in the Far East Basin, the depths of drafts and access channels will need to be increased. Pursuant to our lease agreements with FSUE ‘‘Rosmorport’’ (‘‘Rosmorport’’), we are responsible for the day-to-day maintenance of quays. However, the maintenance of access channels and drafts, the creation of new quays and increases in the depth of drafts and access channels are the responsibility of Rosmorport and therefore not within our control. Any failure on the part of Rosmorport or other governmental authorities to make the necessary infrastructure investments at our ports facilities could substantially impair operations of our Ports Division, which, in turn, may have a material adverse effect on our business, results of operations, financial condition or prospects.

We rely on security procedures carried out at other port facilities and by our shipping line customers, which are outside of our control, and the imposition of additional security requirements at our ports facilities may increase our costs and reduce throughput. We inspect cargo that enters our terminals in accordance with the inspection procedures prescribed by, and under the authority of, the governmental body charged with oversight of the relevant port. We also rely on the security procedures carried out by our shipping line customers and the port facilities that such cargo has previously passed through to supplement our own inspection to varying degrees. We cannot guarantee that these security measures and procedures will be sufficient to prevent contraband from passing through our ports. There can also be no assurance that we will not be impacted by breaches in security or acts of terrorism either directly against us or indirectly in other areas of the supply chain that would have an impact on our operations. A security breach or act of terrorism that occurs at one or more of our facilities, or at a shipping line or other port facility that has handled cargo before we do, could subject us to significant liability, including the risk of litigation, adverse publicity and loss of goodwill. In addition, a major security breach or act of terrorism that occurs at one of our facilities or one of our competitors’ facilities may result in a temporary shutdown of the country’s terminal industry. The costs associated with any such outcome could have a material adverse effect on our business, financial condition, results of operations or prospects. Security breaches may also lead to the introduction of additional or more stringent security measures and other regulations. Ensuring compliance with new security measures or updated regulatory compliance requirements may involve considerable time and resources and may negatively affect our operating income, should we be unable to recover the full amount of these costs from our customers. In addition, failure to comply with applicable security requirements or obtain relevant security-related certifications may, among other things, prevent certain shipping line customers from using our facilities and result in higher insurance premiums. Similarly, additional security measures that require us to increase the scope of our screening procedures may effectively reduce the capacity of, and increase congestion at, our terminals. Failure to comply with applicable security requirements, payment of the costs associated with complying with such requirements and the administrative burden of implementing required security procedures could have a material adverse effect on our business, results of operations, financial condition or prospects.

Risks Relating to Our Rail Division Our rail business is heavily dependent on the services provided by, and our relationship with, Russian Railways. The State-owned Russian Railways is a natural monopoly in the Russian railway sector and plays a monopolistic role as the sole railway infrastructure operator. In addition, it enjoys a near-monopoly position in the provision of locomotive services. As a result, the business of our Rail Division depends on the railway infrastructure and services provided by Russian Railways. See ‘‘Regulatory Overview—Rail’’ for a discussion of the reforms in the Russian railway sector, including deregulation of certain of Russian Railways’ services, and ‘‘—We are subject to risks relating to delays in and changes to the rail industry’s reform programme or the changes that may result from such reform programme’’.

37 Russian Railways charges its clients for the use of its railway infrastructure and for the provision of locomotive services. These charges are regulated by the FTS and are an important component of the rail transportation price. While our prices are not regulated by the FTS, the tariffs set by the FTS for Russian Railways’ freight transportation services have an indirect impact on the prices we charge customers for our services. An increase in tariffs would cause Russian Railways to increase the tariff-regulated prices that it charges us and other private rail operators for the use of its infrastructure and locomotives. We and other private rail operators would typically pass this price increase on to our customers. If we, however, increased our prices to compensate for the increase in tariffs at higher rates than our competitors, who may be better able to spread such increases across greater economies of scale, our transportation services could become less economically attractive as compared with those of our competitors. Also, an increase in our prices may make freight transport by rail less attractive in comparison to other forms of transport, which may reduce demand for our services from our clients. Furthermore, should locomotive services provided by Russian Railways cease to be available for any reason or at acceptable rates, our clients may seek alternative means of transportation of their products and cargo. Tariffs for the use of railway infrastructure and locomotives are not only ‘‘pass through’’ costs for us (as described above). These tariffs represent direct costs for us in that they comprise most of the empty run costs we face. Empty run costs are the largest contributor to our operating costs after infrastructure and locomotive tariffs for loaded trips, which are pass-through. At the end of each trip, after the customers’ cargo has been transported to its destination, the empty railcar must be routed to the next loading destination. There is a single tariff (subject to certain exemptions) for such empty journeys, irrespective of the type of cargo last transported, and this is one of our direct costs. We seek to manage our empty run costs through our route optimisation systems, which reduce the number of empty runs by matching routes and destinations to increase utilisation of our railcars on both outbound and return journeys, and through the use of block trains for which customers generally pay a portion of the tariffs applicable to empty runs directly to Russian Railways. However, our ability to effectively manage empty run costs is limited and, as a result, we remain exposed to Russian Railways’ infrastructure and locomotive tariffs. Any increase in these tariffs could have a material adverse effect on our business, results of operations, financial condition or prospects. In addition, Russian Railways is the main provider of maintenance services to our Rail Division, and any defects in the provision of these services could have a material adverse effect on the condition and performance of our rolling stock. Although we have enjoyed a good relationship with Russian Railways, there is no assurance that we will always continue to do so in the future. There can be no assurance that, because of our dependence on the rail infrastructure and locomotive and other services provided by Russian Railways, we will not become subject to competitive pressures exerted by Russian Railways or that our competitors will not receive better treatment in terms of service levels and delivery times than those received by us. On some routes, we currently utilise our own locomotives and may expand our use of owned locomotives in the future, if applicable regulations permit. Current Russian regulation on the use of locomotives is incomplete and ambiguous in relation to procedures through which private companies may operate locomotives, and access to infrastructure for private locomotives is currently dependent on the cooperation of Russian Railways. Moreover, Russian Railways, as a monopoly carrier, does not fully support the private operation of locomotives in competition with Russian Railways’s locomotive services. There is a risk that Russian Railways may delay applications or refuse to grant permission necessary for us to provide services. Moreover, we and Russian Railways jointly own the platform operator Russkaya Troika. Russkaya Troika manages 1,574 platforms (as of 31 December 2012), most of which are currently integrated into our transportation value chain. We also own a 23.7% stake in TransContainer, which is controlled by Russian Railways. See ‘‘Business—Associates’’. If a dispute were to arise between us and Russian Railways, particularly with respect to the allocation of Russkaya Troika’s platform fleet, we may lose the ability to use such fleet, or a share of such fleet, in the provision of services to our clients. Any increase in Russian Railways tariffs, defects in the quality of services provided by Russian Railways, changes to the legislative regime governing locomotive usage that negatively affect our ability to operate locomotives or deterioration in our relationship with Russian Railways could have a material adverse effect on our business, results of operations, financial condition or prospects.

38 We are subject to risks relating to delays in or changes to the rail industry’s reform programme or the changes that may result from such reform programme. In 2001, Russia’s Ministry of Railways embarked on a comprehensive railway structural reform programme consisting of three phases that set out strategic priorities for the rail industry to 2010 and beyond, with the aim of encouraging investment in and improving the safety, quality, efficiency and profitability of rail services in Russia (the ‘‘Rail Reform Programme’’). We take the Rail Reform Programme into account when developing our business plan and strategy, and a failure to complete, or a reversal of, the Rail Reform Programme may significantly disrupt our current or future rail business. There have already been a number of delays in implementation of the Rail Reform Programme. The first phase was scheduled for completion in 2002, but was completed only in 2003 with the establishment of Russian Railways. The second phase was to be completed by 2005, but certain second-phase reform objectives have yet to be accomplished, such as decreasing cross-subsidisation of passenger transportation. The third phase began in 2006 and ended in 2010 without all the planned reforms having been implemented. See ‘‘Regulatory Overview—Rail—Structural Reform of Railway Transportation’’. Further reform or liberalisation of the Russian railway sector, a reversal of such reform or liberalisation or delays in or changes to the current plan for reform and liberalisation could have a material adverse effect on our business, results of operations, financial condition or prospects.

Difficulty in procuring new rolling stock to renew our fleet or replace our existing fleet may limit our operations. There is a relatively limited number of quality rolling stock manufacturers in Russia and the CIS, and their output is limited by existing production capacities. In addition, the adaptability of these manufacturers’ production facilities to change from one type of railcar to another is limited. Furthermore, given the advanced age of some of the rolling stock in Russia, demand and competition for new rolling stock are likely to increase. Production of new railcars almost ceased during the 1990s, and although by the end of the 2010s it reached levels similar to those achieved during the end of the Soviet period, the bottleneck that was created in the interim has created substantial pressure on manufacturing capacity. Imports of a substantial number of railcars from foreign suppliers is unlikely to occur primarily due to the stringent technical and certification requirements that may prevent the effective operation of certain types of railcars in Russia, as well as the fact that not many countries use the same rail gauge that is used in Russia. We anticipate that we will be required to retire approximately 400 railcars in 2013 and 1,580 railcars in 2014. See ‘‘Business—Operations—Rail Division—Key Assets—Rolling Stock’’. Although we plan to replace these railcars through the acquisition of new railcars, there can be no assurance that in the future we will be able to source sufficient supplies of quality new rolling stock for our fleet on commercially acceptable terms, or at all. If we are unable to acquire the requisite quantity of new rolling stock on commercially acceptable terms, experience delays or failures in delivery of rolling stock ordered or if the new rolling stock delivered is of inferior quality or if its use is not permitted or is suspended on the Russian Railways network because it comes from a manufacturer whose railcars have been suspended from use due to defects in design or construction, this could have a material adverse effect on our business, results of operations, financial condition or prospects.

Our ability to attract and retain large industrial clients is dependent on development of our container block train service. In recent years, container block train services have become an increasingly important priority for us. We have rapidly expanded our deployment of container block trains, which has allowed us to handle increasing volumes of cargo turnover to and from China. In 2012, we organised 964 container block trains, compared to 714 in 2011 and 509 in 2010. In 2012, we sent an average of eight block trains per week from Moscow to points in Siberia and 8.5 block trains per week from the Russian Far East to Moscow. See ‘‘Business—Operations—Rail Division—Services—Block train formations’’. To dispatch a block train effectively, the organiser must have a fleet of containers and platforms available for use, access to container terminals and an agreement in place with Russian Railways on the organisation and monitoring of block train formations. Large industrial companies, such as Sibur, increasingly rely on container block trains for their imports and exports. For us to attract and maintain longstanding relationships with large industrial companies, we must be able to deliver container block train services in a reliable, cost effective manner and on a sufficiently frequent basis. Should we fail to expand our block train services, whether due to capacity

39 constraints, a lack of resources or an inability to secure the necessary agreements with Russian Railways or any other reason, we may lose our ability to attract large industrial clients, which may have a material adverse effect on our business, financial condition, results of operation or prospects.

Our freight service contracts do not ensure firm volumes. Like other freight rail operators, we generally enter into one year contracts with our customers that have automatic renewal provisions and are terminable upon the request of either party before the end of the contract term. Under these contracts, we generally agree expected amounts of cargo to be transported on a monthly basis, but such volumes are not assured until the cargo is actually loaded into the railcars, as nearly all of our contracts do not contain a ‘‘take or pay’’ provision or otherwise provide for an ensured volume of cargo. Since volumes are not ensured, and customers only pay for volumes actually transported, should our key customers fail to provide us with the expected volumes of cargo for shipment, our railcar utilisation rates may go down or revenue from railcar operations may decline, which, in turn, could have a material adverse effect on our business, results of operations, financial condition or prospects.

Risks Relating to Our Liner and Logistics Division We may not be successful in implementing our strategy to become an integrated national leader in the container logistics market. Since 2002, our key strategy has been to strengthen our position as one of Russia’s leading providers of intermodal transportation and logistics services with a particular focus on container transportation. We have adopted this strategy based on our beliefs that the demand for intermodal products and services is likely to grow and that our ability to bundle and cross-sell services across the entire transportation value chain will generate higher margins. Relying on these assumptions, over the past decade, we have reoriented our business away from its historical focus—ship management—disposing of 27 vessels between 1 January 2010 and 31 December 2012, with plans for further sales in 2013, towards a new focus on providing integrated logistics and transportation solutions. To implement this change in strategy, we have made selective acquisitions in the rail, ports, container and freight-forwarding industries that enable us to unite nearly all the links in the intermodal transportation value chain. For example, in 2004, we, together with Russian Railways, established Russkaya Troika to provide container transportation services along the Trans-Siberian Railway. In 2006 and 2007, we acquired Transgarant, one of the largest private railcar operators in Russia in 2012. In 2012, we managed to achieve full operating control over the Port of Vladivostok, one of the leading ports in the Russian Far East. We have made substantial investments of time, money and management resources in the restructuring of our business. If any of our beliefs and assumptions about rising demand for intermodal products or the ability to generate higher margins from providing such products proves to be incorrect, the expected growth resulting from the investments we have made in our asset base may not materialise, which, in turn, may have a material adverse effect on our business, financial condition, results of operations or prospects.

Results of operations of our Liner and Logistics Division are dependent on shipping rates. The Liner and Logistics Division charters-in ships from third parties, in addition to those it charters-in from our Shipping Division, and thus its results of operations are subject to fluctuations in global shipping rates. The shipping industry is highly competitive and has experienced significant fluctuations in charter rates based on, among other things, a reduction in demand for cargo shipments. Although shipping rates have been in decline since the global financial crisis, should they increase materially in the future, we may face higher operating costs. Furthermore, certain types of vessels are scarce in the vessel charter market; if, as we need them, we are unable to charter-in appropriately-sized vessels cost-effectively or at all, we may be forced to use vessels on applicable lines that are less efficient or suitable for the cargo we are transporting and the profitability of these lines may be negatively affected. Any of these risks could have a material adverse effect on our business, financial condition, results of operations or prospects.

40 Our Liner and Logistics Division competes on the basis of service quality, and a failure to maintain a superior level of service could lead to a loss in business. Deliveries along our intermodal transportation network are generally more expensive than like deliveries along deep-sea routes. Therefore, for us to compete effectively, we must offer our clients a higher quality and more reliable level of service relative to our competitors. We believe that our extensive network of transportation infrastructure and logistics know-how allow us to offer a better all-around product that meets the specific needs of a particular client in a quicker, more convenient and more reliable manner. Nevertheless, for us to retain this competitive advantage, we need to have the necessary intermodal network in place and available for use on a prompt and cost-effective basis. For example, we must ensure that a sufficient number of railcars, containers and trucks for last mile shipments can be delivered to clients upon their request in a timely manner and in accordance with a client’s production cycle and that such infrastructure is of sufficient quality and possesses the requisite certifications necessary to avoid delays when dispatching. Our ports facilities must operate in such a way that delays are minimised and cargo is loaded and unloaded efficiently, and our sea liners and container block train formations must maintain sufficient capacity and depart on schedules and travel along routes that are convenient for our clients. We may be unable to meet client expectations for superior service due to, for example, insufficient availability of rolling stock or containers or capacity constraints on any of our sea liners or container block trains or in our ports facilities. In addition, the ability to offer our clients a better quality service compared to our competitors is often outside our direct control. For example, we rely on third parties, such as Russian Railways for locomotive services and infrastructure usage, and certain shipping companies, for the chartering-in of vessels for use along our sea lines. A significant delay in the provision of these services could lead to significant business interruptions for, and/or material losses sustained by, our clients. Any inability on the part of our Liner and Logistics Division to offer our clients a quality of service that surpasses that of our deep sea competitors may lead to a loss of business, which, in turn, could have a material adverse effect on our results of operations, financial condition or prospects.

Risks Relating to Our Shipping Division The shipping industry and the business of our Shipping Division is subject to strong cyclical variations. Historically, the global shipping industry has been cyclical, experiencing volatility in profitability due to changes in the supply and demand for shipping capacity, and our ability to employ our vessels profitably will depend upon, among other things, economic conditions in the shipping market, many of which are beyond our control. The supply of shipping capacity is influenced by a number of different factors, including the number of newbuilding deliveries, the scrapping rate of older vessels, conversion of vessels to other uses, the number of vessels that are out of service and environmental concerns and regulations. In recent years, the world shipping fleet has grown significantly based on both the number of ships and dead weight tonnage. Overcapacity is likely to lead to a decrease in charter rates. Similarly, the demand for shipping capacity is influenced by a number of different factors, including the supply and demand for the products we transport, global and regional economic conditions, the distance products are to be moved by sea and changes in seaborne and other transportation patterns. A fall in demand for shipping capacity will likely lead to a decrease in charter rates and/or a decline in the volumes we transport by ship. These and other factors affecting the supply and demand for shipping capacity may continue to cause significant volatility in charter rates and the volume of goods transported by sea. If the shipping market is depressed, the consequent decrease in charter rates and/or volumes transported could have a material adverse impact on our business, financial condition, prospects or results of operations. While our disposition of shipping assets has generally reduced our exposure to declines in shipping rates, we also will not benefit to the same extent as in the past should shipping rates increase, and we may not be able to employ our remaining vessels at profitable charter rates.

41 Shipping operations are exposed to the risk of losses from marine disasters, mechanical failures and other similar events that may disrupt their operations. Shipping companies can suffer significant losses if a vessel is lost, subject to an accident or its operations are otherwise disrupted. The operation of vessels has inherent risks, including, but not limited to: • marine disasters; • mechanical malfunctions or failures of the vessels or their equipment; • human error; • inclement weather; • war, piracy and terrorist attacks that could damage our vessels, impose security-related costs and liabilities, prohibit the use of certain ports, close important shipping lines or decrease world trade generally; and • business interruptions due to social or political instability, including hostilities, labour strikes, port and canal closings and boycott, or to the requisition or seizure of any of our vessels by a government during wartime or an emergency. In particular, we operate a portion of our business in the Arctic region, where harsh weather and ice conditions increase the risk of accidents, such as striking an iceberg, ice compression or business disruptions due to weather. The occurrence of one or more of these risks could lead to a number of adverse effects on us, including death or injury to persons, pollution or loss of property; delays in the delivery of shipments; loss of revenue from, or termination of, charter contracts; governmental fines, penalties or restrictions on conducting our business; higher insurance rates; and damage to our reputation and customer relationships generally. The occurrence of any one or more of these events could have a material adverse effect on our business, financial condition, prospects, results of operations or the value of the Notes. See ‘‘—General Risks—Our insurance policies may be insufficient to cover all of our losses’’.

Rising fuel prices and other unexpected expenses may adversely affect the results of our Shipping Division. Fuel comprises a significant portion of the operating costs of our Shipping Division, and we are sensitive to changes in the price of marine bunker fuel. The price and supply of marine bunker fuel is unpredictable and fluctuates based on events outside our control, including economic and geopolitical developments, supply and demand for oil and gas, actions by the Organisation of the Petroleum Exporting Countries (‘‘OPEC’’) and other oil and gas producers, war and unrest in oil-producing countries and regions, regional production patterns and environmental concerns. A significant or sustained increase in the price of marine bunker fuel could increase the operating expenses of our Shipping Division and have a material adverse effect on our business, financial condition, prospects or results of operations.

Our Shipping Division is subject to extensive regulation that may require us to incur substantial costs in meeting existing and future regulatory requirements or limit our ability to do business. The shipping industry is highly regulated, and the operations of our Shipping Division are affected by extensive and evolving environmental protection laws and other regulations in the form of numerous international, regional, national and local laws, regulations, treaties and conventions that are in force where our vessels operate. Such laws and regulations impose significant requirements on us, many of which are designed to promote health and safety, as well as to reduce the risk of oil spills and other pollution. These requirements include, among others, obligations relating to air emissions, maintenance and inspection of our vessels, development and implementation of emergency procedures and acquisition of adequate insurance coverage. In particular, seaborne vessels such as ours are required to operate within the rules and regulations adopted by the International Maritime Organization (‘‘IMO’’), an agency of the United Nations, as well as the environmental protection laws, health and safety regulations and other marine protection laws in each of the jurisdictions in which our vessels operate. Since the International Safety Management Code (the ‘‘ISM Code’’) became effective in 1998, shipping companies and individual vessels have been

42 required to establish safety systems and have them certified by standardisation bodies. Our vessels are inspected regularly by Russian governmental agencies, a vessel’s flag state, or classification society if nominated by the flag state, port authorites and many of our customers. See ‘‘Business—Safety and Environment’’. In complying with current and future rules and regulations, we may be required to incur additional costs in meeting new maintenance and inspection requirements, including ship modifications and changes in operating procedures; in developing contingency arrangements for potential contamination by vessels; and in obtaining, maintaining or renewing insurance coverage. Because such laws and regulations are often revised, we are unable to predict the timing or extent of the long-term costs of compliance. Furthermore, if any vessel fails to maintain its class, it may be unable to trade between ports and/or may result in the violation of our insurance policies. We could also face substantial liability for penalties, fines, damages, clean-up obligations and remediation costs associated with hazardous substance spills or other discharges into the environment involving our vessels, as well as misconduct or incidents of non-compliance by our crewmembers under environmental laws and regulations. See ‘‘—General Risks—Environmental accidents, such as oil, fuel or chemical spills, expose us to significant potential environmental costs and liabilities’’ and ‘‘General Risks—Our insurance policies may be insufficient to cover all of our losses’’. We could also become subject to personal injury and property damage claims relating to the release of, or exposure to, hazardous materials associated with our operations. Moreover, failure to comply with applicable laws and regulations may result in criminal sanctions or the suspension or termination of our operations, including, in certain instances, seizure or detention of our vessels. The violation of any laws and regulations or inspection procedures with respect to our vessels, the costs of complying with such laws, regulations and procedures and any liability for property damage or damage caused to the environment or personal injury from the use of our vessels could have a material adverse effect on our business, financial condition, prospects, results of operations or the value of the Notes.

Maritime claimants could arrest our vessels, which may lead to delivery delays. Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may be entitled to a maritime lien against a vessel (and, in some jurisdictions, any vessel owned or controlled by the same owner) for unsatisfied debts, claims or damages, even when protection and indemnity insurance is available to cover any such debts, claims or damages. In many jurisdictions, a maritime lien holder may enforce its lien by arresting a vessel through foreclosure proceedings. The arrest or attachment of one or more of our vessels, particularly those operating on our China Line, could lead to delivery delays and schedule disruptions, which could have a material adverse effect on our image as a reliable transportation company and on our business, financial condition, prospects and results of operations.

Fluctuations in the market value of our vessels may materially and adversely affect our results of operations and our ability to obtain additional financing. The market value of vessels fluctuates depending upon a number of factors, including general economic and market conditions affecting the industry, demand for vessel capacity, the number, type, age and size of vessels in the world fleet, the price of newbuildings (which is affected by availability of shipyard berths and financing), the level of vessel scrapping, the impact of any port congestion on fleet productivity, the cost of other modes of transportation and swings in the historically cyclical shipping industry. Declining vessel values could make it more difficult for us to raise cash by mortgaging vessels and could have a material adverse effect on our liquidity. Declining vessel values could also lead to a breach of loan covenants, which could give rise to events of default under our financing agreements and may require us to recognise impairment losses, which could have a material adverse effect on our business, financial condition, prospects and results of operations.

RISKS RELATING TO RUSSIA We are a Russian company, and most of our fixed assets are located in, and a significant portion of our revenue is derived from, Russia. There are certain risks associated with an investment in Russian businesses. Our Rail Division also operates in Ukraine, where it is subject to many similar risks.

43 Emerging markets such as Russia and Ukraine are subject to greater risks than more developed markets. Investors in emerging markets such as Russia and Ukraine should be aware that these markets are subject to greater risks than more developed markets, including in some cases significant legal, economic, political and social risks. Moreover, financial turmoil in any emerging market country tends to adversely affect the condition of all emerging market countries, as investors move their money to more stable developed markets. As has happened in the past, financial problems or an increase in the perceived risks associated with investing in emerging economies could dampen foreign investment in Russia and Ukraine and adversely affect the Russian and Ukrainian economies. During such times, companies that operate in emerging markets can face severe liquidity constraints as foreign funding sources are withdrawn. Thus, even if the Russian and Ukrainian economies remain relatively stable, financial turmoil in any emerging market country could have an adverse effect on our business, financial condition, results of operations or prospects or on the value of the Notes. Investors should also note that emerging economies such as the economy of the Russian Federation or Ukraine are subject to rapid change, and that the information set out herein may become outdated relatively quickly. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in light of those risks, their investment in the Notes is appropriate. Generally, investment in emerging markets is only suitable for sophisticated investors who are familiar with and fully appreciate the significance of the risks involved in investing in such markets, and prospective investors are urged to consult with their own legal and financial advisers before making an investment in the Notes.

Domestic and international political conflicts, and any future political and government instability could create an uncertain operating environment hindering our long-term planning ability and could have a material adverse effect on the value of investments in Russia, including the value of the Notes. The Russian Federation is a federation of sub-federal political units, consisting of republics, territories, regions, cities of federal importance and autonomous regions and districts, some of which have the right to manage their internal affairs pursuant to agreements with the federal government and in accordance with applicable laws. The delineation of authority and jurisdiction among the constituent units of the Russian Federation and the federal government remains, in many instances, uncertain and contested. In practice, the uncertainty concerning the division of authority could hinder our long-term planning efforts and may lead to uncertainties in our operating environment, which may prevent us from effectively and efficiently carrying out our business strategy. In addition, ethnic, religious, historical and other divisions have, on occasion, given rise to tensions and, in certain cases, military conflicts. In the future, such divisions, military conflict or terrorist activities could have significant political and economic consequences. Russia has been involved in military and political conflicts and tensions. For example, a military conflict in August 2008 between Russia and Georgia involving South Ossetia and Abkhazia resulted in a significant overall price decline for listed Russian securities. The emergence or escalation of any tensions or hostilities in Russia, including terrorist attacks, or with foreign countries could negatively affect the Russian economy. These uncertainties, tensions and conflicts may lead to reduced liquidity, deterioration in the investment climate, trading volatility and a significant reduction in the prices of listed Russian securities, with a resulting negative effect on liquidity, the ability of Russian companies (including us) to raise financing on commercially acceptable terms and the value of the Notes as well as our business, financial condition, results of operations or prospects. Any future political instability in Russia could result in a worsening overall economic situation, including capital flight and a slowdown of investment and business activity. Any future major policy or regulatory shifts or a lack of consensus between the president, the Russian government, Russia’s parliament and powerful economic and social groups could lead to political instability and disrupt or reverse political, economic or regulatory reforms, which could have a material adverse effect on the value of investments relating to Russia and the Notes in particular, as well as on our business, ability to obtain financing, financial condition or prospects.

44 Economic or social instability could have a material adverse effect on our business. Over the last two decades, the Russian economy has experienced at various times: • significant declines in its GDP; • high levels of inflation; • an unstable local currency; • a relatively unstable banking system providing limited liquidity to Russian enterprises; • the continued operation of loss-making enterprises due to the lack of effective bankruptcy proceedings; • the use of fraudulent bankruptcy actions in order to take unlawful possession of property; • widespread tax evasion; • pervasive capital flight; • high levels of corruption and the penetration of organised crime in the economy; • increases in, or high, interest rates and unstable credit conditions; • a weakly diversified economy, which depends significantly on global prices for raw materials; • significant increases in unemployment and underemployment; • low personal income levels of a significant part of the Russian population, the failure of salaries and benefits to keep pace with a rapidly increasing cost of living and/or labour unrest; and • a major deterioration of the country’s physical infrastructure. The recent global financial turmoil has also adversely affected the Russian economy. In the past few years, the Russian economy has been characterised by volatility in the debt and equity markets, which experienced significant declines in the second half of 2008 and the second half of 2011, continuing in 2012. In 2008, the high degree of volatility caused market regulators to temporarily suspend trading multiple times on the principal Russian securities exchange. The Russian economy has also been characterised by significant reductions in foreign investment and sharp decreases in GDP. For example, Russian GDP declined by 7.9% in 2009, before returning to growth from 2010 through 2012. Capital flight out of Russia remains high, with net private sector capital outflows reaching U.S.$34.4 billion in 2010, U.S.$80.5 billion in 2011 and U.S.$47.3 billion in the nine months ended 30 September 2012, according to the CBR. As Russia produces and exports large quantities of crude oil, natural gas and other commodities, the Russian economy is also particularly vulnerable to fluctuations in the prices of crude oil, natural gas and other commodities on the world markets. Russian banks, and the Russian economy generally, have also been adversely affected by the global financial crisis, from which the Russian economy has not fully recovered. There can be no assurance that any measures adopted by the Russian government since 2008 to mitigate the effect of the financial and economic crisis will result in a sustainable recovery of the Russian economy. Current macroeconomic challenges, low or negative economic growth in the United States, Japan and Europe and market volatility may prolong the economic crisis. The Russian economy remains vulnerable to further external shocks. For example, continued instability in the Eurozone, such as in Cyprus, where the government has imposed certain capital controls and taxes on bank deposits and where many Russian businesses and individuals hold assets, may have an adverse effect on economic conditions in Russia. In addition, events occurring in one geographic or financial market sometimes result in an entire region or class of investments being disfavoured by international investors—so-called ‘‘contagion effects’’. Russia has been adversely affected by contagion effects in the past, and it is possible that the market for Russian investment, including the Notes, will be similarly affected in the future by negative economic or financial developments in other countries. There can be no assurance that recent economic volatility, or a future economic crisis, will not negatively affect investors’ confidence in the Russian markets or economy or in the ability of Russian companies to raise capital in the international debt markets, any of which, in turn, could have a material adverse effect on the Russian economy and our results of operations, financial condition or prospects or on the value of the Notes. In addition, any declines in the price of crude oil, natural gas or other commodities could further disrupt the Russian economy and materially adversely affect our business.

45 The Russian banking system is not as strong as the banking systems of certain developed markets, and another banking crisis in Russia could place severe liquidity constraints on our business. Russia’s banking and other financial systems are not as strong as the banking systems in more developed markets, and Russian legislation relating to banks and bank accounts is subject to varying interpretations. Although a number of major Russian banks have an investment-grade credit rating, there are still many Russian banks that do not meet international banking standards, and the transparency of some parts of the Russian banking sector may still not meet internationally accepted norms. The deficiencies in the Russian banking sector, combined with the reported deterioration in the credit portfolios of Russian banks, may result in the banking sector being more susceptible to the current worldwide credit market downturn and economic slowdown. In the autumn of 2008, the credit crisis that began in the U.S. resulted in decreased liquidity in the Russian credit market and weakened the Russian financial system. Starting from the second half of 2008, the majority of Russian banks experienced difficulties with funding on domestic and international markets, and interest rates increased significantly. Some of the banks were unable to service their obligations and were sold to larger banks, and the credit ratings of multiple banks were lowered. Notwithstanding improvement since 2010, a renewed banking crisis, caused by either domestic events or conditions on international markets, or the bankruptcy of a number of Russian banks could have a material adverse effect on our business and our ability to complete banking transactions in Russia.

The Russian legal system and Russian legislation is in a developmental stage, and this may create an uncertain environment for investment and business activity. The Russian legal framework applicable to a market economy is still under development. Since 1991, Soviet law has been largely, but not entirely, replaced by a new legal regime established by the 1993 Constitution of the Russian Federation, the Civil Code, other federal laws and decrees, orders and regulations issued by the Russian President, the Russian government and state authorities, which are, in turn, complemented by regional and local rules and regulations. These legal norms, at times, overlap with or contradict one another, or have substantial gaps. The recent nature of much Russian legislation and the rapid evolution of the Russian legal system may cast doubt on the enforceability and underlying constitutionality of certain laws and result in ambiguities, inconsistencies and anomalies. Russia is a civil law jurisdiction, and, as a rule, judicial precedents have no binding effect on subsequent decisions. The powers of various state authorities are not always clearly delineated, which may lead to administrative and/or legal conflicts. We can give no assurance that the development or implementation or application of legislation or regulations will not adversely affect foreign investors or private investors generally. Among the risks of the current Russian legal system are: • conflicting local, regional and federal rules and regulations; • the limited availability of judicial and administrative guidance on interpreting Russian legislation; • substantial gaps in the regulatory structure due to delay or absence of implementing legislation; • the relative lack of independence of the judiciary; • limited court personnel, especially in lower courts, with the ability to interpret developing Russian legislation, particularly business and corporate law; • a high degree of discretion on the part of state authorities; • bankruptcy procedures that are not well developed and potentially subject to abuse; and • the difficulty in enforcing domestic and foreign court judgments, as well foreign arbitral awards in practice. Furthermore, the lack of developed corporate and securities laws and regulations in Russia may limit our ability to attract future investments. The regulation and supervision of the securities market, financial intermediaries and issuers are relatively less developed in Russia than in the United States and certain members of the EU. While some important areas are subject to virtually no oversight, the regulatory requirements imposed on Russian issuers in other areas result in delays in conducting securities offerings and in accessing the capital markets. It is often unclear whether or how regulations, decisions and letters issued by the various regulatory authorities apply to us. As a result, we may be subject to fines or other enforcement measures despite our best efforts at compliance with the domestic securities laws and regulations.

46 As a result of these factors, even the best efforts to comply with Russian law may not always result in full compliance. In addition, all of the above weaknesses could affect our ability to enforce our rights under contracts and licences or to defend ourselves against claims by others and could affect the ability of investors to have their rights upheld in a Russian court.

Selective government action could materially adversely affect our business. We operate in an uncertain regulatory environment. State authorities in Russia have a high degree of discretion and may at times exercise their discretion selectively, without hearing or prior notice, or in a manner that could be unduly influenced by political or commercial considerations. Selective governmental actions have included unscheduled inspections by regulators, suspension or withdrawal of licences and permits, unexpected tax audits, criminal prosecutions and civil actions. In addition, state authorities have also tried, in certain circumstances, by regulation or government act, to interfere with the performance of, nullify or terminate contracts. Furthermore, federal and local authorities have used common defects in matters surrounding the documentation of business activities as pretexts for court claims and other demands to invalidate such activities or to void transactions, sometimes to further interests different from the formal substance of the claims. The occurrence of such selective action against us could have a material adverse effect on our business, financial condition, results of operations or prospects or on the value of the Notes. See ‘‘—The difficulty of enforcing court decisions and the discretion of state authorities in enforcing claims could prevent investors in the Notes from obtaining effective redress in court proceedings’’, ‘‘The Russian legal system and Russian legislation is in a developmental stage, and this may create an uncertain environment for investment and business activity’’ and ‘‘—Risks Relating to Our Business and Industry—General Risks—Environmental accidents, such as oil, fuel or chemical spills, expose us to significant potential environmental costs and liabilities’’.

The difficulty of enforcing court decisions and the discretion of state authorities in enforcing claims could prevent investors in the Notes from obtaining effective redress in court proceedings. The independence of the judicial system from economic and political influences in Russia is developing. The court system is reported to be understaffed. Under Russian legislation, judicial precedents generally have no binding effect on subsequent decisions and are not recognised as a source of law. However, in practice, courts usually consider prior judicial decisions, particularly those of high-level courts, in their decisions. Enforcement of court judgments can in practice be very difficult in Russia. Additionally, court claims are sometimes reported to be used in furtherance of political and commercial aims. All of these factors make judicial decisions in Russia difficult to predict and make effective redress uncertain in some instances. These uncertainties also extend to property rights. During Russia’s transformation from a centrally planned economy to a market economy, legislation was enacted to protect private property against expropriation and nationalisation. However, due to a relative lack of experience in enforcing this legislation and potential political changes, we may not be able to obtain proper redress in the courts and may not receive adequate compensation if, in the future, the Russian government decides to nationalise or expropriate some or all of our assets. The expropriation or nationalisation of any of our assets without fair compensation may have a material adverse effect on our business, financial condition, results of operations or prospects or on the value of the Notes. Furthermore, any incidents of the judiciary’s corruption and occasional abuse of discretion could lead to unjustified and abusive court decisions. It is not uncommon for excessive injunctive remedies or damages to be sought by a claimant (which may be a small shareholder of a public company) and granted by courts in commercial disputes. Russia is not a party to treaties for the mutual enforcement of court judgments with most Western countries. Consequently, if a judgment is obtained from a court in any such jurisdiction, it is highly unlikely to be given direct effect in Russian courts. However, Russia (as a successor to the Soviet Union) is a party to the New York Convention. A foreign arbitral award obtained in a state which is a party to the New York Convention should be recognised and enforced by a Russian court (subject to the qualifications provided for in the New York Convention and in compliance with Russian civil procedure and other procedures and requirements established by Russian legislation). The Arbitration Procedural Code of the Russian Federation is in conformity with the New York Convention and thus has not introduced any substantial changes relating to the grounds for refusing to recognise and enforce foreign arbitral awards and court judgments. Nonetheless, in practice, reliance upon international treaties may meet with resistance or a lack of understanding on the part of Russian courts or other officials, thereby introducing substantial delay, difficulty and uncertainty into the process of enforcing any foreign

47 judgment or any foreign arbitral award in Russia. Such issues could prevent us or investors from obtaining effective redress in court proceedings in Russia. Furthermore, because the Issuer, FESCO and the Guarantors are domiciled outside the United Kingdom and United States, and all or a substantial portion of their assets and substantially all of their directors and executive officers are located or resident outside the United Kingdom and United States, it may not be possible to effect service of process within the United Kingdom or United States upon the Issuer, FESCO or the Guarantors or enforce English or U.S. courts judgments obtained outside the United Kingdom and United States against the Issuer, FESCO or Guarantors. See ‘‘Enforceability of Judgments’’.

One or more of our subsidiaries may be forced into liquidation or their indebtedness accelerated due to technical non-compliance with certain requirements of Russia corporate law. In accordance with Russian legislation, if the net assets (determined in accordance with RAS) of a Russian company, whether a limited liability company or a joint stock company, remain lower than the charter capital (‘‘insufficient net assets’’) at the end of its third financial year or any subsequent financial year, the company is required to either (i) decrease its charter capital to match the net assets or (ii) liquidate. If a Russian limited liability company adopts a decision to decrease its charter capital, it is is required to notify governmental authorities and make a public disclosure of this fact, and certain of the company’s creditors will have the right to accelerate their claims or demand early performance of the company’s obligations owed to them and demand compensation of damages. In addition, if a Russian joint stock company’s net assets calculated on the basis of RAS are lower than its charter capital by more than 25% as at the end of three, six, nine or twelve months of the financial year that follows its second or any subsequent financial year, at the end of which the net assets of such company were lower than its charter capital, a joint stock company is obliged to make a public disclosure of this fact and certain of the company’s creditors will have the right to accelerate their claims or demand early performance of the company’s obligations owed to them and demand compensation of damages. However, if a Russian limited liability company or joint stock company is able to demonstrate that (i) the creditors’ rights were not violated as a result of the decrease of its charter capital or the decrease of the amount of its net assets, respectively, or (ii) that the security provided for due performance of the company’s obligations is sufficient, a court may dismiss the creditors’ claims. Moreover, if the net assets of a Russian joint stock company at the end of its second or any subsequent financial year fall below the statutory minimum charter capital (RUB100,000) (‘‘negative net assets’’), such company must adopt a decision to liquidate. If a Russian joint stock company fails to comply with any of the requirements stated above (i.e., to decrease its charter capital, publicly disclose and notify governmental authorities of net assets decrease or to adopt decision on liquidation) within the required period of time after the end of the relevant financial year, the company’s creditors may accelerate their claims or demand early performance of the respective company’s obligations and compensation of damages, and governmental authorities may seek the involuntary liquidation of the company. It is unclear under Russian law and court practice whether a historical violation of either of these requirements may be retroactively cured, even if a company later comes into compliance with these requirements. On occasion, Russian courts have ordered the involuntary liquidation of a company for having negative net assets even if the company has continued to fulfil its obligations and had net assets in excess of the minimum amount at the time of liquidation. We are also aware of certain court practice where a company’s negative net assets position was interpreted by courts as entailing a duty of the company to file for bankruptcy in accordance with Federal Law No. 127-F2 ‘‘On Insolvency (Bankruptcy)’’ dated 26 October 2002, as amended (the ‘‘Bankruptcy Law’’). A debtor’s chief executive officer responsible to file for bankruptcy may be held liable for the company’s obligations that arose after the failure to perform such duty. Some of our subsidiaries historically had negative and/or insufficient net assets, and measures to rectify the situation were taken. In particular, the net assets of our subsidiary LLC TG FESCO were below the statutory minimum charter capital as of 31 December 2012 and 2011, and the net assets of our subsidiary LLC TG Terminal were below the statutory minimum charter capital as of 31 December 2012. Although in the past some of our subsidiaries failed to meet applicable net assets tests, we believe that such subsidiaries should not currently be subject to liquidation on such grounds and that none of the violations was of a material nature. However, weaknesses in the Russian legal system create an uncertain legal environment, which makes the decisions of a Russian court or a state authority difficult, if not impossible, to predict. If involuntary liquidation were to occur, we may be forced to reorganise the

48 operations we conduct through the affected entity. Any such liquidation could lead to additional costs, which could materially adversely affect our business, financial condition, results of operations or prospects.

In Russia, the legal framework for ascertaining the validity and enforceability of title to land or other real property or assets, such as railcars, and encumbrances on such property is not fully developed. The legal framework relating to the ownership and use of land and other real property in Russia is not yet sufficiently developed to support private ownership of land and other real property to the same extent as is common in countries with more developed market economies. Because of Russia’s vast territory and difficulties of being in a transitional phase, the process of surveying and title registration may last for many years. Thus, it is often difficult to ascertain the validity and enforceability of title to land or other real property in Russia and the extent to which it is encumbered. In order to protect our rights in relation to our properties, such as ownership or lease rights in relation to land plots and ownership rights in our buildings and structures, we must register our rights with the relevant authorities. However, under Russian law, even where such rights have been registered, transactions involving real estate may be challenged on many grounds, including where the seller, lessor or assignor of such rights did not have the right to dispose of such real estate or internal corporate requirements were breached by a counterparty. We can be exposed to the risk that title to our properties may be challenged based on flaws in the title of previous owners. Furthermore, under Russian law, certain encumbrances over real estate (including leases of less than one year, free-of-charge use agreements, easements, rights of way and other similar encumbrances) do not need to be registered. In addition, the quality and reliability of the official information in the United Register of Immovable Property and Transactions Therewith (the ‘‘United Register’’) is generally less than that of more developed countries. Although it is generally expected that information contained in the United Register is accurate and complete, this is not always the case, and such information may not be relied upon as entirely accurate and complete. Accordingly, there is a risk that the government or a third party may successfully claim the existence of encumbrances of which we had no prior knowledge over real estate owned or leased by us. Challenges to our ownership interests in buildings, structures and/or lease interests in land plots may prevent us from conducting our activities on these properties and we could lose our interests in these properties, which could have a material adverse effect on our business, results of operations, financial condition or prospects and the value of the Notes. Furthermore, to the extent that Russian privatisation legislation is vague, inconsistent or in conflict with other legislation, any privatisation through which we acquired property may be subject to challenge. In the event we face such a challenge, we risk losing our ownership interest in the property in dispute, which could have a material adverse effect on our business, results of operations, financial condition or prospects. In addition, there is not a legally established reliable register in Russia for recording title to, and encumbrances on, railcars. As a result, disputes as to ownership of railcars and whether they have been pledged to a third party can arise if a railcar is not purchased from its original manufacturer. These uncertainties may have a material adverse effect on our business, financial condition, results of operations or prospects.

Shareholder liability under Russian legislation could cause us to become liable for the obligations of our subsidiaries. Russian legislation generally provides that shareholders in a Russian joint stock company or members in a Russian limited liability company are not liable for the obligations of the joint stock company or limited liability company and bear only the risk of loss of their investment. This may not be the case, however, when one person (the ‘‘effective parent’’) is capable of determining decisions made by another entity (the ‘‘effective subsidiary’’) on the basis of an agreement between the two or in accordance with the charter of the latter. Under certain circumstances, the effective parent may bear joint and several responsibility for transactions concluded by the effective subsidiary prior to its insolvency. The Civil Code and the Bankruptcy Law provide for certain other circumstances where a parent company may be deemed secondarily liable for the debts of its insolvent subsidiary. Accordingly, we could be liable in

49 some cases for the debts of our subsidiaries. This liability could have a material adverse effect on our business, results of operations, financial condition or prospects.

Shareholder rights provisions under Russian law may impose additional costs on us. Russian law provides that shareholders that vote against or abstain from voting on certain matters have the right to require the company to purchase their shares at market value. The decisions that trigger this right include: • decisions with respect to a reorganisation; • decisions with respect to delisting of shares or securities convertible into shares; • the approval by shareholders of a ‘‘major transaction’’, which, in general terms, is a transaction involving property worth more than 50% of the gross book value of the relevant company’s assets calculated according to Russian accounting standards, regardless of whether the transaction is actually consummated; and • the amendment of the relevant company’s charter in a manner that limits shareholder rights. Our (or, as the case may be, our subsidiaries’) obligation to purchase shares in these circumstances, which is limited to 10% of our (or the relevant subsidiary’s) net assets calculated in accordance with Russian accounting standards at the time the matter at issue is voted upon, could have a material adverse effect on our business, financial condition, results of operations or prospects.

Our interested party transactions require the approval of disinterested directors or disinterested shareholders. Russian law requires a joint stock company that enters into transactions with certain related persons that are referred to as ‘‘interested party transactions’’ to comply with special approval procedures. Under Russian law, an ‘‘interested party’’ of a company includes: (i) members of the board of directors, (ii) the executive body of the company, including the managing organisation or hired manager, (iii) a member of a collegial executive body, (iv) a shareholder who, together with its affiliates, owns at least 20% of the company’s voting shares or (v) a person who has the right to give mandatory instructions to the company. The above persons are deemed interested in a transaction if they, a close relative or an affiliate of such person, is: • a party to, representative in, intermediary in or a beneficiary of the transaction; • the owner, whether individually or collectively, of at least 20% of the shares in a company that is a party to a transaction with the company, whether directly or as a representative or intermediary, or a beneficiary of the transaction; • a member of a governing body of a company that is a party to, or a beneficiary of, a transaction with the company, whether directly or as a representative or intermediary, or an officer of the managing organisation of such company; or • in other cases provided for by the company’s charter. Under applicable Russian law, interested party transactions require approval by a majority of the disinterested (and, if the company has more than 1,000 shareholders, also independent) directors or disinterested shareholders of the company. A majority vote of the disinterested shareholders of the company is required if (i) the number of disinterested directors is less than the required quorum for board of directors (supervisory council) meetings (or, if a company with more than 1,000 shareholders, there are no disinterested independent directors), (ii) the value of the transaction (or of a number of interrelated transactions) is equal to or exceeds 2% of the balance sheet value of the company’s assets (determined under Russian Accounting Standards according to its latest balance sheet) or (iii) the transaction (or a series of interrelated transactions) involves the issuance or sale by the company of ordinary shares or securities convertible into such shares, in a quantity exceeding 2% of the company’s issued ordinary shares. A failure to obtain the appropriate approval for a transaction may result in it being declared invalid upon a claim by the company or its shareholders made within three months from the day when the decision in question was known or should have been known and the reasons for which it may be declared invalid.

50 RISKS RELATING TO RUSSIAN TAXATION The Russian taxation system is not well developed and is subject to frequent changes, which could have an adverse effect on us. FESCO and its Russian subsidiaries are subject to a broad range of taxes and other compulsory payments imposed at the federal, regional and local levels, including, but not limited to, corporate income tax, value added tax, property tax and other taxes. Russian tax laws, regulations and court practice are subject to frequent change, varying interpretations and inconsistent and selective enforcement. The system of tax collection has been developing, resulting in the imposition of new taxes in an attempt to increase government revenues. The existing Russian tax legislation, including the Tax Code of the Russian Federation (the ‘‘Tax Code’’), has been in force for a short period relative to tax laws in more developed market economies. Interpretation of existing tax laws by the governmental authorities is often unclear, inconsistent or contradictory and may result in the imposition of conditions, requirements or restrictions not provided for by the existing legislation. Accordingly, few precedents with regard to the interpretation of these laws have been established. In addition, in some past instances, although it may be viewed as contradictory to Russian constitutional law, Russian tax authorities have applied certain tax laws retroactively, issued tax claims for periods for which the statute of limitations had expired and reviewed the same tax period multiple times. In practice, the Russian tax authorities may interpret the tax laws in ways that do not favour taxpayers, who often have to resort to court proceedings to defend their position against the tax authorities. Furthermore, court rulings on tax or other related matters by different courts relating to the same or similar circumstances may also be inconsistent or contradictory. In addition to the usual tax burden imposed on Russian taxpayers, these conditions complicate tax planning and related business decisions. For example, tax laws are unclear with respect to the deductibility of certain expenses. Despite FESCO and its Russian subsidiaries’ best efforts to comply with applicable tax laws, these uncertainties could possibly expose FESCO and its Russian subsidiaries to significant fines and penalties and to potentially severe enforcement measures despite their best efforts at compliance, could result in a greater than expected tax burden and could have a material adverse effect on our business, financial condition, results of operations or prospects. On 12 October 2006, the Plenum of the Supreme Arbitration Court of the Russian Federation (the ‘‘Supreme Arbitration Court’’) issued Resolution No. 53 (the ‘‘Resolution’’), formulating the concept of ‘‘unjustified tax benefit’’, which is described in the Resolution by reference to circumstances such as absence of business purpose or transactions where the form does not match the substance, and which could lead to the disallowance of tax benefits resulting from the transaction or the re-characterisation of the transaction for tax purposes. There is a growing practice on the interpretation of this concept by the tax authorities or courts and it is likely that the tax authorities will actively seek to apply this concept when challenging tax positions taken by taxpayers in Russian courts. Although the intention of this Resolution was to combat tax law abuses, in practice there can be no assurance that the tax authorities will not seek to apply this concept in a broader sense than may have been intended by the Supreme Arbitration Court. According to reports in the press, tax has been utilised as a tool for significant state intervention in certain key industries. In addition, a large number of changes have been introduced to the Tax Code since its adoption. These amendments may result in additional tax costs for us. The above conditions create tax risks in the Russian Federation that are more significant than the tax risks typically found in countries with more developed taxation, legislative and judicial systems. These tax risks may impose additional burdens and costs on FESCO’s and its Russian subsidiaries’ operations, including management resources. Further, these risks and uncertainties complicate FESCO’s and its Russian subsidiaries’ tax planning and related business decisions, potentially exposing FESCO and its Russian subsidiaries to significant fines, penalties and enforcement measures, which could have a material adverse effect on our business, results of operations, financial condition and prospects. It is expected that Russian tax legislation will become more sophisticated, which may result in the introduction of additional revenue raising measures. On 2 May 2012, in its Main Directions of Russian Tax Policy for 2013 and planned period of 2014 - 2015, the Government considered certain legislative changes. It is proposed to introduce into the Russian tax legislation so-called ‘‘controllable foreign companies rules’’ aimed at anti-avoidance of taxation on profits retained by controllable foreign entities, especially by entities which are residents in offshore jurisdictions. There is a plan to introduce a number

51 of conditions under which the Russian taxpayers shall pay profits tax on profits retained by controllable foreign entities and not distributed into Russia. Following the Main Directions of Russian Tax Policy for 2013 and planned period of 2014 - 2015, on 3 December 2012 the Government issued an Order setting out the action plan aimed to mitigate tax avoidance. According to this plan in 2013 it is planned to draft the legislative proposals dealing with tax avoidance structures using companies, in particular, through introduction of such concepts as ‘‘entity—tax resident’’, ‘‘beneficial owner of income’’, and the introduction of ‘‘controlled foreign companies rules’’. Although it is unclear how any new measures would operate, the introduction of such measures may affect FESCO’s and its Russian subsidiaries’ overall tax efficiency and may result in significant additional taxes becoming payable. FESCO cannot offer prospective investors any assurance that additional tax exposures will not arise while the Notes are outstanding. Additional tax exposures could have a material adverse effect on our business, financial condition, results of operations or prospects.

Repeated tax audits and extension of liability beyond the limitation period may result in additional tax assessments. Generally, tax returns in the Russian Federation remain subject to inspection by the tax authorities for a period of three years immediately preceding the year in which the decision to conduct a tax audit is taken. The fact that a particular year has been reviewed by the tax authorities does not mean that any tax returns applicable to that year will not be subject to further review by a superior tax authority during the three year limitation period. In addition, on 14 July 2005 the Russian Constitutional Court issued a decision allowing the statute of limitations for tax liabilities to be extended beyond the three-year term set forth in the Tax Code if a court determines that the taxpayer has obstructed or hindered a tax inspection. Moreover, the Tax Code provides for the extension of the three year statute of limitations if the actions of a taxpayer create insurmountable obstacles for a tax audit. Because none of the relevant terms is defined in Russian law, the tax authorities may have broad discretion to argue that a taxpayer has ‘‘obstructed’’ or ‘‘hindered’’ or ‘‘created insurmountable obstacles’’ in respect of an inspection and to ultimately seek review and possibly apply penalties beyond the three year term. Therefore, the statute of limitations is not entirely effective. Tax audits may result in additional costs to FESCO and its Russian subsidiaries if the relevant tax authorities conclude that FESCO and its Russian subsidiaries did not satisfy its tax obligations in any given year. Such audits may also impose additional burdens on FESCO and its Russian subsidiaries by diverting the attention of management resources. The outcome of these audits could have a material adverse effect on our business, financial condition, results of operations and prospects or the trading price of the Notes.

Russian transfer pricing legislation may require pricing adjustments and impose additional tax liabilities with respect to controlled transactions. Transfer pricing legislation became effective in the Russian Federation on 1 January 1999. This legislation allowed the tax authorities to make transfer-pricing adjustments and impose additional tax liabilities in respect of certain types of transactions which are subject to control. There were also special transfer pricing rules for transactions with securities and derivatives. However, Russian transfer pricing rules were not well-developed and there was little guidance and court practice, which left a wide room for interpretation by the Russian tax authorities and courts. Following the adoption of Federal Law No 227-FZ dated 18 July 2011, new Russian transfer pricing rules became effective from 1 January 2012. The new rules are more technically elaborated, detailed and, to a certain extent, better aligned with the international transfer pricing principles developed by the Organisation for Economic Cooperation and Development. The list of the transactions which are subject to control under the new transfer pricing legislation includes transactions with related parties and certain types of cross border transactions. The amendments have toughened considerably the previous transfer pricing rules, by, among other things, effectively shifting the burden of proving market prices from the tax authorities to the taxpayer and obliging the taxpayer to keep specific documentation. The introduction of the new transfer pricing rules may increase the risk of transfer pricing adjustments being made by the tax authorities and, therefore, may have a material impact on our business and results of operations. It will also require FESCO and its Russian subsidiaries to ensure compliance with the new transfer pricing documentation requirements proposed in such rules.

52 RISKS RELATING TO THE NOTES, OUR INDEBTEDNESS AND OUR STRUCTURE Our significant debt obligations could limit our flexibility in managing our business and expose us to risks. After the issuance of the Notes, we will be highly leveraged and have significant debt service obligations. As of 31 December 2012, as adjusted to give effect to the Offering, we had U.S.$1.3 billion of debt, excluding U.S.$147 million of debt to trade and other creditors in the ordinary course of business. As of the same date, as adjusted to give effect to the Offering, the Subsidiary Guarantors as a group had U.S.$1,121 million of debt, and the Non-Guarantor Subsidiaries as a group had U.S.$211 million of debt, in each case excluding debt to trade and other creditors in the ordinary course of business. In addition, we are permitted under the Trust Deeds to incur additional debt, subject to certain limitations. Our high degree of leverage may have important consequences to you. For example, it could: • make it more difficult for us to satisfy our obligations under the Notes or other indebtedness, and if we fail to comply with these requirements, an event of default could result; • require us to dedicate a substantial portion of our cash flow from operations to required payments on indebtedness, thereby reducing the availability of cash flow for working capital, capital expenditures and other general corporate activities; • under covenants relating to our debt, restrict our ability to obtain additional financing for working capital, capital expenditures and other general corporate activities; • under covenants relating to our debt, limit our flexibility in planning for, or reacting in planning for, or reacting to, changes in our business and the industry in which we operate; • make us more vulnerable than our competitors to the impact of economic downturns and adverse developments in our business; • expose us to interest rate increases on indebtedness, including under the OpCo Facility and credit facilities that we may enter into after the Issue Date; and • place us at a competitive disadvantage against any less leveraged competitors. The occurrence of any of these events could have a material adverse effect on our business, financial condition, results of operations, prospects and ability to satisfy our obligations under the Notes. In addition, the OpCo Facility contain and the Trust Deeds will, and credit facilities that we enter into in the future may, contain certain restrictive covenants. These covenants will limit our ability to engage in certain activities that may be in our long term best interests. Our failure to comply with those covenants could result in an event of default under the Trust Deeds, the OpCo Facility and credit facilities that we enter into in the future which, if not cured or waived, could result in the acceleration of all of our indebtedness.

We may incur additional indebtedness, which could increase our risk exposure from debt and could decrease your share in any proceeds. Subject to restrictions in the Trust Deeds and in the OpCo Facility, we may incur additional indebtedness, which could increase the risks associated with our already substantial indebtedness. The terms of the Trust Deeds will permit us to incur additional debt, including additional secured debt. For instance, under the Trust Deeds, we will be permitted to incur additional debt in accordance with the Trust Deeds, which may rank pari passu with the Notes and be secured on the Collateral. If we incur any additional indebtedness secured by liens that rank equally with those securing the Notes, the holders of that debt will be entitled to share ratably with you in any proceeds distributed in connection with any of our insolvency, liquidation, reorganisation, dissolution or other winding-up. See ‘‘Description of Certain Indebtedness—Description of the Intercreditor Agreement’’. In addition, the Trust Deeds will not prevent us from incurring other obligations that do not constitute indebtedness thereunder.

We may not be able to generate sufficient cash flows to meet our debt service obligations. Our ability to make scheduled payments on, or to refinance, our obligations with respect to our indebtedness, including the Notes, will depend on our financial and operating performance, which in turn will be affected by general economic conditions and by financial, competitive, regulatory and other factors beyond our control. We cannot assure you that our business will generate sufficient cash flow

53 from operations or that future sources of capital will be available to us in an amount sufficient to enable us to service our indebtedness, including the Notes. In addition, future borrowings or amounts available for borrowing under credit facilities may be insufficient to fund our other liquidity needs. If we are unable to generate sufficient cash flow to satisfy our debt obligations, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets, reducing or delaying capital investments or seeking to raise additional capital. We cannot assure you that any refinancing would be possible, that any assets could be sold or, if sold, of the timing of the sales and the amount of proceeds that may be realised from those sales, or that additional financing could be obtained on acceptable terms, if at all. The Trust Deeds will restrict our ability to dispose of assets and use the proceeds from the disposition. Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on commercially reasonable terms, would materially and adversely affect our financial condition and results of operations and our ability to satisfy our obligations under the Notes.

Restrictive covenants in the Trust Deeds may restrict our ability to pursue our business strategies and react to changes in the economy or our industry. The Trust Deeds will limit our ability or would require us to comply with certain conditions in order, among other things, to: • incur additional debt and guarantees; • pay dividends or make other distributions or repurchase our stock; • make other restricted payments, including without limitation, investments; • create or incur liens; • sell or otherwise dispose of assets, including capital stock of restricted subsidiaries; • enter into agreements that restrict certain of our subsidiaries’ ability to pay dividends; • enter into transactions with our affiliates; • grant guarantees, unless Notes are guaranteed at the same time; • consolidate, merge, sell or otherwise dispose of all or substantially all of our assets; and • enter into new lines of business. Our ability to comply with these covenants may be affected by events beyond our control. The restrictions contained in the Trust Deeds could: • limit our ability to plan for or react to market conditions or meet capital needs or otherwise restrict our activities or business plans; and • adversely affect our ability to finance our operations, strategic acquisitions, investments or alliances or other capital needs or to engage in other business activities that would be in our interest. A breach of any of these restrictive covenants would result in a default under the Notes. If our obligations to repay the indebtedness under the Notes were accelerated, we cannot assure you that our assets would be sufficient to repay in full such indebtedness. See ‘‘Terms and Conditions of the 2018 Notes—3. Covenants’’.

The interests of our principal shareholders may conflict with your interests. The interests of our principal shareholders, in certain circumstances, may conflict with your interests as holders of the Notes. Our principal shareholders have, directly or indirectly, the power, among other things, to affect our legal and capital structure and our day-to-day operations, as well as the ability to elect and change our management and to approve any other changes to our operations. See ‘‘Sponsors and Principal Shareholders’’. For example, our principal shareholders could vote to cause us to incur additional indebtedness, sell certain material assets or pay dividends, in each case, so long as the Trust Deeds and the Intercreditor Agreement so permit. The interests of our principal shareholders could conflict with your interests, particularly if we encounter financial difficulties or are unable to pay our debts when due. The incurrence of additional indebtedness would increase our debt service obligations and the sale of certain assets could reduce our ability to generate revenue, each of which could adversely affect holders of the Notes.

54 There may not be sufficient Collateral to pay all or any of the Notes. The value of the Collateral in the event of its enforcement or liquidation will depend on the prevailing market and economic conditions, the availability of buyers and other factors. Consequently, liquidating the Collateral securing the Notes may not produce proceeds in an amount sufficient to pay amounts due on the Notes, under the OpCo Facility or any other pari passu additional indebtedness. The fair market value of the Collateral is subject to fluctuations based on factors that include, among others, the physical condition of the assets that comprise the Collateral, the ability to sell Collateral in an orderly sale, general economic conditions, the availability of buyers and similar factors. The amount to be received upon enforcement of the Collateral would be dependent on numerous factors, including, but not limited to, the actual fair market value of the Collateral at such time and the timing and the manner of the sale. By its nature, portions of the Collateral may not be liquid and may have no readily ascertainable market value. In addition, a significant portion of the Collateral includes assets that may only be usable, and thus retain value, as part of our existing operating business. With respect to some of the Collateral securing the Notes and the Note Guarantees, the Security Agents’ security interests and ability to enforce those security interests may also be limited by the need to meet certain requirements, such as obtaining third party consents and making additional filings. If these consents are not obtained or these filings are not made, the Security Agents’ ability to enforce the security interests may be adversely affected. We cannot assure you that any such required consents or filings can be obtained or made on a timely basis or at all. These requirements may delay any enforcement, which may have an adverse effect on the realisation proceeds from enforcement of the Collateral. In the event of a foreclosure, liquidation, bankruptcy or similar proceeding, the proceeds from any enforcement or liquidation of this Collateral may not be sufficient to pay our obligations under the Notes and other prior ranking and pari passu claims. Not all of our assets are part of the Collateral securing the Notes and other assets of FESCO and its subsidiaries may be subject to other liens. To the extent the claims of holders of the Notes exceed the value of the assets securing the Notes and other liabilities, the remaining claims of holders of the Notes will rank equally with the claims of the holders of any other unsecured indebtedness. As a result, if the value of the assets pledged as security for the Notes is less than the value of the claims of the holders of the Notes together with any claims of lenders under the OpCo Facility or any claims of the holders of any other pari passu additional indebtedness, those claims may not be satisfied in full.

There are circumstances other than repayment of the Notes under which the Collateral will be released, without your consent. Under various circumstances, Collateral may be released without your consent, including: • in connection with any sale, assignment, transfer, conveyance or other disposition of such property or other assets that does not violate the ‘‘Asset Sales’’ covenant of the Trust Deeds; • in the case of a Subsidiary Guarantor that is released from its Note Guarantee pursuant to the Trust Deeds, the release of the property and assets and capital stock, as applicable, of such Subsidiary Guarantor or any of its subsidiaries; and • if FESCO designates any of its restricted subsidiaries as an unrestricted subsidiary in accordance with the applicable provisions of the Trust Deeds, the release of the property and assets of such subsidiary. The pledges over the equity interests in FESCO will only be released: (a) upon repayment in full of the Notes; (b) in accordance with the ‘‘Modification and Waiver’’ provisions of the Trust Deeds; or (c) in connection with a repurchase or other retirement of such equity interests by FESCO that complies with the ‘‘Restricted Payments’’ covenant of the Trust Deeds. In addition, a Note Guarantee by a Guarantor may be released in certain circumstances, including in connection with a sale of a Subsidiary Guarantor if the transaction is not prohibited under the Trust Deeds. See ‘‘Terms and Conditions of the 2018 Notes—2. Status and Note Guarantees—2.3 Note Guarantees Release’’ and ‘‘Terms and Conditions of the 2018 Notes—2. Status and Note Guarantees— 2.6 Release of the Collateral’’.

55 The security over the Collateral will not be granted directly to the holders of the Notes. The security interests in the Collateral that will secure the Issuer’s obligations under the Notes and the obligations of the Guarantors under the Note Guarantees will not be granted directly to the holders of the Notes, but will be granted only in favour of the Security Agents for the benefit of the secured creditors, including the holders of the Notes and the lenders under the OpCo Facility. The Intercreditor Agreement provides that only the Security Agents have the right to enforce the Collateral. Holders of the Notes will not be entitled to take enforcement action in respect of the Collateral, except through the Trustee, who will provide instructions to the Security Agents. In addition, in certain circumstances, lenders under the OpCo Facility and other debt, which rank pari passu with the Notes, may have the right to direct the Security Agents with respect to an enforcement action in respect of the Collateral, which may limit recovery for the holders of the Notes. See ‘‘Description of Certain Indebtedness—Description of the Intercreditor Agreement’’.

It may be difficult to realise the value of the Collateral. The Collateral will be subject to any and all exceptions, defects, encumbrances, liens and other imperfections permitted under the Trust Deeds and accepted by other creditors that have the benefit of security interests in the Collateral from time to time, whether on or after the date the Notes are first issued. The existence of any such exceptions, defects, encumbrances, liens and other imperfections could adversely affect the value of the Collateral, as well as the ability of the Security Agents to realise or foreclose on such Collateral. Furthermore, the ranking of security interests can be affected by a variety of factors, including, among others, the timely satisfaction of perfection requirements, statutory liens or re-characterisation under the laws of certain jurisdictions. The security interests of the Security Agents will be subject to practical problems generally associated with the realisation of security interests in collateral and the recognition of those security interests under the laws of the jurisdictions in which the Collateral is located at the time of enforcement. The Security Agents may also need to obtain the consent of a third party to enforce a security interest. We cannot assure you that the Security Agents will be able to obtain any such consents. We also cannot assure you that the consents of any third parties will be given when required to facilitate a foreclosure on such assets. Accordingly, the Security Agents may not have the ability to enforce its security interest in a timely manner or at all over those assets, and the value of the Collateral may significantly decrease.

The Note Guarantees and security interests in the Collateral will be subject to certain limitations on enforcement and may be limited by applicable law or subject to certain defences that may limit their validity and enforceability. If the Issuer defaults under the Trust Deeds or if a Guarantor defaults under its Note Guarantee, the holders of a majority of the aggregate principal amount of the Notes may direct the Trustee to instruct the Security Agents to bring an enforcement action against the defaulting party. Their ability to bring enforcement actions may be limited by laws applicable to the Issuer or the relevant Guarantor. We cannot assure you that the Collateral will be located in a jurisdiction having effective or favourable foreclosure procedures and lien priorities. Any foreclosure proceedings could be subject to lengthy delays resulting in increased custodial costs, deterioration in the condition of the Collateral and substantial reduction of the value of such Collateral. In addition, some jurisdictions may not provide a legal remedy for the enforcement of security on the Collateral. The costs of enforcement in foreign jurisdictions can be high and can include fees based on the face amount of the mortgage(s) being enforced. Foreign court proceedings can also be slow and have unexpected procedural hurdles.

Cyprus On 24 March 2013, the government of Cyprus and ECB, the EU and the IMF (the ‘‘Troika’’) reached a provisional agreement regarding the provision of a loan and related finance package to Cyprus, such loan and finance package being conditional on Cyprus implementing a comprehensive economic adjustment programme. In addition, agreement has been reached on a Memorandum of Understanding which is expected to be signed on or around the date of hereof between the government of Cyprus and the Troika whereby among others, the government of Cyprus has passed legislation for the increase of the income tax rate from 10% to 12.5% and the increase of the rate of special defence contribution tax from 15% to 30%. The statements in the Offering Memorandum under the heading ‘‘Risk Factors’’ and ‘‘Taxation—Cyprus’’ should, therefore, be read in light of the above developments.

56 Under Cyprus contract law, there are certain requirements which, if not fulfilled, will render any pledge over shares in a Cyprus company invalid and unenforceable. These requirements include for the pledge of shares to be expressed in writing, be signed by the pledgor and be made in the presence of two witnesses, giving formal notice of the pledge together with a certified copy thereof to the company in which the pledged shares are held, the company making a memorandum of such pledge in its register of shareholders against the shares in respect of which the notice has been given, and the company delivering to the pledgee a certificate confirming that a memorandum of such pledge has been made in its register of shareholders. Any attempt to enforce any Cyprus law governed share pledge in an out of court procedure using any of the enforcement documentation attached to any of the share pledges, may not be enforceable as such enforcement documentation has not been tested before a court in Cyprus. Any rights of a pledgee holding a pledge over shares in a Cyprus company to sell the pledged shares will be subject to the provisions of the articles of association of that company. A transfer of shares in a Cyprus company is not complete until and unless it is entered into the company’s register of members. Following the commencement of the winding up of a Cyprus company no transfer of shares in, nor any transfer of assets of, such company can take place unless the court otherwise orders. In order to ensure that certain classes of security over its assets are not rendered void against a liquidator or any creditor, a company registered in Cyprus must deliver the instrument creating or evidencing the security, together with the prescribed particulars thereof, to the Registrar of Companies for registration within 21 days after the creation of such security. The Registrar of Companies will then issue a certificate of registration of charge, which is conclusive evidence that the procedure required by the legislation to register with the Registrar of Companies in Cyprus the security concerned has been complied with. There is no authority in Cyprus as to what the position would be were a Cyprus company to go insolvent between the date of the filing of the security at the companies registry and the Registrar issuing the certificate of registration of charge. Under Cypriot law the effectiveness of Cyprus law share pledges has not been tested by any Cypriot court to date. Further, according to section 303 of the Companies Law Cap. 113 where a company is being wound up, a floating charge on the undertaking or property of the company created within 12 months of the commencement of the winding up shall, unless it is proved that the company immediately after the creation of the charge was solvent, be invalid, except to the amount of any cash paid to the company at the time of or subsequently to the creation of, and in consideration for, the charge, together with interest on that amount at the rate of 5% per annum or such other rate as may for the time being be prescribed by order of the Accountant-General. To the extent that under any of the fixed and floating charges provided by any of the Guarantors and/or Security Providers incorporated in Cyprus, they are entitled to deal with the assets which are charged pursuant thereto prior to the occurrence of an event of default or a crystallisation event or similar event, then the relevant charge will not be effective as a fixed charge over the relevant assets but only as a floating charge. Any security entered into by any of the Guarantors and/or Security Providers incorporated in Cyprus which is governed by the laws of other jurisdictions may require that certain acts be performed in said jurisdictions in order for this security to be properly perfected and enforceable. Any guarantee or any instrument which creates a guarantee may be subject to the following restrictions: Under Cyprus law a continuing guarantee may, at any time be revoked by the surety, as to future transactions, by notice to the creditor. Also, any variance, made without the surety’s consent, in the terms of the contract between the principal and the creditor, discharges the surety as to transactions subsequent to the variance. The surety is discharged by any contract between the creditor and the principal debtor, by which the principal debtor is released, or by any act or omission of the creditor, the legal consequence of which is the discharge of the principal debtor. A contract between the creditor and the principal debtor, by which the creditor makes a composition with, or promises to give time to, or not to sue, the principal debtor, discharges the surety, unless the surety assents to such contract. If the creditor does any act which is inconsistent with the rights of the surety, or omits to do any act which his duty to the surety requires him to do, and the eventual remedy of the surety himself against the principal debtor is thereby impaired, the surety is discharged. Where a guaranteed debt has become due, or default of the principal debtor to perform a guaranteed duty has taken place, the surety, upon payment or performance of all that he is liable for, is invested with all the rights which the creditor had against the

57 principal debtor. Also, a surety is entitled to the benefit of every security which the creditor has against the principal debtor at the time when the contract of suretyship is entered into, whether the surety knows of the existence of such security or not; and, if the creditor loses or, without the consent of the surety, parts with such security, the surety is discharged to the extent of the value of the security. The obligations of each Guarantor and/or Security Provider incorporated in Cyprus and any security provided by them may also be limited under the laws of Cyprus applicable to such Guarantor and/or Security Provider and the granting of such Guarantees and security by laws relating to corporate benefit, capital, capital preservation, financial assistance, transactions at an under value or other similar laws.

Luxembourg According to Luxembourg conflict of laws rules, the courts in Luxembourg will generally apply the lex rei sitae or lex situs (the law of the place where the assets or subject matter of the pledge or security interest is situated) in relation to the creation, perfection and enforcement of security interests over such assets. As a consequence, Luxembourg law will apply in relation to the creation, perfection and enforcement of security interests over assets located or deemed to be located in Luxembourg, such as registered shares in Luxembourg companies, bank accounts held with a Luxembourg bank, receivables/claims governed by Luxembourg law and/or having debtors located in Luxembourg, tangible assets located in Luxembourg, securities which are held through an account located in Luxembourg, bearer securities physically located in Luxembourg, etc. The Luxembourg law of 5 August 2005 on collateral arrangements, as amended (the ‘‘Luxembourg Collateral Act 2005’’) governs the creation, validity, perfection and enforcement of pledges over shares, bank accounts and receivables located or deemed to be located in Luxembourg. Under the Luxembourg Collateral Act 2005, the perfection of security interests depends on certain registration, notification and acceptance requirements. A share pledge agreement must be (i) acknowledged and accepted by the company which has issued the shares (subject to the security interest) and/or (ii) registered in the shareholders’ register of such company. If future shares are pledged, the perfection of such pledge will require additional registration in the shareholders’ register of such company. A pledge over receivables becomes enforceable against the debtor of the receivables and third parties from the moment when the agreement pursuant to which the pledge was created is entered into between the pledgor and the pledgee. However, if the debtor has not been notified of the pledge or if he did not otherwise acquire knowledge of the pledge, he will be validly discharged if he pays the pledgor. For ranking purposes, a bank account pledge agreement must be notified to and accepted by the account bank so as to ensure that the account bank has waived any pre-existing security interests and other rights in respect of the relevant account. If (future) bank accounts are pledged, such additional notification to, acceptance and waiver by the account bank will be required. Article 11 of the Luxembourg Collateral Act 2005 sets out enforcement remedies available upon the occurrence of an enforcement event, including, but not limited to: • appropriation by the pledgee or appropriation by a third party of the pledged assets at (i) a value determined in accordance with a valuation method agreed upon by the parties or (ii) (if listed) the listing price of the pledged assets; • sell or cause the sale of the pledged assets (i) in a private transaction (vente de gre´ a` gre´) at commercially reasonable terms (conditions commerciales normales), (ii) by a public sale at the stock exchange (if listed shares), or (iii) by way of a public auction; • court allocation of the pledged assets to the pledgee in discharge of the secured obligations following a valuation made by a court-appointed expert; or • set-off between the secured obligations and the pledged assets. As the Luxembourg Collateral Act 2005 does not provide any specific time periods and depending on (i) the method chosen, (ii) the valuation of the pledged assets, (iii) any possible recourses, and (iv) the possible need to involve third parties, such as, e.g., courts, stock exchanges and appraisers, the enforcement of the security interests might be substantially delayed. The Luxembourg Collateral Act 2005 expressly provides that financial collateral arrangements (including pledges) including enforcement measures are valid and enforceable, even if entered into during the hardening period, against third parties including supervisory, receivers, liquidators and any other similar

58 persons or bodies irrespective of any bankruptcy, liquidation or other situation, national or foreign, of composition with creditors or reorganisation affecting any one of the parties. The appointment of a foreign security agent will be recognised under Luxembourg law, (i) to the extent that the designation is valid under the law governing such appointment and (ii) subject to possible restrictions. Generally, according to paragraph 2(4) of the Luxembourg Collateral Act 2005, a security (financial collateral) may be provided in favour of a person acting on behalf of the collateral taker, a fiduciary or a trustee in order to secure the claims of third party beneficiaries, whether present or future, provided that these third party beneficiaries are determined or may be determined. Without prejudice to their obligations vis-a-vis third party beneficiaries of the security, persons acting on behalf of beneficiaries of the security, the fiduciary or the trustee benefit from the same rights as those of the direct beneficiaries of the security aimed at by such law. The perfection of the security interests created pursuant to pledge agreements does not prevent any third party creditor from seeking attachment or execution against the assets, which are subject to the security interests created under the pledge agreements, to satisfy their unpaid claims against the pledgor. Such creditor may seek the forced sale of the assets of the pledgors through court proceedings, although the beneficiaries of the pledges will, in principle, remain entitled to priority over the proceeds of such sale (subject to preferred rights by operation of law). Foreign law governed security interests and the powers of any receivers/administrators may not be enforceable in respect of assets located or deemed to be located in Luxembourg. Security interests/ arrangements, which are not expressly recognised under Luxembourg law and the powers of any receivers/administrators might not be recognised or enforced by the Luxembourg courts, even over assets located outside of Luxembourg, in particular where the relevant Luxembourg security provider or Issuer becomes subject to Luxembourg insolvency proceedings or where the Luxembourg courts otherwise have jurisdiction because of the actual or deemed location of the relevant rights or assets, except if a ‘‘main insolvency proceedings’’ (as defined in of the Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings, as amended (the ‘‘EU Insolvency Regulation’’ )) are opened under Luxembourg law and such security interests/arrangements constitute rights in rem over assets located in another Member State in which the EU Insolvency Regulation applies, and in accordance with article 5 of the EU Insolvency Regulation.

Russia The direct or indirect acquisition of the shares in Russian companies upon enforcement requires prior FAS approval where the acquirer, together with its group, acquires more than 25%, more than 50% or more than 75% of the voting shares in the target company and certain thresholds regarding the asset value of the acquirer and such target company are satisfied. See ‘‘Regulatory Overview—Antimonopoly and Related Regulation’’. Additionally, the direct or indirect acquisition of more than 50% of the voting shares of FESCO or VMTP upon enforcement by foreign persons would require approval by the SIL Commission. See ‘‘Risks Relating to Our Business and Industry—General Risks—Our business and prospects could be materially adversely affected by laws regarding foreign control’’ and ‘‘Regulatory Overview—Foreign Investment in Strategic Enterprises’’. Finally, a party that together with its group acquires more than 30%, more than 50% or more than 75% of the shares in FESCO or VMTP will also be required to make a mandatory offer to purchase the remaining shares in FESCO or VMTP. The transaction structure allows the shares in FESCO to be acquired indirectly through enforcement of security over the shares in the Intermediate HoldCo Guarantors. Following the Wiredfly Reorganisation, each such Intermediate HoldCo Guarantors will individually hold less than 25% of the shares in FESCO and pursuant to the Terms and Conditions of the Notes will be prohibited from acquiring more than 25% of FESCO’s shares. See ‘‘Terms and Conditions of the 2018 Notes—3. Covenants—3.10 Limitation on holding company activities’’. Based on the applicable legislation in effect as at the Issue Date, foreclosure of up to 25% of the outstanding shares of FESCO (either through enforcement of the relevant pledges over the FESCO shares or enforcement of security over the shares in the HoldCo Guarantors) by a person that is not affiliated, and does not otherwise form part of a group of entities, with direct or indirect shareholders of FESCO should not be subject to shareholder or governmental approvals or trigger a mandatory tender offer under Russian law. As such, it should be possible to effect enforcement though the indirect sale of FESCO shares to unrelated parties at thresholds below those which would trigger governmental consents or a mandatory offer (although there can be no assurance that enforcement in this manner will realise the greatest value of Collateral for holders of the Notes).

59 Ukraine Ukrainian currency control regulations may impact the ability of Transgarant Ukraine to make payments under its Note Guarantee The National Bank of Ukraine (the ‘‘NBU’’) is empowered to establish policies for and to regulate currency operations in Ukraine and has the power to establish restrictions on currency operations and repatriation of investment. Ukrainian currency control framework is subject to continuing change, with the NBU exercising considerable autonomy in interpretation and practice. The Note Guarantee of Transgarant Ukraine will constitute a suretyship under Ukrainian law. Under the applicable Ukrainian legislation, a Ukrainian entity, not being a financial institution, is required to obtain an individual licence from the NBU (the ‘‘Cross-Border Payment Licence’’) in order to make cross- border payments pursuant to a suretyship (although no Cross-Border Payment Licence is required for a Ukrainian entity to provide the suretyship). However, the NBU does not issue such Cross-Border Payment Licences in advance or for contingent payments when the amount and date of a cross-border payment are not known. Accordingly, there can be no assurance that Transgarant Ukraine will obtain a Cross-Border Payment Licence to make cross-border payments under its Note Guarantee. At the same time, the lack of a Cross-Border Payment Licence would not affect the validity of such Note Guarantee, and in the absence of the Cross-Border Payment Licence, a Ukrainian entity, such as Transgarant Ukraine, should be permitted to make cross-border payments under its Note Guarantee pursuant to a valid and effective order of a Ukrainian court (enforcing a foreign arbitral award or adopted as a result of review of the merits of the dispute). The ability of Transgarant Ukraine to make cross-border payments under its Note Guarantee may be further impeded by the Ukrainian currency control regulations restricting a Ukrainian entity’s ability to purchase foreign currency in the interbank currency market of Ukraine in order to make payments under a suretyship issued with respect to obligations of a foreign debtor. At the same time, Transgarant Ukraine may utilise its own foreign currency proceeds for the purpose of making such cross-border payments pursuant to its Note Guarantee.

The validity of the Note Guarantee of Transgarant Ukraine could be challenged The Note Guarantee of Transgarant Ukraine will constitute a suretyship under Ukrainian law. Under the Law of Ukraine ‘‘On Financial Services and the State Regulation of the Markets of Financial Services’’ dated 12 July 2001, suretyships are considered ‘‘financial services’’, which may only be rendered by a duly licensed bank or another financial institution or, as an exception, by a non-financial institution when expressly permitted by a law of Ukraine or the State Commission of Ukraine on the Regulation of the Financial Services Markets (the ‘‘Commission’’). The Commission has permitted non-financial institutions to issue suretyships, subject to compliance by the issuer of a suretyship with anti-money laundering requirements and procedures. Ukrainian companies often conclude suretyship agreements, and neither the Commission nor Ukrainian courts have as yet challenged such practice. However, due to a lack of guidance by the Commission with regard to the exact scope of such compliance, a particular surety, such as Transgarant Ukraine, could be viewed by the Ukrainian authorities or courts as not complying with such requirements and procedures and, accordingly, the legal capacity of such surety to issue a suretyship and the validity of any particular suretyship could be challenged.

Enforcement of the pledge of ownership in Transgarant Ukraine may be difficult in Ukraine Our Ukrainian subsidiary, Transgarant Ukraine, was registered and exists in the legal form of ‘‘subsidiary enterprise’’. While many companies in Ukraine were registered and continue to exist in the legal form of a ‘‘subsidiary enterprise’’, the legal status of subsidiary enterprises in Ukraine is not entirely clear under effective laws of Ukraine. It follows from the general provisions of Article 63(4) of the Commercial Code of Ukraine that the charter capital of a Ukrainian subsidiary enterprise shall not be divided into participation interests (chastky) or shares (aktsii). In the absence of any provisions in Ukrainian legislation which would determine the legal nature of the ownership rights of the founder (owner) in a subsidiary enterprise, it is not entirely clear how such ownership rights should be alienated or pledged. Accordingly, there can be no assurance that this uncertainty would not complicate the enforcement under the pledge agreement in relation to the ownership in Transgarant Ukraine. In addition, although Ukrainian laws allow the pledge of participation interests or other corporate rights with respect to the charter capitals of Ukrainian companies, effective legislative framework provides for

60 no reliable mechanics of such pledge enforcement. Moreover, standard registration procedures to be performed for perfection of the transfer of title to corporate rights relating to charter capitals of Ukrainian companies with the Unified State Register of Companies and Individual Entrepreneurs require substantial cooperation of the pledgor and the target company with the pledgee. Accordingly, there can be no assurance that such pledges would be successfully enforced in Ukraine in the absence of such cooperation from the pledgor and/or the target company.

British Virgin Islands Under the law of the British Virgin Islands, the enforcement of the security interests granted by the Security Providers incorporated in the British Virgin Islands (the ‘‘BVI Security Providers’’) may be affected by prescription or lapse of time, bankruptcy, insolvency, liquidation, reorganisation, reconstruction or similar laws generally affecting creditors’ rights. Other laws and defences which may limit or affect enforcement may also apply, including those that relate to corporate benefit or corporate purpose, voidance preference, transaction at undervalue, disclaimer of onerous property, whereby certain security interests (for example, a floating charge) created later than a certain time prior to the commencement of insolvency proceedings are avoided, subordination, set-off, counterclaim, as well as general principles of equity. Amongst other applicable BVI laws, the Insolvency Act 2003 of the British Virgin Islands, prescribes for situations under which the security interests granted by BVI Security Providers may be voidable by a British Virgin Islands court. The enforceability and registration of foreign judgments in the British Virgin Islands is governed by the Foreign Judgments (Reciprocal Enforcement) Act (‘‘Cap 27’’), the Reciprocal Enforcement of Judgments Act (‘‘Cap 65’’), and the common law. Only judgments for a final and conclusive monetary sum (including an order for costs) may be enforced in the British Virgin Islands and then only subject to the various matters to which are referred to below. Any other judgment whether declaratory, injunctive or otherwise cannot be enforced. However, it may in certain circumstances be possible for the plaintiff to obtain the same or similar relief from the British Virgin Islands court. Cap 27 provides that it shall apply to any jurisdiction designated thereunder. Notwithstanding that certain jurisdictions have purportedly been designated, the purported designation was not carried out properly and Cap 27 has therefore not been effectively extended to any jurisdiction. It follows that Cap 27 is not relevant to the question of enforcement and or registration of foreign judgments in the British Virgin Islands at the present time. Cap 65 provides that any final and conclusive monetary judgment for a definite sum obtained against the debtor in the High Court of a jurisdiction to which Cap 65 applies may, subject to those matters referred to in the last paragraph of this section on the British Virgin Islands, be registered and enforced as a judgment of the British Virgin Islands court if an application is made for registration of the said judgment within twelve months of the date thereof or such longer period as the court may allow and if the British Virgin Islands court considers it just and convenient that the judgment be so enforced. However, if the judgment debtor satisfies the British Virgin Islands court that either an appeal is pending or that he is entitled and intends to appeal the British Virgin Islands court will not register the judgment. Cap 65 applies to judgments of the High Court in the following jurisdictions: (i) England; (ii) Northern Ireland; (iii) Scotland; (iv) Bahamas; (v) Barbados; (vi) Bermuda; (vii) Belize; (viii) Trinidad & Tobago; (ix) Guyana; (x) St Lucia; (xi) St Vincent; (xii) Grenada; (xiii) Jamaica; (xiv) New South Wales, ; (xv) Nigeria. Any final and conclusive monetary judgment for a definite sum obtained against the debtor in any jurisdiction other than one to which Cap 65 applies would, subject to those matters set out in the paragraph below, also be treated by the British Virgin Islands court as a cause of action in itself so that no retrial of the issues would be necessary. In such a case it would be usual to commence proceedings in the British Virgin Islands court and enter judgment or make an application for summary judgment. The creditor would have to satisfy the British Virgin Islands court that it had jurisdiction over the debtor. If the judgment is not capable of registration pursuant to Cap 65, it would be usual for the British Virgin Islands court to make an award in respect of costs against the defendant in the British Virgin Islands proceedings.

61 A judgment cannot be registered pursuant to Cap 65 and/or found an action at common law unless it complies with the following requirements. The requirements are that: (i) the judgment was made in a court which had jurisdiction in the matter and the judgment debtor either submitted to such jurisdiction or was resident or carrying on business within such jurisdiction and was duly served with process; (ii) the judgment given by the court was not in respect of penalties, taxes, fines, or similar fiscal or revenue obligations of the debtor; (iii) in obtaining the judgment there was no fraud on the part of the person in whose favour the judgment was given or on the part of the court (iv) recognition or enforcement of the judgment in the British Virgin Islands would not be contrary to public policy; (v) the proceedings pursuant to which the judgment was obtained were not contrary to natural justice.

Halimeda and its subsidiaries are not subject to restrictive covenants in the Notes. Halimeda International Limited, which holds an interest in the publicly traded rail operator TransContainer, and its subsidiaries have been designated as ‘‘Unrestricted Subsidiaries’’ under the Notes and are not subject to the restrictive covenants in the Notes for the benefit of Holders. In particular, while other subsidiaries and assets directly and indirectly held by FESCO are subject to a restrictive covenant limiting dividends and other restricted payments, all of the assets of Halimeda and its subsidiaries may be distributed to the shareholders of FESCO. See ‘‘Terms and Conditions of the 2018 Notes—3. Covenants—3.1 Restricted Payments’’.

Foreclosing on share collateral of the HoldCo Guarantors may be hindered by a change of jurisdiction of organisation of such HoldCo Guarantors. The Notes are secured by a share pledge over shares of the HoldCo Guarantors. The HoldCo Guarantors are organised under the laws of Cyprus. The Terms and Conditions of the Notes permit the HoldCo Guarantors to reorganise in a jurisdiction that would not materially impair the rights of the holders of the Notes to take liens over the shares of such person or its assets. See ‘‘Terms and Conditions of the 2018 Notes—3. Covenants—3.10 Limitation on holding company activities’’. There can be no assurance, however, that such alternate jurisdiction of organisation will be as efficient with respect to foreclosure on share collateral as Cyprus.

The Issuer is a special purpose vehicle and is completely dependent on payments under intra- Group loans and equity contributions to meet its obligations under the Notes. The Issuer of the Notes has been formed specifically in connection with the issuance of the Notes with no business or revenue generating operations other than the issuance of debt securities and on-lending the proceeds of such issuance, including on-lending the proceeds of the Offering to Maple Ridge and Elvy. Its only significant assets consist of its interest in the loans granted to Maple Ridge and Elvy pursuant to subordinated intra-Group loans out of the proceeds of the Offering and any cash in its bank account. Further, the Terms and Conditions of the Notes prohibit the Issuer from engaging in any activities other than certain limited activities. See ‘‘Terms and Conditions of the 2018 Notes—3. Covenants—3.8 Limitation on Issuer activities’’. The Issuer’s ability to make principal and interest payments on the Notes is dependent on interest and principal payments by Maple Ridge and Elvy to the Issuer under the intra- Group loans out of the proceeds of the Offering as well as loans and equity contributions from members of the FESCO group.

We may not be able to finance a Change of Control Offer. Upon a Change of Control as defined in the Trust Deeds, the Issuer would be required to make an offer to repurchase the Notes at 101% of their principal amount. A Change of Control will occur if a third person acquires control over FESCO or Summa Group and/or TPG cease to have at least a 25% interest in FESCO, as well as sale of ‘‘all or substantially all assets’’ of the FESCO group to a third party. The source for any repurchase required as a result of any such event will be cash generated from operating activities or other sources, including borrowings, sales of assets, sales of equity or funds provided by our subsidiaries. If a Change of Control occurs, there can be no assurance that we will have sufficient

62 funds to repurchase the Notes that have been tendered. See ‘‘Terms and Conditions of the 2018 Notes—5. Redemption and Purchase—5.6 Redemption at the Option of the Noteholders upon a Change of Control’’ or that the restrictions in its other debt instruments, including under the OpCo Facility or future credit facilities, would allow the Issuer to make such required repurchases. In addition, a Change of Control could constitute a default under our other indebtedness (including under the OpCo Facility or future credit facilities). Our principal shareholders and their advisors have in the past and continue to review strategic alternatives with respect to us, including the possible sale of our business. Our principal shareholders may therefore enter into discussions with, or solicit indications from, interested parties, the result of which may or may not lead to the sale of our business. One of the ways a Change of Control can occur is upon a sale of ‘‘all or substantially all’’ of our assets. The meaning of the phrase ‘‘all or substantially all’’ as used in that definition varies according to the facts and circumstances of the subject transaction, has no clearly established meaning under the relevant law and is subject to judicial interpretation (the Trust Deeds, in any case, provides that the expression ‘‘all or substantially all’’ shall not relate to assets that represent less than 70% of each of the consolidated assets and consolidated EBITDA of FESCO and its restricted subsidiaries taken as a whole). Accordingly, in certain circumstances there may be a degree of uncertainty in ascertaining whether a particular transaction would involve a disposition of ‘‘all or substantially all’’ of the assets of a person and therefore whether a Change of Control has occurred and the Issuer is obligated to undertake a Change of Control Offer (as defined in the Trust Deeds). See ‘‘Terms and Conditions of the 2018 Notes— 5. Redemption and Purchase—5.6 Redemption at the Option of the Noteholders upon a Change of Control’’.

The Notes will be structurally subordinated to all indebtedness of any current or future subsidiaries of FESCO that do not become Guarantors or to the indebtedness of FESCO. You will not have any claim as a creditor against FESCO or any of FESCO’s existing subsidiaries that are not Guarantors or against any of FESCO’s future subsidiaries that do not become Guarantors. As a result of the structure of the Offering, the Notes will rank pari passu with the debt and other obligations of the Guarantors but will be effectively subordinated in right of payment to all of the debt and other obligations of FESCO and its Subsidiaries that are not Guarantors in the event of the bankruptcy or insolvency of any such company. Generally, in the event FESCO or any of its subsidiaries that are not Guarantors becomes insolvent, liquidates, reorganises, dissolves or otherwise winds up, the creditors of the Issuer and Guarantors (including the holders of the Notes) will have no right to proceed against such company or its assets. Creditors of such company, including trade creditors, will generally be entitled to payment in full from sale or other disposal of the assets of FESCO or its subsidiary that is not a Guarantor before the Issuer or any Guarantor. Furthermore, the Trust Deeds will, subject to certain limitations, permit FESCO’s subsidiaries that are not Guarantors and FESCO to incur additional indebtedness. In addition, the Trust Deeds limit the requirement of FESCO’s restricted subsidiaries to become Guarantors under the Notes, where guarantees by such restricted subsidiaries are granted in relation to other indebtedness of the Issuer or Guarantor and a guarantee in favour of the Noteholders cannot be granted without violating applicable law or resulting in personal liability to the officers, directors or shareholders of FESCO’s restricted subsidiaries. A Note Guarantee granted by a Subsidiary Guarantor will also be released in connection with a sale of that Guarantor if the transaction is not prohibited under the Trust Deeds or in the event of the designation of such Guarantor as an unrestricted subsidiary. See ‘‘Terms and Condition of the 2018 Notes—2. Status and Note Guarantees—2.3 Note Guarantees Release’’.

Creditors under other debt are entitled to be repaid with the proceeds of the Collateral sold in any enforcement sale, the proceeds of any distressed disposal and from other amounts paid to the Security Agents pursuant to the terms of the Intercreditor Agreement. The obligations under the Notes and Note Guarantees are secured on a first-priority basis with security interests over the Collateral. The Collateral has also been pledged to secure the OpCo Facility and may be pledged to secure additional debt in accordance with the terms of the Trust Deeds and the Intercreditor Agreement.

63 Pursuant to the Intercreditor Agreement, the liabilities under debt permitted to be secured under the terms of the Trust Deeds may be applied pro rata in repayment of the Notes, the OpCo Facility and other pari passu indebtedness (including certain other hedging obligations) secured on the Collateral. The Intercreditor Agreement provides that the Security Agents, who will also serve as the security agents for any additional secured debt permitted to be incurred by the Trust Deeds, will act only as provided for in the Intercreditor Agreement. The creditors under any future class of secured debt may have interests that are different from the interests of holders of the Notes and they may, subject to the terms of the Intercreditor Agreement, elect to pursue their remedies under the security documents at a time when it would be disadvantageous for the holders of the Notes to do so.

Enforcing your rights as a holder of Notes under the Notes or the Note Guarantees or the Collateral across multiple jurisdictions may prove difficult. The Issuer is organised under the laws of Luxembourg, and the Notes will be guaranteed and/or secured by entities organised under the laws of Cyprus, Russia, British Virgin Islands and Ukraine. In the event of bankruptcy, insolvency, administration or similar event, proceedings could be initiated in any of these jurisdictions. The rights of the holders of Notes under the Notes, the Note Guarantees and the Collateral are likely to be subject to insolvency and administrative laws of several jurisdictions, and there can be no assurance that you will be able to effectively enforce your rights in such complex proceedings. In addition, such multi-jurisdictional proceedings are typically complex and costly for creditors and often result in substantial uncertainty and delay in the enforcement of creditors’ rights. In addition, the bankruptcy, insolvency, administration and other laws of the jurisdiction of organisation of the Issuer, the Guarantors and the Security Providers may be materially different from, or in conflict with, one another, including creditors’ rights, priority of creditors and the duration of the insolvency proceeding. The application of these various laws in multiple jurisdictions could trigger disputes over which jurisdiction’s laws should apply and could adversely affect the ability to enforce the security and to realise any recovery under the Notes and the Note Guarantees.

The insolvency laws of Luxembourg, Cyprus, the British Virgin Islands, Russia and Ukraine may not be as favourable to you as insolvency laws of jurisdictions with which you may be familiar and may preclude holders of the Notes from recovering payments due on the Notes and the Note Guarantees. The Issuer is organised under the laws of Luxembourg, and the Guarantors are organised under the laws of Cyprus, Russia and Ukraine. Certain of the Security Providers are organised under the laws of the British Virgin Islands. Future subsidiaries of FESCO may be organised in other jurisdictions and are or may be subject to the insolvency laws of such jurisdictions. The insolvency laws of these jurisdictions may not be as favourable to your interests as creditors as the bankruptcy laws of the United States, or certain other jurisdictions. If the Issuer or one or more of our Guarantors, subsidiaries or Security Providers experiences financial difficulties, it is not possible to predict with certainty in which jurisdiction or jurisdictions insolvency or similar proceedings would first be commenced or how these proceedings would be resolved. The insolvency, administration and other laws of the jurisdictions in which the respective companies are organised or operate may be materially different from, or conflict with, each other. Any conflict between them could call into question whether, and to what extent, the laws of any particular jurisdiction should apply. There can be no assurance as to how the insolvency laws of these jurisdictions will be applied in relation to one another. In addition, the grant of the Note Guarantees or security interests by the respective Guarantors may be subject to challenge in the relevant local insolvency proceedings.

Luxembourg The insolvency laws of Luxembourg may not be as favourable to holders of Notes as insolvency laws of jurisdictions with which investors may be familiar. The Issuer is incorporated and has its centre of main interests (centre des inter´ etsˆ principaux), for the purposes of the Council Regulation (EC) No 1346/2000 of 29 May 2000 on insolvency proceedings, as amended, in Luxembourg. Accordingly, insolvency proceedings with respect to the Issuer may proceed under, and be governed by, Luxembourg insolvency laws. The following is a brief description of certain aspects of insolvency laws in Luxembourg. Under Luxembourg insolvency laws, the following types of proceedings (together referred to as

64 insolvency proceedings) may be opened against the Issuer to the extent that the Issuer has its registered office or centre of main interests in Luxembourg: • bankruptcy proceedings (faillite), the opening of which may be requested by the Issuer, by any of its creditors or by the Luxembourg public prosecutor. Following such a request, the courts having jurisdiction may open bankruptcy proceedings, if the Issuer (a) has ceased to make payments (cessation de paiements) and (b) has lost its commercial creditworthiness (ebranlement´ de credit´ ). If a court considers that these conditions are met, it may open bankruptcy proceedings, absent a request made by the Issuer or a creditor. The main effect of such proceedings is the suspension of all measures of enforcement against the Issuer, except, subject to certain limited exceptions, for secured creditors, and the payment of creditors in accordance with their rank upon the realisation of assets; • controlled management proceedings (gestion controlˆ ee´ ), the opening of which may only be requested by the Issuer and not by its creditors; and • preventive composition proceedings (concordat preventif´ de la faillite) may only be applied for by a company which is in financial difficulty. The application for the composition proceedings can only be made by the company and must be supported by proposals of composition. Except as provided for in the Luxembourg Collateral Act 2005, while the composition is being negotiated, unsecured creditors may not take action against the company to recover their claims. Secured creditors who do not participate in the composition proceedings may take action against the company to recover their claims and to enforce their security. In addition to these proceedings, the ability of the holders of Notes to receive payment on the Notes may be affected by a decision of a court to grant a reprieve from payments (sursis de paiements) or to put the Issuer into judicial liquidation (liquidation judiciaire). Judicial liquidation proceedings may be opened at the request of the public prosecutor against companies pursuing an activity violating criminal laws or that are in serious violation of the commercial code or of the Luxembourg law dated 10 August 1915 on commercial companies, as amended. The management of such liquidation proceedings will generally follow similar rules as those applicable to bankruptcy proceedings. The Issuer’s liabilities in respect of the Notes will, in the event of a liquidation of the Issuer following bankruptcy or judicial liquidation proceedings, rank after the cost of liquidation (including any debt incurred for the purpose of such liquidation) and those of the concerned Issuer’s debts that are entitled to priority under Luxembourg law. Preferential debts under Luxembourg law for instance include, among others: • certain amounts owed to the Luxembourg Revenue; • value-added tax and other taxes and duties owed to the Luxembourg Customs and Excise; • social security contributions; and • remuneration owed to employees. Assets over which a security interest has been granted will in principle not be available for distribution to unsecured creditors (except after enforcement and to the extent a surplus is realised). During insolvency proceedings, all enforcement measures by unsecured creditors are suspended. The ability of secured creditors to enforce their security interest may also be limited in the event of controlled management proceedings automatically causing the rights of secured creditors to be frozen until a final decision has been taken by the court as to the petition for controlled management, and may be affected thereafter by a reorganisation order given by the court. A reorganization order requires the prior approval by more than 50% of the creditors representing more than 50% of the Issuer’s liabilities in order to take effect. The Luxembourg Collateral Act 2005 expressly provides that all financial collateral arrangements (including pledges) including enforcement measures are valid and enforceable even if entered into during the pre-bankruptcy period, against all third parties including supervisors, receivers, liquidators and any other similar persons or bodies irrespective of any bankruptcy, liquidation or other situation, national or foreign, of composition with creditors or reorganisation affecting anyone of the parties, save in the case of fraud. Generally, Luxembourg insolvency laws may also affect transactions entered into or payments made by the Issuer during the pre-bankruptcy hardening period (periode´ suspecte) which is a maximum of six

65 months preceding the judgement declaring bankruptcy, except that in certain specific situations the court may set the start of the suspect period at an earlier date. In particular: • pursuant to article 445 of the Luxembourg code of commerce, some specific transactions (in particular, the granting of a security interest for antecedent debts, save in respect of financial collateral arrangements within the meaning of the Luxembourg Collateral Act 2005; the payment of debts which have not fallen due, whether payment is made in cash or by way of assignment, sale, set-off or by any other means; the payment of debts which have fallen due by any means other than in cash or by bill of exchange; the sale of assets without consideration or with substantially inadequate consideration) entered into during the suspect period (or the ten days preceding it) must be set aside or declared null and void, if so requested by the insolvency receiver; • pursuant to article 446 of the Luxembourg code of commerce payments made for matured debts as well as other transactions concluded for consideration during the suspect period are subject to cancellation by the court upon proceedings instituted by the insolvency receiver if they were concluded with the knowledge of the bankrupt’s cessation of payments; and • pursuant to article 448 of the Luxembourg code of commerce and article 1167 of the civil code (action paulienne) gives the insolvency receiver (acting on behalf of the creditors) has the right to challenge any fraudulent payments and transactions, including the granting of security with an intent to defraud, made prior to the bankruptcy, without any time limit. In principle, a bankruptcy order rendered by a Luxembourg court does not result in automatic termination of contracts except for intuitu personae contracts, that is, contracts for which the identity of the company or its solvency were crucial. The contracts, therefore, subsist after the bankruptcy order. However, the insolvency receiver may choose to terminate certain contracts. However, as of the date of adjudication of bankruptcy, no interest on any unsecured claim will accrue vis-a-vis` the bankruptcy estate. The bankruptcy order provides for a period of time during which creditors must file their claims with the clerk’s office of the Luxembourg district court sitting in commercial matters. After having converted all available assets of the company into cash and after having determined all the company’s liabilities, the insolvency receiver will distribute the proceeds of the sale, on a pro rata basis, to the creditors after deduction of the receiver fees and the bankruptcy administration costs.

Cyprus The obligations of any of the Guarantors and/or Security Provider incorporated in Cyprus in respect of the Notes may be subject to review under the relevant insolvency laws of Cyprus. In general, under applicable insolvency laws, (or similar laws), a court could subordinate or void any of the Guarantees or security, as applicable, if it found that: (i) the relevant Guarantee or security was incurred with the intent to hinder, delay or defraud any present or future creditor; (ii) the Guarantor and/or Security Provider did not receive fair consideration or reasonably equivalent value for the Guarantee or security and the Guarantor and/or Security Provider was: (x) insolvent or was rendered insolvent as a result of having granted the Guarantee or security; (y) undercapitalised or became undercapitalised because of the Guarantee or Security; or (z) intended to incur indebtedness beyond its ability to pay at maturity; (iii) the Guarantee or security was held not to be in the best interests or not to be for the corporate benefit of the Guarantor and/or Security Provider; (iv) the Guarantor and/or Security Provider incorporated in Cyprus made any payment to or entered into any arrangement with any of its creditors which is influenced by a desire to put that creditor in a better position than it would be in if the Guarantor and/or Security Provider company went into liquidation. If a court were to find that a Guarantee or any security given by a Guarantor and/or Security Provider located in Cyprus were made in contravention of any applicable insolvency law, the court might void the payment obligations under such Guarantee or security, or subordinate such Guarantee or Security, to presently existing and future indebtedness of the respective Guarantor, or require repayment of amounts received with respect to such Guarantee or security, as applicable. In the event of a finding that a contravention of these insolvency laws had occurred, you may not receive any payment on a Guarantee or security, as applicable. In addition, the bankruptcy, insolvency, administrative, and other laws of such other jurisdictions of organisation may be materially different from, or be in conflict with, one another and those in other jurisdictions, of which you may be familiar in certain areas, including creditors’ rights, priority of creditors, the ability to obtain post-petition interest and the duration of the insolvency proceeding. The application of these various laws in multiple jurisdictions could trigger disputes over

66 which jurisdictions’ law should apply and could adversely affect your ability to enforce your rights and to collect payment in full under the Notes, Guarantees and any security. The Guarantees or any security provided by any of the Guarantors and/or Security Providers incorporated in Cyprus may be subject to hardening periods. Under Cyprus law, according to section 301 of the Companies Law Cap. 113 any conveyance, charge, mortgage, delivery of goods, payment, execution or other act relating to property made or done by or against a company within six months before the commencement of its winding-up may be deemed a fraudulent preference of its creditors and be invalidated accordingly. Furthermore, it is possible under Cyprus law that a transaction involving fraudulent actions by the directors and tainted with illegality would be rendered void irrespective of how long such transaction took place before the commencement of the winding-up of the company.

British Virgin Islands In the British Virgin Islands, the corporate insolvency laws are governed by the Insolvency Act, 2003 of the British Virgin Islands (the ‘‘Insolvency Act’’) and the Insolvency Rules 2005. These laws are closely based on the English Insolvency Act 1986. There are a number of insolvency regimes available. However, the provisions for administration, which are similar to the provisions of the English Insolvency Act 1986 prior to its amendment by the Enterprise Act 2002, and which promote the rescue of companies in financial difficulty assisted by a statutory moratorium, are not yet in force. The key current insolvency procedures are liquidation, creditor arrangements, receivership and administrative receivership. See ‘‘—The Note Guarantees and security interests in the Collateral will be subject to certain limitations on enforcement and may be limited by applicable law or subject to certain defenses that may limit their validity and enforceability—British Virgin Islands’’ for further information on enforcement of the security interests in the Collateral under the laws of the British Virgin Islands.

Russia The Bankruptcy Law include the provision of adequate protection for creditors, debtors, shareholders and other stakeholders in bankruptcy, as well as protection of the ability of debtors with viable businesses to rehabilitate and emerge from bankruptcy as a going concern. Nevertheless, the Bankruptcy Law generally does not provide creditors with the level of protection available under more sophisticated insolvency regimes, such as those in the United States and the United Kingdom. For example, at a creditors’ meeting called in the course of insolvency proceedings, a creditor may vote only if its claim against the debtor has been duly registered. However, a claim may be registered only if it has been confirmed by a judgment of a court, and obtaining such a judgment between the date of notice of the insolvency and the deadline for registration may be difficult or impossible. In addition, although the financial rehabilitation proceeding under the Bankruptcy Law is intended as a corporate rescue measure, Russian courts generally require that, if possible, the debtor’s participants (founders) provide (if a third party files a motion to initiate financial rehabilitation proceeding to the creditors’ meeting (or to the court, as the case may be) it is obliged to provide) sufficient security to ensure that the debtor can repay its debts in full on a court-approved timetable. In practice, this requirement has effectively made financial rehabilitation impracticable and extremely rare. A debtor’s controlling shareholders have the ability to veto certain major transactions, such as those which would affect the share capital of the debtor. As a practical matter, this lack of a shareholder cramdown gives the shareholder significant leverage to prolong insolvency proceedings and to delay or prevent creditors—particularly unsecured creditors—from recovering monies from or gaining control over the debtor. As a result of this and other structural defects in the Bankruptcy Law, Russian insolvency proceedings have an inherent bias toward liquidation as the ultimate outcome. The prospect or initiation of insolvency proceedings in respect of any of the Guarantors incorporated in the Russian Federation may have a material adverse effect on the Group’s business, financial condition, results of operations and prospects, and, therefore, the Issuer’s ability to meet its obligations under the Notes and the Guarantors’ ability to meet their obligations under the Guarantees. Moreover, in the event that insolvency proceedings are initiated against any of the Guarantors incorporated in the Russian Federation, the aforementioned limitations of the Bankruptcy Law may delay or prevent the holders of

67 the Notes, as unsecured creditors of the Guarantor, from recovering monies due to them under the relevant Guarantee.

Ukraine Ukrainian bankruptcy laws may prohibit Transgarant Ukraine from making payments pursuant to its Note Guarantee in certain circumstances. In the event of the bankruptcy of Transgarant Ukraine, its obligations to the Noteholders will be subordinated to the following obligations: • obligations secured by pledges or mortgages of its assets; • severance pay, employment-related obligations and payment of wages to the Transgarant Ukraine employees; • expenditures associated with the conduct of the bankruptcy proceedings and work of the liquidation commission; • obligations arising as a result of causing harm to life and health of individuals, as well as, mandatory pension and social security contributions; • local and state taxes and other mandatory payments (including claims of the respective governmental authorities managing the state reserve fund). Hence, the obligations of Transgarant Ukraine to the Noteholders will be ranked pari passu with the other unsecured claims of its creditors. Moreover, restated version of the Law of Ukraine ‘‘On Restoration of a Debtor’s Solvency or Declaration of its Bankruptcy’’ dated 14 May 1992 (the ‘‘Bankruptcy Law of Ukraine’’), entitles a court to invalidate agreements or reverse assets-related actions, entered into or made by a debtor after the commencement of the bankruptcy proceedings or within one year prior to the commencement of the bankruptcy proceedings. The Note Guarantee and/or assets-related actions in connection with the Note Guarantee may be challenged in a bankruptcy proceeding, in particular, on the following grounds: (i) Transgarant Ukraine assumed obligations without the respective consideration from another party, (ii) Transgarant Ukraine assumed obligations as a result of which it became insolvent or performance of its monetary obligations towards other creditors became fully or partially impossible, (iii) Transgarant Ukraine made payment to a creditor on a date when the amount of the creditors’ claims exceeded the value of Transgarant Ukraine’s assets, etc. If the Note Guarantee was to be invalidated or assets-related actions in connection with the Note Guarantee were to be reversed on any of the above grounds, the payee under the Note Guarantee will be required to return to the liquidation estate of the Guarantor all funds received pursuant to the Note Guarantee. The Bankruptcy Law of Ukraine also envisages that the payee, in case of invalidation of the Guarantee or reversal of the assets-related actions in connection with the Note Guarantee, will be entitled either to request the Guarantor to discharge its obligations under the Note Guarantee together with other first-ranking claims in the course of the bankruptcy proceedings, or to request the Guarantor’s specific performance of its obligations under the Note Guarantee after the termination of the bankruptcy proceedings. The clawback provisions of the Bankruptcy Law summarised above are a part of the restatement of the Bankruptcy Law of Ukraine that came into effect on 18 January 2013 and differ significantly from the version previously in place. Therefore, as at the date of this Offering Memorandum, such provisions are untested and may be subject to varying interpretations. Additionally, the Bankruptcy Law of Ukraine provides for special bankruptcy procedure in case of bankruptcy of the companies determined as ‘‘particularly hazardous enterprise’’ by the Cabinet of Ministers of Ukraine, whereby the relevant state authorities would be entitled to intervene and, in particular, to request a court to order conduct of the financial rehabilitation of such companies on the terms that might be unfavourable for certain creditors. It is very unlikely, however, that Transgarant Ukraine will be considered as a ‘‘particularly hazardous enterprise’’. Accordingly, in the event of the bankruptcy of Transgarant Ukraine, Ukrainian bankruptcy law may materially adversely affect its ability to make payments to the Noteholders.

68 Ownership in respect of the Notes in registered form The Issuer will, in respect of the Notes, cause a register (the ‘‘Register’’) to be kept at the specified office of the Registrar in which will be entered the names and addresses of the Holders of the Notes and particulars of the Notes held by them and all transfers and redemptions of the Notes. According to Luxembourg company law, the Issuer is obliged to maintain a register of the Notes at its registered office (the ‘‘Issuer Register’’). Ownership in respect of the Notes (which are in registered form) is, according to Luxembourg company law, established by the relevant registration (inscription) in the Issuer Register. The Registrar has undertaken pursuant to the Paying Agency Agreements to notify the Issuer forthwith of any changes made to the Register to enable it to update the Issuer Register. Accordingly, the registrations in the Register should, in principle, match the recordings in the Issuer Register. However, there may be a delay in updating the Issuer Register and discrepancies in recordings cannot be excluded. It is generally held that the registrations made in the Issuer Register constitute a means to prove ownership in respect of the Notes. While Luxembourg case law seems to admit that such registrations in the Issuer Register are not an irrebuttable presumption (presomption´ irrefragable´ ) of title to the Notes, it cannot be excluded that, in the case of discrepancies between that Register and Issuer Register, a Luxembourg court would rule that the Issuer Register prevails over the Register. Certificates representing the Notes in registered form may be issued but they do not confer title to the Notes. Such certificates would also, in principle, not be conclusive evidence to prove ownership in respect of the Notes.

You will not be considered owners or holders of the Notes unless and until the Notes are in definitive registered form or definitive registered notes are issued in exchange for book-entry interests. Interests in the Global Certificates will trade in book-entry form only. Unless and until the Notes are in definitive registered form or definitive registered notes are issued in exchange for book-entry interests (ownership interests in the Global Note Certificates), owners of book-entry interests will not be considered owners or holders of the Notes. DTC, or its nominee, will be the registered holder of each Restricted Global Certificate and Euroclear or Clearstream, Luxembourg, as applicable, will be the registered holder of each Unrestricted Global Certificate. After payment of DTC, Euroclear and Clearstream, Luxembourg, the Issuer will have no responsibility or liability for the payment of interest, principal or other amounts to the owners of book-entry interests. Accordingly, if you own a book-entry interest, you must rely on the procedures of DTC, Euroclear or Clearstream, Luxembourg, as applicable, and if you are not a participant in DTC, Euroclear or Clearstream, Luxembourg on the procedures of the participant through which you own your interest, to exercise any rights and obligations of a holder under the Trust Deeds. Unlike the holders of the Notes themselves, owners of book-entry interests will not have the direct right to act upon the Issuer’s solicitations for consents, requests for waivers or other actions from holders of the Notes. Instead, if you own a book-entry interest, you will be permitted to act only to the extent you have received appropriate proxies to do so from DTC, Euroclear or Clearstream, Luxembourg or, if applicable, from a participant. There can be no assurance that procedures implemented for the granting of such proxies will be sufficient to enable you to vote on any request actions on a timely basis. Similarly, upon the occurrence of an event of default under the Trust Deeds, unless and until definitive registered notes are issued in respect of all book-entry interests, if you own a book-entry interest, you will be restricted to acting through DTC, Euroclear or Clearstream, Luxembourg. The Issuer cannot assure you that the procedures to be implemented through DTC, Euroclear or Clearstream, Luxembourg will be adequate to ensure the timely exercise of rights under the Notes. See ‘‘Clearing and Settlement’’.

There are significant restrictions on your ability to transfer or resell your Notes. The Notes are being offered and sold pursuant to an exemption from registration under United States and applicable state securities laws. The Notes have not been registered under the Securities Act or any state securities laws, and we do not intend to register the Notes under the Securities Act or any state securities laws after the Offering. Therefore, you may transfer or resell the Notes in the United States or to a U.S. person only to certain persons in transactions exempt from the registration requirements of the United States and applicable state securities laws, and you may be required to bear the risk of your

69 investment for an indefinite period of time. See ‘‘Transfer Restrictions’’. The risk may be exacerbated by the absence of registration rights for the holders of the Notes.

Your ability to transfer the Notes may be limited by the absence of an active trading market, and there is no assurance that any active trading market will develop for the Notes. The Joint Bookrunners have advised us that they intend to make a market in the Notes, as permitted by applicable laws and regulations. However, the Joint Bookrunners are not obligated to make a market in the Notes, and they may discontinue their market-making activities at any time without notice. Therefore, we cannot assure you as to the development or liquidity of any trading market for the Notes. The liquidity of any market for the Notes will depend on a number of factors, including: • the number of holders of Notes; • our operating performance and financial condition; • the market for similar securities; • the interest of securities dealers in making a market in the Notes; and • prevailing interest rates. Historically, the market for non-investment grade debt has been subject to disruptions that have caused substantial volatility in the prices of securities similar to the Notes. We cannot assure you that the market, if any, for the Notes will be free from similar disruptions or that any such disruptions may not adversely affect the prices at which you may sell your Notes. Therefore, we cannot assure you that you will be able to sell your Notes at a particular time or price, if at all.

The market price of the Notes may be volatile. The market price of the Notes could be subject to significant fluctuations in response to actual or anticipated variations in our operating results and those of our competitors, adverse business developments, changes to the regulatory environment in which we operate, changes in financial estimates by securities analysts and the actual or expected sale of a large number of Notes, as well as other factors, including the credit rating of the Group. In addition, in recent years the global financial markets have experienced significant price and volume fluctuations which, if repeated in the future, could adversely affect the market price of the Notes without regard to our operating results, financial condition or prospects or the credit rating of the Group.

The Notes are subject to interest rate risk. As the Notes bear a fixed rate of interest, an investment in the Notes involves the risk that subsequent changes in market interest rates may adversely affect the value of the Notes.

The Notes are subject to exchange rate risk and exchange controls. The Issuer will pay principal and interest on the Notes in U.S. Dollars. This presents certain risks relating to currency conversions if an investor’s financial activities are denominated principally in a currency or currency unit (the ‘‘Investor’s Currency’’) other than U.S. Dollar. These include the risk that exchange rates may significantly change (including changes due to devaluation of the U.S. Dollar or revaluation of the Investor’s Currency) and the risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchange controls. An appreciation in the value of the Investor’s Currency relative to the U.S. Dollar would decrease (i) the Investor Currency’s equivalent yield on the Notes; (ii) the Investor’s Currency equivalent value of the principal payable on the Notes; and (iii) the Investor’s Currency equivalent market value of the Notes. Government and monetary authorities may impose (as some have done in the past) exchange controls that could adversely affect an applicable exchange rate. As a result, investors may receive less interest or principal than expected, or no interest or principal.

The Issuer may issue additional Notes with identical terms that may have a negative impact on the market value of the original Notes. The Issuer may, without the consent of the Noteholders of outstanding Notes, issue additional Notes with identical terms. These additional Notes, even if they are treated for non-tax purposes as part of the same

70 series as the original Notes, may be treated as a separate series for U.S. federal income tax purposes. If the additional Notes are issued with original issue discount (‘‘OID’’) and the original Notes had no OID, or the additional Notes have a greater amount of OID than the original Notes, this may have a negative impact on the market value of the original Notes if the additional Notes are not otherwise distinguishable from the original Notes.

Payments of interest within the jurisdiction of a European Union Member State are subject to the EU Savings Tax Directive. Under EC Council Directive 2003/48/EC (the ‘‘EU Savings Tax Directive’’ ) on the taxation of savings income, Member States are required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to or for an individual resident in that other Member State or to certain limited types of entities established in that other Member State. However, for a transitional period, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other countries) subject to a procedure whereby, on meeting certain conditions, the beneficial owner of the interest or other income may request that no tax be withheld. A number of non-EU countries and territories, including Switzerland have adopted similar measures (a withholding system in the case of Switzerland). Luxembourg has announced that it will elect out of the withholding system in favour of automatic exchange of information with effect from 1 January 2015. The European Commission has proposed certain amendments to the EU Savings Tax Directive, which may, if implemented, amend or broaden the scope of the requirements described above. If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Note as a result of the imposition of such withholding tax. The Issuer and the Guarantors are required to maintain a Paying Agent in a Member State that is not obliged to withhold or deduct tax pursuant to the EU Savings Tax Directive.

The Notes may not become, or remain, listed on the Irish Stock Exchange. Pursuant to the Trust Deeds, the Issuer will agree to have the Notes listed on the Official List and admitted to trading on the Global Exchange Market on or within a reasonable period after the Issue Date and to use its commercially reasonable efforts to maintain such listing as long as the Notes are outstanding. However, the Issuer cannot assure you that the Notes will become, or remain, listed. If the Issuer can no longer maintain the listing on the Official List and the admission to trading on the Global Exchange Market or it becomes unduly burdensome to make or maintain such listing, the Issuer may cease to make or maintain such listing, provided that it will use reasonable best efforts to obtain and maintain the listing of the Notes on another stock exchange, although there can be no assurance that it will be able to do so. We do not intend to have the Notes listed on a national securities exchange or to arrange for quotation on any automated dealer quotation systems. Although no assurance is made as to the liquidity of the Notes as a result of listing on the Official List or another recognised listing exchange for comparable issuers in accordance with the Trust Deeds, failure to be approved for listing or the delisting of the Notes from the Official List or another listing exchange in accordance with the Trust Deeds may have a material adverse effect on a holder’s ability to resell Notes in the secondary market.

Credit ratings may not reflect all risks, are not recommendations to buy or hold securities and may be subject to revision, suspension or withdrawal at any time. S&P and Fitch are expected to assign credit ratings to the Notes. The ratings may not reflect the potential impact of all risks related to the structure, market, additional risk factors discussed herein and other factors that may affect the value of the Notes. A credit rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal by the rating agency at any time. No assurance can be given that a credit rating will remain constant for any given period of time or that a credit rating will not be lowered or withdrawn entirely by the credit rating agency if, in its judgment, circumstances in the future so warrant. A suspension, reduction or withdrawal at any time of the credit

71 rating assigned to the Notes by one or more of the credit rating agencies may adversely affect the cost and terms and conditions of our financings and could adversely affect the value and trading of the Notes.

Tax might be withheld on disposals of the Notes in the Russian Federation, reducing their value. Where proceeds from a disposition of the Notes are received from a source within the Russian Federation by a non-resident Noteholder that is an individual, Russian withholding tax would be charged at a rate of 30% on the gross amount of proceeds from such disposal of the Notes less any available documented cost deductions (including the acquisition cost of the Notes). There is no assurance that advance double tax treaty relief would be granted to a non-resident Noteholder who is an individual, and obtaining a refund can involve considerable practical difficulties. The imposition or possibility of imposition of this withholding tax could adversely affect the value of the Notes. See ‘‘Taxation—Russian Federation’’.

Payments required under the Note Guarantees may be subject to Russian withholding tax. Russian tax legislation in respect of withholding tax on guarantee payments to non-residents is complex and unclear. Non-resident Noteholders that are legal entities or individuals should consult their own tax advisors with respect to the tax consequences of the receipt of payments under the Note Guarantees, including applicability of any available double tax treaty relief. In general, payments of Russian source income made by a Russian legal entity to a non-resident Noteholder who is an individual or to a non-resident Noteholder that is a legal entity with no registered presence and no permanent establishment in the Russian Federation should be subject to Russian withholding tax at prescribed tax rates, unless withholding tax is reduced or eliminated under an applicable double tax treaty. Due to the lack of clarity in Russian tax legislation and the vague wording of the Russian withholding income tax provisions, a portion of guarantee payments under the Trust Deeds relating to interest on the Notes and, to a lesser extent, a portion of guarantee payments relating to the principal amounts due under the Notes, may be subject to withholding tax at a rate of 20% in the event that such payments are made to a non-resident Noteholder that is a legal entity or organisation (in each case not organised under Russian laws and which holds and disposes of the Notes otherwise than through a permanent establishment in Russia), unless such withholding tax is reduced or eliminated pursuant to the terms of an applicable double tax treaty. Russian companies paying income to foreign recipients should act as a tax agent in respect of each payment to the recipients of the Russian source income. The Tax Code provides that Russian companies should be released from the obligation to withhold Russian withholding tax from interest payments made to foreign companies on debt obligations which arise in connection with the issuance by foreign companies of traded bonds provided that (i) there is a double tax treaty between Russia and the jurisdiction of tax residency of the foreign company receiving interest income and (ii) the foreign company receiving interest income duly confirms its tax residency. This exemption from the tax agent obligation applies from 1 January 2007 to bonds issued before 1 January 2014. The ‘‘traded bonds’’ are defined as bonds and other debt obligations listed and/or admitted to circulation on one or several foreign stock exchanges and/or the rights to which are recorded by recognised depository-clearing organisations, provided such foreign stock exchanges and depository-clearing organisations are specified in a list approved by the Federal Authority for Securities Markets in consultation with the Ministry of Finance of the Russian Federation. This fact should be confirmed by Russian companies based on information provided by foreign stock exchanges, depository-clearing organisations, offering memorandum or other documents relating to the issue of the bonds or on the basis of information from public sources. Such list was approved by the Federal Authority for Securities Markets on 25 October 2012. The DTC, Euroclear and Clearstream, Luxembourg are included in this list. In order to confirm tax residence in a jurisdiction that has a double tax treaty in effect with the Russian Federation, recipients of interest income that are legal entities are required to file a residency certificate issued by the competent tax authority of the relevant treaty country. This certificate (apostilled or legalised and translated into Russian) is then required to be filed in the Russian Federation with the payer of interest income, in its role as a withholding tax agent and renewed on a yearly basis, before the payment under the debt obligation is made. Release from the duty to act as a withholding tax agent effectively means that, in practice, withholding tax on interest payments should not arise in Russia, because currently there is no mechanism or requirement for non-resident legal entities to self-assess and pay the tax. However, there can be no

72 assurance that such rules will not be introduced in the future, which may result in the obligation of non-resident Noteholders which are legal entities to self-assess and pay the tax. According to the Tax Code, the conditions for the release from the obligation to withhold Russian withholding tax from interest payments described herein should also apply to guarantee or suretyship payments made in respect of traded bonds and/or corresponding debt obligations as well as to other payments provided that such payments are envisaged by the terms of the relevant debt obligations or are connected with the changes in terms and conditions of the traded bonds including their early repurchase and/or redemption. The above provision may potentially be interpreted in a way that the release from the withholding tax obligation should apply only if the traded bonds are issued to finance a debt obligation provided to a Russian debtor and the recipients of guarantee payments (such as the non-resident Noteholders that are legal entities or organisations) provide the payor of Russian source income (such as Guarantors) with tax residency certificates. If the release mentioned above does not apply, Russian withholding income tax may be reduced or eliminated under provisions of a double tax treaty, if the Noteholders are residents in countries having effective double tax treaties with the Russian Federation, and the requirements established by the applicable treaty and the Russian tax legislation are met. While it may be possible for some Noteholders, who are eligible for an exemption from Russian withholding tax under double tax treaties, to claim a refund of tax withheld, there may be considerable practical difficulties in obtaining any such refund. Furthermore, there can be no assurance that the Russian withholding tax would not be imposed on the payments made under the Note Guarantees to the non-resident Noteholders that are legal entities not residing for tax purposes in countries which have concluded a double tax treaty with Russia. In such case there is a risk that Russian withholding tax would be imposed on the full amount of the Note Guarantee payment, including the principal amount of the Notes. Since the above could only be relevant in case of payments made in favour of the non-resident Noteholders that are legal entities residing for tax purposes in countries which do not have a double tax treaty with Russia, reduction or elimination of 20% Russian withholding tax on the basis of the double tax treaties under such circumstances should not be possible. If the guarantee payments under the Trust Deeds would be required to be made to, or to the order of, the Trustee, there is also uncertainty if the release from the obligation to withhold the Russian withholding tax from guarantee payments made to the Trustee would be available. In this respect, guarantee payments made by the Guarantors to the Trustee may be subject to Russian income tax withholding at a rate of 20% (or potentially, 30% in respect of non-resident individual Noteholders) or such other rate as may be in force at the time of payment. It is not expected that the Trustee will, or will be able to, claim a withholding tax exemption under any double tax treaty. Where Russian source income is paid to a non-resident Noteholder who is an individual, the list of Russian source income subject to Russian personal income tax is defined by Article 208 of the Tax Code. It is not clear from the provisions of the Tax Code whether payments made by the Guarantors under the Note Guarantees should be classified as income received from sources within or outside the Russian Federation. If payments made by the Guarantors under the Note Guarantees to individuals who are not tax residents of the Russian Federation are classified as income received from source in the Russian Federation, these payments may be subject to withholding tax at a rate of 30% on the gross proceeds subject to reduction or elimination under any available double tax treaty provided that conditions for application of treaty relief established by such corresponding treaty and Russian tax legislation are met. If the payments under the Trust Deeds are made to the non-resident Noteholders who are individuals and in case the tax is withheld, the non-resident Noteholders can claim a refund of Russian tax withheld. However, obtaining a refund of Russian tax withheld may be a time-consuming process and no assurance can be given that such refund will be granted in practice (see section ‘‘Taxation—Russian Federation—Refund of Tax Withheld’’). If payments under the Note Guarantees become subject to Russian withholding tax or deduction for any taxes, duties, assessments or governmental charges of any nature (as a result of which the Guarantors would have to reduce payments made under the Note Guarantees by the withheld amount), the Guarantors will be obliged (subject to certain conditions) to increase payments under the Note Guarantees so as to result in the receipt by the Trustee or another entity acting on behalf of the Noteholders of such amounts as would have been received by it if no such withholding or deduction had been required. As a result, the Group may incur expenses in excess of the amount due to the Noteholders. The Group cannot be certain that it would have sufficient funds to make any payment

73 required under the Note Guarantees or to pay the additional amounts associated with the withholding. Further, the Group can give no assurance that its obligation to pay the additional amounts associated with the withholding tax is enforceable under Russian law. There is some uncertainty under Russian law as to the enforceability of such gross-up provisions. If the Guarantors were to fail to make tax gross-up payments in accordance with the terms of the Note Guarantees and the related provisions under the Note Guarantees were deemed to be unenforceable, the net amount of the payments made by the Guarantors to the Trustee, or any other person acting on behalf of the Noteholders, could be insufficient to make payment in full under the Notes.

Payment by Transgarant Ukraine under the Note Guarantee may be subject to withholding tax in Ukraine. In general, interest payments on borrowed funds made by a Ukrainian entity to a non-resident are subject to Ukrainian withholding tax at a rate of 15%, unless the withholding tax is reduced or eliminated pursuant to the terms of the applicable tax treaty. Moreover, there is a risk that the Ukrainian tax authorities may treat all the amounts payable under the Guarantee (and not only those in respect of the interest on borrowed funds) as the Ukrainian source income of the recipient of such payments subject to 15% withholding tax based on the catch-all clause of Article 160.1 of the Tax Code of Ukraine which considers ‘‘any other income’’ of a foreign resident received from carrying out business in Ukraine as Ukrainian source income. If any payments under the Guarantee are viewed to be Ukrainian source income and, thereby, subject to 15% withholding tax, the foreign beneficiary of such payments may, nevertheless, be exempt from withholding tax in Ukraine, provided such beneficiary is (i) a tax resident of a jurisdiction which has a tax treaty with Ukraine, (ii) entitled to the benefits of such tax treaty and (iii) deemed not to carry on business in Ukraine through its permanent establishment. In order to benefit from the tax treaty exemption, confirmation of the current tax residency status of the foreign beneficiary must be available on or prior to the date of payment of Ukrainian source income. Under the terms of the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland and the Government of Ukraine for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains signed on 10 February 1993 and effective from 11 August 1993 (the ‘‘UK-Ukraine Double Tax Treaty’’), as it is currently applied, payments by Transgarant Ukraine to the Security Agent under the Guarantee may be exempt from withholding tax in Ukraine, provided that certain conditions set forth in the UK-Ukraine Double Tax Treaty and under applicable Ukrainian law are satisfied. However, there can be no assurance that the exemption from withholding tax is, or will continue to be, available. Payments to the Security Agent under the Guarantee would be exempt from Ukrainian withholding tax under the UK-Ukraine Double Tax Treaty provided that the Security Agent is a resident of the United Kingdom for the purposes of the UK-Ukraine Double Tax Treaty, is the ‘‘beneficial owner’’ of the payments and is ‘‘subject to tax’’ in respect of such payments in the United Kingdom. Under applicable Ukrainian law, the Security Agent’s residence in the United Kingdom for purposes of the UK-Ukraine Double Tax Treaty will be evidenced by a certificate issued by the taxing authority in the United Kingdom. The exemption of payments from Ukrainian withholding tax will not be available under the UK-Ukraine Double Tax Treaty if the Security Agent carries on business in Ukraine through a permanent establishment situated therein, and the debt claim in respect of which the payments are made is effectively connected with such permanent establishment. Ukraine does not have an established practice of applying the concept of ‘‘beneficial ownership’’ of payments. For tax law purposes, this concept was introduced in Ukraine by the Tax Code of Ukraine. Under the Tax Code, a person that acts as agent, nominal holder (owner) or intermediary in respect of Ukrainian source income would not qualify as the ‘‘beneficial owner’’ of the income. Although the Ukrainian tax authorities rarely applied the ‘‘beneficial ownership’’ concept to deny tax treaty benefits to foreign payees in the past, it cannot be excluded that, based on the above specified provisions of the Tax Code, the Security Agent may be viewed by the Ukrainian tax authorities as a person acting as agent, nominal holder or intermediary for the Noteholders and Secured Parties, for this reason, the Security Agent may fail to satisfy the ‘‘beneficial ownership’’ test in respect of payments under the Guarantee. In such event, such payments would not be exempt from the Ukrainian withholding tax, and the Guarantor would be required by the terms of the Intercreditor Agreement to gross-up its payments to compensate relevant Secured Parties for such tax withholding. However, a recent interpretation of the Ukrainian tax authorities indicates that tax gross-up provisions like those contained in the Intercreditor Agreement may be seen as contravening the Ukrainian tax law and unenforceable.

74 In addition, Article 11(7) of the UK-Ukraine Double Tax Treaty contains a ‘‘main purpose’’ anti-avoidance provision, which may apply to that part of payments under the Guarantee which corresponds to interest payments. While there is no established practice of the Ukrainian tax authorities with respect to the application of this provision, if the Ukrainian tax authorities take the position that the main or one of the main purposes of using the United Kingdom as the Security Agent’s jurisdiction of residence for this transaction was to take advantage of the tax benefits (i.e. exemption of interest payments from withholding taxation in Ukraine) under the UK-Ukraine Double Tax Treaty, the tax authorities may potentially invoke the anti-avoidance provision of Article 11(7) of the UK-Ukraine Double Tax Treaty. In such circumstances, there is a risk that payments to the Security Agent under the Guarantee would cease to have the benefit of the UK-Ukraine Double Tax Treaty.

Other Risks We have not independently verified information we have sourced from third parties. We have sourced certain information contained in this Offering Memorandum from third parties, including private companies and Russian public authorities, and we have relied on the accuracy of this information without independent verification. The official data published by Russian federal, regional and local governments may be substantially less complete or researched than those in certain more developed economies. Official statistics may also be produced on different bases than those used in Western countries. Any discussion of matters relating to Russia in this Offering Memorandum must, therefore, be subject to uncertainty due to concerns about the completeness or reliability of available official and public information. In addition, the veracity of some official data released by Russian public authorities may be questionable.

75 USE OF PROCEEDS The aggregate net proceeds of the issuance of the Notes are expected to be approximately U.S.$796 million after deducting from the gross proceeds the fees and commissions of the Joint Bookrunners. Certain other expenses associated with the Offering, including legal fees and travel and certain other out-of-pocket expenses, are expected to be paid by FESCO after the Offering and are expected not to exceed U.S.$5 million. The aggregate net proceeds from the issuance of the Notes will be loaned to Maple Ridge and Elvy pursuant to subordinated intra-group loans and will be used to repay outstanding amounts in connection with certain acquisition debt of the Sponsors and a portion of the outstanding pre-acquisition debt of the Group and the payment of fees and expenses in relation thereto. The table below shows the gross proceeds from the issuance of the Notes and the application of such amounts.

Sources Uses(1) U.S.$ million U.S.$ million Notes due 2018 offered hereby . . . 500.0 Repayment of HoldCo Facility(2) . . . 400.0 Notes due 2020 offered hereby . . . 300.0 Repayment of certain Pre-acquisition loans(3) Alfa Bank Loan to Transgarant . . . 47.2 Raiffeisen Loan to Transgarant . . 50.7 VTB Loan to Transgarant ...... 46.3 Repayment of other indebtedness(4) 225.2 Repayment of accrued interest, breakage costs, fees and expenses related to refinancing(5) . . 26.6 Repayment of certain fees and expenses of the Offering(6) ...... 4.0 Total sources ...... 800.0 Total uses ...... 800.0

(1) Amounts denominated in Roubles have been translated into U.S. Dollars at a rate of U.S.$1 = RUB31.08, which was the CBR rate on 31 March 2013. (2) The amount presented excludes accrued and unpaid interest. The HoldCo Facility is not recognised in the IFRS Statement of Financial Position of the Group as of 31 December 2012. (3) The amounts presented reflect the amounts outstanding as of 31 March 2013, and exclude accrued and unpaid interest. The amounts outstanding on the repayment date may differ from these amounts. In addition, we may be responsible for breakage costs or other fees and expenses (as defined or otherwise described in the facility agreements). We expect to pay any difference between the figures presented and the amounts due with proceeds from the Offering and/or available cash. (4) The amount of other indebtedness repaid may be lower or higher than indicated in the table above on account of any applicable breakage costs and other fees and expenses. (5) Estimated accrued and unpaid interest, breakage costs, foreign exchange adjustments and other fees and expenses relating to the refinancing. The accrued and unpaid interest on the repayment date may differ from these amounts. We expect to pay any difference between the figure presented and the amount due with proceeds from the Offering and/or available cash. (6) Estimate of certain fees and expenses of the Offering, including fees to the Joint Bookrunners.

76 CAPITALISATION The following table sets forth our consolidated cash and cash equivalents and total capitalisation as of 31 December 2012 and as adjusted to reflect the Offering and the application of the net proceeds thereof as set forth under ‘‘Use of Proceeds’’, as if each had taken place on 31 December 2012. For further information regarding our financial position, see ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and the Financial Statements. The table below and the total indebtedness indicated do not include indebtedness of Maple Ridge and Elvy, holding companies of the Group, under the HoldCo Facility (U.S.$400.0 million as of the date hereof, excluding accrued and unpaid interest). The HoldCo Facility is not recognised in the IFRS Statement of Financial Position of the Group as of 31 December 2012. A portion of the proceeds from the Offering will be used to repay any outstanding amounts under the HoldCo Facility together with prepayment fees and transaction expenses, to the lenders under the HoldCo Facility. See ‘‘Use of Proceeds’’. The guarantees issued to our shareholders in connection with the financing of the acquisition of an interest in FESCO amounted to U.S.$400 million as of 31 December 2012.

As of 31 December 2012 Actual(2) As Adjusted(2) (U.S.$ million) Cash and cash equivalents(1) ...... 232 215 Alfa Bank Loan to Transgarant ...... 48 0 Raiffeisen Loan to Transgarant ...... 54 0 VTB Loan to Transgarant ...... 47 0 Margin loan at Halimeda(3) ...... 140 140 Other loans and finance leases(4) ...... 630 392 Notes offered hereby(5) ...... 0 800 Total indebtedness ...... 920 1,332 Non-controlling interest ...... 9 9 Equity attributable to FESCO shareholders ...... 1,523 1,523 Total capitalisation(6) ...... 2,452 2,864

(1) Approximately U.S.$17 million of pre-acquisition finance leases, including related breakage costs and fees, will be repaid using cash and cash equivalents prior to completion of the Offering. (2) Amounts denominated in Roubles have been translated into U.S. Dollars at a rate of U.S.$1 = RUB30.37, which was the CBR rate on 31 December 2012. (3) Represents the U.S.$140 million margin loan to Halimeda (an Unrestricted Subsidiary as defined in the Terms and Conditions of the 2018 Notes), which is without recourse to other members of the Group. Halimeda is the owner of our 23.7% stake in TransContainer, and the U.S.$140 million margin loan is secured against our stake in TransContainer. For further information regarding the margin loan to Halimeda, see ‘‘Description of Certain Indebtedness—Description of margin loan’’. (4) Includes repayment of other pre-acquisition indebtedness and a portion of the OpCo Facility (U.S.$400.0 million as of the date of this Offering Memorandum), as well as the principal amount of the pre-acquisition finance leases being repaid prior to completion of the Offering. The amount of other indebtedness repaid may be lower or higher than indicated in the table above on account of any applicable breakage costs, foreign exchange adjustments and other fees and expenses. (5) We intend to use a portion of the net proceeds from the Offering of the Notes and available cash and cash equivalents to refinance certain of our indebtedness. See ‘‘Use of Proceeds’’. (6) Total capitalisation is the sum of (i) total indebtedness, (ii) non-controlling interest and (iii) equity attributable to FESCO shareholders. Except as set forth below, since 31 December 2012, there have been no material changes in our capitalisation: • On 21 March 2013, we prepaid Pacific Conlease Company’s finance lease agreement with Intermodal Finance Ltd. in the amount of U.S.$6 million. • On 12 March 2013, our subsidiary Transgarant entered into a credit agreement with UniCredit Bank allowing borrowings of up to RUB300 million. As of 29 March 2013, the amount outstanding under this loan was RUB280 million (approximately U.S.$9 million). See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments’’.

77 SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA The tables below set forth FESCO’s historical financial information as of and for the years ended 31 December 2012, 2011 and 2010. With the exception of the section entitled ‘‘Other Financial Data’’ and certain information under the section ‘‘Presentation of Financial Information on the Issuer and Guarantors’’, this information has been extracted without material adjustment from our Financial Statements. This selected consolidated financial data should be read in conjunction with ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ and our Financial Statements included elsewhere in this Offering Memorandum. Our Financial Statements have been prepared in accordance with IFRS. Although our results are presented in U.S. Dollars, you should not construe those translations as a representation that those amounts could be converted from one currency to another at any particular rate or at all. The Rouble generally is not convertible outside of Russia. A market exists within Russia for the conversion of Roubles into other currencies, but the limited availability of other currencies may tend to inflate their values relative to the Rouble.

CONSOLIDATED INCOME STATEMENT DATA

Year ended 31 December 2012 2011 2010 (U.S.$ million) Consolidated Income Statement Revenue ...... 1,197 1,029 800 Operating expenses ...... (793) (680) (544) Gross profit before depreciation and amortisation ...... 404 349 256 Depreciation and amortisation ...... (100) (82) (73) Administrative expenses ...... (157) (133) (99) Impairment (loss)/reversal on tangible fixed assets, net ...... (96) (47) 39 Loss on disposal of tangible fixed assets ...... (2) — (5) Bad debt charge ...... (2) (6) (4) Other (expenses)/income ...... (24) 1 7 Profit from operating activity ...... 23 82 121 Interest expense ...... (53) (45) (54) Foreign exchange gain/(loss) ...... 1 15 (2) Result on disposal of investments ...... ——420 Other financial income/(expenses), net ...... 5 1 (14) Share of profit of equity accounted investees ...... 45 7 6 (Loss)/Profit before income tax ...... 21 60 477 Income tax expense ...... (38) (31) (21) Profit for the year ...... (17) 29 456 Attributable to: Owners of the Company ...... (20) 19 449 Non-controlling interests ...... 3 10 7

78 CONSOLIDATED BALANCE SHEET DATA

Year ended 31 December 2012 2011 2010 (U.S.$ million) Consolidated Statement of Financial Position ASSETS Non-Current Assets Fleet ...... 87 382 412 Rolling stock ...... 498 505 317 Other tangible fixed assets ...... 409 161 153 Goodwill ...... 280 214 200 Other intangible assets ...... 3 2 6 Investments in associates and joint ventures ...... 359 105 101 Other equity investments ...... 2 199 165 Other non-current assets ...... 565 313 30 Total non-current assets ...... 2,203 1,881 1,384 Current Assets Inventories ...... 26 25 21 Accounts receivable ...... 190 178 147 Current tax assets ...... 14 10 3 Assets held for sale ...... 12 —— Other current assets ...... 3 8 2 Cash and cash equivalents ...... 232 232 556 Total current assets ...... 477 453 729 Total Assets ...... 2,680 2,334 2,113 EQUITY AND LIABILITIES Shareholders’ Equity Share capital ...... 57 57 57 Share premium ...... 777 999 999 Treasury shares ...... — (336) (336) Retained earnings ...... 814 889 870 Reserves ...... (125) (182) (74) Equity attributable to owners of the Company ...... 1,523 1,427 1,516 Non-controlling interests ...... 91411 Total equity ...... 1,532 1,441 1,527 Non-current liabilities Long term loans and finance lease obligations ...... 701 499 303 Deferred tax liability ...... 57 35 33 Other long term liabilities ...... 16 27 27 Total non-current liabilities ...... 774 561 363 Current Liabilities Accounts payable ...... 147 128 99 Current tax liabilities ...... 2 5 2 Liabilities held for sale ...... 6 —— Short term loans and finance lease obligations ...... 219 199 122 Total current liabilities ...... 374 332 223 Total liabilities ...... 1,148 893 586 Total equity and liabilities ...... 2,680 2,334 2,113

79 CONSOLIDATED CASH FLOWS DATA

Year ended 31 December 2012 2011 2010 (U.S.$ million) Consolidated Statement of Cash Flows Cash flows from operating activities (Loss)/Profit for the year ...... (17) 29 456 Adjustments for: Depreciation and amortisation ...... 100 82 73 Impairment losses/(reversal) ...... 96 47 (38) Loss on disposal of tangible fixed assets ...... 2 — 5 Foreign exchange differences ...... (1) (15) 3 Net finance costs/(income) ...... 48 44 (352) Share of profit of equity accounted investees ...... (45) (7) (6) Income tax expense ...... 38 30 21 Share options (release)/expense ...... —— 3 Other income and expense ...... (8) 3 — Cash from operating activities before changes in working capital and provisions ... 213 213 165 Change in inventories ...... 1 (3) (3) Change in trade and other receivables ...... (10) (22) (23) Change in trade and other payables ...... 19 18 11 Cash flows from operations before income taxes paid ...... 223 206 150 Income tax paid ...... (54) (34) (15) Income tax received ...... —— 6 Cash flows from operating activities ...... 169 172 141 Cash flows from investing activities Expenditure on vessels under construction ...... (9) (25) (37) Refund from cancellation of construction contract ...... — 125 Expenditure on non-current assets ...... (1) —— Expenditure on other fixed assets ...... (48) (110) (53) Expenditure on drydocking ...... (7) (8) (9) Proceeds on disposal of fleet ...... 186 5 115 Proceeds on disposal of other fixed assets ...... 26 4 2 Acquisition of equity-accounted investee ...... (40) (5) (2) Other investments acquired ...... (1) (106) (139) Acquisition of subsidiaries, net of cash acquired ...... 18 (45) — Prepayments for investments ...... (2) (293) — Proceeds on sale of investments ...... — 1 870 Dividends received ...... 10 2 3 Long-term loans issued ...... (540) —— Short-term loans/investments received ...... 11 (6) (3) Finance lease received ...... 2 1 1 Interest received ...... 12 11 5 Net cash (used in)/generated from investing activities ...... (383) (573) 778 Cash flows from financing activities Proceeds from borrowings ...... 588 501 280 Repayment of borrowings ...... (411) (345) (650) Finance charges ...... (53) (46) (58) Financial instruments liability paid ...... (32) (10) (10) Decrease in overdraft ...... ——(1) Dividends paid ...... — (8) (2) Proceeds on sale of treasury shares ...... 114 —— Acquisition of non-controlling interests ...... — (4) — Net cash generated from/(used in) financing activities ...... 206 88 (441) Effect of exchange rate fluctuations on cash and cash equivalents ...... 8 (11) (4) Net (decrease)/increase in cash and cash equivalents ...... — (324) 474 Cash and cash equivalents at 1 January ...... 232 556 82 Cash and cash equivalents at 31 December ...... 232 232 556

80 Set forth below is a consolidating balance sheet and income statement showing Subsidiary Guarantors (including VMTP), Non-Guarantor Subsidiaries, FESCO, eliminations and total amounts as of and for the years ended 31 December 2012 and 2011. The information on Subsidiary Guarantors, Non-Guarantor Subsidiaries and FESCO presented below has been extracted from the consolidation schedules of the Group used in the preparation of IFRS consolidated financial statements for the relevant period. Intra-Group balances and turnover within the Subsidiary Guarantors and Non-Guarantor Subsidiaries have been eliminated.

Consolidating IFRS Statement of Financial Position 2012

Subsidiary Non-Guarantor Guarantors Subsidiaries FESCO Eliminations(1) Total (U.S.$ million, except percentages) ASSETS Non-current assets Fleet ...... — 51 36 — 87 Rolling stock ...... 457 41 ——498 Other tangible fixed assets ...... 318 69 22 — 409 Goodwill ...... 274 6 ——280 Other intangible assets ...... ——3 — 3 Investments in associates and joint ventures ...... 3 333 23 — 359 Other equity investments ...... 1 1 ——2 Investments in subsidiaries ...... 1 258 1,586 (1,845) — Other non-current assets ...... 421 141 3 — 565 Total non-current assets ...... 1,475 900 1,673 (1,845) 2,203 Current assets Inventories ...... 14 2 10 — 26 Accounts receivable ...... 148 31 11 — 190 Current tax assets ...... 13 1 ——14 Assets held for sale ...... 6 6 ——12 Other current assets ...... 3 —— —3 Cash and cash equivalents ...... 97 125 10 — 232 Total current assets ...... 281 166 31 — 477 Total assets ...... 1,756 1,065 1,704 (1,845) 2,680 Intercompany debtors/creditors ...... (4) 99 (98) 4 — EQUITY AND LIABILITIES Total equity ...... 877 941 1,559 (1,845) 1,532 Non-current liabilities Long-term loans and finance lease obligations ...... 545 149 7 — 701 Deferred tax liability ...... 52 1 4 — 57 Other long-term liabilities ...... 15 1 ——16 Total non-current liabilities ...... 612 151 11 — 774 Current liabilities Accounts payable ...... 111 21 11 4 147 Current tax liabilities ...... 2 —— —2 Liabilities held for sale ...... 4 2 ——6 Short-term loans and finance lease obligations ...... 146 48 25 — 219 Total current liabilities ...... 264 71 36 4 374 Total liabilities ...... 876 222 47 4 1,148 Total equity and liabilities ...... 1,751 1,164 1,607 (1,841) 2,680 Net assets, excluding intercompany items and subsidiaries ...... 880 585 71 (4) 1,532 Proportion of Group net assets(2) ...... 57.4% 38.2% 4.6% (0.2)% 100.0%

Notes: (1) The eliminations relate to balances and turnover within the Subsidiary Guarantors, Non-Guarantor Subsidiaries and FESCO. (2) See ‘‘—Adjusted Guarantor Coverage’’.

81 Consolidating Income Statement IFRS 2012

Subsidiary Non-Guarantor Guarantors Subsidiaries FESCO Eliminations Total (U.S.$ million, except percentages) Revenue ...... 1,183 195 62 (243) 1,197 Operating expenses ...... (819) (147) (71) 244 (793) Gross profit before depreciation and amortization ...... 364 48 (9) 1 404 Depreciation and amortisation ...... (65) (24) (11) — (100) Administrative expenses ...... (86) (46) (39) 14 (157) Impairment loss on tangible fixed assets . — (90) (6) — (96) Other expenses net, including: ...... 8 10 (31) (15) (28) Profit/(Loss) on disposal of Fixed Assets ...... 2 3 (7) — (2) (Loss)/profit from operating activity . . . 221 (102) (96) — 23 Interest expense ...... (42) (35) (6) 30 (53) Foreign exchange gain ...... — 1 —— 1 Other finance income, net ...... 10 17 8 (30) 5 Share of profit of equity accounted investees ...... — 32 13 — 45 (Loss)/profit before income tax ...... 189 (87) (81) — 21 Income tax expense ...... (42) (6) 10 — (38) (Loss)/profit for the period ...... 147 (93) (71) — (17) EBITDA ...... 283 9 (45) — 247 Proportion of Group EBITDA ...... 114.6% 3.6% (18.2)% — 100.0%

82 Consolidating IFRS Statement of Financial Position 2011

Subsidiary Non-Guarantor Guarantors Subsidiaries FESCO Eliminations Total (U.S.$ million, except percentages) ASSETS Non-current assets Fleet ...... — 301 81 — 382 Rolling stock ...... 461 44 ——505 Other tangible fixed assets ...... 62 76 23 — 161 Goodwill ...... 208 6 ——214 Other intangible assets ...... — 2 ——2 Investments in associates and joint ventures ...... — 798— 105 Other equity investments ...... — 198 ——198 Investments in subsidiaries ...... 98 241 1,309 (1,647) 1 Other non-current assets ...... 12 298 3 — 313 Total non-current assets ...... 841 1,173 1,514 (1,647) 1,881 Current assets Inventories ...... 6 9 10 — 25 Accounts receivable ...... 117 48 13 — 178 Current tax assets ...... 7 1 2 — 10 Other current assets ...... 8 ———8 Cash and cash equivalents ...... 42 69 121 — 232 Total current assets ...... 180 127 146 — 453 Total assets ...... 1,021 1,300 1,660 (1,647) 2,334 Intercompany debtors/creditors ...... (15) (29) 44 —— EQUITY AND LIABILITIES Total equity ...... 582 871 1,635 (1,647) 1,441 Non-current liabilities Long-term loans and finance lease obligations ...... 270 209 20 — 499 Deferred tax liability ...... 24 (3) 14 — 35 Other long-term liabilities ...... 2 25 ——27 Total non-current liabilities ...... 296 231 34 — 561 Current liabilities Accounts payable ...... 79 38 11 — 128 Current tax liabilities ...... 4 1 ——5 Liabilities held for sale Short-term loans and finance lease obligations ...... 45 130 24 — 199 Total current liabilities ...... 128 169 35 — 332 Total liabilities ...... 424 400 69 — 893 Total equity and liabilities ...... 1,006 1,271 1,704 (1,647) 2,334 Net assets, excluding intercompany items and subsidiaries ...... 499 659 282 — 1,440 Proportion of Group net assets ...... 34.7% 45.8% 19.6% — 100.0%

83 Consolidating Income Statement IFRS 2011

Subsidiary Non-Guarantor Guarantors Subsidiaries FESCO Eliminations Total (U.S.$ million, except percentages) Revenue ...... 701 416 93 (181) 1,029 Operating expenses ...... (436) (336) (89) 181 (680) Gross profit before depreciation and amortisation ...... 265 80 4 — 349 Depreciation and amortisation ...... (47) (26) (9) — (82) Administrative expenses ...... (60) (64) (19) 10 (133) Impairment loss on tangible fixed assets . — (42) (5) — (47) Other expenses net, including: ...... (2) 11 (1) (13) (5) Profit/(Loss) on disposal of fixed assets ————— (Loss)/profit from operating activity . . . 156 (41) (30) (3) 82 Interest expense ...... (25) (26) (3) 9 (45) Foreign exchange gain ...... 14 (1) (1) 3 15 Other finance income, net ...... — 37(9)1 Share of profit of equity accounted investees ...... ——7 — 7 (Loss)/profit before income tax ...... 145 (65) (20) — 60 Income tax expense ...... (30) (2) 1 — (31) (Loss)/profit for the period ...... 115 (67) (19) — 29 EBITDA ...... 202 27 (16) (3) 210 Proportion of Group EBITDA ...... 96.2% 12.7% (7.4)% (1.6)% 100.0%

84 OTHER FINANCIAL DATA (non-IFRS)

Year ended 31 December (Unaudited) 2012 2011 2010 (U.S.$ million) Ports Division ...... 206 219 172 Rail Division ...... 347 308 209 Liner and Logistics Division ...... 623 567 430 Shipping Division ...... 87 159 160 Inter-Company eliminations ...... (92) (82) (58) Total Adjusted Revenue(1) ...... 1,172 1,171 913

(1) For the years ended 31 December 2011 and 2010, Adjusted Revenue represents our revenues assuming consolidation of the Port of Vladivostok, as this consolidation reflects the current state of our business. For the year ended 31 December 2012, Adjusted Revenue represents our revenues assuming consolidation of the Port of Vladivostok with effect from 1 January 2012 and the exclusion of revenues to the date of disposal of 21 disposed vessels in 2012, as these vessels will not be included in our results going forward. The table below presents a reconciliation of Adjusted Revenue to our revenue for the Group, Ports Division and Shipping Division for the years ended 31 December 2012, 2011 and 2010: For the year ended 31 December (Unaudited, except revenue) 2012 2011 2010 (U.S.$ million) Group Revenue ...... 1,197 1,029 800 Consolidation of Port of Vladivostok ...... 28 142 113 Disposed vessels operations ...... (54) —— Adjusted Revenue ...... 1,172 1,171 913 Ports Division Revenue ...... 178 77 59 Consolidation of Port of Vladivostok ...... 28 142 113 Adjusted Revenue ...... 206 219 172 Shipping Division Revenue ...... 141 159 160 Disposed vessels operations ...... (54) —— Adjusted Revenue ...... 87 159 160

Year ended 31 December (Unaudited) Division 2012 2011 2010 (U.S.$ million) Ports Division ...... 98 84 61 Rail Division ...... 167 133 55 Liner and Logistics Division ...... 43 51 63 Shipping Division ...... (3) 5 19 Intra-Group/Corporate Division ...... (26) (29) (18) Total Adjusted EBITDA(1) ...... 279 244 180

(1) For the years ended 31 December 2011 and 2010, Adjusted EBITDA represents our EBITDA assuming consolidation of the Port of Vladivostok, as this consolidation reflects the current state of our business. For the year ended 31 December 2012, Adjusted EBITDA represents our EBITDA (including an adjustment for the effect of a breakup expense for an unconsummated proposed sale of Transgarant to NefteTransService) assuming consolidation of the Port of Vladivostok with effect from 1 January 2012 and the exclusion of revenues and expenses to the date of disposal of 21 disposed vessels in 2012 and administrative expenses of the Shipping Division proportionate to the 21 disposed vessels, as these vessels will not be included in our results going forward, as well as the exclusion of compensation of insurance claims for damage to vessels as well as non-recurring consulting expenses relating to acquisitions, as these were one-time fees and expenses that we do not expect will affect our results in the future.

85 The table below presents a reconciliation of Adjusted EBITDA to net income for the Group and its divisions for the years ended 31 December 2012, 2011 and 2010: For the year ended 31 December 2012 2011 2010 (U.S.$ million) Group Net (Loss)/Income ...... (17) 29 456 Income tax expense ...... 38 31 21 Profit Before Tax ...... 21 60 477 Share of profit of equity accounted investees ...... (45) (7) (6) Fair-value adjustments ...... 100 57 (20) Result on disposal of investments ...... ——(420) Result on disposal of assets ...... 3 — 5 Profit before asset disposals and revaluations ...... 79 110 36 Foreign exchange loss/(gain) ...... (1) (15) 3 Interest expenses ...... 53 45 54 Interest income ...... (10) (12) (6) Investing income ...... ——— Depreciation and amortisation ...... 100 82 73 Breakup fee for unconsummated Transgarant sale ...... 26 —— EBITDA ...... 247 210 160 Consolidation of Port of Vladivostok ...... 13 35 25 Disposed vessels operations ...... 4 —— Compensation of insurance claims ...... — (1) (5) Non-recurring consulting expenses ...... 15 —— Adjusted EBITDA ...... 279 244 180 Ports Division Net Income ...... 69 36 32 Income tax expense ...... 15 8 8 Profit Before Tax ...... 84 44 40 Share of profit of equity accounted investees ...... (4) (3) (8) Fair-value adjustments ...... — 5 — Result on disposal of assets ...... 2 —— Profit before asset disposals and revaluations ...... 82 46 32 Foreign exchange (loss)/gain ...... (1) (2) (1) Interest expenses ...... 3 1 — Interest receivable ...... (5) (1) — Investing income ...... (9) 1 — Depreciation and amortisation ...... 15 4 5 EBITDA ...... 85 49 36 Consolidation of Port of Vladivostok ...... 13 35 25 Adjusted EBITDA ...... 98 84 61 Rail Division Net Income ...... 81 61 (7) Income tax expense ...... 21 13 2 Profit Before Tax ...... 102 74 (5) Share of profit of equity accounted investees ...... (7) (2) 3 Fair-value adjustments ...... (1) (1) 1 Profit before asset disposals and revaluations ...... 81 72 1 Foreign exchange (loss)/gain ...... 2 (12) 1 Interest expenses ...... 40 35 26 Interest receivable ...... (4) (3) (5) Depreciation and amortisation ...... 48 41 32 EBITDA ...... 167 133 55 Adjusted EBITDA ...... 167 133 55 Liner and Logistics Division Net Income ...... 23 29 45 Income tax expense ...... 9 9 8 Profit Before Tax ...... 32 38 53 Result on disposal of assets ...... (1) (1) (2) Profit before asset disposals and revaluations ...... 31 37 51 Foreign exchange (loss)/gain ...... 0 1 0 Interest expenses ...... 2 3 3 Interest receivable ...... (3) (2) (1) Depreciation and amortisation ...... 13 12 10 EBITDA ...... 43 51 63 Adjusted EBITDA ...... 43 51 63

86 For the year ended 31 December 2012 2011 2010 (U.S.$ million) Shipping Division Net Income ...... (67) (64) 30 Income tax (benefit)/expense ...... (9) (1) 3 (Loss)/Profit Before Tax ...... (76) (65) 33 Share of profit of equity accounted investees ...... 0 (1) (1) Fair-value adjustments ...... 99 47 (27) Result on disposal of assets ...... (68) 0 5 Profit before asset disposals and revaluations ...... (45) (19) 10 Foreign exchange loss/(gain) ...... 9 1 1 Interest expenses ...... 12 8 16 Interest receivable ...... (4) (7) (14) Investing income ...... ——(14) Depreciation and amortisation ...... 22 23 25 EBITDA ...... (7) 6 24 Disposed vessels operations ...... 4 —— Compensation of insurance claims ...... — (1) (5) Adjusted EBITDA ...... (3) 5 19

PRO FORMA DATA (non-IFRS)

Year ended 31 December (Unaudited) 2012 Pro Forma Cash and Cash Equivalents(1) (U.S.$ million) ...... 215 Pro Forma Adjusted Gross Interest-Bearing Debt(2) (U.S.$ million) ...... 1,192 Pro Forma Adjusted Net Interest-Bearing Debt(3) (U.S.$ million) ...... 976 Pro Forma Adjusted Interest Expense(4) (U.S.$ million) ...... 99 Pro Forma Adjusted Net Interest-Bearing Debt/Adjusted EBITDA ...... 3.5x Adjusted EBITDA/Pro Forma Adjusted Interest Expense(5) ...... 2.8x

(1) Pro Forma Cash and Cash Equivalents are cash and cash equivalents adjusted to give effect to the Offering and related use of proceeds. (2) Pro Forma Adjusted Gross Interest-Bearing Debt consists of adjusted gross debt (excluding the U.S.$140 million margin loan incurred by Halimeda (an Unrestricted Subsidiary as defined in the Terms and Conditions of the 2018 Notes)) adjusted to give effect to the Offering and related use of proceeds. (3) Pro Forma Adjusted Net Interest-Bearing Debt consists of Pro Forma Adjusted Gross Interest-Bearing Debt, net of Pro Forma Cash and Cash Equivalents. (4) Pro Forma Adjusted Interest Expense represents the annual interest expense on Pro Forma Adjusted Gross Interest-Bearing Debt. For the purposes of this calculation, amounts being used for repayment of other indebtedness (as set forth under ‘‘Use of Proceeds’’) have been allocated to certain pre-acquisition indebtedness and the OpCo Facility according to our current refinancing plans. The allocation to specific facilities is subject to revision and, accordingly, Pro Forma Adjusted Interest Expense could be higher or lower depending upon the other indebtedness ultimately repaid. (5) For the purposes of this calculation, amounts being used for repayment of other indebtedness (as set forth under ‘‘Use of Proceeds’’) have been allocated to certain pre-acquisition indebtedness and the OpCo Facility according to our current refinancing plans. The allocation to specific facilities is subject to revision and, accordingly, Pro Forma Adjusted Interest Expense, and therefore the ratio of Adjusted EBITDA/Pro Forma Adjusted Interest Expense, could be higher or lower depending upon the other indebtedness ultimately repaid.

ADJUSTED GUARANTOR COVERAGE We have also adjusted the Guarantor coverage ratios to reflect (1) our Adjusted EBITDA, which represents our EBITDA assuming consolidation of the Port of Vladivostok with effect from 1 January 2012 and the exclusion of revenues and expenses to the date of disposal of 21 vessels disposed in 2012, administrative expenses of the Shipping Division proportionate to the 21 disposed vessels, as well as compensation for insurance claims for damage to assets and non-recurring consulting expenses relating to acquisitions (see ‘‘Selected Consolidated Financial and Other Data’’ for a reconciliation of Adjusted EBITDA to our net income for the years ended 31 December 2012, 2011 and 2010) and (2) our Adjusted Net Assets, which represent our Net Assets excluding the Net Assets of Halimeda, which is outside of the restricted group for the purposes of this Offering. Halimeda is the owner of our 23.7% stake

87 in TransContainer and the borrower under the U.S.$140 million margin loan secured against our stake in TransContainer (which is without recourse to other members of the Group).

Reconciliation of Adjusted Net Assets to Net Assets

As of 31 December 2012 (U.S.$ million) Net Assets ...... 1,532 Book Value of Halimeda’s 23.7% stake in TransContainer ...... (327) Adjusted Net Assets ...... 1,205

88 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our financial condition and results of operations as of and for each of the years ended 31 December 2012, 2011 and 2010 should be read in conjunction with ‘‘Selected Consolidated Financial and Other Data’’ and the Financial Statements. This review includes forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in the forward-looking statements as a result of numerous factors, including the risks discussed in ‘‘Risk Factors’’. See ‘‘Forward-Looking Statements’’.

Overview We are one of the leading, privately-owned transportation and logistics companies in Russia with operations in the ports, rail, integrated logistics and shipping businesses. Our diversified but integrated asset portfolio enables us to unite nearly all of the links in the intermodal transportation value chain and to provide door-to-door logistics solutions that are tailor-made to the needs of our clients in Russia and abroad. Our well-invested asset base allows us to offer our clients fully integrated supply chain solutions. Our operations are grouped into four divisions—Ports; Rail; Liner and Logistics; and Shipping—which are supported by a corporate centre in Moscow and non-divisional service companies. • Ports Division: Our Ports Division manages our portfolio of port facilities and container terminals at the Port of Vladivostok, one of the largest ports in Russia, in terms of capacity and cargo volumes handled. The Port of Vladivostok, in which we have full operational control, is one of the major gateways in the Russian Far East and is well-situated to capitalise on growing trade flows between Russia and Asia, particularly of containerised and non-containerised cargo and automotive imports and metals and other commodities exports. By connecting the assets of our Rail Division, Liner and Logistics Division and Shipping Division, our terminals at the Port of Vladivostok represent a critical link in the logistics value chain, which enables us to deliver intermodal transportation services to our customers. • Rail Division: Our Rail Division operates our freight rail transportation business under the Transgarant brand, as well as our inland dry terminal in Khabarovsk. As of 31 December 2012, we operated a fleet of 16,194 railcars under the Transgarant brand, of which we owned 14,975 railcars. Our Rail Division also manages the majority of the fleet of Russkaya Troika, our 50-50 joint venture with Russian Railways. • Liner and Logistics Division: Our Liner and Logistics Division manages our container lines and forwarding and logistics business, operating a variety of sea (both international and cabotage), intermodal and refrigerated liner services to ports in the Russian Far East, North America, Asia and Europe. Our liner services are integrated with the services of our other divisions, including cargo handling at ports and onward delivery by rail, thereby offering our customers a ‘‘one-stop shop’’ for the transportation of their cargoes under a single bill of lading. • Shipping Division: Our Shipping Division is mainly engaged in ship ownership and management and operates primarily as a support centre for our Liner and Logistics Division, to which it charters-out ships and provides vessel agency services.

Presentation of Financial Information on the Issuer and Guarantors The Issuer is a special purpose vehicle established for the purpose of raising capital through the issuance of debt securities. Because it was incorporated on 4 April 2013, it has not yet prepared any financial statements, and no financial statements of the Issuer are included in this Offering Memorandum. In addition, no separate financial statements of any of the Guarantors are included in this Offering Memorandum. See ‘‘Presentation of Financial and Other Information—Presentation of Financial Information on the Issuer and Guarantors’’.

89 Division Information For management purposes, our business is organised into four major operating divisions—ports, rail, liner and logistic and shipping. The tables below show our division results by revenue, Adjusted Revenue and Adjusted EBITDA for the years ended 31 December 2012, 2011 and 2010.

Year ended 31 December 2012 2011 2010 Ports Division ...... 178 77 59 Rail Division ...... 347 308 209 Liner and Logistics Division ...... 623 567 430 Shipping Division ...... 141 159 160 Eliminations/Adjustments ...... (92) (82) (57) Total Revenue ...... 1,197 1,029 801

Year ended 31 December (Unaudited) 2012 2011 2010 Ports Division ...... 206 219 172 Rail Division ...... 347 308 209 Liner and Logistics Division ...... 623 567 430 Shipping Division ...... 87 159 160 Inter-Company eliminations ...... (92) (82) (58) Total Adjusted Revenue(1) ...... 1,172 1,171 913

(1) See ‘‘Selected Consolidated Financial and Other Data’’ for a reconciliation of Adjusted Revenue to our total revenue and that of our Ports and Shipping Divisions for the years ended 31 December 2012, 2011 and 2010.

Year ended 31 December (Unaudited) 2012 2011 2010 Ports Division ...... 98 84 61 Rail Division ...... 167 133 55 Liner and Logistics Division ...... 43 51 63 Shipping Division ...... (3) 5 19 Intra-Group/Corporate Division ...... (26) (29) (18) Total Adjusted EBITDA(1) ...... 279 244 180

(1) See ‘‘Selected Consolidated Financial and Other Data’’ for a reconciliation of Adjusted EBITDA to net income for the Group and each of its divisions for the years ended 31 December 2012, 2011 and 2010.

Changes in Our Structure from 1 January 2010 to 31 December 2012 Set forth below is a description of significant changes to our structure from 1 January 2010 to 31 December 2012.

Acquisition of MetizTrans Group In July 2011, we obtained control over MetizTrans Group, a railway operator, by acquiring 100% of the shares and voting interests in MetizTrans LLC (‘‘MetizTrans’’), Investconsulting LLC and TEK MetizTrans for U.S.$49 million. The acquisition was made from a member of our management. The acquisition contributed 971 railcars to our fleet. See Note 30 to the 2011 Financial Statements.

Acquisition of control over the Port of Vladivostok On 31 March 2012, we obtained control over the Port of Vladivostok by indirectly acquiring an additional 47.78% of the shares and voting interests in the company. As a result, our equity interest in the Port of

90 Vladivostok increased to 95.577%, and the Port of Vladivostok has been consolidated in our results of operations from 1 April 2012. Prior to 1 April 2012, we accounted for our interest in the Port of Vladivostok using the equity method. In the nine month period to 31 December 2012, the Port of Vladivostok contributed revenue of U.S.$74 million and profit of U.S.$15 million to our results. See Note 29 to the 2012 Financial Statements.

Divestment of NCC Group Limited From 2006 to 2010, we controlled a 50% stake in NCC Group Limited (‘‘NCC’’), which in turn owned five container terminals across all three Russian marine basins—the North West Basin, the South Basin and the Far East Basin. In 2010, we sold our stake in NCC to First Quantum, which held the remaining 50% stake, for U.S.$900 million in order to raise funding for our investments in the subsequent privatisation of TransContainer. We recorded a gain of U.S.$420 million on our disposition of NCC, which significantly affected our profit before income tax for the year ended 31 December 2010.

Acquisition of shares and GDRs of TransContainer In 2010, we acquired shares and GDRs in TransContainer representing 12.5% of the share capital for total cash consideration of U.S.$139 million. Prior to TransContainer becoming our associate, our shares and GDRs in TransContainer were classified as available-for-sale investments and were accounted for on a fair-value basis at each reporting date, with revaluations recognised in our statement of comprehensive income. In 2011, we acquired an additional 6.0% stake in TransContainer, increasing our total stake to 18.5%. In January 2012, we purchased an additional 2.6% stake in TransContainer in the form of GDRs, which resulted in TransContainer becoming our associate and our investments in TransContainer being accounted for on an equity basis. In July 2012, we obtained a further 2.6% of the shares and GDRs in TransContainer, increasing our total effective ownership in TransContainer to 23.7% of the share capital.

Key Factors Affecting Results of Operations and Financial Condition The following are key factors that have significantly affected our results of operations and financial condition during the period under review, or which we expect will significantly affect (or continue to affect) our operations in the future.

Macroeconomic factors in Russia Our results have been, and future results are likely to be, affected by the macroeconomic environment both globally and in Russia, including, in particular, the dynamics of GDP and disposable income in Russia, demand for consumer goods, foreign trade and volumes of imports and exports in Russia, as well as industry-specific factors, such as containerisation levels and demand for railcars and rail transportation services. See ‘‘Industry—Macroeconomic Overview’’ for a discussion of macroeconomic trends in Russia during the period under review. Our Rail Division is dependent on the demand for freight rail transportation services in Russia. The demand for commodities freight, such as coal, iron ore, construction materials and ferrous metals, is significantly influenced by macroeconomic conditions in Russia and globally. For example, in 2009, during the global economic crisis, freight rail turnover in Russia fell by 11.9%, according to Rosstat. As the Russian economy improved in 2010, 2011 and 2012, freight rail turnover expanded by an average of 6.0% per year, according to Rosstat. The development of Russian domestic and global trade volumes, and in particular container volumes, is an important determinant of the cargo volumes and container throughput handled by our Ports and Liner and Logistics Divisions, and consequently affects their margins. For example, we were significantly affected by the decline in industrial production, consumer spending capacity and international trade that took place in 2008 and 2009. The global economic downturn impacted our ports and liner and logistics customers, including car manufacturers, pulp producers and consumer goods companies, causing a decline in demand for railway container transportation services and a significant decrease in container imports and demand for intermodal services. In 2009, as a result of the global economic crisis, annual container volumes in Russia decreased by 33.3%, according to Morcenter. Between 2010 and 2012, total annual container volumes in Russia increased by 26.0%, according to Morcenter.

91 The Liner and Logistics Division charters-in ships, including from our Shipping Division, and thus also is partially dependent on shipping rates. The shipping industry is closely tied to, and is affected by developments in, the global economy. After reaching highs during the summer of 2008, charter rates for crude oil carriers and product tankers fell dramatically thereafter. While the rates improved at certain points during 2009 and 2010, generally they remained significantly below the levels reached in 2008.

Rolling stock The size, utilisation and composition of our rail fleet significantly impact the revenues of our Rail Division. Our cargo transportation volumes, and as a result our revenue and operating expenses, depend on the size and utilisation of our fleet and rolling stock. We operate an extensive fleet of rail cars, which grew from 15,601 units as of 1 January 2010 to 16,194 units as of 31 December 2012. Our rolling stock is owned or leased under operating leases, and we intend to continue to acquire rolling stock in the future. We purchase most of our rolling stock either through the acquisition of existing rail operators, such as the purchase of MetizTrans Group in 2011, which contributed an additional 971 cars to our fleet, or directly from manufacturers. We have established relationships with well-known railcar manufacturers in Russia and Ukraine, thereby gaining the ability to access railcars in periods of short supply and achieve more favourable pricing terms than prevailing market prices. The efficient commercial utilisation of rolling stock has a significant impact on our revenue and margins. Capacity utilisation, defined as the number of days when a railcar is not in depot or parked on sidetracks, divided by number of days in the year, was 95.2%, 93.8% and 93.9% for the years ended 31 December 2012, 2011 and 2010, respectively. To mitigate against decreases in overall rail transport volumes, we have focused on maximising our utilisation rates through a combination of factors that reduce idle time, including our IT system, which allows for real-time fleet tracking; our strong relationships with infrastructure managers; and our ability to swap between various railcar types on relatively short notice. We also manage the dispatching and routing of our rolling stock to make its utilisation commercially efficient on outbound as well as on return journeys to reduce the number of empty runs of our fleet on return journeys and increase the proportion of time for which our rolling stock is generating revenue. Over the last three years, we have sought to improve our mix of railcars toward more specialised types that generally command higher rates. Marginal income per day per railcar, defined as revenue per railcar per day less direct expenses, is a key metric that we use to track our performance. Our daily average marginal income per railcar per day, exclusive of VAT, was RUB1,289, 1,170 and 719 in the years ended 31 December 2012, 2011 and 2010, respectively. In recent years, freight rail transportation market participants such as operators, lessors and freight owners in Russia have purchased large numbers of new railcars in response to increases in demand for freight rail transportation and the relatively old age of the Russian railcar fleet. These increased supplies of railcars may adversely affect the prices we are able to achieve for our Rail Division.

Disposal of Vessels We disposed of 21 vessels with total DWT of 622,986 tonnes in 2012 and plan to dispose of a total of six vessels with total DWT of 59,009 tonnes in 2013. These disposals are part of our plans to downsize our shipping operations to focus on internal and niche services and reduce our exposure to global shipping markets. In December 2012 we sold 11 vessels to our former controlling shareholder for consideration of U.S.$158 million, and we recognised a gain on disposal of U.S.$2 million in connection with this transaction. In addition, we scrapped ten vessels in 2012, the average age of which was 27.1 years, and in connection with which we recognised a loss on disposal of U.S.$12 million. See ‘‘—Recent Developments—Disposal of vessels in 2013’’ for a discussion of our disposals to date in 2013. The proceeds from disposal of vessels were used to repay debt. In the historical period under review, we sought to utilize our vessels as voyage charters on the spot market and as time charters in a manner that maximizes long-term cash flow. Although time charters generally provide stable revenue, they also limit the portion of our fleet available for spot market voyages during an upswing in the shipping industry cycle, when spot market voyages might be more profitable.

Relationship with Russian Railways As a significant portion of our total revenue is derived from rail-based container and bulk transportation services, we depend on Russian Railways to provide reliable railway infrastructure and locomotive services. Revenue from our rail-based container transportation services, integrated logistics services,

92 and freight forwarding and logistics services involve using railway infrastructure owned by, and locomotive services provided by, Russian Railways. Russian Railways is a natural monopoly with respect to the Russian public railway infrastructure and has a dominant position in Russia in the provision of locomotive services. In addition, Russian Railways, as the sole operator of the Russian railway network, charges us and other private rail operators tariff-regulated prices for the use of its railway infrastructure and the provision of locomotive services. The FTS regulates these tariffs, which in turn have an indirect impact on the prices we charge customers for our services. An increase in tariffs would cause Russian Railways to increase the tariff-regulated prices that it charges us and other private rail operators for the use of its infrastructure and locomotives. We typically would attempt to pass such a price increase to customers, but if we increased prices at higher rates than those charged by competitors, our container transportation services could become less economically attractive compared with those of competitors or other modes of transportation. For the years ended 31 December 2012, 2011 and 2010, our tariffs paid for the use of railway infrastructure and the provision of locomotive services in Russia have increased 5.6%, 7.5% and 9.4%, respectively.

Cargo mix The mix of cargoes transported by us affects the results of operations in our Rail and Liner and Logistics Divisions due to differing pricing and logistics issues for various cargoes. The principal types of cargo we transport by rail are coal, iron ore, construction materials and containers, which accounted for approximately 42%, 23%, 8% and 7%, respectively, of our overall transportation volumes as of 31 December 2012. We focus on transporting coal, metallurgical cargoes (including ferrous metals, scrap metal, iron ores) and construction materials due to the generally higher margins and revenue stability that these cargoes offer, but we have also diversified into other types of cargoes to take advantage of market conditions and leverage the growth of our railcar fleet. Operating margins on container handling in our Ports Division typically are approximately 20% higher than those for general freight handling and 10% higher than those for car handling. Our margins for rail container transportation are typically approximately 17% higher than our average rail transportations margin in our Rail Division as well.

Port capacity Our ability to increase revenue in response to macroeconomic factors driving demand for cargo handling services is constrained by the capacity of our facilities, the scarcity of available waterfront and adjacent land, the capacity of berths for vessels calling at the port and the capacity of local rail and road transport infrastructure. Our capacity to handle cargo may be constrained by the capacity of our terminals, in view of existing methods, technology used and the current mix of cargoes handled. In addition, our ability to operate and expand our ports depends on the construction of new quays, dredging of existing quays and access channels and the continuous maintenance of our quay drafts. The maintenance of quays, access channels and drafts, the creation of new quays and increases in the depth of drafts and access channels are not always within our control and depend, in part, on whether governmental authorities make necessary investments. As of 31 December 2012, the Port of Vladivostok had an annual container throughput capacity of 600,000 TEUs and bulk throughput capacity of 3.85 million tonnes. The Port of Vladivostok is expected to increase its annual container throughput capacity to 650,000 TEUs per annum by 2017. Certain of our competitors are planning to introduce significant new capacity at their terminals as well, which may result in surplus capacity, intensified price competition and lower utilisation, see ‘‘Risk Factors—Risks Related to Our Business and Industry— General Risks—We encounter competition from other companies in our ports, rail and liner and logistics operations’’.

Interest expense on borrowings We are highly leveraged and have significant debt service obligations. As of 31 December 2012, as adjusted to give effect to the Offering, we had U.S.$1.3 billion of debt, excluding U.S.$147 million of debt to trade and other creditors in the ordinary course of business. A substantial portion of our cash flow from operations may be required to service payments on our indebtedness, thereby reducing the availability of cash flow for growth, capital expenditures and other general corporate activities. See ‘‘Description of Certain Indebtedness’’ and ‘‘Risk Factors—Risks Relating to the Notes, Our Indebtedness and Our Structure’’.

93 Rouble/U.S. Dollar exchange rate and inflation The following table sets out rates of inflation and foreign exchange movements for the years ended 31 December 2012, 2011 and 2010:

Year ended 31 December Inflation and RUB/U.S.$ exchange rate 2012 2011 2010 Russian inflation rate ...... 6.6% 6.1% 8.8% Producer price index (‘‘PPI’’)...... 5.1% 12.0% 16.7% RUB/U.S.$ exchange rate at period beginning ...... 32.20 30.35 30.18 RUB/U.S.$ exchange rate at period end...... 30.37 32.19 30.47 Nominal appreciation/(depreciation) of Rouble ...... (5.5)% 3.4% 4.3% Real Rouble appreciation/(depreciation) ...... (2.7)% 8.8% 9.7%

Sources: CBR and Rosstat (Russian inflation rate and PPI) Our presentation currency is the U.S. Dollar. However, the functional currency of each of our entities is the currency of the primary economic environment in which the entity operates. In preparing our consolidated financial statements, transactions in currencies other than the entity’s functional currency are translated into functional currency rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Foreign currency differences arising in translation are recognised in the income statement. See ‘‘Note 3 to the 2012 Financial Statements’’. A decline in the value of the Rouble against the U.S. Dollar results in a translation loss when we translate our Rouble assets into U.S. Dollars for inclusion in our consolidated financial statements. Generally, our trade transactions with customers outside of Russia are denominated in U.S. Dollars or Euros, while domestic transactions in Russia are denominated in Roubles (though some Rouble- denominated contracts are indexed to the U.S. Dollar). A portion of our revenue is denominated in U.S. Dollars or Euros, most of our operating leases are denominated in U.S. Dollars and 65% of our total debt was denominated in U.S. Dollars as of 31 December 2012. For the year ended 31 December 2012, 53% of our revenue was denominated in U.S. Dollars or Euro, which serves as a natural hedge against certain foreign currency exchange risks arising from our U.S. Dollar-denominated operating expenses and debt. Since most of our debt is denominated in U.S. Dollars or Euros and a significant portion of our revenue is in Roubles, depreciation of the Rouble will increase the cost of repayment on our U.S. Dollar- and Euro-denominated indebtedness when expressed in Roubles. A Rouble depreciation against the U.S. Dollar would also lower the value of our Rouble-denominated assets in U.S. Dollar terms. Rouble depreciation would also lead to a decline in Russian imports as it becomes relatively more expensive for Russian consumers to purchase foreign products, which would likely have a negative effect on our intermodal and container businesses. In addition, the Russian economy has been characterised by high rates of inflation. According to Rosstat, inflation in Russia in 2012, 2011 and 2010 was 6.6%, 6.1% and 8.8%, respectively, as measured by the consumer price index and was 5.1%, 12.0% and 16.7%, respectively, as measured by the producer price index. The relatively high rate of inflation in Russia increases our Rouble-denominated costs, for example, our tariff payments, salary and utility costs, and reduces the value of our Rouble- denominated cash assets, such as our Rouble deposits, domestic debt instruments and accounts receivable. High Rouble inflation may also negatively impact the domestic demand for our products.

Seasonality Our operations are affected by seasonal factors including river and port transport seasonality, the summer shipping season in northern regions and consumer and construction market cycles. Generally, our volumes of cargo transported, as well as revenue, in the second half of the year tend to be higher than those in the first half. We typically experience lower transportation volumes and revenue in the first quarter of the year following the Christmas and New Year holidays and higher operating volumes and revenue in the second and third quarters of the year, when demand for transporting containerised cargo to river ports in Siberia increases, due to warmer temperatures before rivers begin to freeze. In addition, port transport can be disrupted during severe winters due to ice conditions that disrupt vessel arrival and departure schedules as well as the loading and unloading of cargo. However, the winter months tend to be a high season for coal transport due to heating needs. Our revenue is generally positively impacted in

94 the third and fourth quarters by increases in the retail industry, which is most active in the months leading up to the New Year and Christmas holidays. Throughout our operations, we attempt to schedule repairs and maintenance to the extent possible during off-peak seasons to maximise operations in the high season.

Recent Developments The following developments have occurred between 31 December 2012, the end of the last financial period for which our financial information has been published, and the date of this Offering Memorandum.

Credit facility with ZAO UniCredit Bank On 12 March 2013, Transgarant entered into a credit agreement with UniCredit Bank allowing borrowings of up to RUB300 million. As of 29 March 2013, the amount outstanding under the credit agreement was RUB280 million (approximately U.S.$9 million). The loan is secured by a pledge of rolling stock owned by Transgarant. The loan has a final maturity date of 12 November 2013. Transgarant is subject to a number of restrictions in relation to the loan, including on transactions related to the disposal or possibility of disposal (for example, via pledge) by Transgarant of property in an amount exceeding 25% of Transgarant’s balance sheet value without prior consent from UniCredit Bank.

Disposal of vessels in 2013 In the three months ended 31 March 2013, we sold four vessels, consisting of three general cargo vessels and one Ro-Ro vessel with a combined DWT of 26,100 tonnes for total consideration of U.S.$7 million, of which U.S.$1 million was received as prepayment in 2012 with the remaining amount received in 2013.

Current trading and prospects In the first three months of 2013, we continued to see significant growth in our container related business driven by the high demand for our services. Outside of containers, we have experienced weaker bulk and general cargo volumes across our divisions. Growth in our container related business was primarily driven by increases in intermodal transportation volumes in our Liner and Logistics Division and throughput in our Ports Division. Although our Rail Division has been negatively impacted by softness in the Russian rail market during the first three months of 2013, we expect Russian rail volumes and turnover to improve over the course of the year. In line with our strategy to continue downsizing and refocusing our Shipping Division, in addition to the disposals of vessels discussed above, we acquired two new vessels, which will serve on our Liner and Logistics Division’s routes, during the first three months of 2013.

95 Results of Operations for the years ended 31 December 2012 and 2011 Financial overview The following table sets forth the components of our profit for the years ended 31 December 2012 and 2011:

Year ended 31 December 2012 2011 (U.S.$ million) Income statement data Revenue ...... 1,197 1,029 Operating expenses ...... (793) (680) Gross profit before depreciation and amortization ...... 404 349 Depreciation and amortisation ...... (100) (82) Administrative expenses ...... (157) (133) Impairment loss on tangible fixed assets ...... (96) (47) Other income and expenses, net ...... (28) (5) Profit from operating activity ...... 23 82 Interest expense ...... (53) (45) Foreign exchange gain ...... 1 15 Other financial income, net ...... 5 1 Share of profit of equity accounted investees ...... 45 7 Profit before income tax ...... 21 60 Income tax expense ...... (38) (31) (Loss)/profit for the year ...... (17) 29 Attributable to: Owners of the Company ...... (20) 19 Non-controlling interest ...... 3 10

Revenue The following tables show the divisional breakdown of our revenue for the year ended 31 December 2012 and 2011, respectively:

Year ended 31 December 2012 Liner and Eliminations/ Ports Rail Logistics Shipping Corporate Adjustments Total (U.S.$ million) Revenue External sales ...... 133 343 622 99 ——1,197 Inter-division sales ...... 45 4 1 42 — (92) — Division revenue ...... 178 347 623 141 (92) 1,197

Year ended 31 December 2011 Liner and Eliminations/ Ports Rail Logistics Shipping Corporate Adjustments Total (U.S.$ million) Revenue External sales ...... 49 301 565 114 — 1,029 Inter-division sales ...... 28 7 2 45 — (82) — Division revenue ...... 77 308 567 159 — (82) 1,029

Revenues from inter-division sales represent sales between our divisions, rather than to third-party customers. Most inter-division sales are made to our Liner and Logistics Division, which purchases

96 services from our other divisions. In our Rail Division, Russkaya Troika also makes significant sales to our Liner and Logistics Division, though it is accounted for as our associate. Our total revenue increased 16% for the year ended 31 December 2012, to U.S.$1,197 million, compared to U.S.$1,029 million for the year ended 31 December 2011. For the year ended 31 December 2012, our Ports, Rail, Liner and Logistics and Shipping Divisions contributed U.S.$178 million, U.S.$347 million, U.S.$623 million and U.S.$141 million in revenue, respectively, before inter-division eliminations. The increase of U.S.$168 million in our consolidated revenue for the year ended 31 December 2012 was driven mainly by growth in our Ports and Liner and Logistics Divisions. Our Ports Division revenue increased by U.S.$101 million as a result of a U.S.$27 milllion increase in revenue from container handling at VKT and U.S.$74 million attributable to the Port of Vladivostok following its consolidation from 1 April 2012. Revenue in our Rail Division grew 13%, or U.S.$39 million, primarily due to an increase in rates for gondolas and for platforms that are increasingly used on block train operations. Our Liner and Logistics Division revenue increased U.S.$56 million primarily due to higher transportation volumes as well as freight rate growth. Revenue of our export-import lines grew 16% due to container volume growth of 27% in our China and Korea liner services. Revenue from domestic lines increased 22% due to the FML (Magadan) and FPKL (Petropavlovsk Kamchatskiy) lines, which experienced a substantial increase in general cargo volume. Intermodal transportation revenue increased due to an average freight rate growth of 16%. Revenues in our Shipping Division fell by U.S.$18 million due to a reduction in our fleet as well as a general decline in the shipping market.

Operating expenses The following table shows a breakdown of our operating expenses for the years ended 31 December 2012 and 2011:

Year ended 31 December % Change 2012 2011 2012/11 (U.S.$ million) Ports Division ...... 80 22 263.6% Rail Division ...... 144 141 2.1% Liner and Logistics Division ...... 529 474 11.6% Shipping Division ...... 133 129 3.1% Inter-Company eliminations ...... (93) (86) 8.1% Total operating expenses ...... 793 680 16.6%

Total operating expenses increased 16.6% for the year ended 31 December 2012, to U.S.$793 million, compared to U.S.$680 million for the year ended 31 December 2011, primarily as a result of an increase of intermodal and railway transportation volumes and the consolidation of the Port of Vladivostok. Operating expenses in our Ports Division increased 263.6% for the year ended 31 December 2012, to U.S.$80 million, principally due to U.S.$61 million attributable to the Port of Vladivostok following its consolidation from 1 April 2012. Operating expenses in our Rail Division increased 2.1% for the year ended 31 December 2012, to U.S.$144 million, primarily due a 6% increase in railway tariff expenses and a 30% increase in repair expenses due to increased numbers and costs of repairs, partially offset by a 21% decrease in operating lease expenses due a reduction in our leased in fleet. Operating expenses in our Liner and Logistics Division increased 11.6% for the year ended 31 December 2012, to U.S.$529 million, primarily due to an increase of U.S.$21 million attributable to increased rail cargo volumes, a U.S.$18 million increase in stevedoring expenses attributable to higher transportation volumes, a U.S.$8 million increase in railway tariffs to service providers and a U.S.$7 million increase in container shipping expenses. Operating expenses in our Shipping Division increased 3.1% for the year ended 31 December 2012, to U.S.$133 million, primarily due to an increase in chartering expenses.

97 Gross profit before depreciation and amortization As a result of the factors discussed above, our gross profit before depreciation and amortisation was U.S.$404 million and U.S.$349 million for the years ended 31 December 2012 and 2011, respectively.

Depreciation and amortisation The following table shows a breakdown of our depreciation and amortisation expenses, by division, for the years ended 31 December 2012 and 2011:

Year ended 31 December % Change 2012 2011 2012/11 (U.S.$ million) Ports ...... (15) (4) 275% Rail ...... (48) (42) 14.3% Liner and logistics ...... (13) (12) 8.3% Shipping ...... (22) (23) (4.3%) Corporate ...... (2) (1) 100% Total depreciation and amortisation expenses ...... (100) (82) 22.0%

Depreciation and amortisation increased 22.0% for the year ended 31 December 2012, to U.S.$100 million, compared to U.S.$82 million for the year ended 31 December 2011, primarily due to an increase in depreciation of our rolling stock and the consolidation of the Port of Vladivostok.

Administrative expenses The following table shows a breakdown of our administrative expenses for the years ended 31 December 2012 and 2011:

Year ended 31 December % Change 2012 2011 2012/11 (U.S.$ million) Salary and other staff related costs ...... 93 86 8.1% Professional fees ...... 21 8 162.5% Office rent ...... 8 8 0.0% Other administrative expenses ...... 35 31 12.9% Total administrative expenses ...... 157 133 18%

Our administrative expenses increased 18% for the year ended 31 December 2012, to U.S.$157 million, compared to U.S.$133 million for the year ended 31 December 2011, primarily due to a U.S.$13 million increase in our professional fees, reflecting professional fees paid in connection with the acquisition of an interest in FESCO by Summa and our consolidation of the Port of Vladivostok. In addition, our other administrative fees increased 12.9% for the year ended 31 December 2012 as a result of our consolidation of the Port of Vladivostok.

Impairment loss on tangible fixed assets, net The following table shows a breakdown of our impairment loss on tangible fixed assets for the years ended 31 December 2012 and 2011:

Year ended 31 December % Change 2012 2011 2012/11 (U.S.$ million) Fleet impairment charge ...... (96) (42) 128.6% Impairment of other fixed assets and assets under construction ...... — (5) — Total impairment loss on tangible fixed assets ...... (96) (47) 104.3%

98 We recorded an impairment loss of U.S.$96 million on tangible fixed assets for the year ended 31 December 2012 as a result of the revaluation of certain of our vessels, which was the result of continued downward market fluctuations in the value of shipping assets in 2012. We recorded an impairment loss of U.S.$47 million on tangible fixed assets for the year ended 31 December 2011, primarily due to a charge in fleet impairment of U.S.$42 million, which was the result of downward market fluctuations in the value of shipping assets in 2011, as well as a U.S.$5 million impairment of other fixed assets and assets under construction relating to a port project under construction in Petropavlosk-Kamchatsky, Russia. See ‘‘Note 3(b) to the 2012 Financial Statements’’ for a discussion of our impairment policy for non-financial assets.

Other income and expenses Our other income and expenses, which primarily represents income and expenses relating to our non-core business activities, was U.S.$28 million in expenses for the year ended 31 December 2012, compared to U.S.$5 million in expenses for the year ended 31 December 2011. This increase in other expenses in 2012 was the result of a U.S.$26 million breakup fee paid after the proposed sale of Transgarant to NefteTransService was not completed.

Profit from operating activity As a result of the factors discussed above, our profit from operating activity was U.S.$23 million and U.S.$82 million for the years ended 31 December 2012 and 2011, respectively.

Interest expense The following table shows a breakdown of our interest expense for the years ended 31 December 2012 and 2011:

Year ended 31 December % Change 2012 2011 2012/11 (U.S.$ million) Interest on loans ...... 35 26 34.6% Finance lease—interest expense ...... 17 17 0.0% Fees and other interest expenses ...... 1 2 (50%) Total interest expenses ...... 53 45 17.8%

Our interest expense increased for the year ended 31 December 2012 by 17.8%, to U.S.$53 million, from U.S.$45 million for the year ended 31 December 2011. This increase was largely due to an increase in our debt in the year ended 31 December 2012.

Foreign exchange gain Our foreign exchange gain was U.S.$1 million for the year ended 31 December 2012, compared to U.S.$15 million for the year ended 31 December 2011, primarily due to the strengthening of the Rouble in 2011 and adjustments arising on translation of the U.S. Dollar-denominated portion of our debt in the companies where the Rouble is the functional currency.

Other financial income, net The following table shows a breakdown of our other financial income, net for the years ended 31 December 2012 and 2011:

Year ended 31 December % Change 2012 2011 2012/11 (U.S.$ million) Interest income ...... 10 12 (16.7%) Changes in fair value of financial instruments ...... (4) (11) (63.6%) Other expenses ...... (1) —— Total other finance income, net ...... 5 1 400%

99 Our other financial income, net increased to U.S.$5 million for the year ended 31 December 2012, compared to U.S.$1 million for the year ended 31 December 2011. The increase was primarily attributable to decreased losses arising from the change in fair value of financial instruments, which reflected favourable foreign exchange rates in relation to our financial instruments as well as higher interest rates obtained in 2012 on our interest-bearing deposits, partially offset by lower deposit balances.

Share of profit of equity accounted investees Our share of profit of equity accounted investees, which included our share in the results of the Port of Vladivostok (until 31 March 2012), TransContainer (from 1 January 2012), Russkaya Troika and other FESCO associated companies increased by 542.9%, to U.S.$45 million for the year ended 31 December 2012, from U.S.$7 million for the year ended 31 December 2011, largely due to TransContainer becoming our associate in 2012.

Profit before income tax As a result of the factors discussed above, our profit before income tax was U.S.$21 million and U.S.$60 million for the years ended 31 December 2012 and 2011, respectively.

Income tax expense The following table shows a breakdown of our income tax expense for the years ended 31 December 2012 and 2011:

Year ended 31 December % Change 2012 2011 2012/11 (U.S.$ million) Current tax expense Current period ...... 49 30 63.3% Adjustment for prior periods ...... —— —% 49 30 63.3% Deferred tax expense Origination and reversal of temporary differences ...... (11) 1 — (11) 1 — Total income tax expense ...... 38 31 22.6%

Our income tax expense increased 22.6%, to U.S.$38 million for the year ended 31 December 2012, compared to U.S.$31 million for the year ended 31 December 2011. Our current income tax expense increased 63.3%, to U.S.$49 million for the year ended 31 December 2012, compared to U.S.$30 million for the year ended 31 December 2011 due to an increase in our taxable profit. Our deferred tax expense decreased due to a reversal of temporary differences between the tax value of our assets and liabilities and their accounting value following a sale of vessels in 2012.

(Loss)/profit of the year As a result of the factors discussed above, our loss for the year was U.S.$17 million for the year ended 31 December 2012, compared to a profit for the year of U.S.$29 million for the year ended 31 December 2011.

100 Results of Operations for the years ended 31 December 2011 and 2010 Financial overview The following table sets forth the components of our profit for the year for the years ended 31 December 2011 and 2010:

Year ended 31 December 2011 2010 (U.S.$ million) Income statement data Revenue ...... 1,029 801 Operating expenses ...... (680) (544) Gross profit before depreciation and amortization ...... 349 256 Depreciation and amortisation ...... (82) (73) Administrative expenses ...... (133) (99) Impairment (loss)/reversal on tangible fixed assets, net ...... (47) 39 Loss on disposal of tangible fixed assets ...... — (5) Bad debt charge ...... (6) (4) Other income ...... 1 7 Profit from operating activity ...... 82 121 Interest expense ...... (45) (54) Foreign exchange gain/(loss), net ...... 15 (2) Result on disposal of investments ...... — 420 Other financial income/(expenses), net ...... 1 (14) Share of profit of equity accounted investees ...... 7 6 Profit before income tax ...... 60 477 Income tax expense ...... (31) (21) Profit for the year ...... 29 456 Attributable to: Owners of the Company ...... 19 449 Non-controlling interest ...... 10 7

Revenue The following tables show the divisional breakdown of our revenue for the years ended 31 December 2011 and 2010:

Year ended 31 December 2011 Liner and Eliminations/ Ports Rail Logistics Shipping Corporate Adjustments Total (U.S.$ million) Revenue External sales ...... 49301 565 114 ——1,029 Inter-division sales ...... 28 7 2 45 — (82) — Division revenue ...... 77 308 567 159 — (82) 1,029

Year ended 31 December 2010 Liner and Eliminations/ Ports Rail Logistics Shipping Corporate Adjustments Total (U.S.$ million) Revenue External sales ...... 34 206 428 132 ——801 Inter-division sales ...... 24 3 2 28 — (57) — Division revenue ...... 59 209 430 160 — (57) 801

101 Revenue from our Ports Division increased U.S.$19 million or 32.8% before intercompany eliminations, from U.S.$59 million for the year ended 31 December 2010 to U.S.$77 million for the year ended 31 December 2011 due to the expansion of the Group’s container handling business as well as increased revenue from storage services as a result of delays at the Vladivostok customs clearance post in 2011. Revenue from container handling operations was affected by a growth of container volumes and change in the mix of containers handled. Revenue in our Rail Division increased U.S.$99 million, or 47.4%, from U.S.$209 million for the year ended 31 December 2010 to U.S.$308 million for the year ended 31 December 2011, reflecting increased transportation tariffs, reduced downtime and more efficient use of railcars, as well as the expansion of the railcar fleet through our acquisition of MetizTrans Group (971 railcars added) and acquisition of railcars through our investment programme (1,140 railcars added). The number of railcar-days-in-operation increased by approximately 2% in 2011, and marginal income (revenue less variable costs) increased from RUB719 per railcar-days-in-operation to RUB1,170 per railcar-days-in-operation. This growth of marginal income resulted from increasing use of higher-margin block train operations as well as recovering volume demand for transportation services that in turn led to increased prices for our services while utilisation of our rolling stock remained constant. Revenue in our Liner and Logistics Division increased U.S.$137 million, or 31.9%, from U.S.$430 million for the year ended 31 December 2010 to U.S.$567 million for the year ended 31 December 2011, resulting from increases in both volumes transported and freight rates. Revenue in export-import lines grew 7% per TEU, due to an increase in cargo volumes driven by container volume growth in our China and Korea services. Revenue from domestic lines also increased due to the FML (Magadan) line, which experienced a 31% increase in cargo volume. In addition, intermodal lines container handling volumes expanded 30% in 2011. Revenue increase in the Liner and Logistics Division in 2011 also reflected higher oil prices and stevedoring rates paid by us, which are typically passed through to customers, thus leaving margins unaffected. Revenue from our Shipping Division remained largely unchanged for the year ended 31 December 2011 compared to the year ended 31 December 2010 as the size of our fleet remained unchanged while market conditions remained weak. We reduced our fleet in 2010 by two vessels, and added two vessels in 2011.

Operating expenses The following table shows a breakdown of our operating expenses for the years ended 31 December 2011 and 2010:

Year ended 31 December % Change 2011 2010 2011/10 (U.S.$ million) Ports Division ...... 22 20 10.0% Rail Division ...... 141 131 7.6% Liner and Logistics Division ...... 474 336 41.1% Shipping Division ...... 129 116 11.2% Inter-Company eliminations ...... (86) (59) 45.8% Total operating expenses ...... 680 544 25.0%

Our total operating expenses increased by 25.0% in 2011, to U.S.$680 million, compared to U.S.$544 million for the year ended 31 December 2011, primarily due to an increase in expenses on railway infrastructure tariffs and transportation services of 38.8%, in line with the increase in our revenues to U.S.$444 million for the year ended 31 December 2011 from U.S.$320 million for the year ended 31 December 2010. Payroll costs increased in part due to our acquisition of MetizTrans Group in the second half of 2011, as well as the fact that performance bonuses were paid in 2011 to our employees, but were not in 2010. Our operating lease expenses decreased due to a significant decline in leased railcars, from 4,090 in 2010 to 1,473 in 2011. Operating expenses in our Ports Division increased by 10.5%, to U.S.$21 million for the year ended 31 December 2011, compared to U.S.$19 million for the year ended 31 December 2010 before intra-

102 group/corporate eliminations. The increase in operating expenses was mainly due to an increase in turnover in 2011 compared to 2010, as well as higher payroll and maintenance expenses. Operating expenses in our Rail Division increased by 7.6%, to U.S.$141 million for the year ended 31 December 2011, compared to U.S.$131 million for the year ended 31 December 2010 before intra- group/corporate eliminations, primarily due the acquisition of Metiztrans Group (see ‘‘—Changes in Our Structure from 1 January 2010 to 31 December 2012’’), a lower average RUB/U.S.$ exchange rate in 2011, which resulted in an increase in certain costs denominated in U.S. Dollars when translated into Roubles, an increase of 9% in repair expenses and an increase of 28% in the infrastructure tariff. Operating expenses in our Liner and Logistics Division increased by 41.1%, to U.S.$474 million for the year ended 31 December 2011, compared to U.S.$336 million for the year ended 31 December 2010 before intra-group/corporate eliminations, primarily due to a U.S.$78 million increase in cargo volumes and tariffs of service providers, a U.S.$15 million increase in container expenses and a U.S.$17 million increase in charter-related expenses due to growth of charter fees paid and changes in fleet placement. Operating expenses in the Shipping Division increased by 11.2% to U.S.$129 million for the year ended 31 December 2011, compared to U.S.$116 million for the year ended 31 December 2010 before intra- group/corporate eliminations, primarily due to increased payroll payments to the crews (including both planned raises and payroll tax rate increase), increased crew travel expenses and the deployment of two newly-built vessels, FESCO Saratov and FESCO Simferopol in 2011. An additional driver of operational expenses in our Shipping Division was the increased expense on purchases of bunkers, both generally and those related to changes in fleet structure (time-charter vs. spot-charter of vessels).

Gross profit before depreciation and amortisation As a result of the factors discussed above, our gross profit before depreciation and amortisation was U.S.$349 million and U.S.$256 million for the years ended 31 December 2011 and 2010, respectively.

Depreciation and amortisation The following table shows a breakdown of our depreciation and amortisation expenses, by division, for the years ended 31 December 2011 and 2010:

Year ended 31 December % Change 2011 2010 2011/10 (U.S.$ million) Ports Division ...... (4) (3) 33.3% Rail Division ...... (42) (32) 31.3% Liner and Logistics Division ...... (12) (11) 9.1% Shipping Division ...... (23) (25) (8.0%) Corporate Division ...... (1) (1) — Total depreciation and amortisation expenses ...... (82) (73) 12.3%

Depreciation and amortisation increased by 12.3%, to U.S.$82 million for the year ended 31 December 2011, compared to U.S.$73 million for the year ended 31 December 2010. Most of our property, plant and equipment in 2011 and 2010 was allocated to our Shipping and Rail Divisions, and accordingly the majority of our depreciation expenses is attributable to those divisions. Depreciation and amortisation in our Rail Division increased 31.3% from U.S.$32 million for the year ended 31 December 2010 to U.S.$42 million for the year ended 31 December 2011, which reflected an increase of our own rolling stock of 31% and a decrease in leased rolling stock of 64%. Transgarant’s rolling stock increased 6% (16,579 railcars); its rolling stock structure as of 31 December 2011 included 91% own and 9% leased railcars (as of 31 December 2010, 74% and 26%, respectively). Structural changes of our rolling stock included the transition of 1,725 railcars from operating to financial leases, 1,140 railcars acquired according to our investment program, 971 railcars acquired through the MetizTrans Group acquisition and the disposal of 241 railcars at the end of their useful lives.

103 Administrative expenses The following table shows a breakdown of our administrative expenses for the years ended 31 December 2011 and 2010:

Year ended 31 December % Change 2011 2010 2011/10 (U.S.$ million) Salary and other staff related costs ...... 86 55 56.4% Professional fees ...... 8 12 (33.3%) Office rent ...... 8 6 33.3% Other administrative expenses ...... 31 25 24.0% Total administrative expenses ...... 133 99 34.3%

Our administrative expenses increased 34.3% for the year ended 31 December 2011, to U.S.$133 million, compared to U.S.$99 million for the year ended 31 December 2010, primarily due to an increase in salary expenses, bonuses and other staff related costs by 56.4%, to U.S.$86 million for the year ended 31 December 2011, compared to U.S.$55 million for the year ended 31 December 2010. This increase was related to higher staff salaries and a change in the timing of bonus payments to our administrative staff. Historically, such bonuses were paid during the first quarter of the year following the year of bonus accrual. For example, bonuses for administrative staff employed in 2010 were paid and accounted for in the first quarter of 2011. However, in 2011, we changed this practice, paying and accounting for administrative staff bonuses for 2011 in the fourth quarter of 2011. Thus, two annual bonus payments were paid in 2011. The growth of our business and acquisition of new entities also contributed to the increase in salary and bonus payments. Other administrative expenses increased 24.0% for the year ended 31 December 2011, to U.S.$31 million, compared to U.S.$25 million for the year ended 31 December 2010, primarily due to the acquisition of MetizTrans Group. Salary and other staff-related costs increased due to changes in Russian legislation which introduced an 8% increase in mandatory payments by employers to the state social insurance, medical and pension funds in Russia for each employee. Finally, in 2011 FESCO incurred additional expenses on charity and social responsibility, spending U.S.$1 million more than in 2010. These increases were somewhat offset by a decrease in professional fees for the year ended 31 December 2011 by 33.3%, to U.S.$8 million, compared to U.S.$12 million for the year ended 31 December 2010.

Impairment (loss)/reversal on tangible fixed assets, net The following table shows a breakdown of our impairment loss and reversal of impairment on tangible fixed assets for the years ended 31 December 2011 and 2010:

Year ended 31 December % Change 2011 2010 2011/10 (U.S.$ million) Fleet impairment (charge)/reversal ...... (42) 73 — Impairment of vessels under construction ...... — (34) (100%) Impairment of other fixed assets and assets under construction ...... (5) —— Total impairment (loss)/reversal on tangible fixed assets ...... (47) 39 —

We recorded an impairment loss of U.S.$47 million on tangible fixed assets for the year ended 31 December 2011, primarily due to a charge in fleet impairment of U.S.$42 million, resulting from market-driven declines in the value of our shipping assets in 2011, as well as a U.S.$5 million impairment of other fixed assets and assets under construction relating to a port project under construction in Petropavlosk-Kamchatsky, Russia. Our fleet was revalued as at 31 December 2010 by independent professional brokers with reference to market transactions with comparable vessels, resulting in a reversal of impairment charges. See ‘‘Note 28 to the 2011 Financial Statements’’. U.S.$73 million of the resulting revaluation increase was

104 recognised in the income statement, but was partially offset by an impairment of U.S.$34 million of vessels under construction for the year ended 31 December 2010.

Loss on disposal of tangible fixed assets We recorded a loss on disposal of tangible fixed assets of U.S.$0.3 million for the year ended 31 December 2011, and U.S.$5 million for the year ended 31 December 2010 primarily as a result of a loss on the disposal of certain fleet assets in both years, though in 2011 this loss was largely offset by a gain on disposal of other fixed assets.

Bad debt charge Our bad debt charge increased by 50% to U.S.$6 million for the year ended 31 December 2011, compared to U.S.$4 million for the year ended 31 December 2010, primarily due to an increase in overdue accounts receivable in 2011.

Other income Other income consists of certain non-core income-producing sources, such as property leasing, insurance compensation and auxiliary fleet services. For the year ended 31 December 2011, our other income decreased by 85.7% to U.S.$.1 million, compared to U.S.$7 million for the year ended 31 December 2010, primarily because in 2010, we received one-off insurance compensation claims relating to an accident in the amount of U.S.$5 million that were accounted for in other income.

Profit from operating activity As a result of the factors discussed above, our profit from operating activity was U.S.$82 million and U.S.$121 million for the years ended 31 December 2011 and 2010, respectively.

Interest expense Our interest expense decreased by 16.6%, to U.S.$45 million for the year ended 31 December 2011, compared to U.S.$54 million for the year ended 31 December 2010. The decrease was attributable to a restructuring of our debt portfolio in 2010, which lowered our overall debt levels, the effects of which benefited us in 2011, as well as a general decrease in our average interest rates in 2011, reflecting decreased interest rates in our variable-rate borrowings in line with changes in the overall interest rate environment.

Foreign exchange gain/(loss) For the year ended 31 December 2011, we recorded a foreign exchange gain of U.S.$15 million, compared to a foreign exchange loss of U.S.$2 million for the year ended 31 December 2010. The foreign exchange gain recorded in 2011 was primarily related to the devaluation of certain Transgarant loans denominated in U.S. Dollars as a result of the strengthening of the Rouble against the U.S. Dollar in the first half of 2011. The foreign exchange loss in 2010 was largely due to the appreciation of the U.S. Dollar against the Rouble at the end of 2010 and the consequent revaluation of U.S. Dollar-denominated loans of Transgarant and VKT.

Result on disposal of investments We recorded a U.S.$420 million gain on disposal of investments, as a result of the disposal of NCC Group Limited and Ealingwood Limited in 2010. The gain on this disposal significantly affected our profit for the year ended 31 December 2010.

105 Other financial income/(expenses), net The following table shows a breakdown of our other financial income and expenses, net for the years ended 31 December 2011 and 2010:

Year ended 31 December % Change 2011 2010 2011/10 (U.S.$ million) Interest income ...... 12 7 71.4% Changes in fair value of financial instruments ...... (11) (20) (45.0%) Other expenses ...... — (1) 100% Other financial income/(expenses), net ...... 1 (14) —

For the year ended 31 December 2011, our other financial income, net was U.S.$1 million, compared to U.S.$14 million in other financial expenses, net for the year ended 31 December 2010. The net expense in 2010 was primarily caused by a U.S.$20 million decrease in the fair value of financial instruments, based on an independent valuation of our interest rate hedging swaps. In addition, our interest income increased 71.4%, to U.S.$12 million for the year ended 31 December 2011, compared to U.S.$7 million for the year ended 31 December 2010, due to growth in the cash balances in our deposit accounts with banks as a result of increased cash generated from our businesses as well as the sale of our stake in NCC. See ‘‘—Changes in Our Structure from 1 January 2010 to 31 December 2012—Divestment of NCC Group Limited’’.

Share of profit of equity accounted investees Our share of profit of equity accounted investees increased by 16.6%, to U.S.$7 million for the year ended 31 December 2011, compared to U.S.$6 million for the year ended 31 December 2010, primarily as a result of an increase in the share of results of Russkaya Troika, which was largely offset by a decrease in the share of results of the Port of Vladivostok.

Profit before income tax As a result of the factors discussed above, our profit before income tax was U.S.$60 million and U.S.$477 million for the years ended 31 December 2011 and 2010, respectively.

Income tax expense The following table shows a breakdown of our income tax expense for the years ended 31 December 2011 and 2010:

Year ended 31 December % Change 2011 2010 2011/10 (U.S.$ million) Current tax expense Current period ...... 30 21 42.9% Adjustment for prior periods ...... — (1) — 30 19 57.9% Deferred tax expense Origination and reversal of temporary differences ...... 1 1 — Total income tax expense ...... 31 21 47.6%

Our effective income tax rate was 51.6% in 2011 and 4.4% in 2010. Our income tax expense increased by 47.6%, to U.S.$31 million for the year ended 31 December 2011, compared to U.S.$21 million for the year ended 31 December 2010. Though our profit before tax decreased in 2011, the taxable profit of our Russian companies increased, thus raising the overall income tax we paid in 2011. In addition, we recorded a non-taxable U.S.$420 million gain on disposal of investments in the year ended 31 December 2010 as a result of the disposal of NCC Group Limited and Ealingwood Limited.

106 Profit of the year As a result of the factors discussed above, our profit for the year was U.S.$29 million and U.S.$456 million for the years ended 31 December 2011 and 2010, respectively.

Liquidity and Capital Resources We are highly leveraged and have significant debt service obligations. We plan to finance budgeted capital expenditures and interest expense primarily from cash flows from operating activities, and subsequent to the Offering intend to reduce our indebtedness where possible. In addition to cash flows from operating activities, we have historically used short- and long-term borrowings, including borrowings by our subsidiaries and on a secured basis to fund capital expenditures. See ‘‘Description of Certain Indebtedness’’ and ‘‘Risk Factors—Risks Relating to the Notes, Our Indebtedness and Our Structure’’.

Cash flows for the years ended 31 December 2012, 2011 and 2010 The following table shows our cash flows for the years ended 31 December 2012, 2011 and 2010:

Year ended 31 December 2012 2011 2010 (U.S.$ million) Cash flows from operating activities (Loss)/Profit for the year ...... (17) 29 456 Adjustments for: Depreciation and amortisation ...... 100 82 73 Impairment losses/(reversal) ...... 96 47 (38) Loss on disposal of tangible fixed assets ...... 2 — 5 Foreign exchange differences ...... (1) (15) 3 Net finance costs/(income) ...... 48 44 (352) Share of profit of equity accounted investees ...... (45) (7) (6) Income tax expense ...... 38 30 21 Share options (release)/expense ...... —— 3 Other income and expense ...... (8) 3 — Cash from operating activities before changes in working capital and provisions ...... 213 213 165 Change in inventories ...... 1 (3) (3) Change in trade and other receivables ...... (10) (22) (23) Change in trade and other payables ...... 19 18 11 Cash flows from operations before income taxes paid ...... 223 206 150 Incomes tax paid ...... (54) (34) (15) Income tax received ...... — 6 Cash flows from operating activities ...... 169 172 141

107 Year ended 31 December 2012 2011 2010 (U.S.$ million) Cash flows from investing activities Expenditure on vessels under construction ...... (9) (25) (37) Refund from cancellation of construction contract ...... — 125 Expenditure on non-current assets ...... (1) —— Expenditure on other fixed assets ...... (48) (110) (53) Expenditure on drydocking ...... (7) (8) (9) Proceeds on disposal of fleet ...... 186 5 115 Proceeds on disposal of other fixed assets ...... 26 4 2 Acquisition of equity-accounted investee ...... (40) (5) (2) Other investments acquired ...... (1) (106) (139) Acquisition of subsidiaries, net of cash acquired ...... 18 (45) — Prepayments for investments ...... (2) (293) — Proceeds on sale of investments ...... — 1 869 Dividends received ...... 10 2 3 Long-term loans issued ...... (540) (6) — Short-term loans/investments received ...... 11 — (3) Finance lease received ...... 2 1 1 Interest received ...... 12 11 5 Net cash (used in)/generated from investing activities ...... (383) (573) 779 Cash flows from financing activities Proceeds from borrowings ...... 588 501 280 Repayment of borrowings ...... (411) (345) (650) Finance charges ...... (53) (46) (58) Financial instruments liability paid ...... (32) (10) (10) Decrease in overdraft ...... ——(2) Dividends paid ...... — (8) (3) Proceeds on sale of treasury shares ...... 114 —— Acquisition of non-controlling interests ...... — (4) — Net cash generated from/(used in) financing activities ...... 206 88 (441) Effect of exchange rate fluctuations on cash and cash equivalents ...... 8 (11) (4) Net (decrease)/increase in cash and cash equivalents ...... — (324) 474 Cash and cash equivalents at 1 January ...... 232 556 82 Cash and cash equivalents at 31 December ...... 232 232 556

Cash flows from operating activities For the year ended 31 December 2012, cash flows from operating activities decreased by 1.8%, to U.S.$169 million, compared to U.S.$172 million for the year ended 31 December 2011. We reported a loss for the year of U.S.$17 million for the year ended 31 December 2012, compared with a profit for the year of U.S.$29 million for the year ended 31 December 2011. See ‘‘—Results of Operations for the years ended 31 December 2012 and 2011—(Loss)/profit for the year’’. Our cash flows from operating activities before changes in working capital and provisions remained unchanged at U.S.$213 million for the years ended 31 December 2012 and 2011. Among working capital items, changes in trade and other receivables negatively affected our cash flows by U.S.$10 million for the year ended 31 December 2012, compared with U.S.$22 million for the year ended 31 December 2011. Our income tax paid also increased by 58.8%, to U.S.$54 million for the year ended 31 December 2012, compared to U.S.$34 million for the year ended 31 December 2011. See ‘‘—Results of Operations for the years ended 31 December 2012 and 2011—Income tax expense’’. For the year ended 31 December 2011, cash flows from operating activities increased by 22.0%, to U.S.$172 million, compared to U.S.$141 million for the year ended 31 December 2010. Although profit for the year decreased 93.6% for the year ended 31 December 2011, to U.S.$29 million, compared to U.S.$456 million for the year ended 31 December 2010, increased adjustments to cash flows from operating activities were made in 2011 for depreciation and amortisation, which increased by 12.3%, to

108 U.S.$82 million for the year ended 31 December 2011, compared to U.S.$73 million for the year ended 31 December 2010, as well as for impairment losses of U.S.$47 million for the year ended 31 December 2011, compared to a reversal of impairment of U.S.$38 million for the year ended 31 December 2010. Income taxes paid by us also increased 126.7% for the year ended 31 December 2011, to U.S.$34 million, compared to U.S.$15 million for the year ended 31 December 2010. See ‘‘—Results of Operations for the years ended 31 December 2012 and 2011—Income tax expense’’.

Net cash (used in)/generated from investing activities For the year ended 31 December 2012, net cash used in investing activities was U.S.$383 million, compared to U.S.$573 million net cash used for the year ended 31 December 2011. The decrease in net cash used was primarily due to long-term loans issued to the Sponsors in connection with the acquisition of FESCO (see ‘‘Use of Proceeds’’) of U.S.$540 million for the year ended 31 December 2012, compared to a total of U.S.$6 million in short-term loans issued for the year ended 31 December 2011. This increase was somewhat offset by lower prepayments of investments of U.S.$2 million for the year ended 31 December 2012, compared to U.S.$293 million for the year ended 31 December 2011, due to prepaid amounts for the acquisitions of the Port of Vladivostok and TransContainer in 2011. In addition, our proceeds on the disposal of our fleet were U.S.$186 million for the year ended 31 December 2012, compared to U.S.$5 million for the year ended 31 December 2011, reflecting an increased number of vessels disposed in 2012. For the year ended 31 December 2011, net cash used in investing activities was U.S.$573 million, compared to U.S.$779 million net cash generated for the year ended 31 December 2010. This difference reflects net proceeds of sale of investments of U.S.$869 million for the year ended 31 December 2010, a result of the sale of NCC Group Limited and Ealingwood Limited, a one-off transaction. In addition, prepayments for investments for the year ended 31 December 2011 were U.S.$293 million, which represented prepayment for 2.6% of the share capital of TransContainer and 100% of the shares of Transportnaya Companiya CJSK (in connection with our acquisition of control over the Port of Vladivostok). See ‘‘Note 11 to the 2011 Financial Statements’’. Expenditures on other fixed assets, which include buildings and infrastructure, plants, machinery and assets under construction, were U.S.$110 million for the year ended 31 December 2011, compared to U.S.$53 million for the year ended 31 December 2010, as a result of an increase in capital expenditures related to the rolling stock of Transgarant and the development of the Vladivostok Container Terminal in the year ended 31 December 2011. Acquisitions of subsidiaries, net of cash acquired also represented U.S.$45 million for the year ended 31 December 2011, as the result of the acquisition of 100% of the shares of MetizTrans, Investconsulting LLC and TEK MetizTrans in July 2011. See Note 30 to the 2011 Financial Statements.

Net cash generated from/(used in) financing activities For the year ended 31 December 2012, net cash generated from financing activities was U.S.$206 million, compared to U.S.$88 million net cash generated for the year ended 31 December 2011. The increase was primarily due to increased proceeds from borrowings of U.S.$588 million for the year ended 31 December 2012, compared to U.S.$501 million for the year ended 31 December 2011, due to the financing of the acquisition of FESCO in 2012. In addition, proceeds from sale of treasury shares of U.S.$114 million contributed positively to our net cash generated from financing activities for the year ended 31 December 2012. For the year ended 31 December 2011, net cash generated from financing activities was U.S.$88 million, compared to U.S.$441 million used in financing activities for the year ended 31 December 2010. This difference was largely due to an increase in proceeds of borrowings of 78.9%, to U.S.$501 million, compared to U.S.$280 million for the year ended 31 December 2010, as result of increased investments in rolling stock and the construction of new buildings. In addition, for the year ended 31 December 2011, cash used for repayments of borrowings decreased 46.9%, to U.S.$345 million, compared to U.S.$650 million for the year ended 31 December 2010. The high amount of repayments in 2010 was due to deleveraging which was undertaken to strengthen our balance sheet. The source of cash for deleveraging was the disposal of our stake in NCC for net cash consideration of U.S.$870 million.

109 Trade working capital The following tables show our trade working capital, defined as inventories and accounts receivables less accounts payable, as of 31 December 2012, 2011 and 2010:

As of 31 December 2012 2011 2010 (U.S.$ million) Inventories ...... 26 25 21 Accounts receivable ...... 190 178 147 Accounts payable ...... (147) (128) (98) Total trade working capital ...... 69 75 70

Our trade working capital decreased 8.0%, to U.S.$69 million as of 31 December 2012, compared to U.S.$75 million as of 31 December 2011. The decrease was primarily caused by an increase of 14.8% in accounts payable as of 31 December 2012, which increased to U.S.$147 million, compared to U.S.$128 million as of 31 December 2011, in line with the growth in the Group’s revenue, somewhat offset by an increase in an accounts receivable, which increased 6.7% as of 31 December 2012 to U.S.$190 million, compared to U.S.$178 million as of 31 December 2011, mainly due to the consolidation of the Port of Vladivostok in 2012. Our trade working capital increased 8.7%, to U.S.$75 million as of 31 December 2011, compared to U.S.$70 million as of 31 December 2010, primarily due to an increase of 21% in accounts receivable as of 31 December 2011, which increased to U.S.$178 million, compared to U.S.$147 million as of 31 December 2010, due to an increase in revenue in our Rail and Liner and Logistics Divisions, somewhat offset by an increase in accounts payable as of 31 December 2011 of 29.3%, to U.S.$128 million, compared to U.S.$98 million as of 31 December 2010, primarily due to construction works at the Khabarovsk Terminal.

Capital expenditures Our capital expenditures are divided into maintenance capital expenditures, which are cash investments in fixed assets aimed at sustaining our current asset base and the replacement of our depreciated assets, and growth capital expenditures, which are cash expenditures aimed at expanding our current asset base. We expect future capital expenditures in our Ports Division to relate primarily to efforts to increase container throughput capacity and bunkering operations. We expect capital expenditures in our Rail Division will primarily focus on maintenance expenditures to replace wheelsets and perform capital repairs, as well as growth capital expenditures for the acquisition of new railcars. In our Shipping Division, maintenance capital expenditures will relate to drydocking maintenance while we expect growth capital expenditures to relate to the acquisition of ice class vessels in 2013. We do not expect to make significant capital expenditures in our Liner and Logistics Division in the next three years. In 2013, we expect our capital expenditures to be approximately U.S.$60 million (of which approximately U.S.$25-30 million is expected to be maintenance capital expenditures), which is consistent with previous years. The table below sets forth our maintenance and growth capital expenditures for the years indicated:

Year ended 31 December 2012 2011 2010 (U.S.$ (U.S.$ (U.S.$ Capital Expenditure million) (%) million) (%) million) (%) Maintenance ...... 23 34.8% 16 11.3% 15 15.3% Growth ...... 43 65.2% 126 88.7% 83 84.7% Total ...... 66 100% 142 100% 98 100%

Ports Division In 2012, 2011 and 2010, capital expenditures in the Ports Division totalled U.S.$12 million, U.S.$10 million and U.S.$10 million, respectively.

110 The table below sets forth our maintenance and growth capital expenditures in the Ports Division for the years indicated:

Year ended 31 December 2012 2011 2010 (U.S.$ (U.S.$ (U.S.$ Capital Expenditure million) (%) million) (%) million) (%) Maintenance ...... 9 75.0% 1 10.0% 1 10.0% Growth ...... 3 25.0% 9 90.0% 9 90.0% Total ...... 12 100% 10 100% 10 100%

In years ended 31 December 2012, 2011 and 2010, substantially all of our capital expenditures in our Ports Division was spent on the acquisition of fixed assets at VKT, and, from April 2012, at the Port of Vladivostok.

Rail Division In 2012, 2011 and 2010, capital expenditures in the Rail Division totalled U.S.$33 million, U.S.$93 million and U.S.$21 million, respectively. The table below sets forth a breakdown of maintenance and growth capital expenditures in the Rail Division for the years indicated:

Year ended 31 December 2012 2011 2010 (U.S.$ (U.S.$ (U.S.$ Capital Expenditure million) (%) million) (%) million) (%) Maintenance ...... 3 9.1% 3 3.2% 1 4.8% Growth ...... 30 90.9% 90 96.8% 20 95.2% Total ...... 33 100% 93 100% 21 100%

A significant portion of capital expenditures in the Rail Division between 2010 and 2012 was spent on the purchase of additional rolling stock. In the near future, we do not expect to make significant purchases of additional rolling stock comparable in scale to our purchases in 2011.

Liner and Logistics Division In 2012, 2011 and 2010, capital expenditures in the Liner and Logistics Division totalled U.S.$2 million, U.S.$3 million and U.S.$3 million, respectively. Most of the capital expenditures were allocated to the acquisition of fixed assets, such as containers and trucks.

Shipping Division In 2012, 2011 and 2010, capital expenditures in the Shipping Division totalled U.S.$17 million, U.S.$36 million and U.S.$64 million, respectively. The table below sets forth a breakdown of maintenance and growth capital expenditures in the Shipping Division for the years indicated:

Year ended 31 December 2012 2011 2010 (U.S.$ (U.S.$ (U.S.$ Capital Expenditure million) (%) million) (%) million) (%) Maintenance ...... 8 47.1% 9 25.0% 10 15.6% Growth ...... 9 52.9% 27 75.0% 54 84.4% Total ...... 17 100% 36 100% 64 100%

In 2012, 52.9% of our capital expenditures were spent on the construction of two new dry bulk ships. In 2011 and 2010, 75.0% and 84.4% of capital expenditures were spent on growth-oriented projects, which mostly included fleet construction-in-progress expenses. In 2011, construction-in-progress expenses were primarily related to three dry bulk ships which were contracted in 2007 during a period of high

111 charter rates in the dry bulk market. In 2010, we invested U.S.$17 million on the acquisition of the fishing facility OOO Terminals FESCO-Kamchatka, where we plan to develop a sea container terminal.

Contingencies and Commitments Operating lease commitments We lease rolling stock, berths and office premises under non-cancellable operating lease agreements. As of 31 December 2012, 2011 and 2010, we had the following outstanding commitments under non-cancellable operating leases:

As of 31 December 2012 2011 2010 (U.S.$ million) Within one year ...... 12 21 22 In two to five years ...... 21 20 12 After five years ...... 70 —— 103 41 34

As of 31 December 2011 and 2010, we had operating lease proceeds receivable by us under non-cancellable operating lease contracts (including long-term time charters) of U.S.$16 million and U.S.$22 million, respectively. As of 31 December 2012, we had no such operating lease proceeds receivable.

Risk Management Capital risk management We manage capital to ensure that we can continue to operate and expand our operations while at the same time maximising returns to shareholders through the optimisation of the debt-equity balance. This strategy remains unchanged from prior years. We are financed by a combination of debt and equity attributable to shareholders. Debt consists of long- and short-term borrowings and is monitored net of cash and cash equivalents. Equity attributable to shareholders comprises issued share capital, share premium, retained earnings and other reserves less treasury shares. We are not subject to externally imposed capital requirements other than those included, from time to time, in the financial covenants associated with borrowings and those imposed by Russian legislation. The Board of Directors monitors our capital structure, taking into account the costs and risks associated with each category of capital. Our net debt to equity ratio is the primary tool used in the monitoring process. No formal targets have been set to maintain a net debt to equity ratio on a definite level.

Major categories of financial instruments. Our principal financial liabilities comprise borrowings, finance leases, trade and other payables. The main risks arising from our financial instruments are market risk which includes foreign currency and interest rate risk, credit and liquidity risks. The Board of Directors has overall responsibility for the establishment and oversight of our risk management framework. Our Audit Committee is responsible for developing and monitoring our risk management policies. The Audit Committee oversees how management monitors compliance with our risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by us. The Audit Committee is assisted in its oversight role by an internal audit function, which undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

Credit risk Credit risk is the risk that a customer may default or not meet its obligations to us on a timely basis, leading to financial losses for us.

112 Trade and other receivables Our exposure to credit risk is influenced primarily by the individual characteristics of each customer. The demographics of our customer base, including the default risk of the industry and country in which the customer operates, has less of an influence on credit risk. There is no concentration of credit risk with a single customer. Each of our Group companies establishes its own credit policy taking into account the specifics of the sector and the company’s customer base. The majority of our customers have been transacting with our companies for many years and losses arising from this category of customer are infrequent. Policies established by our companies for new customers generally involve a credit check based on the available information. Where a customer is not deemed creditworthy, we will generally offer services only on a prepayment basis. We have provided fully for all receivables over one year as our historical experience is such that receivables that are past due beyond one year are generally not recoverable. Our maximum exposure to credit risk in relation to each class of recognised financial asset is the carrying amount of those assets as stated in the balance sheet and was as follows:

As of 31 December 2012 2011 2010 (U.S.$ million) Investments available-for-sale ...... — 197 163 Long term loans issued to a related party ...... 542 —— Prepayment for investment, at cost ...... 2 293 — Accounts receivable ...... 190 178 147 Current tax assets ...... 14 10 2 Other current assets ...... 1 8 2 Cash and cash equivalents ...... 232 232 556 Total ...... 981 918 871

The table below presents the ageing profile of trade receivables as of 31 December 2012, 2011 and 2010:

As of 31 December 2012 2011 2010 Total book Allowance for Total book Allowance for Total book Allowance for value impairment value impairment value impairment (U.S.$ million) Current ...... 50 — 33 — 36 3 Overdue 90 days . . . 3 — 5 — 4 — Overdue 91 days . . . 2 — 7241 Overdue more than one year ...... 22 22 21 21 22 22 Total ...... 77 22 66 23 66 26

During the year, we had the following movement on allowance for trade receivables:

As of 31 December 2012 2011 2010 (U.S.$ million) Balance as of 1 January ...... 23 27 27 Uncollectible receivables written off during the year ...... (4) (6) (4) Increase in allowance ...... 3 2 4 Balance as of 31 December ...... 22 23 26

113 Other assets with exposure to credit risk include cash and advances to suppliers. Cash is placed with reputable banks. Advances to suppliers primarily include prepayments for transportation services and prepayments to Russian Railways.

Currency risk We are exposed to currency risk on sales, purchases, finance leases and borrowings that are denominated in a currency other than the respective functional currencies of our entities, primarily the Russian Rouble and U.S. Dollar. Borrowings and interest thereon are generally denominated in currencies that match the cash flows generated by our underlying operation, providing an economic hedge. We seek to limit our net exposure to other monetary assets and liabilities denominated in foreign currencies by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. See ‘‘Risk Factors—Risks Relating to Our Business and Industry—General Risks—We face foreign exchange and inflation risks’’.

Interest rate risk Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. Our interest rate risk primarily arises from our debt obligations, in particular non-current borrowings. Borrowing at variable rates exposes us to cash flow interest rate risk. Lending at fixed rates or the purchase of debt instruments at fixed rates exposes us to changes in fair value. We regularly review our debt portfolio and monitor the changes in the interest rate environment to ensure that interest payments are within acceptable levels. Information relating to interest rates on our borrowings is disclosed in Note 16 to the 2012 Financial Statements.

Liquidity risk Liquidity risk is the risk that we will not be able to settle all liabilities as they fall due. We have a detailed budgeting and cash flow forecasting process in place to help ensure that we have sufficient cash to meet our payment obligations.

Critical Accounting Policies The preparation of consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. See Note 2(c) to the 2012 Financial Statements for critical accounting estimates and judgments in applying accounting policies and Note 2 to the 2012 Financial Statements for a discussion of our accounting policies.

114 DESCRIPTION OF CERTAIN INDEBTEDNESS The following summary of certain provisions of our indebtedness does not purport to be complete and is subject to, and qualified in its entirety by reference to, the underlying documents. The following is a description of certain of our material indebtedness and of indebtedness related to the acquisition financing in connection with the changes in our shareholding structure that took place in December 2012. See ‘‘Overview—Sponsors and Principal Shareholders’’. As of 31 December 2012, as adjusted to give effect to the Offering, we had U.S.$1.3 billion of debt, excluding U.S.$147 million of debt to trade and other creditors in the ordinary course of business. As of the same date, the Subsidiary Guarantors as a group had U.S.$1,121 million of debt, and the Non-Guarantor Subsidiaries as a group had U.S.$211 million of debt, in each case including debt to trade and other creditors in the ordinary course of business. Based on the structure of the Offering, the Notes will rank pari passu with the debt and other obligations of the Subsidiary Guarantors but will be effectively subordinated in right of payment to all of the debt and other obligations of FESCO and the Non-Guarantor Subsidiaries in the event of the bankruptcy or insolvency of any such company. The table below sets forth certain information regarding certain of our debt, as adjusted to reflect Offering proceeds and a part of the use thereof. The table below has been adjusted for (i) repayment of the HoldCo Facility and (ii) repayment of certain pre-acquisition loans including (a) the Alfa Bank Loan to Transgarant, (b) Raiffeisen Loan to Transgarant and (c) the VTB Loan to Transgarant, given actual gross proceeds of U.S.$800 million, approximately U.S.$225 million of additional indebtedness in the table below will be repaid with proceeds from the Offering (see ‘‘Use of Proceeds’’):

Principal amount outstanding as at 31 December Lenders Borrowers Final maturity date 2012 (USD millions) Loans and borrowings Goldman Sachs Lending Partners LLC, VKT and VMTP (upon 13/12/2017 400.00 ING Bank N.V., Raiffeisenbank accession) (Facility A) International AG and ZAO Raiffeisenbank . Sberbank ...... FESCO 14/11/2013 12.64 ZAO Raiffeisenbank ...... FESCO 11/07/2014 19.50 ING Bank N.V., London Branch ...... Bonver Shipping Company 16/08/2015 15.08 Limited Unicredit Bank ...... Transgarant 05/08/2013 9.78 ZAO Raiffeisenbank ...... VMTP 30/06/2016 11.44 Sberbank ...... VMTP 09/11/2016 16.46 OJSC VTB Bank ...... VMTP 31/01/2013 0.48 OJSC VTB Bank ...... VMTP 25/12/2015 7.93 Finance lease agreements Sberbank Leasing CJSC ...... Transgarant 25/02/2016 68.35 Tal International Container Corporation . . . Pacific Conlease Company 01/09/2015 5.34 Tal International Container Corporation . . . Pacific Conlease Company 01/11/2015 2.48 Tal International Container Corporation . . . Pacific Conlease Company 31/07/2013 0.52 Non-recourse loans outside of the restricted group Margin loan ...... Halimeda International Limited 01/09/2014 140.00 consisting of: Natixis S.A...... 90.00 ING Bank N.V., London Branch ...... 30.00 East-West United Bank S.A...... 20.00 The following table provides an estimate of our expected obligations related to the indebtedness set forth in the table above due by the periods indicated as of 31 December 2012, as adjusted to reflect the net proceeds of the Offering, given actual gross proceeds from the Offering of U.S.$800 million, and the use thereof as described under ‘‘Use of Proceeds’’. For the purposes of the following table, amounts being used for repayment of other indebtedness (as set forth under ‘‘Use of Proceeds’’) have been allocated to certain pre-acquisition indebtedness and the OpCo Facility according to our current refinancing plans. The allocation to specific facilities is subject to revision and, accordingly, the expected

115 obligations in each period, could be higher or lower depending upon the other indebtedness ultimately repaid.

After 2013 2014 2015 2016 2017 2017 (U.S.$ in millions) Total ...... 91 66 81 93 60 800 The obligations set forth in the table above exclude the U.S.$140 million margin loan borrowed by Halimeda and secured against the 23.7% stake in TransContainer, which is outside of the restricted group for the purposes of this Offering and is without recourse to other members of the Group.

Description of the Acquisition Financing Overview and structure On 7 December 2012, VKT entered into a term loan facility agreement with, amongst others, Goldman Sachs Lending Partners LLC, ING Bank N.V. and ZAO Raiffeisenbank allowing committed borrowings of up to U.S.$400 million (the ‘‘OpCo Facility’’). As of 31 December 2012, the principal amount outstanding under the OpCo Facility was U.S.$400 million. A portion of the principal amount outstanding under the OpCo Facility is intended to be repaid out of the proceeds of the Offering (together with any accrued and unpaid interest and prepayment fees). See ‘‘Use of Proceeds’’. On 7 December 2012, Maple Ridge and Elvy entered into a facilities agreement with, amongst others, Goldman Sachs Lending Partners LLC, ING Bank N.V., ZAO Raifeisenbank and Raiffeisen Bank International AG allowing borrowings of up to U.S.$400 million (the ‘‘HoldCo Facility’’). As of 31 December 2012, the principal amount outstanding under the HoldCo Facility was U.S.$400 million plus US$0.8 million of capitalised interest. All amounts outstanding under the HoldCo Facility (together with any accrued and unpaid interest and prepayment fees) are intended to be repaid out of the proceeds of the Offering. See ‘‘Use of Proceeds’’. The committed facility under the OpCo Facility has been utilised by VKT in full and all or part of it will be transferred to VMTP. On and from the date VMTP accedes as an additional borrower and additional guarantor, VMTP and VKT will become jointly and severally liable for repayment of the OpCo Facility. The OpCo Facility required VMTP to join as a borrower and guarantor on or before 31 May 2013 or the date on which VMTP becomes a Guarantor in respect of the Notes, if earlier. See ‘‘Terms and Conditions of the 2018 Notes—3.9 Accession of Open Joint Stock Company Commercial Port of Vladivostok’’ with respect to the required accession date. The proceeds drawn under the OpCo Facility were on-lent by VKT to Maple Ridge by way of certain intra- Group loans to be applied towards payment of the purchase price for the shares in Wiredfly in connection with the December 2012 acquisition (see ‘‘Overview—Sponsors and Principal Shareholders’’).

Guarantees and Security The OpCo Facility is governed by the same intercreditor arrangements as the Notes. See ‘‘Terms and Conditions of the 2018 Notes—Note Guarantees’’ and ‘‘Risk Factors—Risks Relating to the Notes, Our Indebtedness and Our Structure’’. The OpCo Facility benefits from, among others: (i) guarantees from Maple Ridge, Elvy, all Intermediate HoldCo Guarantors and the following Group companies—VKT, FESCO Ocean Management, Remono, Transgarant Ukraine, Dalreftrans, FESCO Rail, FIT, Transgarant, TEK MetizTrans and, upon its accession, VMTP; (ii) pledges of the shares in Maple Ridge and Elvy, all Intermediate HoldCo Guarantors, and their holdings in FESCO representing 69.98% of the FESCO’s share capital and pledges over certain shares in the following Group companies—TEK MetizTrans, FESCO Rail, Transgarant Ukraine, Transgarant, VMTP, VKT, Remono and FESCO Ocean Management; (iii) the rights of withdrawal of funds in certain of bank accounts of the Russian guarantors; and (iv) security over certain other assets of the Group companies (which security is required to be provided after the Issue Date). Furthermore, the OpCo Facility contains: • a guarantor coverage maintenance covenant based on group guarantor coverage by reference to a percentage of total Group EBITDA and total Group gross assets; and

116 • an ongoing security coverage maintenance covenants which require additional security (including asset security) to be provided by the members of the Group in certain circumstances.

Interest and fees Loans under the committed portion of the OpCo Facility will bear interest at rates per annum equal to LIBOR plus certain mandatory costs, if any, plus 7.50% per annum. Default interest will be calculated as an additional 2% on the overdue amount.

Repayments The loans under the committed portion of the OpCo Facility are repayable in instalments (in such amounts as are included in the table immediately above the section entitled ‘‘Description of the Acquisition Financing’’.

Prepayment The OpCo Facility allows for voluntary prepayments (subject to de minimis amounts) and require mandatory prepayment in full or part in certain circumstances, including: • on a change of control or sale of all or substantially all of the assets of the Group whether in a single transaction or a series of related transactions; • proceeds received from floatation or share issuances (the proportion of such proceeds required to be prepaid being determined by reference to a leverage test); • consideration received by a member of the Group for disposals of assets (subject to certain carve-outs); • proceeds received by a member of the Group arising from any insurance claims subject to carve-outs; and • amounts received under the documents relating to the acquisition of the shares in Wiredfly and the Intermediate HoldCo Guarantors (including adjustments to purchase price) in December 2012 and recovery claims in relation thereto against the vendors, their affiliates or providers of due diligence reports. See ‘‘Overview—Sponsors and Principal Shareholders’’.

Covenants The OpCo Facility contains customary operating and financial covenants (see ‘‘—Financial Covenants’’), subject to certain exceptions and qualifications, including covenants restricting the ability of members of the Group to: • make acquisitions or investments, including entering into joint ventures; • make loans or grant guarantees; • incur financial indebtedness; • create or permit to subsist any security over assets; • dispose of assets; • make distributions in relation to share capital; • make any change to the general nature of business; • issue shares; • enter into hedging transactions; and • enter into transactions, other than on arm’s length basis. In addition to the above, certain holding companies (including Maple Ridge and Elvy and the Intermediate HoldCo Guarantors) and Halimeda International Limited are subject to additional negative covenants which include restrictions on carrying on business, owning any assets or incurring any liabilities, subject to certain limited exceptions.

117 Financial covenants The OpCo Facility requires maintenance at all times of certain financial covenants. These are tested quarterly on a rolling twelve month basis, except for the limitation on capital expenditure which is an annual limit. The ratios are based on the definitions in the facility agreement documenting the OpCo Facility, which may differ from similar definitions in the Trust Deeds and described in this Offering Memorandum. The financial covenants include the following: • Consolidated Cashflow Cover (being the ratio of cashflow to debt service which must not be less than 1.2 to 1.0, provided that for each relevant period ending on or before 31 December 2014 certain amounts of Cash held by members of the Group may be added back the the Group’s cashflow for the purposes of this covenant); • Consolidated Interest Cover (being the ratio of consolidated adjusted EBITDA to net finance charges, which must not be less than the ratio set out opposite the relevant period in the table below): Relevant Period Ratio Relevant Periods expiring 31 March 2013 to 31 December 2013 ...... 1.75:1 Relevant Periods expiring 31 March 2014 to 31 March 2018 ...... 2.00:1 • Consolidated Adjusted Leverage (being the ratio of total net debt to consolidated adjusted EBITDA, which must not exceed the ratio set out opposite the relevant period in the table below); Relevant Period Ratio Relevant Periods expiring 31 March 2013 and 30 June 2013 ...... 4.25:1 Relevant Periods expiring 30 September 2013 and 31 December 2013 ...... 4.00:1 Relevant Periods expiring 31 March 2014 and 30 June 2014 ...... 3.75:1 Relevant Periods expiring 30 September 2014 and 31 December 2014 ...... 3.50:1 Relevant Periods expiring 31 March 2015 and 30 June 2015 ...... 3.25:1 Relevant Periods expiring 30 September 2015 and 31 December 2015 ...... 2.75:1 Relevant Periods expiring 31 March 2016 and 30 June 2016 ...... 2.50:1 Relevant Periods expiring 30 September 2016 to 31 March 2018 ...... 2.00:1 • Limitation on annual capital expenditure (which must not exceed U.S.$63,000,000 in any financial year). The financial covenants referred to above are also subject to a limited equity cure provision which is available to be used no more than two times over the life of the OpCo Facility and not in respect of two consecutive quarters.

Events of Default The OpCo Facility contains certain events of default, the occurrence of which would allow the requisite majority of lenders (under and as defined in the OpCo Facility Agreement) to, amongst other actions, accelerate all outstanding loans and terminate their commitments, including, among other events (subject, in certain cases, to agreed grace periods, materiality thresholds and other qualifications): • non-payment; • non-compliance with the financial covenants; • non-compliance with the terms of any Finance Document; • misrepresentation under, or in connection with, the finance documents; • cross-default linked to any financial indebtedness of the Group or a security provider of the OpCo Facility, subject to a specific exception for the financing described below under ‘‘Description of other indebtedness—Financing in connection with the acquisition of FESCO shares by Maple Ridge and Elvy—Halimeda International Limited structured financing transaction with ING Bank N.V., London Branch, Natixis S.A. and East-West United Bank S.A.’’ and any refinancing thereof on substantially similar terms with respect to recourse; • insolvency, insolvency proceedings, unsatisfied judgment or creditor’s process in respect of any obligor, security provider for the OpCo Facility, FESCO or a material subsidiary of FESCO; • failure to comply with mandatory tender offer requirements;

118 • material adverse change; • certain changes of ownership; • audit qualification; • expropriation and convertibility events with respect to currency controls; and • certain steps in relation to the December 2012 acquisition taken by certain government bodies in the Russian Federation under the applicable strategic investment laws.

Description of the Intercreditor Agreement General To establish the relative rights of certain of our creditors under our financing arrangements, Maple Ridge, Elvy, Goldman Sachs International, ING Bank N.V., ING Bank N.V., London Branch (as Senior Agent and Security Agent), Raiffeisen Bank International AG and ZAO Raiffeisenbank, certain Intra-Group Lenders, Debtors and Investors, amongst others, entered into an intercreditor agreement on 7 December 2012 (‘‘Intercreditor Agreement’’). In connection with the Offering, the Issuer, TMF Trustee Limited as Co-Security Agent and TMF Trustee Limited as Senior Secured Notes Trustee will accede to the Intercreditor Agreement on the Issue Date. The Intercreditor Agreement is governed by English law and sets out, among other things, the relative ranking of certain indebtedness of the Debtors, when payments can be made in respect of the indebtness of the Debtors, when enforcement action can be taken in respect to that indebtedness, the terms pursuant to which certain of that indebtedness will be subordinated upon the occurrence of certain insolvency events and turnover provisions. As at the Issue Date, the indebtedness governed by the Intercreditor Agreement will be the indebtedness under the OpCo Facility, under the Notes, under certain hedging transactions and under certain intra-Group loans as well as liabilities owed to investors. By accepting a Note, the relevant Holder shall be deemed to have agreed to, and accepted the terms and conditions of the Intercreditor Agreement. The following description is a summary of certain provisions, among others, that are contained in the Intercreditor Agreement and which primarily relate to the rights and obligations of the Holders of the Notes. It does not restate the Intercreditor Agreement in its entirety. As such, you are urged to read the Intercreditor Agreement because it, and not the discussion that follows, defines certain rights of the Holders of the Notes. Capitalised terms set forth and used in this section entitled ‘‘Description of the Intercreditor Agreement’’ have the same meanings as set forth in the Intercreditor Agreement, which may have different meanings from the meanings given to such terms and used elsewhere in this Offering Memorandum. In particular, in this section the term ‘‘Senior Secured Notes’’ means the Notes, the ‘‘Senior Secured Noteholders’’ means the Holders of the Notes, the ‘‘Senior Secured Notes Indenture’’ means the Trust Deeds and the ‘‘Senior Secured Notes Trustee’’ means the Trustee (in each case as defined elsewhere in this Offering Memorandum). Certain terms used in this summary of the Intercreditor Agreement are summarised below. For the full definitions of the below terms, the Holders are urged to refer to the Intercreditor Agreement. The below is intended as a summary only. ‘‘Acceleration Event’’ means, in respect of any Senior Facilities Agreement the exercising of any rights to accelerate the Liabilities thereunder, and in respect of the Senior Secured Notes the exercising of any rights to accelerate the Senior Secured Notes Liabilities. ‘‘Distress Event’’ means either the occurrence of an Acceleration Event or the enforcement of any Transaction Security. ‘‘Enforcement Action’’ include the following (subject to certain limited exceptions): (a) the acceleration of Liabilities or the making of any declaration that any Liabilities are prematurely due and payable (other than as a result of illegality event affecting a Senior Lender or a Senior Secured Noteholder); (b) the making of any demand against any member of the Group in respect of the Liabilities under the Deed of Guarantee (including in respect of the Note Guarantees); (c) the taking of any steps to enforce or require the enforcement of any Transaction Security (including the crystallisation of any floating charge forming part of the Transaction Security);

119 (d) the premature termination or close-out of any hedging transaction under each Hedging Agreement save to the extent permitted by the Intercreditor Agreement; and (e) certain insolvency-related events in relation to a member of the Group in relation to the Liabilities under the Senior Secured Finance Documents, the Security Documents or any agreement evidencing the terms of certain investor Liabilities and intra-Group Liabilities. ‘‘Insolvency Event’’ means, in relation to any member of the Group, inter alia: (a) any resolution is passed or order made for the winding up, dissolution, administration or reorganisation of that member of the Group, a moratorium is declared in relation to any indebtedness of that member of the Group or an administrator is appointed to that member of the Group; (b) any composition, compromise, assignment or arrangement is made with its creditors generally; (c) the appointment of any liquidator, receiver, administrator, administrative receiver, compulsory manager or other similar officer in respect of that member of the Group or any of its assets; or (d) any analogous procedure or step is taken in any jurisdiction. ‘‘Instructing Group’’ means, at any time, those Primary Creditors whose Senior Secured Credit Participations at that time aggregate more than 50% of the total Senior Secured Credit Participations at that time. ‘‘Primary Creditor’’ means each of: (a) the Senior Secured Noteholders, each Senior Secured Notes Trustee, each Senior Secured Notes Agent, the Security Agent and the Co-Security Agent; and (b) each Hedge Counterparty or a lender under any Senior Facilities Agreement and which in each case is an original party to or accedes to the Intercreditor Agreement as a Senior Lender or a Hedge Counterparty, and ‘‘Secured Parties’’ include Primary Creditors to the extent they are subject to the Intercreditor Agreement. ‘‘Senior Facilities Agreement’’ means the facility agreements documenting the HoldCo Facility or the OpCo Facility or any other facilities agreement documenting the permitted refinancing thereof. ‘‘Senior Secured Credit Participation’’ means: (i) in relation to a Senior Lender or Hedge Counterparty, its aggregate (drawn and undrawn) commitments under the Senior Facilities Agreement and termination amounts under certain hedging transactions or, if not terminated, the mark to market exposure under those hedging transactions; and (ii) in relation to a Senior Secured Noteholder, the principal amount of outstanding Senior Secured Notes held by that Senior Secured Noteholder. ‘‘Senior Secured Notes Major Terms’’ and ‘‘Senior Facility Major Terms’’ means the terms set out in Schedules 4 and 5 to the Intercreditor Agreement, including in relation to the Senior Secured Notes Major Terms and by way of summary: (a) limitations on scheduled or mandatory principal repayments, limitations on minimum average life; (b) covenants and events of default of a type generally consistent with, or otherwise not materially less favourable overall to the Group than those customary for offerings of high yield senior secured notes in the European market for leveraged acquisitions or the Russian Eurobond market at the date of the issuance taking into account market conditions, the debt structure and the size, type and credit quality of the Group; and (c) subject to the terms of the Intercreditor Agreement and the trust deed or indenture in respect of the Senior Secured Notes is governed by the laws of England or the State of New York. The Notes comply with the Senior Secured Notes Major Terms. ‘‘Transaction Security’’ means the Security created or evidenced or expressed to be created or evidenced or pursuant to the ‘‘Transaction Security Documents’’ and includes any other document entered into by any investor or debtor creating or expressed to create any Security over all or any part of its assets in respect of the obligations of any of the Debtors under any of the Senior Secured Finance Documents. The term ‘‘Transaction Security’’ includes any Liens created pursuant to the Security Documents. See ‘‘Terms and Conditions of the 2018 Notes—2.4 Notes Security’’.

120 A copy of the Intercreditor Agreement shall be made available to holders of the Notes upon request.

Additional and/or Refinancing Debt The Intercreditor Agreement permits the Debtors to incur incremental Borrowing Liabilities and/or Guarantee Liabilities in respect of incremental Borrowing Liabilities or refinancing Borrowing Liabilities and/or incurring Guarantee Liabilities in respect of any refinancing of Borrowing Liabilities, which in any case are intended to rank and/or share any existing Security pari passu with any existing Liabilities to the extent permitted by the underlying debt documents. Under the terms of the Intercreditor Agreement the Creditors confirm that if and to the extent such a financing or refinancing and such ranking and such Security is permitted by the terms of the Debt Documents at such time, they will (at the cost of the Debtors) co-operate with the Debtors with a view to enabling such financing or refinancing and such sharing in the Security to take place. In particular, the Senior Lenders, the Hedge Counterparties and the Senior Secured Noteholders authorise and direct the Agent, the Security Agent and the Co-Security Agent to execute any amendment to the Intercreditor Agreement and such other Debt Documents required to reflect such arrangements to the extent of such financing, refinancing and/or sharing is permitted by such Debt Documents. In particular, the Senior Secured Creditor Liabilities may be refinanced in whole or part on terms and in a manner that do not breach the terms of the Intercreditor Agreement, any Senior Facilities Agreement or any Senior Secured Notes Indenture without the consent of any other Creditors subject to certain restrictions which require no change to ranking and provided that such refinancing complies with the Senior Facility Major Terms and the Senior Secured Notes Major Terms, as applicable.

Ranking and Priority – Priority of Debts The Intercreditor Agreement provides that the liabilities owed by the Debtors to the Creditors under the relevant Debt Documents shall rank in right and priority of payment in the following order: • First, the Senior Lender Liabilities, the Senior Secured Notes Liabilities, the Hedging Liabilities, the Senior Agent Liabilities, the Arranger Liabilities and the Senior Secured Notes Trustee Amounts owed by the Debtors to the Secured Parties and shall rank pari passu between themselves and without preference between them; and • Second, the Intra-Group Liabilities and the Investor Liabilities. On the terms of the Intercreditor Agreement, each of the Intra-Group Liabilities and the Investor Liabilities is postponed and subordinated to the Liabilities owed by the Debtors to the Secured Parties. The Intercreditor Agreement does not purport to rank any of the Intra-Group Liabilities or the Investor Liabilities as between themselves. – Priority of Security The Transaction Security granted or to be granted to secure to the Senior Lender Liabilities, the Senior Secured Notes Liabilities, the Hedging Liabilities, the Senior Agent Liabilities, the Arranger Liabilities and the Senior Secured Notes Trustee Amounts is to rank and secure such Liabilities on a pari passu basis and without preference between them (but only to the extent that such Transaction Security is expressed to secure those Liabilities).

Restrictions relating to Senior Lender Liabilities and Senior Secured Notes Liabilities The Debtors may make payments in respect of the Senior Secured Creditor Liabilities (other than Hedging Liabilities) at any time, provided that following the occurrence of a Senior Acceleration Event, a Senior Secured Notes Acceleration Event or an Insolvency Event, no Debtor may make (and no Primary Creditor may receive) payments of the Senior Lender Liabilities or Senior Secured Notes Liabilities, except from recoveries distributed in accordance with the provisions set out in the section entitled ‘‘Application of Proceeds’’. The Intercreditor Agreement provides that, subject to certain restrictions, the relevant Primary Creditors and the Debtors may amend or waive the terms of the Senior Secured Finance Documents in accordance with their terms (and subject only to any consent required under them) at any time. The terms of a Senior Secured Notes Finance Document or a Senior Finance Document relating to a Senior Secured Notes Facility may not be amended or waived without the consent of the Majority Senior

121 Lenders under each Senior Facilities Agreement if such amendment or waiver would result in those Senior Secured Notes Finance Documents in respect of which any Senior Secured Notes remain outstanding ceasing to comply with the Senior Secured Notes Major Terms. The terms of the Senior Secured Finance Documents may also not be amended or waived if such amendment or waiver would conflict with the provisions of the Intercreditor Agreement or create a default thereunder with respect to any action or event or circumstance that is permitted under the Intercreditor Agreement. – Security and Guarantees: Secured Parties The Senior Lenders and the Senior Secured Notes Creditors may take, accept or receive (in addition to the Transaction Security and guarantees contained in the Deed of Guarantee) the benefit of: (a) any security from any member of the Group or any Investor in respect of the Senior Lender Liabilities or the Senior Secured Notes Liabilities if and to the extent legally possible, at the same time it is also offered either: (i) to the Security Agent or the Co-Security Agent (as appropriate) as agent or trustee for the other Secured Parties in respect of their Liabilities; or (ii) in the case of any jurisdiction in which effective Security cannot be granted in favour of the Security Agent or the Co-Security Agent as agent or trustee for the Secured Parties: (A) to the other Secured Parties in respect of their Liabilities; or (B) to the Security Agent or the Co-Security Agent (as appropriate) under a parallel debt structure, joint and several creditor structure or agency structure for the benefit of the other Secured Parties, and ranks in the same order of priority as that contemplated in the section entitled ‘‘Priority of Security’’, provided that all amounts received or recovered by any Secured Party with respect to such Security are immediately paid to the Security Agent and held and applied in accordance with the section entitled ‘‘Application of Proceeds’’; and (b) any guarantee, indemnity, surety or other assurance against loss from any member of the Group or any Investor in respect of the Senior Lender Liabilities or the Senior Secured Notes Liabilities if and to the extent legally possible, at the same time it is also offered to the other Secured Parties in respect of their Liabilities and ranks in the same order of priority as that contemplated in the sections entitled ‘‘Priority of Debts’’ and ‘‘Priority of Security’’ and all amounts received or recovered by any Secured Party with respect to such guarantee, indemnity, surety or other assurance are immediately paid to the Security Agent and held and applied in accordance with the section entitled ‘‘Application of Proceeds’’. – Restriction on Enforcement: Senior Lenders and Senior Secured Notes Creditors The Intercreditor Agreement provides that none of the Senior Lenders or the Senior Secured Notes Creditor may take any Enforcement Action involving the taking of any steps to enforce or require the enforcement of any Transaction Security (including the crystallisation of any floating charge forming part of the Transaction Security) without the prior written consent of an Instructing Group. This prohibition does not exclude other forms of Enforcement Action (as defined in the Intercreditor Agreement). In all cases, Enforcement Action shall only be taken in accordance with the process or in the circumstances described in the section entitled ‘‘Manner of Enforcement’’.

Effect of Insolvency Event The Intercreditor Agreement provides that, among other things, after the occurrence of an Insolvency Event in relation to any member of the Group, any party entitled to receive a distribution out of the assets of that member of the Group in respect of, Liabilities owed to that party shall, to the extent it is able to do so, direct the person responsible for the distribution of the assets of that member of the Group to pay that distribution to the Security Agent until the Liabilities owing to the Secured Parties have been paid in full. In this respect, the Security Agent shall apply any distributions paid to it in accordance with the provisions summarised in section entitled ‘‘Application of Proceeds’’. Subject to certain exceptions relating to netting by a Hedge Counterparty, to the extent that any Group member’s Liabilities are discharged by way of set-off (mandatory or otherwise) after the occurrence of an Insolvency Event in relation to that member of the Group, any Creditor which benefited from that set-off

122 shall pay an amount equal to the amount of the Liabilities owed to it which are discharged by that set-off to the Security Agent for application in accordance with provisions summarised in the section entitled ‘‘Application of Proceeds’’, provided that each Senior Secured Notes Trustee shall only be obliged to pay the Security Agent amounts received by it in its capacity as Senior Secured Notes Trustee and held on trust in such capacity. If the Security Agent, the Co-Security Agent or any other Secured Party receives a distribution in a form other than in cash in respect of any of the Liabilities, the Liabilities will not be reduced by that distribution until and except to the extent the realization proceeds are actually applied towards the Liabilities. After the occurrence of an Insolvency Event in relation to any member of the Group, each Creditor irrevocably authorizes the Security Agent and the Co-Security Agent, on its behalf to: (a) take any take any Enforcement Action (in accordance with the terms of the Intercreditor Agreement) against that member of the Group; (b) demand, sue, prove and give receipt for any or all of that Group member’s Liabilities; (c) collect and receive all distributions on, or on account of, any or all of that Group member’s Liabilities; and (d) file claims, take proceedings and do all other things the Security Agent or the Co-Security Agent considers reasonably necessary to recover that Group member’s Liabilities. Each Creditor will do: (i) all things that the Security Agent or the Co-Security Agent reasonably requests in order to give effect to the provisions summarised under this section ‘‘Effect of Insolvency Event’’; and (ii) if the Security Agent or the Co-Security Agent is not entitled to take any of the actions contemplated by the provisions summarised under this section ‘‘Effect of Insolvency Event’’ or if the Security Agent or the Co-Security Agent requests that a Creditor take that action, undertake that action itself in accordance with the instructions of the Security Agent or the Co-Security Agent (as appropriate) or grant a power of attorney to the Security Agent or the Co-Security Agent (as appropriate) (on such terms as the Security Agent or the Co-Security Agent (as appropriate) may reasonably require, although no Senior Secured Notes Trustee shall be under any obligation to grant such powers of attorney) to enable the Security Agent or the Co-Security Agent (as appropriate) to take such action.

Turnover of Receipts Subject to certain exceptions, the Intercreditor Agreement provides that if at any time prior to the date on which all the Liabilities are discharged in full, any Creditor receives or recovers from any member of the Group: (a) any payment or distribution of, or on account of or in relation to, any of the Liabilities which is not either: (i) a Permitted Payment; or (ii) made in accordance with the provisions summarised under the section entitled ‘‘Application of Proceeds’’; (b) other than where the provisions summarised in the second paragraph under section entitled ‘‘Effect of Insolvency Event’’ apply, any amount by way of set-off in respect of any of the Liabilities owed to it which does not give effect to a Permitted Payment; (c) notwithstanding paragraphs (a) and (b) above, and other than where the provisions summarised in the second paragraph under the section entitled ‘‘Effect of Insolvency Event’’ applies, any amount: (i) on account of, or in relation to, any of the Liabilities: (A) after the occurrence of a Distress Event; or (B) as a result of any other litigation or proceedings against a member of the Group (other than after the occurrence of an Insolvency Event in respect of that member of the Group); or (ii) by way of set-off in respect of any of the Liabilities owed to it after the occurrence of a Distress Event, other than, in each case, any amount received or recovered in accordance with the provisions summarised in section entitled ‘‘Application of Proceeds’’. (d) the proceeds of any enforcement of any Transaction Security except in accordance with the provisions summarised in section entitled ‘‘Application of Proceeds’’; or

123 (e) other than where the provisions summarised in the second paragraph under section entitled ‘‘Effect of Insolvency Event’’ apply or the provisions summarised in the third paragraph under section entitled ‘‘Additional and/or Refinancing Debt’’ applies, any distribution in cash or in kind or payment of, or on account of or in relation to, any of the Liabilities owed by any member of the Group which is not in accordance with the provisions summarised in section entitled ‘‘Application of Proceeds’’ and which is made as a result of, or after, the occurrence of an Insolvency Event in respect of that member of the Group, that Creditor will: (i) in relation to receipts and recoveries not received or recovered by way of set-off: (A) hold an amount of that receipt or recovery equal to the relevant Liabilities (or if less, the amount received or recovered) on trust (to the extent permitted by applicable law) or otherwise for the Security Agent and promptly pay that amount to the Security Agent for application in accordance with the terms of the Intercreditor Agreement; and (B) promptly pay an amount equal to the amount (if any) by which the receipt or recovery exceeds the relevant Liabilities to the Security Agent for application in accordance with the terms of the Intercreditor Agreement; and (ii) in relation to receipts and recoveries received or recovered by way of set-off, promptly pay an amount equal to that recovery to the Security Agent for application in accordance with the terms of the Intercreditor Agreement, provided that each Senior Secured Notes Trustee shall only be obliged to pay the Security Agent amounts received by it in its capacity as Senior Secured Notes Trustee and held on trust in such capacity.

Enforcement of Transaction Security Enforcement Instructions The Security Agent may refrain from enforcing the Transaction Security unless instructed otherwise by the Instructing Group in accordance with the provisions summarised in the section entitled ‘‘Consultation Period’’. The Co-Security Agent shall not be bound to enforce any Transaction Security unless instructed otherwise by the Security Agent (acting on the instructions of the Instructing Group). Subject to the Transaction Security having become enforceable in accordance with its terms, the Instructing Group may give in accordance with the provisions summarised in section entitled ‘‘Consultation Period’’ or refrain from giving instructions (i) to the Security Agent to enforce or refrain from enforcing the Transaction Security as they see fit or (ii) to the Security Agent to instruct the Co-Security Agent to enforce or refrain from enforcing Transaction Security as they see fit. No Secured Party shall have any independent power to enforce, or to have recourse to, any Transaction Security or to exercise any rights or powers arising under the Transaction Security Documents except through the Security Agent or the Co-Security Agent (as appropriate).

Manner of Enforcement If the Transaction Security is being enforced pursuant to the provisions summarised in the section entitled ‘‘Enforcement Instructions’’, the Security Agent or the Co-Security Agent (as the case may be) shall enforce the Transaction Security in such manner (including, without limitation, the selection of any administrator of any Debtor to be appointed by the Security Agent or the Co-Security Agent (as the case may be)) as the Instructing Group shall instruct (in the case of the Security Agent) or as the Security Agent shall instruct (acting on the instructions of an Instructing Group) (in the case of the Co-Security Agent) or, in the absence of any such instructions, as the Security Agent sees fit.

Exercise of Voting Rights Each Creditor agrees (to the fullest extent permitted by law at the relevant time) with the Security Agent and the Co-Security Agent that it will cast its vote in any proposal put to the vote by or under the supervision of any judicial or supervisory authority in respect of any insolvency, pre-insolvency or rehabilitation or similar proceedings relating to any member of the Group as instructed by the Security Agent or the Co-Security Agent.

124 The Security Agent and the Co-Security Agent shall give instructions as directed by an Instructing Group (in the case of the Security Agent) or by the Security Agent (acting on the instructions of an Instructing Group) (in the case of the Co-Security Agent). Notwithstanding the foregoing, no Party is entitled to exercise or require any other Primary Creditor to exercise such power of voting or representation to (i) waive, reduce, discharge, extend the due date for payment of or reschedule any of the Liabilities owed to that Primary Creditor or (ii) modify the terms of any Senior Secured Finance Document to which any Primary Creditor is a party in any other way that will treat that Primary Creditor in a materially less beneficial manner than any other Primary Creditor.

Security Held by Other Creditors If any Transaction Security is held by a Creditor other than the Security Agent or the Co-Security Agent, then Creditors may only enforce that Transaction Security in accordance with instructions given by an Instructing Group in accordance with the provisions summarised in this section ‘‘Enforcement of Transaction security’’ (and for this purpose references to the Security Agent or the Co-Security Agent shall be construed as references to that Creditor).

Consultation Period Subject to the paragraphs below, before giving any instructions to the Security Agent and/or (in the case of the Co-Security Agent) to the Security Agent to instruct the Co-Security Agent to (i) enforce the Transaction Security or (ii) take any other Enforcement Action, the agent(s) of the Creditors in the Instructing Group concerned shall consult with each other agent of the Creditors in the Instructing Group concerned and the Security Agent and/or the Co-Security Agent (as appropriate) in good faith about the instructions to be given by the Instructing Group for a period of no less than 15 days (or such shorter period as each agent of the Creditors in the Instructing Group concerned and the Security Agent and/or the Co-Security Agent (as appropriate) shall agree) (the ‘‘Consultation Period’’), and only following the expiry of a Consultation Period, the Instructing Group shall be entitled to give any instructions to the Security Agent and/or (in the case of the Co-Security Agent) to the Security Agent to instruct the Co-Security Agent (as appropriate) to (A) enforce the Transaction Security or (B) take any other Enforcement Action. The Senior Secured Notes Trustee is not liable to any person for any loss suffered as a result of its failure to consult in accordance with the provisions described in the paragraph immediately above during the Consultation Period if it determines, in its sole discretion, that it is necessary to seek instructions from the Senior Secured Noteholders, consult with any or all of the Senior Secured Noteholders or convene a meeting of the Senior Secured Noteholders but it is not practicable to do so within the Consultation Period. No agent of the Creditors shall be obliged to consult in accordance with the first paragraph of this section entitled ‘‘Consultation Period’’ above and the Instructing Group shall be entitled to give any instructions to the Security Agent and/or (in the case of the Co-Security Agent) to the Security Agent to instruct the Co-Security Agent to enforce the Transaction Security or take any other Enforcement Action prior to the end of a Consultation Period if: (a) the Transaction Security has become enforceable as a result of an Insolvency Event; or (b) the Instructing Group or any agent of the Creditors in the Instructing Group determines in good faith (and notifies each Agent and the Security Agent) that to enter into such consultations and thereby delay the commencement of enforcement of the Transaction Security could reasonably be expected to have a material adverse effect on: (i) the Security Agent’s or the Co-Security Agent’s ability to enforce any of the Transaction Security; or (ii) the realisation proceeds of any enforcement of the Transaction Security. For purposes of the provisions summarised in this section entitled ‘‘Enforcement of Transaction Security’’, in the event of any conflicting instructions, requests or determinations from or by the Security Agent, on the one hand, and the Co-Security Agent, on the other hand, the instructions, requests and/or determinations (as applicable) of the Security Agent shall prevail (but without prejudice to any action taken in accordance with the Intercreditor Agreement in reliance on any such instructions, requests or

125 determinations from or by the Co-Security Agent which were taken before notice of a conflicting instruction, request or determination from or by the Security Agent).

Application of Proceeds Order of Application of Group Recoveries Subject to certain exceptions which apply in the case of prospective liabilities, all amounts from time to time received or recovered by the Security Agent and the Co-Security Agent pursuant to the terms of any document setting out the terms of the Liabilities or in connection with the realisation or enforcement of all or any part of the Transaction Security (for the purposes of this section entitled ‘‘Order of Application of Group Recoveries’’, the ‘‘Group Recoveries’’) shall, in the case of the Co-Security Agent, be held on trust and promptly turned over to the Security Agent for application by the Security Agent as if such sum constituted a Group Recovery received by it under this provision and, in the case of the Security Agent, shall be held by the Security Agent on trust, to the extent legally permitted, to apply them at any time as the Security Agent (in its discretion) sees fit, to the extent permitted by applicable law (and subject to the provisions of this section entitled ‘‘Order of Application of Group Recoveries’’), in the following order of priority: (a) in discharging Senior Agent Liabilities, Senior Secured Notes Trustee Amounts or any sums owing to the Security Agent, the Co-Security Agent, any Receiver or any Delegate on a pari passu basis; (b) in payment of all costs and expenses incurred by any agent of the Creditors or Primary Creditor in connection with any realisation or enforcement of the Transaction Security taken in accordance with the terms of this Agreement or any action taken at the request of the Security Agent or the Co-Security Agent as summarised in the final paragraph of the section entitled ‘‘Effect of Insolvency Event’’; (c) in payment to: (i) each Senior Agent on its own behalf and on behalf of the Mandated Lead Arrangers and the Senior Lenders; and (ii) each Senior Secured Notes Trustee on its own behalf and on behalf of the Senior Secured Notes Creditors; and (iii) the Hedge Counterparties, for application towards the discharge of: (A) the Arranger Liabilities and the Senior Lender Liabilities (in accordance with the terms of the Senior Finance Documents) (on a pro rata basis between each Senior Finance Document); (B) the Senior Secured Notes Liabilities (in accordance with the terms of the Senior Secured Notes Finance Documents) (on a pro rata basis between each Senior Secured Notes Finance Document); and (C) the Hedging Liabilities (on a pro rata basis between the Hedging Liabilities of each Hedge Counterparty), on a pro rata basis and ranking pari passu between paragraph (A) above, paragraph (B) above and paragraph (C) above; (d) if none of the Debtors is under any further actual or contingent liability under any Senior Secured Finance Document, in payment to any person to whom the Security Agent or the Co-Security Agent is obliged to pay in priority to any Debtor; and (e) the balance, if any, in payment to the relevant Debtor or any other person entitled to it.

Equalisation of the Primary Creditors The Intercreditor Agreement provides that if, for any reason, any Senior Secured Liabilities remain unpaid after the Enforcement Date and the resulting losses are not borne by the Primary Creditors in the proportions which their respective exposures at the Enforcement Date bore to the aggregate exposures of all the Primary Creditors at the Enforcement Date, the Primary Creditors will make such payments

126 amongst themselves as the Security Agent shall require to put the Primary Creditors in such a position that (after taking into account such payments) those losses are borne in those proportions.

Consents, Amendments and Override The Intercreditor Agreement provides that, subject to certain exceptions, the Intercreditor Agreement may be amended or waived only with the consent of the agents of the Creditors, the Majority Senior Lenders under each Senior Facilities Agreement (other than a Senior Secured Notes Facilities Agreement), the relevant Senior Secured Notes Trustee(s), the Security Agent and Maple Ridge. The Intercreditor Agreement provides that certain amendments or waivers, including those that have the effect of changing or which relate to redistribution, the provisions summarised under section entitled ‘‘Application of Proceeds’’, the amendment and waiver provisions, certain clauses relating to instructions to the Security Agent or Co-Security Agent and exercise of their discretion, the order of priority or subordination under the Intercreditor Agreement may not be made without the consent of: (a) the agents of the Creditors; (b) the Senior Lenders; (c) the Senior Secured Notes Creditors (to the extent that the amendment or waiver would materially and adversely affect such creditors); (d) each Hedge Counterparty (to the extent that the amendment or waiver would adversely affect the Hedge Counterparty); and (e) the Security Agent. The Intercreditor Agreement may be amended by Maple Ridge, the Senior Agent(s), the Senior Secured Notes Trustee(s) and the Security Agent without the consent of any other Party to cure defects, resolve ambiguities or reflect changes in each case of a minor technical or administrative nature or as otherwise prescribed by the relevant Senior Secured Finance Documents. Each Senior Secured Notes Trustee shall, to the extent consented to by the requisite percentage of Senior Secured Noteholders in accordance with the relevant Senior Secured Notes Indenture, act on such instructions in accordance therewith unless to the extent any amendments so consented to relate to any provision affecting the rights and obligations of that Senior Secured Notes Trustee in its capacity as such. The Intercreditor Agreement contains a provision whereby, if a request for consent or other matter requires approval of the other parties, and the party to whom such request for consent or approval has been made fails to respond by a specified time period, then (i) such persons’ Senior Secured Creditor Participation will be deemed to be zero for the purposes of the vote, and (ii) if such request only relates to the provision of a confirmation or notification under the Intercreditor Agreement, then such confirmation or notification shall be deemed to be given. The specified time period for the Senior Secured Notes Creditors to respond is 30 Business Days from the date of the request being made (unless extended by mutual agreement of Maple Ridge and the Security Agent). The Senior Secured Notes Trustee is not liable to any person for any failure to initiate, co-ordinate or formulate such a request or approval. Unless expressly stated otherwise in the Intercreditor Agreement, the Intercreditor Agreement overrides anything in the documents setting out the terms of the Liabilities to the contrary. Description of other indebtedness In connection with the Offering, we are seeking waivers under certain of our financing arrangements. We expect to receive these waivers to the extent not already received.

Pre-acquisition Debt to be repaid from Offering proceeds Alfa Loan to Transgarant On 22 June 2011, Transgarant entered into a non-revolving credit facility agreement with OAO Alfa-Bank allowing borrowings of up to RUB2,650 million. The loan was provided to refinance certain of Transgarant’s loans. As of 31 December 2012, the amount outstanding under this facility was RUB1,468.1 million (U.S.$48.3 million). The loan is secured by a pledge of rolling stock owned by Transgarant and a suretyship from FESCO. In addition, Transgarant is required to provide a pledge of

127 promissory notes issued by OAO Alfa-Bank by June 2013 as additional security. The loan has a final maturity date of 22 June 2016. The Pre-acquisition Alfa Loan is subject to a number of financial covenants, including certain maintenance covenants and general covenants, including the regular provision of accounting statements. In addition, the loan can be accelerated as a result of certain events of default, including the failure to provide the pledge of promissory notes, the seizure of a substantial part of Transgarant’s assets, deterioration of Transgarant’s financial situation or the initiation of court or administrative proceedings against Transgarant exceeding certain thresholds. We plan to repay the outstanding indebtedness under this loan with the net proceeds from the Offering.

Raiffeisenbank Loan to Transgarant On 30 May 2011, Transgarant entered into a non-revolving credit facility with ZAO Raiffeisenbank allowing borrowings of up to RUB1,965 million. The loan was provided to purchase rolling stock, refinance existing indebtedness, finance or refinance (as applicable) corporate expenses and provide an intra-Group loan to Transgarant Ukraine for the purchase of railcars. As of 31 December 2012, the amount outstanding under this facility was RUB1,641.6 million (U.S.$54.1 million). The loan is secured by a pledge of rolling stock owned by Transgarant and a suretyship from FESCO. The loan has a final maturity date of 30 May 2016. The loan is subject to a number of financial covenants, including certain maintenance covenants and certain other covenants, such as a prohibition on the use of funds borrowed under this facility for certain purposes including, amongst others, providing loans to third parties, repaying liabilities owed by third parties, purchasing or paying off securities, investing into the capital of other companies, crediting Transgarant’s account with other banks or financing transactions that are unrelated to Transgarant’s principal activities or that violate the law. In addition, the loan can be accelerated or terminated as a result of certain events of default, including the deterioration of Transgarant’s financial position and the incurrence by Transgarant of overdue indebtedness to third parties and adverse court decisions granted against Transgarant, if such indebtedness or court decisions exceed certain thresholds. We plan to repay the outstanding indebtedness under this loan with the net proceeds from the Offering.

VTB Bank Loan to Transgarant On 5 July 2011, Transgarant entered into a non-revolving credit facility agreement with OJSC VTB Bank allowing borrowings of up to RUB1,445 million. The loan was provided to finance the acquisition of 100% of the participation shares in TEK MetizTrans, Investconsulting LLC and MetizTrans. As of 31 December 2012, the amount outstanding under this facility was RUB1,438.0 million (U.S.$47.3 million). The loan is secured by a pledge of rolling stock owned by Transgarant and Investconsulting LLC and a suretyship from FESCO, FESCO Lines Vladivostok, FIT and Investconsulting LLC. The loan has a final maturity date of 3 July 2016. The loan is subject to a number of maintenance covenants and general covenants, including providing certain share purchase agreements and accounting statements to the lender. In addition, the loan can be accelerated or terminated as a result of certain events of default, including the disposal of a substantial part of Transgarant’s or the sureties’ assets without prior written notice to the lender and the incurrence of overdue indebtedness by Transgarant or the sureties to third persons that exceeds certain thresholds. We plan to repay the outstanding indebtedness under this loan with the net proceeds from the Offering.

Other Pre-acquisition Indebtedness The summary below describes our other pre-acquisition indebtedness. Assuming gross proceeds from the Offering of U.S.$800 million, certain of the borrowings, described below will be repaid with the proceeds of the Offering. FESCO Sberbank Loan to FESCO On 15 November 2010, FESCO entered into a revolving credit facility agreement with Sberbank allowing borrowings of up to RUB648 million. The loan was provided to finance FESCO’s working capital. As of

128 31 December 2012, the amount outstanding under this facility was RUB384 million (U.S.$12.6 million). The loan is secured by a mortgage on certain FESCO real estate in Vladivostok and a suretyship from FESCO Lines Vladivostok. The loan has a final maturity date of 14 November 2013. The loan is subject to a number of financial covenants, including certain maintenance covenants. The loan can be accelerated in a number of events, including the following: (i) FESCO’s default under any payment obligations with respect to bonds and a mandatory or a voluntary offer of shares owned by FESCO in other companies as required under the JSC Law; (ii) acceleration of other FESCO indebtedness under loan agreements by any creditor; (iii) deterioration of the financial condition of FESCO or FESCO Lines Vladivostok; and (iv) the depreciation, deterioration or loss of security. In addition, FESCO is required to perform a number of notification obligations, non-performance of which may also result in the acceleration of the loan.

Raiffeisenbank Loan to FESCO On 11 July 2011, FESCO entered into a non-revolving credit facility with ZAO Raiffeisenbank allowing borrowings of up to U.S.$31 million. The loans was provided to finance FESCO’s working capital. As of 31 December 2012, the amount outstanding under the loan was U.S.$19.5 million. The non-revolving credit facility is secured by the mortgage of vessels owned by FESCO and a suretyship from FIT. The loan has a final maturity date of 11 July 2014. The loan is subject to a number of financial covenants, including certain maintenance covenants and certain other covenants, such as a prohibition on the use of funds borrowed under this facility for certain purposes including, amongst others, providing loans to third parties, repaying liabilities owed to third parties, purchasing or paying off securities, investing into the capital of other companies or financing transactions that are unrelated to FESCO’s principal activities or that violate the law. In addition, the loan can be accelerated or terminated as a result of certain events of default, including the deterioration of FESCO’s financial position and the incurrence by FESCO of overdue indebtedness to third parties and adverse court decisions granted against FESCO, if such indebtedness or court decisions exceed certain thresholds.

Bonver Shipping Company Limited ING Bank Loan to Bonver Shipping On 25 August 2010, Bonver Shipping Company Limited, a FESCO subsidiary, entered into a loan agreement with ING Bank N.V., London Branch allowing borrowings of up to U.S.$43 million. The loan was provided for general corporate purposes, including the repayment of certain intra-Group loans. As of 31 December 2012, the amount outstanding under this facility was U.S.$15.1 million. The loan is secured by the mortgage of seven vessels owned by FESCO subsidiaries and a pledge of shares held by FESCO in these subsidiaries, and guaranteed by FESCO and certain of its subsidiaries. The loan has a final maturity date of 16 August 2015. The loan is subject to a number of covenants, including (i) a negative pledge (with limited exceptions), applicable to Bonver Shipping Company Limited and companies providing security, as well as their shareholders; (ii) a prohibition applicable to all members of the Group on the disposal of all or a substantial part of their assets or any debt payable to Bonver Shipping Company Limited; (iii) a prohibition on Bonver Shipping Company Limited on incurring other liabilities or obligations or extending credit or financial assistance, other than in the ordinary course of business and intercompany loans; (iv) restrictions on Bonver Shipping Company Limited on the opening of certain accounts; (v) an obligation of FESCO to maintain ownership of the entire share capital in Bonver Shipping Company Limited, in the companies providing security, as well as in their shareholders; and (vi) a restriction on Bonver Shipping Company Limited on acquiring shares or securities in other companies, with certain exceptions. In addition, Bonver Shipping Company Limited is required to maintain insurance on, perform valuations of and observe restrictions regarding the use of vessels securing the loan.

Transgarant Credit agreement with ZAO UniCredit Bank On 3 August 2010, Transgarant entered into a credit agreement with UniCredit Bank allowing borrowings of up to RUB600 million. The loan was provided to finance Transgarant’s current activities. As of 31 December 2012, the amount outstanding under this facility was RUB297 million (U.S.$9.8 million).

129 The loan is secured by a suretyship from FESCO, FESCO Lines Vladivostok and Dalreftrans, and a pledge of rolling stock owned by Transgarant. The loan has a final maturity date of 5 August 2013. The loan is subject to a number of financial covenants, including certain maintenance covenants and certain other covenants, such as a limitation on raising financing, issuing guarantees and pledging property in an amount exceeding 25% of the balance sheet value of Transgarant, without prior consent of UniCredit Bank. In addition, the loan can be accelerated or terminated as a result of certain events of default, including the incurrence by Transgarant of overdue indebtedness to third parties and the filing of judicial or tax claims against Transgarant, in both cases if such indebtedness or claims exceed certain thresholds. On 12 March 2013, Transgarant entered into another credit agreement with UniCredit Bank allowing borrowings of up to RUB300 million. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations—Recent Developments’’.

VKT Credit facilities with Sberbank On 18 June 2010 and 24 March 2011, VKT entered into three credit facility agreements with Sberbank allowing borrowings of up to EUR588 thousand, EUR2.4 million and EUR2.4 million. The loans were provided to finance the acquisition of equipment. As of 31 December 2012, the amount outstanding under this facility was EUR5.2 million (U.S.$6.9 million). The loans are secured by a subsequent pledge of equipment and property rights under the contracts, and have final maturity dates of 13 June 2015 and 23 March 2016. The loan is subject to a number of financial covenants, including certain maintenance covenants. The loan can be accelerated as a result of certain events, including the following: (i) VMTP’s default under any other payment obligations with respect to bonds and a mandatory or voluntary offer of shares owned by FESCO in other companies as required under the JSC Law; (ii) the acceleration by any creditor of VMTP indebtedness under other loan agreements; (iii) the deterioration of VMTP’s financial situation and (iv) the depreciation, deterioration or loss of security.

VMTP Raiffeisenbank Loans to VMTP On 28 June 2011, VMTP entered into a letter of credit with ZAO Raiffeisenbank allowing borrowings of up to EUR8.6 million to finance the acquisition of equipment. As of 31 December 2012, the amount outstanding under this letter of credit was EUR8.6 million (U.S.$11.4 million). The letter of credit is secured by a pledge of equipment and has a final maturity date of 30 June 2016. On 2 May 2012, VMTP entered into an overdraft agreement with ZAO Raiffeisenbank allowing up to RUB50 million in borrowings. Proceeds from the overdraft agreement were used to finance working capital. There is no outstanding amount under the overdraft agreement. The overdraft agreement is unsecured and has a final maturity date of 25 October 2013. The loans are subject to a number of financial covenants, including certain maintenance covenants. In addition, the overdraft agreement can be accelerated or terminated as a result of certain events of default, including the deterioration of VMTP’s financial position.

Sberbank Loan to VMTP On 10 November 2011, VMTP entered into a non-revolving credit facility agreement with Sberbank allowing borrowings of up to RUB500 million. The loan was provided to cover expenses incurred under certain investment projects, as well as for the expansion of VMTP’s production and business activities. As of 31 December 2012, the amount outstanding under this facility was RUB500 million (U.S.$16.5 million). The loan is secured by a mortgage on a building owned by VMTP, and has a final maturity date of 9 November 2016. The loan is subject to a number of financial covenants, including certain maintenance covenants. The loan can be accelerated as a result of certain events, including the following: (i) VMTP’s default under any other payment obligations with respect to bonds and a mandatory or voluntary offer of shares owned by FESCO in other companies as required under the JSC Law; (ii) the acceleration by any

130 creditor of VMTP indebtedness under other loan agreements; (iii) the deterioration of VMTP’s financial situation; and (iv) the depreciation, deterioration or loss of security. In addition, VMTP shall perform a number of notification obligations, non-performance of which may also result in the acceleration of the loan.

Credit facilities with OJSC VTB Bank On 16 May 2008 and 24 January 2011, VMTP entered into three credit facility agreements with OJSC VTB Bank allowing borrowings of up to EUR1.1 million, EUR1.2 million and EUR6.5 million, respectively. The loans were provided to finance the acquisition of equipment. As of 31 December 2012, the amount outstanding under these facilities was EUR110.6 thousand, EUR245.5 thousand and EUR6 million, respectively. The loans are secured by a pledge of equipment including equipment to be purchased in the future as well as a mortgage on vessels. The loans have final maturity dates of 31 January 2013 and 25 December 2015. In January 2013, VMTP fully repaid EUR110.6 thousand and EUR243.5 thousand outstanding under two of these loans and released the vessels from the mortgage. The outstanding credit facility agreement is subject to a number of maintenance covenants and general covenants, including providing accounting statements to the lender. In addition, the loan can be accelerated or terminated as a result of certain events of default, including the disposal of a substantial part of VMTP’s assets without prior written notice to the lender and the incurrence of overdue indebtedness by VMTP to third persons that exceeds certain thresholds. In addition, VMTP is subject to a number of notification obligations, the non-performance of which may also result in the acceleration of the loan.

Description of material finance lease agreements Transgarant Finance lease with Sberbank Leasing On 25 February 2011, Transgarant entered into a finance lease agreement with Sberbank Leasing CJSC to purchase railcars for an aggregate amount of RUB3,363.8 million. Sberbank Leasing CJSC, as lessor, has agreed to lease 1,725 railcars to Transgarant, which has an option to buy the railcars within the term specified in the agreement. As of 31 December 2012, the amount outstanding under this finance lease agreement was RUB2,076 million (U.S.$68.4 million). This finance lease has a final maturity date of 25 February 2016. The agreement is unsecured. The finance lease is subject to a number of events of default, including Transgarant’s subleasing of railcars to a third person without the lessor’s written consent. In addition, Transgarant is required to maintain the railcars and provide the lessor with information on their use and condition.

Pacific Conlease Company Limited Finance leases with TAL International Container Corporation On 1 March 2007, Pacific Conlease Company entered into a Master Lease Agreement with Tal International Container Corporation and three addenda for the delivery of dry cargo and refrigerator containers for the aggregate amount of U.S.$25.7 million. TAL International Container Corporation, as lessor, has agreed to lease the containers to Pacific Conlease Company, which has an option to buy the containers subject to giving prior notice to the lessor. As of 31 December 2012, the amount outstanding under the addenda was U.S.$8.3 million. The three finance leases have final maturity dates of 31 July 2013, 1 September 2015 and 1 November 2015, respectively. The finance lease is guaranteed by FESCO. The finance leases are subject to a number of events of default, including the lessor becoming aware of any fact that, in its reasonable opinion, results in it losing its security under this finance lease agreement.

Description of margin loan Halimeda International Limited structured financing transaction with ING Bank N.V., London Branch, Natixis S.A. and East-West United Bank S.A. On 7 December 2012, Halimeda International Limited entered into a share swap and a share forward transaction with each of ING Bank N.V., London Branch, Natixis S.A. and East-West United Bank S.A.

131 Pursuant to the transactions, the financial institutions extended financing in the amount of U.S.$140 million in the aggregate, including, U.S.$90 million under the transaction with Natixis S.A., U.S.$30 million under the transaction with ING Bank N.V., London Branch and U.S.$20 million under the transaction with East-West United Bank S.A. As of 31 December 2012, the principal amount outstanding under these transactions was U.S.$140 million. The proceeds of the financing were on-lent by Halimeda International Limited to Maple Ridge (through its holding company) for the purposes of the acquisition of FESCO shares. The transactions were entered into on the basis of the 2002 ISDA Master Agreements (subject to certain adjustments). The transactions benefit from security over the shares and global depositary receipts over shares in TransContainer, as well as certain cash collateral. The transactions also benefit from guarantees from Merbau Synergy Limited, Sian Participation Corp. and Souz Petrolium SA and pledges of receivables over certain bank accounts of Halimeda International Limited and Sian Participation Corp opened with ING Bank N.V. Halimeda International Limited is subject to a number of covenants in connection with the transactions, including but not limited to, restrictions on the ability: (i) to create security, (ii) incur further indebtedness, (iii) make distributions, and (iv) make asset disposals. There is also a general restriction on Halimeda International Limited’s ability to trade and carry on its business. The transactions are without recourse to other members of the Group.

132 INDUSTRY MACROECONOMIC OVERVIEW The Russian Federation is the largest country in the world by territory and is characterized by significant distances both between population centres and between suppliers of raw materials and their intermediate or end customers. Russia has a territory of 17,098,242 square kilometres covering more than one-ninth of the Earth’s land area, and extends across the whole of northern Asia and a large part of Europe, spanning nine time zones. Prior to the recent global economic slowdown, the period between 2000 and 2008 was characterized by economic growth in Russia. Favourable commodity market conditions had facilitated the improvement of Russia’s trade balance, allowing the Government of the Russian Federation to build up budget surpluses and foreign currency reserves, which enabled increased public investment in infrastructure and accumulation of foreign exchange reserves. Growing incomes resulted in strong demand for housing and consumer goods, which significantly facilitated overall production growth across all segments. Starting from the second half of 2008, the Russian economy was adversely affected by the global economic downturn. Since foreign currency reserves were accumulated by the CBR during the preceding period of consequent growth, significant stimulus packages were put in place by the Government, lessening the impact of the global economic downturn on the Russian economy, which, according to the Ministry of Economic Development of the Russian Federation and its predecessors, returned to 0.1% monthly GDP growth in June 2009 (free of seasonal factors) and continued to grow thereafter. Depreciation of the Rouble during the downturn also substantially improved the cost competitiveness of Russia’s export-focused industries. Improvements in the Russian macroeconomic environment have also resulted in a significant acceleration of industrial production, foreign trade and investment growth. Industrial production demonstrated 8.2% growth in 2010, 4.7% in 2011 and 2.6% in 2012. According to Rosstat, export volumes increased from U.S.$302 billion in 2009 to U.S.$529 billion in 2012 and import volumes increased from U.S.$192 billion in 2009 to U.S.$366 billion in 2012. Key macroeconomic indicators exceeded pre-crisis levels in 2011 and continued to demonstrate growth in 2012. The following table sets Russian GDP and year-on-year growth, as well as other key macroeconomic indicators in Russia between 2007 and 2012:

For the year ended 31 December 2007 2008 2009 2010 2011 2012 (RUB billion) Russian GDP ...... 33,248 41,277 38,807 46,322 55,799 62,357 Gross fixed investment ...... 6,716 8,782 7,976 9,152 11,036 12,569 (RUB per capita) Average personal income(1) ...... 12,540 14,864 16,895 18,951 20,755 22,811 (U.S.$ billion) Export volume(2) ...... 352 468 302 397 517 529 Import volume(2) ...... 200 267 192 249 324 336 (% to previous year) Industrial production ...... 6.8% 0.6% (9.3)% 8.2% 4.7% 2.6% Average personal income(1) ...... 23.5% 18.5% 13.7% 12.2% 9.5% 9.9% Export volume(2) ...... 16.8% 32.9% (35.1)% 32.0% 30.3% 1.4% Import volume(2) ...... 45.0% 33.7% (28.2)% 29.6% 30.2% 3.6% (% real growth) Russian real GDP growth ...... 8.5% 5.2% (7.8)% 4.5% 4.3% 3.4% Gross fixed investment ...... 23.8% 9.5% (13.5)% 6.3% 10.8% 6.6%

Source: Rosstat (1) Preliminary estimate for 2012. (2) Export and import volumes as per Federal Customs Service statistics.

133 According to the Ministry of Economic Development of the Russian Federation, economic growth is likely to continue in Russia in the medium-term, with GDP expected to rise by 2.4% in 2013, 3.7% in 2014 and 4.1% in 2015 and industrial production is expected to demonstrate 2.0% growth in 2013 and 3.4% growth in each of 2014 and 2015. In addition, the Ministry of Economic Development of the Russian Federation expects exports to increase from U.S.$506 billion in 2013 to U.S.$509 billion in 2015, for a CAGR of 0.3%, and imports to increase from U.S.$355 billion in 2013 to U.S.$387 billion in 2015, for a CAGR of 4.4%.

RUSSIAN PORTS OPERATIONS AND INFRASTRUCTURE In Russia, ports represent the major gateway for the export and import of cargo. Historically, Russian ports have been export-oriented and closely integrated with rail and pipeline systems to handle significant portions of bulk cargo. Over the last five years, the throughput of Russian ports demonstrated a 5.6% CAGR as per the Association of Sea Commercial Ports (‘‘ASOP’’), primarily due to increased volumes of exported and transit cargo and a gradual shift of Russian cargo volumes away from ports in former Soviet countries to Russian ports. Even during the economic downturn of 2009, the throughput of Russian ports demonstrated a 9.2% growth rate according to ASOP. The throughput of Russian ports was positively affected by implementation of various brownfield expansion projects in existing ports and the launch of several new ports (including ports at Ust-Luga on the Baltic Sea and Kosmino in the Far East of Russia). These factors resulted in a decline of the share of foreign ports in the handling of Russian cargo from 18.0% in 2009 to 14.3% in 2012 according to Rosmorport and Morcenter. In 2012, Russian ports experienced accelerated throughput growth of 5.6% according to ASOP, driven primarily by continuingly favourable conditions in the commodity markets and the strong momentum of the Russian economy. Port throughput is divided into export, import, cabotage and transit/coastal volumes. Export volumes constitute the largest part of throughput and accounted for 78.9% of total throughput in 2012. Oil, oil products, coal and metallurgical products constitute the majority of cargo exported through Russian ports. Although commodity prices have exhibited significant volatility in recent years, overall demand for Russian commodities resulted in moderate growth, with export throughput demonstrating 6.7% CAGR from 2008 to 2012 according to ASOP. Import volumes constituted 8.4% of total throughput and demonstrated more volatile dynamics over the past several years, with a sharp decline of 34.9% in 2009 and a 43.6% rebound in 2010. Import volumes mainly include consumer goods, machinery and equipment and chemicals, which are more dependent on domestic consumer and industrial demand. In 2012, import throughput through Russian ports increased by 6.3% compared with 2011, primarily due to ongoing growth of the Russian economy, increased consumer spending and the import of consumer goods and industrial machines. The following table sets forth the throughput volumes of Russian ports from 2008 to 2012:

For the year ended 31 December 2008 2009 2010 2011 2012 (Throughput in millions of tonnes) Export ...... 344 385 404 409 446 YoY growth, % ...... — 11.9% 5.0% 1.1% 9.2% Import ...... 42 27 39 45 47 YoY growth, % ...... — (34.9)% 43.6% 13.4% 6.3% Other ...... 69 84 82 82 72 YoY growth, % ...... — 22.8% (2.5)% (0.1)% (12.5)% Total ...... 456 496 526 535 565 YoY growth, % ...... — 9.2% 5.9% 1.8% 5.6%

Source: ASOP Russian port throughput in 2012 consisted mainly of oil and oil products, coal, containerised cargo and ferrous metals, comprising 55.0%, 15.8%, 7.6% and 4.5% of total volume, respectively, according to ASOP. Other major cargoes included timber, grain and mineral fertilisers.

134 Rosmorport, the Russian state-controlled operator of port infrastructure, expects the throughput of Russian ports to continue to rise, driven primarily by: • The retention of Russia’s leading position as supplier of crude oil, coal, grain and other commodities to the global markets, and Russian ports remaining the key route for the export of these commodities. • The continued strong growth of import volumes fuelled by consumer and industrial demand. • The completion of current investment projects in Russian ports, including the expected implementation of an additional 210 million tonnes of handling capacity by 2016, which is expected to add 37.0% above 2012 capacity.

Key features of Russia’s sea basins The geography of the Russian sea trade is divided into three basins: the North West Sea Basin (which includes ports on the Baltic Sea and in the Arctic regions), the South Basin (which includes ports on the Black and Caspian Seas) and the Far East Basin (which includes Russian ports on the Pacific coast). The Baltic Sea Basin remains the largest basin by throughput, while the Far East Basin has demonstrated the fastest growth over the past years. The North West Basin (including the Baltic Sea and ports on the Arctic coast of Russia) accounts for 43.5% of the total cargo throughput of Russian ports and posted a 3.3% CAGR from 2009 to 2012. The largest ports of the North West Basin are located in St. Petersburg, Ust-Luga, Primorsk and Kaliningrad. The North West Basin is the main sea gateway to Russia, as it is the closest basin to Russia’s industrial core regions and financial centres, which are key markets for imported durable and capital goods. In addition, a significant amount of oil and oil products is exported to Europe through the ports on the Baltic Sea. The South Basin (including the Black and Caspian Seas) accounts for 32.8% of the total port throughput and demonstrated a 0.8% CAGR from 2009 to 2012. Novorossiysk Commercial Sea Port is its largest port and the only Russian deep-sea port in the Black Sea. The ports of the Black Sea Basin have a diversified cargo mix with almost no cabotage volumes. Novorossiysk and other Black Sea ports compete with Ukrainian deep-sea ports to handle transit traffic to and from Russia. The Far East Basin is a natural gateway for container traffic to and from eastern Russia and a major route for the export of coal and metallurgical products to Asian markets. The ports in the Far East Basin have been the most dynamic, with a growing throughput at a 13.4% CAGR from 2009 to 2012, increasing their share in total throughput from 18.6% in 2009 to 23.7% in 2012. The Far East Basin has benefited from Asia’s strong economic growth, which has generated strong demand for Russian raw materials, particularly oil and coal. These ports also serve the eastern regions of Russia, which include a significant domestic cabotage trade, and handle cargo bound west to central Russia, Central Asia and Moscow by rail. This overland option offers transit time advantages for cargo from the Far East to Moscow and other major cities, which is crucial for time-sensitive and high-value goods. The largest ports in the Far East Basin are Vladivostok, Vanino, Vostochniy, Nakhodka and Posyet. These ports are connected to railway and pipeline infrastructure and handle the majority of liquid and bulk cargo. Vladivostok and Vostochniy are two key ports for the handling of containerised cargo. The following table demonstrates the throughput of Russian ports by basin, from 2009 to 2012:

For the year ended 31 December 2009 2010 2011 2012 (Throughput in millions of tonnes) North-West Basin ...... 223 228 227 246 South Basin ...... 181 180 184 185 Far East Basin ...... 92 118 125 134 Total ...... 496 526 535 565

Source: ASOP

135 RAIL TRANSPORTATION The Russian railway system is one of the largest globally, ranked third largest by operational network length (86,000 kilometres as of 2011) in the world with cargo volumes transported of 1272 million tonnes and turnover of 2,222 billion tonnes-kilometres in 2012 according to Rosstat and Russian Railways. An extensive rail network connects the majority of Russia’s regions and offers transportation service to major cities. The European part of Russia has a relatively dense railway network, while two main railway lines to the east from Urals, the Trans-Siberian Railway and Baikal-Amur Mainline, connect the regions in South Siberia and the Far East with the European part of Russia. Rail transportation plays a key role in the Russian economy for the following reasons: • Russia is characterised by a high concentration of population and production in several regions with significant distances between both the suppliers of raw materials and intermediates on one side and the largest cities and end-customers on the other. • A limited road network, severe climate conditions and a lack of suitable waterways make rail the only major viable alternative for cargo transportation across the entire territory of Russia. • As the Russian economy is largely commodity-driven, rail represents one of the most efficient transportation methods for bulk freight. The Russian railway system has gradually been increasing its share in freight turnover in the recent years. The share of rail transportation in total freight turnover increased from 38% (80% excluding pipeline traffic) in 2000 to 43% (85% excluding pipeline traffic) in 2011. Russian freight rail turnover has demonstrated a stable increase with a 4.1% CAGR from 2001 to 2012. The increase has been driven, in particular, by strong GDP growth and surging global demand for commodities, which are major cargoes for Russian rail operators. During the economic downturn in 2009, Russian freight rail turnover experienced a decline of 11.9%, but as the Russian economy started to recover, turnover returned to pre-crisis levels in 2011. In 2012 the freight rail turnover demonstrated a 4.4% growth rate compared with 2011, supported by high demand for exported commodities and continuing rebound in domestic consumer demand and industrial production.

For the year ended 31 December 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 (Turnover in billions of tonne-kilometres) Rail Freight Turnover ...... 1,434 1,510 1,669 1,802 1,858 1,951 2,090 2,116 1,895 2,011 2,128 2,222 YoY growth, % ...... 4.4% 5.3% 10.5% 8.0% 3.1% 5.0% 7.1% 1.2% (11.9)% 7.8% 5.8% 4.4% (Volume in millions of tonnes) Rail Freight Volume ...... 1,058 1,084 1,161 1,221 1,273 1,312 1,345 1,304 1,109 1,206 1,242 1,272 YoY growth, % ...... 1.1% 2.5% 7.1% 5.2% 4.3% 3.1% 2.5% (3.0)% (15.0)% 8.8% 3.0% 2.4%

Source: Rosstat, Russian Railways Freight rail turnover is expected to continue to grow, driven by the following factors: • A strong correlation of Russian industrial production and freight turnover has been witnessed in the past. The Ministry of Economic Development of the Russian Federation expects industrial production growth of 2.0% in 2013 and 3.4% in each of 2014 and 2015, which would support a continued increase in freight rail turnover. • Further growth of private rail car operators and deregulation of tariffs is expected to positively affect the sector. Stronger competition is expected to increase efficiency of railcar operators, optimisation of routes and minimisation of empty run costs. See ‘‘Regulatory Overview—Rail—Competition and Pricing’’ and ‘‘—Structural Reform of Railway Transportation’’. • The Russian Ministry of Transport and Russian Railways plan to continue to invest in railway infrastructure development aimed at increasing the rail system’s throughput capacity, reducing bottlenecks and improving railway transportation safety.

Rail Freight Overview Thermal and coking coal, oil and oil products, construction materials and metallurgical products constitute the top cargo transported by railway. Both coking coal and metallurgical products benefited from robust domestic demand primarily from the construction, engineering and energy sectors. Thermal

136 coal transportation volume is driven by demand for electricity from industrial consumers mainly located in Siberia and the Far East as well as by growing demand and prices for thermal coal in the international markets.

Russian Freight Rail % of Total Russian Transportation Freight Rail Volume in millions Transportation tons Volume Cargo 2010 2011 2012 2010 2011 2012 Chemicals and Mineral Fertilisers ...... 46 47 45 4% 4% 4% Coal ...... 286 296 308 24% 24% 24% Construction Materials ...... 143 158 215 12% 13% 17% Ferrous Materials ...... 94 94 91 8% 8% 7% Iron and Manganese Ore ...... 102 111 110 8% 9% 9% Oil and Oil Products ...... 253 250 258 21% 20% 20% Timber...... 42 41 36 3% 3% 3% Other ...... 242 246 208 20% 20% 16%

Source: Russian Railways

Railcar Market The Russian railcar fleet is the second largest globally with approximately 1,152 thousand railcars as of 31 December 2012, according to INFOLine. The fleet of railcars in Russia consists primarily of gondola (open top) cars which constitute 46% of the total fleet. Gondola cars can be used for carrying a variety of cargoes (ferrous metals, scrap metals, ores, coal, etc). Tank cars used for transporting oil and other liquid commodities are the second largest type of railcars (24% of the total fleet). Box cars (6% of the total fleet) are mostly used for general cargo. Flat cars (5% of the total fleet) have an open flat deck and are designed to carry machinery, containers, timber, etc. Privatisation of freight railcars is one of the main results of the rail sector liberalisation. See ‘‘Regulatory Overview—Rail—Structural Reform of Railway Transportation’’. A highly liquid market for railcars exists in Russia and allows operators to buy or lease railcars. The prices for railcars and rent rates are typically impacted by economic conditions, availability of production capacities at manufacturers and cost of raw materials (primarily steel).

Railcar Price Railcar Rent Rates in RUB thousand per railcar in RUB per railcar-day Railcar type 2008 2009 2010 2011 2012 2008 2009 2010 2011 2012 Boxcar ...... 2,651 1,529 2,005 2,585 2,661 1,171 765 1,076 1,154 1,366 Cement hopper ...... 1,919 1,392 1,621 2,229 2,364 1,113 285 549 928 1,129 Gondola ...... 2,200 1,302 1,674 2,274 2,194 1,285 672 961 1,434 1,211 Tank car ...... 2,083 1,429 1,890 2,452 2,501 930 890 1,016 1,139 1,267 Platform (40ft) ...... 1,836 1,308 1,480 2,103 2,096 875 463 538 835 1,138 Platform (80ft) ...... 2,418 1,638 1,882 2,410 2,457 1,047 644 725 988 1,274

Source: INFOLine

Competitive Landscape The rail transportation sector is becoming more competitive as the share of railcar fleet owned by Russian Railways and its subsidiaries decreased from 67% in 2006 to approximately 22% as of 31 December 2012 according to INFOLine data, and private operators have been expanding their fleets through acquisition of new railcars. Railcar ownership is split across several categories of companies: • Russian Railways and its subsidiaries (notably Federal Freight and TransContainer): remaining cars post-privatisation of the rest of the Russian Railways fleet. • Independent transportation companies: operators of railcars that provide transportation services to third parties. They typically own their cars, but can also lease from other providers. The largest players include UCL Rail, Globaltrans, NefteTransService, Transoil and Novotrans.

137 • Cargo owners: large private commodities producers that often keep a certain fleet of railcars to operate on selected routes and secure guaranteed access to railcars. This category includes companies like SUEK, Mechel, Gazprom, Eurochem, SIBUR and others. These companies often own their own fleet and lease additional railcars when needed. • Operating leasing companies: independent companies focused on purchasing railcars and providing operating leasing services to transportation companies or cargo owners. The largest players in this segment are Brunswick Rail, OTEKO, RRR and United Wagon Company. The sector remains fragmented, with over 1,800 railcar operators, while only approximately 30 of them manage more than 2,000 railcars as of 1 January 2013 according to INFOLine data. Strengthening of competition, significant economies of scale and capital expenditure requirements are expected to lead to further consolidation and many of the smaller players are likely to leave the market as larger companies continue to expand. See ‘‘Regulatory Overview—Rail—Structural Reform of Railway Transportation’’.

Railcar fleet under management(1) Owned railcar fleet Thousands Share of Thousands Share of Railcar Operators Ownership of railcars total fleet of railcars total fleet UCL Rail ...... Private 195.0 16.9% 209.1 18.2% Federal Freight ...... State-owned 84.0 7.3% 163.7 14.2% NefteTransService ...... Private 64.2 5.6% 42.3 3.7% Globaltrans ...... Private 52.7 4.6% 58.5 5.1% RusTransCom ...... Private 38.9 3.4% 29.4 2.6% Transoil ...... Private 35.8 3.1% 24.2 2.1% UniRail ...... Private 30.8 2.7% 29.9 2.6% Novotrans ...... Private 26.8 2.3% 26.8 2.3% Gazpromtrans ...... State-owned 26.6 2.3% 16.7 1.5% TransContainer ...... State-owned 25.0 2.2% 24.7 2.1% Rail Garant ...... Private 20.5 1.8% 26.6 2.3% SUEK ...... Private 17.7 1.5% 2.5 0.2% FESCO (Transgarant) ...... Private 16.2 1.4% 15.0 1.3% SIBUR-Trans ...... Private 14.4 1.3% 6.2 0.5% Sovfracht ...... Private 13.2 1.1% 1.8 0.2% Total ...... 661.8 57.5% 677.4 58.8%

Source: INFOLine (1) Fleet under management is defined as total owned (incl. under financial lease) and rented in-fleet less owned fleet rented-out to third parties FESCO’s rail business, represented by Transgarant, is amongst the ten largest private participants in the sector (excluding state-owned operators) by number of railcars under management. TransContainer is

138 Russia’s leading intermodal container transportation and logistic company and the eighth largest operator, but is the largest provider of rail container services by a significant margin.

Transportation Transportation volume turnover Share of Share of total total Railcar Operators Ownership Mn ton volume Bn ton-km turnover UCL Rail ...... Private 194.8 15.3% 368.2 16.6% NefteTransService ...... Private 79.1 6.2% 163.5 7.4% Globaltrans ...... Private 74.3 5.8% 116.7 5.3% Federal Freight ...... State-owned 65.5 5.1% 140.0 6.3% Transoil ...... Private 56.0 4.4% 71.8 3.2% Rail Garant ...... Private 35.6 2.8% 74.7 3.4% RusTransCom ...... Private 31.1 2.4% 54.1 2.4% Gazpromtrans ...... State-owned 24.7 1.9% 40.1 1.8% Novotrans ...... Private 24.3 1.9% 70.1 3.2% Zapsib-Transservis ...... Private 24.0 1.9% 19.5 0.9% FESCO (Transgarant) ...... Private 23.6 1.9% 29.7 1.3% UniRail ...... Private 22.8 1.8% 41.3 1.9% SUEK ...... Private 22.4 1.8% 41.2 1.9% Evrosib ...... Private 20.9 1.6% 35.3 1.6% ISR Trans ...... Private 15.7 1.2% 20.8 0.9% Total ...... 714.8 56.2% 1,287.0 57.9%

Source: INFOLine

THE CONTAINER MARKET The Russian container market has been rapidly developing in recent years, supported by the growth in consumer and industrial spending and imports. Russian import volumes increased by more than five times over the last ten years and growth of machinery and equipment imports outpaced the overall import growth over the same time period. These developments contributed to booming demand for consumer products and equipment transported in containers. Thus container traffic growth rate was significantly higher than real GDP and foreign trade growth rates. Container transportation was the fastest growing segment of the Russian transportation sector in the last several years and made Russia one of the fastest growing container markets in the world.

CAGR 2008 2009 2010 2011 2008-11 (Thousand TEUs) Russia(1) ...... 2,516 3,602 4,631 5,062 26.2% India(2) ...... 7,661 8,012 9,753 9,951 9.1% Brazil(2) ...... 6,904 6,575 8,121 8,598 7.6% China(2) ...... 115,935 107,963 128,930 138,391 6.1% Rep. of Korea(2) ...... 17,418 15,699 18,538 20,809 6.1% Turkey(2) ...... 5,194 4,522 5,547 5,999 4.9% World total(2) ...... 515,763 472,274 540,693 572,834 3.6%

Source: (1) Morcenter; (2) UNCTAD The total Russian ports container traffic in ports grew from 879 thousand TEUs in 2003 to 5,062 thousand TEUs in 2012, demonstrating 21.5% CAGR, implying a multiplier of 5.0x to GDP growth. Although during the economic downturn container traffic experienced a decline of 33.3% in 2009, it saw a strong rebound

139 of 43.2% in 2010, which then slowed down to 28.6% in 2011 and 9.3% in 2012. In 2012, Russian container throughput was 34.2% higher than the pre-crisis 2008 level.

CAGR 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2003-12 (Thousand TEUs) Russia’s port container throughput(1) ...... 879 1,465 1,979 2,431 3,172 3,773 2,516 3,602 4,631 5,062 — YoY growth, % ...... — 66.7% 35.1% 22.8% 30.5% 19.0% (33.3%) 43.2% 28.6% 9.3% 21.5% Russian real GDP growth, %(2) ...... 7.3% 7.2% 6.4% 8.2% 8.5% 5.2% (7.8%) 4.5% 4.3% 3.4% 4.3% Container traffic growth to GDP growth multiplier — 9.3 x 5.5 x 2.8 x 3.6 x 3.6 x 4.3 x 9.5 x 6.7 x 2.7 x 5.0 x

Source: (1) Morcenter; (2) Rosstat Russian Railways have forecasted that containers will remain the fastest growing cargo in Russia, primarily due to the following factors: • A recovering macro environment should support consumer and industrial spending. The Ministry of Economic Development of the Russian Federation expects real GDP growth of 2.4% in 2013, 3.7% in 2014 and 4.1% in 2015, which should translate into continuing strong growth of container traffic. • Container penetration levels remain fundamentally low (25 TEUs per thousand capita in Russia compared to 180 TEUs in Germany, 138 TEUs in the U.K., 135 TEUs in the US, 83 TEUs in China and 42 TEUs in Brazil in 2010 according to UNCTAD and Morcenter) and is expected to catch up to levels in more developed markets. • The containerisation levels of Russian cargo flows remain significantly below international benchmarks and create the potential for further growth. Russian Railways predicted container transit in ports to demonstrate 11.5% CAGR from 2011 to 2015 and TransContainer expects transportation by rail to demonstrate a 7.5% CAGR over 2012-2020.

Container Transportation Market Segments The Russian container transportation market includes three segments: container handling at ports, container transportation by rail and truck deliveries of containers. Ports are the major gateways for imported and exported containers to and from Russia. Russian exports are dominated by bulk and liquid commodities (where containerisation is relatively low), while imports comprise mainly finished consumer goods, machinery and assembly parts for foreign manufacturers with production in Russia (most of which is delivered in containers).

2006 2007 2008 2009 2010 2011 2012 (Thousand TEUs) Russia’s ports(1) ...... 2,431 3,172 3,773 2,516 3,602 4,631 5,062 YoY growth, % ...... 22.8% 30.5% 19.0% (33.3%) 43.2% 28.6% 9.3% Russia’s rail(2) ...... 1,838 2,111 2,435 1,903 2,298 2,715 2,971 YoY growth, % ...... 7.3% 14.9% 15.4% (21.9%) 20.8% 18.2% 9.4%

Source: (1) Morcenter; (2) INFOLine Rail transportation of containers constitutes nearly one-third of the total inland containers transported and is normally used for long-distance deliveries where rail has cost advantages compared to trucks. Over the last decade container traffic at ports and railways demonstrated similar dynamics affected by the same factors driving the overall market growth. Container traffic in ports increased with higher growth rates and showed more volatile dynamics during the economic downturn due to its high dependency on import flows. After the economy started to recover, both railway and port traffic recovered in the next two years.

Container Traffic Flows The majority of containerised cargo is still delivered by road, as trucking is the key mode of transportation for inland container traffic. Roads are normally used for short-distance deliveries or first- or last-mile port and rail connections where speed of delivery and flexibility of service are crucial. Russian rail container throughput involves a wide range of consumer and industrial goods. Containerisation levels vary across different cargoes in Russia with pulp and paper, non-food consumer

140 goods and non-ferrous metals having the highest containerisation level. Most of the cargoes are below global averages in terms of containerisation, which creates the potential for further growth of container volumes.

Container traffic flows by % of total container traffic flows rail by type of cargo by rail by cargo 2010 2011 2012 2010 2011 2012 (Thousand TEUs) (as % of total) Automobiles ...... 169 214 258 7.4% 7.9% 8.7% Pulp & Paper ...... 217 238 234 9.4% 8.8% 7.9% Chemicals & Sodium Ash ...... 169 202 227 7.3% 7.4% 7.6% Heavy Machinery ...... 78 121 128 3.4% 4.4% 4.3% Non-ferrous Metals ...... 81 94 99 3.5% 3.5% 3.3% Ferrous Metals ...... 68 78 81 2.9% 2.9% 2.7% Construction Materials ...... 51 67 72 2.2% 2.5% 2.4% Oil Products ...... 48 58 70 2.1% 2.2% 2.3% Other Cargos ...... 518 585 648 22.5% 21.5% 21.8% Empty Containers ...... 901 1,058 1,155 39.2% 39.0% 38.9% Total Russian rail container traffic ...... 2,298 2,716 2,971 100.0% 100.0% 100.0%

Source: INFOLine Total Russian exports are heavily dominated by oil and oil products and other bulk cargo. Only a small portion of Russian export cargoes are containerised given the nature of cargoes transported. Russian containerised exports consist mainly of pulp and paper, processed timber and non-ferrous metals. Auto components used in the assembly of foreign cars in Russia constitute the largest share of imported cargo in containers. Containerised imports also include various food and non-food consumer products (footwear, clothing, domestic appliances, etc.), chemicals and rapidly growing volumes of industrial equipment and machinery. Domestic traffic of containerized cargo is more diversified than export and import cargo flows. Major cargoes transported domestically include chemicals, food and non-food consumer goods, machinery and equipment, metal products and paper. Transit containerised cargo flows mainly include auto components, ferrous metals and food. Container traffic flows by % of total container traffic flows rail by direction by rail by direction 2010 2011 2012 2010 2011 2012 (Thousand TEUs) (as % of total) Domestic ...... 1,123 1,283 1,361 48.9% 47.2% 45.8% Export ...... 545 705 755 23.7% 26.0% 25.4% Import ...... 471 555 617 20.5% 20.4% 20.8% Transit ...... 160 173 238 7.0% 6.4% 8.0% Total Russian rail container traffic ..... 2,298 2,716 2,971 100.0% 100.0% 100.0%

Source: INFOLine

Container ports and terminals The Russian container terminals are located in the ports of the Baltic Sea Basin, the Far East Basin and the Black Sea Basin. The ports are focused on serving local markets that are captive to their respective basins, as well as a contestable hinterland. The way these regions are served is determined by container terminal location, capacity and quality of rail connections. Historically, the Baltic Sea Basin has held the

141 greatest market share at approximately 60%, due to its proximity to Moscow and other major cities of the European part of Russia and the associated shorter delivery times and lower costs.

Container traffic flows in % of total container traffic flows ports by basin in ports by basin 2010 2011 2012 2010 2011 2012 (Thousand TEUs) (as % of total) Baltic Sea Basin ports ...... 2,281 2,815 3,055 63.3% 60.8% 60.4% YoY growth, % ...... 47.1% 23.4% 8.5% ——— Black and Caspian Seas Basin ports ..... 456 676 689 12.7% 14.6% 13.6% YoY growth, % ...... 36.2% 48.2% 2.0% ——— Far East Basin ports ...... 865 1,139 1,317 24.0% 24.6% 26.0% YoY growth, % ...... 37.3% 31.8% 15.6% ——— Total Russian ports ...... 3,602 4,631 5,062 100% 100% 100% YoY growth, % ...... 43.2% 28.6% 9.3% ———

Source: Morcenter The Far East Basin serves the regional industrial and consumer market and is a gateway for containers from Far East countries delivered westward via the Trans-Siberian Railway. The Far East Basin is well positioned to leverage the ongoing growth of foreign trade volumes between Russia and the Far East countries and sustain its leadership in container export/import, given limited competition for Russian cargo from foreign ports and underdeveloped rail infrastructure between Russia and China.

Competitive Landscape The container port terminal market is dominated by four operators: Global Ports, National Container Company, FESCO and NCSP. Both Global Ports and the National Container Company operate container terminals in several sea basins, while NCSP and FESCO concentrate their operations in one particular basin, the South Basin and Far East Basin, respectively. FESCO, through the Port of Vladivostok, is the leading operator of container terminals in the Far East Basin by volume and is the largest by throughput capacity (600,000 TEU) followed by VSC, located in the Vostochniy port, with throughput capacity of 550,000 TEU. Other ports, including those at Korsakov, Petropavlovsk-Kamchatsky and Nakhodka, as well as VSFP, have significantly smaller scope of container operations. The table below shows total container throughput in the Russian Far East ports from 2010 to 2012.

Container traffic flows in % of total container traffic flows ports by basin in ports by basin 2010 2011 2012 2010 2011 2012 (Thousand TEUs) (As % of total) (FESCO) Port of Vladivostok ...... 339 432 456 39.2% 37.9% 34.6% VSC...... 254 339 397 29.4% 29.7% 30.1% VSFP ...... 77 108 145 8.9% 9.5% 11.0% Korsakov ...... 84 93 99 9.7% 8.1% 7.5% Other ...... 111 168 221 12.8% 14.7% 16.8% Total Russian Far East container throughput ...... 865 1,139 1,317 100.0% 100.0% 100.0% Growth % ...... 37.3% 31.8% 15.6% ———

Source: Morcenter The two largest terminals of the Russian Far East have different positioning. The Port of Vladivostok serves both the local market and cabotage lines as well as central and western regions of Russia, while the majority of the VSC’s import volumes are sent only to the central and western regions of Russia, including Moscow, via the Trans-Siberian Railway. The rail container market is more consolidated than the larger rail transportation sector, with the top five players accounting for approximately 78% of platforms owned as of 31 December 2012. TransContainer has a dominant position in the market with an approximate market share of 58% in terms of operated and

142 owned fleet. FESCO’s rail business, represented by Transgarant, and Russkaya Troika, are among the five largest players by number of railcars.

Owned platform, fleet Platform fleet under and platforms in management(*) financial leasing Thousands Share of Thousands Share of Platform Operators of railcars total fleet of railcars total fleet TransContainer(1) ...... 25.0 58.5% 24.7 57.8% A-Trans (RusTransCom)(1) ...... 3.2 7.5% 3.2 7.5% FESCO (Transgarant)(2) ...... 2.6 6.0% 2.6 6.0% Russkaya Troika(2) ...... 1.6 3.7% 1.5 3.6% Rail Garant(1) ...... 1.4 3.3% 1.4 3.2% Others(1) ...... 9.0 21.1% 9.4 21.9% Total(1) ...... 42.7 100.0% 42.7 100.0%

Source: (1) INFOLine; (2) Company (*) Fleet under management is defined as total owned (incl. under financial lease) and rented in-fleet less owned fleet rented-out to third parties The top four players also account for more than 60% of total containerised cargo volumes transported by rail in 2010-2012. TransContainer remains the largest player with a dominating position. However, TransContainer’s market share has been gradually declining, from 52.3% in 2010 to 49.9% in 2012, due to liberalisation of the sector and increased competition from independent operators. FESCO is the second largest player by volume transported and the third largest by number of platforms owned. See ‘‘Regulatory Overview—Rail—Structural Reform of Railway Transportation’’ and ‘‘—Competition and Pricing’’.

Container traffic by % of total container traffic rail by rail 2010 2011 2012 2010 2011 2012 (Thousand TEUs) (As % of total) TransContainer(1) ...... 1,202 1,362 1,484 52.3% 50.1% 49.9% FESCO (Transgarant)(2) ...... 113 147 149 4.9% 5.4% 5.0% Modul(1) ...... 91 120 121 4.0% 4.4% 4.1% Russkaya Troika(2) ...... 81 105 116 3.5% 3.9% 3.9% Others(1) ...... 811 982 1,101 35.3% 36.2% 37.1% Total Russian Rail container throughput(1) ...... 2,298 2,716 2,971 100.0% 100.0% 100.0%

Source: (1) INFOLine; (2) Company TransContainer is also the owner of the largest inland container terminal network with 26.3% market share in terms of volumes handled in 2012, followed by Russian Railways with 17.7% market share.

SHIPPING TRANSPORTATION Russia remains a relatively small player in the global shipping market with a fleet of 1,787 vessels with 20.4 million deadweight tonnage as at 1 January 2012 (including vessels operated under national and foreign flags), which constitutes 3.8% of the global fleet and 1.3% of the global deadweight tonnage, according to UNCTAD. Russia’s market share in terms of DWT and number of vessels has been marginally declining over the last several years. Russia’s geographical positioning, lack of suitable inland waterways, well-developed rail and pipeline systems and limited number of large ports historically have resulted in shipping constituting a small share of Russia’s total transportation turnover. In 2012, shipping accounted for 2.5% of Russia’s total transportation turnover or 4.8% of Russia’s transportation turnover excluding pipelines. At the same time, the Russian economy is dependent on international trade and shipping as one of the major transportation modes for exported and imported cargoes. Russian shipping turnover gradually increased with a 0.9% CAGR from 2005 to 2010, but demonstrated 11% and 8% decline in 2011 and 2012, respectively, driven primarily by the global economic crisis and

143 the implementation of an unfavourable domestic tax regime which incentivised Russian vessels to operate under foreign flags. General cargo ships constitute the largest part of the Russian fleet registered under the Russian flag (44.0%) due to their versatility. The second largest group is oil tankers, with a share that has been growing from 25.9% in 2009 to 28.6% in 2012, in tandem with the increased demand for Russian oil and oil products in the global commodities market. Bulkers are the third largest group of ships and have been serving Russian exports of coal, metals grain and other cargo. The Russian shipping sector is dominated by Sovcomflot, a major state-owned seaborne energy transportation company. Sovcomflot controls approximately 60% of the sector in terms of DWT and its fleet includes oil tankers, liquefied natural gas carriers and oil product carriers. Murmansk Shipping Company, a private company with a fleet comprising mainly dry bulk vessels operating in the Baltic Sea Basin, is the second largest shipping company with 6% market share. Prisco is the third largest shipping company with 5% market share, operating a fleet of oil tankers in the Far East Basin of Russia. Following disposal of the majority of its fleet FESCO is focussed on operating mainly general and bulk cargo vessels and container ships and has a market share of 2% as of 31 December 2012.

REGULATION In general, both Russian ports and the Russian railway sector are subject to a wide range of regulation. Ongoing railway sector reform is leading to a structural shift in how rail transportation services are provided and priced, with steps towards liberalisation of the market and promotion of competition. Currently, the Ministry of Transport and Russian Railways own and operate the rail system and the related infrastructure and retain the monopoly over locomotive traction. The reform is expected to be complete by 2015 and contemplates further enhancement of tariff regulation and privatisation of Russian Railways subsidiaries. See ‘‘Regulatory Overview—Rail—Structural Reform of Railway Transportation’’ and ‘‘—Competition and Pricing’’. Currently, almost all Russian ports are subject to various regulations. The FTS sets maximum tariffs for a number of port services, including transhipment from vessel to yard, transportation to a point of storage and transhipment from the yard/storage to trucks or railway cars. See ‘‘Regulatory Overview—Ports— Tariffs’’.

144 BUSINESS OVERVIEW We are one of the leading, independent transportation and logistics companies in Russia with operations in the ports, rail, integrated logistics and shipping businesses. Our diversified but integrated asset portfolio enables us to unite nearly all of the links in the intermodal transportation value chain and to provide door-to-door logistics solutions that are tailor-made to the needs of our clients in Russia and abroad. The majority of our assets are located in the Russian Far East, enabling us to capitalise on growing trade volumes between Russia and Asia. In 2012, we generated revenue of U.S.$1,197 million, Adjusted Revenue of U.S.$1,172 million and Adjusted EBITDA of U.S.$279 million. Since 2002, our key strategy has been to strengthen our position as one of Russia’s leading providers of intermodal transportation and logistics services with a particular focus on container transportation. Our well-invested asset base allows us to offer our clients fully integrated supply chain solutions. Our operations are grouped into four divisions—Ports; Rail; Liner and Logistics; and Shipping—which are supported by a corporate centre in Moscow and non-divisional service companies. • Ports Division: Our Ports Division manages our portfolio of port facilities and container terminals at the Port of Vladivostok, one of the largest ports in Russia, in terms of capacity and cargo volumes handled. The Port of Vladivostok, in which we have full operational control, is one of the major gateways in the Russian Far East and is well-situated to capitalise on growing trade flows between Russia and Asia, particularly of containerised and non-containerised cargo and automotive imports and metals and other commodities exports. The Port of Vladivostok handles goods arriving by sea, rail and road, benefiting from convenient access to the Trans-Siberian railway and to roads leading into the city of Vladivostok. By connecting the assets of our Rail Division, Liner and Logistics Division and Shipping Division, our terminals at the Port of Vladivostok represent a critical link in the logistics value chain, which enables us to deliver intermodal transportation services to our customers. • Rail Division: Our Rail Division operates our freight rail transportation business under the Transgarant brand, as well as our inland dry terminal in Khabarovsk. As of 31 December 2012, we operated a fleet of 16,194 railcars under the Transgarant brand, of which we owned 14,975 railcars. Our Rail Division also manages a majority of the fleet of Russkaya Troika, our 50-50 joint venture with Russian Railways. Russkaya Troika owns 1,574 platforms, which are used to transport containerised cargo by regular block trains on the Moscow-Vladivostok, Moscow-Novosibirsk, Moscow-Yekaterinburg and Moscow-Nakhodka routes, as well as on block trains between the Baltics and Central Asia. In 2012, a majority of Russkaya Troika’s fleet was involved in operations managed by our Rail Division and directly serviced our projects. • Liner and Logistics Division: Our Liner and Logistics Division manages our container lines and forwarding and logistics business, operating a variety of sea (both international and cabotage), intermodal and refrigerated liner services to ports in the Russian Far East, North America, Asia and Europe. Our liner services are integrated with the services of our other divisions, including cargo handling at ports and onward delivery by rail, thereby offering our customers a ‘‘one-stop shop’’ for the transportation of their products under a single bill of lading. Our Liner and Logistics Division also operates Dalreftrans, the only specialised reefer cargo terminal in the Russian Far East and itself a provider of refrigerated container transport, and performs certain agency functions, such as customs clearance, on behalf of our clients. Through our Liner and Logistics Division, as of 31 December 2012, we held 35,926 containers, with a capacity of 56,446 TEUs. • Shipping Division: Our Shipping Division is mainly engaged in ship ownership and management and operates primarily as a support centre for our Liner and Logistics Division, to which it charters-out ships and provides vessel agency services. As of 31 December 2012, we owned a fleet of 26 vessels. In 2013, we disposed of four vessels, and we also expect to sell our two ice-breaking transportation vessels by the end of the year, representing a total capacity for the six vessels of 59,009 DWT.

145 The table below sets forth certain financial information for each of our divisions for 2012:

For the year ended 31 December 2012 Revenue Adjusted Revenue Adjusted EBITDA U.S.$ % of U.S.$ % of U.S.$ % of Division (in millions) total(1) (in millions) total(1) (in millions) total(1) Ports ...... 178 13.8 206 16.3 98 32.1 Rail ...... 347 26.9 347 27.5 167 54.8 Liner and Logistics ...... 623 48.3 623 49.3 43 14.1 Shipping ...... 141 10.9 87 6.9 (3) (1.0) Intra-group/corporate ...... (92) — (92) — (26) — Total ...... 1,197 100.0 1,172 100.0 279 100.0

Note: (1) excluding intra-group/corporate. See ‘‘Selected Consolidated Financial and Other Data’’ for a reconciliation of Adjusted Revenue to revenue, and EBITDA and Adjusted EBITDA to net income.

Competitive Strengths We believe our key strengths include:

Unique integrated intermodal transport operator in Russia With more than 130 years of experience in the transportation sector, we are one of the leading, privately- owned transportation and logistics companies in Russia with strategically integrated operations in the ports, rail, liner and logistics and shipping businesses. Our diverse asset portfolio and world-wide network of sales offices enable us to unite nearly all of the links in the intermodal transportation value chain, connecting Asia and the Far East, Russia and Europe. As a result, we are able to provide our clients with a full range of sophisticated, integrated, door-to-door logistics solutions, including cargo transportation and freight forwarding services such as delivery by rail or sealiner, cargo handling at ports and pick-up and delivery by truck, all under a single bill of lading. Integrated operations and asset ownership enable us to increase the speed and efficiency of cargo transportation, which we believe positions us favourably with respect to domestic competition as well as competing deep sea trade routes from Asia to Russia and Europe. Because we own much of the asset base required to provide integrated transportation solutions, including a sizable fleet of containers and railcars, ports facilities and shipping vessels, we have a distinct competitive advantage over many forwarding companies who do not have their own transportation assets and thus must rely on third parties to provide them. We also offer our customers essential complementary services, such as route planning and optimisation, customs clearance, storage and cargo tracking. Our integrated service offering is flexible and can be tailor-made to the specific and evolving needs of our clients in Russia and abroad.

Strong position to benefit from structural growth in the container transportation market The Russian container market has historically been one of the fastest growing segments in the Russian transportation market, and we expect this trend to continue in the future. Container volumes grew at 5.0 times the real growth rate of Russian GDP between 2003 and 2012, according to Rosstat, and total Russian port container volumes grew from approximately 879,000 TEUs in 2003 to 5,061,566 TEUs in 2012, a CAGR of 22%, according to Morcenter. Notwithstanding this growth, containerisation levels in Russia are significantly lower than in developed countries, and comparable emerging markets, such as Brazil and China, suggesting significant growth opportunities. In 2010, container penetration in Russia was 25 TEUs per thousand persons, compared to 180 TEUs per thousand persons in Germany, 138 TEUs per thousand persons in the U.K., 135 TEUs per thousand persons in the U.S., 83 TEUs per thousand persons in China and 42 TEUs per thousand persons in Brazil, according to UNCTAD and Morcenter. Reflecting growing consumer and industrial spending as well as continued container penetration in the Russian market, container handling at ports is expected to grow at a 11.5% CAGR between 2011 and 2015, according to Russian Railways, and container transportation by rail is expected to grow at a 7.5% CAGR between 2012 and 2020, according to TransContainer.

146 We are well-positioned to benefit from increasing containerisation levels in Russia. Our operations in the Far East are strategically located in close proximity to key Asian markets, such as China, Japan and South Korea. We hold a sizable market share in container trade on certain of our sea lines between Asia and Russia, with our China Line accounting for approximately 26% of the market share along its route in 2012 based on management estimates. As a result of our five regularly-scheduled cabotage lines, we also hold a substantial share of the container transportation market on Far East cabotage lines. In addition, we benefit from captive capacity across the multi-modal chain, including the container gateway at the Port of Vladivostok, and possess an extensive fleet of containers and platforms. As of 31 December 2012, we held 35,926 containers with a capacity of 56,446 TEUs and owned 2,571 platforms, and we own a 50% share in Russkaya Troika, which manages 1,574 platforms, most of which are used in our transportation value chain. We operated dedicated container block train services, currently dispatching on average eight block trains per week from Moscow to points in Siberia and the Far East, including Vladivostok, Novosibirsk and Khabarovsk, and 8.5 block trains per week from Vladivostok to Moscow and Novosibirsk, and have expanded our offering of container sea liner services. Currently, we operate five sea lines across Asia, three lines to Europe and two sea lines to the United States. We believe that our strong position in the container trade market between Russia and Asia and along Far East cabotage routes, together with our extensive portfolio of container assets, puts us in an ideal position to take advantage of the anticipated growth in the Russian container transportation market.

Diversified business across products, markets and customers with an established presence in certain niche markets We operate a diversified business across the entire transportation value chain, which allows us to mitigate cyclical weaknesses in isolated transportation end markets. Alongside our core container operations, we maintain a balanced portfolio of services with significant exposure to other cargoes, which we believe increases the resilience of our operations. In 2012, for example, bulk cargo turnover equaled 2,953 thousand tonnes and container turnover equaled 456,146 TEUs at the Port of Vladivostok. The Rail Division also has a well-balanced portfolio, with coal, iron ore and construction materials accounting for 44.5%, 25.0% and 8.1%, respectively, of the division’s non-containerised freight volumes in 2012. Container volumes handled by the Rail Division totaled 148,872 TEUs in 2012. We also benefit from balanced exposure among the markets we serve. In 2012, 23.1% of the cargo throughput of our Liner and Logistics Division was delivered to domestic markets (including intermodal transportation services within Russia), with shipments to China, Europe and South Korea accounting for 35.2%, 14.8% and 14.7%, respectively, of throughput. Our broad and diverse customer base limits our exposure to a particular customer or industry. In 2012, we served over 1,500 customers, representing an attractive mix of freight forwarders, retail and industrial customers. In 2012, the five largest customers of our Ports Division accounted for 13% of the Ports Division’s revenue, and the five largest customers of our Rail Division accounted for 38% of the Rail Division’s revenue. We are also an established player in certain niche markets. We maintain a leading position in the transportation of coal in the Yakutia region, one of the fastest growing coal exploration markets in Russia. We operate our own train formation in Yakutia, consisting of two main-line diesel locomotives, as well as a fleet of railcars operated on behalf of third parties. We also operate a seven kilometre railway spur, adjacent to the Neryungri coal-fired power station to which we deliver coal, under a long-term lease from Russian Railways. Because of our management of this railway branch and the deliveries we make along the spur to various important facilities in the region, we believe we have an incumbent and defendable market position in the coal transportation market in Yakutia. As measured by freight turnover at the Neryungri-Freight Station and Neryungri-Passenger Station, we believe our share of the coal transportation market in Yakutia was approximately 44% in 2012. In addition, we are among the largest railcar operators in Ukraine, providing services to a core set of clients, such as ArcelorMittal, with which we maintain strategic relationships. We are transforming our Shipping Division to focus on support services for our Liner and Logistics Division and to take advantage of certain niche markets. Following our repositioning of the Shipping Division, our fleet will consist primarily of icebreakers, ice-class vessels and container and general purpose vessels, which we believe to be the most attractive niche markets in the shipping industry. As of 31 December 2012, 13 of our remaining 26 vessels were operated under the Russian flag, which provides a key competitive advantage in Russia, where operating under the Russian flag is a requirement in the provision for cabotage services.

147 Well-invested asset base in markets with high capital intensity We own and operate a diverse, but integrated, asset portfolio. We own most of our key operating and infrastructure assets, which allows us to capture value across the entire transportation chain, reduce our dependence on third party providers and provide guaranteed high quality services to our customers. We believe that the high capital intensity of the transportation business serves as a natural barrier to entry and supports the sustainability of our market position. As of 31 December 2012, our total tangible non-current assets had a total balance sheet value of U.S.$994 million, including U.S.$585 million of liquid rolling stock and vessels. Over the past three years, we invested more than U.S.$325 million on acquiring and maintaining our tangible non-current asset base, thereby creating a strong platform for future growth with a relatively limited need for additional capital expenditures to execute on our growth strategy.

Ports Division In March 2012, we obtained full operational control over the Port of Vladivostok, which offers a full range of stevedoring, storage, bunkering and related ports services. The Port of Vladivostok is well-situated in the Far East Basin to capitalise on growing trade flows between Russia and Asia, particularly of containerised and non-containerised cargo and automotive imports and metals and other commodities exports. In 2012, the Port of Vladivostok accounted for approximately 35% of container throughput in the Far East Basin, according to Morcenter. Since acquiring control, we have also started the reorganisation of the Port of Vladivostok, so that all stevedoring operations at the port are handled by a single operator and VKT becomes fully integrated into the port’s corporate structure. We believe that this reorganisation, which is expected to be completed in 2013, will allow us to further leverage the synergies that exist between the Port of Vladivostok and our rail, shipping and liner and logistics assets.

Rail Division We own approximately 92.5% of our fleet of 16,194 cars as of 31 December 2012. Our rolling stock, which had a net book value of U.S.$498 million as of 31 December 2012, has an average age of 11.3 years, compared to a Russian market average age of 14.8 years, according to INFOLine. Our relatively new fleet allows us to keep our maintenance costs low and our fleet operational for longer periods. In addition, we operate our own railway station in Chelyabinsk, which provides us with extra storage and parking capacity for our railcar fleet and functions as a repair depot for routine maintenance of our railcars and locomotives, thereby reducing our dependence on Russian Railways or other third- party providers for such services. We also operate an inland container terminal at Khabarovsk, which we are in the process of reconstructing and expanding. The Khabarovsk Terminal handles container and non-container cargo arriving by rail and truck and also maintains storage facilities for containers, timber, metal, oil and other products. The Khabarovsk Terminal had a storage capacity of approximately 18,000 m3 as of 31 December 2012, and has an annual throughput capacity of 30,000 TEUs of containerised cargo. The Khabarovsk Terminal plays an important role in our plans to develop a network of inland rail container terminals that is designed to lessen our dependence on other terminal operators.

Liner and Logistics Division As of 31 December 2012, we held 35,926 containers with a capacity of 56,446 TEUs. The net book value of our container units was U.S.$34 million as of 31 December 2012. Our Liner and Logistics Division also operates Dalreftrans, the only specialised reefer cargo terminal in the Russian Far East and itself a provider of refrigerated container transportation services.

Shipping Division As of 31 December 2012, we owned a shipping fleet of 26 vessels with a total capacity of 0.3 million DWT, including 13 Russian-flagged vessels that we deploy on relatively high-margin cabotage lines. Our fleet as of 31 December 2012, which consisted of 14 container ships, four timber carriers, four Ro-Ro carriers, two bulk carriers/dry cargo ships and two icebreaking transportation vessels, had a net book value of U.S.$87 million.

Attractive and historically high cash generative financial profile We have generated a growing EBITDA margin since 2010, and have achieved pre-expansion capex cash flow conversion, i.e., Adjusted EBITDA less maintenance capital expenditures and changes in trade

148 working capital as a percent of Adjusted EBITDA, of 94%, 91% and 99% for the years ended 31 December 2012, 2011 and 2010, respectively. The Rail Division and Ports Division, which collectively accounted for 87% of our Adjusted EBITDA in 2012 (excluding intra-group/corporate transactions), have achieved solid profitability due to strong fundamentals of the underlying markets and a number of strategic initiatives we have undertaken in recent years. The Ports Division recorded an Adjusted EBITDA margin of 48% in the year ended 31 December 2012, compared to 38% and 35% in the years ended 31 December 2011 and 2010, respectively. The strong Adjusted EBITDA margins generated by the Ports Division are in large part due to the consolidation of all stevedoring activities at the Port of Vladivostok after we acquired full control over the port in March 2012 and the ongoing integration of VKT, which was historically treated as a distinct business unit, into the corporate structure of the Port of Vladivostok. Both of these developments have allowed us to leverage cost synergies through the reduction of employees and other overhead costs. We believe that there is scope for a further increase in efficiency of our Ports operations as we progress with the integration of VKT into the Port of Vladivostok and further optimise the Port of Vladivostok’s operations. The Rail Division recorded an Adjusted EBITDA margin of 48% in the year ended 31 December 2012, compared to 43% and 26% in the years ended 31 December 2011 and 2010, respectively. The improving margins in our Rail Division are a function of increasing rates, the changing cargo mix towards higher margin container transportation, the optimisation of our fleet structure and the renegotiation of operating lease contracts at the end of 2012, which has resulted in more attractive and flexible leasing terms. The optimisation of our fleet structure reflects a strategic shift away from relatively more expensive rented-in railcars towards a largely owned fleet. For example, as of 31 December 2012, rented-in railcars accounted for only 7.5% of our total railcar fleet, compared to 26.2% as of 31 December 2010. As part of our optimisation programme, we have also replaced many of our older and less efficient railcars with newer railcars. The strong growth and margin profile of our core operating divisions indicates our commitment to maintaining a high quality asset base and a lean, efficient and flexible cost structure. As part of our commitment to an efficient and flexible cost structure, we have also disposed of ships and reduced headcount in our Shipping Division. In 2013, we plan to further reduce headcount in our Shipping Division and Ports Division to adjust for the changed scope of our operations. We also benefit from significant free cash flow potential in light of our limited maintenance capital expenditure requirements and the discretionary nature of our growth capital expenditures. From 2010 to 2012, we made total capital expenditures of U.S.$306 million, of which U.S.$252 million related to growth expenditures and U.S.$54 million related to maintenance capital expenditures. We believe these previous investments have helped us to establish a well-capitalised asset base and as a result we expect our capital expenditure requirements to remain relatively low in the near term, thereby potentially unlocking significant free cash flow resources. In 2013, we expect our capital expenditures to be approximately U.S.$60 million (of which approximately U.S.$25-30 million is expected to be maintenance capital expenditures), which is consistent with previous years. See ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operation—Liquidity and Capital Resources—Capital expenditures’’.

Highly experienced management team and committed Sponsors with significant industry experience We have an experienced and highly-qualified team of senior management with an average of 16 years of relevant experience in the transportation and infrastructure industry. Our management team has a proven track record of managing our business through the cycle, as demonstrated by the restructuring measures taken during and after the recent economic downturn. We have put into place a leaner cost structure by lowering our fixed costs through selective headcount reductions and the restructuring of our railcar fleet. In 2008, for example, we rented-in an average of 4,326 railcars, many of which were rented-in pursuant to inflexible and expensive lease terms, compared to an average of 1,219 cars rented-in in 2012. At the same time, we have managed to secure more attractive and flexible lease terms for our current portfolio of rented-in cars. During and after the downturn, we have refocused our business on serving high quality clients, thereby minimising our credit risk and enabling us to manage our working capital more effectively. Our management team has also implemented measures to improve the efficiency of our operations by fostering deeper integration among our divisions and altering our business mix, such as by acquiring a controlling stake in the Port of Vladivostok in March 2012, which allowed us to optimise our cargo handling business and contributed to the U.S.$14 million increase in the Ports Division’s Adjusted EBITDA in 2012 compared to 2011. Our management team also reduced our exposure to the global shipping market in an effort to focus on niche, high margin shipping

149 operations, such as cabotage and icebreaking. Since 2008, we have also prioritised the structurally more attractive container transportation market by increasing our rail container volumes from approximately 59,000 TEUs in 2008 to 149,000 TEUs in 2012. In addition, Russkaya Troika, our equity investee, transported approximately 116,000 TEUs in 2012. These changes have enabled us to reduce our exposure to the more mature and competitive bulk cargo market, which in 2012 started to experience an oversupply of railcars and a decline in rates. We also enjoy a strong and transparent working relationship with the Sponsors, who possess substantial management and industry experience. Summa Group, which exercises significant management control over us, is a strategic investor that plays an active role in the operational management of its companies and focuses on adding long-term value to its investments. Summa Group also possesses substantial relevant industry experience as it, together with its principal shareholder, is currently involved in the management of the NCSP, Russia’s largest and Europe’s third largest port operator in terms of cargo turnover, according to Morcenter. We believe that cooperation with Summa Group could provide us with access to the strategically important Black Sea market, where we are currently not actively present. TPG, which has certain rights in respect of the oversight of our business, is a leading private equity platform with more than U.S.$54.5 billion under management and significant experience managing levered companies and improving their financial metrics and cash flows. The Sponsors support our long-term growth strategy, including our plans to expand our presence in the container market, and we intend to leverage the Sponsors’ managerial expertise and any potential operating synergies that may exist with the other portfolio companies of the Summa Group to realise our strategic vision.

Strategies Our key strategies include:

Continue growing an integrated container transportation business platform Our key strategic objective is to become an integrated national leader in the container logistics market, capturing domestic, international and transit flows and benefiting from the high-growth container market in Russia. We intend to marshal the resources of our diverse asset base in order to capitalise on growing container flows between Russia and Asia. We intend to complete the integration and reorganisation of our port facilities by the end of 2013, which we believe will allow us to improve the port’s operational efficiency and debottleneck the port’s infrastructure, thereby increasing port container throughput to approximately 650,000 TEUs by 2017. We plan to leverage our network of container terminals, including the Port of Vladivostok, which benefits from convenient access to the Trans-Siberian Railway, and the Khabarovsk Terminal, which has an annual throughput capacity of 30,000 TEUs of containers, to provide our customers with cost-effective, intermodal transportation services. We are currently the second largest Russian rail container transportation operator by volume and third largest by fleet size, according to INFOLine. Since 2008, we have prioritised the structurally more attractive container transportation market by increasing our container volumes from approximately 59,000 TEUs in 2008 to 149,000 TEUs in 2012. In addition, Russkaya Troika, our equity investee, transported approximately 116,000 TEUs in 2012. We are among the pioneers in block train services in Russia and have recently increased the frequency of our container block train services, currently dispatching on average eight block trains per week from Moscow to points in the Russian Far East, and intend to further develop this service as well as increase the frequency of such trains, which are in high demand from our customers and generate premium margins for us in light of the priority treatment given to such trains by Russian Railways. Operating block trains significantly expands our potential customer base and reduces our dependence on large industrial clients, increasing the resilience of the business to downturns. We also intend to expand the international sea lines offered by our Liner and Logistics Division to capitalise on growing container flows and to further integrate our Liner and Logistics Division with the services of our other divisions, including cargo handling at ports and onward delivery by rail, in order to provide our customers with integrated logistics solutions.

150 Strengthen niche positioning outside containers Although the container market is a core priority for us, we are also an established player in certain niche markets. Going forward, we intend to maintain our leading positions in these niche markets and selectively expand into new businesses. For example, we maintain a leading position in the transportation of coal in the Yakutia region, one of the fastest growing coal exploration markets in Russia, where we operate our own train formation, a fleet of railcars on behalf of third parties and a seven kilometre railway spur, adjacent to the Neryungri coal-fired power station to which we deliver coal. In addition, we are one of the largest railcar operators in Ukraine providing services to a core set of clients, including leading metal and mining companies such as ArcelorMittal, with which we maintain strategic relationships. We are one of the largest owners of pellet hoppers in Russia. These specialised railcars are in high demand from Russian and Ukrainian metallurgy players. As these railcars are mostly used for transportation of hot metal inside steel plants, we rent out a majority of these railcars to a number of Russian and Ukrainian steel companies at attractive rates. In the Rail Division we own a diverse fleet of railcars that we intend to optimise over time by focusing on the niche segments above and disposing of certain railcars or swapping them for a specialised fleet that we focus on, such as platforms, gondola cars and mineral hoppers. For example, in 2012, we disposed of 427 grain hoppers to FinTrans Group. We intend to leverage our experience in these niche markets to expand selectively into new businesses. For example, with acquisition of control over the Port of Vladivostok we have attained control over bunkering operations in the port which we consider to be an attractive growth opportunity. We intend to invest approximately U.S.$7.0 million in increasing bunkering capacity to 750,000 tonnes per annum by 2014.

Deepen integration of businesses We believe that there is growing demand for integrated logistics services in Russia. We are one of the leading independent transportation and logistics companies in Russia, and one of the few service providers that has a diverse asset base and world-wide network of sales offices in order to provide our clients with sophisticated, tailor-made logistics solutions in a cost effective manner. We believe that our ability to bundle and cross-sell our services will provide opportunities to provide better services to our customers and generate higher margins. We plan to complete the reorganisation of the Port of Vladivostok by the end of 2013, which we believe will allow us to further leverage the synergies that exist between the Port of Vladivostok and our rail, shipping and liner and logistics assets. We have transformed our Shipping Division into a support centre that services our Liner and Logistics Division and certain niche markets. We disposed of 21 vessels in 2012 and plan to dispose of an additional six vessels in 2013, four of which have already been sold, constituting the majority of our bulk and general cargo ships. Following these disposals, our fleet will be heavily skewed towards icebreakers, ice-class vessels and container and general purpose vessels, which we believe to be the most attractive niche markets in the shipping industry. We also intend to leverage our relationship with Summa Group, which, given its expertise in infrastructure management, will enable us to deepen the integration of our Group businesses and capture any potential operating synergies that may exist with other portfolio companies of Summa Group, including potentially expanding into the strategically important Black Sea market, where we do not currently have a significant presence.

Maintain a lean and efficient cost structure We are focused on maintaining and improving our cost competitiveness. Since the financial crisis, we have undertaken a significant restructuring of the business that included changes in our business mix, rebalancing client and cargo portfolio and operational restructuring. We have downsized low margin shipping operations and increased our high margin ports business, increased our share of the relatively more profitable container transportation business and higher margin services such as block trains. We have also reduced our fixed costs base by reducing our rented-in railcar fleet, optimising our geographic footprint in Russia and reducing headcount. As a result, our Adjusted EBITDA margin has increased from 20% in 2010 to 24% in 2012.

151 In March 2012, we obtained full operational control over the Port of Vladivostok, which offers a full range of stevedoring, storage, bunkering and related ports services, and, in 2012, accounted for approximately 35% of container throughput in the Far East Basin, according to Morcenter. Full operational control enables us to complete the integration of VKT into the Port of Vladivostok and the reorganisation of the port’s assets, which we plan to accomplish by the end of 2013. As part of this reorganisation, we intend to minimise the number of stevedoring operators at the Port of Vladivostok and continue to reduce overhead costs, including further cutbacks in personnel, which we expect will enhance the port’s operational efficiency and allow us to more effectively leverage the synergies that exist between the Port of Vladivostok and our rail, shipping and liner and logistics assets.

De-lever balance sheet over time and maintain a strong liquidity position We intend to continue our focus on generating strong cash flow and reducing our leverage through liquidity and cash flow management. Through our active cash flow management and our moderate maintenance capital requirements, combined with our flexibility to postpone strategic capital expenditures when required, we have been able to achieve strong cash flow conversion. We intend to actively manage our indebtedness towards a target net leverage of 2.0-2.5x that we believe is adequate for our business in the long term. We intend to manage our leverage position through the selective growth of our business, the optimisation of operations and a disciplined and demand-driven capital expenditure programme. We plan to operate with a significant cash balance, in line with our current level, which we believe, when allied with our prudent working capital management, will address our liquidity needs going forward and provide an important ‘‘through the cycle’’ cash buffer for our business.

HISTORY AND STRUCTURE History and Development We trace our history to the 1880s, when the steamship ‘‘Moscow’’, owned by the Volunteer Fleet Agency (Dobroflot), sailed from Odessa to Vladivostok and other points in the Russian Far East, establishing regular cargo and passenger voyages from European Russia to Russia’s Far East a quarter of a century before the opening of the Trans-Siberian Railway. For over a century, we operated primarily as a shipping company, offering shipping services on both domestic and international routes and linking the Russian Far East with the Asian continent. In 1935, the Soviet Government renamed the Volunteer Fleet Agency (Dobroflot) as the Far East State Shipping Company (FESCO). Since 1935, we have actively expanded our operations abroad and launched a number of international services, particularly to China, Japan, Korea, Cuba, Vietnam and other countries, as well as established strong transportation connections between the Russian Far East and European Russia. By the start of World War II, we operated approximately 70 steamboats and 15 motor ships, including five tankers. Following World War II, we expanded our role in the international shipment of cargo within the Asian Pacific region and began to lay the groundwork for our entry into the liner business. Among the key lines we introduced are the Japan-Nakhodka line in 1958; the FESCO-India line in 1967; the FESCO-Pacific South and FESCO-Pacific North container lines, linking the United States, Japan and , in 1971-72; the FESCO Pacific Straits line in 1974; the FESCO-Australian line for container and non-container cargo transport between ports in Japan, the Philippines and Australia in 1976; the FESCO-New Zealand container line in 1983. As of 1 July 1992, we had a fleet of 174 vessels, including 10 icebreakers, with a total capacity of 1,833.5 thousand DWT. In 1995, FESCO’s shares commenced trading on the RTS (now the Moscow Exchange), and we opened our first overseas agency company, FESCO Lines Australia Pty Ltd. In 2002, Industrial Investors became our then controlling shareholder, following which we began our transformation from a shipping company into an integrated, intermodal transportation and logistics company. Key stages in our development since our change in strategy in 2002 are set out below:

2002 • Successful participation in the Exxon Neftegaz Ltd. tender to provide icebreaking lead and cargo procurement of offshore Sakhalin oil platforms.

152 2003 • Incorporation of FESCO Logistic in Moscow to expand our liner container transportation services in Western Russia. • Acquisition of a 100% stake in refrigerated cargo operator Dalreftrans, to launch refrigerated cargo transport on platforms along the Moscow-Vladivostok route.

2004 • Commencement of operations of Russkaya Troika, our 50-50 rail joint venture with Russian Railways, focusing on container transportation along the Trans-Siberian Railway.

2005 • Launch of FESCO Lines China, our fifth agency company.

2006 • Strategic alliance with First Quantum Group to manage and develop the then largest container terminal in Russia ‘‘First Container Terminal’’ located in St. Petersburg and the ‘‘Baltic Container Terminal’’ under construction at the Ust-Luga Port. • Acquisition of a 50% stake in National Container Company, jointly with co-investor First Quantum Group, to expand container terminal operations. • Acquisition of a 50% stake in Transgarant. • Acquisition of TIS and Incotec to develop forwarding services as part of our intermodal operations.

2007 • Acquisition of a controlling stake in Transgarant in order to diversify our asset base and expand our intermodal transportation services. • Acquisition of a 50% stake in M-Port LLC (‘‘M-Port’’), which owned a majority stake in VMTP (which, at the time of acquisition, owned a 50% stake in VKT) to expand our port assets portfolio. • Acquisition of a 70% stake in ESF Euroservices in order to extend the geography of our container deliveries to ports on the Baltic Sea.

2008 • Acquisition of a 50% stake in VKT, bringing our overall stake in VKT to 75%. • Launch of the FESCO Moscow Shuttle, a scheduled block train service for the transportation of containers between Moscow and Vladivostok.

2010 • Sale of 50% stake in NCC for U.S.$900 million in order to raise funds for our core business and the acquisition of a 12.5% stake in TransContainer in its .

2011 • Acquisition of a private railcar operator MetizTrans Group. • Creation of a joint venture with BLG Logistics Group in order to develop our operations in the transportation and distribution of automobiles across our network of terminals. • Increase in ownership in TransContainer to 18.5%.

2012 • Acquisition of operating control over VMTP through the purchase of a 100% stake in Transportnaya Kompaniya CJSC, which indirectly holds 50% of shares in M-Port (the other 50% of shares already being held by FESCO), which in turn holds a 95.577% stake in VMTP, leading to VMTP’s full consolidation into our financial statements starting from April.

153 • Acquisition of an additional stake in TransContainer via open market share purchases, bringing our overall stake in TransContainer to 23.7%. • Continued downsizing of the Shipping Division through disposal of 21 vessels.

Sponsors and Principal Shareholders In December 2012, Mr. Ziaudin Magomedov, the controlling shareholder of Summa Group, and entities controlled by Mr. Mark Garber, one of the principal shareholders of the GHP Group, indirectly acquired 49.99% and 23.75%, respectively, of the shares of FESCO. Also in December 2012, TPG acquired certain rights in respect of oversight of the FESCO business and an indirect economic ownership interest of 17.5% in the Group from the 49.99% interest indirectly acquired by Mr. Magomedov. See ‘‘Sponsors and Principal Shareholders’’. The acquisitions were funded by a mixture of debt and equity, including the HoldCo Facility and the OpCo Facility.

Organisational Structure FESCO is primarily a holding company, and substantially all of our operations are conducted through over 100 subsidiaries, which are organised into the following four divisions: Ports; Rail; Liner & Logistics; and Shipping. The diagram below presents our organisational structure, including our principal subsidiaries and Guarantors, and the percentage of shares owned or controlled by FESCO as of the date of this Offering Memorandum:

FESCO

Ports Rail Liner and Shipping Corporate Logistics

100% VMTP Transgarant FIT FESCO FESCO (Subsidiary (Subsidary (Subsidiary (Breach 95.6% Ocean 100% Guarantor) Guarantor) 100% 100% Guarantor) Freight located in Management Moscow) 100% 99.9% B.V. VKT FESCO Lines (Subsidiary Transgarant FESCO Rail TEK FESCO FESCO Management 100% Guarantor) Ukraine (Subsidiary MetizTrans 100% Ocean 100% (Vladivostok 100% (Subsidiary Guarantor) (Subsidiary Management branch) Guarantor) Guarantor) (Subsidiary Guarantor) OOO FESCO Bunker OJSC SOT Remono Other 100% 100% (formerly, (Khabarovsk Dalreftrans (Subsidiary companies Vladportbunker) Terminal) (Subsidiary 100% 100% Guarantor Guarantor) Guarantor) 50% Russkaya Other Troika companies FESCO Lines Vladivostok 23.7% 100% Offshore Ship TransContainer Holding Companies

100% Other LLC TG- companies Terminal

Other companies 12APR201318205389

OPERATIONS We are one of the leading independent transportation and logistics companies in Russia. Our operations are grouped into four divisions: Ports, Rail, Liner and Logistics and Shipping, which are supported by a Corporate Division in Moscow and non-divisional service companies. Each business division has its own

154 management team responsible for daily operations, while the Corporate Division is responsible for the overall coordination of our operations, strategy and business planning and financial policy. Our diverse asset portfolio and world-wide network of sales offices enable us to unite nearly all of the links in the intermodal transportation value chain, connecting the Far East, Russia and Europe. As a result, we are able to provide our clients with a full range of sophisticated, integrated, door-to-door logistics solutions, which include cargo transportation and freight forwarding services, such as delivery by rail or sea liner, cargo handling at ports and pick-up and delivery by truck, all under a single bill of lading. We also offer our customers essential auxiliary services, such as route planning and optimisation, customs clearance, storage and cargo tracking. Our integrated service offering is flexible and can be tailor-made to the specific and evolving needs of our clients in Russia and abroad. Our divisions are fully integrated with one another, allowing us to deliver a powerful, one-stop-shop cargo service to our customers. Our Ports Division, Rail Division and Shipping Division each generates revenue from the provision of services to customers of the Liner and Logistics Division. To provide integrated transportation solutions to our customers, the Liner and Logistics Division leverages the container rail services of our Rail Division, the stevedoring, storage and handling services of our Ports Division and the shipping fleet of our Shipping Division, which currently operates primarily as a support centre for the Liner and Logistics Division. The diagram below sets out the interrelationship among our divisions:

Integrated Service Customers

Integrated solutions for containerised cargo; freight forwarding and logistics Liner and Logistics Division Container rail Stevedoring Agency Vessel rent- transportation Storage & Services out Handling

Rail Division Ports Division Shipping Division

Containerised and Stevedoring Vessel chartering non-containerised Storage & cargo transportation cargo transportation Handling Stand-Alone Service Customers 2APR201318445871

Ports Division Overview Our Ports Division owns and operates port facilities and container terminals located at the Port of Vladivostok, offering a wide range of services, including stevedoring, storage, rent of premises, bunkering and other related port services. Our ports terminals are well-situated in the Far East Basin to capitalise on growing trade flows between Russia and Asia, particularly of containerised cargo and Russian exports of various commodities, and benefit from convenient access to the Trans-Siberian railway and road infrastructure. By connecting the assets of our Rail Division, Liner and Logistics Division and Shipping Division, our network of terminals represents a critical link in the logistics value chain, which enables us to deliver intermodal transportation services to our customers.

155 In the years ended 31 December 2012, 2011 and 2010, our Ports Division generated revenue of U.S.$178 million, U.S.$77 million and U.S.$59 million, respectively, which accounted for 14.9%, 7.5%, and 7.4%, respectively, of our total revenue. In the years ended 31 December 2012, 2011 and 2010, the Ports Division generated Adjusted Revenue of U.S.$206 million, U.S.$219 million and U.S.$172 million, respectively, which accounted for 17.6%, 18.7%, and 18.8%, respectively, of our total Adjusted Revenue, and Adjusted EBITDA of U.S.$98 million, U.S.$84 million and U.S.$61 million, respectively, which accounted for 35.1%, 34.4%, and 33.9%, respectively, of our total Adjusted EBITDA.

Assets The Port of Vladivostok is located in the city of Vladivostok beside the Gold Horn Bay on the southern extremity of the Muravyov-Amurski Peninsula in the Russian Far East. The Port of Vladivostok is one of the major gateways in the Russian Far East for the import of containerised and non-containerised cargo and the export of various break-bulk cargo. In 2012, the Port of Vladivostok handled 35% of containers, 30% of automobiles and 15% of bulk cargo, according to Morcenter, transiting through ports in the Far East Basin. The Port of Vladivostok is a non-freezing port, and therefore icebreaking services are not required for the port to function. The Ports Division manages a diversified set of terminals at the Port of Vladivostok: one automobile terminal, occupying three piers; four general cargo terminals, occupying eight piers; one oil-loading terminal, occupying one pier; and one container terminal, VKT, occupying three piers. According to Morcenter, our container terminals in the Port of Vladivostok terminal is one of the largest container operators in Russia, and the largest in the Russian Far East, in terms of capacity and throughput. We received full operational control over the Port of Vladivostok in early 2012, and, since 2 April 2012, it has been consolidated in our Financial Statements. We are currently in the process of reorganising the Port of Vladivostok so that all stevedoring operations at the port are handled by a single operator and the VKT terminal, which was historically treated as a distinct business unit, is fully integrated into the Port of Vladivostok’s corporate structure. We expect to complete this restructuring by the end of 2013. The Port of Vladivostok handles goods arriving by sea, rail and road. It operates 15 deep-water berths fitted for a wide range of cargo types, including containers, break-bulk, general cargo, steel products, timber, oil products and vehicles. Our deep water berths, with a total quay length of approximately 3.1 km and alongside water depths of 10-14 metres, are able to accommodate Panamax-class vessels of up to 12.6 metres draught and a capacity of up to 60,000 DWT. The Port of Vladivostok can handle up to 13 Panamax-class vessels at one time. The Port of Vladivostok covers a total area of 34.3 hectares. We own most of the land at the Port of Vladivostok. We also own most of the equipment used at the port, including 56 cranes with a 16-100 tonne lifting capacity, two rail-mounted gantries and a fleet of fork lifts, tractors, reachstackers, front bucket loaders and empty container stackers. The table below provides certain information on the productivity of our facilities at the Port of Vladivostok:

Year ended 31 December Performance Indicator 2012 2011 2010 Terminal productivity speed (tonnes/sea-hour) ...... 4,504 3,899 4,070 Mooring station productivity (tonnes/metre) ...... 2,143 2,062 1,646 Port crane productivity (tonnes/unit) ...... 120,793 110,197 123,444

Services Our Ports Division provides a full range of stevedoring services, together with various related services, including the loading and unloading of vessels, railcars and freight trucks; the transportation of cargo to storage facilities; sorting cargo; packing, unpacking and separating packaged cargo; measuring and weighing cargo; warehouse clean-up between cargo shipments; the sale of fuel (bunkering); customs clearance of vehicles; documentation services in respect of cargo receipts and dispatches; and port pilot services. As a multi-purpose port operator, we handle a broad variety of cargo, including containerised, bulk, general and Ro-Ro cargo, as well as oil products.

156 The table below sets forth the breakdown of cargo turnover at the Port of Vladivostok, including capacity and utilisation: Annual capacity Year ended 31 December as of Utilisation 31 December ratio in Cargo Type 2012 2011 2010 2012 2012 thousand tonnes, thousand tonnes, thousand tonnes, thousand tonnes, % except except except except containers containers containers containers Containers (in TEUs)(1) ...... 456,146 432,056 339,836 600,000 76 Bulk cargo ...... 2,953 2,860 4,146 3,850 77 incl. Metals & Scrap ...... 1,450 1,291 2,145 —— Oil & oil products ...... 440 379 419 —— Coke ...... 546 296 484 —— Vehicles(2) ...... 206 255 163 300 67

Notes: (1) As of 31 December 2012, container capacity at VKT was 500,000 TEUs, and container capacity at the other container terminals at the Port of Vladivostok was 100,000 TEUs. Container turnover was 3,485 thousand tonnes, 3,276 thousand tonnes and 2,605 thousand tonnes in 2012, 2011 and 2010, respectively. (2) Turnover in terms of units of vehicles equaled 85,107, 70,772 and 52,905 respectively, in 2012, 2011 and 2010. Ro-Ro capacity as of 31 December 2012 was 150,000 vehicles.

Containers Containers account for a significant share of the cargo handled by our Ports Division. The Port of Vladivostok had a container throughput capacity of 600,000 TEUs per annum as of 31 December 2012, which is expected to increase to 650,000 TEUs per annum by 2017. In 2012, container throughput equaled 456,146 TEUs, of which 34.7% consisted of exports, 40.7% of imports and 24.6% of cabotage shipments. Container handling is a higher margin service than bulk cargo or vehicle handling due to relatively higher tariffs. In recent years, container handling has accounted for an increasing share of revenue of the Ports Division, and we expect this trend to continue. The following table sets forth consolidated container throughput at the Port of Vladivostok for the periods indicated, broken down by destination:

Year ended 31 December Direction 2012 2011 2010 TEUs % TEUs % TEUs % Export ...... 158,391 34.7 162,393 37.6 125,429 36.9 Import ...... 185,721 40.7 156,733 36.3 108,678 32.0 Cabotage ...... 112,034 24.6 112,930 26.1 105,729 31.1 Total ...... 456,146 100.0 432,056 100.0 339,836 100.0

Bulk cargo We also handle several kinds of bulk cargo, including liquid bulk cargo, dry bulk cargo and general cargo, at the Port of Vladivostok. The Port of Vladivostok has an annual bulk throughput capacity of 3.85 million tonnes. In 2012, bulk cargo throughput equaled 2.95 million tonnes, of which 73.1% consisted of exports, 8.8% of imports and 18.1% of cabotage shipments. The following table sets forth bulk throughput at the Port of Vladivostok for the periods indicated, broken down by destination:

Year ended 31 December Direction 2012 2011 2010 mln tonnes % mln tonnes % mln tonnes % Export ...... 2.157 73.1 2.052 71.7 3.348 80.7 Import ...... 0.261 8.8 0.300 10.5 0.236 5.7 Cabotage ...... 0.534 18.1 0.508 17.8 0.562 13.6 Total ...... 2.953 100.0 2.860 100.0 4.146 100.0

157 The 31.0% decline in bulk throughout in 2011 compared to 2010 was mainly due to an increase in throughput volumes of higher value-added cargo such as containers and vehicles at the Port of Vladivostok. The table below sets forth the bulk throughput structure of the Port of Vladivostok for the periods indicated:

Year ended 31 December Bulk Type 2012 2011 2010 % Metals & Scrap ...... 49.0 45.0 52.3 Oil products ...... 14.9 13.3 10.1 Coke ...... 18.5 10.3 11.7 Pig iron ...... 1.7 8.7 12.1 Pulp & Paper ...... 6.2 6.5 4.8 Other ...... 9.7 16.2 9.0 100% 100% 100%

Vehicles We also handle vehicles and other Ro-Ro cargo at the Port of Vladivostok. In 2012, 2011 and 2010, Ro-Ro turnover equaled 206 thousand tonnes, 255 thousand tonnes and 163 thousand tonnes, respectively, or 85,107 units, 70,772 units and 52,905 units, respectively, in terms of number of vehicles. Vehicle handling is a higher margin service than bulk cargo handling due to relatively higher tariffs. In recent years, vehicle handling has accounted for an increasing share of revenue of the Ports Division, and we expect this trend to continue.

Bunkering We plan for bunkering, the supply of fuel to shipping vessels, to become an increasingly important part of our operations at the Port of Vladivostok. We plan to invest approximately U.S.$7.0 million to increase bunkering capacity to 750,000 tonnes per annum by 2014.

Transportation Links The Port of Vladivostok maintains convenient transportation links with Siberia, the Russian Far East and European parts of Russia, with direct connections to Russian Railways’ system and to roads leading into the city of Vladivostok, which are used for deliveries of cargo to storage areas and end-customers. The Port of Vladivostok also benefits from its own railway station that is used for handling general and containerised cargo. The Port of Vladivostok maintains a balanced portfolio between receiving cargo by rail for export by sea and receiving cargo by sea for onward transport by rail. In 2012, approximately 54% of general cargo throughput at the Port of Vladivostok was delivered by sea transport, with approximately 44% delivered by rail and 2% by truck. Approximately 69.4% of container throughput at the Port of Vladivostok was delivered by sea transport and approximately 30.6% by rail in 2012. Our port facilities are therefore dependent on our access to, and further development of, sea-based and rail transport.

Storage Facilities We also maintain facilities at the Port of Vladivostok for the storage of containers, timber, metal, oil and other products. As of 31 December 2012, the Port of Vladivostok had an open storage area of approximately 260,564 m2 and a covered storage area of 111,820 m2.

Key Customers The Port of Vladivostok offers its services both directly to external clients and indirectly to clients through our Liner and Logistics Division. See ‘‘—Operations—Liner and Logistics Division—Customers’’ for a discussion of the key customers of the Liner and Logistics Division. The key customers with which the Port of Vladivostok enters into direct contractual relationships are main-line operators to which we provide loading and unloading services, bunkering services and certain other auxiliary services, such as port pilot services, equipment leasing and storage. In 2012, the Port of

158 Vladivostok’s five largest external customers were Maersk, ITRS, KoreaMarineTransport, Kamchatka Lines and Hyundai Merchant Marine, which collectively accounted for 13% of the Ports Division’s revenue. In the past, VKT typically entered into contracts with external customers for the provision of transshipment services, such as cargo handling, either directly with clients or through an expeditor. Beginning in 2013, as part of VKT’s integration into the Port of Vladivostok’s operational structure, VKT no longer enters into direct contractual relationships with third-party customers, but instead provides its services as a subcontractor through the Port of Vladivostok. Contracts with external customers and with our Liner and Logistics Division typically have a one-year term, with an option to extend. Payment is generally required within an average of 10 days following invoicing. Contracts with main-line operators are typically priced and settled in U.S. Dollars or Roubles, depending on the client, and contracts entered into with expeditors are typically priced and settled in Roubles. In monetary terms, approximately 30-40% of the Ports Division’s contracts are denominated in Roubles and 60-70% in U.S. Dollars. VKT’s contracts with third party customers were typically entered into on an annual basis and generally required 100% prepayment. Historically, the Ports Division provided certain of its services to customers of the Liner and Logistics Division at a discount to the prices it charges for similar services to direct, third-party customers. For example, VKT previously extended the Liner and Logistics Division a discount of approximately 10% for terminal services and 20-25% for stevedoring services. Our 2013 budget contemplates a reduction in these discounts, which we intend to gradually eliminate as part of our transition to arms-length pricing for all inter-divisional transactions.

Competitive Environment Our Ports Division faces competition from other ports located in the Far East Basin which have container and/or bulk cargo handling capacity, including the Vostochny Port, Nakhodka Port, Vanino Port and VSFP. We compete primarily on a variety of factors, including service quality, pricing and the ability to provide supplemental services by leveraging other aspects of our business. We believe that the Port of Vladivostok enjoys certain important advantages over its competitors. The Port of Vladivostok is better integrated into Russia’s rail infrastructure and benefits from its own railway station located on the premises of the port, and on account of its location in the city of Vladivostok, the Port of Vladivostok also enjoys good connections with Russia’s road network as well as access to nearby storage facilities. In addition, due to its geographic location in a city area, the Port of Vladivostok does not handle coal shipments, and coal shipments represent a significant share of Russian transportation volumes and port throughput overall. This significantly reduces congestion at the port railway station, which allows for increased speed in loading and unloading cargo from rail to port and vice versa. See ‘‘—Transportation Links’’ above. In 2012, the Port of Vladivostok was the largest operator in the Far East Basin in terms of container handling, with a market share of 35%, according to Morcenter. Our key competitors in the container handling market are the Vostochny Port, VSFP and Korsakov, which held market shares of 30%, 11% and 8%, respectively, in 2012, according to Morcenter. The Vostochnaya Stevedoring Company located at the Vostochny Port had the second largest container throughput capacity in the Far East Basin at 550,000 TEUs as of 31 December 2012, according to Global Ports. We also face competition in the container handling market from the Zarubino Port, Vanino Port and Nakhodka Port, although we believe that each of these ports has significantly smaller container operations than ours. See ‘‘Industry—The Container Market—Competitive Landscape’’. In 2012, the Port of Vladivostok was the third largest operator in the Far East Basin in terms of bulk cargo handling, with a market share of 15%, according to Morcenter. Our market share in bulk cargo handling is relatively low because we do not handle coal, which is a significant export cargo for many of our competitors. Our key competitors in the bulk cargo handling market are the Nakhodka Port, the Vanino Port and VSFP, which held a 33%, 26% and 8% market share, respectively, in 2012, according to Morcenter.

159 Rail Division Overview Our Rail Division consists of nine subsidiaries in Russia, one in Ukraine and one in Latvia. According to INFOLine, we are one of the largest private railcar operators in Russia with 16,194 units of rolling stock, including 1,219 railcars that are rented-in pursuant to operating leases, as of 31 December 2012. Our Rail Division offers transportation services primarily to Russian commodities producers as well as other customers either directly or indirectly through our Liner and Logistics Division. Our inland container terminal at Khabarovsk is also operated by our Rail Division. In the years ended 31 December 2012, 2011 and 2010, our Rail Division generated revenue of U.S.$347 million, U.S.$308 million and U.S.$209 million, respectively, which accounted for 29.0%, 29.9%, and 26.1%, respectively, of our total revenue. In the years ended 31 December 2012, 2011 and 2010, the Rail Division generated Adjusted Revenue of U.S.$347 million, U.S.$308 million and U.S.$209 million, respectively, which accounted for 29.6%, 26.3%, and 22.9%, respectively, of our total Adjusted Revenue, and Adjusted EBITDA of U.S.$167 million, U.S.$133 million and U.S.$55 million, respectively, which accounted for 59.9%, 54.5%, and 30.6%, respectively, of our total Adjusted EBITDA. The Rail Division also benefits from our relationship with Russkaya Troika, our 50-50 joint venture with Russian Railways. Russkaya Troika transports containerised cargo by regular block trains on the Moscow-Vladivostok, Moscow-Novosibirsk, Moscow-Yekaterinburg and Moscow-Nakhodka routes, as well as on block trains between the Baltics and Central Asia. In 2012, a majority of Russkaya Troika’s fleet was involved in operations managed by our Rail Division and directly serviced our projects. See ‘‘— Associates—Russkaya Troika’’.

Key Assets The key operating entity of our Rail Division is Transgarant, our wholly-owned subsidiary, which accounts for all of the Rail Division’s revenue and EBITDA. Transgarant is a diversified rail car operator that has specialised in the transportation of general and dry bulk cargoes across Russia and for export for over 13 years. Transgarant also maintains operations in Ukraine, as well as Latvia where it has a single customer, Kroma-Trans.

Rolling Stock We have an extensive fleet of rail cars, which grew from 15,601 units as of 31 December 2010 to 16,194 units as of 31 December 2012. A major reason for the increase in rail cars during this period was the acquisition of MetizTrans Group in 2011, which contributed an additional 971 railcars to our fleet. We also enter into operating leases of rolling stock from third parties as a reliable way to enable us to quickly react to changes in demand for freight rail transportation services without significant delays or expense. The composition of our fleet has changed between 2010 and 2012, with owned cars accounting for a greater share of our total fleet of management and cars rented-in under operating leases representing a diminishing share of our total fleet. This change in structure has had a positive effect on the Rail Division’s overall Adjusted EBITDA, which increased by 203.6% in 2012 compared to 2010. The following table sets out information on the evolution of our railcar fleet during the periods indicated:

As of 31 December 2012 2011 2010 Owned ...... 14,975 15,106 11,511 incl. leased-in under finance lease ...... 3,869 2,787 1,274 Rented-in under operating lease ...... 1,219 1,473 4,090 Total fleet under management ...... 16,194 16,579 15,601

We maintain a diversified and well-invested fleet of general purpose and semi-specialised railcars. As of 31 December 2012, gondola cars accounted for 48.7% of our fleet, and, according to Russian Railways, we maintained the largest fleet of iron ore pellet hoppers in Russia. From 2010 through 2012, we

160 invested approximately U.S.$280 million in fleet acquisition and maintenance, including the purchase of MetizTrans Group. The table below sets out a breakdown of our railcar fleet as of 31 December 2012:

As of 31 December 2012 Type of railcar Owned Rented-in(1) Total Gondola cars ...... 6,781 1,106 7,887 Platforms ...... 2,571 6 2,577 40-foot ...... 1,142 0 1,142 60-foot ...... 200 6 206 80-foot ...... 1,229 0 1,229 Pellet hoppers ...... 2,278 0 2,278 Box cars ...... 1,177 35 1,212 Tanks(2) ...... 967 0 967 Cement hoppers ...... 582 0 582 Other(3) ...... 619 72 691 Total ...... 14,975 1,219 16,194

Notes: (1) Cars rented-in pursuant to operating leases. (2) Tanks are used to transport oil, oil products, gas and ammonia. (3) Includes reefer cars, platform cars, mineral hoppers and dump cars. The weighted average age of our railcar fleet is 11.3 years, compared to a market average of 14.8 years, according to INFOLine. The table below sets out information on the age of our railcar fleet as of 31 December 2012:

Regulated Average maximum Share of Type of railcar age age(1) total fleet (%) Gondola cars ...... 8.3 33.0 48.7 Platforms ...... 8.0 47.8 15.9 40-foot ...... 11.2 48.0 7.1 60-foot ...... 6.5 48.0 1.3 80-foot ...... 5.3 47.5 7.6 Pellet hoppers ...... 20.3 22.5 14.1 Box cars ...... 12.2 48.0 7.5 Tanks ...... 11.5 52.4 6.0 Cement hoppers ...... 6.8 39.0 3.6 Reefer cars ...... 34.5 37.5 0.3 Other ...... 30.3 44.2 3.5 Total ...... 11.3 100

Note: (1) Includes potential technical life extensions from post-capital repairs. • Gondola cars: The gondola is an open-top high-sided railcar designed for carrying a variety of cargoes, including ferrous metals, scrap metal and loose bulk materials, such as ores, crushed stone, coal, timber and pipes. A gondola may be equipped with dump doors in the floor and hinged end walls or a solid body. The weight carrying capacity and the volume capacity of our gondolas is 71.0 tonnes per unit and 82.3 m3 per unit. • Platforms: Platforms are designed to carry containers of various sizes. Containers, in turn, are designed to transport a wide variety of cargo, including consumer goods, clothing, supplies and certain foodstuffs. We operate 40-foot, 60-foot and 80-foot platforms. Our 40-foot and 60-foot platforms are mainly used to deliver containers to small-scale clients and are generally not used in block-train forms of transportation. Our 80-foot platforms are mainly used to transport containers on regular container block trains on the Moscow-Vladivostok-Moscow and Moscow-Novosibirsk- Moscow routes. The average weight carrying capacity of our platforms is 70.0 tonnes per unit.

161 • Pellet hoppers: A hopper car is a closed-top railcar used to transport loose bulk commodities such as iron ore, mineral fertilisers, cement and grain. A hopper’s dumper body is shaped like a funnel and has gates at the bottom to empty cargo by the force of gravity, making for and effective unloading. A pellet hopper is a type of hopper car that is specially designed to transport iron ore. Following the expiration of a pellet hopper’s regulated maximum operating life, a pellet hopper is either written off or transferred to large enterprises for internal use or to Ukraine for continued usage. By the end of 2015, 920, or 40%, of our pellet hoppers will reach the end of their regulated maximum life. As of 31 December 2012, approximately 700 of our pellet hoppers were leased to one customer—UCL Rail (previously known as Freight One)—pursuant to a five-year contract that expires in 2016. The weight carrying capacity and the volume capacity of our pellet hoppers is 70.0 tonnes per unit and 45.0 m3 per unit. • Box cars: The box car is designed to transport various types of products (including foods) that require protection against precipitation. The weight carrying capacity and the volume capacity of our boxcars is 67.2 tonnes per unit and 138.0 m3 per unit. • Tank cars: Tank cars are designed to carry liquids, including oil and oil products, chemically active and aggressive liquid substances, such as ammonia, acids, alkalis and other compound substances, liquefied gas and others. Most of our tank cars are designed to transport oil. The weight carrying capacity and the volume capacity is 66.0 tonnes per unit and 73.0 m3 per unit for our oil tank cars; 43.0 tonnes per unit and 76.0 m3 per unit for our gas tank cars; and 51.0 tonnes per unit and 83.6 m3 per unit for our ammonia tank cars. • Cement hoppers: The cement hopper is a hopper car designed to carry bulk cement. The weight carrying capacity and the volume capacity of our cement hoppers is 73.0 tonnes per unit and 60.0 m3 per unit. • Reefer cars: Reefer cars are designed to transport refrigerated cargo, such as foodstuffs. The weight carrying capacity and the volume capacity of our reefer cars is 46.0 tonnes per unit and 140.0 m3 per unit. We anticipate that we will need to retire approximately 400 railcars in 2013 and 1,580 railcars in 2014. We plan to gradually replace these railcars through the acquisition of new railcars or the renting-in of additional railcars.

Supply of Rolling Stock As of 31 December 2012, we owned approximately 92.5% of our rolling stock fleet. We purchased most of our rolling stock either through the acquisition of existing rail operators, for example, our purchase of MetizTrans Group in 2011, or directly from Russian and Ukrainian manufacturers. In the future, we are targeting an approximate 80%/20% split between owned cars and cars rented-in pursuant to operating leases, which we believe will enable us to service niche markets and manage spare capacity. We have established firm relationships with well-known railcar manufacturers and railcar lessors in Russia and Ukraine, thereby obtaining the ability to gain access to railcars in periods of short supply and, in addition, to achieve more favourable pricing terms than the prevailing market prices. We are not dependent on any single supplier for our railcars. We usually prepay 50% of the price of a railcar in order to secure production capacity. The typical delivery time for a new railcar ranges from 30 to 90 days from the date of the relevant supply contract.

Repairs and Maintenance Our rolling stock undergoes rigorous repair and maintenance, and we apply strict standards to ensure our fleet is well-maintained. Our maintenance and repair work falls into two main categories: (i) scheduled repairs, which are carried out according to the standards and regulations set by Russian Railways and the Ministry of Transport of the Russian Federation; and (ii) unscheduled repairs, which are carried out according to the condition of the railcars which are inspected on a continuous basis at loading and unloading or sorting stations. Scheduled repairs are carried out on the basis of either the period of operation, the mileage of operation or the type of car. ‘‘Depot repairs’’ are generally performed one year after construction, and thereafter once a year for non-operating cars and once every two to three years, depending on the type of car, or after 110,000-160,000 kilometres, whichever is earlier. ‘‘Capital repairs’’ take place 10-17 years after

162 construction, and ‘‘post-capital repairs’’ take place 8-16 years after the last ‘‘capital repair’’. Unscheduled repairs are driven by the technical condition of the railcar. On average, wheel pairs are replaced once every five years. We primarily use repair facilities owned by Russian Railways, but we also contract with privately-owned depots as well as perform ordinary course maintenance at our own Chelyabinsk Railway Station. See ‘‘—Other Rail Assets’’ below. We generally enter into one-year repair contracts that can be automatically extended with the external depots we use. We also maintain a working inventory of essential spare parts, including wheel pairs, side frames and shock absorbers, which significantly reduces railcar repair and maintenance idle time.

Khabarovsk Terminal We also operate an inland container terminal at Khabarovsk, which we are in the process of reconstructing and expanding. The Khabarovsk Terminal handles container and non-container cargo arriving by rail and truck. It also maintains storage facilities for containers, timber, metal, oil and other products. As of 31 December 2012, the Khabarovsk Terminal had a storage capacity of approximately 18 thousand m3. Annual throughput capacity of the Khabarovsk Terminal is 30,000 TEUs of container goods. Container throughput at the Khabarovsk Terminal was 30,000 TEUs in 2012. The Khabarovsk Terminal covers a total area of 9.3 hectares, of which approximately 3.85 hectares are leased from state authorities pursuant to several long-term lease agreements; the remaining territory belongs to our subsidiary OAO ‘‘Stroyopttorg’’. The Khabarovsk Terminal is an integral part of our strategy to develop a network of inland rail container ports in order to lessen the dependence of our own rail services on other terminal operators.

Other Rail Assets We operate our own railway station in Chelyabinsk, which provides us with extra storage and parking capacity for our railcar fleet and is used for routine repairs of our railcars and locomotives. As of 31 December 2012, we owned seven locomotives. One main-line locomotive and two shunting diesel locomotives are used on the South-Urals Railroad and based at our Chelyabinsk railway station; two main-line locomotives are used on our owned train formation in Yakutia on the Far-Eastern Railroad and based at the Neryungri rail station; and two main-line locomotives are rented-out and used on the Far-Eastern Railroad. See ‘‘—Services—Freight Rail Operating Services—Services in Yakutia’’. We also operate our own switch engines, which are used for train formations at our own railroad terminals. The use of our own locomotives enables us to provide a more competitive and integrated service to certain of our clients by offering better delivery times and greater reliability in terms of providing railcars for on-time dispatching. This is particularly important to the coal companies we work with in Yakutia, which do not have substantial storage capacity at their sites. We maintain our own crews on the two main-line locomotives that we use in Yakutia. The remaining locomotive crews are provided by Russian Railways. We currently do not have plans to expand our locomotive operations. In addition, we operate a seven-kilometre rail spur adjacent to the Neryungri coal-fired power station in Yakutia pursuant to a long-term lease from Russian Railways, which is due to expire in 2032.

Services Our Rail Division offers freight rail transportation services, both as an operator and lessor of railcars, and public container and block train services. Our Rail Division also operates our inland terminal at Khabarovsk and provides certain ancillary services.

Freight Rail Operating Services Freight rail operating and forwarding services is the core function of our Rail Division. The principal types of cargo we transport are coal, iron ore, construction materials and containers. We focus our rail services on niche markets with high barriers to entry where we believe we possess certain competitive advantages. For example, we maintain a leading position in the coal transportation market in the Yakutia region (see ‘‘—Services in Yakutia’’, below), and we operate the largest fleet of iron ore pellet hoppers in Russia, according to Russian Railways. We are among the largest railcar operators in Ukraine in terms of rolling stock under management.

163 In 2012, 2011, and 2010, rail container transportation volumes totaled 148,872 TEUs, 147,327 TEUs and 112,786 TEUs, respectively. The table below sets forth freight rail volumes for cargo delivered by our Rail Division other than containers:

Year ended 31 December Cargo Type 2012 2011 2010 (tonnes) (%) (tonnes) (%) (tonnes) (%) Coal ...... 9,793,896 44.5 11,431,054 47.4 11,524,654 49.1 Iron ore ...... 5,512,249 25.0 5,306,212 22.0 5,696,194 24.3 Construction materials ...... 1,790,340 8.1 1,873,543 7.8 1,530,757 6.5 Ferrous metals ...... 1,434,180 6.5 1,437,402 6.0 1,011,969 4.3 Flux ...... 1,235,707 5.6 1,135,824 4.7 1,403,580 6.0 Pulp and Paper ...... 422,294 1.9 445,995 1.8 380,484 1.6 Cement...... 373,216 1.7 541,422 2.2 352,894 1.5 Timber...... 332,184 1.5 430,440 1.8 257,665 1.1 Raw materials ...... 297,684 1.4 588,526 2.4 489,021 2.1 Ferrous scrap ...... 215,992 1.0 237,351 1.0 182,854 0.8 Other ...... 603,694 2.7 685,779 2.8 627,694 2.7 Total (Non-container cargo) ...... 22,011,436 100 24,113,547 100 23,457,766 100 Containerised cargo ...... 1,560,415 — 1,403,827 — 1,106,839 — Total ...... 23,571,851 — 25,517,373 — 24,564,605 — The table below sets forth freight turnover and capacity utilisation for the years indicated, in respect of both our containerised and non-containerised cargo:

Year ended 31 December Performance Indicator 2012 2011 2010 Turnover (million tonnes/km) ...... 29,694 33,509 35,270 Capacity utilisation (%)(10 ...... 95.2 93.8 93.9

Note: (1) Capacity utilisation is defined as the number of days when a railcar is not in depot or parked on sidetracks, divided by number of days in the year. In 2012, overall non-containerised freight rail volumes declined by 9.3% and containerised and non-containerised freight rail turnover fell by 11.4% compared to 2011 mainly because of a 14.3% decline in coal volumes, which, in turn, was primarily attributable to a slowdown in the average speed on Russia’s railway network and an increase in the number of railcars we rented out to customers. In 2011, non-containerised freight volumes expanded by 4.0% compared to 2010 mainly because of an increase in deliveries of construction materials, containers, ferrous metals, paper and timber. However, containerised and non-containerised freight rail turnover declined by 5.0% in 2011 compared to 2010 due to shorter delivery distances. To mitigate the decline in overall volumes in 2012, we have focused on maximising our utilisation rates, which have remained consistent due to a combination of factors that reduce idle time, including: our IT system, which allows for real-time fleet tracking; our strong relationships with infrastructure managers; and our ability to swap between various railcar types on relatively short notice. We have also increased our shipments of higher-margin freight, such as containers. Platforms generate the highest average marginal income per railcar per day, and our deliveries of containers, which are transported by platforms, increased by approximately 32.0% in 2012 compared to 2010. Marginal income per railcar per day, defined as revenue per railcar per day (exclusive of VAT) less direct expenses, is a key metric that we use to track our performance. In 2012, 2011 and 2010, marginal income per railcar per day equaled RUB1,289, RUB1,170 and RUB719, respectively. Average daily marginal income per railcar increased significantly in 2012 compared to 2011 and 2010 due to an increase in demand for transport-forwarding services and growth in the volume of cargo shipped by rail. In 2012, rates for platforms returned to pre-crisis levels. In line with industry practice, most freight rail transportation services of our Rail Division are delivered to customers on the basis of annual contracts, which are automatically renewed as long as the customer

164 has not requested otherwise. Annual contracts establish general terms for the provision of transportation services with volume, destination and price terms set out and adjusted, generally, on a monthly basis in either a contractual addendum or an application for cargo transportation. Monthly orders are generally placed on or before the 15th day in the preceding month. Price adjustments are typically driven by prevailing competition levels among service providers, costs, currency rates and other market conditions. Volume adjustments are largely driven by changes in the transportation needs of our customers. Typically our contracts require payment 15 days after the period in which services were rendered. Certain of our contracts, however, stipulate prepayment, ranging from 50-100%, depending on the client. From time to time, we also enter into contracts for terms longer than one year. For example, as of 31 December 2012, approximately 700 of our pellet hoppers were leased to one customer—UCL Rail (previously known as Freight One)—pursuant to a five-year contract that expires in 2016. In addition, as of 31 December 2012, a significant number of our box cars were leased to Mondi SLPK pursuant to a three-year contract expiring in 2015. Pricing for rail transportation services in Russia is unregulated except for services provided by Russian Railways. The importance of Russian Railways’ regulated railcar tariff as a market benchmark decreased significantly in 2011 following the completion of the spin-off of the majority of its commercial freight fleet into subsidiaries that operated in an unregulated pricing environment. However, charges payable to Russian Railways for infrastructure and locomotive usage remain regulated. Factors that affect our pricing for railcar services are route configuration, points of origin and destination, railcar availability in specific locations, the type of railcar used and the distance carried as well as competition from other operators. Another factor is whether it is possible for the railcar to be loaded with cargo for a substantial part of the return journey. We employ pricing and logistics software to resolve these complex pricing calculations. See ‘‘—Information Technology’’, below. In the freight rail transportation business, we offer our customers three types of contracts: (i) a ‘‘lump sum’’ contract pursuant to which the customer is charged a single price for our services, the infrastructure and locomotive charges payable to Russian Railways are borne by us and the customer has no interaction with Russian Railways; (ii) a ‘‘railcar charge only’’ contract, pursuant to which the customer pays only the railcar charge to us, and the infrastructure and locomotive charges are payable by the customer to Russian Railways directly; and (iii) another ‘‘railcar charge only’’ contract pursuant to which we pay the infrastructure and locomotive charges to Russian Railways and recharge this amount to the customer as a reimbursement. Most of the larger industrial companies that use our services pay the infrastructure and locomotive tariffs directly to Russian Railways. Many of our smaller clients pay infrastructure tariffs through us. In most contracts, the price is quoted and payable in Roubles.

Services in Yakutia We have historically been a leading player in the local coal transportation market in the Republic of Yakutia, one of the fastest growing coal exploration markets in Russia. We operate our own train formation in Yakutia, consisting of two main-line diesel locomotives, as well as a fleet of railcars on behalf of third parties. We also operate a seven kilometre railway spur, adjacent to the Neryungri coal-fired power station to which we deliver coal, under a long-term lease from Russian Railways, which is due to expire in 2032. Because of our management of this railway branch and the deliveries we make along the spur to various important facilities in the region, we believe we exercise operational control over a large share of the coal transportation market in Yakutia. As measured by freight turnover at the Neryungri- Freight Station and Neryungri-Passenger Station, we believe our share of the coal transportation market in Yakutia was approximately 44% in 2012. Sales in Yakutia accounted for approximately 20-30% of revenue of the Rail Division in 2010-2012.

Railcar Operating Leasing From time to time, we also rent out railcars pursuant to operating leases, which represented 16.5% of the revenue of our Rail Division in 2012. Our leased-out fleet mainly consists of pellet hoppers, gondolas,

165 platforms and tank cars. The table below sets out the average daily number of railcars leased-out in the periods indicated:

For the year ended 31 December Type of railcar 2012 2011 2010 Gondola cars ...... 927 710 308 Platforms ...... 596 405 248 Pellet hoppers ...... 907 555 240 Box cars ...... 151 198 102 Tank cars (oil) ...... 595 582 570 Cement hoppers ...... 313 251 426 Other ...... 774 960 548 Total railcars rented out ...... 4,262 3,661 2,441

We typically rent out excess fleet on a short-term basis of less than one year or a more specialised fleet on a medium- to long-term basis of up to seven years when leasing the cars is more profitable than operating them. As of 31 December 2012, the average length of our operating lease contracts was 10.5 months. The leased asset remains on our balance sheet, and we retain the title and exposure to the residual value at the end of the lease. Depending on the type of customer and length of customer relationship, operating lease contracts may require 100% prepayment. Alternatively, they may provide for payment in arrears a certain number of days following the provision of the relevant service. Our operating lease contracts generally stipulate that we bear the costs associated with scheduled repair and maintenance and the lessee bears the costs associated with routine, day-to-day repairs. The lessee pays for each day of rent under the lease contracts, except for the days when the rolling stock is undergoing scheduled repair and maintenance. The pricing for leasing of rolling stock is unregulated, and our operating lease prices are primarily determined by the prevailing prices in the spot market. In negotiating an operating lease, we adjust the price based on a number of factors, including the type of railcar, type of operating lease contract entered into and the length of the contract. Under our operating lease contracts, the operating lease rate is expressed as the amount of payment for possession and use of one railcar per day. During the term of a contract, the daily rate may be indexed upwards, depending on the spot market performance, but it may not fall below the daily rate prevailing on the date the relevant contract is signed. In most contracts, the operating lease is quoted in U.S. Dollars and payable in Roubles at the exchange rate published by the CBR on the day of payment.

Block train formations Public container and block train services have become an increasingly important priority for us. The organiser of a block train must have a fleet of containers and platforms, access to container terminals and an agreement in place with Russian Railways on the organisation and monitoring of block train formations. In 2012, we organised 964 container block trains, compared to 714 in 2011 and 509 in 2010. We operate regularly-scheduled container block trains between Moscow and Vladivostok, supporting our ability to handle increasing volumes of cargo turnover from China. In 2012, we sent an average of eight block trains per week from Moscow to Siberia (compared to an average of six per week in 2011 and an average of 4.5 per week in 2010) on our Moscow Shuttle, FESCO Ob Shuttle (Silikatnaya- Novosibirsk) and FESCO Amur Shuttle (Silikatnaya-Krasnaya Rechka) lines and an average of 8.5 trains per week from the Russian Far East to Moscow (compared to an average of 5.5 per week in 2011 and an average of 2.5 per week in 2010) on our FMS-FESCO Moscow Shuttle (Vladivostok-Moscow) and FSS-FESCO Siberian Shuttle (Vladivostok-Novosibirsk) lines.

Ancillary Services Our Rail Division also offers ancillary services, including spot wagon deployment, tracing and dispatcher’s control, integrated services to consignors and consignees, scheduling and railcar management and accounts settlement with Russian Railways.

166 Customers Our Rail Division mainly provides its services directly to external clients, although it also provides services to clients indirectly and through our Liner and Logistics Division. See ‘‘—Operations—Liner and Logistics Division—Customers’’ for a discussion of the key customers of the Liner and Logistics Division. Coal and iron ore accounted for approximately 64.9% of our freight structure in 2012 in terms of volumes. As a result, key customers of our Rail Division are large coal and metals companies. In 2012, the five largest direct clients of the Rail Division accounted for approximately 38% of the division’s revenue. The five largest customers in 2012 were Mechel-Trans, which is the transport and logistics division of Mechel, Eastern Transportation and Energy Company, Dnepropetrovsk Metkombinat in Ukraine, SUEK and ArcelorMittal Krivyi Rih in Ukraine. Mondi SLPK is also an important customer of our Rail Division. The largest customer of our Rail Division in 2012, in terms of revenue, was Mechel-Trans, which accounted for approximately 12.9% of the division’s revenue. No other customer accounted for more than 8% of the division’s revenue in 2012. The table below sets out information regarding the Rail Division’s most important external customers in 2012:

Customer Customer’s sector Primary service provided to customer Mechel-Trans ...... Coal Operating and forwarding of open wagons Eastern Transportation and Energy Company . Coal Operating open wagons Dnepropetrovsk Metkombinat ...... Metals (Ukraine) Operating open wagons and pellet cars SUEK ...... Coal Operating open wagons ArcelorMittal Krivyi Rih ...... Metals (Ukraine) Operating open wagons Mondi SLPK ...... Paper and Pulp Operating covered wagons Vostsibuglesbit ...... Coal Operating open wagons Independent Transportation Company ...... Rail transport Leasing pellet cars Donetsk Steel Metallurgical Factory ...... Rail transport (Ukraine) Operating pellet cars Ecodor ...... Logistics Operating platforms Russkaya Troika ...... Rail Transport Operating platforms EvrazTrans Ukraine ...... Rail transport (Ukraine) Operating open wagons and pellet cars Metinvest Shipping ...... Rail transport Operating open wagons and pellet cars Ecodor is a key counterparty of both our Rail Division and Liner and Logistics Division. Ecodor manages two container terminals and offers the following services: (i) temporary cargo storage; (ii) railcar shipment of cargo; (iii) freight forwarding services; (iv) container depot services; and (v) formation of container block trains. Our Rail Division and Russkaya Troika transport containers for Ecodor that are supplied by our Liner and Logistics Division. Ecodor provides us, in turn, with expeditor services, facilitating the formation of block- trains along the Moscow-Vladivostok-Moscow and Moscow-Novosibirsk-Moscow routes, and terminal handling and storage services.

Competitive Environment We focus our rail services on niche markets with high barriers to entry where we believe we possess certain competitive advantages. We have historically been a leading player in the local coal transportation market in the Republic of Yakutia, one of the fastest growing coal exploration markets in Russia. Because of our management of this railway branch and the deliveries we make along the spur to various important facilities in the region, we believe we exercise operational control over a large share of the coal transportation market in Yakutia. As measured by freight turnover at the Neryungri-Freight Station and Neryungri-Passenger Station, we believe our share of the coal transportation market in Yakutia was approximately 44% as of 31 December 2012. See ‘‘—Services—Freight Rail Operating Services—Services in Yakutia’’. In addition, we operate the largest fleet of iron ore pellet hoppers in Russia, according to Russian Railways, and, in 2011, were among the top ten private railcar operators in Russia in terms of fleet under management, according to INFOLine. We are among the largest railcar fleet operators in Ukraine in terms of rolling stock under management.

167 In the future, we will continue expanding our presence on the high-margin container transportation market. According to INFOLine, in 2012, our share of the platform market in Russia was 6.0%. We intend to make further investments in our fleet of platforms, grow our container block train services and deepen the integration of the Rail Division with our other divisions to provide intermodal services. Our Rail Division faces competition from Russian Railways and its subsidiaries, including Federal Freight and TransContainer, in which we own a 23.7% stake (see ‘‘—Associates—TransContainer’’), and independent transportation companies, such as UCL Rail (Freight One), Globaltrans, NefteTransService and Novotrans. To a lesser degree, our Rail Division also competes with freight owners that maintain their own fleet of railcars, such as SUEK, Mechel, Gazprom and Eurochem. See ‘‘Industry’’ for details of the competitive environment in which our Rail Division operates.

Liner and Logistics Division Overview The Liner and Logistics Division offers a wide range of sea liner services for containers and other cargo, as well as freight-forwarding, logistics and a host of other services, including refrigerated and Ro-Ro transport. The Liner and Logistics Division integrates the operations of our other divisions, including cargo handling in ports and onward delivery by rail, which enables us to provide our customers with ‘‘door to door’’ transportation services under one bill of lading. For many of our clients, the Liner and Logistics Division is the key point of contact with the Group. Sea-liner services mainly consist of the transportation of containers along regularly-scheduled international sea lines and the transportation of containers, dry bulk and general cargo across the Russian Far East on a cabotage basis. Forwarding and logistics services include intermodal transportation within Russia of cargo carried on our sea-liner services, and other freight forwarding and inland logistics services. We operate Dalrefttrans, the only specialised reefer cargo terminal in the Russian Far East, and itself an operator of refrigerated container transport, and provide Ro-Ro transportation services. In the years ended 31 December 2012, 2011 and 2010, our Liner and Logistics Division generated revenue of U.S.$623 million, U.S.$567 million and U.S.$430 million, respectively, which accounted for 52.0%, 55.1%, and 53.7%, respectively, of our total revenue. In the years ended 31 December 2012, 2011 and 2010, the Liner and Logistics Division generated Adjusted Revenue of U.S.$623 million, U.S.$567 million and U.S.$430 million, respectively, which accounted for 53.2%, 48.5% and 47.1%, respectively, of our total Adjusted Revenue, and Adjusted EBITDA of U.S.$43 million, U.S.$51 million and U.S.$63 million, respectively, which accounted for 15.4%, 20.9% and 35.0%, respectively, of our total Adjusted EBITDA. In the years ended 31 December 2012, 2011 and 2010, Adjusted EBITDA margin of the Liner and Logistics Division was 7%, 9% and 15%, respectively.

Key Assets The key assets of the Liner and Logistics Division consist of containers, rolling stock, the reefer cargo terminal at Dalrefttrans and a fleet of trucks.

Containers As of 31 December 2012, we held 35,926 containers with a capacity of 56,446 TEUs. The average technical life of containers is 8.25 years. All of our containers are certified as being in compliance with international requirements and regulations, are built under the supervision of International Classification Societies and meet all ISO-TC-104 standards and rules. The table below sets forth information on the Liner and Logistics Division’s container assets, broken down by type, as of 31 December 2012.

Container Type Owned Rented in Total % of total General Purpose ...... 18,451 15,250 33,701 93.8 Reefer ...... 1,845 297 2,142 6.0 Open Top ...... — 58 58 0.2 Flat Rack ...... — 25 25 0.1 Total ...... 20,296 15,630 35,926 100

168 There are many container manufacturing companies from which we can purchase or rent-in containers. There is also a liquid market for used containers. Our principal container suppliers include Triton Container International Limited, Textainer Equipment Management II LLC, TAL International Container Corporation, Seacastle Container Leasing LLC and Cronos Containers Limited. See ‘‘Description of Certain Indebtedness—Description of material finance lease agreements—Pacific Conlease Company Limited—Finance leases with TAL International Container Corporation’’.

Rolling Stock Our Liner and Logistics Division also maintains its own fleet of rolling stock designed for refrigerated transportation. As of 31 December 2012, through Dalrefttrans, the Liner and Logistics Division owned and operated 604 platforms, 49 diesel railcars and one container crane. There is a limited number of manufacturers that produce platforms suitable for transportation on Russia’s wide-gauge railroads. We purchase platforms primarily from Russian and Ukrainian manufacturers and distributors, including Altaiwagon and Ruzaevsky Factory.

Reefer Cargo Terminal Through Dalreftrans, our wholly-owned subsidiary, we own and operate the only reefer cargo terminal in the Russian Far East. The Dalreftrans reefer terminal covers a total area of seven hectares, all of which we own.

Trucks Our Liner and Logistics Division also maintains a fleet of trucks, which allows us to provide ‘‘door to door’’ delivery services over short distances from our cargo and logistics terminals. As of 31 December 2012, we owned approximately 55 trucks, including Freightliners, Man, Maz and ISUZO trucks. Dalreftans also currently leases a fleet of 20 Mercedes trucks.

Services The Liner and Logistics Division offers international and cabotage sea-liner services, forwarding and logistics services, including intermodal transportation services, and other services, such as refrigerated cargo and Ro-Ro transport. In 2012, the largest business lines within the Liner and Logistics Division were international sea-lines, in terms of revenue and throughput. The table below sets forth a breakdown by throughput of the business lines within the Liner and Logistics Division for 2012:

Throughput of Liner and Logistics Division Business Line in 2012 (TEUs in thousands, except Ro-Ro) International Sea Lines ...... 342 Cabotage Lines ...... 68 Intermodal Transportation ...... 208 Refrigerated Cargo ...... 49 Total ...... 668 Ro-Ro Cargo (vehicles, thousands) ...... 57

169 The table below sets forth a breakdown by cargo destination in terms of volumes for 2012:

Throughput of Liner and Logistics Division Destination in 2012 (TEUs in thousands) China ...... 235 Europe ...... 99 South Korea ...... 98 Domestic and DRWT(1) ...... 154 Other ...... 81 Total ...... 668

Note: (1) Intermodal transportation service within Russia.

Sea Liner Services Sea liner services mainly consist of the transportation of containers along regularly-scheduled international sea lines between ports of call in the Russian Far East, Asia, Europe and North America, and the transportation of containers, dry bulk and general cargo across the Russian Far East on a cabotage basis. The following table sets forth the volumes of cargo delivered by our sea liner services for the periods indicated.

Sea Liner Services 2012 2011 2010 TEUs International ...... 341,685 297,381 256,038 Cabotage ...... 67,994 62,943 66,679 Total ...... 409,679 360,324 322,717

International Sea Lines The Liner and Logistics Division operates 14 regularly-scheduled international sea lines to more than 40 seaports in Asia, North America and Europe, having transported 341,685 TEUs of containers in 2012. Imports of consumer goods, electronics, automotive parts and foodstuffs and exports of raw materials, construction materials and foodstuffs account for a substantial share of the cargo transported by our international sea lines. Our international sea lines use both ships chartered-in from third parties and vessels from our Shipping Division. Most of our shipping lines run on a weekly basis, except for certain lines, such as the Korea-Sakhalin Line and Japan Line, which run on a bi-weekly basis.

170 The table below sets forth information on our international sea lines.

Line Title Code Route Asia FESCO Black Sea Service ...... FBSS -Ningbo-Shekou-Ilyichyovsk-Odessa China ...... FCDL Port Vostochny-Vladivostok-Hong Kong-Xiamen- Qindao-Shanghai-(Ningbo)-Xingang-Port Vostochny-Vladivostok Korea-Sakhalin ...... FKSL Korsakov-Kholmsk-Pusan-Korsakov South Korea(1) ...... KSDL Port Vostochny-Vladivostok-Masan-Pusan-Port Vostochny Japan(2) ...... JTSL Port Vostochny-Vladivostok-Kobe-Nagoya- Yokohama-Moji-Toyama-Port Vostochny North America USA (West Coast)-Pusan ...... USWC Los Angeles-Oakland-Seattle-Vancouver-Tacoma- Pusan-Vladivostok/Port Vostochny-Korsakov/ Kholmsk-Magadan-Petropavlovsk-Kamchatsky North America ...... FPL Everett (Seattle)-Magadan-Korsakov-Vladivostok- Petropavlovsk-Kamchatsky Europe FESCO-Europe ...... ESF St. Petersburg-Rotterdam-Antwerpen-Zeebrugge- Hamburg Europe-East Asia ...... FBOL (eastward) St. Petersburg-Hamburg-Rotterdam-Zeebrugge- Southampton Le Havre-La Spezia-Algeciras- Genoa-Fos-Barcelona-Valencia-Pusan-Dalian- Tianjin-Ningbo-Qingdao-Xiamen--Port Kelang-Shanghai-Port Vostochny-Vladivostok- Korsakov-Petropavlovsk-Kamchatsky-Magadan Europe-West Asia ...... FBOL (westward) Dalian-Tianjin-Qingdao-Ningbo-Shanghai- Xiamen-Hong Kong-Chiwan-Yantian-Port Kelang- Singapore-Southampton-Hamburg-Rotterdam- Zeebrugge-St. Petersburg The China Line, South Korea Line, FESCO-Europe Line, Europe-East Asia Line and Europe-West Asia Line have historically been our most important international sea lines, in terms of volumes shipped. To the extent available, we use ships from our Shipping Division on our international sea lines; however, if necessary, we may also charter-in ships from third parties. The China Line has historically generated the highest cargo turnover among all lines within the Liner and Logistics Division, accounting for 35% of cargo turnover on our international sea lines in 2012. We carry out a portion of our services along the China Line pursuant to a vessel-sharing agreement with CMA CGM, consisting of two of our vessels and one CMA CGM vessel. Under a vessel-sharing agreement, each party contributes a certain amount of capacity and shares in the revenue and expenses in proportion to such capacity; each party relies on its own network of sales offices to make sales. This vessel-sharing agreement gives us a buffer time of approximately two days in the event that one of our scheduled services is delayed due to inclement weather or otherwise. The South Korea Line accounted for 15% of cargo turnover on our international sea lines in 2012. Until the end of 2011, shipments along the South Korea Line were carried out pursuant to a joint-service agreement with Hyundai Machine Marine (‘‘HMM’’), whereby we and HMM established a freight pool, consisting of one FESCO vessel and one HMM vessel, and shared revenue and expenses on a parity basis; sales were made through a network of sales offices jointly controlled by us and HMM. Since 1 January 2012, we have carried out shipments on the South Korea Line pursuant to a vessel-sharing agreement with HMM, consisting of one ship from each party. The South Korea Line faces significant competition from seven other carriers that operate along the same route. Lines to Europe accounted for 15% of cargo turnover on our international sea lines in 2012. Cargo on the FESCO-Europe Line mainly consists of feeder traffic from Rotterdam to St. Petersburg and shipments of our own cargo between St. Petersburg and European seaports. The main customers of the FESCO- Europe Line are deep sea carriers on routes from the Far East and South East Asia to Europe. The Europe-East Asia Line and Europe-West Asia Line transport cargo from the seaports of China and South East Asia to Europe via the Suez Canal. We do not operate our own vessels on these lines; rather, we lease slots on vessels of third-party deep sea carriers, such as CMA CGM, and therefore the cost of

171 transportation depends on the rates of these third-party carriers, which are generally determined on a spot basis one month in advance.

Cabotage We operate five cabotage lines, delivering primarily containers, dry bulk and general cargo, including food, consumer goods and construction materials, between Vladivostok and other seaports along the Far Eastern coast of Russia. In 2012, our cabotage lines transported 67,994 TEUs of containers. Under Russian law, cabotage services may only be provided by Russian-flagged ships. This provides us with an important competitive advantage as 13 of our remaining 26 vessels operated under the Russian flag as of 31 December 2012. We are one of very few shipping operators using Russian-registered ships. We use only our own ships on the cabotage lines. Cargo volumes along the DMRWT intermodal service are a key source of revenue for our cabotage lines. Kamchatka accounted for the largest share of throughput on our cabotage lines, with approximately one-third of the total, followed by Magadan and Sakhalin. Our ability to allocate ice-class cargo vessels to the Magadan route during winter months is a key competitive advantage of our Magadan Line. Since December 2011, we have also operated a cabotage line to the Port of Novorossiysk for cargo deliveries in connection with the 2014 Winter Olympic Games in Sochi. We expect to close this line after closing of the Games. The customer base of our cabotage lines is widely dispersed among relatively small customers. The table below sets forth information on our cabotage lines:

Line Title Code Route Cabotage Kamchatka ...... FKPL Vladivostok-Petropavlovsk-Kamchatsky Magadan ...... FML Vladivostok-Magadan Sakhalin ...... FKDL Vladivostok-Korsakov Chukotka ...... FADL Vladivostok-Anadyr Sochi (since Dec. 2011) ...... FSDL Novorossiysk-Sochi

Forwarding and Logistics Services Intermodal Our intermodal delivery services are designed to provide tailor-made transportation solutions to our customers by combining two or more modes of transport, including sea liners and road and rail transport, to deliver containerised cargo. We offer our intermodal services between the largest cities in Russia and seaports in the Russian Far East, South-East Asia, Korea and Japan, servicing a wide range of customers. To offer our clients a broad selection of intermodal transportation solutions, we leverage the services and assets of all of our divisions, including our international and cabotage sea liners, our container block trains and our truck fleet. See ‘‘—Rail Division—Services—Block train formations’’ for a discussion of our block trains. If necessary, we procure the services of third-party providers on behalf of our intermodal clients. We maintain long-term contracts with many third-party providers of transportation infrastructure, including trucking companies and other forwarding companies, which enables us to adapt quickly and in a cost-effective manner to changes in the availability of our owned assets, such as a deficit of rolling stock on a particular line, or to changes in our customers’ logistics needs. In 2012, we delivered approximately 208,300 TEUs of containers by means of intermodal transport, compared to 197,049 TEUs in 2011 and approximately 152,000 TEUs in 2010. Consumer goods, automotive parts, machinery and electronics account for most of our intermodal cargo. In 2012, deliveries to and from China comprised the largest share of intermodal cargo volumes. We also offer intermodal transit services connecting points in Europe and Central Asia through Russian territory. We also operate a regular block train service between Europe and Afghanistan for the delivery of cargo on behalf of NATO forces. Shipments to Afghanistan have declined as a result of NATO’s planned withdrawal from Afghanistan, although we may be able to capture a share of the shipments back from Afghanistan to Europe.

Freight Forwarding The Liner and Logistics Division also performs certain agency functions for our clients, serving as shipping and forwarding agents and customs clearance agents along our transport routes.

172 Other Services Refrigerated Services The Liner and Logistics Division also offers a wide range of refrigerated transportation services through our wholly-owned subsidiary Dalreftrans, which operates the only specalised reefer cargo terminal in the Russian Far East and is itself an operator of integrated container transport. The Dalrefttrans Reefer Terminal handles refrigerated container cargo. As of 31 December 2012, annual capacity of the Dalrefttrans Reefer Terminal was 50,000 TEUs of refrigerated container cargo. The table below sets forth the refrigerated container throughput of the Dalrefttrans Reefer Terminal:

Year ended 31 December Direction 2012 2011 2010 (TEUs) (%) (TEUs) (%) (TEUs) (%) Export ...... 100 0.2 200 0.5 70 0.2 Import ...... 13,162 32.6 11,186 30.1 8,916 24.0 Cabotage ...... 16,289 40.4 15,013 40.4 16,974 45.7 Rail/Auto Transport ...... 10,811 26.8 10,745 28.9 11,175 30.1 Total ...... 40,362 100 37,144 100 37,135 100

Refrigerated cargo, which mostly consists of foodstuffs, is delivered by sea and rail. By sealiner, we deliver refrigerated cargo internationally along our China Line, South Korea Line and Belgium Line and domestically along our Kamchatka Line, Magadan Line and Sakhalin Line. By rail, we deliver refrigerated cargo on the Vladivostok-Novosibirsk-Moscow-St. Petersburg route. Key customers of our Dalreftrans Reefer Terminal include Kas Foods, Westcargo, Irna, Interbridge, LTD Demense Consulting Ltd., Sea Ice and Dary Morya.

Ro-Ro Line Using our four owned Ro-Ro vessels, we operate a single Ro-Ro Line that transports cars and other vehicles between the Russian Far East and ports in Japan and South Korea. We expect transportation volumes along our Ro-Ro Line to grow in the future due to an anticipated increase in used-car imports from Japan following Russia’s admission into the WTO and imports of heavy vehicles used in gold-mining operations in the Magadan Region. Key customers of our Ro-Ro Line include Orient-Maritime Co, Global-Korea Ltd, Aksys Corporation and Light International Business Corp.

Pricing We set prices for the services of our Liner and Logistics Division, including for the use of our containers and ‘‘last mile’’ truck delivery services, based on free market pricing, taking into consideration such factors as maintenance costs of our equipment, the potential length of a return empty run, transportation distance, container size, cargo weight, time of delivery and other factors. We offer customers two pricing options: a per-service price or a through-rate price. A per-service price is the individual rate that applies for a particular service, such as sea transport, forwarding or rail transport. A through-rate price is an all-inclusive price charged for a set of integrated logistics services. Such through-rate price includes a charge for standard services, such as rail-based container transportation, transshipment to ports in the Far East, container handling or truck delivery, as well as a charge for value- added services, which may be custom-tailored for the customer. Most of our liner and logistics contracts are set for a one-year term, with price and volume adjustments made on a quarterly basis. We generally require a portion of the contract to be pre-paid. Prices are adjusted to reflect, inter alia, changes in tariff levels charged by Russian Railways or other third-party service providers or significant changes in foreign exchange rates or inflation. Rates for our liner and logistics services are standardised across our clientele and determined on a centralised basis. Liner and logistics contracts are priced in U.S. Dollars, Euro or Roubles depending on the client, and, in particular, whether the client is an international or Russian company, and on the type of service provided. For example, international sea liner services are quoted in U.S. Dollars or Euro, whereas cabotage services and the rail portion of intermodal contracts are denominated in Roubles.

173 Customers The Liner and Logistics Division maintains a diversified customer base, with its five largest customers accounting for approximately 28% of the division’s revenue in 2012. The core clients of the Liner and Logistics Division are large and mid-size freight forwarders and certain industrial companies. In 2012, our largest customers among freight forwarders included Yenwin International, China Shipping Holding, APL, Group ST and Ecodor. See ‘‘—Rail Division—Customers’’, for a discussion of our relationship with Ecodor. Other significant customers among freight forwarders include NYK Group Europe, Transport Logistics and Asia Cargo Trans. In 2012, the largest industrial clients of the Liner and Logistics Division, including of our block train formations, were Caterpillar, the construction and mining equipment manufacturer; John Deere, the manufacturer of agricultural machinery; SportMaster; and the petrochemical company SIBUR.

Competitive Environment We are one of the leading, privately-owned transportation and logistics companies in Russia. Due to our diverse portfolio of ports, rail and shipping assets, our world-wide network of sales offices and our experience in managing complex logistics solutions, we are able to unite nearly all of the links in the intermodal transportation value chain through our leading liner and logistics service offerings. See ‘‘—Overview—Competitive Strengths—Unique integrated intermodal transport operator in Russia’’. The Liner and Logistics Division faces competition in the following markets: (i) container handling at ports; (ii) railway container transportation; (iii) sea lines transportation; (iv) cabotage; and (v) refrigerated container transportation. In the container port terminal market, we face competition from other operators in the Far East Basin, including VSC. See ‘‘—Ports Division—Competitive Environment’’, for a discussion of the competition we face in the ports market. In the Russian rail container market, we face competition from TransContainer, Modul, FinTrans and VSK. Historically, TransContainer, in which we currently own a 23.7% stake (see ‘‘—Associates— TransContainer’’), has held a dominant position in the market, controlling 50% of total rail container volumes and 59% of total platforms, according to INFOLine. In 2012, according to INFOLine, we were the second largest operator in terms of rail container volumes, holding a 5% market share, and the third largest operator in terms of total owned platforms, holding a 6% market share. In the sea lines transportation market, we face competition mainly from TransContainer and deep sea carriers such as Maersk. In the cabotage market, we face competition mainly from Sakhalin Shipping and the Kamchatka Sea Steamship Company. Management estimate that we controlled our half of the cabotage market in 2012. Because only Russian-flagged ships are permitted to carry out cabotage operations, there are high barriers to entry associated with the cabotage market. For this reason, we do not expect to face significant new competition in this market. In the refrigerated container transportation market, we face competition mainly from Alliance Vostok- Zapad.

Shipping Division Overview Until 2002, shipping was our core business. As a result of our strategic decision to transform ourselves from a shipping company into a leading provider of intermodal transportation and logistics services, our Shipping Division now operates primarily as a support centre for our Liner and Logistics Division, to which it charters-out ships and provides vessel agency services. In connection with this strategy, we have begun to reduce our fleet inventory in recent years, focusing more on the management and ownership of those types of vessels, such as container ships, Ro-Ro vessels, icebreakers and ice-class vessels, that support our core operations and allow us to maximise intra-Group synergies. The Shipping Division operates icebreaking services and transport cargo on a cabotage and import-export basis. In the year ended 31 December 2012, our Shipping Division generated revenue of U.S.$141 million and Adjusted Revenue of U.S.$87 million, which accounted for 11.8% and 7.4%, respectively, of our total

174 revenue and Adjusted Revenue. In 2012, our Shipping Division generated negative Adjusted EBITDA. In the years ended 31 December 2012, 2011 and 2010, Adjusted EBITDA margin of the Shipping Division was negative 3%, 4% and 12%, respectively.

Assets The assets of our Shipping Division largely consist of our fleet of vessels. As of 31 December 2012, we owned 26 vessels, with a total capacity of 302,338 DWT. Our fleet consists of 14 container ships; four timber carriers; four Ro-Ro carriers; two bulk carriers/dry cargo ships; and two icebreaking transportation vessels. In 2013, we disposed of four vessels, and we plan to dispose of an additional two vessels by the end of this year. As of 31 December 2012, the Shipping Division was comprised of FESCO, which owns the 13 vessels that operate under the Russian flag and leases the four icebreakers we operate, and various offshore companies that operate chartered vessels and own the 13 vessels that fly foreign flags, including FESCO Ulan Ude which flies both the Panamanian and Russian flags. Our extensive fleet of Russian-flagged ships gives us a competitive advantage in the cabotage market because cabotage operations are required under Russian law to be carried out only by Russian ships. See ‘‘—Overview—Competitive Strengths—Diversified business across products, markets and customers with an established presence in certain niche markets’’.

175 The table below sets forth a summary of our owned vessels as of 31 December 2012:

TEU Capacity (for Estimated Capacity container Year Year of Vessel type and name (DWT) ships) Built Disposal Flag Container Ships Kapitan Artyukh ...... 9,141 490 1986 2017 Russia Kapitan Gnezdilov ...... 5,805 320 1980 2016 Russia Kapitan Krems ...... 5,805 320 1980 2017 Russia Kapitan Lyashenko(1) ...... 8,717 490 1987 2017 Russia Kapitan Sergiyevskiy ...... 5,805 320 1981 2015 Russia Khudozhnik N. Rerikh ...... 8,717 490 1989 2018 Russia Krasnogvardeyets ...... 9,141 490 1986 2015 Russia Kapitan Afanasyev(1) ...... 23,380 1,748 1998 2023 Cyprus Kapitan Maslov(1) ...... 23,372 1,748 1998 2023 Cyprus Vladivostok(1) ...... 23,407 1,748 1998 2023 Cyprus FESCO Askold ...... 13,806 1,080 2006 2031 Cyprus FESCO Diomid(1) ...... 42,274 3,091 2009 2034 Cyprus FESCO Trader(1) ...... 15,213 1,060 1997 2022 Cyprus FESCO Voyager(1) ...... 15,232 1,060 1998 2023 Cyprus Container Subtotal ...... 209,815 14,455 Timber Carriers Pioner Kirgizia(2) ...... 6,070 — 1978 2012 Russia FESCO Ilinksky(3) ...... 7,365 — 1990 2012 Vanuatu FESCO Vysogorsk(4) ...... 7,365 — 1991 2017 Vanuatu Abakan ...... 7,365 — 1990 2020 Russia Timber Subtotal ...... 28,165 Bulk Carriers/Dry Cargo Amur...... 7,207 — 1997 2022 Russia Ussuri(1) ...... 7,212 — 2002 2027 Russia Bulk Carrier Subtotal ...... 14,419 — Ro-Ro Ships FESCO Gavriil(5) ...... 4,600 — 1976 2013 Marshall Islands FESCO Nikolay(1) ...... 5,554 — 1984 2014 Marshall Islands FESCO Ulan Ude ...... 3,198 — 1985 2015 Panama/Russia FESCO Uelen(1) ...... 2,978 — 1990 2018 Cyprus Ro-Ro Subtotal ...... 16,330 Ice breaking Transportation Vessel Vasilij Golovnin(1)(6) ...... 10,764 — 1988 2012 Russia Vasilij Burkhanov(1)(6) ...... 22,845 — 1986 2012 Russia Ice breaking Subtotal ...... 33,609 — Total ...... 302,338

Notes (1) Vessels subject to mortgage. (2) Vessel sold on 11 January 2013. (3) Vessel sold on 31 January 2013. (4) Vessel sold on 15 January 2013. (5) Vessel sold on 24 January 2013. (6) Vessel expected to be sold in second quarter of 2013. To complement our fleet of owned vessels, we currently charter-in four icebreakers under operating leases from the Federal Agency for State Property Management. The operating leases were granted in 2004 and expire in 2016. Our leased icebreakers, which have a total capacity of approximately

176 21,435 DWT, allow us to provide year-round transportation services. Our icebreakers patrol the Eastern zones of the Arctic Ocean and, in 2012, rendered ice lead to approximately 38 vessels, delivering approximately 140 thousand tonnes of cargo. In 2010, our icebreaking fleet included our owned vessel FESCO Sakhalin, which we sold in 2010. We plan to discontinue the leases of two of our four chartered- in icebreakers in the second half of 2013. The table below sets forth a summary of our chartered-in icebreakers as of 31 December 2012:

Capacity Year Name (DWT) Built Flag Lessor Lessee Admiral Makarov ...... 7,554 1975 Russia FASPM FESCO Kapitan Khlebnikov ...... 4,418 1981 Russia FASPM FESCO Krasin ...... 7,554 1976 Russia FASPM FESCO Magadan ...... 1,909 1982 Russia FASPM FESCO Total ...... 21,435

In recent years, we have begun to reduce our inventory of owned ships, particularly, bulk carrier and general cargo ships, which is broadly in line with our strategy to focus the Shipping Division on providing support to our core operations, particularly in the container transportation market, and on capturing higher margins in cabotage operations. Between 1 January 2010 and 31 December 2012, we sold 27 vessels, representing 705,728 DWT, consisting of the following: seven container ships, with 123,683 DWT; 13 bulk carriers, with 471,279 DWT; six general cargo ships, with 106,468 DWT; and one icebreaker, with 4,298 DWT. Total proceeds received from these sales was U.S.$316.2 million. In 2013, we expect to sell six vessels (of which we have already sold four), representing 59,009 DWT, including our two ice-breaking transportation vessels. In 2013, we purchased two general cargo carriers: the Sokol 3 and Sokol 6, each with a capacity of 9,597 DWT. We intend to use these ships to perform cabotage operations in the Kamchatka, Sakhalin, Magadan and Chukotka regions.

Services Our Shipping Division offers chartering and vessel agency services directly to third-party customers as well as to our Liner and Logistics Division. We operate mainly container vessels, timber ships and Ro-Ro ships, and, to a lesser extent, bulk vessels and icebreakers. The ships we charter out to third parties are mainly used on cabotage lines, delivering cargo to Arctic coastal towns and the Russian Far East. The ships we charter out to our Liner and Logistics Division are used primarily on regularly-scheduled, liner services in the Asian-Pacific region. As of 31 December 2012, 20 of our ships, representing a capacity of approximately 216 thousand DWT, were chartered out to our Liner and Logistics Division, and six ships, representing a total capacity of approximately 86 thousand DWT, were chartered out third parties. In 2012, ships chartered out to third parties accounted for a total of 8,827 days in operation, while ships chartered out to the Liner and Logistics Division accounted for 7,312 days in operation. The table below sets out the time in operation of our ships during the periods indicated:

Year ended 31 December Customer 2012 2011 2010 Number of days Third-party customers ...... 8,827 9,137 11,019 Liner and Logistics Division ...... 7,312 7,332 5,489 Total ...... 16,139 16,469 16,508

Container Shipping Our container ships primarily transport consumer goods and food on regularly-scheduled lines operated by the Liner and Logistics Division. As of 31 December 2012, 11 of our 14 container ships were chartered out to our Liner and Logistics Division. Our container ships primarily range in size from 5,805 DWT to 42,274 DWT.

177 Bulk Shipping Through FESCO Ocean Freight Management B.V., our FESCO-branded bulk shipping operator established in The Netherlands in 2011, we offer a full range of bulk shipping services that are integrated with our other businesses and assets, including rail transport and port handling. Our bulk ships primarily transport raw materials, such as iron ore, coal and other metallurgical products, on regularly-scheduled lines arranged by our Liner and Logistics Division. As of 31 December 2012, both of our bulk vessels were chartered out to our Liner and Logistics Division.

General Cargo Shipping Our general cargo fleet primarily ships consumer goods and break-bulk goods, such as timber, on regularly-scheduled liner services. As of 31 December 2012, three of our general cargo vessels were chartered out to our Liner and Logistics Division, and three general cargo ships were chartered out to third parties. Our general cargo vessels range in size from 6,070 DWT to 22,845 DWT.

Ro-Ro Shipping Our Ro-Ro ships are used to transport vehicles, automotive spare parts and mining materials between ports in Japan, China and the Russian Far East. Through our Liner and Logistics Division, we operate on a weekly basis the only Ro-Ro service between ports on both the Eastern and Western coasts of Japan and the Port of Vladivostok. Provided there is sufficient demand, our Ro-Ro line is also capable of making deliveries to other ports in the Russian Far East. As of 31 December 2012, all of our Ro-Ro ships were chartered out to our Liner and Logistics Division. Our Ro-Ro ships range in size from 2,978 DWT to 5,554 DWT.

Icebreaking We are one of the largest operators of icebreakers in the Russian Far East. Our fleet of chartered-in icebreakers provides icebreaking assistance mainly to Government-owned and oil and gas companies in the Arctic Ocean, and in other freezing areas of the Far East sea basin, including the Sea of Okhotsk, the Bering Strait, the Sea of Japan and the Gulf of Anadyr. We operate three diesel engine motorships, the Krasin, Admiral Makarov and Kapitan Khlebnikov, which are liner class and can be used for a wide range of work in complex, icy conditions. We also operate a diesel icebreaker, the Magadan, which assists ports of the frozen, non-Arctic seas and performs auxiliary icebreaking work in the Arctic regions during the summer months and salvage operations in icy conditions.

Key customers The primary customer of the Shipping Division is the Liner and Logistics Division. We expect the Liner and Logistics Division to remain the Shipping Division’s most significant customer going forward in light of the Shipping Division’s role as a support centre for our core operations in the container transportation and logistics markets. The Shipping Division also offers transportation services directly to third-party customers. Russian clients include SUEK, Polymetal and Metaltorg. International clients include Seven Seas Logistics, Fimo Japan, Copenship A/S, Dalaro Oil, Sojits, Western Bulk, CMA CGM, T.S. Lines and MSC Geneva. In 2011 and 2010, Kinross was the largest client of the Shipping Division. In 2012, the five largest third-party clients of the Shipping Division, which accounted for 30% of the Shipping Division’s revenue, were Exxon Neftegas, MSC Geneva, West Bulk Carriers, Dalaro Shipping and SOJITZ Corp.

Pricing The time-charter rates we charge to third-party charterers are set annually and based on market rates; rates can be revised during the course of the year based on market trends. Rates we charge to our Liner and Logistics Division are set in October for the following calendar year and are based on market rates at the time of setting. Rates charged to our Liner and Logistics Division may also be amended based on market dynamics.

Corporate Division The Corporate Division is responsible for the overall coordination of our operations, strategy and business planning and financial policy. Until 2012, group management functions were performed by

178 OOO FESCO Transport Group. Starting in 2012, these functions were transferred to FESCO, which currently employs the majority of our management and other administrative personnel. Other key companies in the Corporate Division include FESCO Lines Management Ltd., which operates as the corporate centre for our overseas operations; various holding companies, which hold certain of our key assets; and other agent and intra-group financial and management companies. Fees for management services provided to our other companies account for most of the revenue of the Corporate Division, with labour costs representing the largest component of the Corporate Division’s expenses.

ASSOCIATES TransContainer As of the date of this Offering Memorandum, we indirectly own a 23.7% stake in TransContainer, a leading intermodal container transportation company in Russia that provides a full range of container logistics services, including rail-based container transportation services, terminal services, truck delivery and freight forwarding services. We acquired an initial stake of 12.5% in TransContainer in its 2010 initial public offering of shares and global depositary receipts, increasing our shareholding to 23.7% through purchases on the open market in 2011 and 2012. In the nine months ended 30 September 2012, TransContainer generated revenue of U.S.$884.6 million and net profit of U.S.$138.2 million (calculated using the exchange rate of RUB30.92/U.S.$1 as published by the CBR on 29 September 2012). We treat TransContainer as an associate and account for it under the equity method. TransContainer owns and operates platforms, a fleet of standard intermodal 20-foot and 40-foot ISO containers as well as a variety of specialised containers, a network of rail-side container terminals and a fleet of approximately 310 truck tractors and 50 container semi-trailers for the provision of ‘‘last mile’’ services. As of 31 December 2012, TransContainer owned 25,016 platforms, including 5,907 80-foot platforms and 60,822 ISO containers, including 41,370 20-foot containers and 19,452 40-foot containers. In 2012, TransContainer transported 1,483.5 thousand TEUs of containers on its platforms, of which domestic shipments accounted for 792.9 thousand TEUs, exports 353.2 thousand TEUs, imports 247.4 thousand TEUs and transit shipments across Russia 90 thousand TEUs. As of 31 December 2012, TransContainer’s terminals, which are located at over 47 railway stations across Russia and one in Slovakia, handled approximately 1,428 million TEUs, which represented approximately 26.3% of the total number of TEUs handled by all rail-side terminals in Russia. Because our container terminals are located at, or in the vicinity of, ports, with no significant rail-side terminal presence, we do not believe that our terminal business competes with that of TransContainer. We do, however, face competition from TransContainer along several routes of our rail-based container transportation network, particularly along the corridor between ports in the Russian Far East and the European part of Russia. Two members of our Board of Directors also serve on TransContainer’s board of directors. See ‘‘Directors and Management—Interests of Members of the Board of Directors and Management Board’’ and ‘‘Risk Factors—Risks Relating to Our Business and Industry—General Risks— Certain of our directors and officers are also directors of one of our competitors’’. TransContainer is an unrestricted suibsidiary and not subject to the covenant package with respect to the Notes. See ‘‘Overview—Corporate and Financing Structure’’.

Russkaya Troika In 2004, we established Russkaya Troika, our 50-50 joint venture with Russian Railways. Russkaya Troika operates containerised cargo that is transported by regular block trains on the Moscow-Vladivostok, Moscow-Novosibirsk, Moscow-Yekaterinburg and Moscow-Nakhodka routes, as well as on block trains between the Baltics and Central Asia, to a stable and diversified client base. We treat Russkaya Troika as an associate and account for it under the equity method. As of 31 December 2012, Russkaya Troika operated 1,574 platforms, mostly consisting of 80-foot and 60-foot platforms, with an average age of 6.3 years. Rail container transportation volumes for Russkaya Troika totaled 115,853 TEUs in 2012. In 2012, a majority of Russkaya Troika’s fleet was involved in operations managed by our Rail Division and directly serviced our projects. According to management estimates, in 2012, we, and in particular our Liner and Logistics Division, accounted for over one-third of Russkaya Troika’s revenue. The

179 remainder of its revenue was generated by sales to third-party customers, including Ecodor, which is also a significant client of our Rail Division.

SAFETY AND ENVIRONMENT Protection of the environment and the health and safety of our employees, customers, suppliers and the local communities in which we work are top priorities for us. We strive to create a healthy and safe working environment at all of our facilities across all of our divisions and on all of our ships through the implementation of appropriate safety and environmental-protection measures and the proper qualification and certification of all personnel involved in handling dangerous and hazardous cargo. Our facilities and shipping fleet have emergency action plans in place and undergo regular fire-safety inspections. In addition, we are committed to eliminating incidents that threaten the safety and integrity of our vessels, such as groundings, fires, collisions and petroleum spills, and to reducing vessel emissions, waste generation and other negative effects on the environment. We believe that we follow industry safety standards applicable to our operations, and we are committed to continuous improvement in processes to manage safety, health and environmental performance. We have adopted a Safety, Quality and Environmental Protection Policy (the ‘‘SQEP Policy’’), which is an essential part of our Integrated Management System that, in turn, combines our four management systems—Safety Management System, Quality Management System, Environmental Management System and OSH Management System. The SQEP Policy applies to all of our activities and personnel. Its key priorities include the following: (i) ensuring safety at sea of our vessels, cargo and property; (ii) protecting the health and safety of all our employees; (iii) implementing a ‘‘zero spill’’ policy; (iv) minimising the negative impact of our operations on the environment; and (v) requiring that not only our employees, but our business partners and suppliers are aware of and maintain appropriate safety and environmental standards. All of our personnel undergo regular environmental, health and safety trainings. Our Integrated Management System, including the operation of our vessels, complies with ISO 9001: 2008 (Quality Management Systems), ISO 14001:2004 (Environment Management Systems) and OHSAS 18001:2007 (Occupational Safety and Health Management Systems). We also use the Trans-Siberian rail bridge to reduce carbon emissions by ships, and have adopted a strict policy at our ports, prohibiting the handling of ‘‘dirty cargo’’. Demonstrating our commitment to protecting the environment, we have signed the Copenhagen Communique´ on Climate Change and the 2C Challenge Communique,´ which call for a comprehensive framework for the reduction of worldwide. The hull and machinery of our shipping vessels have been accredited by GL-Det Norsk Veritas Group and under the ISM Code by the Russian Maritime Register of Shipping. In each case, the relevant classification society certifies that the vessel has been built and maintained in accordance with the rules of that classification society. Our accreditation under the ISM Code is valid until November 2017 and is subject to an annual inspection procedure. Since 2003, our Shipping Division has also been accredited under the ISO 9001, ISO 14001 and ISO OHSAS 18001 systems by the Russian Register Association and SAI Global Limited (Australia). Our ISO accreditation is valid for three years and is also subject to annual audits by the Russian Register Association and SAI Global Limited (Australia), both of which completed their most recent audits of our fleet in December 2012. Our vessels are regularly inspected by our seafaring crews, which perform much of the necessary routine maintenance, as well as by shore-based operational and technical specialists. Every two years, our fleet is inspected by various Russian governmental agencies, including the following: Gosmortransnadzor, which monitors marine safety and issues licences for sea-based transport of hazardous goods and ocean towage; Rosprirodnadzor, which monitors environmental compliance and issues licences for the handling of dangerous waste; Rospotrebnadzor, which oversees compliance with occupational safety and health regulations; and MCHS, which monitors our fire safety policies. Each vessel’s flag state, or the vessel’s classification society if nominated by the flag state, also inspects our vessels at least once a year to ensure they comply with applicable rules and regulations of the country of registry of the vessel and the international conventions to which that country is a signatory. Port state authorities also inspect our vessels when they visit our ports. Many of our customers also regularly inspect our vessels as a condition to chartering. We experienced no on-the-job fatalities in either 2010 or 2012. In 2011, we recorded two fatalities, both of which occurred as a result of slip-and-fall accidents on board our shipping vessels.

180 INSURANCE Our operations are subject to risks inherent to the freight transportation industry, including property loss or damage, accidents causing death or injury and environmental damage and pollution, among other risks. We maintain all insurance policies we are required to have under applicable law as well as certain non-mandatory types of insurance. For example, our real estate, rolling stock (whether owned or leased from third parties), shipping fleet and other fixed assets are covered by insurance. Our insurance policies include cover for third-party liability arising out of the operation of certain of our facilities, mandatory motor vehicle insurance and certain other types of insurance. In addition to mandatory insurance, we also maintain insurance coverage in respect of the risk of damage to or loss of our owned and leased property, such as certain of our facilities and our leased rail fleet, as a result of fire, lightning, explosions, natural disasters, damaged caused by water and theft. We do not maintain business interruption insurance. Our Shipping Division is subject to certain risks specific to maritime operations. To protect against catastrophic marine disasters, losses caused by adverse weather conditions, mechanical failures and human error, we carry hull and machinery insurance, protection and indemnity insurance and, with respect to one vessel, freight demurrage and defence insurance. Hull and machinery insurance generally covers the loss of, or damage to, a vessel due to marine perils such as collisions, grounding and weather. Protection and indemnity insurance indemnifies us for liabilities incurred while operating vessels, including injury to our crew or to third parties, cargo loss and pollution. Our maritime insurance policies also cover war risks, including piracy and terrorism risks. We also maintain a directors and officers (‘‘D&O’’) insurance policy with Chartis. See ‘‘Directors and Management—D&O Liability Insurance’’ for a discussion of our D&O insurance. We generally renew our insurance policies on an annual basis on commercially reasonable terms, conditions and rates. We purchase our insurance policies from leading Russian insurers, such as Rosgosstrakh, VTB Insurance, Alfa Insurance, and, with respect to the four icebreakers we operate, Sogaz, and directly from international insurers. For example, we maintain several hull and machinery insurance policies with Marsh; protection and indemnity insurance with respect to our vessels with U.K. P&I Club, West of England and Steamship Mutual; and one freight demurrage and defence policy with the U.K. Defence Club. Our Russian insurers typically re-insure their risks with leading international re-insurers, including Hannover Re, Gen Re, Swiss Re and Lloyds. We believe that we maintain adequate insurance coverage to protect against most of the risks involved in the conduct of our business, including appropriate levels of environmental damage and pollution insurance coverage consistent with industry norms. However, there can be no assurance that all covered risks are adequately insured against, that any particular claim will be paid or that we will be able to procure adequate insurance coverage at commercially reasonable rates in the future. See ‘‘Risk Factors—Risks Relating to Our Business and Industry—General Risks—Our insurance policies may be insufficient to cover all of our losses’’.

INFORMATION TECHNOLOGY The importance and sophistication of the logistics, dispatching, rolling stock tracking and freight tracing components of our services require the use of advanced information technology systems and software that are sufficient for our current needs and scalable to support the growth in volume of our operations. Our information technology system incorporates commercial and proprietary software, which enables us to carry out key business functions and processes, such as business planning, Russian and IFRS accounting, customer relations management and document flow, and provides us with information on the location of our rolling stock, containers and shipping fleet and real-time updates and historical data with respect to the movement of our containers, rail assets and ships. In particular, we have begun using the business management software SAP in our Liner and Logistics Division in order to optimise transshipments and deliveries as well as track the location of our containers and wagons. In the future, we plan to introduce SAP into all of our operations. Through the use of our information technology system, we are capable of analysing the commercial feasibility of new and existing routes and destinations as compared to competing transportation solutions or alternative transportation modes. The system also calculates transportation service prices, based on a complex system of criteria, including the tariff components of the price, the nature and volume of the cargo, the transportation route,

181 distance carried and certain other criteria. It also enables us to provide additional value-added services such as dispatching and tracing services. Our system interfaces with certain of the information systems of Russian Railways, thereby giving us up-to-date transport control and tracking information as well as the ability to exchange real-time information on tariffs with Russian Railways.

INTELLECTUAL PROPERTY AND SIGNIFICANT LICENCES As of 31 December 2012, we held 13 registered trademarks. Our subsidiary Transgarant is in the process of registering one additional trademark. We currently have registered over 20 domain names and two computer software programmes: the Railroad Transportation Company Management, whose rightsholder is Transgarant, and Vladivostok Container Terminal Information System, whose rightsholder is VKT. We hold licences authorising us to carry out a wide range of business activities, including licences to load and unload hazardous freight in railway transportation and at sea ports as well as various communications, maritime and customs services licences. We believe that we are in possession of all the material licences required for us to carry out our principal business activities.

EMPLOYEES & SOCIAL RESPONSIBILITY As of 31 December 2012, we had 7,376 employees. The following table sets out the number of our employees as of the dates indicated.

Year ended 31 December 2012 2011 2010 Corporate Division ...... 156 134 152 Ports Division ...... 2,507 2,402 403 Rail Division ...... 707 687 587 Liner and Logistics Division ...... 1,428 1,400 1,260 Shipping Division ...... 2,578 2,803 2,962 Total ...... 7,376 7,426 5,364

We pay our employees monthly salaries largely at prevailing market rates. Our remuneration system consists of two components: a fixed component, comprising a base salary, and a variable component, consisting of performance-based bonus payments remitted on a monthly, quarterly, semi-annual and annual basis, as well as discretionary bonuses issued from time to time upon the decision of management. Annual bonuses for top management generally range from 40-100% of one’s annual salary. In addition, certain members of our top management are entitled to receive stock options in FESCO pursuant to our management incentive programme. See ‘‘Directors and Management’’. Apart from a brief work stoppage at the Port of Vladivostok in December 2012 in connection with salary levels, we have not experienced any material work stoppages or other significant labour disputes, and we consider our relationship with our employees to be stable. We believe that this stability is testament to the loyalty of our employees and our ability to retain and promote qualified personnel. Approximately 40% of our employees were members of a trade union as of 31 December 2012. FESCO and certain of our subsidiaries, including the Port of Vladivostok, sign collective bargaining agreements with their employees every three years. We are committed to promoting the professional development of our employees and to fostering a positive working environment at each of our facilities. Through our Corporate Personnel Policy, we offer our employees an array of educational and vocational opportunities, including in-house trainings and off-site seminars relating to business and the transport industry. In 2012, over 10% of our employees participated in at least one of our educational initiatives, either in-house or off-site. We provide medical insurance and accident insurance to our employees and offer voluntary medical insurance through an on-going relationship with ‘‘RESO-Garantiya’’. We also make mandatory pension contributions on behalf of our employees as required under Russian law, and may extend financial assistance to employees in need upon their request. We are also committed to supporting and enriching the local communities in which we work, where we make contributions to various social programmes and support local philanthropic initiatives. For

182 example, through our FESCO Veterans’ Public Organisation, we finance preventive treatment and medical aid to veterans. In 2012, we spent approximately U.S.$1.2 million on various charitable activities, including the veteran’s organisation. In 1962, we opened the Trade Fleet Museum of FESCO, which in 1987 secured the status of ‘‘National Museum of the Russian Soviet Federated Socialist Republic’’. The museum houses more than 20,000 exhibits, including documents, models of vessels and maritime paintings and photographs.

MATERIAL LITIGATION We are involved in legal and regulatory proceedings from time to time that arise in the ordinary course of business, including disputes with contractors, third parties, Russian Railways and Russian governmental agencies, such as the Federal Service for Financial Markets (‘‘FSFM’’) and FAS. In January 2007, our vessel Chelyabinsk ran aground in Italy, damaging several oyster plantations. The owners of the plantations filed a lawsuit against us in Italian courts for damages in the total amount of EUR7.9 million (approximately U.S.$10.5 million). Most claims have been settled, except for two outstanding claims: one for EUR446 thousand (approximately U.S.$595 thousand), which is currently suspended, and one for EUR393 thousand (approximately U.S.$520 thousand), which has been granted. Our liability under the second claim was covered by insurance, and damages were limited to the amount of the deductible, which was U.S.$15,000. In February 2012, we filed a lawsuit against Morskoy Sudtechgarant LLC, seeking to recover RUB140 million (approximately U.S.$4.6 million) in compensation for a sea rescue mission in the Sakhalin Gulf carried out by two of our icebreakers. The court of first instance dismissed our claims. The appellate court in part reversed, upholding our claims in the amount of RUB125 million (U.S.$4.1 million), against which judgment the defendant filed an appeal with the cassation court. In November 2012, the cassation court dismissed the appeal. In parallel with this lawsuit, we obtained the arrest of and injunction against the ship that was the subject of the rescue mission in dispute. In December 2012, Morskoy Sudtechgarant LLC was declared insolvent; we filed our claims for compensation as part of the defendant’s bankruptcy proceedings. We filed an application for entry of our claims into the register of creditors of Morskoy Sudtechgarant LLC with the court of first instance. The hearing is scheduled for 15 May 2013. At the same time, we filed a lawsuit for the forced sale of the arrested ship. The court of first instance rejected our claim, and our appeal was dismissed in April 2013. We are currently preparing a cassation appeal expected to be filed in May 2013. In February 2012, we filed a lawsuit against RIMSCO CJSC, seeking to recover RUB80 million (approximately U.S.$2.6 million) in compensation for a sea rescue mission in the Sakhalin Gulf carried out by two of our icebreakers. After the initial judgment dismissing our claim and various appeals, the case was remanded to the appellate court, where a preliminary hearing on the merits was held in March 2013. At a subsequent hearing held in April 2013, our claims were granted in the amount of RUB70 million. In connection with this proceeding, we filed a lawsuit against BN Marine Co. Ltd, seeking to obtain interim relief against RIMSCO CJSC in the form of an attachment of one of its refrigerated cargo ships or an injunction barring the disposal of the refrigerated cargo ship. Preliminary hearings took place in March 2013. In addition, our subsidiary VMTP has been involved in an ongoing dispute with the FTS about whether VMTP should be regulated as a natural monopoly. In October 2009, the FTS removed VMTP from the register of natural monopolies, only to annul this order in April 2012, when it reinserted VMTP back into the register. In August 2012, VMTP applied for interim relief and obtained a ruling suspending the order on its inclusion in the register, and, in November 2012, VMTP filed a lawsuit against the FTS seeking exclusion from the register. In November 2012, the court of first instance dismissed VMTP’s claims, which decision was upheld by the appellate court in March 2013. As a result, VMTP is currently included in the register of natural monopolies. We are challenging the March 2013 decision and have filed an application with the FTS requesting that VMTP be exempt from the restrictions applicable to natural monopolies, including tariffs adopted by the FTS, and plan to file a cassation appeal in May 2013. Because VMTP’s status as a natural monopoly remains in dispute, VMTP does not currently adhere to the tariff restrictions imposed by the FTS. See ‘‘Risk Factors—Risks Relating to Our Business and Industry—Risks Relating to Our Ports Division’’ and ‘‘Regulatory Overview—Antimonopoly and Related Regulation—Regulation of Natural Monopolies’’. In the opinion of management, with the exception of the dispute concerning VMTP’s status as a natural monopoly, none of these proceedings, if adversely determined, could have a material adverse effect on our financial position, results of operations or cash flows.

183 DIRECTORS AND MANAGEMENT Overview Our current charter was approved by the General Shareholders’ Meeting on 25 November 2011 and was duly registered in the Unified State Register of Legal Entities on 12 December 2011. In accordance with Russian legislation governing joint stock companies and our charter, our principal management bodies are the General Shareholders’ Meeting, the Board of Directors, the Management Board and the President. A brief description of each of the management bodies is set out below.

General Shareholders’ Meeting The General Shareholders’ Meeting is our supreme governance body pursuant to the Joint Stock Companies Law. An Annual General Shareholders’ Meeting must be held every year, and Extraordinary General Shareholders’ Meetings can be called by the Board of Directors, Review Commission, our independent auditor or shareholders holding not less than 10% of our voting shares. Each of our ordinary shares carries the right to cast one vote at any General Shareholders’ Meeting. The authority of the General Shareholders’ Meeting is limited to those matters that are expressly set out in our charter and the Joint Stock Companies Law. The following decisions, among others, can be taken only by the General Shareholders’ Meeting: amendments to the charter; the reorganisation or liquidation of FESCO; the election of the members of our Board of Directors and early termination of their powers; the appointment of the members of the Review Commission and early termination of his/her powers; the determination of the quantity, category and nominal price of FESCO’s authorised shares as well as the rights arising out of the ownership of such shares; the increase or decrease of charter capital; the approval of the annual report and annual accounts; and the approval of certain major transactions and interested party transactions, in accordance with the provisions of the Joint Stock Companies Law.

Board of Directors The Board of Directors is responsible for general management matters, with the exception of those matters that are designated by our charter and the Joint Stock Companies Law as being the exclusive responsibility of the General Shareholders’ Meeting. The Board of Directors meets and casts absentee voting regularly, at least once every six weeks, and makes its decisions by simple majority so long as a quorum of at least half of the elected members of the Board of Directors is present, unless otherwise required by law or our charter. Our shareholders elect members of the Board of Directors until the next Annual General Shareholders’ Meeting, and such members may be re-elected an unlimited number of times. Our Board of Directors currently consists of nine directors. All of our directors are non-executive directors, five of whom are also independent directors. The following table sets forth the name, age, position and first year of appointment on the Board of Directors for each director.

First Year Name Age Position Appointed Alexander Vinokurov ...... 30 Chairman of the Board of Directors 2013 Hans Gustav Jacob Grapengiesser ...... 34 Member of the Board of Directors 2013 Stefan Emanuel Kowski ...... 34 Member of the Board of Directors 2013 Dmitry Kalinin ...... 46 Member of the Board of Directors 2013 Sergei Zakharov ...... 33 Member of the Board of Directors 2013 Nataliya Chumachenko ...... 41 Member of the Board of Directors 2013 Stephen Mark Peel ...... 47 Member of the Board of Directors 2013 Marat Shaidayev ...... 44 Member of the Board of Directors 2013 Dmitry Shvets ...... 40 Member of the Board of Directors 2013 All of our directors were appointed at the General Shareholders’ Meeting on 11 March 2013. The terms of appointment for all directors expire on the date of the next Annual General Shareholders’ Meeting. The business address of each of the members of the Board of Directors is 29 Serebryanicheskaya Naberezhnaya, 109028 Moscow, Russia.

184 Alexander Vinokurov—Chairman of the Board of Directors Mr. Alexander Semenovich Vinokurov was born in 1982. He graduated from Cambridge University in 2004 with a Bachelor’s Degree in Economics. From 2007 to 2010, he held various positions at TPG Capital Russia, and, from 2010 to 2012, was Vice President of TPG Capital Russia. From 2011 to 2012, Mr. Vinokurov served as first Vice-President of Summa Group, and, since 2011, has been a member of the boards of directors of Summa Group, Summa Telecom, Stroynovatsiya and INTEX. Since 2012, Mr. Vinokurov has also served on the board of directors of NCSP. Since 2012, he has been the President of LLC Summa Group. Mr. Vinokurov was elected as Chairman of the Board of Directors in March 2013.

Hans Gustav Jacob Grapengiesser—Member of the Board of Directors Mr. Hans Gustav Jacob Grapengiesser was born in 1978. He graduated from the Stockholm School of Economics in 2002 with a degree in Economics. He also holds an MBA from Cornell University. From 2008 to 2012, he was a member of our Board of Directors. Since 2008, Mr. Grapengiesser has been a member of the board of directors of CJSC Company B92, and, in 2010 and 2011, he was a member of the board of directors of OJSC Ostankino Diary. Since 2002, Mr. Grapengiesser has been the director of East Capital International AB. In March 2013, Mr. Grapengiesser was elected as a member of our Board of Directors.

Stefan Kowski—Member of the Board of Directors Mr. Stefan Emanuel Kowski was born in 1979. He joined TPG Capital in 2006, is a Principal at the firm based in Hong Kong and involved in the firm’s investment activities across Developing Asia and Russia. Prior to joining TPG, Mr. Kowski worked in the Mergers, Acquisitions and Restructurings Department of Morgan Stanley in London and at The Procter & Gamble Company in Frankfurt and Cincinnati. Mr. Kowski received an M.B.A. from Harvard Business School, where he was a Baker Scholar and holds Master degrees in economics and finance, summa cum laude, from the Leopold-Franzens University of Innsbruck, where he was Valedictorian. He currently serves on the boards of Strauss Coffee BV and China International Capital Corporation. In March 2013, Mr. Kowski was elected as a member of our Board of Directors.

Dmitry Kalinin—Member of the Board of Directors Mr. Dmitry Kalinin was born in 1966. He graduated from Lomonosov Moscow State University in 1994 with a degree in Economics. From 2004 to 2010, he served as Deputy CEO for Economy and Finance at OJSC Sheremetyevo International Airport. From 2010 to 2012, Mr. Kalinin served as an advisor to the President of the Financial Department of CJSC Asteros. Since 2012, Mr. Kalinin has been a member of the boards of directors of Shtandart-TT BV, Summa Group Europe BV, Summa Group Europe Holding BV, Soyuz Commodities SA, Intimere Holdings Ltd. (BVI) and Hellicorp Investments Ltd. (BVI). Since 2012, he has also been a Counsel and a member of the board of directors of LLC Summa Group. In March 2013, Mr. Kalinin was elected as a member of our Board of Directors.

Sergei Zakharov—Member of the Board of Directors Mr. Sergei Zakharov was born in 1980. He graduated from Lomonosov Moscow State University in 2002 with a degree in Law. From 2005 to 2009, Mr. Zakharov served as an associate and from 2009 to 2012 as counsel at Clifford Chance CIS Ltd. Since 2012, he has been a member of the board of directors of LLC Stroynovaziya and Vice-President of Legal Affairs for LLC Summa Group. In March 2013, Mr. Zakharov was elected as a member of our Board of Directors.

Nataliya Chumachenko—Member of the Board of Directors Ms. Nataliya Chumachenko was born in 1972. She graduated from Voronezh State Academy of Architecture and Civil Engineering in 1994 with a degree in Engineering, from Voronezh State University in 2001 with a degree in Management and from the executive training firm International Center for Training and Coaching ‘‘Door International’’ in 2005 with a degree in Master-Coaching. From 2007 to 2012, she held various positions at OJSC VympelCom, including Chief Sales Officer, Vice-President and Regional Director for Moscow Region and Executive Vice-President for Business Development. Since 2012, Ms. Chumachenko has been Vice-President of Asset Management of LLC Summa Group. In March 2013, Ms. Chumachenko was elected as a member of our Board of Directors.

185 Stephen Peel—Member of the Board of Directors Mr. Stephen Peel was born in 1965. Mr. Peel is a Managing Partner at TPG Capital based in Hong Kong and heads the firm’s investing activities in Developing Asia and Russia. Mr. Peel was a founder of Pacific Group’s (now TPG Capital) European office in 1997. He also set up the firm’s activities in Eastern Europe and Russia before assuming responsibility for the businesses in Asia in late 2008. Before joining TPG, Mr. Peel was in the Principal Investment Area of Goldman Sachs International in Europe from 1989 to 1997. He graduated from Cambridge University in 1987. He serves or has served on the boards of directors, including China Grand Automotive Service Co. Ltd., HCP Holdings, Inc., Strauss Coffee B.V., Grohe AG, Lenta Limited, Mey Alkollu¨ Ikiler, Punch Taverns, Spirit Group Limited, Findexa Limited and Pivovarni Ivana Taranova. In March 2013, Mr. Peel was elected as a member of our Board of Directors.

Marat Shaidayev—Member of the Board of Directors Mr. Marat Shaidayev was born in 1968. He graduated from the Military Institute of the Ministry of Defense of the USSR in 1990 with a degree in Law and from the Russian Presidential Academy of National Economy and Public Administration in 2007 with a degree in State and Municipal Management. From 2006 to 2009, Mr. Shaidayev served as General Director of CJSC Trans-Flot. From 2009 to 2012, he served as Vice-President, Vice-President—Executive Director, First Vice-President—Executive Director and the President of LLC Summa Capital. Since 2007, he has been a member of the board of directors of LLC Summa Group. Since 2008, he has been Chairman of the board of directors of LLC Primorsky Trade Port and a member of the board of directors of OJSC YATEC. Since 2011, Mr. Shaidayev has been Chairman of the board of directors of OJSC Novoroslesexport and a member of the board of directors of NCSP, OJSC Novorossiysk Shiprepair Yard, LLC Novorossiysk Residual Terminal, OJSC Novorossiysk Grain Terminal and LLC Baltic Stevedore Company. Since 2012, he has also been First Deputy General Director, Chairman of the board of directors of NCSP and a Vice-President for Investments and Director of the Moscow office of NCSP. In March 2013, Mr. Shaidayev was elected as a member of our Board of Directors.

Dmitry Shvets—Member of the Board of Directors Mr. Dmitry Shvets was born in 1972. Mr. Shvets is Head of TPG Capital’s branch in Moscow and is responsible for the firm’s activities in Russia and CIS. Mr. Shvets is a member of the board of directors, Head of the Capex Committee and Head of the Human Capital Committee of the Russian food retailer Lenta. Between 2004 and 2008, Mr. Shvets served as Head of the Operational Efficiency Department at Norilsk Nickel where he helped optimise the company’s existing business and integrate its newly acquired assets. Between 1998 and 2004, Mr. Shvets worked at McKinsey & Company where he was leading projects in such industries as transportation, metals & Mining and oil & gas. Prior to that, he worked in various marketing related positions at the Coca-Cola Company. Mr. Shvets graduated with honors from the Moscow State Institute for International Relations in 1995 and from Emory University in 1997 with an M.B.A. In March 2013, Mr. Shvets was elected as a member of our Board of Directors.

Management Board The Management Board is our collective executive body. It is elected by the Board of Directors and may be re-elected an unlimited number of times. The Management Board meets and casts absentee voting at least once a month, and makes its decisions by simple majority, provided that a quorum of at least half of the elected members of the Management Board is present. The Management Board is responsible for our day-to-day management and administration. The President acts as Chairman of the Management Board. Going forward, the Management Board will include a chief financial officer, the search process for whom is currently ongoing.

186 The following table sets forth the name, age, position and first year of appointment of each member of the Management Board:

First Year Name Age Position Appointed Yury Gilts ...... 44 President and Chief Executive Officer, 2003 Chairman of Management Board Alexey Grom ...... 41 Member of the Management Board, 2011 First Vice President Sergey Blynda ...... 52 Member of the Management Board, 2012 Vice President, Organisational Development Natalie Bondar ...... 45 Member of the Management Board, 2012 Vice President, Information Technology Vladimir Korchanov ...... 48 Member of the Management Board, 2002 First Vice President Sergey Kostyan ...... 50 Member of the Management Board, 2007 Vice President, Liner and Logistics Alla Sugrey ...... 46 Member of the Management Board, 2012 Deputy Chief Financial Officer The business address of each of the members of the Management Board is 29 Serebryanicheskaya Naberezhnaya, 109028 Moscow, Russia

Yury Gilts—President and Chief Executive Officer, Chairman of the Management Board Mr. Yury Borisovich Gilts was born in 1968. He graduated from the Saint Petersburg University of Management and Economics in 1994 with a degree in Economics. From 2003 to 2008, Mr. Gilts was the first deputy General Director for Economic and Finances and a member of the Management Board of FESCO. He serves on the boards of directors of several companies, including FESCO Lines Australia Pty. Ltd; International Paint (East Russia) Limited; FESCO Lines Hong Kong Limited; FESCO Agency Lines HK Limited; FESCO Marine Limited; FESCO Agencies N.A. Inc.; FESCO Lines China Co. Ltd.; Maritime and Intermodal Logistics Systems Inc.; FESCO Lines Management Limited; OJSC Marine Bank; Transsiberian Intermodal Service (Shanghai) Co. Ltd.; and TransContainer. Since 2007, Mr. Gilts has also served as a member of the Supervisory Board of VMTP, and, from 2008 to 2011, as a member of the Management Board of LLC Transport Group FESCO. From 2009 to 2012, Mr. Gilts was the Director of M-Port, and, since 2011, was the Deputy Head of TransContainer. In 2011 to 2012, Mr. Gilts was Vice President for Finance of FESCO and a member of FESCO’s Management Board. Since 2012, Mr. Gilts has been the President and the Chairman of the Management Board of FESCO.

Alexey Grom—Member of the Management Board, First Vice President Mr. Alexey Nikolayevich Grom was born in 1971. He graduated from the Moscow Institute of Transport Engineers in 1993 with a degree in Management and from the Stockholm School of Economics in 2006 with an MBA. From 2001 to 2007, Mr. Grom occupied various positions at CJSC Yukos-Transservice, including General Director. From 2007 to 2008, he occupied various positions at Transgarant, including First Deputy General Director and General Director. In 2008 and 2009, Mr. Grom served as the Managing Director of the LLC Transport Group FESCO and as a member of the board of directors of LLC Port Express. From 2008 to 2010, Mr. Grom was a member of the board of directors of LLC Transgarant- Vostok, and, from 2009 to 2011, was also a member of the Management Board and Vice President of the Rail Division of LLC Transport Group FESCO. Since 2009, Mr. Grom has served as a member of the board of directors of Russkaya Troika, and, since 2012, he has been a member of the board of directors of TransContainer, a member of the Management Board of LLC Transport Group FESCO, a member of the Supervisory Board of VMTP and General Director of FESCO Rail. Since December 2011, Mr. Grom has been a member of the Management Board of FESCO and from January to May 2012, he was Vice President of Rail Division of FESCO. Since May 2012, Mr. Grom has served as First Vice President of FESCO.

187 Sergey Blynda—Member of the Management Board, Vice President, Organizational Development Mr. Sergey Alexandrovich Blynda was born in 1961. He graduated from the Leningrad Higher Political School of Air Defence in 1983 with a degree in Military Politics, from the Military-Political Humanitarian Academy of Military Services in 1994 with a degree in Military Education and from the St. Petersburg State University of Economics and Finances in 2002 with a Ph. D. degree in Economics. Since 2007, he has been the Head of the Council of SIA Tektrans. From 2003 to 2012, Mr. Blynda occupied management positions at Transgarant, including Deputy General Director and Executive Officer to the President. Since 2012, Mr. Blynda has been the Vice President of Development and a member of the Management Board of FESCO.

Natalie Bondar—Member of the Management Board, Vice President, Information Technology Ms. Natalie Nikolayevna Bondar was born 1967. She graduated from Lomonosov Moscow State University in 1994 with a degree in Applied Mathematics. She also holds an MBA CIO from the Academy of National Economy. From 2005 to 2008, Ms. Bondar served as Leading Consultant at LLC Borlas ABC, and, from 2008 to 2011, she was Director of the Information Technologies Department of LLC Transport Group FESCO. Since 2012, she has been a member of the Management Board and a Vice President for Information Technologies at FESCO.

Vladimir Korchanov—Member of the Management Board, First Vice President Mr. Vladimir Nikodimovich Korchanov was born in 1964. He graduated from the Nevelskiy Far East Higher Engineer Marine School in 1987 with a degree in Engineering. He also holds an MBA from the Academy of National Economy. From 2002 to 2008, he was a member of the Management Board of FESCO. Mr. Korchanov serves on the boards of directors of several companie, including International Paint (East Russia) Limited; FESCO Marine Limited; FESCO Lines China Co. Ltd.; Universal Transfer and Shipping Complex; CJSC Morcenter-TFC; and VKT. From 2008 to 2011, Mr. Korchanov was a member of the Management Board and Vice President of the Marine Division of LLC Transport Group FESCO. Since 2011, Mr. Korchanov has been a member of the Management Board and General Director of VMTP. Since December 2011, Mr. Korchanov has been a member of the Management Board of FESCO and since 2012, has been the First Vice President and Vice President of the Marine Division of FESCO.

Sergey Kostyan—Member of the Management Board, Vice President, Liner and Logistics Mr. Sergey Vasilyevich Kostyan was born in 1962. He graduated from the Nevelskiy Far East Higher Engineer Marine School in 1984 with a degree in Exploitation of Marine Transport. He also holds an MBA from the Academy of National Economy. Mr. Kostyan serves on the boards of directors of several companies, including FESCO Agency Lines HK Limited; FESCO Lines Hong Kong Limited; FESCO Lines Management Limited; Russkaya Troika; LLC Euroforward; FESCO Lines N.V.; FESCO North West Europe B.V.; FESCO Agencies N.A. Inc.; Maritime and Intermodal Logistics Systems Inc.; FESCO LINES KOREA CO Ltd.; FESCO Lines China Co. Ltd.; and Dalreftrans. From 2006 to 2007, Mr. Kostyan served as the Deputy General Director for Container Logistic and Intermodal Shipping. From 2008 to 2011, Mr. Kostyan was a member of the Management Board of LLC Transport Group FESCO, and, from 2010 to 2012, he was the General Director of LLC FESCO Integrated Transport. Since 2011, Mr. Kostyan has been a member of the Supervisory Board of VMTP. Mr. Kostyan has held various positions at FESCO, including Deputy General Director in 2005 and 2006, member of the Management Board in 2007 and 2008, and then again in since 2011. Since 2012, he has been Vice-President of our Liner and Logistics Division.

Alla Sugrey—Member of the Management Board, Deputy Chief Financial Officer Ms. Alla Andreyevna Sugrey was born in 1966. She graduated from the Kuybyshev Arkhangelsk Forest Engineering Institute in 1988 with a degree in Economics and Forestry Management. She also holds an MBA from the Academy of National Economy. From 1998 to 2008, Ms. Sugrey held various positions at OJSC Northern Shipping Company, including Deputy General Director. From 2008 to 2011, she was the Director of the Finance-Economy Department of LLC Transport Group FESCO. Ms. Sugrey serves on the boards of directors of several companies, including LLC Euro-Shipping and Forwarding; FESCO Lines N.V.; and FESCO Mediterranean Agency S.r.l. From January to July 2012, Ms. Sugrey was the Director of the Finance and Economics Department at FESCO and, since August 2012, has been our

188 Deputy Vice President for Finance. Since September 2012, she has been a member of the Management Board of FESCO.

President The President is the chief executive officer and Chairman of the Management Board by virtue of being the President. Pursuant to the Joint Stock Companies Law and our charter, the President is responsible for implementation of decisions of the General Shareholders’ Meeting and the Board of Directors. The President acts on our behalf without a power of attorney, representing its interests, entering into transactions, disposing of assets, approving staffing structure and issuing internal orders and directives. Our current President is Mr. Gilts who was appointed on 26 November 2012.

Compensation The aggregate amount of remuneration paid to members of our Board of Directors and Management Board for services in all capacities provided to FESCO during the years ended 31 December 2012, 2011 and 2010 was approximately RUB233 million, RUB177 million and RUB152 million, respectively, in salary and bonuses. The remuneration payable and expenses reimbursable to the members of the Board of Directors are set forth in our charter and the Regulations on the Board of Directors. The amount of remuneration for serving on our Board of Directors is subject to approval by the General Shareholders’ Meeting. The remuneration payable and expenses reimbursable to the members of our Management Board are set forth in the Regulations on the Management Board and employment agreements entered into between FESCO and the individual members of the Management Board. The short-term incentive scheme for our Management Board consists of a monthly fixed salary and one annual bonus based on fulfillment of certain performance indicators as set forth in the Regulations on Bonus Payments for the Members of the Management Board.

Management Option Programme In November 2010, our Board of Directors approved the Management Option Programme (the ‘‘Programme’’) for certain senior and key managers. The Programme aims to motivate the management by granting them the option to purchase FESCO shares and thereby encourage them to take a more active role in our future development. For purposes of the Programme, we incorporated Shonstar Limited, a 100% subsidiary, which owns 88,643,593 shares in FESCO, to be distributed to senior and key managers. The participants of the Programme enter into option agreements (secured by FESCO guarantees) with Shonstar Limited for a particular number of option shares. In total, the value ascribed to the full package of shares for which options may be granted constitutes 3.004% of FESCO’s charter capital. The option may be exercised by senior and key managers within one year from the expiration date of the three-year option period. The option period is defined in the option agreement and begins in each case in June 2010 or January 2011, as applicable. The Programme’s participants are entitled to exercise, at their own discretion, in only one of the following option rights: (i) acquire the option shares at the option price determined by the Board of Directors and stated in the option agreement with Shonstar Limited (the ‘‘Option Price’’); (ii) receive the difference between (a) the market price of one FESCO share multiplied by the number of option shares and (b) the Option Price multiplied by the number of option shares; (iii) receive FESCO shares from Shonstar Limited based at market price. The number of shares to be received shall be equal to the amount calculated in accordance with (ii) above divided by the market price for one share. The option rights expire if the senior and key management fails to exercise such rights within one year. The participant shall lose all rights under the Programme if his/her employment is terminated, provided that such termination is based upon documentary proof relating to fraud, theft or any other unlawful action committed either by the participant or by any other person under his/her instructions. If the participant’s employment is terminated due to other reasons, such participant is entitled to pro-rata remuneration under the Programme.

189 Contracts with management As of the date of this Offering Memorandum, we had no service contracts with the members of the Board of Directors and the Management Board.

Loans and Guarantees As at 31 December 2012, we had RUB4 million of outstanding loans and guarantees to the members of our Board of Directors and the Management Board.

D&O Liability Insurance We maintain a director and officer insurance policy with Chartis. The policy stipulates a limitation of liability on all claims of U.S.$10 million, with a liability cap of U.S.$500,000 for non-executive directors. The premium for the one-year policy, valid until June 2013, was U.S.$38,000. A standard set of exceptions apply, including for intentional criminal activity, unlawful profit, and pollution-related claims.

Interests of Members of the Board of Directors and Management Board As of the date of this Offering Memorandum, none of our directors or members of the Management Board has an ownership interest in our share capital. Certain of our directors and executive officers also serve as directors or officers of some of our competitors. For example, Mr. Yury Gilts and Mr. Alexey Grom, members of our Management Board, also serve on the board of directors of TransContainer, one of our competitors in the rail container market. In addition, Messrs. Alexander Vinokurov, Sergey Zakharov and Stephen Mark Peel, members of our Board of Directors, and Mr. Alexey Grom, member of our Management Board, were nominated for election to the board of directors of TransContainer at the next annual shareholders’ meeting scheduled for 26 April 2013. See ‘‘Risk Factors—Risks Relating to Our Business and Industry—General Risks—Certain of our directors and officers are also directors of one of our competitors’’. Other than the potential conflicts of interest described immediately above, we are not aware of any other potential conflicts of interest between any duties owed by members of the Board of Directors or Management Board to us and their private interests and/or other duties.

Corporate Governance We comply with the corporate governance requirements applicable to Russian public companies listed on Russian stock exchanges. In 1995, our shares commenced trading on the RTS (now the Moscow Exchange). As of the date of this Offering Memorandum, our shares have been listed on quotation list ‘‘B’’ of the Moscow Exchange and, as a result, we are required to comply with certain corporate governance requirements. Such requirements, inter alia, include: (i) the obligation to have at least one independent director on the Board of Directors, (ii) the formation of an audit committee, (iii) the adoption of a bylaw on insider trading and (iv) the implementation of internal control procedures. We are in full compliance with these requirements. In Russia, a director of a company is deemed ‘‘independent’’, if such director: (i) as of the moment of his appointment to the company is not, and during the last one year has not been, an executive officer or an employee of the company or its executive director, (ii) is not an executive officer of another company where any of the company’s current executive officers serves on that other company’s HR and remuneration committee, (iii) is not a close relative (i.e, a spouse, parent, child or siblings) of an executive officer (or an executive director) of the company or of an executive officer of the company’s management company, (iv) is not an affiliate of the company (except by virtue of membership on the company’s supervisory board), (v) is not a party under a commitment with the company, pursuant to which such director can acquire property (receive funds) in the amount equal to or exceeding 10% of his/her total annual revenue (except for a director’s fee) and (vi) is not a state representative. The criteria governing director independence as set forth under Russian law and FSFM guidance differ in some respects from the criteria for independent directors that are set out in the U.K. Corporate Governance Code and under applicable listing requirements in the United States. In particular, the following criteria on director independence are not explicitly set forth in Russian law or FSFM guidance: a director may not (i) have a material business relationship with a company as a partner, shareholder, director or senior employee of a body that has such a relationship with the company, (ii) have close family ties with any of

190 the company’s advisers, (iii) represent a significant shareholder, or (iv) be a current partner or employee of a firm that is the company’s auditor. In July 2009, the Board of Directors approved a Corporate Management Code. The main priorities of the Corporate Management Code include (i) respect for shareholders’ rights and interests; (ii) further improvement of the efficiency of our corporate governance and (iii) maintenance of our financial stability and profitability. In March 2009, the Board of Directors approved our Information Policy, which was recommended by the Federal Commission for the Securities Markets of the Russian Federation. The Information Policy is designed to ensure that regular, timely, balanced, complete and accurate information is available to all interested stakeholders, including shareholders, potential investors, media representatives and securities professionals in compliance with applicable legislation and regulations.

Strategy and Investments Committee of the Board of Directors The Strategy and Investments Committee is responsible for the initial discussion and analysis of issues in connection with our strategic development, and for the provision of recommendations to the Board of Directors on the use of reserve funds and other funds. The Strategy Committee was established in 2009. As of the date of this Offering Memorandum, we are in the process of selecting the composition of this committee to reflect the election of the new Board of Directors.

Audit Committee of the Board of Directors The Audit Committee coordinates our policies regarding internal controls and audit services, monitors the work of our independent auditors and discusses our financial reports with corporate bodies and the independent auditors. The Audit and Finance Committee was established in 2009 and currently consists of Sergei Zakharov, Alexander Vinokurov and Stefan Kowski. The Audit Committee is chaired by Sergei Zakharov.

Human Resources and Remuneration Committee of the Board of Directors The Human Resources and Remuneration Committee advises the Board of Directors on criteria regarding the appointment of executive officers and candidates to the Board of Directors and the remuneration to be paid to executive officers and members of the Board of Directors. The Human Resources and Remuneration Committee was established in 2009 and currently consists of Nataliya Sedyhkh, Stephen Peel, Nataliya Chumachenko and Marat Shaidayev. The Human Resources and Remuneration Committee is chaired by Nataliya Sedyhkh.

Litigation Statement about Directors and Officers As of the date of this Offering Memorandum, none of the members of the Board of Directors or the members of the Management Board for at least the previous five years: • has had any convictions in relation to fraudulent offences; nor • has held an executive function in the form of a senior manager or a member of the administrative, management or supervisory bodies, of any company, or a partner in any partnership, at the time of or preceding any bankruptcy, receivership or liquidation; nor • has been subject to any official public incrimination and/or sanction by any statutory or regulatory authority (including any designated professional body) nor has ever been disqualified by a court from acting as a member of the administrative, management or supervisory bodies of a company or from acting in the management or conduct of the affairs of any company.

191 RELATED PARTY TRANSACTIONS The following is a summary of our transactions with related parties for the years ended 31 December 2012, 2011 and 2010. For further details, see Note 32 to the 2012 Financial Statements and Note 34 to the 2011 Financial Statements.

GENERAL MATTERS Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions, as defined in IAS 24 ‘‘Related Party Disclosures’’. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form. We are, and have been, a party to various agreements and other arrangements with certain related parties and interested parties, the most significant of which are described below.

TRANSACTIONS WITH RELATED PARTIES Related party transactions for the years ended 31 December 2012, 2011 and 2010 consisted of the following:

For the year ended 31 December 2012 2011 2010 ($ in million) Key management and directors Salaries ...... 3 3 2 Bonuses ...... 3 2 3 Board of Directors remuneration ...... 2 1 1 Non-consolidated subsidiaries Agency services (purchases) ...... (1) (1) (1) Associates Agency services, rent and security expenses (purchases) ...... (3) (2) (4) Joint venture company Agency, transportation and stevedoring services (purchases) ...... (9) (10) (6) Transportation services (sales) ...... 2 3 2 Finance lease and interest income ...... 1 2 2 Related through common shareholder Interest income ...... 4 3 1 Selling expenses related to disposal of investment ...... ——(27) Consulting expenses ...... (4) —— We entered into transactions to purchase and sell goods and services from and to our related parties in the ordinary course of business. See ‘‘Directors and Management’’ for a discussion of the remuneration of our key management and directors. Transactions with non-consolidated subsidiaries primarily consisted of the agency and forwarding services rendered by LLC Orista, in which we currently own a 70% stake, and the fleet repair and maintenance services rendered by LLC FESCO Service, our non-material, 100% subsidiary. Transactions with associates primarily consisted of the railway transportation services rendered by TransContainer, in which we currently own a 23.7% stake, and auto transportation services rendered by LLC MB-FESCO Trans, in which we currently own a 49% stake. Transactions with the joint venture primarily consisted of the agency billing services rendered by TransRussia Agency Japan Co. Ltd, our joint venture with MITSUI O.S.K. Lines, as well as the repair and maintenance services rendered by FESCO Wallem Ship Management, our joint venture with Wallem Ship Management. In addition, for the years ended 31 December 2012, 2011 and 2010 we were involved in the related party transactions with Russkaya Troika, our joint venture with Russian Railways. These transactions with Russkaya Troika primarily consisted of the railway transportation services rendered by

192 Russkaya Troika, financial leasing issued to and managing a majority of the fleet owned by Russkaya Troika, as well as granting a U.S.$1.5 million loan to Russkaya Troika. Transactions with the entities related through common shareholder primarily consisted of the disposal of our stake in NCC Group Ltd and Ealingwood Ltd, consulting services and interest income from the loans issued to our shareholders in connection with the financing of the acquisition of interests in VMTP and FESCO. As at 31 December 2012, 2011 and 2010, related party balances were as follows:

As of the year ended 31 December 2012 2011 2010 ($ in mln) Non-consolidated subsidiaries Trade receivables ...... —— 1 Loan (payable)/receivable ...... (1) — 1 Associates Agency and other service ...... — 24 Trade receivables ...... 2 —— Joint venture company Trade payables ...... — (2) (2) Trade receivables ...... 1 2 2 Loan payable ...... — (13) — Loan issued ...... 1 2 3 Finance lease receivable ...... 7 9 9 Related through common issued ...... 541 —— Interest receivables ...... 2 —— Payables on behalf of related parties ...... 4 —— Cash and cash equivalents ...... — 72 148 The U.S.$541 million balance as of 31 December 2012 consisted of the U.S.$141 million and U.S.$400 million loans issued to our shareholders in connection with the financing of acquisition of interests in VMTP and FESCO. The guarantees issued to our shareholders in connection with the financing of their acquisition of an interest in FESCO amounted to U.S.$400 million as of 31 December 2012, compared to nil as of 31 December 2011 and 2010.

193 SPONSORS AND PRINCIPAL SHAREHOLDERS As of 31 December 2012, FESCO’s charter capital was RUB2,951,250,000, consisting of 2,951,250,000 ordinary shares with a nominal value of RUB1 each, all of which have been issued on a fully paid-up basis. No preferred shares are issued, authorised or outstanding. The following table sets forth FESCO’s shareholders who own at least 4% of the ordinary shares as of the date of this Offering Memorandum:

Shares Owned Name of Shareholder Number Percent Wiredfly Investments Ltd(1) ...... 1,475,616,254 49.99 Rikima Holdings Limited(2) ...... 196,552,053 6.66 Calamita Trading Ltd(3) ...... 134,352,903 4.55 Vovosa Co Ltd(4) ...... 236,111,111 8.00 Mirihia Holdings Limited(5) ...... 134,352,903 4.55 Noubelius Ltd(6) ...... 144,114,038 4.88 Other(7) ...... 630,150,738 21.35 Total ...... 2,951,250,000 100

(1) Wiredfly, a limited liability company organised and existing under the laws of Cyprus (registered number HE300315), having its registered address at Kyriakou Matsi, 3, Roussos Limassol Tower, 5th floor, Flat/Office 5A, 3040, Limassol, Cyprus, is indirectly wholly owned by Intimere Holdings Limited (‘‘Intimere’’), a company incorporated under the laws of the British Virgin Islands. Intimere is ultimately controlled by Mr. Ziaudin Magomedov, who is also the controlling shareholder of the Summa Group, and entities and persons from TPG, as further described below. (2) Rikima, a limited liability company organised and existing under the laws of Cyprus (registered number HE307545), whose registered office is at Griva Digeni, 115, Trident Centre, 3101, Limassol, Cyprus, is wholly owned by Elvy Limited (‘‘Elvy’’). Elvy is a company organised and existing under the laws of Cyprus, which is ultimately controlled by Mr. Mark Garber. (3) Calamita, a limited liability company organised and existing under the laws of Cyprus (registered number HE303070), whose registered office is at Agias Eirinis, 30, 3095, Limassol, Cyprus, is wholly owned by Elvy. (4) Vovosa, a limited liability company organised and existing under the laws of Cyprus (registered number HE292368), whose registered office is at Agias Eirinis, 30, 3095 Limassol, Cyprus, is wholly owned by Elvy. (5) Mirihia, a limited liability company organised and existing under the laws of Cyprus (registered number HE301032), whose registered office is at Agias Eirinis, 30, 3095, Limassol, Cyprus, is wholly owned by Elvy. (6) Noubelius Ltd (‘‘Noubelius’’), a company organised and existing under the laws of the Republic of Cyprus (registered number HE314036), whose registered office is at Spyridonos Lamprou, 10, 3106, Limassol, Cyprus, is wholly owned by Zutrek Holdings Ltd, a company organised and existing under the laws of the British Virgin Islands. (7) Consists of various nominee shareholders, including East Capital AB, which manages, among others, the assets of East Capital Russian Fund, East Capital Eastern European Fund and certain sub funds of East Capital (Lux) and shareholdings acquired in the free float of FESCO shares. In December 2012, Mr. Ziaudin Magomedov, the controlling shareholder of Summa Group, acquired from Industrial Investors Transportation Holdings Limited, an entity ultimately controlled by Mr. Sergey Generalov, ownership of Wiredfly, which, at the time of purchase, held Mr. Generalov’s holdings in FESCO. Wiredfly is now indirectly wholly-owned by Intimere, in which Mr. Ziaudin Magomedov holds an approximate 65.09% stake and entities and persons from TPG, who hold an approximate 34.91% stake. As a result of these transactions, Mr. Magomedov owns a significant stake in FESCO, and TPG has certain rights in respect of oversight of the FESCO business and an indirect economic ownership interest of 17.5% in the Group. Also, in December 2012, entities controlled by Mr. Mark Garber, one of the principal shareholders of the GHP Group, indirectly acquired 23.75% of the shares of FESCO. Each of FESCO’s shareholders has only the voting rights conferred on them by their holding of ordinary shares in FESCO, which ordinary shares bear the same rights and rank pari passu among themselves.

194 DESCRIPTION OF THE ISSUER AND GUARANTORS The following sets forth certain information about the Issuer and the Guarantors, as well as a brief description of the security provided by each of the Guarantors.

Issuer Corporate Information Far East Capital Limited S.A., as the Issuer of the Notes, was incorporated on 4 April 2013 under the laws of Luxembourg as a public limited liability company (societ´ e´ anonyme). The Issuer has been incorporated for an unlimited duration and is in the process of being registered with the Luxembourg trade and companies register (Registre de Commerce et des Societ´ es´ Luxembourg) under number B176472. The Issuer has been established as a special purpose vehicle for the purpose of issuing the Notes. The registered office of the Issuer is located at 13-15 avenue de la Liberte,´ L-1931 Luxembourg (telephone number (+352 268901). The articles of association of the Issuer (the ‘‘Articles’’) are in the process of being filed with the Luxembourg trade and companies register and are in the process of being published in the Memorial´ C, Recueil des Societ´ es´ et Associations.

Share capital and shareholder The Issuer has a share capital of USD2,565,000 divided into 2,565,000 ordinary shares each having a par value of USD1 and fully paid-up. All the Issuer’s shares are held by Kalentio Trading Limited, a company incorporated and existing under the laws of Cyprus and having its registered office at Arch. Makariou III, 284, Fortuna Court Block B, 2nd Floor, P.C.3105, Limassol, Cyprus.

Business operations Pursuant to article 4 of the Articles, the business operations of the Issuer consist in the performance of the following activities: The Issuer may borrow in any form and proceed to the issue of bonds, notes and debentures or any kind of debt or equity securities. The Issuer may lend funds or otherwise advance proceeds including without limitation resulting from any borrowings of the Issuer or from the issue of any equity or debt securities of any kind, to its subsidiaries, affiliated companies (including upstream and sidestream) or any other company or entity as it deems fit. The Issuer may also give guarantees and grant security in favour of third parties to secure its own obligations or the obligations of its subsidiaries, affiliated companies or any other company. The Company may further pledge, transfer, encumber or otherwise create security over some or all its assets. In a general fashion it may carry out any operation which it may deem useful in the accomplishment and development of its purposes. The Issuer may generally employ any techniques and instruments relating to or with respect to any of its investments for the purposes of efficient management, including without limitation techniques and instruments designed to protect the Issuer against credit, currency exchange, interest rate risks and other risks. Finally, the Issuer can perform all commercial, technical and financial or other operations, connected directly or indirectly in all areas in order to facilitate the accomplishment of its purpose. The Issuer is a special purpose vehicle and its sole business is the raising of money by issuing securities for the purposes of acquiring assets or risks relating to assets generally.

Administration and management Pursuant to article 10 of the Articles, the Issuer is managed by a board of directors, which consists of not fewer than three members, who must not be shareholders of the Issuer and who are elected by the

195 shareholders at a general meeting of the shareholders of the Issuer. As long as the Issuer has only one shareholder it may also be managed by a sole director. The Issuer’s board of directors has full authority to execute all acts in connection with business operations and management within the framework of the business purpose of the Issuer defined in the Articles. All powers not reserved for the general meeting by law or by the Articles fall within the scope of responsibility of the board. The Issuer’s board of directors can transfer certain of its tasks. The current members of the Issuer’s board of directors are: • Hille-Paul Schut, Director professionally residing at L-1931 Luxembourg, 13-15, avenue de la Liberte,´ Grand Duchy of Luxembourg. The principal outside activity of Mr. Schut is Business Unit Director at ATC Corporate Services (Luxembourg) S.A. (‘‘ATC’’); • Joost Tulkens, professionally residing at L-1931 Luxembourg, 13-15, avenue de la Liberte,´ Grand Duchy of Luxembourg. The principal outside activity of Mr. Tulkens is Commercial Director at ATC; and • Harald Thul, professionally residing at L-1931 Luxembourg, 13-15, avenue de la Liberte,´ Grand Duchy of Luxembourg. The principal outside activity of Mr. Thul is Business Unit Manager at ATC.

Accounting The Issuer produces audited and non-consolidated annual financial statements. Because it was incorporated on 4 April 2013, it has not yet prepared any financial statements, and no financial statements of the Issuer are included in this Offering Memorandum. In accordance with Articles 72, 74 and 75 of the Luxembourg act dated 10 August 1915 on commercial companies, as amended (the ‘‘Luxembourg Companies Act 1915’’), the Issuer is obliged to publish its annual accounts on an annual basis following approval of the annual accounts by the annual general meeting of the shareholders. The annual general meeting of shareholders takes place each year on 15 June at 10 a.m. If such day is not a day where banks are generally open for business in Luxembourg, the annual general meeting shall be held on the next following business day. A copy of any future published annual audited financial statements prepared for the Issuer can be obtained at the Luxembourg trade and companies register.

Financial year The Issuer’s financial year begins on 1 January of each year and ends on 31 December of the same year. The first financial year began on the date of the Issuer’s incorporation and shall end on 31 December 2013.

Supervisory Auditor KPMG Audit S.a` r.l., having its registered office at 9, allee´ Scheffer, L-2520 Luxembourg has been appointed as supervisory auditor (commissaire aux comptes) of the Issuer for a term expiring at the annual general meeting to be held in 2018.

Litigation There are no, and have not been, any legal or arbitration proceedings against or affecting the Issuer, nor is the Issuer aware of any pending or threatened proceedings of such kind, which may have, or have had, since its incorporation, prior to the date of this Offering Memorandum a significant effect on the financial position or profitability of the Issuer.

No Conflict of Interests There are no potential conflicts of interests between any duties to the Issuer, of the directors, of the Supervisory Auditors and their private interests and or other duties.

Miscellaneous No corporate governance regime to which the Issuer would be subject exists in Luxembourg as at the date of this Offering Memorandum.

196 There are no other material contracts entered into in the ordinary course of the Issuer’s business that are material to the Issuer’s ability to meet its obligations to the Noteholders in respect of the Notes being issued.

Guarantors HoldCo Guarantors TopCo Guarantors Maple Legal and commercial name Maple Ridge Ltd Registration number HE 283756 Date and place of incorporation 21 March 2011, Republic of Cyprus Duration of existence Indefinite Place of domicile Republic of Cyprus Legal form Private Limited Liability Company Charter Capital 1000 shares of 1 Euro each Registered office address 8 Koronias Street, Pot. Germasogeias, 4042, Limassol, Cyprus Principal activities Holding company established for the purpose of acquiring FESCO in December 2012

Elvy Legal and commercial name Elvy Limited Registration number HE 275184 Date and place of incorporation 12 October 2010, Republic of Cyprus Duration of existence Indefinite Place of domicile Republic of Cyprus Legal form Private Limited Liability Company Charter Capital 1200 Registered office address Agias Eirinis, 30, 3095 Limassol, Cyprus Principal activities Holding company established for the purpose of acquiring FESCO in December 2012

Intermediate HoldCo Guarantors Wiredfly Wiredfly is expected to be reorganised shortly after the Issue Date.

Legal and commercial name Wiredfly Investments Ltd. Registration number HE300315 Date and place of incorporation 24 January 2012, Republic of Cyprus Duration of existence Indefinite Place of domicile Republic of Cyprus Legal form Private Limited Liability Company Charter Capital 10,000 Ordinary shares of e1.00 each (issued share capital of 5,000 Ordinary shares of e1.00 each) Registered office address Kyriakou Matsi, 3, Roussos Limassol Tower, 5th Floor, Flat/Office 5A, 3040, Limassol, Cypru Principal activities Holding company without any independent operations

197 Rikima Legal and commercial name Rikima Holdings Limited Registration number HE 307545 Date and place of incorporation 8 June 2012, Republic of Cyprus Duration of existence Indefinite Place of domicile Republic of Cyprus Legal form Private Limited Liability Company Charter Capital 5000 shares of 1 Euro each Registered office address Griva Digeni 115, Trident Centre, 3101 Limassol, Cyprus Principal activities Holding company without any independent operations

Calamita Legal and commercial name Calamita Trading Ltd. Registration number HE 303070 Date and place of incorporation 16 March 2012, Republic of Cyprus Duration of existence Indefinite Place of domicile Republic of Cyprus Legal form Private Limited Liability Company Charter Capital 1000 shares of 1 Euro each Registered office address 30 Agias Eirinis Street, 3095 Limassol, Cyprus Principal activities Holding company without any independent operations

Vovosa Legal and commercial name Vovosa Co. Ltd Registration number HE 292368 Date and place of incorporation 19 August 2011, Republic of Cyprus Duration of existence Indefinite Place of domicile Republic of Cyprus Legal form Private Limited Liability Company Charter Capital 1000 shares of 1 Euro each Registered office address 30 Agias Eirinis Street, 3095 Limassol, Cyprus Principal activities Holding company without any independent operations

Mirihia Legal and commercial name Mirihia Holdings Limited Registration number HE 301032 Date and place of incorporation 8 February 2012 Duration of existence Indefinite Place of domicile Republic of Cyprus Legal form Private Limited Liability Company Charter Capital 1000 shares of 1 Euro each Registered office address 30 Agias Eirinis Street, 3095 Limassol, Cyprus Principal activities Holding company without any independent operations

198 Subsidiary Guarantors Fully-Owned Subsidiary Guarantors FIT Legal and commercial name Limited Liability Company FESCO Integrated Company Registration number 1027739043023 Date and place of incorporation 8 October 1998, Russian Federation Duration of existence Indefinite Place of domicile Russian Federation Legal form Limited Liability Company Charter Capital RUB 100,000 Group ownership 100% of charter capital (100% voting rights) Registered office address 12a/7 2-oy Yuzhnoportovy Proezd, 109432 Moscow, Russian Federation Principal place of business Russian Federation Principal activities Warehouse storage services, forwarding services Share of EBITDA of Group in 2012 8% Share of net assets of Group in 2012 3%

Remono Legal and commercial name Remono Shipping Company Limited Registration number HE137846 Date and place of incorporation 22 April 2003, Cyprus Duration of existence Indefinite Place of domicile Cyprus Legal form Limited Liability Company Charter Capital EUR 1,710 Group ownership 100% of charter capital (100% voting rights) Registered office address 2nd floor, Block B, Fortuna Court, 284 Arch. Makariou III, P.C. 3105, Limassol, Cyprus Principal place of business Cyprus Principal activities Bareboat chartering of vessels, purchasing, exchanging, hiring, chartering, building of vessels, shipping transportations and brokerage, ship chandler services Share of EBITDA of Group in 2012 — Share of net assets of Group in 2012 —

199 FESCO Ocean Management Legal and commercial name FESCO Ocean Management Limited Registration number HE96069 Date and place of incorporation 15 July 1998, Cyprus Duration of existence Indefinite Place of domicile Cyprus Legal form Limited Liability Company Charter Capital EUR 1,710 Group ownership 100% of charter capital (100% voting rights) Registered office address 3rd floor, Kolokasides Building, 1 Kostaki Pantelidi, 1010, Nicosia, Cyprus Principal place of business Cyprus Principal activities Purchasing, hiring and selling vessels, construction, maintenance, demolition and operation of vessels, shipping transportations, agency services, chartering brokerage services, stevedoring services Share of EBITDA of Group in 2012 5% Share of net assets of Group in 2012 1%

Transgarant Legal and commercial name Limited Liability Company ‘‘Firm ‘‘Transgarant’’ Registration number 1027700460380 Date and place of incorporation 23 December 1997, Russian Federation Duration of existence Indefinite Place of domicile Russian Federation Legal form Limited Liability Company Charter Capital RUB 3,696,850,000 Group ownership 100% of charter capital (100% voting rights) Registered office address 24/1 Ulitsa Radio, 105005 Moscow, Russian Federation Principal place of business Russian Federation Principal activities Railcar operator, rail transport, forwarding services, cargo handling, railcar maintenance Share of EBITDA of Group in 2012 42% Share of net assets of Group in 2012 19%

FESCO Rail Legal and commercial name Limited Liability Company ‘‘FESCO Rail’’ Registration number 1087746421421 Date and place of incorporation 26 March 2008, Russian Federation Duration of existence Indefinite Place of domicile Russian Federation Legal form Limited Liability Company Charter Capital RUB 1,000,000 Group ownership 100% of charter capital (100% voting rights) Registered office address 29 Serebryanicheskaya Naberezhnaya, 109028 Moscow, Russian Federation Principal place of business Russian Federation Principal activities Railway transportation, forwarding services, cargo handling, maintenance of railcars Share of EBITDA of Group in 2012 7% Share of net assets of Group in 2012 —

200 Transgarant Ukraine Legal and commercial name Subsidiary Enterprise ‘‘Transgarant—Ukraine’’ Registration number 32667198 Date and place of incorporation 3 November 2003, Ukraine Duration of existence Indefinite Place of domicile Ukraine Legal form Subsidiary Enterprise Charter Capital UAH 5,055,000 Group ownership 100% of charter capital (100% voting rights) Registered office address Bldg. 5/2, Ulitsa Dymytrova, 03150 Kiev, Ukraine Principal place of business Ukraine Principal activities Other support activity in transportation sphere; non-specialised wholesale trade; other types of retail trade in non-specialized stores; cargo railway transport, rendering of other information services; leasing of other machinery, equipment and goods Share of EBITDA of Group in 2012 13% Share of net assets of Group in 2012 3%

Dalreftrans Legal and commercial name Dalreftrans Co., Ltd. Registration number 1022501910331 Date and place of incorporation 29 July 1998, Russian Federation Duration of existence Indefinite Place of domicile Russian Federation Legal form Limited Liability Company Charter Capital RUB 432,448,396.5 Group ownership 100% of charter capital (100% of voting rights) Registered office address 4th floor, 7a Ulitsa Morozova, 690065 Vladivostok, Russian Federation Principal place of business Russian Federation Principal activities Forwarding services for transportation of refrigerator containers via sea, railway and automobile transport Share of EBITDA of Group in 2012 3% Share of net assets of Group in 2012 2%

Partially-Owned Subsidiary Guarantors VMTP Legal and commercial name Open Joint Stock Company ‘‘Commercial Port of Vladivostok’’ Registration number 1022502259625 Date and place of incorporation 24 November 1992, Russian Federation Duration of existence Indefinite Place of domicile Russian Federation Legal form Open Joint Stock Company Charter Capital RUB 176,731,311.3 Group ownership 95.57% of charter capital (95.57% voting rights) Registered office address 9 Ulitsa Strelnikova, Primorsky Kray, 690065 Vladivostok, Russian Federation Principal place of business Russian Federation Principal activities Forwarding services, cargo handling, storage services, agency, ship chandler and surveyor services, shipping transportations Share of EBITDA of Group in 2012 11% Share of net assets of Group in 2012 16%

201 TEK MetizTrans Legal and commercial name Limited Liability Company ‘‘TEK MetizTrans’’ Registration number 5087746655057 Date and place of incorporation 22 December 2008, Russian Federation Duration of existence Indefinite Place of domicile Russian Federation Legal form Limited Liability Company Charter Capital RUB 5,000,000 Group ownership 99.99% of charter capital (99.99% voting rights) Registered office address Bldg. 1, 6 Proezd Zavoda ‘‘Serp i Molot’’, 111250 Moscow, Russian Federation Principal place of business Russian Federation Principal activities Railway transportations, cargo handling, maintenance of transportation equipment Share of EBITDA of Group in 2012 2% Share of net assets of Group in 2012 1%

VKT Legal and commercial name Closed Joint Stock Company ‘‘Vladivostok Container Terminal’’ Registration number 1122540006929 Date and place of incorporation 1 August 2012, Russian Federation Duration of existence Indefinite Place of domicile Russian Federation Legal form Closed Joint Stock Company Charter Capital RUB 288,363,940 Group ownership 97.79% of charter capital (97.79% voting rights) Registered office address 9 Ulitsa Strelnikova, Primorsky Kray, 690065 Vladivostok, Russian Federation Principal place of business Russian Federation Principal activities Cargo handling, transshipment and storage in sea ports, stevedore and container operations in sea ports, agency services with respect to railway transportation, forwarding services Share of EBITDA of Group in 2012 24% Share of net assets of Group in 2012 13%

202 TERMS AND CONDITIONS OF THE 2018 NOTES The following is the text of the terms and conditions of the 2018 Notes which, subject to amendment and completion and except for the text in italics, will be endorsed on each 2018 Global Note Certificate (if issued): The issue of $500,000,000 8 per cent. senior secured notes due 2018 (the ‘‘Notes’’, which expression includes, unless the context requires otherwise, any further notes (the ‘‘Additional Notes’’) issued pursuant to Condition 15 and forming a single series with the Notes), of Far East Capital Limited S.A. (the ‘‘Issuer’’) was authorised by resolutions of the board of directors of the Issuer on 23 April 2013. Maple Ridge Limited and Elvy Limited (the ‘‘TopCo Guarantors’’), and Calamita Trading Limited, Mirihia Holdings Limited, Rikima Holdings Limited, Vovosa Co Limited, and Wiredfly Investments Limited (the ‘‘Intermediate HoldCo Guarantors’’ and, together with the TopCo Guarantors, the ‘‘HoldCo Guarantors’’), and Closed Joint Stock Company ‘‘Vladivostok Container Terminal’’, Fesco Ocean Management Limited, Remono Shipping Company Limited, Subsidiary Enterprise ‘‘Transgarant- Ukraine’’ 5APR201317564846 Limited Liability Company ‘‘Dalreftrans’’, Limited Liability Company ‘‘FESCO Rail’’, Limited Liability Company ‘‘FESCO Integrated Transport’’, Limited Liability Company ‘‘Firm ‘‘Transgarant’’ and Limited Liability Company ‘‘TEK MetizTrans’’, and, upon accession, Open Joint Stock Company ‘‘Commercial Port of Vladivostok’’ (the ‘‘Subsidiary Guarantors’’ and, together with the HoldCo Guarantors, the ‘‘Guarantors’’) have agreed jointly and severally to guarantee the Issuer’s obligations in respect of the Notes. Additionally, Sian Participation Corp. and Merbau Synergy Limited (together, the ‘‘TopCo Security Providers’’) and Kalentio Trading Limited, Eustacia Finance Limited, Limited Liability Company ‘‘M-Port’’, Limited Liability Company ‘‘National Container Company’’ and Tryreefer Shipping Company Limited (collectively, with the TopCo Security Providers, the ‘‘Security Providers’’) and some of the Subsidiary Guarantors have agreed to provide security over certain assets on a limited recourse basis as security for the Notes. The giving of the said guarantees (the ‘‘Note Guarantees’’) was authorised by resolutions of the relevant governing body of each of the Guarantors passed in April 2013. The Notes are constituted by a trust deed (as amended and/or supplemented and/or restated from time to time, the ‘‘Trust Deed’’), dated on or about 2 May 2013 (the ‘‘Issue Date’’), between the Issuer, the Guarantors, the Security Providers, ING Bank N.V., London Branch (the ‘‘Security Agent’’) and TMF Trustee Limited in its capacity as co-security agent (the ‘‘Co-Security Agent’’ and, together with the Security Agent, the ‘‘Security Agents’’) and TMF Trustee Limited in its capacity as trustee (the ‘‘Trustee’’, which expression will include all Persons (as defined below) for the time being the trustee or trustees under the Trust Deed) as trustee for the Holders (as defined below) of the Notes. The Note Guarantees are constituted by a deed of guarantee dated 7 December 2012 (the ‘‘Deed of Guarantee’’), as confirmed by a deed of confirmation (the ‘‘Deed of Confirmation’’), dated 17 April 2013, in each case between the Guarantors (other than Open Joint Stock Company ‘‘Commercial Port of Vladivostok’’; which shall accede to the Deed of Guarantee after the Issue Date pursuant to these Conditions) and the Security Agents. These Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed, which include the form of the Notes. Copies of the Trust Deed and of the paying and transfer agency agreement (as amended and/or supplemented and/or restated from time to time, the ‘‘Agency Agreement’’) dated 2 May 2013 relating to the Notes between the Issuer, the Trustee, Citibank, N.A., London Branch as Principal Paying Agent (the ‘‘Principal Paying Agent’’ and, together with the other paying agents for the time being, the ‘‘Paying Agents’’, which expression will include their successor paying agents appointed under the Agency Agreement) and as Transfer Agent (the ‘‘Transfer Agent’’, which expression will include their successor transfer agents appointed under the Agency Agreement), and Citigroup Global Markets Deutschland AG, as Registrar (the ‘‘Registrar’’, which expression will include their successor registrars appointed under the Agency Agreement) are available for inspection during usual business hours at the principal office of the Trustee (presently at 6 St Andrew Street, London, EC4A 3AE, United Kingdom) and at the specified offices of the Paying and Transfer Agents. The Noteholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions of the Agency Agreement applicable to them. References to ‘‘Conditions’’ are, unless the context otherwise requires, to the numbered paragraphs of these Conditions and Condition 20 contains certain definitions used herein. In the following Conditions, ‘‘Person’’ means any individual, company, corporation, firm, partnership, joint venture, association, joint stock company, trust, unincorporated organisation, limited liability

203 company or other juridical entity, including, without limitation, any state or agency of a state or other entity, whether or not having separate legal personality, ‘‘Noteholder’’ or ‘‘Holder’’ means the Person in whose name a Note is registered in the Register (as defined below) and ‘‘Holders’’ will be construed accordingly.

1. FORM, DENOMINATION, REGISTER, TITLE AND TRANSFER 1.1 Form and Denomination The Notes are in registered form, without interest coupons attached, and will be issued in the minimum denomination of $200,000 and integral multiples of $1,000 in excess thereof. A certificate (each an ‘‘Individual Certificate’’) will be issued to each Noteholder in respect of its registered holding of Notes. Each Individual Certificate will be numbered serially with an identifying number which will be recorded on the relevant Individual Certificate and in the Register (as defined below). The Notes sold pursuant to (i) Rule 144A under the U.S. Securities Act (the ‘‘Rule 144A Notes’’) will be initially represented by one or more certificates (the ‘‘Restricted Global Certificates’’) and (ii) Regulation S under the U.S. Securities Act (the ‘‘Regulation S Notes’’) will be initially represented by a certificate (the ‘‘Unrestricted Global Certificate’’), collectively referred to as ‘‘Global Certificates’’. The Restricted Global Certificates will be registered in the name of Cede & Co. as nominee for The Depository Trust Company (‘‘DTC’’), and deposited with a custodian for DTC. The Unrestricted Global Certificates will be deposited with, and registered in the name of a nominee for, a common depositary of Euroclear Bank S.A./N.V. (‘‘Euroclear’’) and Clearstream Banking, societ´ e´ anonyme (‘‘Clearstream’’). DTC, Euroclear, Clearstream and any other clearing system are collectively referred to herein as the ‘‘Clearing Systems’’ and each, a ‘‘Clearing System’’. Except in the limited circumstances described in the Global Certificates, owners of interests in Notes represented by the Global Certificates will not be entitled to receive physical Individual Certificates (as defined herein) in definitive form in respect of their individual holdings of Notes. The Notes are not issuable in bearer form.

1.2 Register The Issuer will cause a register (the ‘‘Register’’) to be kept at the specified office of the Registrar outside the United Kingdom in which the names and addresses of the Holders of the Notes and particulars of the Notes held by them and all transfers and redemptions of the Notes will be entered.

1.3 Title Title to the Notes will pass by transfer and registration as described in Conditions 1.2, 1.4 and 1.5. The Holder of any Note will (except as otherwise required by law or as ordered by a court of competent jurisdiction) be treated as its absolute owner for all purposes whether or not it is overdue and regardless of any notice of ownership, trust or any interest in it, any writing thereon by any Person (other than a duly executed transfer thereof in the form endorsed thereon) or any notice of any previous theft or loss thereof and no Person will be liable for so treating the Holder.

1.4 Transfers Notes may, subject to the terms of the Agency Agreement and to Conditions 1.6, 1.7 and 1.8, be transferred in whole or in part (in a minimum denomination of $200,000 and integral multiples of $1,000 in excess thereof) by delivering the relevant Individual Certificate (with the form of transfer in respect thereof duly executed and duly stamped where applicable) at the specified office of the Registrar or any Transfer Agent. No transfer of any Notes will be valid unless and until entered on the Register. A Note may be registered only in the name of, and transferred only to, a named Person (or Persons, not exceeding four in number). Transfers of interests in the Notes evidenced by the Global Certificates will be effected in accordance with the rules of the relevant Clearing System. Transfers of Notes are also subject to the restrictions described under ‘‘Important information about this Offering Memorandum’’ and ‘‘Transfer Restrictions’’.

204 1.5 Registration and delivery of Notes The Registrar will, within five Business Days (as defined below) of any duly made application for the transfer of a Note, issue a new Individual Certificate to the transferee (and, in the case of a transfer of part only of a Note, deliver an Individual Certificate for the untransferred balance to the transferor), at the specified office of the Registrar, or (at the risk and, if mailed at the request of the transferee or, as the case may be, the transferor otherwise than by ordinary mail, at the expense of the transferee or, as the case may be, the transferor) mail the Individual Certificate by uninsured mail to such address as the transferee or, as the case may be, the transferor may request.

1.6 Formalities Free of Charge Such transfer will be effected without charge subject to the Person making such application for transfer paying or procuring the payment of any taxes, duties and other governmental charges in connection therewith and the Registrar being satisfied with the documents of title and/or identity of the Person making the application.

1.7 Closed Periods Neither the Issuer nor the Registrar will be required to register the transfer of any Note (or part thereof) during the period of 15 days immediately prior to the due date for any payment of principal or interest in respect of the Notes.

1.8 Regulations Concerning Transfer and Registration All transfers of Notes and entries on the Register will be made subject to the detailed regulations concerning transfer of Notes scheduled to the Agency Agreement, as applicable. These regulations may be changed by the Issuer with the prior approval of the Registrar and the Trustee to reflect changes in legal requirements or in any other manner which is not prejudicial to the interests of Noteholders.

2. STATUS AND NOTE GUARANTEES 2.1 Notes The Notes: (i) are general senior secured obligations of the Issuer; (ii) are secured by the Collateral (as defined below); (iii) are effectively subordinated to any existing and future Indebtedness of the Issuer, to the extent such Indebtedness is secured by Liens senior to the Liens securing the Notes, or secured by property and assets that do not secure the Notes, to the extent of the value of the property and assets securing such Indebtedness; (iv) rank at least pari passu in right of payment with all existing and future senior Indebtedness of the Issuer; (v) rank senior in right of payment to any future Indebtedness of the Issuer that is or is expressed to be subordinated in right of payment to the Notes; (vi) are fully and unconditionally guaranteed by the Guarantors, subject to limitations under applicable law as set forth below in Condition 2.2; and (vii) are structurally subordinated to all obligations of the Parent’s Subsidiaries that are not Guarantors.

2.2 Note Guarantees The Notes are guaranteed by the Guarantors. The Note Guarantees are joint and several obligations of the Guarantors. The obligations of the Guarantors are contractually limited under the applicable Note Guarantees to reflect limitations under applicable law with respect to maintenance of share capital, corporate benefit, fraudulent conveyance and other legal restrictions applicable to the Guarantors and their respective shareholders and directors. For a description of such limitations, see ‘‘Risk Factors— Risks Relating to the Notes, Our Indebtedness and Our Structure—The Note Guarantees and security interests in the Collateral will be subject to certain limitations on enforcement and may be limited by applicable law or subject to certain defences that may limit their validity and enforceability’’.

205 Each Note Guarantee: (i) is general senior secured obligation of the Guarantors; (ii) is secured by the Collateral (as defined below); (iii) is effectively subordinated to any existing and future Indebtedness of that Guarantor that is secured by Liens senior to the Liens securing the Note Guarantees, or secured by property and assets that do not secure the Note Guarantees, to the extent of the value of the property and assets securing such Indebtedness; (iv) ranks at least pari passu in right of payment with any future senior Indebtedness of that Guarantor; (v) ranks senior in right of payment to any future Indebtedness of that Guarantor that is or is expressed to be subordinated in right of payment to the relevant Note Guarantee; and (vi) is effectively senior to all of that Guarantor’s existing and future unsecured Indebtedness to the extent of the assets of the Guarantor securing that Note Guarantee. Some of the Parent’s Subsidiaries are guaranteeing the Notes. In the event of a bankruptcy, liquidation or reorganization of the Parent or any non-guarantor Subsidiary, the Parent and such non-guarantor Subsidiary will pay the holders of its debt and its trade creditors before it will be able to distribute any of its assets to its shareholders or make contributions to its Subsidiaries. As of and for the year ended 31 December 2012, on an adjusted basis, the Subsidiary Guarantors (including Open Joint Stock Company ‘‘Commercial Port of Vladivostok’’) represented 106.1 per cent. of Adjusted EBITDA of the Parent and its Subsidiaries, and 73.0 per cent. of the Adjusted Net Assets of the Parent and its Subsidiaries. The Issuer depends on the cash flow of the Parent and its Subsidiaries to meet its obligations under the Notes. The Notes will be effectively subordinated in right of payment to all Indebtedness and other liabilities and commitments (including trade payables and lease obligations) of the Parent and non-guarantor Subsidiaries. Any right of the Issuer or any Guarantor to receive assets of the Parent or any of the non-guarantor Subsidiaries upon the Parent’s or that non-guarantor Subsidiary’s liquidation or reorganisation (and the consequent right of the Holders of the Notes to participate in those assets) will be effectively subordinated to the claims of the Parent’s or that non-guarantor Subsidiary’s creditors, except to the extent that the Issuer or such Guarantor is itself recognised as a creditor of the Parent or the non-guarantor Subsidiary, in which case the claims of the Issuer or such Guarantor, as the case may be, would still be subordinate in right of payment to any security in the assets of the Parent or that non-guarantor Subsidiary and any Indebtedness of the Parent or the non-guarantor Subsidiary senior to that held by the Issuer or such Guarantor. See ‘‘Risk Factors—Risks Relating to the Notes, Our Indebtedness and Our Structure—The Notes will be structurally subordinated to all indebtedness of any current or future subsidiaries of FESCO that do not become Guarantors or to the indebtedness of FESCO’’. As of the Issue Date, all of the Parent’s Subsidiaries (other than Halimeda) are ‘‘Restricted Subsidiaries’’ of the Parent. However, under the circumstances described below in Condition 3.14, the Parent is permitted to designate certain of its Subsidiaries as ‘‘Unrestricted Subsidiaries’’. The Parent’s Unrestricted Subsidiaries will not be subject to any of the restrictive covenants in these Conditions.

2.3 Note Guarantees Release The Note Guarantee of a Subsidiary Guarantor will be released: (i) in connection with any sale or other disposition of all or substantially all of the assets of that Subsidiary Guarantor (including by way of merger, amalgamation or consolidation) to a Person that is not (either before or after giving effect to such transaction) the Issuer, the Parent or another Restricted Subsidiary of the Parent, if the sale or other disposition does not violate Condition 5.5; (ii) in connection with any sale or other disposition of all of the Capital Stock of that Subsidiary Guarantor (whether by direct sale or through a holding company) to a Person that is not (either before or after giving effect to such transaction) the Issuer, the Parent or a Restricted Subsidiary, if the sale or other disposition does not violate Condition 5.5;

206 (iii) if such Subsidiary Guarantor is a Restricted Subsidiary and the Parent designates such Guarantor (or any parent entity thereof) as an Unrestricted Subsidiary in accordance with the applicable provisions of these Conditions; (iv) upon repayment in full of the Notes pursuant to Condition 5; (v) if approved pursuant to Condition 11; or (vi) as otherwise permitted under the Conditions, the Trust Deed or the Intercreditor Agreement. The HoldCo Guarantors will be entitled to a release of their respective Note Guarantees in the circumstances described in (iv) and (v) above or as contemplated by Condition 3.5(c).

2.4 Notes Security The Notes and the Note Guarantees will be secured by first priority Liens over the Collateral (as defined below). The Collateral consists or will consist of: (i) all of the Capital Stock in the Issuer and each HoldCo Guarantor; (ii) all of the Capital Stock held by the Subsidiary Guarantors and the Security Providers in their direct Subsidiaries which are Guarantors; (iii) bank accounts of the Issuer; (iv) Cypriot law debentures from each HoldCo Guarantor over all of their assets other than shares in the Parent and Russian law share pledges over the shares held by the Intermediate HoldCo Guarantors in the Parent representing 69.98% of the Parent’s share capital; and (v) other assets of the Parent or its Restricted Subsidiaries: (X) required to be made subject to Liens to secure the OpCo Facility in accordance with its terms and only for so long as the OpCo Facility remains in place; or (Y) if, prior to the date on which Liens are granted pursuant to (X), the OpCo Facility is repaid and/or is amended so that Liens over assets (other than the ones listed in paragraphs (i) through (iv) above) are no longer required to be provided to secure the OpCo Facility, of their choosing and with an aggregate value (as certified by an Approved Appraiser) of not less than US$400.0 million. Any Collateral pursuant to this paragraph (v) shall be delivered on a date no later than 180 days after the Issue Date. For the purposes of this Condition 2.4(v), an ‘‘Approved Appraiser’’ means: (a) in relation to any asset, PricewaterhouseCoopers, Ernst & Young, KPMG, Deloitte & Touche; (b) in relation to real estate, Cushman & Wakefield, Colliers International, CBRE and each entity listed at paragraph (d) below; (c) in relation to vessels, Clarkson Plc, Howe Robinson & Co. Limited and Oslo Shipbrokers A.S.; and (d) in relation to assets other than shares and vessels, American Appraisal, FBK, Grant Thornton, Limited Liability Company ‘‘Center of Independent Evaluation of Property’’ (OOO14APR201317230616 « 14APR201317224544 14APR201317224810 14APR201317225068») and Limited Liability Company ‘‘Center of Evaluation of Property’’ (OOO14APR201314191824 « 14APR201317230886 14APR201317225319»), OOO ‘‘ 14APR20131723115414APR20131722556814APR201317225811’’—OOO ‘‘Far Eastern appraisal company’’, OOO 14APR201317231401‘‘ 14APR20131723008714APR201317230345’’—OOO ‘‘Center razvitiya investitsiy’’, OOO 14APR201314193009‘‘ ’’— OOO ‘‘Industriya’’ and OOO ‘‘14APR201314191233’’—OOO ‘‘Industriya-R’’, (or any successor firm of any of them) or another third party acceptable to the Trustee and/or the Security Agents. Under these Conditions, the Issuer, the Guarantors and the Restricted Subsidiaries will be permitted to pledge the Collateral in connection with future incurrences or issuances of Indebtedness, including any Additional Notes, in each case, permitted under these Conditions. The amount of any Permitted Collateral Liens will be limited by Conditions 3.2 and 3.3. Under certain circumstances, the amount of such additional Indebtedness secured by Permitted Collateral Liens could be significant. The Liens securing the Notes and the Guarantees will also secure the obligations of the Guarantors under the OpCo Facility and certain hedging obligations on a pari passu basis. The assets and property

207 of the HoldCo Guarantors, Parent and its Subsidiaries that are from time to time subject to, or required to be subject to, a Lien pursuant to the Security Documents are referred to as the ‘‘Collateral’’. The proceeds from any sale of the Collateral may not be sufficient to satisfy the obligations owed to the Holders of the Notes. Only limited appraisals of the Collateral will be made in connection with this offering of the Notes. By its nature, some or all of the Collateral will be illiquid and may have no readily ascertainable market value. Accordingly, the Collateral may not be able to be sold in a short period of time, or at all. See ‘‘Risk Factors—Risks Relating to the Notes, Our Indebtedness and Our Structure—The Note Guarantees and security interests in the Collateral will be subject to certain limitations on enforcement and may be limited by applicable law or subject to certain defences that may limit their validity and enforceability’’ and ‘‘Risk Factors—Risks Relating to the Notes, Our Indebtedness and Our Structure—It may be difficult to realise the value of the Collateral’’.

2.5 Security Documents Under the Security Documents, the Collateral will be pledged by the Issuer, certain of the Guarantors and the Security Providers to secure, among others, the performance, when due, of the Issuer’s and the Guarantors’, as applicable, payment obligations under the Notes, the Note Guarantees and the Trust Deed. The Security Documents have been or will be entered into by, inter alios, the Security Agents, who will act as Security Agents for the lenders under the OpCo Facility, for the trustee for the 2020 Notes and holders of the 2020 Notes and for the Trustee and the Holders of Notes. Each Holder of Notes, by subscribing for, purchasing or otherwise acquiring a Note, shall be deemed (i) to have authorized the Trustee and the Security Agents to enter into the Security Documents and the Intercreditor Agreement and (ii) to be bound thereby. Each Holder of Notes, by subscribing for, purchasing or otherwise acquiring a Note, appoints the Trustee and the Security Agents as its agents under the Security Documents and the Intercreditor Agreement and authorizes them to act as such and in accordance with the terms of the Trust Deed (in the case of the Trustee) and the Intercreditor Agreement and the Security Documents (in the case of the Security Agents). The Security Documents will provide that the rights of the Holders of the Notes with respect to the Collateral must be exercised by the Security Agents. Since the Holders of the Notes are not a party to the Trust Deed or Security Documents, Holders may not, individually or collectively, take any direct action to enforce any rights in their favour under the Trust Deed or Security Documents. The Holders may only act through the Trustee or the Security Agents, as applicable. Subject to the terms of the Intercreditor Agreement, the Security Agents will agree to any release of the security interest created by the Security Documents that is in accordance with these Conditions and the Trust Deed without requiring the consent of the Holders. The Trustee will have the ability to direct the Security Agents to commence enforcement action under the Security Documents in accordance with the Intercreditor Agreement. In enforcing the Liens provided for under the Security Documents, the Security Agents will take direction from the Instructing Group. Subject to the terms of the Security Documents, the Issuer, the Security Providers and the Guarantors, as the case may be, will be entitled to exercise any and all voting rights and to receive and retain any and all cash dividends, stock dividends, liquidating dividends, non-cash dividends, shares of stock resulting from stock splits or reclassifications, rights issue, warrants, options and other distributions (whether similar or dissimilar to the foregoing) in respect of any shares that are part of the Collateral. The Security Documents are governed by applicable local laws.

2.6 Release of the Collateral Each Subsidiary Guarantor and each Security Provider which is a Restricted Subsidiary will be entitled to the release of the Liens on any of the Collateral provided by them in the following circumstances: (i) in connection with any sale, assignment, transfer, conveyance or other disposition of property or assets constituting the Collateral (x) to a Person that is not (either before or after giving effect to such transaction) the Parent or a Restricted Subsidiary of the Parent, if the sale or other disposition does not violate Condition 5.5 or (y) if such assets are fixed assets and they become subject to an equivalent Lien in favour of the Security Agent for the benefit of the Holders of the Notes substantially concurrent with such sale, assignment, transfer, conveyance or other disposition; provided that such sale, assignment, transfer, conveyance or other disposition of such property or assets is not in violation of the Trust Deed;

208 (ii) if any fixed assets are worn out or obsolete in the good faith determination of the Parent; (iii) in the case of a Subsidiary Guarantor that is released from its Note Guarantee pursuant to the terms of Condition 2.3, the release of the property and assets, and Capital Stock, of such Subsidiary Guarantor and any of its Subsidiaries; (iv) if the Parent designates any of its Restricted Subsidiaries to be an Unrestricted Subsidiary in accordance with the applicable provisions of these Conditions, the release of the property, Capital Stock and assets of such Restricted Subsidiary; (v) upon repayment in full of the Notes pursuant to Condition 5; (vi) in the case of a sale of Capital Stock in a Restricted Subsidiary of the Parent to a Person other than the Parent or a Restricted Subsidiary (to the extent such Asset Sale does not violate Condition 5.5), the release of the property, assets and Capital Stock of such Restricted Subsidiary; (vii) if approved pursuant to Condition 11; and (viii) as otherwise permitted under these Conditions, the Trust Deed or the Intercreditor Agreement. The HoldCo Guarantors and the TopCo Security Providers will be entitled to a release of the Liens on the respective Collateral pledged by them in the circumstances described in (v) and (vii) above or as contemplated by Condition 3.5(c).

3. COVENANTS 3.1 Restricted Payments (a) The HoldCo Guarantors will not cause or permit the Parent or any of its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make any other payment or distribution on account of the Parent’s or any of its Restricted Subsidiaries’ Equity Interests (including, without limitation, any such payment or distribution made in connection with any merger or consolidation involving the Parent or any of its Restricted Subsidiaries) or to the direct or indirect holders of the Parent’s or any of its Restricted Subsidiaries’ Equity Interests in their capacity as such (other than dividends or distributions payable in Equity Interests (other than Disqualified Stock) of the Parent and other than dividends or distributions payable to the Parent or a Restricted Subsidiary of the Parent); (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, any such purchase, redemption, acquisition or retirement made in connection with any merger or consolidation involving the Parent) any Equity Interests of the Parent or any Parent Entity of the Parent; (iii) make any payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Indebtedness of the Issuer or any Subsidiary Guarantor that constitutes a Subordinated Obligation (excluding any intercompany Indebtedness between or among the Parent and any of the Parent’s Restricted Subsidiaries), except (i) a payment of interest or principal at the Stated Maturity thereof or (ii) the purchase, repurchase, redemption, defeasance or other acquisition or retirement of Indebtedness purchased in anticipation of satisfying a sinking fund obligation, principal instalment or scheduled maturity, in each case due within one year of the date of such purchase, repurchase, redemption, defeasance or other acquisition or retirement; (iv) make any cash payment on or with respect to, or purchase, redeem, defease or otherwise acquire or retire for value any Subordinated Shareholder Debt; or (v) make any Restricted Investment; (all such payments and other actions set forth in clauses (i) through (v) above being collectively referred to as ‘‘Restricted Payments’’), unless, at the time of and after giving effect to such

209 Restricted Payment, the conditions specified in Condition 3.1(b) are satisfied or the Restricted Payment is permitted under Condition 3.1(c): (b) The conditions referred to in Condition 3.1(a) are that at the relevant time: (i) no Default or Event of Default has occurred and is continuing or would occur as a consequence of such Restricted Payment; (ii) the Subsidiary Guarantors would, at the time of such Restricted Payment and after giving pro forma effect thereto as if such Restricted Payment had been made at the beginning of the applicable four-quarter period, have been permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Condition 3.2(a)(i); and (iii) such Restricted Payment, together with the aggregate amount of all other Restricted Payments made by the Parent and its Restricted Subsidiaries since the Issue Date (excluding Restricted Payments permitted by Condition 3.1(c)(ii) through (v), (vii) through (xii) and (xv) through (xvii)), is equal to or less than the sum, without duplication, of: (1) 50 per cent. of the Consolidated Net Income of the Parent for the period (taken as one accounting period) from 1 April 2013 to the end of the Parent’s most recently ended fiscal quarter for which internal financial statements are available at the time of such Restricted Payment (or, if such Consolidated Net Income for such period is a deficit, less 100 per cent. of such deficit); plus (2) 100 per cent. of the aggregate net cash proceeds, and the Fair Market Value of any Marketable Securities and other property, received by the Parent since the Issue Date as a contribution to its common capital or from the issue or sale of Equity Interests of the Parent (other than Disqualified Stock) or from the issue or sale of convertible or exchangeable Disqualified Stock or convertible or exchangeable debt securities of the Parent or a Restricted Subsidiary that have been converted into or exchanged for Equity Interests of the Parent (other than Equity Interests (or Disqualified Stock or debt securities) sold to a Restricted Subsidiary of the Parent or a Designated Unrestricted Subsidiary) or from the issuance or sale of Subordinated Shareholder Debt (other than an issuance or sale to the Parent or a Restricted Subsidiary of the Parent); plus (3) to the extent that any Restricted Investment that was made after the Issue Date (x) is sold, disposed of or otherwise cancelled, liquidated or repaid, 100 per cent. of the aggregate net cash proceeds, or in case of non-cash consideration, the Fair Market Value of any Marketable Securities and other property, received by the Parent or any of its Restricted Subsidiaries; (y) is made in an entity that subsequently becomes a Restricted Subsidiary (or that is merged or consolidated into the Parent or a Restricted Subsidiary), 100 per cent. of the Fair Market Value of the Restricted Investment of the Parent and its Restricted Subsidiaries as of the date such entity becomes a Restricted Subsidiary (or that is merged or consolidated into the Parent or a Restricted Subsidiary); or (z), to the extent such a Restricted Investment was a Guarantee, 100 per cent. of the amount of such Guarantee upon the full and unconditional release of such Guarantee; plus (4) 100 per cent. of any cash dividends or distributions, and the Fair Market Value of any Marketable Securities and other property distributed as non-cash dividends and distributions, received by the Parent or a Restricted Subsidiary after the Issue Date from an Unrestricted Subsidiary, to the extent that such dividends or distributions were not otherwise included in the Consolidated Net Income of the Parent for such period. (c) Condition 3.1(a) will not prohibit: (i) the payment of any dividend or the consummation of any irrevocable redemption within 60 days after the date of declaration of the dividend or giving of the redemption notice, as the case may be, if at the date of declaration or notice, the dividend or redemption payment would have complied with the provisions of these Conditions; (ii) the making of any Restricted Payment in exchange for, or out of the net cash proceeds of the substantially concurrent sale (other than to a Restricted Subsidiary of the Parent) of, Equity

210 Interests of the Parent (other than Disqualified Stock) or Subordinated Shareholder Debt or from the substantially concurrent contribution of common equity capital to the Parent; provided that the amount of any such net cash proceeds that are utilized for any such Restricted Payment will be excluded from Condition 3.1(b)(iii)(2) of the preceding paragraph and will not be considered to be net cash proceeds from an Equity Offering for purposes Condition 5.2(a); (iii) the repurchase, redemption, defeasance or other acquisition or retirement for value of the Subordinated Obligations with the net cash proceeds from a substantially concurrent incurrence of Permitted Refinancing Indebtedness for the purpose of such repurchase, redemption, defeasance or other acquisition or retirement for value; (iv) the payment of any dividend (or, in the case of any partnership or limited liability company, any similar distribution) by a Restricted Subsidiary of the Parent to the holders of its Equity Interests (other than the Parent or any of its Restricted Subsidiaries) on no more than a pro rata basis; (v) the defeasance, repurchase, redemption or other acquisition or retirement for value of any Equity Interests of the Parent or any of its Restricted Subsidiaries held by any of the Parent’s (or any of its Restricted Subsidiaries’ or any Parent Entity’s) future, current or former officers, directors, employees or consultants pursuant to any equity subscription agreement, stock option agreement, restricted stock grant, shareholders’ agreement or similar agreement; provided that the aggregate price paid for all such repurchased, redeemed, acquired or retired Equity Interests may not exceed $6.0 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over into succeeding calendar years) and provided, further, that such amount in any calendar year may be increased by an amount not to exceed the cash proceeds from the sale of Equity Interests of the Parent or a Restricted Subsidiary received by the Parent or a Restricted Subsidiary during such calendar year, in each case to officers, directors, employees or consultants of the Parent, any of its Restricted Subsidiaries or of any Parent Entity to the extent the cash proceeds from the sale of Equity Interests have not otherwise been utilised pursuant Condition 3.1(b)(iii)(2) or Condition 3.1(c)(ii); (vi) repurchases of Subordinated Obligations (other than those held by Affiliates of the Parent excluding Restricted Subsidiaries of the Parent) at a purchase price not greater than (i) 101 per cent. of the principal amount of such Subordinated Obligations and accrued and unpaid interest thereon in the event of a Change of Control or (ii) 100 per cent. of the principal amount of such Subordinated Obligations and accrued and unpaid interest thereon in the event of an Asset Sale, in each case plus accrued interest, in connection with any change of control offer or asset sale offer required by the terms of such Indebtedness, but only if: (1) in the case of a Change of Control, the Issuer has first complied with and fully satisfied its obligations under the provisions described in Condition 5.6; or (2) in the case of an Asset Sale, the Issuer has complied with and fully satisfied its obligations in accordance with in Condition 5.5; (vii) the repurchase, redemption or other acquisition for value of Capital Stock of the Parent or a Restricted Subsidiary representing fractional shares of such Capital Stock in connection with a merger, consolidation, amalgamation or other combination involving the Parent or such Restricted Subsidiary or any other transaction permitted by these Conditions; (viii) repurchases of Capital Stock deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof; (ix) the declaration and payment of regularly scheduled or accrued dividends to holders of any class or series of Disqualified Stock of the Parent or any Restricted Subsidiary of the Parent issued on or after the Issue Date in accordance with Condition 3.2; (x) payments of cash, dividends, distributions, advances or other Restricted Payments by the Parent or any of its Restricted Subsidiaries to allow the payment of cash in lieu of the issuance of fractional shares upon (x) the exercise of options or warrants or (y) the conversion or exchange of Capital Stock of any such Person;

211 (xi) advances or loans to (a) any future, current or former officer, director, employee or consultant of the Parent, a Restricted Subsidiary or any Parent Entity to pay for the purchase or other acquisition for value of Equity Interests of the Parent or a Restricted Subsidiary, or any obligation under a forward sale agreement, deferred purchase agreement or deferred payment arrangement pursuant to any management equity plan or stock option plan or any other management or employee benefit or incentive plan or other agreement or arrangement or (b) any management equity plan or stock option plan or any other management or employee benefit or incentive plan or unit trust or the trustees of any such plan or trust to pay for the purchase or other acquisition for value of Equity Interests of the Parent or a Restricted Subsidiary; provided that the total aggregate amount of Restricted Payments made under this clause (xi) does not exceed $5.0 million in any calendar year (with unused amounts in any calendar year being permitted to be carried over into the next succeeding calendar year) and further provided that any Restricted Payments pursuant to this clause (xi) shall be in addition to any Management Advances; (xii) so long as no Default or Event of Default has occurred and is continuing, the payment of Management Fees; (xiii) so long as no Default or Event of Default has occurred and is continuing, (X) Permitted Parent Payments, and (Y) in case Permitted Parent Payments under (X) are made in the form of dividends, concurrent pro rata distributions to the shareholders of the Parent (other than a Parent Entity); (xiv) so long as no Default or Event of Default has occurred and is continuing or would be caused thereby, following a Public Equity Offering that results in a Public Market of the Capital Stock of the Parent or Parent Entity of the Parent, the declaration or payment of dividends or distributions on the Capital Stock of the Parent or any Parent Entity; provided that the aggregate amount of all such dividends or distributions in any fiscal year under this clause (xiv) shall not exceed the greater of (a) 7.0 per cent. of the net cash proceeds received by the Parent from any Public Equity Offering or contributed to the Parent’s equity (other than through the issuance of Disqualified Stock) from any Public Equity Offering after the Issue Date and (b) 5.0 per cent. of the Market Capitalization, provided, with respect to clause (b), (i) that after giving pro forma effect to the payment of any such dividend or making of any such distribution, the Consolidated Total Leverage Ratio would not exceed 3.0 to 1.0 and (ii) the net cash proceeds received by the Parent from any Public Equity Offering or contributed to the Parent’s equity (other than through the issuance of Disqualified Stock) from any Public Equity Offering after the Issue Date exceeds 10.0 per cent. of the Equity Interests of the Parent outstanding on the Issue Date; provided that if such Public Equity Offering was of Capital Stock of a Parent Entity, the net proceeds of any such dividend are used to fund a corresponding dividend in equal or greater amount on the Capital Stock of such Parent Entity; (xv) (X) Restricted Payments to the HoldCo Guarantors to the extent required for them to make a substantially concurrent payment of interest or principal on any Indebtedness incurred in connection with the OpCo Facility, the 2020 Notes and/or the Notes, including any Guarantees in respect thereof; and (Y) in case the Restricted Payments under (X) are made in the form of dividends distributed by the Parent, a concurrent pro rata distributions to the shareholders of the Parent (other than the Permitted Holders); (xvi) (X) distributions, dividends, loans or other dispositions of Equity Interests, or out of proceeds of any disposition of Equity Interests, in Unrestricted Subsidiaries (other than (i) Unrestricted Subsidiaries, the primary assets of which are cash and/or Cash Equivalents other than cash or Cash Equivalents resulting from a sale or disposition of other assets after the Issue Date and (ii) the amount invested into a Designated Unrestricted Subsidiary pursuant to paragraph (18) of the definition of ‘‘Permitted Investments’’), provided that, for the avoidance of doubt, any amount of any such dividends or distributions shall not be taken into account when calculating the amount under Condition 3.1(b)(iii)(4); and (Y) to the extent required in connection with any actions contemplated by (X) above, redemption or repurchase of any Equity Interests of the Parent as may be required in accordance with applicable law, provided that any costs incurred by the Parent in connection with such redemption or repurchase are

212 funded or reimbursed either out of Subordinated Shareholder Debt or concurrent capital contribution or proceeds of any disposition under (X) above; (xvii) so long as no Default or Event of Default has occurred and is continuing or would be caused thereby, other Restricted Payments in an aggregate amount not to exceed $40.0 million since the Issue Date. (d) The amount of all Restricted Payments (other than in the form of cash or Cash Equivalents) will be the Fair Market Value on the date of the Restricted Payment of the asset(s) or securities proposed to be transferred or issued by or to the Parent or such Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment. (e) In the event that a payment or arrangement meets the criteria of more than one of the categories described in Condition 3.1(c), the Parent, in its sole discretion, will be permitted to classify such item or portion of an item and only be required to include the amount and type of such payment or arrangements in one of such clauses and will be permitted from time to time to reclassify all or a portion of such item in any manner that complies with this covenant.

3.2 Incurrence of Indebtedness and Issuance of Preferred Stock (a) The HoldCo Guarantors will not cause or permit the Parent or any of its Restricted Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable, contingently or otherwise, with respect to (collectively, ‘‘incur’’ and ‘‘incurrence’’ should have a corresponding meaning) any Indebtedness, and the HoldCo Guarantors will not permit any Restricted Subsidiary of the Parent to issue any shares of preferred stock; provided, however, that the Parent and the Issuer may incur Indebtedness and any Subsidiary Guarantor may incur Indebtedness or issue preferred stock, if: (i) the Fixed Charge Coverage Ratio for the Parent’s most recently ended four full consecutive fiscal quarters for which the Parent’s internal consolidated financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such preferred stock is issued, as the case may be, would have been at least 2.0 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom), as if the additional Indebtedness had been incurred or the preferred stock had been issued, as the case may be, and the proceeds therefrom applied at the beginning of such four-quarter period; and (ii) the Consolidated Total Leverage Ratio for the Parent’s most recently ended four full consecutive fiscal quarters for which the Parent’s internal consolidated financial statements are available immediately preceding the date on which such additional Indebtedness is incurred or such preferred stock is issued, as the case may be, is less than 3.25 to 1.0, determined on a pro forma basis (including a pro forma application of the net proceeds therefrom) as if the additional Indebtedness had been incurred or the preferred stock had been issued, as the case may be, and the application of proceeds therefrom had occurred at the beginning of such four-quarter period. (b) Condition 3.2(a) will not prohibit the incurrence of any of the following items of Indebtedness or issuance of preferred stock (collectively, ‘‘Permitted Indebtedness’’): (i) the incurrence by the Parent and its Restricted Subsidiaries of additional Indebtedness under the Credit Facilities in an aggregate principal amount at any one time outstanding under this clause (i) not to exceed $100.0 million, plus, in the case of any refinancing of any Indebtedness permitted under this clause (i) or any portion thereof, the aggregate amount of fees, underwriting discounts, premiums and other costs and expenses incurred in connection with such refinancing; (ii) the incurrence by the Subsidiary Guarantors of Indebtedness under the OpCo Facility, after giving effect to the proceeds of the Notes and the 2020 Notes on the Issue Date; (iii) the incurrence by the Issuer of Indebtedness represented by the 2020 Notes issued on the Issue Date; (iv) the incurrence by the Parent and its Restricted Subsidiaries of Existing Indebtedness;

213 (v) the incurrence by the Issuer of Indebtedness represented by the Notes issued on the Issue Date; (vi) the incurrence by the Parent or any of its Restricted Subsidiaries of Indebtedness represented by Capital Lease Obligations, mortgage financings or purchase money obligations, in each case, incurred for the purpose of financing all or any part of the purchase price, lease expense, rental payments or cost of design, construction, installation or improvement of property, plant or equipment or other assets used in the business of the Parent or any of its Restricted Subsidiaries, whether through the direct purchase of, or the Capital Stock of any Person owning such, property, plant or equipment or other assets (including any Indebtedness deemed to be incurred in connection with such purchase) (it being understood that any such Indebtedness may be incurred after the acquisition or purchase or the construction, installation or the making of any improvement with respect to any such property, plant or equipment or other assets), in an aggregate principal amount, including all Permitted Refinancing Indebtedness incurred to renew, refund, refinance, replace, defease or discharge any Indebtedness incurred pursuant to this clause (vi), not to exceed the greater of (x) $50.0 million and (y) 3.0 per cent. of Consolidated Tangible Assets; (vii) the incurrence by the Parent or any of its Restricted Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of which are used to renew, refund, refinance, replace, defease or discharge any Indebtedness (other than intercompany Indebtedness) that was permitted to be incurred under Condition 3.2(a) or 3.2(b)(ii), (iii), (iv), (v), (vii) or (xvi); (viii) the incurrence by the Parent or any of its Restricted Subsidiaries of intercompany Indebtedness between or among the Parent and any of its Restricted Subsidiaries; provided, however, that: (1) if the Issuer or any Subsidiary Guarantor is the obligor on such Indebtedness (other than (I) Indebtedness owed to the Issuer or a Subsidiary Guarantor and (II) Indebtedness owed by the Issuer and the Subsidiary Guarantors to Restricted Subsidiaries other than the Issuer and Subsidiary Guarantors in an amount up to $2.5 million for each Restricted Subsidiary so lending to such obligors), such Indebtedness must be unsecured and expressly subordinated to the prior payment in full in cash of all Obligations then due with respect to the Notes, in the case of the Issuer, or the Note Guarantee, in the case of a Subsidiary Guarantor; and (2) (i) any subsequent issuance or transfer of Equity Interests that results in any such Indebtedness being held by a Person other than the Parent or a Restricted Subsidiary of the Parent and (ii) any sale or other transfer of any such Indebtedness to a Person that is not either the Parent or a Restricted Subsidiary of the Parent will be deemed, in each case, to constitute an incurrence of such Indebtedness by the Parent or such Restricted Subsidiary, as the case may be, that was not permitted by this clause (viii); (ix) the issuance by any of the Parent’s Restricted Subsidiaries to the Parent or to any of its Restricted Subsidiaries of shares of preferred stock; provided, however, that: (1) any subsequent issuance or transfer of Equity Interests that results in any such preferred stock being held by a Person other than the Parent or a Restricted Subsidiary of the Parent; and (2) any sale or other transfer of any such preferred stock to a Person that is not either the Parent or a Restricted Subsidiary of the Parent, will be deemed, in each case, to constitute an issuance of such preferred stock by such Restricted Subsidiary that was not permitted by this clause (ix); (x) the incurrence by the Parent or any of its Restricted Subsidiaries of Hedging Obligations in the ordinary course of business and not for speculative purposes (as determined in good faith by a responsible financial or accounting officer of the Parent); (xi) the Guarantee by the Parent or any Restricted Subsidiary of Indebtedness of the Parent or a Restricted Subsidiary of the Parent; in each case, to the extent that the guaranteed Indebtedness was permitted to be incurred by another provision of this Condition 3.2 and

214 provided further that if the Indebtedness being Guaranteed is contractually subordinated to or pari passu with the Notes or a Note Guarantee, as applicable, then the Guarantee shall be subordinated or pari passu, as applicable, to the same extent as the Indebtedness Guaranteed; (xii) the incurrence by the Parent or any of its Restricted Subsidiaries of Indebtedness arising from the honouring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds, so long as such Indebtedness is covered within ten Business Days of incurrence; (xiii) Indebtedness in respect of self-insurance obligations or captive insurance companies or consisting of the financing of insurance premiums in the ordinary course of business; (xiv) the incurrence by the Parent or any of its Restricted Subsidiaries of Indebtedness arising from agreements of the Parent or any of its Restricted Subsidiaries providing for customary indemnification, obligations in respect of earnouts or other adjustment of purchase price or, in each case, similar obligations, in each case, incurred or assumed in connection with the disposition of any business, assets or Capital Stock of a Subsidiary, provided that the maximum aggregate liability in respect of all such Indebtedness shall at no time exceed the gross proceeds, including non-cash proceeds, actually received by the Parent and its Restricted Subsidiaries in connection with such disposition; (xv) the incurrence by the Parent or any of its Restricted Subsidiaries of Indebtedness in respect of (A) letters of credit, bank guarantees, bid, performance, appeal, surety and similar bonds, completion guarantees, judgment, advance payment, customs, VAT or similar instruments issued for the account of the Parent and any of its Restricted Subsidiaries in the ordinary course of business (in each case, other than an obligation for money borrowed, excluding any obligations which are reimbursed within no more than 30 days upon incurrence), including guarantees and obligations of the Parent or any of its Restricted Subsidiaries with respect to letters of credit, bank guarantees or similar instruments supporting such obligations or in respect of self-insurance and workers compensation obligations; and (B) any customary cash management, cash pooling or netting or setting off arrangements; (xvi) Indebtedness of a Person outstanding on the date on which such Person becomes a Restricted Subsidiary or is acquired by the Parent or a Restricted Subsidiary or merged, consolidated, amalgamated or otherwise combined with (including pursuant to any acquisition of assets and assumption of related liabilities) the Parent or a Restricted Subsidiary (other than Indebtedness incurred in connection with, or in contemplation of, such acquisition); provided, however, with respect to this clause (xvi) that at the time of the acquisition or other transaction pursuant to which such Indebtedness was deemed to be incurred, (x) the Subsidiary Guarantors would have been able to incur $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio in Condition 3.2(a)(i) after giving pro forma effect to the incurrence of such Indebtedness pursuant to this clause (xvi) or (y) the Fixed Charge Coverage Ratio calculated pursuant to Condition 3.2(a)(i) would not be less than it was immediately prior to giving pro forma effect to the incurrence of such Indebtedness pursuant to this clause (xvi); (xvii) any Guarantees in respect of, or constituting, an Investment to the extent permitted under Condition 3.1; (xviii)Indebtedness represented by Guarantees of any Management Advances; (xix) the issuance of shares of preferred stock by any of the Parent’s Restricted Subsidiaries in an amount at any time outstanding not to exceed $10.0 million; and (xx) the incurrence by the Parent or any of its Restricted Subsidiaries of additional Indebtedness or the issuance of preferred stock by any Restricted Subsidiary in an aggregate principal amount (or accreted value, as applicable) at any time outstanding, including all Permitted Refinancing Indebtedness incurred to renew, refund, replace, defease or discharge any Indebtedness incurred pursuant to this paragraph (xx) not to exceed the greater of (a) $50.0 million and (b) 4.0 per cent. of Consolidated Tangible Assets. (c) The Issuer will not incur, and the HoldCo Guarantors will not permit any Subsidiary Guarantor to incur, any Indebtedness (including Permitted Indebtedness) that is contractually subordinated in

215 right of payment to any other Indebtedness of the Issuer or such Subsidiary Guarantor unless such Indebtedness is also contractually subordinated in right of payment to the Notes and the applicable Note Guarantee on substantially identical terms. For the purposes of these Conditions, no Indebtedness will be deemed to be contractually subordinated in right of payment to any other Indebtedness of the Issuer or any Subsidiary Guarantor solely by virtue of being unsecured, by virtue of being secured with different collateral or by virtue of being secured on a junior priority basis or by virtue of the application of waterfall or other payment ordering provisions affecting different tranches of Indebtedness under credit facilities. (d) For purposes of determining compliance with, and the outstanding principal amount of, any particular Indebtedness incurred pursuant to and in compliance with this Condition 3.2: (i) in the event that an item or portion of an item of proposed Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in Condition 3.2(b), or is entitled to be incurred pursuant to Condition 3.2(a), the Parent, in its sole discretion, will be permitted to classify such item or portion of an item of Indebtedness on the date of its incurrence and only be required to include the amount and type of such Indebtedness in one of such clauses and will be permitted from time to time to reclassify all or a portion of such item of Indebtedness, in any manner that complies with this Condition 3.2; provided that Indebtedness incurred under the OpCo Facility outstanding on the Issue Date shall be deemed to have been incurred on such date in reliance on Condition 3.2(b)(ii) and Indebtedness incurred under the 2020 Notes on the Issue Date shall be deemed to have been incurred on such date in reliance on Condition 3.2(b)(iii) and such Indebtedness may not be reclassified; and (ii) Indebtedness permitted by this covenant need not be permitted solely by reference to one provision permitting such Indebtedness but may be permitted in part by one such provision and in part by one or more other provisions of this Condition 3.2 permitting such Indebtedness. (e) The amount of any Indebtedness outstanding as of any date will be: (i) in the case of any Indebtedness issued with original issue discount, the amount of the liability in respect thereof determined in accordance with IFRS; and (ii) the principal amount or of the Indebtedness, in the case of any other Indebtedness. (f) Accrual of interest, accrual of dividends, the accretion or amortization of original issue discount, capitalisation of interest on any Indebtedness, the reclassification of preferred stock as Indebtedness due to a change in accounting principles and the payment of dividends in the form of additional shares of preferred stock will not be deemed to be an Incurrence of Indebtedness or an issuance of preferred stock for purposes of this covenant. (g) If at any time an Unrestricted Subsidiary becomes a Restricted Subsidiary, any Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the Parent as of such date (and, if such Indebtedness is not permitted to be incurred as of such date under this Condition 3.2, the Parent shall be in Default of this Condition 3.2). (h) For purposes of determining compliance with any U.S. Dollar-denominated restriction on the incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of Indebtedness denominated in a different currency shall be utilized, calculated based on the relevant currency exchange rate in effect on the date such Indebtedness was incurred; provided however, that (i) if such Indebtedness denominated in non-dollar currency is subject to a Currency Exchange Protection Agreement with respect to U.S. dollars, the amount of such Indebtedness expressed in U.S. dollars will be calculated so as to take account of the effects of such Currency Exchange Protection Agreement; and (ii) the U.S. dollar-equivalent of the principal amount of any such Indebtedness outstanding on the Issue Date shall be calculated based on the relevant currency exchange rate in effect on the Issue Date. The principal amount of any refinancing Indebtedness incurred in the same currency as the Indebtedness being refinanced will be the U.S. dollar-

216 equivalent of the Indebtedness refinanced determined on the date such Indebtedness was originally incurred, except that to the extent that: (i) such U.S. dollar-equivalent was determined based on a Currency Exchange Protection Agreement, in which case the Refinancing Indebtedness will be determined in accordance with the preceding sentence; and (ii) the principal amount of the refinancing Indebtedness exceeds the principal amount of the Indebtedness being refinanced, in which case the U.S. dollar-equivalent of such excess will be determined on the date such refinancing Indebtedness is being incurred. (i) The principal amount of any Indebtedness incurred to refinance other Indebtedness, if incurred in a different currency from the Indebtedness being refinanced, shall be calculated based on the currency exchange rate applicable to the currencies in which such Permitted Refinancing Indebtedness is denominated that is in effect on the date of such refinancing. (j) Notwithstanding any other provision of this covenant, the maximum amount of Indebtedness that the Parent or any of its Restricted Subsidiaries may incur pursuant to this covenant shall not be decreased solely as a result of fluctuations in exchange rates or currency values.

3.3 Liens The HoldCo Guarantors will not cause or permit the Parent or any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or suffer to exist any Lien of any kind securing Indebtedness upon any of its property or assets (whether owned on the Issue Date or acquired thereafter), except (1) in the case of any property or asset that does not constitute Collateral, (a) Permitted Liens or (b) if such Lien is not a Permitted Lien, to the extent that all payments due under the Trust Deed, the Notes and the Note Guarantees are secured on an equal and rateable pari passu basis with the obligations so secured (and if such obligations so secured are contractually subordinated in right of payment to either the Notes or any Note Guarantee, on a senior priority basis) and (2) in the case of any property or asset that constitutes Collateral, Permitted Collateral Liens. Any Lien created for the benefit of the Noteholders pursuant to clause (1)(b) of the preceding paragraph shall provide by its terms that any such Lien shall automatically and unconditionally be released and discharged upon the release and discharge of the initial Lien.

3.4 Dividend and other Payment Restrictions Affecting Subsidiaries (a) The HoldCo Guarantors will not, and will not cause or permit the Parent or any of its Restricted Subsidiaries to, directly or indirectly, create or permit to exist or become effective any contractual encumbrance or restriction on the ability of any Restricted Subsidiary (other than a Subsidiary Guarantor) to: (i) pay dividends or make any other distributions to the Parent or any of its Restricted Subsidiaries on its Capital Stock, or with respect to any other interest or participation in, or measured by, its profits, or pay any indebtedness owed to the Parent or any of its Restricted Subsidiaries; (ii) make loans or advances to the Parent or any of its Restricted Subsidiaries; or (iii) sell, lease or transfer any of its properties or assets to the Parent or any of its Restricted Subsidiaries, provided that (x) the priority of any preferred stock in receiving dividends or liquidating distributions prior to dividends or liquidating distributions being paid on common stock and (y) the subordination of loans or advances made to the Parent or any of its Restricted Subsidiaries to other Indebtedness incurred by the Parent or any of its Restricted Subsidiaries (including by application of any standstill requirements), shall not be deemed to constitute such an encumbrance or restriction. (b) However, the preceding restrictions will not apply to encumbrances or restrictions existing under or by reason of: (i) agreements governing Existing Indebtedness, the OpCo Facility, the 2020 Notes, the Guarantees of the 2020 Notes and Security Documents (and any related instruments and agreements) as in effect on the Issue Date and any amendments, restatements,

217 modifications, renewals, supplements, increases, refundings, replacements or refinancings of those agreements; provided that the amendments, restatements, modifications, renewals, supplements, increases, refundings, replacements or refinancings are not materially more restrictive with respect to such restrictions than those contained in those agreements on the Issue Date (as determined in good faith by the Board of Directors or a responsible accounting or financial officer of the Parent); (ii) the Trust Deed, the Notes (including Additional Notes) and the Note Guarantees, the Intercreditor Agreement and the Security Documents (and any related instruments and agreements); (iii) applicable law, rule, regulation or order or the terms of any license, authorization, approval, concession or permit or similar restriction; (iv) any instrument or agreement binding on a Person acquired by the Parent or any of its Restricted Subsidiaries (or on its Capital Stock or assets and properties) as in effect at the time of such acquisition (except to the extent such Indebtedness or Capital Stock was incurred in connection with or in contemplation of such acquisition), which encumbrance or restriction is not applicable to any Person, or the properties or assets of any Person, other than the Person, or the property or assets of the Person, so acquired; provided that, in the case of Indebtedness, such Indebtedness was permitted by these Conditions to be incurred; (v) customary non-assignment and similar provisions in contracts, leases and licenses (including, without limitation, licenses of intellectual property) entered into in the ordinary course of business; (vi) purchase money obligations for property (including Capital Stock) acquired in the ordinary course of business, Capital Lease Obligations and mortgage financings that impose restrictions on the property purchased or leased of the nature described in Condition 3.4(a)(iii); (vii) any agreement for the sale or other disposition of the Capital Stock or any of the assets of a Restricted Subsidiary that restricts asset sales or distributions by the applicable Restricted Subsidiary pending the sale or other disposition; (viii) Permitted Refinancing Indebtedness; provided that the restrictions contained in the agreements governing such Permitted Refinancing Indebtedness are not materially more restrictive than those contained in the agreements governing the Indebtedness being refinanced (as determined in good faith by the Board of Directors or a responsible accounting or financial officer of the Parent); (ix) customary restrictions and conditions in the document relating to any Lien so long as (i) such Lien is a Permitted Lien or Permitted Collateral Lien and such restrictions or conditions relate only to the specific asset subject to such Lien and (ii) such restrictions and conditions are not created for the purpose of avoiding the restrictions imposed by this covenant; (x) provisions limiting the disposition or distribution of assets or property, or transfer of Capital Stock, in joint venture agreements, asset sale agreements, sale-leaseback agreements, stock sale agreements and other similar agreements in the ordinary course of business (including agreements entered into in connection with a Restricted Investment), which limitations are applicable only to the assets, property or Capital Stock that are the subject of such agreements; (xi) agreements governing other Indebtedness, including Liens securing such Indebtedness, of the Parent or any of its Restricted Subsidiaries or the issuance of preferred stock by a Restricted Subsidiary or the payment of dividends thereon in accordance with the terms thereof permitted to be incurred subsequent to the Issue Date or issued, as applicable, under the covenants set out in Conditions 3.2 and 3.3; and any amendments, restatements, modifications, renewals, supplements, increases, refundings, replacements or refinancings of those agreements; provided that such encumbrance or restriction taken as a whole contained in such Indebtedness are not materially more restrictive than customary in comparable financings in such jurisdictions as such Indebtedness is being incurred (as determined in good faith by the Board of Directors or a responsible accounting or financial officer of the Parent);

218 (xii) supermajority voting requirements or restrictions required under applicable law existing under corporate charters, bylaws, stockholders agreements and similar documents and agreements; (xiii) customary provisions restricting subletting or assignment of any property or assets subject to a lease; (xiv) encumbrances or restrictions contained in Hedging Obligations permitted from time to time under these Conditions; (xv) restrictions on cash or other deposits or net worth imposed by customers or suppliers or required by insurance, surety or bonding companies, in each case under contracts entered into in the ordinary course of business; (xvi) lock up arrangements upon public offering of securities; (xvii) any encumbrance or restriction existing under any agreement that extends, renews, refinances or replaces the agreements containing the encumbrances or restrictions in this Condition 3.4(b); provided that the terms and conditions of any such encumbrances or restrictions taken as a whole are not materially more restrictive than those under or pursuant to the agreement so extended, renewed, refinanced or replaced (as determined in good faith by the Board of Directors or a responsible accounting or financial officer of the Parent); (xviii)customary provisions in joint venture agreements and other similar agreements (including stockholder agreements) relating solely to such joint venture or entered into in the ordinary course of business; (xix) restrictions or conditions contained in any trading, netting, operating, construction, service, supply, purchase, sale or other agreement to which the Parent or any Restricted Subsidiaries is a party entered into in the ordinary course of business; provided that such agreement prohibits the encumbrance of solely the property or assets of the Parent or such Restricted Subsidiary that are the subject of the agreement, the payment rights arising thereunder or the proceeds thereof and does not extend to any other asset or property of the Parent or such Restricted Subsidiary or the assets or property of another Restricted Subsidiary; and (xx) restrictions arising in connection with cash or other deposits permitted in Condition 3.3.

3.5 Merger, Consolidation or Sale of Assets (a) The HoldCo Guarantors will not cause or permit the Parent to, directly or indirectly (i) consolidate, amalgamate or merge with or into another Person (whether or not the Parent is the surviving corporation) or (ii) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of the properties or assets of the Parent and its Restricted Subsidiaries, taken as a whole, in one or more related transactions, to another Person, unless: (i) either: (a) the Parent is the surviving corporation; or (b) the Person formed by or surviving any such consolidation, amalgamation or merger (if other than the Parent) or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made is an entity organized or existing under the laws of any member state of the European Union as in effect on 31 December 2003, Russia, Switzerland, Canada, any state of the United States or the District of Columbia, Hong Kong and the British Virgin Islands; (ii) immediately after such transaction or transactions, no Default or Event of Default exists; (iii) the Person formed by or surviving any such consolidation, amalgamation or merger, or to which such sale, assignment, transfer, conveyance, lease or other disposition has been made would, on the date of such transaction after giving pro forma effect thereto and any related financing transactions as if the same had occurred at the beginning of the applicable four-quarter period (i) be permitted to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in Condition 3.2(a)(i); or (ii) have a Fixed Charge Coverage Ratio not less than it was immediately prior to giving effect to such transaction; and (iv) the Parent shall have delivered to the Trustee an Officer’s Certificate and an opinion of counsel, each stating that such consolidation, merger or transfer comply with this covenant

219 and that the conditions set out in paragraphs (i) through (iii) above have been satisfied; provided that in giving an opinion of counsel, counsel may rely on an Officer’s Certificate as to any matters of fact. The Trustee shall be entitled to rely upon the Officer’s Certificate and opinion of counsel as sufficient evidence of the satisfaction of the conditions required by this paragraph without further inquiry and shall not be liable for any consequences of such consolidation, merger or transfer. (b) A Subsidiary Guarantor (other than any Subsidiary Guarantor whose Note Guarantee is to be released in accordance with the terms of these Conditions) may not sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to, or consolidate, amalgamate or merge with or into (whether or not such Subsidiary Guarantor is the surviving Person) another Person, other than the Parent or another Subsidiary Guarantor, unless: (i) immediately after giving effect to that transaction, no Default or Event of Default exists; and (ii) either: (1) the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation, amalgamation or merger (if other than the Issuer or another Subsidiary Guarantor) unconditionally assumes, pursuant to a supplemental trust deed or by acceding to the Deed of Guarantee and/or the Intercreditor Agreement and/or by entering into additional Security Documents (in form and substance reasonably satisfactory to the Security Agents), all the obligations of such Subsidiary Guarantor under such Trust Deed, its Note Guarantee, the Intercreditor Agreement and the Security Documents to which such Subsidiary Guarantor is a party; or (2) the Net Proceeds of such sale, assignment, transfer, lease, conveyance or other disposition are applied in accordance with the provisions in Condition 5.5. Subject to receipt of an Officer’s Certificate and an opinion of counsel confirming that the conditions in this Condition 3.5(b) have been satisfied, the Trustee shall (at the expense of the Parent) enter into a supplemental trust deed or such other documents as may be required to be executed pursuant to paragraph (ii)(1) above in a form and manner satisfactory to the Trustee provided that the Trustee shall not be obliged to enter into any such supplemental trust deed or such other document if such sale, disposal, consolidation or merger would impose, in the Trustee’s opinion, more onerous obligations upon it or require the Trustee to incur any liability. The Trustee shall be entitled to rely upon the Officer’s Certificate and/or an opinion of counsel as sufficient evidence of the satisfaction of the conditions required by this paragraph without further inquiry and shall not be liable for any consequences of such sale, disposal, consolidation or merger. (c) No HoldCo Guarantor will, directly or indirectly (x) consolidate, amalgamate or merge with or into another Person (whether or not such HoldCo Guarantor is the surviving corporation) or (y) sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its properties or assets in one or more related transactions, unless: (i) either: (A) such HoldCo Guarantor is the surviving corporation; or (B) the Person formed by or surviving any such consolidation, amalgamation or merger or to which such sale, assignment, transfer, lease, conveyance or other disposition has been made is wholly owned by a HoldCo Guarantor or an Investor or group of Investors (as defined in the Intercreditor Agreement) and is an entity organized or existing under the laws of: (X) Luxembourg, British Virgin Islands, Cyprus, Hong Kong, Jersey, Guernsey or Cayman Islands or any state of the United States of America, including the District of Columbia; or (Y) a jurisdiction that would not materially impair the rights of the Holders of the Notes to take Liens over all of the assets of that Person and all of the shares in that Person, as determined by the Board of Directors of the Parent and evidenced to the Trustee by filing with the Trustee a certified copy of the relevant resolution of the Board of Directors of the Parent; and

220 (ii) immediately after such transaction or transactions, no Default or Event of Default exists; (iii) in the case of: (A) paragraph (i)(A) above, on or immediately following completion of the consolidation amalgamation or merger, any Note Guarantee and Liens on Collateral provided in connection with the Notes by that HoldCo Guarantor remains valid, enforceable and in full force and effect and such HoldCo Guarantor provides such confirmations in relation to existing Note Guarantees and Liens on the Collateral provided in connection with the Notes by that HoldCo Guarantor and any amendments to any Security Documents entered into by that HoldCo Guarantor as the Security Agents may reasonably request, in each case, as supported by legal opinions, in form and substance reasonably satisfactory to the Security Agents; and (B) paragraph (i)(B) above, the Person acquiring the property in any such sale or disposition or the Person formed by or surviving any such consolidation, amalgamation or merger (if other than such HoldCo Guarantor), becomes a HoldCo Guarantor, unconditionally assumes, pursuant to a supplemental Trust Deed or by acceding to the Deed of Guarantee, all obligations of such Holdco Guarantor under the Trust Deed and its Note Guarantee; enters the Intecreditor Agreement and grants security over all of its assets (including any shares it owns in the Parent, but only to the extent required to maintain the number of shares in the Parent that were part of the Collateral immediately prior to such consolidation, amalgamation or merger, at the same level) and each of its shareholders grants security over all of the shares in that Person and provides all such other documents and evidence (including corporate authorisations) as the Security Agents may reasonably request including legal opinions, in each case, in form and substance reasonably satisfactory to the Security Agents; (iv) such transaction or transactions do not result in any HoldCo Guarantor holding directly 25 per cent. or more of the Equity Interests in the Parent; and (v) immediately after such transaction or transactions, all of the outstanding Equity Interests in each HoldCo Guarantor which directly holds Equity Interests in the Parent and any Equity Interests in the Parent directly held by such HoldCo Guarantor (but only to the extent required to maintain the number of shares in the Parent that were part of the Collateral immediately prior to such merger, amalgamation, consolidation or reconstruction, at the same level) have been pledged as Collateral. Subject to receipt of the Officer’s Certificate and an opinion of counsel confirming that the conditions of this Condition 3.5(c) have been satisfied, the Trustee shall (at the expense of the Parent) enter into a supplemental trust deed or such other document as may be required to be executed pursuant to paragraph (iii)(B) above in a form and manner satisfactory to the Trustee provided that the Trustee shall not be obliged to enter into any such supplemental trust deed or such other document if such consolidation, merger or transfer would impose, in the Trustee’s opinion, more onerous obligations upon it or require the Trustee to incur any liability. The Trustee shall be entitled to rely upon the Officer’s Certificate and opinion of counsel as sufficient evidence of the satisfaction of the conditions required by this paragraph without further inquiry and shall not be liable for any consequences of such consolidation, merger or transfer. (d) For purposes of this Condition 3.5, the sale, lease, conveyance, assignment, transfer, or other disposition of all or substantially all of the properties and assets of one or more Subsidiaries of the Parent, which properties and assets, if held by the Parent instead of such Subsidiaries, would constitute all or substantially all of the properties and assets of the Parent and its Subsidiaries on a consolidated basis, shall be deemed to be the transfer of all or substantially all of the assets of the Parent. (e) Condition 3.5(a)(iii) will not apply to any merger or consolidation of the Parent into an Affiliate solely for the purpose of reincorporating the Parent in another jurisdiction for tax reasons. Nothing in the Trust Deed or these Conditions will prevent, and this covenant will not apply to, any Restricted Subsidiary consolidating with, merging with or into or transferring all or part of its properties and assets to the Parent or a Subsidiary Guarantor.

221 3.6 Transactions with Affiliates (a) The HoldCo Guarantors will not cause or permit the Parent or any of its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate of the Parent (each, an ‘‘Affiliate Transaction’’) involving aggregate payments or consideration in excess of $5.0 million, unless: (i) the Affiliate Transaction is on terms that are no less favourable to the Parent or the relevant Restricted Subsidiary than those that would have been obtained in a comparable arm’s length transaction by the Parent or such Restricted Subsidiary with a Person who is not an Affiliate of the Parent or any of its Restricted Subsidiaries; and (ii) the Parent delivers to the Trustee with respect to any Affiliate Transaction or series of related Affiliate Transactions involving aggregate consideration in excess of $20.0 million, a resolution of the Board of Directors of the Parent confirming that such Affiliate Transaction has been approved by the Board of Directors of the Parent. (b) The following items will not be subject to the provisions of Condition 3.6(a): (i) any employment agreement or arrangement, collective bargaining agreement, consultant agreement, stock option, stock appreciation, stock incentive or stock ownership or similar plan, employee benefit arrangements, officer or director indemnification agreement, restricted stock agreement, severance agreement or other compensation plan or arrangement, in each case entered into by the Parent or any of its Restricted Subsidiaries in the ordinary course of business (as determined in good faith by a responsible financial or accounting officer of the Parent) with officers, directors, consultants or employees of the Parent and its Restricted Subsidiaries and payments, awards, grants or issuances of securities pursuant thereto; (ii) transactions between or among the Parent and/or its Restricted Subsidiaries, or an entity that becomes a Restricted Subsidiary as a result of, or in connection with, such transaction, and any merger, consolidation or amalgamation of the Parent and any direct parent of the Parent; provided that such merger, consolidation or amalgamation of the Parent is otherwise in compliance with the terms of the Trust Deed and effected for a bona fide business purpose; (iii) Management Advances and the payment of Management Fees; (iv) any Restricted Payments allowed pursuant to Condition 3.1; (v) any Permitted Investments other than paragraph (18) of the definition of ‘‘Permitted Investments’’ (and with respect to any Investment in Equity Interests of the Parent or Subordinated Shareholder Debt not on arm’s length terms or on terms that are less favourable to the Parent than arm’s length terms, such Equity Interests or Subordinated Shareholder Debt are pledged as Collateral to secure the Notes in accordance with the Intercreditor Agreement); (vi) transactions in the ordinary course of business with a Person (other than an Unrestricted Subsidiary of the Parent) that is an Affiliate of the Parent or a Restricted Subsidiary solely because the Parent or such Restricted Subsidiary owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such Person; (vii) transactions with customers, clients, suppliers or purchasers or sellers of goods or services, in each case, in the ordinary course of business and otherwise in compliance with the Trust Deed that are fair to the Parent or its Restricted Subsidiaries as reasonably determined by the Parent, or are on terms at least as favourable as might reasonably be obtained at such time from an unaffiliated Person; (viii) any issuance or sale of Equity Interests, options, other equity related interests or other securities, or other payments, awards or grants in cash, securities or otherwise pursuant to any employment, consulting, collective bargaining or benefit plan, program, agreement or arrangement, related trust or other similar agreement and other compensation arrangements, options, warrants or other rights to purchase Equity Interest of the Parent or any Parent Entity, restricted stock plans, long term incentive plans stock appreciation rights

222 plans, participation plans or similar employee benefits or consultant plans (including valuation, health, insurance, deferred compensation, severance, retirement, savings or similar plans, programs or arrangements) and/or indemnities provided on behalf of officers, employees or directors or consultants approved by the Board of Directors, in each case in the ordinary course of business; (ix) payment of customary directors’ fees, indemnification and similar arrangements (including the payment of directors’ and officers’ insurance premiums), consulting fees, employee salaries, bonuses, employment agreements and arrangements, compensation or employee benefit arrangements, including stock options or legal fees (as determined in good faith by the Parent); (x) any issuance of Equity Interests or incurrence of Subordinated Shareholder Debt by the Parent to Affiliates of the Parent, provided that if such Equity Interests or Subordinated Shareholder Debt are not issued on arm’s length terms or on terms that are more favourable to the Parent than arm’s length terms, such Equity Interests or Subordinated Shareholder Debt are pledged as Collateral to secure the Notes in accordance with the Intercreditor Agreement; (xi) transactions with a joint venture or similar entity which would constitute an Affiliate Transaction solely because the Parent owns, directly or through a Restricted Subsidiary, an Equity Interest in, or controls, such joint venture or similar entity; (xii) transactions pursuant to, or contemplated by any agreement or arrangement in effect on the Issue Date and transactions pursuant to any amendment, modification, supplement or extension thereto; provided that any such amendment, modification, supplement or extension to the terms thereof, taken as a whole, is not materially more disadvantageous to the Holders of the Notes than the original agreement or arrangement as in effect on the Issue Date; (xiii) the granting of Guarantees or security in respect of the obligations of the Affiliates of the Parent or its Restricted Subsidiaries pursuant to the OpCo Facility; (xiv) the granting of security in relation to Permitted Investments falling under paragraph (17) of the Permitted Investment definition; and (xv) transactions between the Parent or any of its Restricted Subsidiaries and any Person, a director of which is also a director of the Parent, a Restricted Subsidiary or any Parent Entity and such director is the sole cause for such Person to be deemed an Affiliate of the Parent or any of its Restricted Subsidiaries; provided, however, that such director shall abstain from voting as a director of the Parent, a Restricted Subsidiary or such Parent Entity, as the case may be, on any matter involving such other Person.

3.7 Limitation on lines of business The HoldCo Guarantors will not permit the Parent or any of its Restricted Subsidiaries to, engage in any business other than a Permitted Business.

3.8 Limitation on Issuer activities (a) The Issuer will not engage in any business activity or undertake any other activity, except (i) any activity reasonably relating to the offering, sale, issuance and servicing, purchase, redemption, refinancing or retirement of the Notes or the incurrence of other indebtedness permitted by the terms of these Conditions and distributing, lending or otherwise advancing funds to the HoldCo Guarantors, Parent or any of its Restricted Subsidiaries, and any amendments to any document related to the foregoing, including with regard to the provision of Collateral; (ii) any activity undertaken with the purpose of fulfilling any other obligations under the Notes, note proceeds loans, other Indebtedness permitted by the terms of these Conditions, any Security Document to which it is a party or the Intercreditor Agreement; (iii) Permitted Investments constituting Investments in the Parent or another Restricted Subsidiary, Investments in the form of cash and Cash Equivalents and repurchases of the Notes; (iv) any activity directly related to the establishment and/or maintenance of the Issuer’s corporate existence or otherwise complying with applicable law; and (v) other activities not specifically listed above that are de minimis in nature.

223 (b) The Issuer will at all times remain a wholly-owned direct or indirect Restricted Subsidiary of the Parent. The Issuer will not (A) merge, consolidate, amalgamate or otherwise combine with or into another Person (whether or not the Issuer is the surviving corporation); or (B) other than in connection with the incurrence of a Permitted Collateral Lien, sell, assign, transfer, lease, convey or otherwise dispose of any material property or assets to any Person in one or more related transactions. (c) For so long as any Notes are outstanding (as defined in the Trust Deed), the HoldCo Guarantors will not cause or permit the Parent or any of its Restricted Subsidiaries to commence or take any action or facilitate a winding-up, liquidation or other analogous proceeding in respect of the Issuer.

3.9 Accession of Open Joint Stock Company ‘‘Commercial Port of Vladivostok’’ The HoldCo Guarantors will cause Open Joint Stock Company ‘‘Commercial Port of Vladivostok’’ to accede to the Deed of Guarantee as an ‘‘Additional Guarantor’’ by executing an ‘‘Accession Deed’’ (both as these terms are defined in the Deed of Guarantee) no later than (X) 30 June 2013 or (Y) any date after 30 June 2013, to which the Trustee may, in its reasonable discretion, agree.

3.10 Limitation on holding company activities None of the HoldCo Guarantors will trade, carry on any business, own any assets or incur any liability other than: (i) the provision of management, headquarter and administrative services (excluding treasury services) to other Persons in which such HoldCo Guarantor owns stock directly or indirectly of a type customarily provided by a holding company and activities related or reasonably incidental to such services or to the establishment and/or maintenance of its own corporate existence and that of any such Persons and receipt of management fees and incurrence of any professional and administrative fees or costs in the ordinary course of business as a holding company; (ii) making capital contributions, acquiring additional Equity Interests as a result of share capital increase, distribution of dividends in kind, rights offering or similar and/or extending Subordinated Shareholder Debt and ownership of any assets or receivables resulting therefrom; (iii) ownership of any assets owned on the Issue Date or acquired as a result of a merger, amalgamation, consolidation or reconstruction with another HoldCo Guarantor (to the extent such merger, amalgamation, consolidation or reconstruction is not in violation of Condition 3.5), any Capital Stock of the Parent either owned on the Issue Date or acquired thereafter by a HoldCo Guarantor, bank credit and debit balances, cash and Cash Equivalents and other assets that are de minimis in nature; provided that any Holdco Guarantor may from time to time receive properties and assets (including cash, Cash Equivalents, shares of Capital Stock of another Person and/or Indebtedness owed to it) in connection and compliance with Condition 3.1 or upon a Permitted Investment, to the extent not otherwise prohibited under the Trust Deed and the Security Documents, including for the purpose of transferring such properties and assets to any Permitted Holder, any Subsidiary or any other Person; provided, however, that no HoldCo Guarantor may hold directly 25 per cent. or more of the Equity Interests in the Parent (other than, until 31 May 2013, Wiredfly Investments Limited); (iv) any activities related to a merger, amalgamation, consolidation or reconstruction (to the extent such merger, amalgamation, consolidation or reconstruction is not in violation of the Condition 3.5 and assumption of any Indebtedness (x) outstanding as at the Issue Date or (y) incurred thereafter and owed to the Parent or any Restricted Subsidiary in accordance with Condition 3.1 or being any Permitted Investment, in each case as a result of any such merger, amalgamation, consolidation or reconstruction with another HoldCo Guarantor; (v) with respect to Wiredfly Investments Limited, any activities related to incorporation of Subsidiaries, contribution of the Equity Interests held by Wiredfly Investments Limited in the Parent into such Subsidiaries’ share capital (or transfer of such Equity Interests to those Subsidiaries otherwise) and transfer of those Subsidiaries to Maple Ridge Limited and any activities related or incidental to the reorganisation of the Wiredfly Investments Limited’s holding in the Parent to ensure that following such reorganisation no Intermediate HoldCo Guarantor holds directly 25 per cent. or more of the Equity Interests in the Parent, provided that any such Subsidiaries of Wiredfly Investments Limited accede to the Deed of Guarantee as Guarantors and that Liens are created to secure the Notes

224 over the shares in such Subsidiaries and Equity Interests in the Parent transferred to them (but only to the extent such Equity Interests were subject to Liens to secure the Notes prior to such transfer) and, further, provided that following such reorganisation Wiredfly Investments Limited may be liquidated or dissolved; (vi) acquisitions of shares in the Parent (and incurrence of liabilities in connection with such acquisitions) provided that such acquisitions do not result in: (1) any HoldCo Guarantor holding directly 25 per cent. or more of the Equity Interests in the Parent; or (2) the incurrence of Indebtedness by a HoldCo Guarantor (other than any Indebtedness incurred in connection with any mandatory tender offer to the extent its incurrence is required as a matter of Russian law or any Indebtedness resulting from any indemnity or purchase price adjustments obligations under any share purchase agreements); (vii) disposals of any shares in the Parent provided that such shares are not part of the Collateral and provided further that such disposal does not result in: (1) any HoldCo Guarantor holding directly 25 per cent. or more of the Equity Interests in the Parent; or (2) the incurrence of Indebtedness by a HoldCo Guarantor; (viii) incurrence of Indebtedness (a) under the OpCo Facility, the Notes, the 2020 Notes, Guarantees in respect thereof and any refinancing of such Indebtedness and making any payments in respect thereof and granting liens in connection therewith, as well as entering into and performance of any obligations or receipt of any payments under any ancillary arrangements entered into in connection with the OpCo Facility, the Notes, the 2020 Notes, and Guarantees in respect thereof or any refinancing of such Indebtedness (including intercompany loans and guarantee compensation agreements); and (b) to the Parent or its Restricted Subsidiary as a result of any Restricted Payment to the extent permitted pursuant to Condition 3.1 or a Permitted Investment; (ix) incurring any costs, including professional fees, in connection with any acquisition of the shares in the Parent prior to the Issue Date; or (x) exercising rights and meeting obligations arising under any finance document relating to Indebtedness secured by Permitted Collateral Liens permitted to be incurred under these Conditions and the Intercreditor Agreement and to which such HoldCo Guarantor is a party and any activity undertaken with the purpose of, and related to, fulfilling any other obligations under such Indebtedness permitted under these Conditions and the Intercreditor Agreement.

3.11 Limitation on Guarantees of Indebtedness by Restricted Subsidiaries (a) The HoldCo Guarantors will not cause or permit the Parent or any other Restricted Subsidiary that is not a Guarantor, directly or indirectly, to Guarantee, assume or in any other manner become liable for the payment of any Indebtedness of the Issuer (other than the Notes) or a Guarantor (other than a Guarantee of the Notes), unless such Restricted Subsidiary simultaneously executes and delivers a supplemental trust deed to the Trust Deed or accedes to the Deed of Guarantee to provide a Guarantee of payment of the Notes by such Restricted Subsidiary substantially on the same terms as the Guarantee of such Indebtedness to the satisfaction of the Trustee; provided, however, that with respect to any Guarantee of Subordinated Obligations by such Restricted Subsidiary, any such Guarantee shall be subordinated to such Restricted Subsidiary’s Guarantee with respect to the Notes at least to the same extent as such Subordinated Obligation is explicitly subordinated to the Notes in right of payment. The Trustee shall (at the expense of the Parent) enter into a supplemental trust deed or such other document as may be required to be executed pursuant to the above paragraph in a form and manner satisfactory to the Trustee; provided that the Trustee shall not be required to enter into any such supplemental trust deed if it would impose, in the Trustee’s opinion, more onerous obligations upon it or require the Trustee to incur any liability. (b) Simultaneously with the execution of such supplemental trust deed, the HoldCo Guarantors will cause all of the Capital Stock in such Restricted Subsidiary owned by a Restricted Subsidiary of the Parent to be pledged to secure the Notes and the Note Guarantees.

225 (c) The foregoing paragraph will not be applicable to any Guarantees of the Parent or any Restricted Subsidiary: (i) existing on the Issue Date or the date of any Guarantees by the Parent or any Restricted Subsidiary provided in respect of Permitted Refinancing Indebtedness of any Existing Indebtedness; (ii) that existed at the time such Person became a Restricted Subsidiary if the Guarantee was not incurred in connection with, or in contemplation of, such Person becoming a Restricted Subsidiary; or (iii) given to a bank or trust company, whose debt has a rating, at the time such Guarantee was given, of at least BBB- or the equivalent thereof by S&P and at least B2 or the equivalent thereof by Moody’s, in connection with the operation of cash management programs established for the Parent’s benefit or that of any Restricted Subsidiary. (d) In addition, notwithstanding anything to the contrary herein: (i) no Guarantee of a Restricted Subsidiary of the Parent shall be required if such Guarantee could reasonably be expected to give rise to or result in (A) personal liability for the officers, directors or shareholders of such Restricted Subsidiary or (B) any violation of applicable law that cannot be avoided or otherwise prevented through measures reasonably available to such Restricted Subsidiary; and (ii) each such Guarantee will be limited as necessary to recognize certain defences generally available to guarantors (including those that relate to fraudulent conveyance or transfer, voidable preference, financial assistance, corporate purpose, capital maintenance or similar laws, regulations or defences affecting the rights of creditors generally) or other considerations under applicable law.

3.12 Impairment of security interest (a) The Security Providers and the HoldCo Guarantors will not, and will not cause or permit the Parent or any of its Restricted Subsidiaries to, take or knowingly omit to take, any action which action or omission might or would have the result of materially impairing the Liens created by the Security Documents with respect to the Collateral; provided that (i) nothing in this provision shall restrict the discharge or release of the Collateral in accordance with the Trust Deed, the Security Documents and/or the Intercreditor Agreement and (ii) the Parent and its Restricted Subsidiaries may incur Permitted Collateral Liens; and provided further, however, that no Security Document may be amended, extended, renewed, restated, supplemented or otherwise modified, replaced or released (followed, if relevant, by an immediate retaking of a Lien of at least equivalent ranking over the same assets), unless substantially contemporaneously with such amendment, extension, replacement, restatement, supplement, modification, renewal or release (followed by an immediate retaking of a Lien of at least equivalent ranking over the same assets), the Parent delivers to the Trustee either (1) a solvency opinion, in form and substance satisfactory to the Trustee from an accounting, appraisal or of international standing confirming the solvency of the Parent and its Restricted Subsidiaries, taken as a whole, after giving effect to any transactions related to such amendment, extension, renewal, restatement, supplement, modification, replacement or release and retaking, (2) a certificate from the chief financial officer or the Board of Directors of the relevant Person which confirms the solvency of the Person granting Liens after giving effect to any transactions related to such amendment, extension, renewal, restatement, supplement, modification, replacement or release and retaking, or (3) an opinion of counsel, in form and substance satisfactory to the Trustee (subject to customary exceptions and qualifications), confirming that, after giving effect to any transactions related to such amendment, extension, renewal, restatement, supplement, modification, replacement or release and retaking, the Lien or Liens securing the Notes created under the Security Documents so amended, extended, renewed, restated, supplemented, modified, replaced or released and retaken are valid and perfected Liens not otherwise subject to any limitation or imperfection or new hardening period, in equity or at law, and that such Lien or Liens were not otherwise subject to immediately prior to such amendment, extension, renewal, restatement, supplement, modification, replacement or release and retaking.

226 (b) Notwithstanding the preceding paragraph, which shall not apply to the actions described in this paragraph, at the direction of the Parent and without the consent of the Holder of Notes, pursuant to the Intercreditor Agreement the Security Agents may from time to time enter into one or more amendments to the Security Documents to: (i) cure any ambiguity, omission, defect or inconsistency therein; (ii) (but subject to compliance with the foregoing paragraph) provide for Permitted Collateral Liens to the extent permitted by these Conditions; (iii) add to the Collateral; (iv) comply with the terms of the Intercreditor Agreement; (v) evidence the succession of another Person to the Issuer, a Guarantor or Security Providers and the assumption by such successor, to the extent relevant, of the obligations under the Security Documents, in each case, in accordance with Condition 3.5; (vi) provide for the release of property and assets constituting Collateral from the Lien under the Security Documents and/or the release of the Note Guarantee of a Guarantor, in each case, in accordance with (and if permitted by) the these Conditions; (vii) conform the Security Documents to these Terms and Conditions of the Notes; (viii) evidence and provide for the acceptance of the appointment of a successor Trustee or Security Agents; or (ix) make any other change thereto that does not adversely affect the rights of the Holders of the Notes in any material respect. (c) In the event that the HoldCo Guarantors comply with this covenant, the Security Agents shall (subject to customary protections and indemnifications) consent to such amendment, extension, renewal, restatement, supplement, modification or replacement with no need for instructions from Holders of the Notes.

3.13 Additional Intercreditor Agreements (a) At the request of the Issuer and upon delivery of an Officer’s Certificate and an opinion of counsel to the Trustee, without the consent of Holders of the Notes, and at the time of, or prior to, the incurrence by the Issuer or a Guarantor of Indebtedness consisting of (x) Additional Notes and/or Additional 2020 Notes, (y) any Indebtedness permitted pursuant to Condition 3.2(b)(x) and (z) any Permitted Refinancing Indebtedness in respect of Indebtedness referred to in the foregoing clause (y), the Issuer or the relevant Guarantor and the Trustee with the Security Agents shall (at the expense of the Parent) enter into with the holders of such Indebtedness (or their duly authorized representatives) an intercreditor agreement (an ‘‘Additional Intercreditor Agreement’’) on substantially the same terms as the Intercreditor Agreement or an amendment to the Intercreditor Agreement, including terms with respect to the limitation on enforcement and release of guarantees and priority as set forth in the Intercreditor Agreement (or on terms more favourable to the Holders of the Notes); provided that such Additional Intercreditor Agreement or such amendments are not materially more adverse to the holders of the Notes taken as a whole than the terms contained in the Intercreditor Agreement and provided further that such Additional Intercreditor Agreement or an amendment to the Intercreditor Agreement will not impose any personal obligations on the Trustee or adversely affect the rights, duties, liabilities or immunities of the Trustee under the Trust Deed or the Intercreditor Agreement. (b) The Trust Deed will also provide that, at the written direction of the Issuer or the Parent and without the consent of the Holders of the Notes and upon delivery to the Trustee of an Officer’s Certificate and an opinion of counsel, the Trustee shall (at the expense of the Parent) from time to time enter into one or more amendments or modifications to the Intercreditor Agreement or any Additional Intercreditor Agreement to: (i) cure any ambiguity, omission, defect or inconsistency therein; (ii) increase the amount of Indebtedness of the types covered by the Intercreditor Agreement or any Additional Intercreditor Agreement in a manner not prohibited by the Trust Deed and in a manner substantially consistent with the ranking and terms of such Intercreditor Agreement; (iii) add Guarantors, Security Providers or other parties (such as representatives of new issuances of Indebtedness) thereto; (iv) make provision for the security securing Additional Notes to rank pari passu with the security interests created by the Security Documents over the Collateral; or (v) make any other such change thereto that does not adversely affect the rights of the Holders of the Notes in any material respect. The Issuer shall not otherwise direct the Trustee to enter into any amendment to the Intercreditor Agreement or any Additional Intercreditor Agreement without the consent of the Holders of a majority in aggregate principal amount of the Notes then outstanding, except as otherwise permitted below in Condition 11. (c) The Trustee shall not be obliged to enter into any such amendment or modification agreements to the Intercreditor Agreement or any Additional Intercreditor Agreement if such agreements would

227 impose, in the Trustee’s opinion, more onerous obligations upon it or require the Trustee to incur any liability and the Trustee shall not be liable for any consequences of any such amendment or modification. (d) Each Holder of a Note, by subscribing for, purchasing or otherwise acquiring such Note, will be deemed to have: (i) appointed and authorized the Trustee to give effect to such provisions; (ii) authorized the Trustee to become a party to any future intercreditor arrangements described above; (iii) agreed to be bound by such provisions and the provisions of any future intercreditor arrangements or amendments to existing ones as described above; and (iv) irrevocably appointed the Trustee to act on its behalf to enter into and comply with such provisions and the provisions of any future intercreditor arrangements described above.

3.14 Designation of Restricted and Unrestricted Subsidiaries (a) The Board of Directors of the Parent may designate any Restricted Subsidiary to be an Unrestricted Subsidiary if that designation would not cause a Default. If a Restricted Subsidiary is designated as an Unrestricted Subsidiary, the aggregate Fair Market Value of all outstanding Investments owned by the Parent and its Restricted Subsidiaries in the Subsidiary designated as an Unrestricted Subsidiary will be deemed to be an Investment made as of the time of the designation and will reduce the amount available for Restricted Payments under the covenant described above in Condition 3.1 or under one or more clauses of the definition of Permitted Investments, as determined by the Parent. That designation will only be permitted if the Investment would be permitted at that time and if the Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. (b) Any designation of a Subsidiary of the Parent as an Unrestricted Subsidiary will be evidenced to the Trustee by filing with the Trustee a certified copy of a resolution of the Board of Directors of the Parent giving effect to such designation and an Officer’s Certificate certifying that such designation complied with this Condition 3.14 and the definition of ‘‘Unrestricted Subsidiary’’ and was permitted by the covenant set out in Condition 3.1. The Board of Directors of the Parent may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary of the Parent; provided that such designation will be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the Parent of any outstanding Indebtedness of such Unrestricted Subsidiary as of the date of designation, and such designation will only be permitted if (1) such Indebtedness is permitted under the covenant set out in Condition 3.2, calculated on a pro forma basis as if such designation had occurred at the beginning of the applicable four-quarter period; and (2) no Default or Event of Default would be in existence following such designation.

3.15 Reports (a) So long as any Notes are outstanding, the HoldCo Guarantors shall cause the Parent to furnish to the Trustee the following reports in electronic form for delivery to Holders of the Notes and publish on its website: (i) within 120 days after the end of each of the Parent’s fiscal years beginning with the fiscal year ended 31 December 2013, annual reports containing the following information: (a) audited consolidated balance sheet, income statements and statements of cash flow of the Parent as of the end of the two most recent fiscal years, including complete footnotes to such financial statements and the report of the independent auditors on the financial statements; (b) pro forma income statement and balance sheet information, together with any explanatory footnotes, for any material acquisitions, dispositions (that, individually or in the aggregate when considered with all other acquisitions or dispositions that have occurred since the beginning of the most recently completed fiscal year as to which such annual report relates, represent greater than 30% of the consolidated EBITDA or total assets of the Parent on a pro forma basis) that have occurred since the beginning of the most recently completed fiscal year as to which such annual report relates, unless the pro forma information has been previously provided; (c) a summary operating and financial review of the audited financial

228 statements, including a discussion of the results of operations including a discussion of financial condition and liquidity and capital resources, and a discussion of material commitments and contingencies and critical accounting policies; (d) any material changes to the business, management and shareholders of the Parent, any material changes to any Indebtedness and the related debt instruments; and (e) any material recent developments affecting the Holders of the Notes; (ii) within 60 days (or in the case of the quarters ending on 31 March 2013 and 30 June 2013, within 90 days, provided, that a trading update with headline numbers for revenue and EBITDA by segment and key operating data is provided within 60 days) after the end of each of the first three fiscal quarters in each fiscal year of the Parent, quarterly reports containing the following information: (a) an unaudited condensed consolidated balance sheet as of the end of such quarter and unaudited condensed statements of income and cash flow for the quarterly and year-to-date periods ending on the unaudited condensed balance sheet date, and the comparable prior year periods for the Parent, together with condensed footnote disclosure; and (b) a summary of results; and (iii) promptly after the occurrence of any material acquisition, disposition or restructuring of the Parent and its Restricted Subsidiaries, taken as a whole, any senior executive officer changes at the Parent or changes in auditors of the Parent or other material event that the Parent announces publicly, a report containing a description of such event. (b) The Trustee shall not have any responsibility for reviewing or verifying the adequacy, accuracy and/or completeness of any report delivered to it pursuant to this Condition 3.15 and shall not be deemed to have knowledge of the contents of any such report. (c) All financial statements shall be prepared in accordance with IFRS on a consistent basis for the periods presented. Except as provided for above, no report need include separate financial statements for the Parent or Subsidiaries of the Parent or any disclosure with respect to the results of operations or any other financial or statistical disclosure not of a type included in this Offering Memorandum. (d) In addition, for so long as any Notes remain outstanding and during any period in which the Issuer is not subject to Section 13 or 15(d) of the U.S. Exchange Act nor exempt therefrom pursuant to Rule 12g3-2(b), the Issuer has agreed that it will furnish to the Holders of the Notes and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the U.S. Securities Act. (e) So long as any Notes are outstanding, the HoldCo Guarantors shall cause the Parent to also: (i) within 15 Business Days after furnishing to the Trustee the annual and quarterly reports required by Condition 3.15(a), hold a conference call to discuss such reports and the results of operations for the relevant reporting period; and (ii) issue a notice to the Noteholders through the Trustee in accordance with Condition 16 no fewer than three Business Days prior to the date of the conference call required by the foregoing paragraph (i) of this paragraph, announcing the time and date of such conference call and either including all information necessary to access the call or directing Holders of the Notes to contact the appropriate person at the Parent to obtain such information. The Issuer will make available copies of all reports required by Condition 3.15(a), if and so long as the Notes are listed on the Official List of the Irish Stock Exchange and admitted for trading on the Global Exchange Market and the rules of the Irish Stock Exchange so require, at the offices of the Paying Agent in Ireland or, to the extent and in the manner permitted by such rules, post such reports on the official website of the Irish Stock Exchange (www.ise.ie).

3.16 Maintenance of Listing The Notes were listed on the Official List of the Irish Stock Exchange and were admitted to trading on the Global Exchange Market. The Issuer will use all commercially reasonable endeavours to maintain the listing of the Notes on the Global Exchange Market for so long as such Notes are outstanding; provided that if at any time the Issuer determines that, having used all commercially reasonable endeavours, it will not maintain such listing, it will obtain prior to the delisting of the Notes from the Global Exchange Market, and thereafter use all commercially reasonable efforts to maintain, a listing of such Notes on

229 another internationally recognized stock exchange or other professional securities market in western Europe.

3.17 Payment of Taxes The HoldCo Guarantors shall, and shall cause the Parent and each of its Restricted Subsidiaries to, pay or discharge, or cause to be paid or discharged, before the same shall become delinquent, all material taxes, assessments and governmental charges levied or imposed upon such HoldCo Guarantor, the Parent or such Restricted Subsidiary, as the case may be; provided, however, that the HoldCo Guarantors, the Parent or the Restricted Subsidiaries shall not be required to pay or discharge, or cause to be paid or discharged, any such tax, assessment, charge or claim the amount, applicability or validity of which is being contested in good faith by appropriate proceedings, for which adequate reserves have been established or where failure to effect such payment is not adverse in any material respect to the Holders of the Notes.

3.18 Waiver of Stay or Extension Laws The HoldCo Guarantors covenant (to the extent that they may lawfully do so) that they shall not, and shall not cause the Parent and each of its Restricted Subsidiaries to, at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of these Conditions or the Trust Deed; and the HoldCo Guarantors (to the extent they may lawfully do so) hereby expressly waive all benefit or advantage of any such law and covenant that they shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted.

3.19 Suspension of Covenants When Notes Rated Investment Grade (a) During any period of time that (i) the Notes have received an Investment Grade Rating from at least two Rating Agencies and (ii) no Default has occurred and is continuing under the Trust Deed (the occurrence of the events described in the foregoing clauses (i) and (ii) being collectively referred to as a ‘‘Covenant Suspension Event’’ and the date thereof being referred to as the ‘‘Suspension Date’’), then Conditions 5.5, 3.1, 3.2, 3.4, 3.6, 3.7 and 3.11 will not be applicable to the Notes (collectively, the ‘‘Suspended Covenants’’). (b) During any period that the Suspended Covenants have been suspended, neither the Parent nor any of its Restricted Subsidiaries may designate any of its Subsidiaries as Unrestricted Subsidiaries pursuant to definition of Unrestricted Subsidiary. (c) In the event that the Parent and the Restricted Subsidiaries are not subject to the Suspended Covenants under the Trust Deed for any period of time as a result of the foregoing, and on any subsequent date (the ‘‘Reversion Date’’) a Rating Agency withdraws its Investment Grade Rating or downgrades the rating assigned to the Notes below an Investment Grade Rating, as a result of which fewer than two Rating Agencies attribute an Investment Grade Rating to the Notes, then the Parent and its Restricted Subsidiaries will thereafter again be subject to the Suspended Covenants under the Trust Deed with respect to events occurring after the Reversion Date. The period of time between the Suspension Date and the Reversion Date is referred to the ‘‘Suspension Period.’’ Upon the occurrence of a Covenant Suspension Event, the amount of Excess Proceeds from Net Proceeds shall be reset to zero. (d) Notwithstanding the foregoing, in the event of any such reinstatement, no action taken or omitted to be taken by the Parent or any of its Restricted Subsidiaries prior to the Reversion Date will give rise to a Default or Event of Default under the Trust Deed with respect to the Notes; provided that (i) with respect to Restricted Payments made after the Reversion Date, the amount available to be made as Restricted Payments will be calculated as though Condition 3.1 had been in effect throughout the Suspension Period; (ii) all Indebtedness incurred or preferred stock issued during the Suspension Period will be classified to have been incurred or issued pursuant to Condition 3.2(b)(iv); (iii) any transactions with Affiliates entered into after the Reversion Date pursuant to an agreement entered into during any Suspension Period shall be deemed to be permitted pursuant to Condition 3.6(b)(xii); (iv) any encumbrance or restriction on the ability of any Restricted Subsidiary that is not a Guarantor to take any action described in Condition 3.4(a)(i) through (iii) that becomes effective during any Suspension Period shall be deemed to be permitted

230 pursuant to Condition 3.4(b)(i); and (v) the Parent or a Restricted Subsidiary shall not be required to comply with Condition 3.11 after the Reversion Period with respect to any Guarantee entered into by the Parent or such Restricted Subsidiary during any Suspension Period.

4. INTEREST Interest on the Notes will accrue on the principal amount of the Notes at the rate of 8 per cent. per annum. Interest on the Notes will be payable semi-annually in arrear on 2 May and 2 November, commencing on 2 November 2013. Interest on overdue principal and interest (accruing from the date on which such payment is due), if any, will accrue at a rate that is 1.0 per cent. higher than the then applicable interest rate on the Notes. The Issuer will make each interest payment to the Holders of record on the immediately preceding record date. Interest on the Notes will accrue from the date of original issuance or, if interest has already been paid, from the date immediately preceding interest payment. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months.

5. REDEMPTION AND PURCHASE 5.1 Redemption at maturity Except as otherwise described in Condition 5.2, the Notes will not be redeemable at the Issuer’s option prior to their maturity on 2 May 2018. The Issuer is not, however, prohibited from acquiring the Notes by means other than a redemption, whether pursuant to a tender offer or open market purchase, so long as the acquisition does not violate the terms of these Conditions.

5.2 Redemption at the Option of the Issuer (a) Prior to 2 May 2016, the Issuer may, at its option, on any one or more occasions, redeem up to 40 per cent. of the aggregate principal amount of the Notes originally issued (including any Additional Notes issued after the Issue Date) at a redemption price equal to 108 per cent. of the principal amount thereof, plus accrued and unpaid interest thereon and Additional Amounts, if any, to, but not including, the redemption date, with all or a portion of the net cash proceeds of one or more Equity Offerings; provided that: (i) at least 60 per cent. of the aggregate principal amount of the Notes originally issued (including any Additional Notes issued after the Issue Date, but excluding Notes held by the Parent and its Subsidiaries on the relevant redemption date) remains outstanding immediately after the occurrence of such redemption; and (ii) such redemption shall occur within 90 days of the date of the closing of any such Equity Offering. (b) In addition, at any time prior to 2 May 2016, the Issuer may also redeem all or only some of the Notes at a redemption price equal to 100 per cent. of the principal amount of Notes to be redeemed, plus the Applicable Premium (as defined below) as of, and accrued and unpaid interest and Additional Amounts, if any, to, but not including, the redemption date. (c) On or after 2 May 2016, the Issuer may on any one or more occasions redeem all or only some of the Notes, at the redemption prices (expressed as percentages of principal amount) set forth below, plus accrued and unpaid interest and Additional Amounts, if any, on the Notes redeemed, to the applicable date of redemption, if redeemed during the twelve month period beginning on 2 May of the years indicated below:

Notes Redemption Year Price 2016 ...... 104per cent. 2017 and thereafter ...... 102per cent. (d) All redemptions of the Notes pursuant to this Condition 5.2 will be made upon not less than 30 days’ nor more than 60 days’ prior notice to the Noteholders in accordance with Condition 16. Unless the Issuer defaults in the payment of the redemption price, interest will cease to accrue on the Notes or portions thereof called for redemption on the applicable redemption date.

231 (e) Notice of any redemption pursuant to this Condition 5.2 including, without limitation, upon an Equity Offering may, at the Issuer’s discretion, be subject to one or more conditions precedent, including, but not limited to, completion of the related Equity Offering.

5.3 Redemption for Changes in Taxes (a) The Issuer may redeem all but not only some of the Notes at its discretion at any time upon giving not less than 30 nor more than 60 days’ prior notice to the Holders of the Notes (which notice will be irrevocable and given in accordance with the procedures described in Condition 5.7), at a redemption price equal to 100 per cent. of the aggregate principal amount thereof, together with accrued and unpaid interest, if any, to the date fixed by the Issuer for redemption (a ‘‘Ta x Redemption Date’’) and all Additional Amounts (if any) then due and which will become due on the Tax Redemption Date as a result of the redemption or otherwise, if on the next date on which any amount would be payable in respect of the Notes, the Issuer or a Guarantor is or would be required to pay Additional Amounts, and the Issuer or Guarantor cannot avoid any such payment obligation by taking reasonable measures available (including making payment through a Paying Agent located in another jurisdiction), and the requirement arises as a result of: (i) any amendment to, or change in, the laws or any regulations, treaties or rulings promulgated thereunder of a relevant Tax Jurisdiction which change or amendment has not been publicly announced as formally proposed before the Issue Date and becomes effective on or after the Issue Date (or, if the applicable Tax Jurisdiction became a Tax Jurisdiction on a date after the date of this Offering Memorandum, such later date); or (ii) any amendment to, or change in, an official written interpretation or application of such laws, regulations, treaties or rulings (including by virtue of a holding, judgment, order by a court of competent jurisdiction or a change in published administrative practice) which amendment, change, application or interpretation has not been publicly announced as formally proposed before the Issue Date and becomes effective on or after the Issue Date (or, if the applicable Tax Jurisdiction became a Tax Jurisdiction on a date after the Issue Date, such later date). (b) The Issuer will not give any such notice of redemption earlier than 90 days prior to the earliest date on which the Issuer or the relevant Guarantor would be obligated to make such payment or withholding if a payment in respect of the Notes was then due, and the obligation to pay Additional Amounts must be in effect at the time such notice is given. Prior to the giving of any notice of redemption of the Notes pursuant to this Condition 5.3, the Issuer will deliver to the Trustee an opinion of independent tax counsel of recognised standing, to the effect that there has been such amendment or change which would entitle the Issuer to redeem the Notes hereunder and an Officer’s Certificate to the effect that the Issuer and the Guarantors cannot avoid the obligation to pay Additional Amounts by taking reasonable measures available to them. (c) The Trustee shall be entitled to rely on such Officer’s Certificate and opinion of counsel as sufficient evidence of the existence and satisfaction of the conditions precedent as described above, in which event it will be conclusive and binding on the Holders of the Notes.

5.4 Mandatory Redemption The Issuer is not required to make mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances described in Conditions 5.5 and 5.6, the Issuer may be required to offer to purchase the Notes.

5.5 Redemption at the Option of the Noteholders upon an Asset Sale (a) The HoldCo Guarantors will not permit the Parent or any of its Restricted Subsidiaries to, directly or indirectly, consummate an Asset Sale unless: (i) consideration received or receivable by the Parent and Restricted Subsidiaries at the time of the Asset Sale is at least equal to the Fair Market Value of the assets or Equity Interests issued or sold or otherwise disposed of; and

232 (ii) at least 75 per cent. of the consideration received in the Asset Sale by the Parent or such other Restricted Subsidiary is in the form of cash or Cash Equivalents. For purposes of this provision, each of the following will be deemed to be cash: (1) any liabilities, as shown on the Parent’s most recent consolidated balance sheet, of the Parent or any of its Restricted Subsidiaries (other than contingent liabilities, Subordinated Obligations or Subordinated Shareholder Debt) that are assumed by the transferee of any such assets pursuant to a customary novation or indemnity agreement that releases the Parent or such other Restricted Subsidiary from further liability or indemnifies the Parent or such other Restricted Subsidiary against further liabilities; (2) any securities, notes or other obligations received by the Parent or any such other Restricted Subsidiary from such transferee that are converted by the Parent or such Restricted Subsidiary into cash or Cash Equivalents within 180 days following the closing of the Asset Sale, to the extent of the cash or Cash Equivalents received in that conversion; (3) any Capital Stock or assets of the kind referred to in Conditions 5.5(b)(i)(4) or 5.5(b)(i)(6); (4) Indebtedness (other than Subordinated Obligations or Subordinated Shareholder Debt) of any Restricted Subsidiary that is no longer a Restricted Subsidiary as a result of such Asset Sale, to the extent that the Parent and each other Restricted Subsidiary are released from any Guarantee of such Indebtedness in connection with such Asset Sale; and (5) consideration consisting of Indebtedness of any Subsidiary Guarantor received from Persons who are not the Parent or any of its Restricted Subsidiaries. (b) Within 450 days after the receipt of any Net Proceeds from an Asset Sale, the Parent (or the applicable Restricted Subsidiary, as the case may be) may: (i) apply such Net Proceeds (at the option of the Parent or Restricted Subsidiary): (1) to purchase the Notes pursuant to an offer to all Holders of Notes at a purchase price equal to 100 per cent. of the principal amount thereof, plus accrued and unpaid interest and Additional Amounts, if any, to (but not including) the date of purchase (a ‘‘Notes Offer’’); (2) to repay any Indebtedness outstanding under the OpCo Facility to the extent required by the terms thereof as in effect on the Issue Date; (3) to repay, repurchase, prepay or redeem (a) to the extent such Net Proceeds are from an Asset Sale of assets of a Restricted Subsidiary of the Parent that is not a Guarantor, any Indebtedness of a Restricted Subsidiary of the Parent that is not a Guarantor, (b) any Indebtedness that is secured by a Lien on the assets or property subject to such Asset Sale so long as such assets or property do not constitute Collateral and, if the Indebtedness repaid, repurchased, prepaid or redeemed is revolving credit Indebtedness, to correspondingly reduce commitments with respect thereto and (c) to make an Asset Sale Offer (as defined below) to all Holders of the Notes and holders of other Indebtedness that is secured by a Lien on the Collateral and that is not contractually subordinated in right of payment to the Notes or the Guarantees; (4) to acquire (i) all or substantially all of the assets of, or any Capital Stock of, another Person involved in a business equivalent to the Permitted Business, if, after giving effect to any such acquisition of Capital Stock, the Permitted Business is or becomes a Restricted Subsidiary; or (ii) any Capital Stock of publicly traded Persons involved in a business equivalent to the Permitted Business, to the extent such acquisition is a Restricted Payment that complies with Condition 3.1 or a Permitted Investment; (5) to make capital expenditures or Permitted Investments falling under paragraphs (18) and (19) of the relevant definition; (6) to acquire other assets (other than Capital Stock) not classified as current assets under IFRS that are used or useful in a Permitted Business; or

233 (ii) enter into a binding commitment to apply the Net Proceeds pursuant to Condition 5.5(b)(i)(4), (5) or (6); provided that such binding commitment shall be treated as a permitted application of the Net Proceeds from the date of such commitment until the earlier of (x) the date on which such acquisition or expenditure is consummated, and (y) the 180th day following the expiration of the aforementioned 450 day period, provided that if the assets sold or transferred in such Asset Sale constituted Collateral, the HoldCo Guarantors shall cause the Parent or the applicable Restricted Subsidiary to create Liens with respect to (i) any assets falling under Condition 5.5(a)(ii)(3) or Condition 5.5(b)(i)(4) or (6), in each case received or acquired in connection with such Asset Sale or (ii) any other assets with a Fair Market Value equal to or greater than the assets mentioned in (i) to secure the Notes on a first- ranking basis. (c) Pending the final application of any Net Proceeds, the Parent or any of its Restricted Subsidiaries may temporarily reduce revolving credit borrowings or otherwise invest the Net Proceeds in any manner that is not prohibited by these Conditions. Any Net Proceeds from Asset Sales that are not applied or invested as provided in Condition 5.5(b) will constitute ‘‘Excess Proceeds’’. (d) When the aggregate amount of Excess Proceeds exceeds $40.0 million, within ten Business Days thereof, the Issuer will make an offer (an ‘‘Asset Sale Offer’’) to all Holders of Notes and may make an offer to all holders of other Indebtedness that is pari passu with the Notes or any Note Guarantees of any Subsidiary Guarantor, to the extent required by the terms of such other Indebtedness, to purchase, prepay or redeem the maximum principal amount of Notes and such other pari passu Indebtedness (plus all accrued interest on the Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith) that may be purchased, prepaid or redeemed out of the Excess Proceeds. The offer price for the Notes in any Asset Sale Offer will be equal to 100 per cent. of the principal amount, plus accrued and unpaid interest and Additional Amounts, if any, to the date of purchase, prepayment or redemption, and will be payable in cash. If any Excess Proceeds remain after consummation of an Asset Sale Offer, the Parent and its Restricted Subsidiaries may use those Excess Proceeds for any purpose not otherwise prohibited by these Conditions. Upon completion of each Asset Sale Offer, the amount of Excess Proceeds will be reset at zero. (e) If the aggregate principal amount of Notes and other pari passu Indebtedness tendered into (or to be prepaid or redeemed in connection with) such Asset Sale Offer exceeds the amount of Excess Proceeds or if the aggregate principal amount of Notes tendered pursuant to a Notes Offer exceeds the amount of the Net Proceeds so applied, the Issuer will select the Notes and such other pari passu Indebtedness, if applicable, to be purchased on a pro rata basis (or, where all Notes are in global form and held in a Clearing System in accordance with the standard proceedings at the relevant time of the relevant Clearing System(s), if any) unless otherwise required by applicable law or applicable stock exchange or depositary requirements, based on the amounts tendered or required to be prepaid or redeemed.

5.6 Redemption at the Option of the Noteholders upon a Change of Control (a) If a Change of Control occurs, each Holder of Notes will have the right to require the Issuer to repurchase all or any part (equal to $200,000 or an integral multiple of $1,000 in excess thereof) of that Holder’s Notes pursuant to an offer (‘‘Change of Control Offer’’) on the terms set forth in this Condition 5.6. In the Change of Control Offer, the Issuer will offer a payment in cash (the ‘‘Change of Control Payment’’) equal to 101 per cent. of the aggregate principal amount of Notes repurchased plus accrued and unpaid interest and Additional Amounts, if any, on the Notes repurchased to the date of purchase (the ‘‘Change of Control Payment Date’’). Within 30 days following any Change of Control, the Issuer will give a notice to Holders (with a copy to the Trustee) in accordance with the procedures described in Condition 5.8, describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the Change of Control Payment Date specified in the notice, which date will be no earlier than 30 days and no later than 60 days from the date such notice is given, pursuant to the procedures required by these Conditions and described in such notice. The Issuer will be under no obligation to repurchase or redeem any Notes tendered after the Change of Control Payment Date.

234 (b) On the Change of Control Payment Date, the Issuer will, to the extent lawful: (i) accept for payment all Notes or portions of Notes properly tendered pursuant to the Change of Control Offer; and (ii) pay to the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions of Notes properly tendered. (c) The Issuer will procure that a new Note is delivered to each Holder equal in principal amount to any unpurchased portion of the Notes surrendered, if any; provided that each such new Note will be in a principal amount of $200,000 or an integral multiple of $1,000 in excess thereof. Any Note so accepted for payment will cease to accrue interest on and after the Change of Control Payment Date unless the Issuer defaults in making the Change of Control Payment. The Issuer will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. (d) The provisions described herein that require the Issuer to make a Change of Control Offer following a Change of Control will be applicable whether or not any other provisions of these Conditions are applicable. Except as described above with respect to a Change of Control, these Conditions do not contain provisions that permit the Holders of the Notes to require that the Issuer repurchase or redeem the Notes in the event of a , recapitalization or similar transaction. (e) The Issuer will not be required to make a Change of Control Offer upon a Change of Control if (1) a third party makes the Change of Control Offer in the manner, at the time and otherwise in compliance with the requirements set forth in this Condition 5.6 applicable to a Change of Control Offer made by the Issuer and purchases all Notes properly tendered and not withdrawn under the Change of Control Offer, or (2) notice of redemption has been given pursuant to Condition 5.2 above, unless and until there is a default in payment of the applicable redemption price. (f) A Change of Control Offer may be made in advance of a Change of Control, and conditional upon the occurrence of such Change of Control, if a definitive agreement is in place for the Change of Control at the time of making the Change of Control Offer. The definition of Change of Control includes a phrase relating to the direct or indirect sale, lease, transfer, conveyance or other disposition of ‘‘all or substantially all’’ of the properties or assets of the Parent and its Restricted Subsidiaries taken as a whole. Although there is a limited body of case law interpreting the phrase ‘‘substantially all’’, there is no precise established definition of the phrase under applicable law, however, the Holders should refer to the definition of ‘‘all or substantially all’’ in Condition 20. Accordingly, the ability of a Holder of Notes to require the Issuer to repurchase its Notes as a result of a sale, lease, transfer, conveyance or other disposition of less, than all of the assets of the Parent and its Restricted Subsidiaries taken as a whole to another Person or group may be uncertain. (g) The provisions under this Condition 5.6 relating to the Issuer’s obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the consent of the Holders of a majority in principal amount of the Notes. If a Change of Control Offer is made, there can be no assurance that the Issuer will have sufficient funds or other resources to pay the Change of Control Payment for all the Notes that might be delivered by Holders thereof seeking to accept the Change of Control Offer. See ‘‘Risk Factors—Risks Relating to the Notes, Our Indebtedness and Our Structure—We may not be able to finance a Change of Control Offer’’.

5.7 Compliance with Securities Laws The Issuer will comply with the requirements of Rule 14e-1under the U.S. Exchange Act and any other applicable securities laws and regulations to the extent those laws and regulations are applicable in connection with each repurchase of Notes pursuant to a Change of Control Offer, an Asset Sale Offer or a Notes Offer. To the extent that the provisions of any securities laws or regulations conflict with the Change of Control, Asset Sale or Notes Offer provisions of these Conditions, the Issuer will comply with the applicable securities laws and regulations and will not be deemed to have breached its obligations under the Change of Control, Asset Sale or Notes Offer provisions of these Conditions by virtue of such compliance.

235 5.8 Selection and Notice If less than all of the Notes are to be redeemed at any time, the Issuer will select Notes for redemption on a pro rata basis (or, where all Notes are in global form and held in a Clearing System, in accordance with the standard procedures of the relevant Clearing System(s), if any) unless otherwise required by law or applicable stock exchange or depository requirements. No Notes of $200,000 or less can be redeemed in part. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount of that Note that is to be redeemed. A new Note in principal amount equal to the unredeemed portion of the original Note will be issued in the name of the Holder of Notes upon cancellation of the original Note. A notice of redemption shall state whether the redemption is conditional on any events and, if so, a detailed explanation of such conditions. Subject to the satisfaction of any conditions precedent set forth in a notice of redemption, Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of Notes called for redemption, unless there is a default in redeeming the Notes, in which event interest will continue to accrue as set out in the Trust Deed.

5.9 Purchases The Issuer and any Guarantor may at any time purchase Notes in the open market or otherwise at any price. The Notes so purchased, while held by or on behalf of such, will not entitle the Holder to vote at any meetings of the Noteholders and will not be deemed to be outstanding for the purposes, inter alia, of calculating quorums at meetings of the Noteholders or for the purposes of Condition 11 and may be resold by the Issuer or such Guarantor only outside the United States in accordance with Regulation S under the U.S. Securities Act or pursuant to any other available exemption.

5.10 Cancellation All Notes redeemed (or purchased and surrendered for cancellation by or on behalf of the Issuer or the Guarantors) will be cancelled and may not be held, re-issued or resold. The Issuer has the power under the Trust Deed on behalf of itself and the Guarantors to compel any beneficial owner of Rule 144A Notes that is not a QIB and a QP to sell its interest in the relevant Rule 144A Notes, or may sell such interest on behalf of, or purchase such interest from, such owner at a price equal to the least of (x) the purchase price therefor paid by the beneficial owner, (y) 100% of the principal amount thereof or (z) the fair market value thereof. The Issuer has the right on behalf of itself and the Guarantors to refuse to honor the transfer of an interest in the Rule 144A Notes to a U.S. person who is not a QIB and a QP.

6. PAYMENTS 6.1 Principal Payment of principal and premium (if any) (and interest due other than on an interest payment date) in respect of the Notes will be made to the Persons shown in the Register at the close of business on the Record Date (as defined below) and subject to the surrender (in the case of payment in full) of the Notes at the specified office of the Registrar or of the Paying and Transfer Agents.

6.2 Interest and other Amounts Payments of interest due on an interest payment date will be made to the Persons shown in the Register at close of business on the Record Date (as defined below) and payments of all other amounts (other than as provided in Condition 6.1) will be made as provided in these Conditions.

6.3 Record Date ‘‘Record Date’’ means the 15th day before the due date for the relevant payment.

6.4 Payments Each payment of principal, premium or interest in respect of the Notes will be made by a wire transfer to a United States dollar account maintained by the payee with a bank in the City of New York specified by the

236 Holder not more than five days after the Record Date with respect to the due date for any payment in respect of the Notes. Payment instructions related to such wire transfers (for value the due date or, if that is not a Business Day, for value the first following day which is a Business Day) will be initiated on the due date for payment or, if later, the day on which the relevant Note is surrendered at the specified office of any of the Paying and Transfer Agents (in the case of principal, premium and interest due on redemption).

6.5 Payments subject to Laws All payments in respect of the Notes are subject in all cases to (i) any applicable fiscal or other laws and regulations in the place of payment and (ii) any withholding or deduction required pursuant to an agreement described in Section 1471(b) of the U.S. Internal Revenue Code of 1986 (the ‘‘Code’’) or otherwise imposed pursuant to Sections 1471 through 1474 of the Code (or any regulations or agreements thereunder, official interpretations thereof) or an intergovernmental agreement between the United States and another jurisdiction facilitating the implementation thereof (or any law implementing such an intergovernmental agreement). No commissions or expenses will be charged to the Noteholders in respect of such payments.

6.6 Payments on Business Days Noteholders will not be entitled to payment of any interest or other amounts for any delay after the due date in receiving the amount due as a result of the due date not being a Business Day or the Holder being late in surrendering its Note.

6.7 Partial Payments If at any time a partial payment of principal, premium and/or interest is made in respect of any Note, the Registrar will endorse the Register with a statement indicating the amount and the date of such payment.

6.8 Agents The names of the initial Paying Agents, Transfer Agents and Registrars and their specified offices are set out below. The Issuer and the Guarantors reserve the right under the Agency Agreement at any time with the prior written approval of the Trustee to remove any Paying Agent, Transfer Agent or Registrar and to appoint other or further Paying Agent, Transfer Agent or Registrar, provided that they will at all times maintain a Principal Paying Agent; Transfer Agents in at least two major European cities approved by the Trustee, including London, for so long as the Notes are listed on the Irish Stock Exchange; a Paying Agent with a specified office in a European Union member state that will not be obliged to withhold or deduct tax pursuant to European Council Directive 2003/48/EC (as amended from time to time) on the taxation of savings income, or any law implementing or complying with, or introduced in order to conform to, such Directive and a Registrar. Notice of any such removal or appointment and of any change in the specified office of any Paying Agent, Transfer Agent or Registrar will as soon as practicable be given to Noteholders in accordance with Condition 16.

7. TAXATION (a) All payments made by or on behalf of the Issuer under or with respect to the Notes or payments by any of the Guarantors under any Note Guarantee will be made free and clear of and without withholding or deduction for, or on account of, any present or future Taxes unless the withholding or deduction of such Taxes is then required by law. If any deduction or withholding for, or on account of, any Taxes imposed or levied by or on behalf of (1) any jurisdiction in which the Issuer or any Guarantor is then incorporated, organized or resident for tax purposes or any political subdivision thereof or therein or (2) any jurisdiction from or through which payment is made by or on behalf of the Issuer or any Guarantor (including the jurisdiction of any Paying Agent) or any political subdivision thereof or therein (each, a ‘‘Tax Jurisdiction’’) will at any time be required to be made from any payments made by or on behalf of the Issuer under or with respect to the Notes or any payment by any of the Guarantors under any Note Guarantee, the Issuer or the relevant Guarantor, as applicable, will pay such additional amounts (the ‘‘Additional Amounts’’) as may be necessary in order that the net amounts received in respect of such payments after such withholding, deduction or imposition (including any such withholding, deduction or imposition from such Additional Amounts) will equal the respective amounts that would have been received in

237 respect of such payments in the absence of such withholding or deduction; provided, however, that no Additional Amounts will be payable with respect to: (i) any Taxes, to the extent such Taxes would not have been imposed but for the existence of any present or former connection between the holder or the beneficial owner of the Notes and the relevant Tax Jurisdiction (including being a resident of such jurisdiction for Tax purposes), other than the mere holding of such Note, the enforcement of rights under such Note or under a Note Guarantee or the receipt of any payments in respect of such Note or a Note Guarantee; (ii) any Taxes, to the extent such Taxes were imposed as a result of the presentation of a Note for payment (where presentation is required) more than 30 days after the relevant payment is first made available for payment to the holder (except to the extent that the holder would have been entitled to Additional Amounts had the Note been presented on the last day of such 30 day period); (iii) any estate, inheritance, gift, sales, transfer, personal property or similar Taxes; (iv) any Taxes withheld, deducted or imposed on a payment to an individual that are required to be made pursuant to European Council Directive 2003/48/EC (as amended from time to time) on the taxation of savings income, or any law implementing or complying with or introduced in order to conform to, such Directive; (v) Taxes imposed on or with respect to a payment made to a holder or beneficial owner of Notes who would have been able to avoid such withholding or deduction by presenting the relevant Note to another Paying Agent; (vi) any Taxes payable other than by deduction or withholding from payments under, or with respect to, the Notes or with respect to any Note Guarantee; (vii) any Taxes payable under section 1471 through 1474 of the U.S. Internal Revenue Code of 1986, as amended, any regulations or other official guidance thereunder, or any agreement (including any intergovernmental agreement) entered into in connection therewith; (viii) any Taxes withheld, deducted or imposed on a payment to an individual or an entity that are required to be made pursuant to the Luxembourg laws of 21 June 2005 and of 23 December 2005; (ix) any Taxes to the extent such Taxes are imposed, withheld or deducted by reason of the failure of the Holder or beneficial owner of Notes, to comply with any reasonable written request of (or on behalf of) the Issuer addressed to the Holder or beneficial owner to satisfy any certification, identification, information or other reporting requirements, or to make a claim or declaration, whether required by statute, treaty, regulation or administrative practice of a Tax Jurisdiction, as a precondition to exemption from, or reduction in the rate of deduction or withholding of, Taxes imposed by the Tax Jurisdiction (including, without limitation, a certification or declaration that the holder or beneficial owner is not resident in the Tax Jurisdiction), but in each case, only to the extent the Holder or beneficial owner is legally entitled to provide such certification, information, declaration or documentation; or (x) any combination of items (i) through (ix) above. (b) In addition to the foregoing, the Issuer and the Guarantors will also pay and indemnify the Trustee and the Holder and beneficial owner of the Notes for any present or future stamp, issue, documentary, registration or other similar taxes and duties, including interest and penalties, payable in the Grand Duchy of Luxembourg, the Republic of Cyprus, Ukraine or the Russian Federation in respect of the creation, issue and offering of the Notes and the execution or delivery of the Trust Deed and/or each Note Guarantee. The Issuer will also indemnify the Trustee and the Noteholders against all stamp, issue, documentary or other similar taxes paid by them in any jurisdiction in connection with any action taken by or on behalf of the Trustee (or the Noteholders) to enforce the Issuer’s or the Guarantors’ obligations under the Trust Deed, the Notes or any of the Note Guarantees. (c) If the Issuer or any Guarantor, as the case may be, becomes aware that it will be obligated to pay Additional Amounts with respect to any payment under or with respect to the Notes or any Note Guarantee, each of the Issuer or the relevant Guarantor, as the case may be, will deliver to the

238 Trustee on a date that is at least 30 days prior to the date of that payment (unless the obligation to pay Additional Amounts arises less than 30 days prior to that payment date, in which case the Issuer or the relevant Guarantor shall notify the Trustee and the Principal Paying Agent promptly thereafter) an Officer’s Certificate stating the fact that Additional Amounts will be payable and the amount estimated to be so payable. The Officer’s Certificate must also set forth any other information reasonably necessary to enable the Paying Agents to pay Additional Amounts to holders on the relevant payment date. The Trustee shall be entitled to rely solely on such Officers’ Certificate as conclusive proof that such payments are necessary. (d) The Issuer or the relevant Guarantor will make all withholdings and deductions required by law and will remit the full amount deducted or withheld to the relevant Tax authority in accordance with applicable law. The Issuer or the relevant Guarantor will use reasonable efforts to obtain Tax receipts from each Tax authority evidencing the payment of any Taxes so deducted or withheld. The Issuer or the relevant Guarantor will furnish to the Trustee (or to a holder upon written request), within a reasonable time after the date the payment of any Taxes so deducted or withheld is made, certified copies of Tax receipts evidencing payment by the Issuer or a Guarantor, as the case may be, or if, notwithstanding such entity’s efforts to obtain receipts, receipts are not obtained, other evidence of payments (reasonably satisfactory to the Trustee) by such entity. (e) Whenever in the Trust Deed or in these Conditions there is mentioned, in any context, the payment of amounts based upon the principal amount of the Notes or of principal, interest or of any other amount payable under, or with respect to, any of the Notes or any Note Guarantee, such mention shall be deemed to include mention of the payment of Additional Amounts to the extent that, in such context, Additional Amounts are, were or would be payable in respect thereof. (f) The above obligations will survive any termination or discharge of the Trust Deed, any transfer by a Holder or beneficial owner of its Notes, and will apply, mutatis mutandis, to any jurisdiction in which any successor Person to the Issuer or any Guarantor is incorporated, engaged in business for tax purposes or resident for tax purposes or any jurisdiction from or through which such Person makes any payment on the Notes (or any Note Guarantee) and any department or political subdivision thereof or therein.

8. EVENTS OF DEFAULT (a) Each of the following is an ‘‘Event of Default’’: (i) default for 30 days in the payment when due of interest or Additional Amounts, if any, with respect to the Notes; (ii) default in the payment when due (at maturity, upon redemption or otherwise) of the principal of, or premium, if any, on, the Notes; (iii) failure to comply with the provisions under Condition 3.5; (iv) failure by the Issuer, a Security Provider or any Guarantor for 60 days after written notice to the Issuer or the Parent by the Trustee or the Holders of at least 25 per cent. in aggregate principal amount of the Notes then outstanding voting as a single class to comply with any of the agreements in the Trust Deed (other than a default in performance, or breach, or a covenant or agreement which is specifically dealt with in Condition 8(a)(i), (ii) or (iii) above), the Intercreditor Agreement or the Security Documents; (v) default under any mortgage, trust deed or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by the Parent or any of its Restricted Subsidiaries (or the payment of which is guaranteed by the Parent or any of its Restricted Subsidiaries), whether such Indebtedness or Guarantee now exists, or is created, after the Issue Date, if that default: (1) is caused by a failure to pay principal of such Indebtedness at final maturity thereof after giving effect to any applicable grace periods provided in such Indebtedness and such failure to make any payment has not been waived or the maturity of such Indebtedness has not been extended (a ‘‘Payment Default’’); or (2) has resulted in the acceleration of such Indebtedness prior to its express maturity,

239 and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $30.0 million or more; (vi) failure by the Parent or any of its Restricted Subsidiaries to pay final and non-appealable judgments entered by a court or courts of competent jurisdiction aggregating in excess of $30.0 million (exclusive of any amounts that a solvent insurance company has acknowledged liability for), which judgments shall not have been discharged or waived and there shall have been a period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of an appeal, waiver or otherwise, shall not have been in effect; (vii) (i) breach by the Issuer, any Guarantor or any Security Provider of any material representation, warranty or agreement in any Security Document; provided that if such breach is curable under each Security Document pursuant to which such breach occurred, such breach has continued uncured for a period of 60 days; (ii) any security interest created by the Security Documents with respect to Collateral having a Fair Market Value in excess of $10.0 million ceases to be in full force and effect (except as permitted by the terms of the Trust Deed, the Intercreditor Agreement, any Additional Intercreditor Agreement or the Security Documents), or an assertion in writing by the Issuer or any Guarantor or any Security Provider that any Collateral having a Fair Market Value in excess of $30.0 million is not subject to a valid, perfected security interest (except as permitted by the terms of the Trust Deed, the Security Documents, the Intercreditor Agreement or any Additional Intercreditor Agreement); or (iii) the repudiation by the Issuer or any Guarantor or any Security Provider of any Security Document; (viii) except as permitted by the Trust Deed, any Note Guarantee is held in any judicial proceeding to be unenforceable or invalid or ceases for any reason to be in full force and effect and such Default continues for 20 days, or any Guarantor, or any Person acting on behalf of any Guarantor, denies or disaffirms its obligations under its Note Guarantee; (ix) the entry by a court of competent jurisdiction of (A) a decree or order for relief in respect of the Issuer, any of the HoldCo Guarantors, the Parent, any Significant Subsidiary or any group of Restricted Subsidiaries of the Parent that, taken together, would constitute a Significant Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy Law or (B) a decree or order adjudging the Issuer, any of the HoldCo Guarantors, the Parent, any Significant Subsidiary or any group of Restricted Subsidiaries of the Parent that, taken together, would constitute a Significant Subsidiary bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Issuer, any of the HoldCo Guarantors, the Parent, any Significant Subsidiary or any group of Restricted Subsidiaries of the Parent that, taken together, would constitute a Significant Subsidiary under any applicable law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Issuer, any of the HoldCo Guarantors, the Parent, any Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary or of any substantial part of their respective properties or ordering the winding up or liquidation of their affairs (other than in each case a liquidation on a solvent basis), and any such decree, order or appointment pursuant to any Bankruptcy Law for relief shall continue to be in effect, or any such other decree, appointment or order shall be unstayed and in effect, for a period of 60 consecutive days; (x) (A) the Issuer, any of the HoldCo Guarantors, the Parent, any Significant Subsidiary or any group of Restricted Subsidiaries that, taken together, would constitute a Significant Subsidiary (x) commences a voluntary case or proceeding under any applicable Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or insolvent or (y) consents to or becomes subject to the filing of a petition, application, answer or consent seeking reorganization or relief under any applicable Bankruptcy Law, (B) the Issuer, any of the HoldCo Guarantors, the Parent, any Significant Subsidiary or any group of Restricted Subsidiaries of the Parent that, taken together, would constitute a Significant Subsidiary consents to or becomes subject to the entry of a decree or order for relief in respect of the Issuer, any of the HoldCo Guarantors, the Parent, such Significant Subsidiary or such group of Restricted Subsidiaries of the Parent that, taken together, would constitute a Significant Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy Law or to

240 the commencement of any bankruptcy or insolvency case or proceeding under any applicable Bankruptcy Law against it or, (C) the Issuer, any of the HoldCo Guarantors, the Parent, any Significant Subsidiary or any group of Restricted Subsidiaries of the Parent that, taken together, would constitute a Significant Subsidiary (x) consents to the appointment of, or taking possession by, a custodian, receiver, liquidator (other than in each case a liquidation on a solvent basis), administrator, supervisor, judicial manager, assignee, trustee, sequestrator or similar official of the Issuer, any of the HoldCo Guarantors, the Parent, such Significant Subsidiary or such group of Restricted Subsidiaries of the Parent that, taken together, would constitute a Significant Subsidiary or of any substantial part of their respective properties, (y) makes an assignment for the benefit of creditors or (z) admits in writing its inability to pay its debt generally as they become due; (xi) any event occurs with respect to the Issuer, any of the HoldCo Guarantors, the Parent, any Significant Subsidiary or any group of Restricted Subsidiaries of the Parent that, taken together, would constitute a Significant Subsidiary which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in any of paragraphs (ix) or (x); (xii) by or under the authority of any agency, authority, central bank, department, government, legislature, minister, ministry, official or public or statutory Person (whether autonomous or not) of, or of the government of, a state (an ‘‘Agency’’) the authority of the Parent, the Issuer, any HoldCo Guarantor or any Significant Subsidiary in the conduct of its business is wholly or substantially curtailed or any Agency seizes, compulsorily acquires, expropriates or nationalises all or substantially all of the assets or shares of the Issuer, any HoldCo Guarantor or any Significant Subsidiary or any such Agency takes any formal or legislative step for or with a view to any of the foregoing; and (xiii) any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorisation, exemption, filing, licence, order, recording or registration) at any time required to be taken, fulfilled or done in order to enable the Issuer and each Guarantor lawfully to enter into, exercise their respective rights and perform and comply with their respective obligations under the Notes and the Trust Deed, to ensure that those obligations are legally binding and enforceable and to make the Notes and the Trust Deed admissible in evidence in the courts of the Russian Federation is not taken, fulfilled or done. (b) Upon the occurrence of an Event of Default specified in Condition 8(a)(ix) through (xi) all then outstanding Notes will become due and payable immediately without further action or notice. If any other Event of Default occurs and is continuing, the Trustee may and if so directed by the Holders of at least 25 per cent. in aggregate principal amount of the then outstanding Notes (or a resolution by the Holders of at least 25 per cent. in aggregate principal amount of the then outstanding Notes) and subject to Condition 8(d) shall, subject in each case to being indemnified and/or secured and/ or prefunded to its satisfaction, declare all of the then outstanding Notes to be due and payable immediately by notice in writing to the Parent. (c) The Trustee will be under no obligation to exercise any of the rights or powers under the Trust Deed at the request or direction of any Holders of Notes or to take any other action under the Trust Deed, the Intercreditor Agreement or any of the Security Documents unless the Trustee has been indemnified and/or secured and/or prefunded to its satisfaction against any loss, liability or expense which it may incur. No holder of a Note may pursue any remedy with respect to the Trust Deed or the Notes or the security unless the Trustee, having become bound to act, has failed to do so for a reasonable period (and, for the avoidance of doubt, a period of less than 60 days shall not be regarded as a reasonable period) and such failure is continuing. (d) The Holders of not less than a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may, on behalf of the holders of all of the Notes, rescind an acceleration (but only unless and until the Trustee has commenced judicial proceedings in respect of such acceleration) or waive any existing Default or Event of Default and its consequences under the Trust Deed except a continuing Default or Event of Default in the payment of interest or Additional Amounts or premium on, or the principal of, the Notes held by a non-consenting Holder (which may be waived with the consent of each Holder of Notes affected).

241 (e) The HoldCo Guarantors shall cause the Parent to deliver to the Trustee, within 120 days after the end of each fiscal year, an Officer’s Certificate stating that (X) a review of the activities of the Parent and its Restricted Subsidiaries, as well as activities of the HoldCo Guarantors during the preceding fiscal year has been made under the supervision of the signing Officer with a view to determining whether the Issuer and the Guarantors have kept, observed, performed and fulfilled their obligations under the Trust Deed; and (Y) to the best of the signing Officer’s knowledge, the Issuer and the Guarantors have kept, observed, performed and fulfilled each and every covenant contained in the Trust Deed and are not in Default or, if a Default has occurred of which such Officer has knowledge, describing such Default and what action the Issuer or the Guarantors are taking or proposing to take with respect thereto. For the purposes of providing such Officer’s Certificate and to the extent that it relates to the HoldCo Guarantors, the relevant Officer will be able to rely on any documents, certificates or communication from the HoldCo Guarantors and shall not be required to perform an independent review of the HoldCo Guarantors’ activities. For the purposes of this paragraph (e), such compliance shall be determined without regard to any period of grace or requirement of notice under the Trust Deed. (f) The HoldCo Guarantors shall cause the Parent and the Restricted Subsidiaries of the Parent to deliver an Officer’s Certificate to the Trustee within 30 days of the Parent becoming aware of the occurrence of a Default or an Event of Default, specifying such Default or Event of Default and what actions the Parent and its Restricted Subsidiaries are taking or are proposing to take with respect thereto.

9. PRESCRIPTION Claims in respect of principal, premium and interest will become void unless presentation for payment is made as required by Condition 6 within a period of ten years, in the case of principal and premium, and five years, in the case of interest, from the appropriate Relevant Date (as defined in Condition 20).

10. REPLACEMENT OF NOTES If any Note is lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Registrar or any Paying and Transfer Agent with its specified office in London or Ireland subject to all applicable laws and stock exchange or other relevant authority requirements, upon payment by the claimant of the expenses incurred in connection with such replacement and on such terms as to evidence, security, indemnity and otherwise as the Issuer may require (provided that the requirement is reasonable in the light of prevailing market practice). Mutilated or defaced Notes must be surrendered before replacements will be issued.

11. MEETINGS OF NOTEHOLDERS, MODIFICATION AND WAIVER 11.1 Meetings of Noteholders (a) The Trust Deed contains provisions for convening meetings of Noteholders to consider any matter affecting their interests, including the sanctioning by Extraordinary Resolution or, in the case of a Core Term, a Core Term Extraordinary Resolution (each as defined below) of a modification of any of these Conditions or any provisions of the Trust Deed, the Intercreditor Agreement or any Security Document. Such a meeting may be convened by the Issuer, any Guarantor or the Trustee at any time and shall be convened by the Issuer if requested by Noteholders holding not less than 10 per cent. in aggregate principal amount of the Notes for the time being outstanding. (b) The quorum for any meeting convened to consider an Extraordinary Resolution (other than a Core Term Extraordinary Resolution) will be one or more Persons holding or representing a clear majority in principal amount of the Notes for the time being outstanding, or at any adjourned meeting one or more Persons being or representing Noteholders whatever the principal amount of the Notes held or represented. (c) If the business of such meeting includes consideration of proposals to: (i) reduce the principal amount of Notes whose Holders must consent to an amendment, supplement or waiver;

242 (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to Condition 5.5 or Condition 5.6); (iii) reduce the rate of or change the time for payment of interest, including default interest, on any Note; (iv) waive a Default or Event of Default in the payment of principal of, or interest, Additional Amounts or premium, if any, on, the Notes (except a rescission of acceleration of the Notes by the holders of at least a majority in aggregate principal amount of the then outstanding Notes and a waiver of the payment default that resulted from such acceleration); (v) make any Note payable in money other than that stated in the Notes; (vi) make any change in the provisions of the Trust Deed relating to the rights of holders of Notes to receive payments of principal of, or interest, Additional Amounts or premium, if any, on, the Notes (other than as permitted in Condition 11.1(c)(vii) below); (vii) waive a redemption payment with respect to any Note (other than a payment required by Condition 5.5 or Condition 5.6); (viii) modify or release any of the Note Guarantees, other than in accordance with the terms of the Trust Deed and the Intercreditor Agreement; (ix) release any Lien on the Collateral except as permitted by the Trust Deed, the Intercreditor Agreement and the Security Documents; (x) impair the right of any holder of Notes to receive payment of principal of and interest on such Holder’s Notes on or after the due dates therefor or to institute suit for the enforcement of any payment on or with respect to such Holder’s Notes or any Note Guarantee in respect thereof; (xi) make any change to the ranking of the Notes or Note Guarantees, in each case in a manner that adversely affects the rights of the holders of the Notes; or (xii) make any change to this Condition 11.1(c); (each of (i) to (xii) above, a ‘‘Core Term’’), the quorum for any such meeting and at any such adjourned meeting will be one or more Persons holding or representing not less than 90 per cent. in principal amount of the Notes for the time being outstanding, with modification of any Core Term requiring sanction by Core Term Extraordinary Resolution. (d) The Trust Deed provides that (i) a resolution passed at a meeting duly convened and held in accordance with the Trust Deed by a majority consisting of not less than 90 per cent. in aggregate principal amount of the Notes for the time being outstanding, (ii) a resolution in writing signed by or on behalf of the Holders of not less than 90 per cent. in aggregate principal amount of the Notes for the time being outstanding or (iii) consent given by way of electronic consents through the relevant Clearing System(s) (in a form satisfactory to the Trustee) by or on behalf of the Holders of not less than 90 per cent. in aggregate principal amount of the Notes for the time being outstanding, shall, in each case, be effective as a ‘‘Core Term Extraordinary Resolution’’ of the Noteholders. (e) The Trust Deed provides that (i) a resolution passed at a meeting duly convened and held in accordance with the Trust Deed by an excess of 50 per cent. in principal amount of the Notes for the time being outstanding, (ii) a resolution in writing signed by or on behalf of the Holders representing an excess of 50 per cent. in principal amount of the Notes for the time being outstanding or (iii) consent given by way of electronic consents through the relevant Clearing System(s) (in a form satisfactory to the Trustee) by or on behalf of the Holders representing an excess of 50 per cent. in principal amount of the Notes for the time being outstanding, shall, in each case, be effective as an ‘‘Extraordinary Resolution’’ (but not a Core Term Extraordinary Resolution) of the Noteholders. (f) Any Extraordinary Resolution or Core Term Extraordinary Resolution duly passed will be binding on Noteholders (whether or not they were present at the meeting at which such resolution was passed).

243 11.2 Modification and Waiver (a) Notwithstanding Condition 11.1, without the consent of any Holder of Notes, the Issuer, the Guarantors and the Trustee may amend or supplement the Trust Deed, the Notes, the Note Guarantees, the Intercreditor Agreement or any Security Document: (i) to provide for the assumption of the Issuer’s or a Guarantor’s obligations under the Notes and Note Guarantees in the case of a merger or consolidation or sale of all or substantially all of the Issuer’s or such Guarantor’s assets, as applicable; (ii) to make any change that would provide any additional rights or benefits to the Holders of Notes; (iii) to enter into additional or supplemental Security Documents; (iv) to release the Collateral in accordance with the terms of the Trust Deed, the Intercreditor Agreement and the Security Documents; (v) to provide for the issuance of Additional Notes in accordance with the limitations set forth in the Trust Deed as of the Issue Date; (vi) to allow any Restricted Subsidiary or Guarantor to execute a supplemental trust deed and/or a Note Guarantee (and, thus, become a Guarantor) with respect to the Notes or release Note Guarantees in accordance with the terms of the Trust Deed and the Intercreditor Agreement; (vii) to secure the Notes; (viii) to evidence and provide for the acceptance and appointment under the Trust Deed of a successor trustee or under the Agency Agreement of a successor agent in any role; or (ix) to add additional parties to the Intercreditor Agreement, any Security Document or the Agency Agreement to the extent permitted by the Trust Deed. (b) The consent of the holders of Notes is not necessary under the Trust Deed to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. (c) The Trustee may agree, without the consent of the Noteholders, to any modification of, or to the waiver or authorisation of any breach or proposed breach of, any of these Conditions, or any of the provisions of the Trust Deed, the Note Guarantees, the Intercreditor Agreement, any Security Document or the Agency Agreement, or determine, without any such consent as aforesaid, that any Event of Default or Default shall not be treated as such (provided that, in any such case, it is not, in the opinion of the Trustee, materially prejudicial to the interests of the Noteholders) or may agree, without any such consent as aforesaid, to any modification which, in its opinion, is of a formal, minor or technical nature or to correct a manifest error or an error which is, in the opinion of the Trustee, proven. (d) Any modification, waiver, authorisation or determination shall be binding on the Noteholders and, unless the Trustee agrees otherwise, any modification, waiver, authorisation or determination shall be notified by the Issuer to the Noteholders as soon as practicable thereafter in accordance with Condition 16.

12. JUDGMENT CURRENCY Any payment on account of an amount that is payable in U.S. dollars which is made to or for the account of any Holder or the Trustee in lawful currency of any other jurisdiction (the ‘‘Judgment Currency’’), whether as a result of any judgment or order or the enforcement thereof or the liquidation of the Issuer or any Guarantor, shall constitute a discharge of the Issuer’s or the Guarantor’s obligation under the Trust Deed and the Notes or Note Guarantee, as the case may be, only to the extent of the amount of U.S. dollars with such Holder or the Trustee, as the case may be, could purchase in the London foreign exchange markets with the amount of the Judgment Currency in accordance with normal banking procedures at the rate of exchange prevailing on the first Business Day following receipt of the payment in the Judgment Currency. If the amount of U.S. dollars that could be so purchased is less than the amount of U.S. dollars originally due to such Holder or the Trustee, as the case may be, the Issuer and the Guarantors (on a joint and several basis) shall indemnify and hold harmless the holder or the Trustee, as the case may be, from and against all loss or damage arising out of, or as a result of, such deficiency.

244 This indemnity shall constitute an obligation separate and independent from the other obligations contained in the Trust Deed or the Notes, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any holder or the Trustee from time to time and shall continue in full force and effect notwithstanding any judgment or order for a liquidated sum in respect of an amount due hereunder or under any judgment or order.

13. ENFORCEMENT The security shall become enforceable in accordance with the Security Documents. Upon the security becoming enforceable, subject always to the provisions of the Intercreditor Agreement, the Noteholders shall be entitled to direct the Trustee to direct the Security Agent to enforce the security. The Trustee may, at any time at its discretion and without further notice, institute such proceedings and/or take such steps or action (including lodging an appeal in any proceedings) against the Issuer and/or any Guarantor as it may think fit to enforce their respective obligations under the Trust Deed, the Notes, the Note Guarantees and the Security Documents, but it need not take any such proceedings, steps or action or take any other steps or action in relation to the Trust Deed and the Notes unless (a) (i) it has been so directed by an Extraordinary Resolution or a Core Term Extraordinary Resolution or (ii) so requested in writing by Noteholders holding at least one-quarter in principal amount of the Notes outstanding, unless instructed otherwise by the Holders of a majority in aggregate principal amount of the then outstanding Notes including pursuant to Condition 8(d) and (b) it has been indemnified and/or secured and/or prefunded to its satisfaction. No Noteholder may proceed directly against the Issuer or any Guarantor unless the Trustee, having become bound so to proceed, fails to do so within a reasonable period (and, for the avoidance of doubt, a period of less than 60 days shall not be regarded as a reasonable period) and such failure is continuing.

14. INDEMNIFICATION OF THE TRUSTEE The Trust Deed contains provisions for the indemnification, securing and prefunding of the Trustee and for its relief from responsibility. The Trustee is entitled to enter into business transactions with the Issuer, any Guarantor and any entity related to the Issuer or any Guarantor without accounting for any profit. The Trustee is not responsible for the validity, sufficiency or enforceability of the Guarantees, the Trust Deed, the Intercreditor Agreement, the Security Documents and the Notes or the Collateral (or the value thereof or anyone’s title thereto) nor is it obliged to take any action unless indemnified or secured to its satisfaction. The Trustee is also entitled to be paid its fees, costs and expenses in priority to the claims of the Noteholders. In connection with the exercise by it of any of its trusts, powers, authorities and discretions under these Conditions and the Trust Deed, the Trustee shall have regard to the general interests of the Noteholders as a class and shall not have regard to any interests arising from circumstances particular to individual Noteholders (whatever their number) and, in particular but without limitation, shall not have regard to the consequences of any such exercise for individual Noteholders (whatever their number) resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory or any political sub-division thereof and the Trustee shall not be entitled to require, nor shall any Noteholder be entitled to claim, from the Issuer, any Guarantor, the Trustee or any other person any indemnification or payment in respect of any tax consequence of any such exercise upon individual Noteholders except to the extent already provided for in Condition 7 and/or any undertaking given in addition thereto or in substitution therefor under the Trust Deed. The Trustee may, in making any determination under these Conditions, act on the opinion or advice of, or information obtained from, any expert and will not be responsible for any loss, liability, cost, claim, action, demand, expense or inconvenience which may result from so acting or not acting. Until the Trustee has actual or express knowledge to the contrary, the Trustee may assume that no Default, Event of Default, Change of Control or Asset Sale has occurred. The Trustee is not, and will not be, liable for any failure to monitor compliance of these Conditions by the Issuer or any Guarantor and may rely upon the information and certificates provided to it pursuant to these Conditions or the Trust Deed. The Notes provide for the Trustee to take action on behalf of the Noteholders in certain circumstances, but only if the Trustee is indemnified or secured to its satisfaction. It may not be possible for the Trustee to

245 take actions in relation to the Notes and accordingly in such circumstances the Trustee will be unable to take action notwithstanding the provision of an indemnity, security and/or prefunding to it. Unless ordered to do so by a court of competent jurisdiction, the Trustee will not be required to disclose to any Noteholder any confidential financial or other information made available to the Trustee by the Issuer or the Guarantors or any other person. The Trustee may refrain from taking any action in any jurisdiction if the taking of such action in that jurisdiction would, in its opinion based upon legal advice in the relevant jurisdiction, be contrary to any law of that jurisdiction. Furthermore, the Trustee may also refrain from taking such action if it would otherwise render it liable to any person in that jurisdiction or if, in its opinion based upon such legal advice, it would not have the power to do the relevant thing in that jurisdiction by virtue of any applicable law in that jurisdiction or if it is determined by any court or other competent authority in that jurisdiction that it does not have such power. The Trust Deed provides that, when determining whether an indemnity or any security or pre-funding is satisfactory to it, the Trustee shall be entitled (i) to evaluate its risk in any given circumstance by considering the worst-case scenario and (ii) to require that any indemnity or security given to it by the Noteholders or any of them be given on a joint and several basis and be supported by evidence satisfactory to it as to the financial standing and creditworthiness of each counterparty and/or as to the value of the security and an opinion as to the capacity, power and authority of each counterparty and/or the validity and effectiveness of the security. In acting under the Agency Agreement and in connection with the Notes, the Paying and Transfer Agents act solely as agents of the Issuer, the Guarantors and (to the extent provided therein) the Trustee and do not assume any obligations towards or relationship of agency or trust for or with any of the Noteholders. The Trustee will not be required to take any steps to ascertain whether a Change of Control or an Asset Sale or any event which could lead to the occurrence of a Change of Control or an Asset Sale has occurred and will not be responsible or liable to Noteholders for any loss arising from any failure by it to do so.

15. FURTHER ISSUES Subject as provided in Condition 3 and in accordance with the Trust Deed, the Issuer may from time to time without the consent of the Noteholders create and issue further notes having the same terms and conditions as the Notes in all respects (or in all respects except for the issue date and/or the first payment of interest on them) and so that such further issue will be consolidated and form a single series with the Notes. References in these Conditions to the Notes include (unless the context requires otherwise) any other securities issued pursuant to this Condition and forming a single series with the Notes, provided that the Issuer will not issue any further Notes if such issuance causes Holders of Notes to become subject to any United States reporting obligation or any United States withholding tax which Holders of Notes would otherwise not have been subject to had the Issuer not issued the further Notes. Any further notes forming a single series with the outstanding Notes constituted by the Trust Deed will be constituted by a deed supplemental to such Trust Deed.

16. NOTICES All notices to Noteholders may be delivered in person or sent by mail to them at their respective addresses reflected in the Register. Any such notice will be deemed to have been given, in the case of a letter delivered by hand, at the time of delivery and, in the case of a letter sent by mail, at the time of dispatch except that, so long as any Notes are listed on the Official List of the Irish Stock Exchange and admitted to trading on the Global Exchange Market and the rules of the Irish Stock Exchange so require, any such notice to the Holders of the relevant Notes shall also be posted, to the extent and in the manner permitted by such rules, on the official website of the Irish Stock Exchange (www.ise.ie) and, in connection with any redemption, the Issuer will notify the Irish Stock Exchange of any change in the principal amount of Notes outstanding. Whilst any of the Notes held by a Noteholder are represented by a Global Certificate, notices to Noteholders may be given by delivery of the relevant notice to Euroclear and/or Clearstream and/or DTC (as the case may be) to each person who is for the time being shown in the records of Euroclear and/or

246 Clearstream and/or DTC (as the case may be) as the holder of a particular principal amount of such Notes rather than by publication as required by this Condition 16.

17. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999 No Person will have any right to enforce any term or condition of the Notes under the Contracts (Rights of Third Parties) Act 1999.

18. GOVERNING LAW 18.1 Governing Law The Trust Deed, the Notes, the Guarantees and any non-contractual obligations arising out of them are governed by and will be construed in accordance with English law. For the avoidance of doubt, the provisions of articles 86 to 94-8 of the Luxembourg act relating to commercial companies dated 10 August 1915, as amended (the ‘‘Luxembourg Companies Act 1915’’) are excluded. No holder of Notes may initiate proceedings against the Issuer based on article 98 of the Luxembourg Companies Act 1915.

18.2 Arbitration (a) Any dispute, claim, difference or controversy arising out of, relating to or having any connection with the Notes, the Guarantees or the Trust Deed, including any dispute as to their existence, validity, interpretation, performance, breach or termination or the consequences of its nullity and any dispute relating to any non-contractual obligations arising out of or in connection with it (for the purpose of this Clause, a ‘‘Dispute’’), shall be referred to and finally resolved by arbitration under the Arbitration Rules (for the purpose of this Clause, the ‘‘Rules’’) of the London Court of International Arbitration (the ‘‘LCIA’’). (b) The Rules are incorporated by reference into this Condition 18 and capitalised terms used in this Condition 18 which are not otherwise defined in these Conditions have the meaning given to them in the Rules. (c) The number of arbitrators shall be three. The claimant(s) shall jointly nominate one arbitrator for appointment by the LCIA and the respondent(s) shall jointly nominate another arbitrator for appointment by the LCIA. The LCIA shall appoint the chairman. In the event the claimant(s) or respondent(s) fail to nominate an arbitrator within the time limits specified in the Rules, such arbitrator shall be appointed by the LCIA as soon as possible. (d) The seat, or legal place of arbitration, shall be London. (e) The language used in the arbitral proceedings shall be English. All documents submitted in connection with the proceedings shall be in the English language, or, if in another language, accompanied by a certified English translation. (f) Service of any Request for Arbitration made pursuant to this Condition 18 shall be by post at the address prescribed for the sending of notices under the Trust Deed. (g) The jurisdiction of the English courts under s 45 and s 69 of the Arbitration Act 1996 is excluded.

18.3 Agent for Service of Process The Issuer and each Guarantor has irrevocably appointed Law Debenture Corporate Services Limited as its agent in England to receive service of process in any Dispute in England based on any of the Notes, the Guarantees or any of the Trust Deed. If for any reason the Issuer or any Guarantor does not have such an agent in England, it will promptly notify the Trustee and will promptly appoint a substitute process agent and notify the Noteholders and the Trustee of such appointment. Nothing herein will affect the right to serve process in any other manner permitted by law.

19. U.S. DOLLAR EQUIVALENT All references in these Conditions to any threshold amounts denominated in U.S. dollars will include the U.S. dollar equivalent of such threshold amounts.

247 20. CERTAIN DEFINITIONS Set forth below are certain defined terms used in these Conditions and/or the Trust Deed. ‘‘2020 Notes’’ means $300,000,000 8.75 per cent. senior secured notes due 2020 issued by the Issuer on the Issue Date under a trust deed. ‘‘Addition 2020 Notes’’ means any ‘‘Additional Notes’’ as defined in the trust deed constituting the 2020 Notes. ‘‘Affiliate’’ of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person. For purposes of this definition, ‘‘control’’, as used with respect to any Person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through the ownership of voting securities, by agreement or otherwise. For purposes of this definition, the terms ‘‘controlling’’, ‘‘controlled by’’ and ‘‘under common control with’’ have correlative meanings. For the avoidance of doubt, portfolio entities of TPG Global LLC (but only if TPG Global LLC or its affiliates Beneficially Own, directly or indirectly, 50 per cent. or less of the issued and outstanding Voting Stock of the Parent (measured by voting power rather than number of shares)) and public companies in which the Parent or any of its Subsidiaries Beneficially Own less than 25 per cent. of the Voting Stock (measured by voting power rather than number of shares) shall not be considered Affiliates of the Parent and any of its Restricted Subsidiaries. ‘‘Agency’’ has the meaning provided in Condition 8(a)(xii). ‘‘all or substantially all’’ for the avoidance of doubt, in relation to Conditions 3.5, 5.5 and 5.6, shall not relate to a sale, lease, conveyance or other disposition of the properties or assets of the Parent and its Restricted Subsidiaries taken as a whole representing less than 70 per cent. of each of Consolidated Tangible Assets and Consolidated EBITDA (while it remains understood that a sale, lease, conveyance or other disposition of any properties or assets of the Parent and its Restricted Subsidiaries taken as a whole representing 70 per cent. or more of each of Consolidated Tangible Assets and Consolidated EBITDA shall not automatically be considered a sale, assignment, transfer, lease conveyance or otherwise a disposition of all or substantially all of the properties or assets of the Parent and its Restricted Subsidiaries, taken as a whole). ‘‘Applicable Premium’’ means, with respect to any Note on any redemption date, the greater of (a) 1 per cent. of the principal amount of such Note and (b) the excess of: (1) the present value at such redemption date of (i) the redemption price on 2 May 2016 (which is 100 per cent. of principal amount), plus (ii) all required interest payments due on such Note through 2 May 2016 (excluding accrued but unpaid interest to the redemption date) discounted back to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at a rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over (2) the then-outstanding principal amount of such Note. ‘‘Asset Sale’’ means: (1) the sale, lease, conveyance or other disposition of any assets or rights; provided that the sale, lease, conveyance or other disposition of all or substantially all of the assets of the Parent and its Restricted Subsidiaries taken as a whole will be governed by the provisions of Condition 5.6 and/or the provisions described in Condition 3.5 and not by the provisions of Condition 5.5; and (2) the issuance of Equity Interests by any of the Parent’s Restricted Subsidiaries or the sale by the Parent or its Subsidiaries of Equity Interests in any of its Subsidiaries. Notwithstanding the preceding, the following items will not be deemed to be an Asset Sale: (1) any single transaction or series of related transactions that involves assets having a Fair Market Value of less than $15.0 million; (2) a transfer of assets or Equity Interests between or among the Parent and its Restricted Subsidiaries; (3) an issuance of Equity Interests by a Restricted Subsidiary of the Parent to the Parent or to a Restricted Subsidiary of the Parent;

248 (4) the sale or lease of products, services, equipment or accounts receivable in the ordinary course of business; (5) any sale or other disposition of damaged, unserviceable, worn-out or obsolete assets in the ordinary course of business; (6) the sale or other disposition of cash or Cash Equivalents in the ordinary course of business; (7) for purposes of Condition 5.5 only, the making of a Permitted Investment or a Restricted Payment that does not violate Condition 3.1; (8) granting of Liens not prohibited by the covenant in Condition 3.3; (9) the licensing or sublicensing of intellectual property and licenses, leases or subleases of other property in the ordinary course of business and which do not materially interfere with the business of the Parent and its Restricted Subsidiaries taken as a whole; (10) a surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind in the ordinary course of business; (11) transactions permitted by Condition 3.5; (12) dispositions of receivables in connection with the compromise, settlement or collection thereof in the ordinary course of business or in bankruptcy or similar proceedings and exclusive of factoring or similar arrangements; (13) foreclosure, condemnation or any similar action with respect to any property or other assets; (14) sales of receivables on a non-recourse basis in the ordinary course of business; (15) disposals in the ordinary course of business of any patents, trademarks, service marks, designs, business names, copyrights, database rights, design rights, domain names, moral rights, inventions, confidential information, knowhow and other intellectual property rights and interests, whether registered or unregistered, when such disposal does not adversely affect the rights of the Holders of the Notes in any material respect; and (16) a transfer of Equity Interests of, or Indebtedness owed to the Parent or a Restricted Subsidiary of the Parent by, an Unrestricted Subsidiary (other than (i) Unrestricted Subsidiaries, the primary assets of which are cash and Cash Equivalents (other than cash and Cash Equivalents resulting from a sale or disposition of other assets after the Issue Date) and (ii) any Designated Unrestricted Subsidiary, but only up to the amount invested into such Designated Unrestricted Subsidiary pursuant to paragraph (18) of the definition of ‘‘Permitted Investments’’). ‘‘Bankruptcy Law’’ means (a) Title 11 of the U.S. Code (as may be amended from time to time) or (b) any other law of the United States (or any political subdivision thereof), Russia (or any political subdivision thereof), Ukraine (or any political subdivision thereof), Cyprus (or any political subdivision thereof) or the laws of any other relevant jurisdiction or any political subdivision thereof relating to bankruptcy, insolvency, receivership, winding up, liquidation, reorganization or relief of debtors. ‘‘Beneficial Owner’’ has the meaning assigned to such term in Rule 13d-3 and Rule 13d-5 under the U.S. Exchange Act, except that in calculating the beneficial ownership of any particular ‘‘person’’ (as that term is used in Section 13(d)(3) of the U.S. Exchange Act), such ‘‘person’’ will be deemed to have beneficial ownership of all securities that such ‘‘person’’ has the right to acquire by conversion or exercise of other securities, whether such right is currently exercisable or is exercisable only after the passage of time. The terms ‘‘Beneficial Ownership’’, ‘‘Beneficially Owns’’ and ‘‘Beneficially Owned’’ have a corresponding meaning. ‘‘Board of Directors’’ means: (1) with respect to a corporation, public company or a limited liability company the board of directors of such Person or any committee thereof duly authorized to act on behalf of such board; (2) with respect to a partnership, the board of directors of the partnership or any committee thereof duly authorized to act on behalf of such board; and (3) with respect to any other Person, the board or committee of such Person serving a similar function.

249 ‘‘Business Day’’ means each day that is not a Saturday, Sunday or other day on which banking institutions in London, Dublin, Moscow, Vladivostok or New York or a place of payment under the Trust Deed are authorized or required by law to close. ‘‘Calculation Date’’ has the meaning given in the definition of ‘‘Fixed Charge Coverage Ratio’’. ‘‘Capital Lease Obligation’’ means an obligation under a lease constituting a capital lease in accordance with IFRS, the amount of which, at the time any determination is to be made, will constitute the amount of the liability in respect of such capital lease that would at that time be required to be capitalized on a balance sheet prepared in accordance with IFRS. ‘‘Capital Stock’’ means: (1) in the case of a corporation, corporate stock (including shares in a public limited liability company); (2) in the case of an association or business entity, any and all shares, interests, participations, rights or other equivalents (however designated) of corporate stock; (3) in the case of a partnership or limited liability company, partnership interests (whether general or limited) or, membership interests; and (4) any other interest or participation that confers on a Person the right to receive a share of the profits and losses of, or distributions of assets of, the issuing Person, but excluding from all of the foregoing any debt securities convertible into or exchangeable for Capital Stock, whether or not such debt securities include any right of participation together with Capital Stock. ‘‘Cash Equivalents’’ means: (1) securities issued or directly and fully guaranteed or insured by the government of: (i) the United States of America, a member state of the European Union on 31 December 2003, Switzerland, the Russian Federation, Ukraine or Canada (including, in each case, any agency or instrumentality thereof), as the case may be the payment of which is backed by the full faith and credit of the United States, the relevant member state of the European Union, Switzerland, the Russian Federation, Ukraine or Canada, as the case may be; or (ii) a country which has a credit rating of either A or higher by S&P or A2 or higher by Moody’s Investors Service Limited (or the equivalent rating category of another internationally recognized rating agency) or by an instrumentality or agency of any such government having an equivalent credit rating, in each case having maturities of not more than twelve months from the date of acquisition; (2) certificates of deposit, time deposits, eurodollar time deposits, money market deposits, overnight bank deposits or bankers’ acceptances (and similar instruments) having maturities of not more than twelve months from the date of acquisition thereof issued by a bank or financial institution incorporated (i) outside of the Russian Federation whose unsecured long term debt and non credit- enhances debt obligations is rated at the time of acquisition thereof at least ‘‘A’’ or the equivalent thereof by S&P, or ‘‘A-3’’ or the equivalent thereof by Moody’s or the equivalent rating category of another internationally recognized rating agency or (ii) in the Russian Federation whose unsecured long term debt and non credit-enhances debt obligations is rated at the time of acquisition thereof at least ‘‘BB’’ or the equivalent thereof by S&P, or ‘‘Ba3’’ or the equivalent thereof by Moody’s or the equivalent rating category of another internationally recognized rating agency; (3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clauses (1) and (2) entered into with any financial institution meeting the qualifications specified in clause (2) above; (4) commercial paper: (i) issued by an issuer incorporated in a country, the government of which has a credit rating of either A or higher by S&P or A2 or higher by Moody’s or the equivalent rating category of another internationally recognized rating agency; (ii) which matures within one year after the relevant date of calculation; and (iii) which has a credit rating of either A-1 or higher by S&P or P-1 or higher by Moody’s or the equivalent rating category of another internationally recognized rating agency, or, if no rating

250 is available in respect of the commercial paper, the issuer of which has, in respect of its long terms unsecured and non credit-enhanced debt obligations, an equivalent rating; (5) sterling bills of exchange eligible for rediscount at the Bank of England (or their dematerialised equivalent) and accepted by a bank or financial institution incorporated outside of the Russian Federation the whose unsecured long term debt and non credit-enhances debt obligations is rated at the time of acquisition thereof at least ‘‘A’’ or the equivalent thereof by S&P, or ‘‘A-3’’ or the equivalent thereof by Moody’s or the equivalent rating category of another internationally recognized rating agency; and (6) interests in any investment company or money market fund which invests 90 per cent. or more of its assets in instruments of the type specified in clauses (1) through (5) above. ‘‘Change of Control’’ means the occurrence of any of the following: (1) the direct or indirect sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one or a series of related transactions, of all or substantially all of the properties or assets of the Parent and its Restricted Subsidiaries taken as a whole to any ‘‘person’’ (as that term is used in Section 13(d) of the U.S. Exchange Act) other than one or more Permitted Holders; (2) the adoption of a plan relating to the liquidation or dissolution of the Parent other than in a transaction which complies with the provisions of Condition 3.5; (3) the consummation of any transaction (including, without limitation, any merger or consolidation), the result of which is that (i) any ‘‘person’’ (as defined above) other than one or more Permitted Holders becomes the Beneficial Owner, directly or indirectly, of more than 50 per cent. of the issued and outstanding Voting Stock of the Parent or (ii) Summa Group Ltd and/or TPG Capital and/or their Affiliates are no longer the Beneficial Owners, directly or indirectly, of at least 25 per cent. plus one share of the issued and outstanding Voting Stock of the Parent, in each case measured by voting power rather than number of shares; or (4) the Parent ceases to own, directly or indirectly, 100 per cent. of the issued and outstanding Voting Stock of the Issuer, other than director’s qualifying shares and other shares required to be issued by law. ‘‘Clearing System(s)’’ has the meaning given to this term in Condition 1.1. ‘‘Collateral’’ has the meaning given to this term in Condition 2.4. ‘‘Conditions’’ mean these terms and conditions. ‘‘Consolidated EBITDA’’ means, for any period, the Consolidated Net Income of the Parent for such period plus the following to the extent deducted in calculating such Consolidated Net Income, without duplication: (1) provision for taxes (or levies in lieu of taxes) based on income, profits or capital, foreign withholding taxes of the Parent and its Restricted Subsidiaries for such period; plus (2) the Fixed Charges of the Parent and its Restricted Subsidiaries for such period; plus (3) depreciation, amortization, impairment and other non-cash charges and expenses (including, without limitation, write downs and impairment of property, plant, equipment and intangible and other long lived assets and the impact of purchase accounting on the Parent and its Restricted Subsidiaries for such period), of the Parent and its Restricted Subsidiaries for such period; plus (4) any expenses, charges or other costs related to the issuance of any Capital Stock, or any Permitted Investment, acquisition, disposition, recapitalization or listing or the incurrence of Indebtedness permitted to be incurred under Condition 3.2 (including refinancing or replacement thereof) whether or not successful, including (i) such fees, expenses or charges related to any incurrence of Indebtedness and (ii) any amendment or other modification of any Indebtedness; plus (5) any foreign currency translation losses (including losses related to currency remeasurements of Indebtedness); plus (6) the amount of any Minority Interest expense consisting of subsidiary income attributable to minority equity interests of third parties in any non-wholly owned Restricted Subsidiary in such

251 period or any prior period, except to the extent of dividends declared or paid on, or other cash payments in respect of, Equity Interests held by such parties; minus (7) any foreign currency translation gains (including gains related to currency measurements of Indebtedness); minus (8) non-cash items increasing the Consolidated Net Income for such period, other than items that were accrued in the ordinary course of business, in each case, on a consolidated basis and determined in accordance with IFRS and after adding the amount (such amount not to exceed 10 per cent. of the Consolidated EBITDA calculated as per above, provided that such limit shall not, for the avoidance of doubt, apply to any Pro Forma Adjustments taken into account when calculating the Consolidated Leverage Ratio or Fixed Charge Coverage Ratio) of net cost savings, synergies and operating expense reductions (other than any of the foregoing related to acquisitions, disposals and other transactions, but only to the extent those are taken into account when calculating the Consolidated Leverage Ratio or Fixed Charge Coverage Ratio) projected by the Parent in good faith to result from actions taken, committed to be taken or with respect to which substantial steps have been taken or are expected in good faith to be taken no later than twelve (12) months after the end of such period (calculated on a pro forma basis as though such cost savings, operating expense reductions and synergies had been realized on the first day of the period for which the Consolidated EBITDA is being determined and if such cost savings, operating expense reductions and synergies were realized during the entirety of such period), net of the amount of actual benefits realized during such period from such actions. ‘‘Consolidated Net Income’’ means, for any period, the net income (loss) of the Parent and its Restricted Subsidiaries for such period, on a consolidated basis (excluding the net income (loss) of any Unrestricted Subsidiaries), determined in accordance with IFRS and without any reduction in respect of preferred stock dividends; provided that: (1) any net after tax gain (or loss), together with any related provision for taxes on such gain (or loss), realized in connection with: (a) any Asset Sale, asset dispositions or abandonments; or (b) the disposition of any securities other than in the ordinary course of business (as determined in good faith by the Parent) by the Parent or any of its Restricted Subsidiaries will be excluded; (2) any net after tax extraordinary or non-recurring items (including relating to any multi-year strategic initiatives), restructuring costs and reserves, duplicative running costs, relocation costs, expenses related to any reconstruction, decommissioning, recommissioning or reconfiguration of fixed assets for alternative uses, facility consolidation and closing costs, severance costs and expenses, one-time compensation charges, costs relating to pre-opening and opening costs for facilities, signing, retention or completion bonuses, executive recruiting costs, costs incurred in connection with any strategic initiatives, transition costs, costs incurred in connection with non-ordinary course product development, one-off costs incurred in connection with acquisitions (or purchases of assets) prior to or after the Issue Date (including integration costs), other business optimization expenses (including costs and expenses relating to business optimization programs, corporate reorganization programs and new systems design, retention charges, system establishment costs and implementation costs and project start-up costs), accruals and reserves, operating expenses attributable to the implementation of cost-savings initiatives, consulting fees and curtailments and modifications to pension and post-retirement employee benefit plans) will be excluded; (3) (a) for the purposes of determining the amount available for Restricted Payments under Condition 3.1(b)(iii)(1), with respect to any such Person that is not a Restricted Subsidiary and, for any other purpose, with respect to any Persons in which the Parent or its Restricted Subsidiaries hold 20 per cent. of Voting Stock or less and with respect to Unrestricted Subsidiaries, the net income of any such Person will be included only to the extent of the amount of dividends or similar distributions paid in cash to the Parent or a Restricted Subsidiary and net loss of any such Person for such period will be included only to the extent such loss has been funded with cash flow from the Parent or its Restricted Subsidiary during such period and (b) for all purposes other than determining the amount available for Restricted Payments under Condition 3.1(b)(iii)(1), with respect to those Persons in which the Parent or its Restricted Subsidiaries hold more than 20 per cent. but less than 50 per cent. of Voting Stock, a pro-rata share of their net income or net loss for such period shall be included;

252 (4) solely for the purpose of determining the amount available for Restricted Payments under Condition 3.1(b)(iii)(1), any net income (loss) of any Restricted Subsidiary (other than any Subsidiary Guarantor) will be excluded if such Restricted Subsidiary is subject to contractual restrictions on the payment of dividends or the making of distributions by such Restricted Subsidiary to the Parent (or any Subsidiary Guarantor that holds the Equity Interests of such Restricted Subsidiary, as applicable), (other than (a) restrictions that have been waived or otherwise released and (b) any restriction listed under Condition 3.4(b)) except that the Parent’s equity in the net income of any such Restricted Subsidiary for such period will be included in the Parent’s Consolidated Net Income in an amount equal to the aggregate amount of cash or Cash Equivalents actually distributed or that could have been distributed by such Restricted Subsidiary during such period to the Parent or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend to another Restricted Subsidiary (other than any Subsidiary Guarantor), to the limitation contained in this clause); (5) the cumulative effect of a change in accounting principles and changes resulting from the adoption or modification of accounting policies during such period whether effected through a cumulative effect adjustment or a retroactive application, in each case in accordance with IFRS, will be excluded; (6) any net after-tax effect of gains or losses on disposal, abandonment (including asset retirement costs) or discontinuance of disposed, abandoned or discontinued operations, as applicable, will be excluded; (7) effects of adjustments (including the effects of such adjustments pushed down to the Parent and its Restricted Subsidiaries) in the Parent’s consolidated financial statements pursuant to IFRS attributable to the application of recapitalisation accounting or purchase accounting, as the case may be, in relation to any consummated acquisition or joint venture investment or the amortization or write-off or write-down of any amounts thereof, net of taxes, will be excluded; (8) any net after-tax effect of income (loss) from the early extinguishment or conversion of (a) Indebtedness, (b) Hedging Obligations or (c) other derivative instruments will be excluded; (9) any impairment charge or asset write-off or write-down in each case, pursuant to IFRS, and the amortization of intangibles arising pursuant to IFRS will be excluded; (10) any equity based or non-cash compensation charge or expense, including any such charge or expense arising from grants of stock appreciation, equity incentive programs or similar rights, stock options, restricted stock or other rights to, and any cash charges associated with the rollover, acceleration, or payout of, Equity Interests by management of such Person or of a Restricted Subsidiary or any of its direct or indirect parent companies, shall be excluded; (11) any fees, expenses or charges incurred during the relevant period, or any amortization thereof for the relevant period, in connection with any acquisition, Investment, Asset Sale, disposition, incurrence or repayment of Indebtedness (including such fees, expenses or charges related to the offering and issuance of the Notes, the 2020 Notes and the syndication and incurrence of any debt facilities (including the OpCo Facility), and the refinancing thereof), issuance of Equity Interests, recapitalisation, refinancing transaction or amendment or modification of any debt instrument (including any amendment or other modification of the Notes, the 2020 Notes and other securities and any debt facilities (including the OpCo Facility) and including, in each case, any such transaction whether consummated on, after or prior to the Issue Date and any such transaction undertaken but not completed, and any charges or non-recurring merger costs incurred during such period as a result of any such transaction, in each case whether or not successful or consummated, shall be excluded; and (12) capitalised interest on any Subordinated Shareholder Debt will be excluded. In addition, to the extent not already included in the Consolidated Net Income of the Parent and its Restricted Subsidiaries, notwithstanding anything to the contrary in the foregoing, Consolidated Net Income shall include the amount of proceeds received from business interruption insurance and reimbursements of any expenses and charges that are covered by indemnification or other reimbursement provisions in connection with any acquisition, Investment or any Asset Sale, conveyance, transfer or other disposition of assets permitted under the Trust Deed.

253 ‘‘Consolidated Tangible Assets’’ means the consolidated total assets of the Parent and its Restricted Subsidiaries, less goodwill and other intangibles, as shown on the most recent balance sheet of the Parent available internally. ‘‘Consolidated Total Debt’’ means as of any date, the sum of the total amount of Indebtedness of the Parent and its Restricted Subsidiaries on a consolidated basis of such date of determination and net of any cash and Cash Equivalents (except for cash and Cash Equivalents which are the proceeds of Indebtedness with respect to which the calculation of the Consolidated Total Leverage Ratio is being made) as of such date and provided that the amount of any Indebtedness denominated in a non-dollar currency and subject to Hedging Obligations shall be converted into U.S. dollars so as to take into account the effects of those Hedging Obligations, and Indebtedness under the relevant Hedging Obligations shall be equal to zero. ‘‘Consolidated Total Leverage Ratio’’ means as of any date of determination, the ratio of (a) the Consolidated Total Debt of the Parent as of the end of the most recently ended four full consecutive fiscal quarter period for which internal financial statements are available immediately preceding the date of determination to (b) the Consolidated EBITDA of the Parent for such four quarter period. In the event that the Parent or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases, redeems, defeases or otherwise discharges any Indebtedness (other than working capital borrowings in the ordinary course of business) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Consolidated Total Leverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Consolidated Total Leverage Ratio is made (the ‘‘Calculation Date’’), then the Consolidated Total Leverage Ratio will be calculated giving pro forma effect (as determined in good faith by a responsible accounting or financial officer of the Parent) to such incurrence, assumption, Guarantee, repayment, repurchase, redemption, defeasance or other discharge of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom, as if the same had occurred at the beginning of the applicable four-quarter reference period; provided, however, that the pro forma calculation of the Consolidated Total Leverage Ratio shall not give effect to (i) any Indebtedness incurred on the Calculation Date (and, for the avoidance of doubt, not reclassified on such Calculation Date) pursuant to Condition 3.2(b) or (ii) the discharge on the Calculation Date of any Indebtedness to the extent that such discharge results from the proceeds incurred pursuant to the provisions of Condition 3.2(b). In addition, for purposes of calculating the Consolidated Total Leverage Ratio: (1) acquisitions that have been made by the Parent or any of its Restricted Subsidiaries, including through mergers, consolidations or otherwise (including acquisitions of assets used or useful in the Permitted Business), or any Person or any of its Restricted Subsidiaries acquired by the Parent or any of its Restricted Subsidiaries, and including any related financing transactions and including increases in ownership of Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date or that are to be made on the Calculation Date, will be given pro forma effect (including any Pro Forma Adjustments in any amount) as if they had occurred on the first day of the four-quarter reference period; (2) the Consolidated EBITDA attributable to discontinued operations, as determined in accordance with IFRS, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded and any Pro Forma Adjustments in any amount resulting therefrom will be included; (3) any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period; and (4) any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period. ‘‘continuing’’ means, with respect to any Default or Event of Default, that such Default or Event of Default has not been cured or waived. ‘‘Credit Facilities’’ means one or more debt facilities or arrangements (including commercial paper facilities) with banks or other institutions providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such institutions or to special purpose entities formed to borrow from such institutions against such receivables), letters of credit, bank guarantees or other Indebtedness, in each case, as amended, restated, modified, renewed, refunded, replaced,

254 restructured, refinanced, repaid, increased or extended in whole or in part from time to time (and whether in whole or in part and whether or not with the original administrative agent and lenders or another administrative agent or agents or other banks or institutions and whether provided under one or more other credit or other agreements, indentures, financing agreements or otherwise) and in each case including all agreements, instruments and documents executed and delivered pursuant to or in connection with the foregoing (including any notes, bank guarantees and letters of credit issued pursuant thereto and any guarantee and collateral agreement, mortgages or letter of credit applications and other guarantees, pledges, agreements, security agreements and collateral documents). Without limiting the generality of the foregoing, the term ‘‘Credit Facilities’’ shall include any agreement or instrument (i) changing the maturity of any Indebtedness incurred thereunder or contemplated thereby, (ii) adding Subsidiaries of the Parent as additional borrowers or guarantors thereunder, (iii) increasing the amount of Indebtedness incurred thereunder or available to be borrowed thereunder or (iv) otherwise altering the terms and conditions thereof. ‘‘Currency Exchange Protection Agreement’’ means, in respect of any Person, any foreign exchange contract, currency swap agreement, currency option, cap, floor, ceiling or collar or agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in currency exchange rates as to which such Person is a party. ‘‘Default’’ means any event that is, or with the passage of time or the giving of notice or both would be, an Event of Default. ‘‘Deed of Guarantee’’ means the deed of guarantee, dated 7 December 2012, between the Guarantors (other than Open Joint Stock Company ‘‘Commercial Port of Vladivostok’’; which shall accede to the Deed of Guarantee after the Issue Date pursuant to these Conditions) and the Security Agents. ‘‘Designated Unrestricted Subsidiary’’ means any Unrestricted Subsidiary designated as such after the Issue Date, into which Investments have been made pursuant to paragraph (18) of the definition of ‘‘Permitted Investments’’). ‘‘Disqualified Stock’’ means any Capital Stock that, by its terms (or by the terms of any security into which it is convertible, or for which it is exchangeable, in each case, at the option of the holder of the Capital Stock), or upon the happening of any event matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, or redeemable at the option of the holder of the Capital Stock, in whole or in part, in each case on or prior to the date that is 91 days after the date on which the Notes mature; provided, that only the portion of Capital Stock which so matures or is mandatorily redeemable, or is so redeemable at the option of the holder thereof in each case prior to such maturity date, will be deemed to be Disqualified Stock. Notwithstanding the preceding sentence, any Capital Stock that would constitute Disqualified Stock solely because the holders of the Capital Stock have the right to require the Issuer to repurchase such Capital Stock upon the occurrence of a change of control or an asset sale will not constitute Disqualified Stock if the terms of such Capital Stock provide that the Issuer may not repurchase or redeem any such Capital Stock pursuant to such provisions unless such repurchase or redemption complies with Condition 3.1. For purposes hereof, the amount of Disqualified Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Stock as if such Disqualified Stock were purchased on any date on which Indebtedness shall be required to be determined for the purposes of these Conditions, and if such price is based upon, or measured by, the Fair Market Value of such Disqualified Stock, such Fair Market Value to be determined as set forth herein. ‘‘Equity Interests’’ means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). ‘‘Equity Offering’’ means any public or private sale of Capital Stock (other than Disqualified Stock and other than offerings registered on Form S-8 (or any successor form) under the U.S. Securities Act or any similar offering in other jurisdictions) after the Issue Date by the Parent or any of its Parent Entities, the proceeds of which are contributed as Subordinated Shareholder Debt or to the equity (other than through the issuance of Disqualified Stock) of the Parent or any of its Restricted Subsidiaries. ‘‘Existing Indebtedness’’ means Indebtedness of the Parent and its Subsidiaries (including all amounts undrawn and committed to the Parent and its Restricted Subsidiaries) in existence on the Issue Date, other than OpCo Facility, the 2020 Notes and the Notes, after giving effect to the use of proceeds of the offering of the Notes and the 2020 Notes on the Issue Date.

255 ‘‘Event of Default’’ has the meaning provided in Condition 8(a). ‘‘Fair Market Value’’ means the value that would be paid by a willing buyer to an unaffiliated willing seller in a transaction not involving distress or necessity of either party, as determined in good faith by a responsible accounting or financial officer of the Parent. For purposes of Condition 3.1, the Fair Market Value of any property (other than cash or Cash Equivalents or Marketable Securities) in excess of $30.0 million will be evidenced by an opinion from an accounting, appraisal or investment banking firm of international standing (or other recognised independent expert of international standing with experience appraising the terms and condition of the type of transaction or series of related transactions for which an opinion is required) which opinion shall be filed with the Trustee. The Fair Market Value of any property nationalised or expropriated or compulsorily acquired under the authority of any Agency shall be the value given to the Parent and its Restricted Subsidiaries in connection with such nationalisation, expropriation or compulsory acquisition. ‘‘Fitch’’ means Fitch’s Ratings Services. ‘‘Fixed Charge Coverage Ratio’’ means as of any date of determination, the ratio of (a) the Consolidated EBITDA of the Parent for the most recently ended four full consecutive fiscal quarter period for which internal financial statements are available immediately preceding the date of determination to (b) the Fixed Charges of the Parent for such four-quarter period. In the event that the Parent or any of its Restricted Subsidiaries incurs, assumes, Guarantees, repays, repurchases, redeems, defeases or otherwise discharges any Indebtedness (other than working capital borrowings in the ordinary course of business) or issues, repurchases or redeems preferred stock subsequent to the commencement of the period for which the Fixed Charge Coverage Ratio is being calculated and on or prior to the date on which the event for which the calculation of the Fixed Charge Coverage Ratio is made (the ‘‘Calculation Date’’), then the Fixed Charge Coverage Ratio will be calculated giving pro forma effect (as determined in good faith by a responsible accounting or financial officer of the Issuer) to such incurrence, assumption, Guarantee, repayment, repurchase, redemption, defeasance or other discharge of Indebtedness, or such issuance, repurchase or redemption of preferred stock, and the use of the proceeds therefrom, as if the same had occurred at the beginning of the applicable four-quarter reference period; provided, however, that the pro forma calculation of the Fixed Charge Coverage Ratio shall not give effect to (i) any Indebtedness incurred on the Calculation Date (and, for the avoidance of doubt, not reclassified on such Calculation Date) pursuant to Condition 3.2(b) or (ii) the discharge on the Calculation Date of any Indebtedness to the extent that such discharge results from the proceeds incurred pursuant to the provisions of Condition 3.2(b). In addition, for purposes of calculating the Fixed Charge Coverage Ratio: (1) acquisitions that have been made by the Parent or any of its Restricted Subsidiaries, including through mergers, consolidations or otherwise (including acquisitions of assets used or useful in the Permitted Business), or any Person or any of its Restricted Subsidiaries acquired by the Parent or any of its Restricted Subsidiaries, and including any related financing transactions and including increases in ownership of Restricted Subsidiaries, during the four-quarter reference period or subsequent to such reference period and on or prior to the Calculation Date or that are to be made on the Calculation Date, will be given pro forma effect (including any Pro Forma Adjustments in any amount) as if they had occurred on the first day of the four-quarter reference period; (2) the Consolidated EBITDA attributable to discontinued operations, as determined in accordance with IFRS, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded and any Pro Forma Adjustments in any amount resulting therefrom will be included; (3) the Fixed Charges attributable to discontinued operations, as determined in accordance with IFRS, and operations or businesses (and ownership interests therein) disposed of prior to the Calculation Date, will be excluded, but only to the extent that the obligations giving rise to such Fixed Charges will not be obligations of the Parent or any of its Restricted Subsidiaries following the Calculation Date; (4) any Person that is a Restricted Subsidiary on the Calculation Date will be deemed to have been a Restricted Subsidiary at all times during such four-quarter period; (5) any Person that is not a Restricted Subsidiary on the Calculation Date will be deemed not to have been a Restricted Subsidiary at any time during such four-quarter period; and

256 (6) if any Indebtedness bears a floating rate of interest, the interest expense on such Indebtedness will be calculated as if the rate in effect on the Calculation Date had been the applicable rate for the entire period (taking into account any Hedging Obligation applicable to such Indebtedness if such Hedging Obligation has a remaining term as at the Calculation Date in excess of 12 months, or, if shorter, at least equal to the remaining term of such Indebtedness). ‘‘Fixed Charges’’ means, for any period, the sum, without duplication, of: (1) the consolidated interest expense (including that attributable to Capital Lease Obligations), net of interest income, of the Parent and its Restricted Subsidiaries with respect to its Indebtedness for such period (excluding debt issuance costs, commissions, fees and expenses), non-cash interest payments (but excluding any non-cash interest expense attributable to the movement in the mark to market valuation of Hedging Obligations or other derivative instruments), the interest component of any deferred payment obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers’ acceptance financings), and net of the effect of all payments made or received pursuant to Hedging Obligations (excluding amortization of fees) in respect of interest rates (and excluding (r) any prepayment premium or penalty, (s) annual agency fees paid to the administrative agents and collateral agents under the OpCo Facility or any working capital or capital expenditure facilities, (t) costs associated with obtaining Hedging Obligations and breakage costs in respect of Hedging Obligations related to interest rates, (u) any expense resulting from the discounting of any indebtedness in connection with the application of recapitalization accounting or, if applicable, purchase accounting in connection with any acquisition (or purchase of assets), (v) penalties and interest related to taxes, (w) any ‘‘additional interest’’ or ‘‘liquidated damages’’ with respect to any securities, (x) amortization or expensing of deferred financing fees, amendment and consent fees, debt issuance costs, commissions, fees and expenses, (y) any amortization or expensing of bridge, commitment and other financing fees and any other fees related to any acquisitions (or purchases of assets) after the Closing Date, and (z) any accretion of accrued interest on discounted liabilities (other than Indebtedness except to the extent arising from the application of purchase accounting)); plus (2) the consolidated interest expense (but excluding such interest on Subordinated Shareholder Debt) of the Parent and its Restricted Subsidiaries that was capitalized during such period; plus (3) all dividends, whether paid or accrued and whether or not in cash, on any series of preferred stock of the Parent or any of its Restricted Subsidiaries, other than dividends on Equity Interests payable solely in Equity Interests of the Parent (other than Disqualified Stock) to the Parent or a Restricted Subsidiary of the Parent. Interest on a Capital Lease Obligation shall be deemed to accrue at an interest rate reasonably determined by the Parent to be the rate of interest implicit in such Capital Lease Obligation in accordance with IFRS. Interest on Indebtedness that may optionally be determined at an interest rate based upon a factor of a prime or similar rate, a eurocurrency interbank offered rate, or other rate, shall be deemed to have been based upon the rate actually chosen, or, if none, then based upon such optional rate chosen as the Parent may designate. ‘‘Guarantee’’ means a guarantee, direct or indirect, and given in any manner including, without limitation, by way of reimbursement obligations in respect of documentary credit, of all or any part of any Indebtedness, or entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against financial loss in respect thereof (in whole or in part); provided, however that the term ‘‘Guarantee’’ will not include the endorsements of negotiable instruments in the ordinary course of business or any obligation to the extent it is payable only in Capital Stock of the guarantor that is not Disqualified Stock. The term ‘‘Guarantee’’ used as a verb has a corresponding meaning. ‘‘Guarantors’’ means each of: (1) the HoldCo Guarantors; (2) Closed Joint Stock Company ‘‘Vladivostok Container Terminal’’; (3) Fesco Ocean Management Limited; (4) Remono Shipping Company Limited; (5) Subsidiary Enterprise ‘‘Transgarant-Ukraine’’ 5APR2013175651595APR201317565442

257 (6) Limited Liability Company ‘‘Dalreftrans’’; (7) Limited Liability Company ‘‘FESCO Rail’’; (8) Limited Liability Company ‘‘FESCO Integrated Transport’’; (9) Limited Liability Company ‘‘Firm ‘‘Transgarant’’; (10) Limited Liability Company ‘‘TEK MetizTrans’’; and (11) any other Subsidiary of the Parent that adheres to the Deed of Guarantee as a Guarantor, and their respective successors and assigns, in each case, until the Note Guarantee of such Person has been released in accordance with the provisions of Condition 2.3. ‘‘Halimeda’’ means Halimeda International Limited, a company incorporated in the British Virgin Islands, and any of its Subsidiaries. ‘‘Hedging Obligations’’ means, with respect to any specified Person, the obligations of such Person (netted to the extent allowed by the terms of the relevant transaction against the counterparty’s obligations under the same transaction on a market-to-market basis) under: (1) interest rate swap agreements (whether from fixed to floating or from floating to fixed), interest rate cap agreements and interest rate collar agreements, other agreements or arrangements designed to manage interest rates or interest rate risk; (2) any foreign exchange contract, currency swap agreement, currency option, cap, floor, ceiling or collar or agreement or other similar agreement or arrangement designed to protect such Person against fluctuations in currency exchange rates; and (3) other agreements or arrangements designed to protect such Person against fluctuations in interest rates or currency exchange rates, including Currency Exchange Protection Agreements. ‘‘IFRS’’ means International Financial Reporting Standards as adopted by the European Union and in effect on the Issue Date or, with respect to Condition 3.15, as in effect from time to time. ‘‘Indebtedness’’ means, with respect to any specified Person, any indebtedness of such Person (excluding accrued expenses and trade payables): (1) in respect of borrowed money; (2) evidenced by bonds, notes, debentures or similar instruments; (3) representing reimbursement obligations in respect of letters of credit, banker’s acceptances or similar instruments (except to the extent any such reimbursement obligations relate to trade payables and such obligations are satisfied within 30 days of incurrence); (4) representing Capital Lease Obligations; (5) the principal component of all obligations of such Person to pay the deferred and unpaid purchase price of property (excluding trade payables) where the deferred payment is arranged primarily as a means of raising finance, which purchase price is due more than one year after the date of placing such property in service or taking final delivery or title thereto; (6) the principal component of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock; (7) representing any Hedging Obligations; (8) the principal component of all Indebtedness of other Persons secured by a Lien on any asset of such Person, whether or not such Indebtedness is assumed by such Person; provided, however, that the amount of such Indebtedness will be the lesser of (a) the Fair Market Value of such asset at such date of determination and (b) the amount of such Indebtedness of such other Persons; and (9) to the extent not otherwise included, the principal component of Indebtedness of other Persons to the extent Guaranteed by such Person other than by endorsement of negotiable instruments for collection in the ordinary course of business; in each case without duplication and provided that the foregoing indebtedness (other than letters of credit and Hedging Obligations) shall be included in this definition of Indebtedness only if, and to the

258 extent that, the indebtedness would appear as a liability upon a balance sheet of such Person prepared in accordance with IFRS. The term ‘‘Indebtedness’’ shall not include: (1) Subordinated Shareholder Debt; (2) project completion guarantees in respect of Non-Recourse Debt; (3) any lease of property which would be considered an operating lease under IFRS; (4) for the avoidance of doubt, any contingent obligations in respect of workers’ compensation claims, early retirement or termination obligations, obligations or contributions, or similar claims, obligations or contributions or social security or wage taxes; or (5) in connection with the purchase by the Parent or any of its Restricted Subsidiaries of any business, any post-closing payment adjustments to which the seller may become entitled to the extent such payment is determined by a final closing balance sheet or such payment depends on the performance of such business after the closing; provided, however, that at the time of closing, the amount of any such payment is not determinable and, to the extent such payment thereafter becomes fixed and determined, the amount is paid within 45 days thereafter. ‘‘Intercreditor Agreement’’ means the intercreditor agreement dated 7 December 2012 made between, among others, Maple Ridge Limited, Elvy Limited, the Security Agents, the Debtors, the Investors and the Intra-group Lenders (each as defined therein), as amended, restated or otherwise modified or varied from time to time. ‘‘Investment Grade Rating’’ means a rating equal to or higher than Baa3 (or the equivalent) by Moody’s and BBB (or the equivalent) by S&P, BBB (or the equivalent) by Fitch, or an equivalent rating by any other Rating Agency. ‘‘Investments’’ means, with respect to any Person: (1) all direct or indirect investments by such Person in other Persons (including Affiliates) in the forms of loans, advances, extensions of credit to, or Guarantees in respect of obligations of, other Persons (but excluding advances or extensions of credit to customers, suppliers, distributors, consultants, endorsements of negotiable instruments and documents in the ordinary course of business, commission, travel and similar advances to officers, employees and consultants made in the ordinary course of business, and Hedging Obligations, which obligations constitute Permitted Indebtedness); (2) capital contributions or acquisitions for consideration of Indebtedness, Equity Interests or other securities of other Persons; and (3) investments that are required by IFRS to be classified on the balance sheet (excluding footnotes) of the relevant Person in the same manner as the other investments included in this definition to the extent such transactions involve the transfer of cash or other property. If the Parent or any of its Restricted Subsidiaries sells or otherwise disposes of any Equity Interests of any direct or indirect Restricted Subsidiary of the Parent such that, after giving effect to any such sale or disposition, such Person is no longer a Restricted Subsidiary of the Parent, the Parent will be deemed to have made an Investment on the date of any such sale or disposition equal to the Fair Market Value of the Parent’s Investments in such Restricted Subsidiary that were not sold or disposed of in an amount determined as provided in Condition 3.1(d). The acquisition by the Parent or any Restricted Subsidiary of the Parent of a Person that holds an Investment in a third Person will be deemed to be an Investment by the Parent or such Subsidiary in such third Person in an amount equal to the Fair Market Value of the Investments held by the acquired Person in such third Person in an amount determined as provided in Condition 3.1(d). Except as otherwise provided in these Conditions, the amount of an Investment will be determined at the time the Investment is made and without giving effect to subsequent changes in value. ‘‘Issue Date’’ means 2 May 2013. ‘‘Lien’’ means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected

259 under applicable law, including any conditional sale or other title retention agreement having the nature of a security interest. ‘‘Management Advances’’ means loans or advances made to, or Guarantees with respect to loans or advances made to, directors, officers or employees of any Parent or any Restricted Subsidiary: (1) in respect of travel, entertainment or moving related expenses incurred in the ordinary course of business; (2) in respect of moving related expenses incurred in connection with any closing or consolidation of any facility or office; (3) in connection with compensation; or (4) in the ordinary course of business and (in the case of this clause (4)) not exceeding $8.0 million in the aggregate outstanding at any time. ‘‘Management Fees’’ means (a) fees and related expenses for the performance of monitoring services by shareholders or any of their Affiliates and (b) fees and related expenses for the performance of transaction, management, consulting, financial or other advisory services or underwriting, placement or other investment banking activities, including in connection with mergers, acquisitions, dispositions, joint ventures or capital markets transactions by the Permitted Holder or any of its Affiliates for the Parent or any of its Restricted Subsidiaries, which payments in respect of this clause (b) have been approved by the Board of Directors of the Parent, and in the case of both clauses (a) and (b) made in any form, including through direct payment or loans; provided that the amount of such fees and related expenses under clauses (a) and (b) will not, in the aggregate, exceed $6.0 million per annum. ‘‘Market Capitalization’’ means an amount equal to (i) the total number of issued and outstanding shares of common stock or common equity interests of the Parent Entity or Parent issuing common equity interests in a Public Equity Offering on the date of the declaration or distribution of the relevant dividend multiplied by (ii) the arithmetic mean of the closing prices per share of such common stock or common equity interests for the 30 consecutive trading days immediately preceding the date of declaration of such dividend or distribution. ‘‘Marketable Securities’’ means publicly traded debt or equity securities that are listed or admitted to trading on a national securities exchange in one or more of the G7 countries, Ireland, Luxembourg or the Russian Federation. ‘‘Minority Interest’’ means the percentage interest represented by any shares of stock of any class of Capital Stock of a Restricted Subsidiary of the Parent that are not owned by the Parent or a Restricted Subsidiary of the Parent. ‘‘Moody’s’’ means Moody’s Investors Service Limited or any successor to its ratings business. ‘‘Net Proceeds’’ means the aggregate cash proceeds received by the Parent or any of its Restricted Subsidiaries in respect of any Asset Sale (including, without limitation, any cash received upon the sale or other disposition of any non-cash consideration or any Cash Equivalents received in any Asset Sale), net of the direct costs relating to such Asset Sale, including, without limitation: (1) all legal, accounting, investment banking, commissions and other fees and expenses incurred, title and recording tax expenses, and all federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under IFRS, as a consequence of such Asset Sale after taking into account any available tax credits or deductions and any tax sharing arrangements; (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Sale, in accordance with the terms of any Lien upon such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Sale, or by applicable law be repaid out of the proceeds from such Asset Sale; (3) all distributions and other payments required to be made to holders of Minority Interests in Subsidiaries or joint ventures as a result of such Asset Sale; and (4) the deduction of appropriate amounts to be provided by the seller as a reserve, in accordance with IFRS, or held in escrow, in either case for adjustment in respect of the sale price or for any liabilities associated with the assets disposed of in such Asset Sale and retained by the Issuer or any Restricted Subsidiary after such Asset Sale.

260 ‘‘Non-Recourse Debt’’ means Indebtedness: (1) as to which neither the Parent nor any of its Restricted Subsidiaries provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness) other than project completion guarantees and any Investment permitted by Condition 3.1; (2) no default (other than in relation with project completion guarantees) with respect to which (including any rights that the holders of the Indebtedness may have to take enforcement action against an Unrestricted Subsidiary) would permit upon notice, lapse of time or both any holder of any other Indebtedness of the Parent or any of its Restricted Subsidiaries to declare a default on such other Indebtedness or cause the payment of the Indebtedness to be accelerated or payable prior to its Stated Maturity; and (3) the explicit terms of which provide (other than in relation with project completion guarantees) that there is no recourse to the assets of the Parent or any of its Restricted Subsidiaries, except for shares that the Parent or its Restricted Subsidiaries hold in a Person incurring such Non-Recourse Debt. ‘‘Note Guarantee’’ means the Guarantee by each Guarantor of the Parent’s Obligations under the Deed of Guarantee (as confirmed by the Deed of Confirmation). ‘‘Obligations’’ means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness. ‘‘Offering Memorandum’’ means the offering memorandum in respect of the Notes dated 24 April 2013. ‘‘Officer’’ means, with respect to any Person, the Chairman of the Board of Directors, the Chief Executive Officer, the President, the Chief Operating Officer, the Chief Financial Officer, the Chief of Staff, the Treasurer, any Assistant Treasurer, the Controller, the Secretary, any Managing Director, Director or any Vice-President of such Person. ‘‘Officer’s Certificate’’ means a certificate signed on behalf of any Person by an Officer. ‘‘OpCo Facility’’ means the $400,000,000 committed loan facility drawn under the facilities agreement dated 7 December 2012, entered into by, amongst others, Closed Joint Stock Company ‘‘Vladivostok Container Terminal’’ as borrower and the Guarantors. ‘‘Parent’’ means the Far-Eastern Shipping Company plc, a joint-stock company incorporated in the Russian Federation. ‘‘Parent Entity’’ means any direct or indirect parent company or entity of the Parent (including the HoldCo Guarantors). ‘‘Permitted Business’’ means any businesses, services or activities (1) engaged in by the Parent or any of its Restricted Subsidiaries on the Issue Date; (2) concerning the transportation (by whichever mode) and any related infrastructure or logistics industry; and (3) that are related, complementary, incidental, ancillary or similar to any of the foregoing or are extensions or developments of any thereof. ‘‘Permitted Collateral Liens’’ means: (1) Liens on any Collateral to secure the Notes and the Note Guarantees (including Additional Notes) and any Permitted Refinancing Indebtedness in respect thereof (and any Permitted Refinancing Indebtedness in respect of such Permitted Refinancing Indebtedness) provided that each of the parties thereto will have entered into the Intercreditor Agreement or an Additional Intercreditor Agreement; (2) Liens on the Collateral to secure Indebtedness under the OpCo Facility and any Permitted Refinancing Indebtedness in respect thereof (and any Permitted Refinancing Indebtedness in respect of such Permitted Refinancing Indebtedness) provided in each case that each of the parties thereto will have entered into the Intercreditor Agreement or an Additional Intercreditor Agreement; (3) Liens on the Collateral to secure Indebtedness under the 2020 Notes and the Guarantees of the 2020 Notes (including, for the avoidance of doubt, any Additional 2020 Notes) and any Permitted Refinancing Indebtedness in respect thereof (and any Permitted Refinancing Indebtedness in respect of such Permitted Refinancing Indebtedness) provided that each of the parties thereto will have entered into the Intercreditor Agreement or an Additional Intercreditor Agreement;

261 (4) Liens on the Collateral to secure Indebtedness permitted to be incurred by Condition 3.2(b)(x) and (xi) (to the extent such Guarantee is in respect of Indebtedness otherwise permitted to be secured and is specified in this definition of ‘‘Permitted Collateral Liens’’) provided in each case that each of the parties thereto will have entered into the Intercreditor Agreement or an Additional Intercreditor Agreement; and (5) Liens on the Collateral arising by operation of law described in one or more clauses (6), (7), (8), (9), (10), (14), (17), (21), (22), (23), (25) and (30) (other than clause (f)) of the definition ‘‘Permitted Liens’’ and that, in each case, would not materially interfere with the ability of the Security Trustee to enforce any Lien over the Collateral; provided, that, in each case, such Lien ranks equal or junior to the Liens on such Collateral securing the Notes and the Note Guarantees. Notwithstanding the foregoing, the Liens listed in clause (5) above, (x) arising by operation of law shall rank as provided by law and (y) to the extent such Liens are not in respect of Indebtedness, shall have a ranking that arises from the obligations described under one or more of such clauses. ‘‘Permitted Holders’’ means Summa Group Ltd, Great Hill Partners LLC and TPG Global LLC (and any funds managed by TPG Global LLC) and their Affiliates. Any person or group of persons whose acquisition or beneficial ownership constitutes a Change of Control in respect of which a Change of Control Offer is made in accordance with the requirements of these Conditions will thereafter, together with its Affiliates, constitute an additional Permitted Holder. ‘‘Permitted Investments’’ means: (1) any Investment (a) in the Parent or (b) in a Restricted Subsidiary of the Parent; (2) any Investment in cash and Cash Equivalents; (3) any Investment by the Parent or any Restricted Subsidiary of the Parent in any Person if as a result of such Investment: (a) such Person becomes a Restricted Subsidiary of the Parent; or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys substantially all of its assets to, or is liquidated into, the Parent or a Restricted Subsidiary of the Parent; (4) any Investment made as a result of the receipt of non-cash consideration from an Asset Sale that was made pursuant to and in compliance with the covenant set out in Condition 5.5; (5) any acquisition of assets or Capital Stock solely in exchange for the issuance of Equity Interests (other than Disqualified Stock) or Subordinated Shareholder Debt of the Parent; (6) any Investments received in compromise or resolution of (A) obligations of trade creditors or customers that were incurred in the ordinary course of business of the Parent or any of its Restricted Subsidiaries, including pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of any trade creditor or customer; or (B) litigation, arbitration or other disputes with Persons who are not Affiliates of the Parent; (7) receivables owing to the Parent or any of its Restricted Subsidiaries created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Parent or any such Restricted Subsidiary deems reasonable under the circumstances; (8) surety and performance bonds and workers’ compensation, utility, lease, tax, performance and similar deposits and prepaid expenses in the ordinary course of business; (9) Guarantees of Indebtedness permitted under Condition 3.2 (other than Condition 3.2(b)(xvii)); (10) Investments of a Restricted Subsidiary acquired after the Issue Date or of any entity merged into or consolidated or amalgamated with the Parent or a Restricted Subsidiary in accordance with Condition 3.5 to the extent that such Investments were not made in contemplation of such acquisition, merger, consolidation or amalgamation and were in existence on the date of such acquisition, merger, consolidation or amalgamation;

262 (11) Investments received as a result of a foreclosure by the Parent or any of its Restricted Subsidiaries with respect to any secured Investment; (12) any Investment existing on, or made pursuant to binding commitments existing on, the Issue Date and any Investment consisting of an extension, modification or renewal of any Investment existing on, or made pursuant to binding commitments existing on, the Issue Date; provided that the amount of any such Investment may be increased (a) as required by the terms of such Investment as in existence on the Issue Date or (b) as otherwise permitted under these Conditions; (13) Investments in the Notes and any other Indebtedness of the Parent or any of its Restricted Subsidiaries; (14) Management Advances; (15) payroll, commission, travel, relocation and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (16) prepaid expenses, negotiable instruments held for collection and lease, utility and workers’ compensation, performance and similar deposits made in the ordinary course of business by the Parent or any of its Restricted Subsidiaries; (17) any loan (and Guarantees and security in respect thereof) out of the proceeds of the OpCo Facility, the Notes and the 2020 Notes made to Maple Ridge Limited and/or Elvy Limited by: (i) Vladivostok Container Terminal LLC; and (ii) the Issuer, in respect to the proceeds of the Notes and the 2020 Notes, as described under the caption ‘‘Use of Proceeds’’ in the Offering Memorandum (provided that such loans may be assigned and/or transferred to other Restricted Subsidiaries); (18) Investments in any Unrestricted Subsidiary (designated as such after the Issue Date) having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (18) in any calendar year, which Investments then continue to be outstanding, not to exceed $50.0 million per calendar year (with unused amounts in any calendar year being permitted to be carried over into succeeding calendar years); provided that if an Investment is made pursuant to this clause and such Person subsequently is designated a Restricted Subsidiary pursuant to Condition 3.14, such Investment shall thereafter be deemed to have been made pursuant to clause (1) or (3) of the definition of ‘‘Permitted Investments’’ and not this clause; and (19) other Investments in any Person having an aggregate Fair Market Value (measured on the date each such Investment was made and without giving effect to subsequent changes in value), when taken together with all other Investments made pursuant to this clause (19) that are at the time outstanding not to exceed the greater of $75.0 million and 3 per cent. of Consolidated Tangible Assets; provided that if an Investment is made pursuant to this clause in a Person that is not a Restricted Subsidiary and such Person subsequently becomes a Restricted Subsidiary or is subsequently designated a Restricted Subsidiary pursuant to Condition 3.14, such Investment shall thereafter be deemed to have been made pursuant to clause (1) or (3) of the definition of ‘‘Permitted Investments’’ and not this clause. ‘‘Permitted Liens’’ means, with respect to any Person: (1) Liens in favour of the Parent or any of its Restricted Subsidiaries; (2) Liens on property of a Person existing at the time such Person becomes a Restricted Subsidiary of the Parent or is merged with or into or consolidated or amalgamated with the Parent or any Restricted Subsidiary of the Parent; provided that such Liens were in existence prior such Person becoming a Restricted Subsidiary of the Parent (and were not put in place in contemplation of such Person becoming a Restricted Subsidiary of the Parent) of or such merger, consolidation or amalgamation and do not extend to any assets other than those of the Person that becomes a Restricted Subsidiary of the Parent or is merged into or consolidated or amalgamated with the Parent or the Restricted Subsidiary;

263 (3) Liens on property (including Capital Stock) existing at the time of acquisition of the property by the Parent or any Restricted Subsidiary of the Parent; provided that such Liens were in existence prior to, such acquisition, and not incurred in contemplation of, such acquisition; (4) Liens securing Existing Indebtedness; (5) Liens securing facilities incurred pursuant to Condition 3.2(b)(i); (6) Liens for taxes, assessments or governmental charges or claims that (x) are not yet due and payable or (y) that are being contested in good faith by appropriate proceedings; provided that any reserve or other appropriate provision as is required in conformity with IFRS has been made therefor; (7) survey exceptions, easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property that were not incurred in connection with Indebtedness and that do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person; (8) Liens encumbering property or assets under construction arising from progress or partial payments by a customer of the Parent or its Restricted Subsidiaries relating to such property or assets; (9) Liens in favour of customs and revenue authorities arising as a matter of law to secure payments of customs duties in connection with the importation of goods; (10) any attachment, prejudgment or judgment Lien that does not constitute an Event of Default and notices of lis pendens and associated rights related to litigation being contested in good faith and for which adequate reserves have been made; (11) Liens created for the benefit of (or to secure) the Notes (and/or the Note Guarantees); (12) Liens to secure any Permitted Refinancing Indebtedness permitted to be incurred under these Conditions; provided, however, that: (a) the new Lien shall be limited to all or part of the same property and assets that (x) were subject of, or, under the written agreements pursuant to which the original Lien arose, could become subject of the original Lien (plus improvements and accessions to, such property or proceeds or distributions thereof); or (y) were subject of Capital Lease Obligations which have been repaid in full using the proceeds of such Permitted Refinancing Indebtedness; and (b) the Indebtedness secured by the new Lien is not increased to any amount greater than the sum of (x) the outstanding principal amount, or, if greater, committed amount, of the Indebtedness renewed, refunded, refinanced, replaced, defeased or discharged with such Permitted Refinancing Indebtedness and (y) an amount of any fees and expenses, including premiums, related to such renewal, refunding, refinancing, replacement, defeasance or discharge; (13) Liens to secure Indebtedness permitted by Condition 3.2(b)(vi) covering only the assets acquired with or financed by such Indebtedness; (14) Liens arising solely by virtue of any statutory or common law provisions relating to banker’s Liens, rights of set-off or similar rights and remedies as to financial accounts or other funds maintained or deposited with a financial institution; (15) any Liens arising under an order, attachment, injunction or other similar legal process restraining the disposal of an asset and Liens granted by or under an escrow agreement in respect of any part of the proceeds of an Asset Sale permitted under the Trust Deed; any right of first refusal, right of first offer, option or other agreement to sell or otherwise dispose of an asset of the Parent or any Restricted Subsidiary; (16) Liens on cash, Cash Equivalents or other property arising in connection with the defeasance, discharge or redemption of Indebtedness; (17) Liens on vessels that arise by operation of law;

264 (18) any (a) interest or title of a lessor or sublessor under any lease and for compliance with the terms of such leases; (b) restriction or encumbrance that the interest or title of such lessor or sublessor may be subject to (including without limitation, ground leases or other prior leases of the demised premises, mortgages, mechanics’ liens, tax liens, and easements); or (c) subordination of the interest of the lessee or sublessee under such lease to any restrictions or encumbrance referred to in the preceding clause (b); (19) Liens arising under the Trust Deed in favour of the Trustee for its own benefit and similar Liens in favour of other trustees, agents and representatives arising under instruments governing Indebtedness permitted to be incurred under these Conditions, provided, however, that such Liens are solely for the benefit of the trustees, agents or representatives in their capacities as such and not for the benefit of the holders of the Indebtedness; (20) Liens securing Hedging Obligations, which obligations are permitted by Condition 3.2(b)(x); (21) Liens upon specific items of inventory, receivables or other goods (and the proceeds thereof) of any Person securing such Person’s obligations in respect of bankers’ acceptances or receivables securitizations issued or created in the ordinary course of business for the account of such Person to facilitate the purchase, shipment or storage of such inventory, receivables or other goods (or the proceeds thereof); (22) Liens arising out of conditional sale, title retention, consignment or similar arrangements for the sale of assets entered into in the ordinary course of business; (23) (i) mortgages, liens, security interests, restrictions, encumbrances or any other matters of record that have been placed by any developer, landlord, contractor or other third party on property over which the Parent or any of its Restricted Subsidiaries has easement rights or on any real property leased by the Parent or any of its Restricted Subsidiaries (including those arising from progress or partial payments by a third party relating to such property or assets) and subordination or similar agreements relating thereto and (ii) any condemnation or eminent domain proceedings or compulsory purchase order affecting real property; (24) Liens (including put and call arrangements) on Capital Stock or other securities of any Unrestricted Subsidiary that secure Indebtedness of such Unrestricted Subsidiary; (25) pledges of goods, the related documents of title and/or other related documents arising or created in the ordinary course of business or operations as Liens only for Indebtedness to a bank or financial institution directly relating to the goods or documents on or over which the pledge exists; (26) limited recourse Liens in respect of the ownership interests in, or assets owned by, any joint ventures which are not Restricted Subsidiaries securing obligations of such joint ventures; (27) Liens on any proceeds loan made by the Parent or any of its Restricted Subsidiaries in connection with any future incurrence of Indebtedness permitted under these Conditions and securing that Indebtedness; (28) Liens created on any asset of the Parent or a Restricted Subsidiary established to hold assets of any stock option plan or any other management or employee benefit or incentive plan or unit trust of the Parent or a Restricted Subsidiary securing any loan to finance the acquisition of such assets; (29) Liens over treasury stock of the Parent or a Restricted Subsidiary purchased or otherwise acquired for value by the Parent or such Restricted Subsidiary pursuant to a stock buy-back scheme or other similar plan or arrangement; (30) the following items in the ordinary course of business: (a) leases or subleases granted to others that do not materially interfere with the ordinary course of business of the Parent and its Restricted Subsidiaries, taken as a whole; (b) landlords’, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or the like Liens arising by contract or statute in the ordinary course of business; (c) pledges or deposits made in the ordinary course of business (A) in connection with leases, tenders, bids, statutory obligations, surety or appeal bonds, government contracts, performance bonds and similar obligations, or (B) in connection with workers’ compensation,

265 unemployment insurance and other social security legislation (including, in each case, Liens to secure letters of credit issued to assure payment of such obligations); (d) Liens arising from Uniform Commercial Code financing statement filings under U.S. state law (or similar filings under applicable jurisdictions) regarding operating leases entered into by the Parent and its Restricted Subsidiaries in the ordinary course of business; (e) Liens on insurance policies and proceeds thereof, or other deposits, to secure insurance premium financings in the ordinary course of business; (f) Liens incurred in the ordinary course of business of the Parent or any Restricted Subsidiary of the Parent with respect to Indebtedness at any one time outstanding that does not exceed the greater of $25.0 million and 1 per cent. of Consolidated Tangible Assets of the Parent; (g) Liens on equipment of the Parent or any of its Restricted Subsidiaries granted in the ordinary course of business; (h) leases, licenses, subleases and sublicenses of assets in the ordinary course of business; and (i) Liens securing or arising by reason of any netting or set-off arrangement entered into in the ordinary course of banking or other business activities. (31) any Liens permitted under clause (3) of the definition of Non-Recourse Debt; (32) any encumbrance or restriction (including put, call arrangements, tag, drag, right of first refusal and similar rights) with respect to Capital Stock of any joint venture or similar arrangement pursuant to any joint venture or similar agreement; (33) Liens solely on any cash earnest money deposits made by the Parent or its Restricted Subsidiaries in connection with any letter of intent or any purchase agreement permitted by the Trust Deed; (34) Liens on insurance policies and the proceeds thereof securing the financing of the premiums with respect thereto; (35) Liens on cash advances in favour of the seller of any property to be acquired in an Investment or other acquisition permitted under the Trust Deed to be applied against the purchase price for such Investment or other acquisition; (36) Liens created in relation to Permitted Investments falling under paragraph (17) of the Permitted Investment definition; and (37) any extension, renewal, refinancing or replacement, in whole or in part, of any Lien described in the foregoing clauses (1) through (36) (but excluding clause (30)(f)); provided that any such Lien is limited to all or part of the same property or assets (plus improvements, accessions, proceeds or dividends or distributions in respect thereof) that was subject (or, under the written arrangements under which the original Lien arose, could become subject) of the original Lien. ‘‘Permitted Parent Payments’’ means the declaration and payment of dividends or other distributions, or the making of loans, by the Parent or any of its Restricted Subsidiaries to any Parent Entity, or the payment by the Parent or any of its Restricted Subsidiaries on behalf of any Parent Entity to pay: (1) franchise fees and other fees, taxes and expenses required to maintain the corporate existence of any Parent Entity; (2) general corporate overhead expenses of any Parent Entity to the extent such expenses are attributable to the ownership or operation of the Parent and its Restricted Subsidiaries or related to the proper administration of such Parent Entity (including fees and expenses properly incurred in the ordinary course of business to auditors and legal advisors and payments in respect of services provided by directors, officers, consultants, or employees of any such Parent Entity); (3) so long as any Parent Entity and the Parent pay income tax on a group basis, any income taxes, to the extent such income taxes are attributable to the income of the Parent and any of its Restricted Subsidiaries, taking into account any net operating loss carryovers and other tax attributes, and, to the extent of the amount actually received in cash from its Unrestricted Subsidiaries, in amounts required to pay such taxes to the extent attributable to the income of such Unrestricted Subsidiaries; provided that such Parent Entity shall promptly pay such taxes or refund such amount to the Parent;

266 (4) costs (including all professional fees and expenses) incurred by any Parent Entity in connection with reporting obligations under or otherwise incurred in connection with compliance with applicable laws, rules or regulations of any governmental, regulatory or self-regulatory body or stock exchange, the Trust Deed or any other agreement or instrument relating to Indebtedness of the Parent or any of its Restricted Subsidiaries, including in respect of any reports filed with respect to the U.S. Securities Act, U.S. Exchange Act or the respective rules and regulations promulgated thereunder; and (5) fees and expenses of any Parent Entity incurred in relation to any public offering or other sale of Capital Stock or Indebtedness (whether or not completed) (a) where the net proceeds of such offering or sale are intended to be received by or contributed to the Parent or any of its Restricted Subsidiaries; (b) in a prorated amount of such expenses in proportion to the amount of such net proceeds intended to be so received by or contributed to the Parent or any of its Restricted Subsidiaries; or (c) otherwise on an interim basis prior to completion of such offering so long as any Parent Entity will cause the amount of such expenses to be repaid to the Parent or the relevant Restricted Subsidiary out of the proceeds of such offering promptly if completed. ‘‘Permitted Refinancing Indebtedness’’ means any Indebtedness of the Parent or any of its Restricted Subsidiaries issued in exchange for, or the net proceeds of which are used to extend, renew, refund, refinance, replace, exchange, defease or discharge in full or in part other Indebtedness of the Parent or any of its Restricted Subsidiaries (other than intercompany Indebtedness); provided that: (1) the aggregate principal amount (or accreted value, if applicable, or if issued with original issue discount, aggregate issue price) of such Permitted Refinancing Indebtedness does not exceed the principal amount (or accreted value, if applicable, or if issued with original issue discount, aggregate issue price) of the Indebtedness being extended, renewed, refunded, refinanced, replaced, exchanged, defeased or discharged (plus all capitalised and accrued interest on such Indebtedness and the amount of all fees and expenses, including premiums, incurred in connection therewith); (2) if the Indebtedness being extended, renewed, refunded, refinanced, replaced, defeased or discharged is a Subordinated Obligation, such Permitted Refinancing Indebtedness is expressly subordinated in right of payment to, the Notes or the Note Guarantees, as the case may be, on terms at least as favourable to the Holders of Notes or the Note Guarantees, as the case may be, as those contained in the documentation governing the Indebtedness being extended, renewed, refunded, refinanced, replaced, exchanged, defeased or discharged; and (3) if the Issuer or any Guarantor was the obligor on the Indebtedness being renewed, refunded, refinanced, replaced, defeased or discharged, such Indebtedness is incurred either by the Issuer or by a Guarantor; provided that if renewal, refund, refinancing, replacement, exchange, defeasance or discharge in full or in part of the Indebtedness is initially funded from sources other than Permitted Refinancing Indebtedness, the Permitted Refinancing Indebtedness is raised within nine (9) months of such renewal, refund, refinancing, replacement, exchange, defeasance or discharge and is identified in good faith by a responsible accounting or financial officer of the Parent as being a replacement for such Indebtedness. ‘‘Pro Forma Adjustments’’ means, without duplication, with respect to any period, reductions in costs and expenses and any other synergies and related adjustments that have been actually realized or are projected by the Parent’s chief financial officer in good faith, but only if such reductions in costs and related adjustments are so projected by the Parent to be realized during the consecutive four-quarter period commencing after the transaction giving rise to such calculation. ‘‘Public Equity Offering’’ means, with respect to any Person, a bona fide underwritten public offering of the ordinary shares or common equity (other than Disqualified Stock) of such Person, either: (1) pursuant to a flotation on the London Stock Exchange or any other nationally recognized stock exchange or listing authority in a member state of the European Union or in Hong Kong; or (2) pursuant to an effective registration statement under the U.S. Securities Act (other than a registration statement on Form S-8 or otherwise relating to Equity Interests issued or issuable under any employee benefit plan).

267 ‘‘Public Market’’ means any time after: (1) a Public Equity Offering has been consummated; and (2) at least 20 per cent. of the total issued shares or common equity interests of the Parent or a Parent Entity are, following such Public Equity Offering, held by investors other than the Permitted Holders or their related parties. ‘‘Rating Agencies’’ is defined to mean (1) S&P, (2) Moody’s, (3) Fitch and (4) if S&P, Moody’s, Fitch or any of these shall not make a rating of the Notes available, an internationally recognized securities rating agency or agencies, as the case may be, selected by the Issuer, which shall be substituted for S&P, Moody’s or Fitch, as the case may be. ‘‘Relevant Date’’ means, in respect of any payment under the Notes, the date on which payment becomes due but, if the full amount of the moneys payable has not been received by the Paying Agents or by the Trustee on or prior to such due date, ‘‘Relevant Date’’ means the date on which the full amount of such moneys has been so received and notice to that effect will be given to the Noteholders. ‘‘Restricted Investment’’ means an Investment other than a Permitted Investment. ‘‘Restricted Subsidiary’’ of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. ‘‘S&P’’ means Standard & Poor’s Ratings Group. ‘‘SEC’’ means the U.S. Securities and Exchange Commission. ‘‘Security Documents’’ means the agreements entered or to be entered into between, inter alia, the Security Agents, the Issuer, the Security Providers or the Guarantors, as applicable, pursuant to which security interests in the Collateral are granted to secure, among others, the obligations of the Issuer and the Guarantors under the Notes and the Notes Guarantees, in each case as amended or supplemented from time to time. ‘‘Security Providers’’ means each of Sian Participation Corp., Merbau Synergy Limited, Kalentio Trading Limited, Eustacia Finance Limited, Limited Liability Company ‘‘M-Port’’, Limited Liability Company ‘‘National Container Company’’ and Tryreefer Shipping Company Limited or any other Person that adheres to the Intercreditor Agreement as a Security Provider. ‘‘Significant Subsidiary’’ means, at the date of determination, any Restricted Subsidiary of the Parent that together with its Subsidiaries which are Restricted Subsidiaries of the Parent (i) for the most recent fiscal year, accounted for more than 10 per cent. of the consolidated EBITDA of the Parent and (ii) as of the end of the most recent fiscal year, was the owner of more than 10 per cent. of the consolidated gross assets of the Parent. ‘‘Standard & Poor’’’means Standard & Poor’s Ratings Service, a division of The McGraw-Hill Companies, Inc, or any successor to its ratings business. ‘‘Stated Maturity’’ means, with respect to any instalment of interest or principal on any series of Indebtedness, the date on which the payment of interest or principal was scheduled to be paid in the documentation governing such Indebtedness (as at the Issue Date or date of its incurrence, whichever is later), and will not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. ‘‘Subordinated Obligation’’ means any Indebtedness of the Issuer (whether outstanding on the Issue Date or thereafter incurred) which is expressly subordinated in right of payment to the Notes pursuant to a written agreement or any Indebtedness of a Subsidiary Guarantor (whether outstanding on the Issue Date or thereafter incurred) which is expressly subordinated in right of payment to the Note Guarantee pursuant to a written agreement, as the case may be, provided that no Indebtedness shall be deemed subordinated merely by virtue of being secured or being secured with different collateral or by virtue of being secured on a junior priority basis. ‘‘Subordinated Shareholder Debt’’ means any Indebtedness of the Parent provided by any HoldCo Guarantor, its holding company or any Permitted Holder or any Indebtedness of the Parent provided by an Unrestricted Subsidiary (other than Indebtedness provided by a Designated Unrestricted Subsidiary out of the proceeds of any Investment made pursuant to paragraph (18) of the definition of ‘‘Permitted Investments’’) that (1) does not (including upon the happening of any event) mature or require any

268 amortization, redemption or other payment of principal or any sinking fund payment prior to six months of the Stated Maturity of the principal amount under the Notes (other than through conversion or exchange of such Indebtedness into Equity Interests (other than Disqualified Stock) of the Parent or into any Indebtedness meeting the requirements of this definition), (2) does not (including upon the happening of any event) require, prior to six months of the Stated Maturity of the Notes, payment of cash interest, cash withholding amounts or other gross ups, or any similar amounts, (3) contains no change of control or similar provisions and does not (including upon the happening of any event) accelerate and under which the creditors have no right to declare a default or event of default or take any enforcement action or otherwise require any payment prior to six months of the Stated Maturity of the principal amount under the Notes, (4) does not provide for or require any security interest or encumbrance over any asset of the Parent or any of its Restricted Subsidiaries and is not guaranteed by the Parent or any of its Restricted Subsidiaries; (5) provides that upon any total or partial liquidation, dissolution, winding up of the Parent or in a bankruptcy, reorganization, insolvency or similar proceeding relating to the Parent or its property, the holders of the Notes are entitled to receive payment in full of the obligations under the Notes or any Note Guarantee before the holders of such Subordinated Shareholder Debt shall be entitled to receive any payment in respect of such Subordinated Shareholder Debt, (6) does not (including upon the happening of any event) restrict the payment of amounts due in respect of the Notes or compliance by the Issuer with its obligations under the Notes and the Trust Deed, (7) does not (including upon the happening of an event) constitute Voting Stock; (8) is not (including upon the happening of any event) mandatorily convertible or exchangeable, or convertible or exchangeable at the option of the holder, in whole or in part, prior to the date on which the Notes mature other than into or for Capital Stock (other than Disqualified Stock) of the Parent; and (9) with respect to any Indebtedness provided by an Unrestricted Subsidiary only to the extent such Unrestricted Subsidiary is a Subsidiary of the Parent or a Permitted Holder; provided, however, that any event or circumstance that results in such Indebtedness ceasing to qualify as Subordinated Shareholder Debt, such Indebtedness shall constitute an incurrence of such Indebtedness by the Parent, and any and all Restricted Payments made through the use of the net proceeds from the incurrence of such Indebtedness since the date of the original issuance of such Subordinated Shareholder Debt shall constitute new Restricted Payments that are deemed to have been made after the date of the original issuance of such Subordinated Shareholder Debt. ‘‘Subsidiary’’ means, with respect to any specified Person: (1) any corporation, association or other business entity (other than a partnership, public or limited liability company or similar) of which more than 50 per cent. of the total ordinary voting power of shares of Capital Stock entitled (without regard to the occurrence of any contingency and after giving effect to any voting agreement or stockholders’ agreement that effectively transfers voting power) to vote in the election of directors, managers or trustees of such entity is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person (or a combination thereof) or such entity is consolidated with the specified Person in accordance with IFRS; (2) any partnership, public or limited liability company or similar entity of which (a) more than 50 per cent. of the capital accounts, distribution rights, total equity and voting interests or general and interests, as applicable, are owned or controlled, directly or indirectly, by such Person or one or more of the other Subsidiaries of that Person or a combination thereof, whether in the form of membership, general, special or limited partnership interests or otherwise, or (b) such Person or any Subsidiary of such Person is a controlling general partner or otherwise controls such entity; or (c) such entity is consolidated with the specified Person in accordance with IFRS. ‘‘Ta x’’ means any tax, duty, levy, impost, assessment or other governmental charge (including penalties, interest and any other additions thereto, and, for the avoidance of doubt, including any withholding or deduction for or on account of Tax). ‘‘Taxes’’ and ‘‘Taxation’’ shall be construed to have corresponding meanings. ‘‘Treasury Rate’’ means, as of any redemption date, the yield to maturity as of such redemption date of United States Treasury securities with a constant maturity (as compiled and published in the most recent Federal Reserve Statistical Release H.15 (519) that has become publicly available at least two Business Days (but not more than five Business Days) prior to the redemption date (or, if such statistical release is no longer published, any publicly available source of similar market data selected by the Issuer in good faith)) most nearly equal to the period from the redemption date to 2 May 2016; provided, however, that if

269 the period from the redemption date to 2 May 2016 is not equal to the constant maturity of a US Treasury security for which a weekly average yield is given, the Treasury Rate shall be obtained by a linear interpolation (calculated to the nearest one-twelfth of a year) from the weekly average yields of US Treasury securities for which such yields are given, except that if the period from the redemption date to 2 May 2016 is less than one year, the weekly average yield on actually traded United States Treasury securities adjusted to a constant maturity of one year will be used. ‘‘U.S. Government Obligations’’ means direct obligations of, or obligations guaranteed by, the United States of America, and the payment for which the United States pledges its full faith and credit. ‘‘Unrestricted Subsidiary’’ means Halimeda and any other Subsidiary of the Parent that is designated by the Board of Directors of the Parent as an Unrestricted Subsidiary pursuant to Condition 3.14, but only to the extent that such Subsidiary: (1) has no Indebtedness other than Non-Recourse Debt; (2) except as permitted by the covenant described in Condition 3.6, is not party to any agreement, contract, arrangement or understanding with the Parent or any Restricted Subsidiary of the Parent unless the terms of any such agreement, contract, arrangement or understanding are no less favourable to the Parent or such Restricted Subsidiary than those that might be obtained at the time from Persons who are not Affiliates of the Parent; and (3) except as permitted by the covenant described in Condition 3.1, is a Person with respect to which neither the Parent nor any of its Restricted Subsidiaries has any direct or indirect obligation (a) to subscribe for additional Equity Interests or (b) to maintain or preserve such Person’s financial condition or to cause such Person to achieve any specified levels of operating results. If, at any time, any Unrestricted Subsidiary would fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease to be an Unrestricted Subsidiary for purposes of the Trust Deed and any Indebtedness of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of the Parent as of such date and, if such Indebtedness is not permitted to be incurred as of such date under the covenant described in Condition 3.2, the Parent will be in default of such covenant. ‘‘U.S. Exchange Act’’ means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations of the SEC promulgated thereunder. ‘‘U.S. Securities Act’’ means the United States Securities Act of 1933, as amended, and the rules and regulations of the SEC promulgated thereunder. ‘‘Voting Stock’’ of any specified Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the directors of such Person. ‘‘Weighted Average Life to Maturity’’ means, when applied to any Indebtedness at any date, the number of years obtained by dividing: (1) the sum of the products obtained by multiplying (a) the amount of each then remaining instalment, sinking fund, serial maturity or other required payments of principal, including payment at final maturity, in respect of the Indebtedness, by (b) the number of years (calculated to the nearest one-twelfth) that will elapse between such date and the making of such payment; by (2) the then outstanding principal amount of such Indebtedness. There will appear at the foot of the Conditions endorsed on each Definitive Note the name and specified office of the Agents as set out at the end of the Offering Memorandum.

270 TERMS AND CONDITIONS OF THE 2020 NOTES The terms and conditions of the 2020 Notes shall be the same as the terms and conditions of the 2018 Notes except that: (a) in the first sentence of such terms and conditions ‘‘2018 Notes’’ shall be substituted with ‘‘2020 Notes’’; (b) in the first sentence of such terms and conditions ‘‘2018 Global Note Certificate’’ shall be substituted with ‘‘2020 Global Note Certificate’’; (c) in the first paragraph of such terms and conditions ‘‘$500,000,000 8 per cent senior secured notes due 2018’’ shall be substituted with ‘‘$300,000,000 8.75 per cent secured notes due 2020’’; (d) in Condition 2.5, ‘‘the trustee for the 2020 Notes and holders of the 2020 Notes’’ shall be substituted with ‘‘the trustee for the 2018 Notes and holders of the 2018 Notes’’; (e) in Condition 3.1(c)(xv), ‘‘2020 Notes’’ shall be substituted with ‘‘2018 Notes’’; (f) in Condition 3.2(b)(ii), ‘‘2020 Notes’’ shall be substituted with ‘‘2018 Notes’’; (g) in Condition 3.2(b)(iii), ‘‘2020 Notes’’ shall be substituted with ‘‘2018 Notes’’; (h) in Condition 3.2(d)(i), ‘‘2020 Notes’’ shall be substituted with ‘‘2018 Notes’’; (i) in Condition 3.4(b)(i), ‘‘2020 Notes’’ shall be substituted with ‘‘2018 Notes’’; (j) in Condition 3.4(b)(i), ‘‘Guarantees of the 2020 Notes’’ shall be substituted with ‘‘Guarantees of the 2018 Notes’’; (k) in Condition 3.10(viii), ‘‘2020 Notes’’ shall be substituted with ‘‘2018 Notes’’; (l) in Condition 3.13(a), ‘‘Additional 2020 Notes’’ shall be substituted with ‘‘Additional 2018 Notes’’; (m) in Condition 4, ‘‘8 per cent’’ shall be substituted with ‘‘8.75 per cent.’’; (n) in Condition 5.1, ‘‘2 May 2018’’ shall be substituted with ‘‘2 May 2020’’; (o) in Condition 5.2(a), ‘‘2 May 2016’’ shall be substituted with ‘‘2 May 2017’’; (p) in Condition 5.2(a), ‘‘108 per cent’’ shall be substituted with ‘‘108.75 per cent’’; (q) in Condition 5.2(b), ‘‘2 May 2016’’ shall be substituted with ‘‘2 May 2017’’; (r) in Condition 5.2(c), ‘‘2 May 2016’’ shall be substituted with ‘‘2 May 2017’’; (s) in Condition 5.2(c), the following table:

Notes Redemption Year Price 2016 ...... 104per cent 2017 and thereafter ...... 102per cent

Shall be substituted with the table below

Notes Redemption Year Price 2017 ...... 104.3750 per cent 2018 ...... 102.1875 per cent 2019 and thereafter ...... 100.00 per cent (t) the definition of ‘‘2020 Notes’’ in Condition 20 shall be substituted with ‘‘2018 Notes’’ means $500,000,000 8 per cent senior secured notes due 2018 issued by the issuer on the Issue Date under a trust deed.’’; (u) the definition of ‘‘Additional 2020 Notes’’ in Condition 20 shall be substituted with ‘‘Additional 2018 Notes’’ means any ‘Additional Notes’ as defined in the trust deed constituting the ‘‘2018 Notes’’; (v) in the definition of ‘‘Applicable Premium’’ in Condition 20, ‘‘2 May 2016’’ shall be substituted with ‘‘2 May 2017’’;

271 (w) in the definition of ‘‘Applicable Premium’’ in Condition 20, ‘‘2 May 2016’’ shall be substituted with ‘‘2 May 2017’’; (x) in clause (11) in the definition of ‘‘Consolidated Net Income’’ in Condition 20, ‘‘2020 Notes’’ shall be substituted with ‘‘2018 Notes’’; (y) in the definition of ‘‘Existing Indebtedness’’ in Condition 20, ‘‘2020 Notes’’ shall be substituted with ‘‘2018 Notes’’; (z) in clause (3) in the definition of ‘‘Permitted Collateral Liens’’ in Condition 20, ‘‘2020 Notes’’ shall be substituted with ‘‘2018 Notes’’; (aa) in clause (3) in the definition of ‘‘Permitted Collateral Liens’’ in Condition 20, ‘‘Guarantees of the 2020 Notes’’ shall be substituted with ‘‘Guarantees of the 2018 Notes’’; (bb) in clause (3) in the definition of ‘‘Permitted Collateral Liens’’ in Condition 20, ‘‘Additional 2020 Notes’’ shall be substituted with ‘‘Additional 2018 Notes’’; (cc) in clause (17) in the definition of ‘‘Permitted Investments’’ in Condition 20, ‘‘2020 Notes’’ shall be substituted with ‘‘2018 Notes’’; (dd) in the definition of ‘‘Treasury Rate’’ in Condition 20, ‘‘2 May 2016’’ shall be substituted with ‘‘2 May 2017’’.

272 SUMMARY OF THE PROVISIONS RELATING TO THE NOTES IN GLOBAL FORM The Global Note Certificates The Regulation S Notes will be evidenced on issue by the Unrestricted Global Certificates registered in the name of a nominee for, and deposited with a common depository on behalf of, Euroclear and Clearstream, Luxembourg. Beneficial interests in the Unrestricted Global Certificates may be held only through Euroclear or Clearstream, Luxembourg at any time. See ‘‘Clearing and Settlement—Book-Entry Procedures for the Global Note Certificates’’. By acquisition of a beneficial interest in an Unrestricted Global Certificate, the purchaser thereof will be deemed to represent, among other things, that it is not a U.S. person, that it is located outside the United States and that, if it determines to transfer such beneficial interest prior to the expiration of the ‘‘distribution compliance period’’ (as such terms are defined in Rules 902 and 903 of Regulation S), deemed to include the 40-day period after commencement of the Offering or the Issue Date, whichever is later, it will transfer such interest only (a) to a non-U.S. person in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S or (b) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believe is a QIB that is also a QP purchasing for its own account or the account of a QIB that is also a QP, in each case in accordance with any applicable securities laws of any state of the United States. See ‘‘Transfer Restrictions’’. The Rule 144A Notes will be evidenced on issue by the Restricted Global Certificates deposited with a custodian for, and registered in the name of a nominee of, DTC. Beneficial interests in the Restricted Global Certificates may only be held through DTC at any time. See ‘‘Clearing and Settlement— Book-Entry Procedures for the Global Note Certificates’’. By acquisition of a beneficial interest in a Rule 144A Global Note Certificate, the purchaser thereof will be deemed to represent, among other things, that it is a QIB that is also a QP purchasing for its own account or the account of a QIB that is also a QP and that, if in the future it determines to transfer such beneficial interest, it will transfer such interest in accordance with the procedures and restrictions contained in the Trust Deeds. See ‘‘Transfer Restrictions’’. Beneficial interests in the Global Certificates will be subject to certain restrictions on transfer set forth therein and in the Trust Deeds, and the Global Certificates will bear the applicable legends regarding the restrictions set forth under ‘‘Transfer Restrictions’’. A beneficial interest in an Unrestricted Global Certificate may be transferred to a person who takes delivery in the form of an interest in a Restricted Global Certificate only in denominations greater than or equal to the minimum denominations applicable to interests in the Restricted Global Certificate and only upon receipt by the Registrar of a written certification (in the form provided in the Paying Agency Agreements) to the effect that the transferor reasonably believes that the transferee is a QIB that is also a QP purchasing for its own account or the account of a QIB that is also a QP and that such transaction is in accordance with any applicable securities laws of any state of the United States or any other jurisdiction. Beneficial interests in a Restricted Global Certificate may be transferred to a person who takes delivery in the form of an interest in an Unrestricted Global Certificate only upon receipt by the Registrar of a written certification (in the form provided in the Paying Agency Agreements) from the transferor to the effect that the transfer is being made in an offshore transaction in accordance with Regulation S. Any beneficial interest in an Unrestricted Global Certificate that is transferred to a person who takes delivery in the form of an interest in a Restricted Global Certificate will, upon transfer, cease to be an interest in the Unrestricted Global Certificate and become an interest in the Restricted Global Certificate, and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in the Restricted Global Certificate for as long as it remains such an interest. Any beneficial interest in a Restricted Global Certificate that is transferred to a person who takes delivery in the form of an interest in an Unrestricted Global Certificate will, upon transfer, cease to be an interest in the Restricted Global Certificate and become an interest in the Unrestricted Global Certificate and, accordingly, will thereafter be subject to all transfer restrictions and other procedures applicable to beneficial interests in the Unrestricted Global Certificate for so long as it remains such an interest. No service charge will be made for any registration of transfer or exchange of Notes, but the Registrar may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith. Except in the limited circumstances described below, owners of beneficial interests in the Global Certificates will not be entitled to receive physical delivery of Individual Certificates (as defined in the Terms and Conditions of the Notes) in definitive form. The Notes are not issuable in bearer form.

273 Exchange for Individual Certificates in Definitive Form Exchange Each Global Certificate will be exchangeable, free of charge to the holder, on or after its Exchange Date (as defined below), in whole but not in part, for Notes in definitive form if: (i) a Global Certificate is held by or on behalf of (A) DTC, and DTC notifies the Issuer that it is no longer willing or able to discharge properly its responsibilities as depository with respect to such Global Certificate or ceases to be a ‘‘clearing agency’’ registered under the Exchange Act or if at any time it is no longer eligible to act as such, and the Issuer is unable to locate a qualified successor within 90 days of receiving notice or becoming aware of such ineligibility on the part of DTC or (B) Euroclear or Clearstream, Luxembourg, as the case may be, is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention to permanently cease business or does in fact do so, by the holder giving notice to the Registrar or any Transfer Agent and the Issuer or (ii) the Issuer would suffer a material disadvantage in respect of the Notes as a result of a change in the laws or regulations (taxation or otherwise) of any jurisdiction referred to in Condition 7 of the Terms and Conditions of the Notes, which would not be suffered were the Notes in definitive form and a notice to such effect signed by the requisite number of signatories of the Issuer is delivered to the Trustee by the Issuer giving notice to the Registrar or any Transfer Agent and the Noteholders of its intention to exchange a Global Note Certificate for Individual Certificates in definitive form on or after the Exchange Date (as defined below) specified in the notice or (iii) the Trustee has instituted or has been directed to institute any judicial proceeding in a court to enforce the rights of the Noteholders under the Notes and the Trustee has been advised by counsel that in connection with such proceeding it is necessary or appropriate for the Trustee to obtain possession of the Notes, by the Trustee giving notice to the Registrar or any Transfer Agent and the Noteholders. The Registrar will not register the transfer of, or exchange of interests in, a Global Certificate for Individual Certificates in definitive form for a period of 15 calendar days ending on the date for any payment of principal or interest in respect of the Notes. If, in respect of the Notes, only one of the Global Certificates (the ‘‘Exchanged Global Certificate’’) becomes exchangeable for Individual Certificates in definitive form in accordance with the above paragraphs, transfers of Notes may not take place between, on the one hand, persons holding Individual Certificates in definitive form issued in exchange for beneficial interests in the Exchanged Global Certificate and, on the other hand, persons wishing to purchase beneficial interests in the other Global Certificate. ‘‘Exchange Date’’ means a day falling not later than 90 days after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Registrar and any Transfer Agent is located.

Delivery In such circumstances, a Global Certificate shall be exchanged in full for Individual Certificates in definitive form, and the Issuer will, at the cost of the Issuer (and against such indemnity as the Registrar or any relevant Transfer Agent may require in respect of any tax or other duty of whatever nature which may be levied or imposed in connection with such exchange), cause sufficient Individual Certificates in definitive form to be executed and delivered to the Registrar for completion, authentication and dispatch to the relevant Noteholders. A person having an interest in a Global Certificate must provide the Registrar with (a) a written order containing instructions and such other information as the Issuer and the Registrar may require to complete, execute and deliver such Notes and (b) in the case of a Restricted Global Certificate only, a fully completed, signed certification substantially to the effect that the exchanging holder is not transferring its interest at the time of such exchange or, in the case of simultaneous sale pursuant to Rule 144A, a certification that the transfer is being made in compliance with the provisions of Rule 144A to a QIB that is also a QP. Individual Certificates in definitive form issued in exchange for a beneficial interest in a Restricted Global Certificate shall bear the legend applicable to transfer pursuant to Rule 144A, as set forth under ‘‘Transfer Restrictions’’.

Legends The holder of an Individual Certificate in definitive form may transfer the Notes evidenced thereby in whole or in part in the applicable minimum denomination by surrendering it at the specified office of the Registrar or any Transfer Agent, together with the completed form of transfer thereon. Upon the transfer,

274 exchange or replacement of a Rule 144A Individual Certificate in definitive form bearing the legend referred to under ‘‘Transfer Restrictions’’, or upon specific request for removal of the legend on a Rule 144A Individual Certificate in definitive form, the Issuer will deliver only Rule 144A Individual Certificates in definitive form that bear such legend, or will refuse to remove such legend, as the case may be, unless there is delivered to the Issuer and the Registrar such satisfactory evidence, which may include an opinion of counsel, as may reasonably be required by the Issuer that neither the legend nor the restrictions on transfer set forth therein are required to ensure compliance with the provisions of the Securities Act and the Investment Company Act. In addition, each Global Certificate will contain provisions which modify the Terms and Conditions of the Notes as they apply to the Notes evidenced by the relevant Global Certificate. The following is a summary of these provisions:

Notices Notwithstanding Condition 16 of the Terms and Conditions of the Notes, so long as a Global Certificate is held by or on behalf of DTC, Euroclear, Clearstream, Luxembourg or any other clearing system (an ‘‘Alternative Clearing System’’), notices to Noteholders represented by a Global Certificate may be given by delivery of the relevant notice to DTC, Euroclear, Clearstream, Luxembourg or (as the case may be) such Alternative Clearing System and such notices shall be deemed to have been given with the same effect as if they had been given in accordance with Condition 16, provided that while the Notes are listed on the Irish Stock Exchange, notices will also be given in accordance with the guidelines of the Irish Stock Exchange.

Record Date Notwithstanding Condition 6.3 of the Terms and Conditions of the Notes, ‘‘Record Date’’ shall mean the Clearing System Business Day before the due date for payment, where ‘‘Clearing System Business Day’’ means (i) in respect of a Global Note Certificate held on behalf of Euroclear or Clearstream, Luxembourg, a day when Euroclear or Clearstream, Luxembourg is open for business, and (ii) in respect of a Global Note Certificate held on behalf of DTC, a day when DTC is open for business.

Payment Payments of principal and interest in respect of the Global Certificates shall be made to the person who appears at the relevant time on the register of Noteholders as holder of a Global Note Certificate against presentation (in the case of payment of principal) and (if no further payment falls to be made on it) surrender thereof to or to the order of the Principal Paying Agent (or to or to the order of such other Paying Agent as shall have been notified to the Noteholders for this purpose) which shall endorse such payment or cause such payment to be endorsed in the relevant schedule thereto (such endorsement being prima facie evidence that the payment in question has been made). No person shall however be entitled to receive any payment on a Global Certificate falling due after the Exchange Date, unless the exchange of such Global Certificate for Individual Certificates in definitive form is improperly withheld or refused by or on behalf of the Issuer.

Meetings The holder of a Global Certificate will be treated as being one person for the purposes of any quorum requirements of, or the right to demand a poll at, a meeting of Noteholders and in any such meeting as having one vote in respect of each Note for which the relevant Global Certificate may be exchangeable.

Trustee’s Powers In considering the interests of Noteholders while a Global Certificate is held on behalf of a clearing system, the Trustee may have regard to any information provided to it by such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to such Global Certificate and may consider such interests as if such accountholders were the holders of such Global Certificate.

Cancellation Cancellation of any Note required by the Terms and Conditions of the Notes to be cancelled will be effected by reduction in the principal amount of the relevant Global Certificate by a record made in the Register.

275 REGULATORY OVERVIEW Below is a brief description of certain key provisions of Russian legislation relating to our operations in the freight transportation and logistics industry. This description is not comprehensive and is qualified in its entirety by reference to applicable law.

Ports The activity of port operators in Russia that handle seaborne trade cargo flows is subject to a wide variety of federal and regional laws and acts of secondary legislation, including civil and commercial law, laws regulating seaports, licensing, water and land use, anti-monopoly matters, environmental, health and safety concerns, employment and other issues, as well as the regulatory supervision of a number of federal, regional and local authorities.

Applicable Laws, Rules and Regulations The regulation of seaport and stevedoring operations in Russia is primarily based on the following laws and regulations. • The Merchant Shipping Code of the Russian Federation No. 81-FZ dated 30 April 1999, as amended (the ‘‘Merchant Shipping Code’’). The Merchant Shipping Code establishes the legal basis for commercial shipping along sea routes and inland waterways and regulates certain aspects of stevedoring operations. • The Water Code of the Russian Federation No. 74-FZ dated 3 June 2006, as amended (the ‘‘Water Code’’). The Water Code regulates the use and protection of bodies of water and establishes water use rights. In particular, the Water Code establishes the regime for use of the sea in connection with carrying out seaport operations (such as use of berths, fixed and floating sea platforms, as well as discharging waste and drainage waters into the sea) and specifies the procedure for provision of use rights to bodies of water. • The Land Code of the Russian Federation No. 136-FZ dated 25 October 2001, as amended (the ‘‘Land Code’’). The Land Code regulates the use and protection of land and establishes the legal basis for creation, transfer and termination of title to land plots. In particular, the Land Code sets out the rules for provision of land plots for various purposes, including allocation of seaports and facilities. • The Civil Code. The Civil Code establishes the general legal framework for commercial relations between persons and entities. In particular, the Civil Code (i) regulates property relations between commercial parties, (ii) sets the rules for obtaining and transferring ownership of movable and immovable property and (iii) provides the main rules for concluding, amending, performing and terminating contracts. • Federal Law ‘‘On Seaports in the Russian Federation and Introduction of Amendments to Certain Acts of Legislation of the Russian Federation’’ No. 261-FZ dated 8 November 2007, as amended (the ‘‘Law on Seaports’’). The Law on Seaports regulates commercial shipping in seaports, determines the procedures for the construction, opening and closing of seaports, sets out certain rules applicable to seaport operations, including provision of port services, and establishes the legal basis for state regulation of seaports and port activities in the Russian Federation. The Law on Seaports determines which property must remain under state ownership and which property may be rented out or used pursuant to concession agreements. • Federal Law ‘‘On Inland Sea Waters, Territorial Sea and Contiguous Zone of the Russian Federation’’ No. 155-FZ dated 31 July 1998, as amended (the ‘‘Law on Water’’). The Law on Water establishes the legal status and regime of inland sea waters, territorial sea and contiguous zone of the Russian Federation. In particular, the Law on Water regulates the call procedure for foreign vessels in ports. • Federal Law ‘‘On Special Economic Zones of the Russian Federation’’ No. 116-FZ dated 22 July 2005, as amended (the ‘‘Law on Special Economic Zones’’). The Law on Special Economic Zones sets out the regime of special economic zones in the Russian Federation (meaning the territory where special business performance policies are in effect, including but not limited to, the port special economic zones).

276 • Federal Law ‘‘On the Procedure for Making Foreign Investments in Commercial Entities Having Strategic Importance for the National Defence and State Security’’ No. 57-FZ dated 29 April 2008, as amended, (the ‘‘Strategic Investment Law’’). The Strategic Investment Law sets out certain restrictions for foreign investors to acquire control over entities that have strategic importance for the national defence and security of Russia. See ‘‘—Foreign Investment in Strategic Enterprises’’. • Federal Law ‘‘On Natural Monopolies’’ No. 147-FZ dated 17 August 1995, as amended (the ‘‘Natural Monopoly Law’’). The Natural Monopolies Law establishes the legal basis for state policy with respect to natural monopolies and sets out the spheres of activity, including port services, subject to regulation as natural monopolies. See also ‘‘—Antimonopoly and Related Regulation— Regulation of Natural Monopolies’’. • Federal Law ‘‘On Licensing of Certain Activities’’ No. 99-FZ dated 4 May 2011, as amended (the ‘‘Law on Licensing’’). The Law on Licensing regulates licensing of certain activities in Russia. See ‘‘—Licensing’’. • Federal Law ‘‘On Environmental Protection’’ No. 7-FZ dated 10 January 2002, as amended (the ‘‘Environmental Protection Law’’). The Environmental Protection Law establishes the state policy on environmental protection. See ‘‘—Environmental Regulation’’. • Federal Law ‘‘On Industrial Safety of Hazardous Industrial Facilities’’ No. 116-FZ dated 21 July 1997, as amended (the ‘‘Industrial Safety Law’’). The Industrial Safety Law sets out health and safety measures at industrial hazardous objects. See ‘‘—Health and Safety’’. • Resolution of the Government of the Russian Federation ‘‘On the State Regulation and Supervision of Prices (Tariffs, Charges) for Services of Natural Monopoly Entities at Transport Terminals, Ports, Airports and the Exploitation of Domestic Waterways’’ No. 293 dated 23 April 2008, as amended. The resolution determines state regulation and supervision of the pricing for, amongst other things, seaport services and sets out the list of seaport services rendered by natural monopoly entities subject to state regulation. • Order of the FTS ‘‘On the Procedure for Establishing (Change of) Port Prices (Tariffs, Charges) or their Maximum Level for Services of Natural Monopoly Entities in Transport Terminals, Ports, Airports and Services for the Use of Internal Water Infrastructure, as well as Lists of Documents Provided in Relation to their Establishment (Change)’’ No. 135-t/1 dated 24 June 2009. The Order regulates pricing for seaport services and sets the list of information and documents requisite for determination of port charges and tariffs or their maximum level. See also ‘‘—Tariffs’’. • Order of the Federal Energy Commission of the Russian Federation No. 45-t/3 dated 23 July 2002, as amended ‘‘On the Approval of Tariffs for Stevedoring and Related Services at the Vladivostok Commercial Sea Port’’ and Order of the Federal Energy Commission of the Russian Federation No. 3-t/1 dated 21 January 2003 ‘‘On Approval of Tariffs for Stevedoring and Related Services at the Vladivostok Commercial Sea Port’’ (the ‘‘VMTP Orders’’). The VMTP Orders establish the procedure for implementing the tariffs for stevedoring and related services rendered at the Port of Vladivostok. See also ‘‘—Tariffs’’.

Regulatory Authorities Several governmental agencies participate in the regulation of the Russian port industry. Functions and authorities of these agencies are at times ambiguous and unclear. Ports activity is mainly regulated by the Ministry of Transport of the Russian Federation, the Federal Service for Transport Supervision, the Federal Agency for Sea and River Transport (reporting to the Ministry of Transport), Seaports Authorities (reporting to the Federal Agency for Sea and River Transport) and the Federal State Unitary Enterprise Rosmorport: • The Ministry of Transport generally regulates and supervises the transport industry and infrastructure in Russia. The Ministry of Transport has several agencies specialising in the regulation of specific types of transport; • The Federal Service for Transport Supervision, which is under the Ministry of Transport, oversees compliance with the laws and regulations governing transport (including seaports), inland water transport, railway transport, motor and electric-powered city transport, civil aviation, industrial transport, and road transport, industrial transport and road facilities and issues licences for certain

277 activities, including loading and unloading of hazardous cargo in seaports, and other authorisation documents; • The Federal Agency of Sea and River Transport carries out state services and manages state-owned property in the field of sea and river transport, holds tenders and enters into government procurement contracts for the provision of certain goods and services required by the agency and conducts research at the request of state bodies; • Seaport Authorities are state organisations that supervise seaport activities. In particular, they supervise compliance by ports with applicable Russian and international law, maintain the register of vessels operated by ports, control navigation within harbours, provide security and ecological safety control and exercise certain other functions; and • Rosmorport is a federal state unitary enterprise that manages and controls the use of state-owned infrastructure operated by seaports and quays, including hydrotechnical constructions, on behalf of the Federal Agency for State Property Management, save for infrastructure facilities managed by the Seaport Authorities. Rosmorport is responsible for the collection of port duties and for allocating them towards construction and modernisation of port infrastructure. Rosmorport also oversees the implementation of certain governmental port development programmes and regulates tariffs for the lease of property assigned to it. Border and customs activities are regulated by two authorities: • The Border Guard of the Federal Security Service of Russia deals with international ships calling at Russian ports; and • The Federal Customs Service determines state customs policy, exercises legal regulation and supervisory powers in the customs sphere, provides customs clearance for all exports and imports, exercises the functions of a currency control agent and special functions to counter smuggling and other crimes and administrative offences. The financial activity of ports is regulated by the FTS and FAS: • The FTS sets maximum tariff rates for the services rendered by natural monopolies, including seaport operators. The FTS also acts as a regulatory authority for natural monopolies in certain other aspects of their activities. See ‘‘—Tariffs’’; and • FAS supervises competition and pricing regulations and monitors compliance by natural monopolies with anti-monopoly and natural monopoly law, particularly in regards to equal access of customers to the services provided by natural monopolies. There are certain other government bodies which, together with their subdivisions, have authority over various issues relating to our ports business.

Licensing We are required to obtain numerous licences from governmental authorities to conduct port operations in Russia, including seaport operations, such as certain towing operations, stevedoring services with respect to hazardous cargos in sea ports and transportation of hazardous cargos via sea transport. According to the Law on Licensing, the licensing of loading and unloading hazardous cargo in seaports and certain others activities will be replaced by a mandatory liability insurance programme. However, as of the date of this Offering Memorandum, the relevant federal law has not been adopted. Under the Law on Licensing, licences for the activities described above are issued for an indefinite period. The licensing authority can suspend and, following upon petition of the courts, cancel a licence if a licensee is held liable for failing to comply with an order to cure a gross violation.

Restrictions on Ownership Under Russian law, a seaport is defined as a complex of transportation infrastructure facilities located on a specially designated territory and aquatic area to service merchant ships and fisheries and provide passenger and cargo services, including transshipment, and other services typical for a sea port. According to the Water Code, the aquatic area is exclusively owned by the state, whereas infrastructure facilities and land plots underlying them may be owned, to a certain extent, by Russian companies.

278 According to the Law on Sea Ports, Russian companies may own sea port infrastructure facilities, except for (i) certain facilities required to be owned by the Russian Federation, such as ship channels, radar systems and navigation equipment, and (ii) state-owned facilities not subject to privatisation or transfer to municipal authorities, such as berths, piers and access communications used by two or more terminals, except for facilities that have been acquired or built with the use of private funds. Foreign individuals and companies are not allowed to own either transportation infrastructure of a sea port or land plots underlying such infrastructure. Additional restrictions on foreign ownership of land plots are set out in the Land Code. In particular, foreigners may not own land plots on the border or within other specially protected territories of the Russian Federation. The list of border territories was adopted by Order of the President of the Russian Federation No. 26 dated 9 January 2011, and includes, inter alia, the Vladivostok city district.

Land Use Rights Russian legislation regulating water use provides that in order to obtain a permit to use the sea, a document certifying the right to use the land plot adjacent to the sea must be provided to the relevant regional state or municipal authority. Under the Land Code, companies may have one of the following rights with regard to land in the Russian Federation: (i) ownership; (ii) lease; (iii) right of free use for a fixed term; or (iv) right of perpetual use. However, rights of free use for a fixed term are now less common, and those companies that have obtained a right of perpetual use over land prior to the enactment of the Land Code are required by 1 July 2012 to either purchase the land from or enter into a land lease agreement with the relevant federal, regional or municipal authority owning the land. Those companies that have a right of perpetual use over land where power transmission lines, communication lines, pipelines and railway lines are located may either purchase such land or enter into a land lease agreement by 1 January 2015. Most land in the Russian Federation is owned by federal, regional or municipal authorities, which can sell, lease or grant other use rights to the land to third parties through public auctions or tenders or private negotiations.

Lease of Quays under Russian Law Russian law defines a quay as real estate. The quay is also a hydrotechnical object for the purposes of the Federal Law ‘‘On the Safety of Hydrotechnical Construction’’ No. 117-FZ dated 21 July 1997, as amended (the ‘‘Hydrotechnical Safety Law’’). Under the Seaport Law, quays, subject to limited exemptions, are owned by the Russian Federation itself. It is generally possible for an individual or a legal entity to obtain a leasehold to a quay on terms and conditions set by the Civil Code, the Law on Seaports and the Hydrotechnical Safety Law. The term of a quay lease cannot exceed 49 years. The lessee has the right of first refusal to renew the leasehold, unless the lease agreement provides otherwise. In accordance with the Law on Seaports, a leasehold to state property at seaports may only be provided on the basis of a tender auction, except where an owner or holder of real estate adjacent to the quay which is used for providing seaport services is by operation of law entitled to obtain a leasehold to the respective quay without auction. A quay lease agreement for a term of at least one year must be registered in the Unified Register of Rights to and Transactions with Immovable Property. Accordingly, the lease rights to a quay arise only at the time of registration of the relevant quay lease agreement in the register. A real estate lease with a term less than one year does not require such registration. Usually, rental rates for quay leases are not subject to state regulation. However, where the quays are owned by the Russian Federation, rental rates are required to be determined by an independent appraiser in accordance with Russian law.

Water Use Rights Seas or separate parts thereof (for example, straits, gulfs, harbours) located on Russian territory are state-owned. Pursuant to the Water Code, use of the sea in connection with carrying out seaport activities, including use of berths and fixed and floating sea platforms and the discharging of waste and drainage waters into the sea, requires a permit from the relevant regional state or municipal authorities.

279 A permit may be suspended by a court decision or administrative order in certain cases where continued use endangers human health and safety or otherwise inflicts harm on the environment. A permit may be cancelled by court if the activities carried out at the seaport fall outside the scope of permitted activities as set out in the permit or otherwise violate Russian law. Pursuant to the Water Code, if the activities cause harm to the sea, including pollution, water quality degradation, desiccation or depletion of water, the person responsible for inflicting such harm shall provide compensation. The methodology for establishing compensation as a result of such harm is set out in regulations of the Ministry of Natural Resources and Ecology.

Tariffs We are deemed to have natural monopoly status in the provision of port services, and thus those services are subject to tariff regulation. Our ports subsidiaries which are included on FTS’ register of natural monopolies and are subject to state regulation are VMTP, Vladportbunker and TET. According to the Resolution of the Government of the Russian Federation No. 293 ‘‘On State Regulation and Control of Prices (Tariffs, Charges) on Services Provided by Natural Monopolies in Transport Terminals, Ports and Airports, and on Services on the Use of Inland Waterway Infrastructure’’ dated 23 April 2008, as amended (‘‘Resolution No. 293’’), tariffs on ports services are set by the FTS using the cost-plus method. The tariffs are set for each company separately and are not industry-wide. For example, tariffs for VMTP are set by the VMTP Orders. The VMTP Orders provide that VMTP is allowed to apply a discount of up to 30% off the tariff and to enact ‘‘experimental’’ tariffs in respect of services not covered by existing tariffs or services that use certain new technologies. Experimental tariffs may be applied for a term of up to six months, subject to notification of the regulatory authority, and then shall be replaced with a final tariff approved by the regulatory authority.

Rail Applicable Laws, Rules and Regulations The regulation of railway transportation in Russia is primarily based on the following laws and regulations: • Federal Law ‘‘On Railway Transport in the Russian Federation’’ No. 17-FZ dated 10 January 2003, as amended (the ‘‘Railway Transport Law’’). The Railway Transport Law establishes the legal framework for the functioning of railway transport. • Federal Law ‘‘Charter of Railway Transport of Russian Federation’’ No. 18-FZ dated 10 January 2003, as amended (the ‘‘Railway Transport Charter’’). The Railway Transport Charter regulates all types of relations between shippers, passengers, consignors, consignees, owners of railway transport infrastructure and other users and providers of railway transport services, including the principal terms and conditions for transportation services, liability issues and procedures for dispute resolution. • Natural Monopolies Law. In accordance with the Natural Monopolies Law, the prices charged by Russian Railways for certain core services are regulated as natural monopolies. • Federal Law ‘‘On Technical Regulation’’ No. 184-FZ dated 27 December 2002, as amended (the ‘‘Technical Regulation Law’’). The Technical Regulation Law determines the rules relating to the development, enactment, application and enforcement of obligatory technical requirements and the development of voluntary standards relating to manufacturing processes, operations, storage, transportation, selling and utilisation. See ‘‘—Certification of Rolling Stock and Equipment’’ for a discussion of the applicable provisions of the Technical Regulation Law. • Government Regulation ‘‘On Approval of the Rules for Rendering the Services on Common Railway Carrier Infrastructure’’ No. 703 dated 20 November 2003 (the ‘‘Rules for Access to Infrastructure’’). The Rules for Access to Infrastructure provide legal grounds for the use of the railway infrastructure by railway operators. • Government Regulation ‘‘On the Programme of Structural Reform of Railway Transport’’ No. 384 dated 18 May 2001, as amended. See ‘‘—Structural Reform of Railway Transportation’’ for the discussion of the Rail Reform Programme.

280 • Government Decree ‘‘On the Development Strategy for Railway Transportation in the Russian Federation up to 2030’’ No. 877-R dated 17 June 2008 (the ‘‘2030 Development Strategy’’). The 2030 Development Strategy provides a roadmap for implementing the remaining reforms of the Russian rail transportation market, lists priorities for modernisation, improvement and expansion of the rail transportation industry in Russia, and sets goals for meeting public transportation needs and facilitating regional social and economic development. • Government Regulation ‘‘On State Regulation and Control of Tariffs, Fees and Duties in Relation to Works (Services) Provided by Natural Monopolies Entities in the Area of Railway Transportation’’ No. 643 dated 5 August 2009 (the ‘‘Regulation on Natural Monopolies in Rail Transportation’’), which sets out the methods for regulating the services provided by Russian Railways determined to be natural monopolies, including the setting of tariffs. • Government Regulation ‘‘On Approval of the Rules on Forwarding Services’’ No. 554 dated 8 September 2006, as amended (the ‘‘Forwarding Services Rules’’), which sets out procedures for rendering forwarding services. • FTS Decree ‘‘On Approval of the Method for Calculating the Economically Justified Expenses and Normative Profit that are Considered when Determining the Economically Justified Index to the Current Level of Tariffs, Fees and Duties for the Freight Railway Transportation’’ No. 198-t/1 dated 31 August 2010, which provides guidelines for indexation of tariffs imposed in accordance with the Regulation on Natural Monopolies in Rail Transportation. • Federal Energy Commission Regulation ‘‘On Approval of the Price List No. 10-01 ‘‘Tariffs for Freight Transportation and Infrastructure Services Provided by Russian Railways’’ No. 47-t/5 dated 17 June 2003, as amended (the ‘‘Tariff 10-01’’). See ‘‘—Competition and Pricing’’ for the discussion of the main provisions of Tariff 10-01. • Ministry of Railway Transport Instruction ‘‘On Work Performance for the Establishment of a Certification System’’ No. 166u dated 12 November 1996, as amended (the ‘‘Railway Transport Certification Rules’’). See ‘‘—Certification of Rolling Stock and Equipment’’ for a discussion of the main provisions of the Railway Transport Certification Rules. • Order of the Ministry of Transport ‘‘On Approval of Rules for Freight Transportation in the Trains Composed of Locomotives and Railcars Owned or Otherwise Possessed by Consignors, Consignees or Other Legal Entities or Individuals Which are not Railway Carriers Themselves’’ No. 150 dated 22 October 2007 (the ‘‘Rules for Freight Transportation’’). The Rules for Freight Transportation regulate the procedure and terms of cargo railway transportation by trains consisting of locomotives and railcars not owned by the railway carrier. In addition, the railway transportation in Russia is also based on, among other laws and regulations, the Civil Code, the Tax Code, Federal Law ‘‘On Forwarding Services’’ No. 87-FZ dated 30 June 2003 (the ‘‘Forwarding Law’’), the Licensing Law and Federal Law ‘‘On Financial Leasing’’ No. 164-FZ dated 29 October 1998, as amended.

International Agreements Russia is a party to certain international agreements governing railway transportation. In particular, Russia is a party to the Agreement on International Railway Cargo Transportation dated 1 November 1951, which establishes terms of transportation and a single set of transportation documents to be used in the transportation of cargo among the railways of 23 countries of Europe and Asia. In July 2009, Russia joined the Convention Concerning International Carriage by Rail dated 9 May 1980, as amended, which aims to establish a system of uniform law applicable to, inter alia, the carriage of freight in direct international traffic between member states.

Regulatory Authorities At the federal level, regulatory powers over the Russian railway industry are primarily divided between the Government, the Ministry of Transport, the Ministry of Economic Development and the Ministry of Finance of the Russian Federation. Regulation of the rail industry is also performed by a number of federal agencies and services, which are responsible for management of state property and provision of state services, oversight of compliance

281 with regulations and various other regulatory functions. These federal services and agencies include the following: • the Federal Agency for Railway Transport, which implements state policy, provides state services and manages state property in the Russian railway transportation sector, maintains the registers of rolling stock and makes decisions on suspension of freight transportation on certain routes; • the Federal Transport Supervision Service, which carries out the licensing of certain activities in the railway sector and otherwise supervises railway transport; • the FTS, which determines and implements state regulation of tariffs and regulates the pricing of natural monopolies in the Russian Federation; and • FAS, which monitors and supervises compliance with Russian competition legislation. At the level of the CIS, the Commonwealth Railway Transportation Council coordinates railway transport activity and provides recommendations with respect to pricing rates and technical policy within the territory of CIS countries. Russian Railways also performs certain regulatory functions in the Russian railway industry. Russian Railways issues approvals for the use of locomotives on particular routes, sets guidelines for the transportation of certain cargo in certain types of railcars and determines the procedure for submitting and agreeing freight carriage applications.

Structural Reform of Railway Transportation The Russian railway system has been undergoing the Rail Reform Programme. See ‘‘Risk Factors— Risks Relating to Our Business and Industry—Risks Relating to Our Rail Division—We are subject to risks relating to delays in or changes to the rail industry’s reform programme or the changes that may result from such reform programme’’. There were three stages of implementation of the Rail Reform Programme.

First stage: Preparation In the first stage, the business and non-core facilities and regulatory functions of the Russian railway system were separated. The first stage was completed in 2003 when Russian Railways was created and the number of private companies participating in the freight rail market was increased.

Second stage: Corporate build-up and encouragement of competition Between 2003 and 2005, the Russian railway industry continued to undergo liberalisation, which included the adoption of Tariff 10-01, resulting in a significant increase in the number of railcars owned by private operators. In the second stage, activities that could become competing businesses were separated into newly-established subsidiaries of Russian Railways. 27 subsidiaries were established to operate various businesses, including railway repair and maintenance, private railcar operations, industrial production, research and development, construction and other non-core activities. The second stage of the Rail Reform Programme also was designed to encourage free market pricing in the competitive sectors of the railway industry, including the elimination of cross-subsidies of passenger transportation at the expense of freight traffic.

Third stage: Formation and development of a competitive market Between 2006 and 2010, the Rail Reform Programme continued the process of creating a competitive environment in freight and passenger railway transportation and encouraging private investment into modernisation of railway-related assets. 58 additional subsidiaries of Russian Railways were created during the third stage, including, among others, two freight rail operators (Freight One and Freight Two), a container transportation subsidiary (TransContainer), a long-distance passenger operator (Federal Passenger Company), and other subsidiaries such as local suburban passenger operators, repair and maintenance companies, and companies offering certain non-core services.

282 Subsequent reforms In order to improve rail fleet management, the FTS has passed several amendments to its regulations, effective 1 November 2012, with the aim of unifying empty-run tariffs into a single tariff applicable to gondola (open top) railcars and flatwagons (subject to certain exemptions), irrespective of the class and nature of cargo last transported.

Railway Operators Under Russian law, railways may be owned by the state, municipal authorities, companies and individual entrepreneurs (whether Russian or foreign). However, in practice, virtually all Russian rail infrastructure is owned by Russian Railways. In addition, Federal Law No. 29-FZ dated 27 February 2003 ‘‘On Specifics of Management and Disposal of Rail Transport Property’’, as amended, provides that main railway lines and related infrastructure, as well as railways important for national defence, may only be owned by Russian Railways and the Russian Federation.

Rolling Stock Operators Under the Railway Transport Law, a rolling stock operator is a legal entity or an individual entrepreneur that owns or otherwise possesses railcars, and which provides its rolling stock for use on the basis of an agreement with a carrier. Russian law does not provide any restrictions on ownership of railcars in Russia, internal or foreign. Rolling stock operators may also provide either their own or leased locomotives, or may rely on locomotives provided by Russian Railways. The number of private locomotive operators is currently limited because of a deficit of available locomotives on the market, a lack of a well-developed traffic controlling system and insufficient skill in transportation of the significant volume of cargo in traffic. Current legislation makes a distinction between rolling stock operators, which own cars and carriers, and assume an obligation to move cargo from one point to another on the railway network, and owners of infrastructure such as railway tracks and railway stations. We are classified as a rolling stock operator. In order to access public railway infrastructure, rolling stock operators must obtain Russian Railways’ consent regarding the technological operating conditions of their private train formations. The locomotive owner must also obtain consent to use the relevant railway of Russian Railways for each trip, or series of trips, made by its private locomotive, as well as conclude agreements with Russian Railways on technical maintenance, on-going repairs and locomotive operation. Russian Railways provides crews for locomotives and locomotive repairs. The tariffs for both services are not regulated by FTS but are set out in the Regulation of Russian Railways No. 2328r dated 30 December 2005, as amended. In line with the reform of the railway sector and with a view to enhancing the development of independent local carriers, the FTS introduced an infrastructure tariff in 2011, the legal framework for which has not yet been established.

Licensing The Law on Licensing sets forth the requirements for obtaining licences in respect of certain activities, including railway transportation of hazardous cargo. Railway transportation of non-hazardous cargo is no longer subject to licensing.

Certification of Rolling Stock and Equipment The Railway Transport Law requires rolling stock, the components of rolling stock, rail equipment and elements of infrastructure to be certified for compliance with safety requirements, including fire safety, sanitary, epidemiological and environmental protection rules. The Railway Transport Certification Rules specify particular types of rolling stock and equipment which must be certified. Certified rolling stock must be inspected at least once a year to ensure continued compliance. Inspection control findings are documented in an official act of inspection. If a breach of certification rules or legal requirements is determined to have occurred, the certificate will be suspended until the certificate holder is able to cure the problem. If the problem is not cured in due course, the certificate may be revoked.

283 Freight Forwarding Services Forwarding services are regulated by the Civil Code, the Forwarding Law, the Forwarding Services Rules and the state standards adopted by Russian governmental authorities. The Russian Forwarders Association, a nongovernmental organisation, has also adopted non-binding general terms of forwarding. Forwarding services include organising cargo transportation, facilitating carriage agreements, supporting cargo shipments and receipts and certain other services ancillary to cargo transportation. The Forwarding Law imposes liability on a forwarder for failure to perform or improper performance of its obligations. This liability is limited in most cases to the actual damage resulting from such failure to perform or improper performance. The law also provides for a one-year limitation period on claims in relation to forwarding services. Forwarding services are not subject to tariff regulation, and no special permits, licences or authorisations are needed to carry out this type of activity.

Competition and Pricing In Russia, Russian Railways is the only company deemed to carry out ‘‘rail cargo shipments’’; other transportation companies have the status of ‘‘operators of railcars’’ and, to access the railway infrastructure, they are required to conclude agreements with Russian Railways. Russian Railways is required to provide such access on a non-discriminatory basis. Tariffs are designed to ensure a reasonable profit and to take into account projections for infrastructure renovation. Tariffs are set annually but may be reviewed at any time at the discretion of the FTS or the Russian Ministry of Transport (in case of international transit), or as a response to a request from the Russian Ministry of Transport, a state authority or a company. The freight tariff structure for the Russian railway sector is divided into two main parts: (a) a general infrastructure and locomotive charge and (b) a railcar charge. While the infrastructure and locomotive component of the tariff is set by the FTS for all market participants, including Russian Railways and private operators, the railcar component established by the FTS applies only to Russian Railways. Accordingly, private operators, including us, are free to set their own rates of railcar charges. The infrastructure and locomotive tariff varies depending on whether the train formation has a private locomotive or a locomotive owned by Russian Railways. The tariff imposed on a private locomotive operator is generally lower than the tariff imposed for the use of a locomotive owned by Russian Railways. The tariffs charged by Russian Railways primarily depend on the distance, cargo class and type of destination, such as whether the freight is being transported internationally or only within Russia, including transportation to and from the sea ports. There are three classes of cargo: From the least expensive Class 1 cargo to the most expensive Class 3 cargo. Our cargo generally falls within Class 2 (oil and oil products) and Class 3 (metals). The formation of Freight One and Freight Two has increased competition in the railway transportation sector and has contributed to the liberalisation of prices in the railcar market. Because railcar charges of Freight One and Freight Two are not subject to FTS regulation, such charges are now more aligned to market rates and, on their own, do not serve as benchmarks for price competition. For more details see ‘‘—Antimonopoly and Related Regulation—Regulation of Natural Monopolies’’.

Shipping Applicable Laws, Rules and Regulations Our shipping operations are regulated by international conventions, and the laws and regulations in force in the jurisdictions where our ships operate and are registered. The main Russian laws and regulations governing shipping include the following: • The Merchant Shipping Code, which establishes the legal framework for regulating sea carriage contracts, including the issuance of bills of lading and the parties’ rights and obligations. • The Law on Sea Ports, which regulates the acceptance of goods for shipping, delivery of goods from the carrier to the consignee and cargo transhipment. See ‘‘—Ports—Applicable Laws, Rules and Regulations’’.

284 • Order of the Ministry of Transport ‘‘On Approval of Rules for Registration of Vessels and Title to Vessels in Sea Ports’’ No. 277 dated 9 December 2010, which sets out procedures for the registration of vessels in state registers as required by the Merchant Shipping Code. • Order of the Ministry of Transport of the Russian Federation ‘‘On Approval of Safety Rules for Carriage of Cargo by Sea’’ No. VR-1/p dated 21 April 2003, which regulates sea carriage of general and bulk goods, establishing certain packaging, storage and safety requirements with respect to the cargo being transported. • Order of the Federal Service of the Russian Navy (‘‘Rosmorflot’’) ‘‘On Approval of Safety Rules for Carriage of Foods, Animals, Poultry and Raw Material of Animal Origin, Plants, and Recommendations thereto’’ No. 43 dated 29 November 1996, which enacts safety rules for carriage by sea of certain food products and plants subject to quarantine. • Order of Rosmorflot ‘‘On Approval and Implementation of Safety Rules for Carriage of Particular Types of General Goods by Sea’’ No. 44 dated 29 November 1996, which enacts a number of safety rules for the sea carriage of certain types of cargo, including steel products, concrete products, heavy and oversized cargo, granite, marble and rubber. • Order of Rosmorflot ‘‘On Approval and Implementation of Rules of Shipping of Cargo in Containers by Sea Transport’’ No. 39 dated 22 October 1996, which sets out rules for shipments of goods by container, including requirements for the proper stowage and securing of goods in containers. • Order of the Ministry of Navy of the USSR ‘‘On Approval of Rules for Carriage of Hazardous Goods by Sea’’ No. 56 dated 3 May 1989, which enacts rules for the transport of certain types of hazardous goods in containers or other packages. Our shipping operations are also regulated under international law, including the following conventions: • International Convention for the Unification of Certain Rules of Law relating to Bills of Lading dated 25 August 1924, as amended by the Protocol dated 23 February 1968 (the ‘‘Hague-Visby Rules’’) and SDR Protocol dated 21 December 1979. The Hague-Visby Rules represent customary international maritime shipping rules underlying national legislation, including the Merchant Shipping Code. They apply to any bill of lading related to a carriage of goods between the sea ports in two different states if such bill of lading is issued in a state-party thereto, the carriage is from a port of a state-party thereto, or the contract contained in or evidenced by a bill of lading expressly provides that the contract is governed by the Hague-Visby Rules or the legislation of any state-party thereto, irrespective of the nationality of the ship, the carrier, the shipper, the consignee or any other interested person. • United Nations Convention on the Carriage of Goods by Sea dated 30 March 1978 (the ‘‘Hamburg Rules’’). The Hamburg Rules regulate maritime shipping contracts. The Russian Federation is not a party to the Hamburg Rules, but the Hamburg Rules apply where the port of loading or the port of discharge is located in one of the 34 states-parties to the Hamburg Rules, or if the bill of lading is issued in one of such states or expressly provides that the contract is governed by the Hamburg Rules or the legislation of any state-party thereto, irrespective of the nationality of the ship, the carrier, the actual carrier, the shipper, the consignee or any other interested person. • International Convention on Civil Liability for Oil Pollution Damage dated 29 November 1969, as amended by the Protocol dated 27 November 1992, which imposes strict liability on the owner of a vessel that discharges oil. • International Convention for the Prevention of Pollution from Ships dated 2 November 1973 (the ‘‘MARPOL’’), as amended by two protocols adopted by the International Maritime Organisation in 1978 and 1997, respectively. MARPOL is aimed at preventing and minimising pollution by oil, noxious liquid substances, packaged hazardous substances, sewage and garbage from ships, as well as air pollution from ships. • International Convention for the Safety of Life at Sea dated 1 November 1974, as amended (the ‘‘SOLAS’’). SOLAS is the main international treaty related to the safety of merchant vessels, setting out minimum standards for the proper construction and operation of ships.

285 Regulatory Authorities The following governmental authorities, in addition to certain other government bodies, regulate our shipping operations: • The Ministry of Transport issues regulations and safety rules, develops state policy in the sphere of shipping transportation and coordinates the work of the Federal Service for Transport Supervision and the Federal Agency of Sea and River Transport; • The Federal Service for Transport Supervision oversees compliance with the laws, regulations and international treaties governing transport (including shipping transportation) and issues licences for certain activities, including loading and unloading of hazardous cargo in seaports, and other authorisation documents, and organises the registration of sea vessels; • The Federal Agency of Sea and River Transport (formerly Rosmorflot) carries out state services and manages state-owned property in the field of sea and river transport, organises work to prevent oil pollution in the sea independent of the ship’s nationality, carries out work to secure navigation on the Northern Sea Route, coordinates the work of rescue services, certifies shipping crew members and classifies and establishes requirements for navigation equipment; • Federal Autonomous Institution ‘‘Russian Maritime Register of Shipping’’ (the ‘‘Russian Maritime Register’’) is a non-commercial organisation that classifies and surveys sea and mixed river-sea going vessels and their equipment. The Russian Maritime Register monitors the compliance of vessels with the requirements of international treaties and Russian law, maintains a register of certified vessels and maritime objects, conducts tonnage measurement and technological audits of vessels and acts as an expert advisor to the Ministry of Transport for the drafting of legislation and regulations in the sphere of shipping transportation.

Licensing We require licences and permits to transport hazardous cargo by sea and to carry out certain towing operations, among other licences and permits.

Registration of Vessels and Right to Operate under the Russian Flag According to the Merchant Shipping Code, a vessel must be registered in one of the state registers: the State Vessels Register, the Register of Small Vessels, the Bareboat-Charter Register, the Russian International Register of Vessels or the Register of Vessels Under Construction. The State Vessels Register covers all vessels, except for small vessels used for non-commercial activities, which are registered in the Register of Small Vessels. The Bareboat-Charter Register includes vessels already registered in foreign states and freighted to Russian consignors without crew. Such vessels also require a permit from the Federal Service for Transport Supervision for temporary carrying of the Russian flag. Their registration in the Russian Bareboat-Charter Register is valid only for the duration of the bareboat- charter contract. The Russian International Register of Vessels includes vessels used for international cargo and passenger shipping. The vessel’s registration in the Russian International Register of Vessels is subject to annual confirmation. Vessels under construction are subject to registration in the Register of Vessels Under Construction, which contains information on the ship-owner and the technical characteristics and encumbrances with respect to such vessel. A vessel can only be registered in one of the above mentioned registers. The registers are maintained by sea port captains. Vessels owned by foreign companies are generally allowed to operate in Russian waters but are not allowed to operate under the Russian flag or engage in coastal shipping, i.e., cabotage, or icebreaking, salvaging, towing, hydraulic engineering works, underwater works or other similar activities carried out in the internal sea waters or territorial sea of Russia. A foreign vessel can temporarily carry the Russian flag if freighted under a bareboat-charter contract to a Russian consignor if such shift is approved by the ship-owner and mortgagor of the vessel (if applicable) and permitted under the law of the state where such vessel is registered and if the vessel’s right to carry a foreign flag is suspended or will be suspended by the time the vessel obtains the right to carry the Russian flag. A foreign vessel’s right to carry the Russian flag is valid for the duration of the bareboat-charter contract. A vessel acquired outside Russia also has the right to carry the Russian flag under a temporary permit issued by a consular post of the Russian Federation, which is valid through the vessel’s state registration.

286 Between 2005 and 2011, several amendments to Russian law were adopted to incentivise owners of vessels to register under the Russian flag instead of shifting to offshore jurisdictions. In particular, owners of vessels registered in the Russian International Register of Vessels have been exempt from profit tax on profits from operation and/or sale of such vessels, VAT on sale or import of such vessels, transport tax and property tax. Moreover, the amendments expanded the list of vessels qualifying for registration in the Russian International Register of Vessels. Thus, the Russian International Register of Vessels currently covers not only vessels used for international shipping, but also vessels used for transportation and towing between Russian sea ports and vessels used for exploration and exploitation of Russian sea bed resources, hydraulic engineering and underwater technical works, among other vessels.

Certification After registration, a vessel must be classified and surveyed. The Russian Maritime Register is the only Russian institution authorised to carry out the classification and survey of vessels registered in any of Russian state registers. The Russian Maritime Register assigns a class to the vessel and monitors its compliance with the requirements of relevant Russian and international law. Furthermore, as a classification and survey institution, the Russian Maritime Register adopts rules governing vessel classification and construction. In cases of non-compliance with these rules, the Russian Maritime Register can suspend or revoke a previously issued certificate. Each vessel must also obtain a number of documents, including a certificate confirming the right to operate under the Russian flag, a permit for a ship radio station (if any) and a certificate confirming compliance with sanitation requirements.

Competition and Pricing Maritime cargo shipment is not per se considered to be a natural monopolistic activity. Accordingly, prices for such services are set on an unregulated, free-market basis. However, in case of unfair market practices or monopolistic prices, the entity abusing its dominant position in the market will be subject to limitations and liability established by competition legislation. See ‘‘—Antimonopoly and Related Regulation’’ below. Starting from 27 January 2013, the provision of icebreaking services on the Northern sea route is considered to be a natural monopoly. Since legal acts regulating tariffs on icebreaking services have not yet been adopted, we are unable to confirm the extent to which our icebreaking services will be subject to tariff regulation in the future.

Antimonopoly and Related Regulation Antimonopoly Approval of Certain Transactions The antimonopoly regulation of the Russian Federation is based on the Competition Law and other federal laws and regulations governing antimonopoly issues. Antimonopoly regulation of the Russian Federation is aimed at the prevention and termination of monopolistic activity and control over economic concentration and governs relations that involve, among others, Russian legal entities, foreign legal entities, state agencies of the Russian Federation and local government authorities. Antimonopoly restrictions include prohibitions on the conclusion of anti-competitive agreements, the exercise of anti-competitive coordinated actions, acts resulting in unfair competition and the abuse of a dominant position. Compliance with antimonopoly legislation in Russia is monitored by FAS. Russian legislation grants FAS the powers necessary for the performance of its functions and for dealing with violations of antimonopoly legislation. FAS is, among other things, authorised: (i) to initiate or examine cases regarding the violation of antimonopoly legislation; (ii) to issue binding orders to business entities in cases specified in the Competition Law; (iii) to hold commercial and non-commercial organisations and their officers to account for violating antimonopoly laws in the instances and by the procedure established by Russian legislation; and (iv) to file with a court or an arbitrazh court applications in respect of violations of antimonopoly laws, including, among other things, invalidating in full or in part any agreements that do not comply with antimonopoly legislation.

287 (i) The Competition Law provides for antimonopoly control over economic concentration and requires prior approval by FAS of the following transactions: • acquisition by a person (or its group) of more than 25%, 50%, or 75% of the voting shares of a Russian joint stock company (or more than 1⁄3, 1⁄2 or 2⁄3 participation interest in a Russian limited liability company), • acquisition by a person (or its group) of the core production assets (with certain exceptions) located in the territory of the Russian Federation and/or intangible assets of an entity if the balance sheet value of such assets exceeds 20% of the total balance sheet value of the core production and/or intangible assets of such entity, as applicable, • obtaining rights to determine the business activity of a Russian entity or to exercise the powers of its executive body by a person (or its group), • acquisition by a person (or its group) of more than 50% of the voting shares (participation interest) of a foreign legal entity or obtaining other rights to determine its business activity or to exercise the powers of its executive body, in each case, if any of the following thresholds are met: • the aggregate asset value of the acquirer (and its group) together with the target (and its group) exceeds RUB7 billion; • the total annual revenue of the acquirer (and its group) and the target (and its group) for the preceding calendar year exceedS RUB 10 billion and the total asset value of the target (or its group) exceeds RUB250 million; or • the acquirer and/or the target and/or any entity within the acquirer’s group or the target’s group are included in the register of entities having a market share in excess of 35% on a particular market or having a dominant position on a particular market maintained by FAS (the ‘‘FAS Register’’). (ii) Furthermore, the Competition Law provides for prior approval by FAS of the following actions: • mergers and consolidations of entities, if any of the following thresholds are met: • the aggregate asset value of such entities (or of the groups of persons to which they belong) exceeds RUB7 billion; • the total annual revenue of such entities (or of the groups of persons to which they belong) for the preceding calendar year exceedS RUB10 billion; or • one or more of these entities is included in the FAS Register; or • formation of an entity, if any the following thresholds are met: • its charter capital is paid by the shares (or participation interest) and/or the assets of another entity (save for monetary funds) or the newly founded entity acquires the rights in respect of such shares (or participation interest) and/or assets as specified in the Competition Law, provided that the aggregate asset value of the founders (or group of persons to which they belong) and the newly founded entity (or groups of persons to which they belong) exceeds RUB7 billion; • the total annual revenue of the founders (or groups of persons to which they belong) and the newly founded entity (or groups of persons to which they belong) for the preceding calendar year exceeds RUB10 billion; or • the entity, the shares (or participation interest) and/or assets of which are contributed to the charter capital of the newly founded entity, is included in the FAS Register. The Competition Law provides for a mandatory post-transactional notification (within 45 days of the closing) of the antimonopoly authorities in connection with actions specified in item (i) above if the aggregate asset value or total annual revenue of an acquirer (and its group) and a target (and its group) for the preceding calendar year exceeds RUB400 million and at the same time the total asset value of the target (and its group) exceeds RUB60 million; and in connection with actions specified in item (ii) above if their aggregate asset value or total annual revenue of the relevant companies for the preceding calendar year exceeds RUB400 million.

288 The Competition Law expressly provides for extraterritorial application to transactions which are made outside of Russia but lead, or may lead, to the restriction of competition in Russia and which relate to assets located in Russia or to the shares (or participation interests) in Russian companies or rights in relation to such companies. Under the Competition Law, if an acquirer has acted in violation of the merger control rules and acquired, for example, shares without obtaining the prior approval of FAS, the transaction may be invalidated by a court order initiated by FAS, provided that such transaction has led or may lead to the restriction of competition, for example, by means of strengthening of a dominant position in the relevant market. More generally, Russian legislation provides for civil, administrative and criminal liability for the violation of antimonopoly legislation.

Regulation of a Dominant Position in a Particular Market The antimonopoly regulation is aimed at the prevention of the abuse of a dominant position. According to the Competition Law, an entity or a group of entities is deemed to have a dominant position in a particular commodity market if: (a) the entity (or the group of entities) has a market share in a particular commodity market in excess of 50%, unless it is specifically established by FAS that the entity (or the group of entities) does not have a dominant position; or (b) the entity has a market share in a particular commodity market which is less than 50%, but more than 35% and the dominant position of the entity (or the group of entities) is specifically established by FAS based on (i) the stability or near stability of such entity’s (or such group of entities’) share in the particular commodity market, and (ii) certain characteristics of the relevant commodity market (such as the accessibility of the commodity market to new competitors); or (c) even if the entity has a market share of less than 35% in certain specific circumstances. The Competition Law also provides the possibility of several unrelated entities being considered to collectively have a dominant position. In particular, each of three business entities collectively having a market share exceeding 50%, or each of five business entities collectively having a market share exceeding 70%, provided that the market share of each entity in any case is not less than 8%, may be considered as having a dominant position provided that: (i) market shares of relevant entities have been stable or nearly stable during a significant period of time; (ii) the access of new competitors into the particular commodity market is hindered; (iii) the relevant commodity cannot be easily substituted; and (iv) the increase of the price for the commodity does not lead to decrease of demand for it. In addition, FAS is authorised by law to maintain a register of companies holding a dominant position. Companies included in this register may become subject to certain restrictions in conducting their business, including in relation to pricing, acquisitions, geographical expansion, and associations and agreements with competitors. FESCO was categorised by FAS as a company with a market share exceeding 65% in the Magadan Region, Kamchatka Region and Chukotsk Autonomous District in 2002 and FESCO Lines Vladivostok was categorised by FAS as a company with a market share exceeding 50% in the Magadan Region in 2011. TransContainer, in which we currently hold a 23.7% stake, was categorised by FAS as a company with a market share exceeding 65% in the Magadan Region in 2011 and a market share exceeding 50% in Omsk and the Russian Federation (for different types of services) in 2007. In addition, TransContainer was included by FAS into the register of companies with a dominant position due to its market share together with the Russian Railways exceeding 50% in the Russian Federation for cargo handling and storage of universal containers in 2011 and 2012, respectively. See also ‘‘Risk Factors—General Risks—Risks Relating to Our Business and Industry—We could face administrative fines if FAS were to conclude that we conducted our business in contravention of the Russian competition law’’. The Competition Law establishes a regulatory framework for companies having dominant positions in certain markets, aimed at protection of competition in the relevant markets. In particular, an entity having a dominant position is prohibited from abusing such a position through, among others, the following activities: (i) fixing and/or maintaining a monopolistic high or low price of goods; (ii) withdrawing goods from circulation, which results in price increases; (iii) dictating to a counterparty the terms of an agreement unfavourable to it or not relevant to the subject-matter of the agreement; (iv) economically or technologically unjustified reduction or termination of the production of certain goods; (v) economically or technologically unjustified refusal to enter into an agreement with certain buyers (customers) or avoiding such agreement; (vi) economically or technologically unjustified fixing of various prices (tariffs)

289 for the same goods; (vii) creating discriminatory conditions; (viii) creating impediments for other entities to either access or exit a particular commodity market; and (ix) violation of established pricing rules. If a company having a dominant position systematically carries out any monopolistic activities a court, based on a claim brought by FAS, may decide that such company is subject to forcible division or spin-off. In addition, FAS is authorised to issue binding orders to stop abuse of a dominant market position and to transfer to the federal budget profits obtained as a result of abusing a dominant position.

Regulation of Natural Monopolies The Natural Monopoly Law defines ‘‘natural monopoly’’ as a condition of the commodity market in which the demand for goods is satisfied more effectively in the absence of competition and in which other goods cannot readily be substituted for the monopoly goods. To be considered a ‘‘natural monopoly’’, a company shall carry out activities mentioned in the list of naturally monopolistic activities set out in the Natural Monopoly Law. With respect to cargo transportation activities, this list includes providing services in terminals and commercial sea ports and carrying out rail cargo shipments. Starting from 27 January 2013, the list of naturally monopolistic activities has included providing services of an icebreaker ship to assist and pilot vessels in the Northern Sea Route. In addition to the list of naturally monopolistic activities set out in the Natural Monopoly Law, the Russian state authorities maintain registers of natural monopolies, which include identities of companies considered natural monopolies and thus subject to special regulation. The Natural Monopolies Law regulates (i) the operations of the companies engaged in naturally monopolistic activities, (ii) major investments of such companies in assets that are not used for the naturally monopolistic activities and (iii) transactions involving fixed assets and shares of such companies. FAS supervises the activities of natural monopolies and the FTS is responsible for regulation of the tariffs. Our subsidiaries VMTP, Vladportbunker and TET are included in the register of natural monopolies in the transport sector as companies carrying out services in sea ports and/or transport terminals. See ‘‘Business—Material Litigation’’ for a discussion of VMTP’s dispute with the FTS regarding its inclusion in the register of natural monopolies. The Natural Monopolies Law enumerates the following key restrictions with respect to investment activities and other dealings in shares of the natural monopolies: • a natural monopoly needs to receive prior written approval from the state authorities for any acquisition of fixed assets or rights to use such assets, if (a) such assets are not used for the naturally monopolistic activities and (b) the book value of such asset exceeds 10% of the natural monopoly entity’s own capital (as calculated in accordance with its latest balance sheet); • a party that intends to acquire, rent or obtain the right to own or use in another way the fixed assets of a natural monopoly must obtain prior written approval of the regulators, if such assets (a) are used for the naturally monopolistic activity and (b) exceed by value 10% of the natural monopoly entity’s own capital (as calculated in accordance with its latest balance sheet); • a natural monopoly requires prior regulatory approval for any investments in production or distribution of goods, not related to the industry of the natural monopoly entity, whose value exceeds 10% of the natural monopoly entity’s own capital (as calculated in accordance with its latest balance sheet); and • any person or group of persons that acquires more than 10% of the total number of votes attributable to voting shares of a natural monopoly is obliged to notify the regulatory authorities of such acquisition, as well as of any subsequent changes in his or their stake. The relevant authority can adopt binding decisions in the case of a breach of the law and issue binding instructions to a natural monopoly to prevent a breach of the law, including instructions on eliminating the consequences of a breach. The principal methods of regulating the activities of natural monopolies by relevant supervising authorities are: • price regulation by setting prices (tariffs) or price limits; and • identifying consumers entitled to obligatory services and/or setting natural monopoly minimum supply levels for such consumers (with a view to protecting the rights and legal interests of citizens, state security, the environment and cultural values).

290 As a natural monopoly, we must submit on-going reports on our activities and drafts of capital investment plans to the relevant supervisory authority pursuant to the Natural Monopoly Law. In order to promote transparency in activity and regulation, the changes require natural monopolies to grant free access to the information on their activity in accordance with the standards of disclosure approved by the Russian Government. The information on the regulated activity of the natural monopolies include the following: (i) information on prices (tariffs) for regulated goods and services; (ii) information on principal operational and financial activity that is the subject of regulation; (iii) information on basic consumer characteristics of the regulated goods and services; (iv) information on technical access to the regulated goods and services, or the lack thereof; and (v) information on the terms and conditions for supplying regulated goods and services. The supervisory authority has the right: (i) to regulate natural monopoly entities and to use methods of regulation contemplated by the Natural Monopoly Law including price regulation; (ii) to instruct natural monopoly entities to stop violations and mitigate its consequences, including entering into contracts with those consumers entitled to obligatory service, to instruct natural monopoly entities to make amendments to existing contracts, to instruct natural monopoly entities to transfer revenue from activities which contravene the existing federal laws; and (iii) to perform other acts contemplated by federal laws.

Foreign Investment in Strategic Enterprises The Strategic Investment Law sets forth certain limitations on the acquisition by a foreign investor of shares in strategic companies and sets out a list of activities considered to be of strategic importance to the national defence and security of Russia. The list includes, among other things, services rendered by companies classified as ‘‘natural monopoly entity’’ under Russian law, including the services rendered in transport terminals and ports. See also ‘‘—Antimonopoly and Related Regulation—Regulation of Natural Monopolies’’. The Strategic Investment Law sets forth a general prohibition on transactions resulting in the acquisition of control over strategic companies by foreign states and international organisations or an organisation controlled by any foreign state or international organisation and requires other foreign investors to obtain prior approval of a state committee (the ‘‘State Committee’’) for the acquisition of control over a strategic company. A person is deemed to control a strategic company if such person: (i) controls (directly or indirectly) more than 50% (25% or more for the companies using the subsoil of the strategic importance (the ‘‘Strategic Subsoil User’’)) of the total number of votes attributable to the voting shares or stakes making up the share capital of a strategic company; (ii) has the right (on the basis of an agreement or otherwise) to direct decisions of a strategic company, including the terms of its business operations; (iii) has the right to appoint the sole executive body of a strategic company and/or for more than 50% (25% or more for the Strategic Subsoil User) of the members of its collective executive body; (iv) has an unconditional ability to procure the election of more than 50% (25% or more for the Strategic Subsoil User) of the members of a strategic company’s board of directors or other management body; or (v) acts as a management company for a strategic company. Also, a strategic company is deemed to be under control if a controlling foreign entity controls (directly or indirectly) less than 50% of the total number of votes attributable to the voting shares or stakes making up the share capital of a strategic company provided the proportion between the amount of votes available to the controlling foreign entity and the amount of votes available to other shareholders provides the controlling foreign entity with an opportunity to determine the decisions of the strategic company. If the proportion of votes available to the foreign entity changed due to (i) the buyback or transfer of shares in a strategic company to it and, consequently, formation of a block of treasury shares, (ii) distribution of treasury shares in a strategic company between its shareholders, (iii) conversion of preferred stock into ordinary stock or (iv) any other reason, and the foreign entity subsequently obtained control over the respective strategic company, such foreign entity is obliged under the Strategic Investment Law to file an application to the State Committee within three months upon obtaining control. Prior approval of the State Committee is also required in the event a foreign state, international organisation or an organisation controlled by any of them acquires direct or indirect control over more than 25% (more than 5% for the Strategic Subsoil User) of the votes represented by shares in a strategic company or other ability to block decisions of the management bodies of such entity.

291 In addition, foreign investors are required to notify the State Committee about any transactions undertaken by them resulting in the acquisition of 5% or more of the charter capital of a strategic company. The Strategic Investment Law provides for certain exceptions to the general rules described above. No prior approval or post-closing notification is required for obtaining control over a Strategic Subsoil User if the Russian government owns or has the right to vote (directly or indirectly) more than 50% of the voting shares of such strategic company, or for making foreign investments in Russia if such investment activity is governed by other federal laws or international treaties of the Russian Federation, including treaties on military and technical cooperation. The Strategic Investment Law governs the procedure for review by the State Committee of an application of foreign investors seeking to obtain control over a strategic company. A foreign investor initiates this process by filing an application with FAS. The term for review of such an application is three months and may be extended for another three months. FAS will issue its approval upon confirmation from the Federal Security Service of Russia and the State Committee that the acquisition of control does not threaten the national defence and security of Russia. Transactions which are subject to review under the Strategic Investment Law and are not subsequently approved by the State Committee are void, and the foreign investor, by order of the courts, may be denied its right to vote at shareholder meetings of such strategic company. As of the date of this Offering Memorandum, VMTP, Vladportbunker and TET are considered to be strategic companies. See also ‘‘Risk Factors—General Risks—Our business and prospects could be materially adversely affected by laws regarding foreign control’’.

Environmental Regulation We are subject to laws, regulations and other legal requirements relating to the protection of the environment, including those governing the discharge of substances into the air and water, and the management and disposal of hazardous substances and waste. Environmental protection in Russia is regulated primarily by the Enviromental Protection Law, as well as by a number of other federal and local legal acts. The Russian government, the Ministry of Natural Resources and Ecology, as well as other state authorities and public and non-governmental organisations, are responsible for the development, implementation and enforcement of relevant environmental laws and regulations.

Pollution and waste disposal Under Russian law, we are required to obtain a number of environmental permits, including statutory limits for waste production and individual limits for waste disposal, permits for atmospheric emissions and permits to discharge polluting substances into water bodies. The Environmental Protection Law established a ‘‘pay-to-pollute’’ regime administered by federal and local authorities. Additional payment obligations may arise under the Water Code, Federal Law No. 89-FZ ‘‘On Wastes of Production and Consumption’’ dated 24 June 1998, as amended, and Federal Law No. 96-FZ ‘‘On Atmospheric Air Protection’’ dated 4 May 1999, as amended. In furtherance of these laws, the Russian government has established the procedure for setting standards relating to the permissible impact of industrial and other business activities on the environment, while the Federal Service for Supervision of Use of Natural Resources sets statutory limits for the emission of hazardous substances into the air, statutory limits for waste production and individual limits for waste disposal. A company may obtain approval for exceeding the statutory limits from the Federal Service for Supervision of Use of Natural Resources, its regional branches or regional authorities, depending on the type and scale of environmental impact. As a condition to such approval, a company must develop its own pollution standards and submit them together with a programme for the reduction of emissions or disposals, required to be implemented within a specified period, to the relevant authority. Payments for pollution are assessed on a sliding scale, ranging from pollution within statutory limits (the lowest fees) through pollution within individually approved limits (higher fees) to pollution in excess of those limits (the highest fees). Any failure to make such payments when due may lead to an administrative fine of up to RUB100,000. These payments do not relieve the relevant company from its

292 responsibility to implement environmental protection measures and undertake restoration and clean-up activities. In addition, we are required to comply with the International Convention on Civil Liability for Oil Pollution Damage dated 29 November 1969, which is implemented by the Ministry of Transport, the FTS and the Federal Agency for Sea and River Transport.

Transportation of hazardous substances The Environmental Protection Law provides certain requirements for the transportation of hazardous substances, which can potentially cause harm to the environment (for example, radioactive materials, certain chemicals and bacteria). These rules include the requirements applicable to the technical characteristics of transportation facilities as well as requirements for packing, loading, escorting and unloading of cargo. In addition, as discussed above, the companies are obliged to maintain special licences for transportation and stevedoring services with respect to hazardous cargo.

Environmental liability If the operations of a company breach environmental requirements or cause harm to the environment or any individual or legal entity, a court action may be brought to limit or prohibit those operations and require the company to remedy the effects of the breach. The statute of limitations for such actions is 20 years. Any company and/or the employees of such company that fail to comply with environmental regulations may be subject to administrative and/or civil liability, including fines and clean-up orders, and individuals may also incur criminal liability in such circumstances. See ‘‘Business—Safety and Environment’’ for a discussion of our environmental policies.

Health and Safety The principal law regulating industrial safety is the Industrial Safety Law. The Industrial Safety Law applies, in particular, to industrial facilities and sites where certain activities are carried out with respect to the usage, production, processing, storage, transportation or utilisation of fuels and explosive, toxic and environmentally dangerous substances. The Industrial Safety Law also contains a list of dangerous substances and in the event there is a critical concentration of these dangerous substances at an industrial facility or site, a company is obliged to adopt an industrial safety declaration. Our activities also include the operation of certain hazardous industrial sites registered with and regulated by Rostekhnadzor. Any construction, exploitation, liquidation or other activities in relation to such hazardous industrial sites and hazardous industrial equipment is subject to Rostekhnadzor’s oversight. Companies that operate regulated industrial sites have a wide range of obligations under the Industrial Safety Law and the Labour Code of the Russian Federation (the ‘‘Labour Code’’). In particular, they must limit access to such sites to qualified specialists, maintain industrial safety controls and carry mandatory civil liability insurance for damage resulting from accidents. The Industrial Safety Law also requires these companies to enter into contracts with professional accident-rescue service companies or create their own accident-rescue services in certain cases, conduct personnel training programmes, create systems to cope with and inform Rostekhnadzor of accidents and maintain these systems in good working order. In certain cases, companies operating regulated industrial sites must also prepare declarations of industrial safety that summarise the risks associated with operating such sites and the measures the company has taken and will take to mitigate such risks. Such declarations must be adopted by the chief executive officer of the company, who is personally responsible for the completeness and accuracy of the data contained therein. Both an industrial safety declaration and an industrial safety expert review are required for the issuance of a licence permitting the operation of a dangerous industrial facility. In the case of an accident, a special commission led by a representative of Rostekhnadzor conducts a technical investigation of the cause. The company operating the industrial facility where the accident took place bears all costs of such investigation. Rostekhnadzor has the right to access industrial sites and may inspect documents to ensure a company’s compliance with safety rules. Rostekhnadzor may also impose administrative liability on a company or its officials, as well as suspend a company’s operations. Any company or individual violating industrial safety rules may incur administrative and/or civil liability and individuals may also incur criminal liability. A company that violates safety rules in a way that

293 negatively impacts the health of an individual may also be liable to compensate the individual for lost earnings and health-related damages and, in certain cases, its activity may be suspended. See ‘‘Business—Safety and Environment’’ for a discussion of our health and safety policies.

Employment and Labour Labour matters in Russia are primarily governed by the Labour Code and certain other federal laws.

Employment contracts As a general rule, an employment contract may not provide for its termination upon the expiration of a set term, except in certain circumstances, for example, where the nature of the employee’s duties is time-limited. Employment contracts with the chief executive officer, deputy chief executive officer and the chief accountant may provide for termination upon the expiration of a set term. All permitted causes for termination of employment by an employer are listed in the Labour Code and other federal laws and may not be changed in the employment contract, subject to certain narrow exceptions. The instances when an employer may terminate an employment contract include, among others: • liquidation of the enterprise or downsizing of its staff; • employee’s failure to comply with his duties due to incompetence; • systematic failure of employee to perform his duties without reasonable justification; • the commitment by an employee of any single gross violation as enumerated in the Labour Code; and • delivery of false documents by the employee in connection with the execution of the employment contract. An employee dismissed from an enterprise due to downsizing or liquidation is entitled to receive compensation, including a severance payment and, depending on the circumstances, salary payments for a certain period of time. The Labour Code also provides protections for specified categories of employees. For example, except for certain cases established by the Labour Code, an employer cannot dismiss minors, expectant mothers, mothers with a child under the age of three, single mothers with a child under the age of 14 or disabled child under the age of 18 or other persons caring for a child under the age of 14 or disabled child under the age of 18 without a mother.

Work time The Labour Code generally sets a working week of 40 hours. Any time worked beyond 40 hours per week, as well as work on public holidays and weekends, must be compensated at a higher rate. Annual paid vacation leave under the Labour Code is generally 28 calendar days. Certain categories of employees who perform work in harmful conditions may be entitled to an additional paid vacation ranging from seven to 36 working days. Other categories of employees having the same right to an additional paid vacation are set forth in the Labour Code and other federal laws. The retirement age in the Russian Federation is generally 60 years for men and 55 years for women.

Strikes The Labour Code defines a strike as the temporary and voluntary refusal of workers to perform their work duties with the intention of settling a collective labour dispute. Russian legislation contains several requirements for lawful strikes. Participation in a lawful strike may not be considered by an employer as employee’s failure to perform his duties and may not be serve as grounds for termination of such employee. However, employers are generally not required to pay wages to striking employees for the duration of the strike. Participation in an unlawful strike may serve as adequate grounds for termination.

294 Trade Unions Although recent Russian labour regulations have curtailed the authority of trade unions, they still retain significant influence over employees and, as such, may affect the operations of large industrial companies in Russia. The activities of trade unions are generally governed by Federal Law No. 10-FZ ‘‘On Trade Unions, Their Rights and Guaranties of Their Activity’’ of 12 January 1996 as amended (the ‘‘Trade Union Law’’) and the Labour Code. The Trade Union Law defines a trade union as a voluntary public association of individuals with common professional and other interests established for the purposes of representing and protecting the rights and interests of its members. National trade union associations, which coordinate activities of trade unions throughout Russia, are also permitted. As part of their activities, trade unions may: • negotiate collective bargaining agreements between and among trade unions and employers, federal, regional or local governmental authorities or other entities; • monitor compliance with labour laws and collective bargaining and other agreements; • access work sites and offices and request information relating to labour issues from the management of companies, federal, regional and local authorities; • represent their members and other employees in individual and collective labour disputes with management; • organise strikes for the purposes of collective dispute resolution; and • put forth proposals for the temporary suspension of mass layoffs, which must be considered by local authorities. Russian laws require that companies cooperate with trade unions and not interfere with their activities. Trade unions and their officers enjoy certain guarantees. If a trade union discovers any violation of work condition requirements, notification is sent to the employer with a request to cure the violation and to suspend work if there is an immediate threat to the lives or health of employees. A trade union may apply to state authorities and labour inspectors and prosecutors to ensure that an employer does not violate Russian labour laws. Although the Trade Union Law provides that those who violate the rights and guarantees provided to trade unions and their officers may be subject to disciplinary, administrative and criminal liability, no specific sanctions for these violations are set forth in Russian legislation. However, a violation of the Labour Code, including the sections wherein the rights of trade unions are established rights, is an administrative violation and may subject an offender company and its officers to administrative liability, including the temporary suspension of operations.

295 TAXATION The following is a general description of certain tax considerations relating to the Notes and the Note Guarantees and does not purport to be a comprehensive discussion of the tax treatment of the Notes or the Note Guarantees. Prospective purchasers of the Notes are advised to consult their own tax advisers as to the consequences arising in their particular circumstances under the tax laws of countries of which they are residents of the purchase and holding of Notes, including, but not limited to, the consequences of the receipt of interest and the sale or redemption of Notes. This summary is based upon the law as in effect on the date of this Offering Memorandum. The information and analysis contained within this section are limited to tax issues, and prospective investors should not apply any information or analysis set out below to other areas, including (but not limited to) the legality of transactions involving the Notes or the Note Guarantees.

United States TO ENSURE COMPLIANCE WITH U.S. TREASURY DEPARTMENT CIRCULAR 230, PROSPECTIVE INVESTORS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES IN THIS OFFERING MEMORANDUMIS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY PROSPECTIVE INVESTORS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON THEM UNDER THE U.S. INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE ‘‘U.S. TAX CODE’’); (B) SUCH DISCUSSION IS INCLUDED HEREIN BY THE ISSUER IN CONNECTION WITH THE PROMOTION OR MARKETING (WITHIN THE MEANING OF CIRCULAR 230) BY THE ISSUER OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) PROSPECTIVE INVESTORS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISER. The following is a summary of certain U.S. federal income tax consequences of the acquisition, ownership and disposition of the Notes by a U.S. Holder (as defined below). This summary deals only with purchasers of Notes that (i) are U.S. Holders, (ii) will hold the Notes as capital assets and (iii) acquired the Notes upon their initial issuances at the original offering price. The discussion does not cover all aspects of U.S. federal income taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of Notes by particular investors, and does not address U.S. federal estate, gift, Medicare contribution or alternative minimum tax considerations, state, local, foreign or other tax laws. In particular, this summary does not discuss all of the tax considerations that may be relevant to certain types of investors subject to special treatment under U.S. federal income tax laws (such as financial institutions, insurance companies, investors liable for the alternative minimum tax, individual retirement accounts and other tax-deferred accounts, tax-exempt organisations, dealers in securities or currencies, traders in securities who elect to mark their securities to market, investors that will hold the Notes as part of straddles, hedging transactions or conversion transactions for U.S. federal income tax purposes or investors whose functional currency is not the U.S. Dollar). As used herein, the term ‘‘U.S. Holder’’ means a beneficial owner of Notes that is, for U.S. federal income tax purposes, (i) an individual citizen or resident of the United States, (ii) a corporation created or organised in or under the laws of the United States or any state thereof, or (iii) any person otherwise subject to U.S. federal income taxation on a net income basis in respect of the Notes. The U.S. federal income tax treatment of a partner in an entity taxable as a partnership for U.S. federal income tax purposes that holds Notes will depend on the status of the partner and the activities of the partnership. Prospective purchasers that are partnerships for U.S. federal income tax purposes should consult their tax adviser concerning the U.S. federal income tax consequences to their partners of the acquisition, ownership and disposition of Notes by the partnership. The summary is based on the tax laws of the United States including the U.S. Tax Code, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, all as currently in effect and all subject to change at any time, possibly with retroactive effect. THE SUMMARY OF U.S. FEDERAL INCOME TAX CONSEQUENCES SET OUT BELOW IS FOR GENERAL INFORMATION ONLY. PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF OWNING THE NOTES,

296 INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND POSSIBLE CHANGES IN TAX LAW

Payments of Interest Payments of ‘‘qualified stated interest’’ (as defined below under ‘‘—Original Issue Discount—General’’) on a Note (including any non-U.S. withholding tax imposed on, and additional amounts paid with respect to, such payments) will be taxable to a U.S. Holder as ordinary income at the time such payments are received or accrued, in accordance with the U.S. Holder’s method of accounting for tax purposes. Interest paid on the Notes, and OID, if any, accrued with respect to the Notes (as described below under ‘‘—Original Issue Discount’’) generally will constitute income from sources outside the United States and, for purposes of the U.S. foreign tax credit, generally will be considered passive category income or, in certain cases, general category income. A U.S. Holder may be able, subject to certain generally applicable limitations, to claim a foreign tax credit (or, alternatively, a deduction if the U.S. Holder has elected to deduct all foreign income taxes for that taxable year) for any non-U.S. withholding taxes imposed on payments of interest or accruals of OID.

Original issue discount General The following is a summary of the principal U.S. federal income tax consequences of the ownership of Notes issued with OID. A Note will be treated as issued with OID if the excess of the Note’s ‘‘stated redemption price at maturity’’ over its issue price is at least a de minimis amount (0.25% of the Note’s stated redemption price at maturity multiplied by the number of complete years to its maturity). The ‘‘issue price’’ of a Note will be the first price at which a substantial amount of the Notes is sold to persons other than bond houses, brokers or similar persons or organizations acting in the capacity of underwriters, placement agents, or wholesalers. The ‘‘stated redemption price at maturity’’ of a Note is the total of all payments provided by the Note that are not payments of ‘‘qualified stated interest.’’ ‘‘Qualified stated interest’’ is generally stated interest that is unconditionally payable in cash or property (other than debt instruments of the Issuer) at least annually at a single fixed rate. The stated interest on the Notes will be treated as qualified stated interest. If the Notes are issued with OID, U.S. Holders must include OID in income calculated using a constant- yield method regardless of their method of accounting for U.S. federal income tax purposes, and will generally have to include in income increasing amounts of OID over the life of the Notes. U.S. Holders must take such income even if the U.S. Holder does not receive cash attributable to the income. The amount of OID includible in income by a U.S. Holder is the sum of the daily portions of OID with respect to the Note for each day during the taxable year or portion of the taxable year on which the U.S. Holder holds the Note (‘‘Accrued OID’’). The daily portion is determined by allocating to each day in any accrual period a pro rata portion of the OID allocable to that accrual period. ‘‘Accrual periods’’ with respect to a Note may be of any length selected by the U.S. Holder and may vary in length over the term of the Note as long as (i) no accrual period is longer than one year and (ii) each scheduled payment of interest or principal on the Note occurs on either the final or first day of an accrual period. The amount of OID allocable to an accrual period equals the excess of (a) the product of the Note’s adjusted issue price at the beginning of the accrual period and the Note’s yield to maturity (determined by compounding at the close of each accrual period and properly adjusted for the length of the accrual period) over (b) the sum of the payments of qualified stated interest on the Note allocable to the accrual period. The ‘‘adjusted issue price’’ of a Note at the beginning of any accrual period is the issue price of the Note increased by the amount of Accrued OID for each prior accrual period and decreased by the amount of any payments previously made on the Note that were not qualified stated interest payments.

Election to treat all interest as original issue discount A U.S. Holder may elect to include in gross income all interest (including stated interest, OID and de minimis OID) that accrues on a Note using the constant-yield method described above under ‘‘Original Issue Discount—General’’ with certain modifications. If a U.S. Holder makes this election for the Note, then, when the constant-yield method is applied, the issue price of the Note will equal its cost, the issue date of the Note will be the date of acquisition, and no payments on the Note will be treated as payments of qualified stated interest. This election will generally apply only to the Note with respect to which it is made and may not be revoked without the consent of the Internal Revenue Service.

297 Substitution of Issuer The terms of the Notes provide that, in certain circumstances, the obligations of the Issuer under the Notes may be assumed by another entity. Any such assumption may be treated for U.S. federal income tax purposes as a deemed disposition of Notes by a U.S. Holder in exchange for new notes issued by the new obligor. As a result of this deemed disposition, unless a nonrecogniotn provision of the U.S. Tax Code applies, a U.S. Holder would be required to recognise capital gain or loss for U.S. federal income tax purposes equal to the difference, if any, between the issue price of the new notes (as determined for U.S. federal income tax purposes), and the U.S. Holder’s tax basis in the Notes. U.S. Holders should consult their tax advisers concerning the U.S. federal income tax consequences to them of a change in obligor with respect to the Notes.

Sale, Exchange, Redemption or Other Disposition of Notes A U.S. Holder will generally recognise gain or loss on the sale, exchange, redemption or other disposition of a Note equal to the difference between the amount realised on such sale, exchange, redemption or other disposition and the U.S. Holder’s tax basis of the Note. A U.S. Holder’s tax basis in a Note will generally be its U.S. Dollar cost, increased by the amount of any OID previously included in the U.S. Holder’s income with respect to the Note and reduced by the amount of any payments that are not qualified stated interest payments. The amount realised does not include the amount attributable to accrued but unpaid interest, which will be taxable as interest income to the extent not previously included in income. Gain or loss recognised on the sale, exchange, redemption or other disposition of a Note will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period in the Notes exceeds one year. In the case of a U.S. Holder that is an individual, estate or trust, the maximum marginal federal income tax rate applicable to capital gains is currently lower than the maximum marginal rate applicable to ordinary income if the Notes are held for more than one year. The ability of a U.S. Holder to offset capital losses against ordinary income is significantly limited. Gain or loss realised by a U.S. Holder on the sale, exchange, retirement or other disposition of a Note generally will be U.S. source gain or loss for U.S. federal income tax purposes. Accordingly, if non-U.S. withholding tax is imposed on the sale or disposition of the Notes, a U.S. Holder may not be able to fully utilize its U.S. foreign tax credits in respect of such tax unless such U.S. Holder has other foreign-source income.

Backup Withholding and Information Reporting Payments of interest on and accruals of OID (if any) on, and the proceeds of a sale, redemption or other disposition of, the Notes payable to a U.S. Holder by a U.S. paying agent or other U.S. intermediary will be reported to the IRS and to the U.S. Holder as may be required under applicable regulations. Backup withholding will apply to these payments if the U.S. Holder fails to provide an accurate taxpayer identification number or certification of exempt status or fails to report all interest and dividends required to be shown on its U.S. federal income tax returns. Certain U.S. Holders are not subject to backup withholding. Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited against a U.S. Holder’s U.S. federal income tax liability. A U.S. Holder may obtain a refund of any excess amounts withheld under the backup withholding rules by timely filing the appropriate claim for refund with the Internal Revenue Service and furnishing any required information.

Russian Federation Taxation of the Notes General The following is an overview of certain Russian tax considerations relevant to the purchase, ownership and disposal of the Notes, as well as the taxation of interest income on the Note Guarantees. The overview is based on the laws of the Russian Federation in effect on the date of this Offering Memorandum, which are subject to potential change (possibly with retroactive effect). The overview does not seek to address the applicability of, and procedures in relation to, taxes levied by regions, municipalities or other non-federal authorities of the Russian Federation, nor does it seek to address the availability of double tax treaty relief in respect of the Notes, and it should be noted that there may be practical difficulties, including satisfying certain documentation requirements, involved in claiming double tax treaty relief. Prospective investors should consult

298 their own advisers regarding the tax consequences of investing in the Notes. No representations with respect to the Russian tax consequences of investing, owning or disposing of the Notes to any particular Noteholder is made hereby. The provisions of the Russian Tax Code applicable to Noteholders and transactions involving the Notes are ambiguous and lack interpretive guidance. Both the substantive provisions of the Russian Tax Code applicable to financial instruments and the interpretation and application of those provisions by the Russian tax authorities may be more inconsistent and subject to more rapid and unpredictable change than in jurisdictions with more developed capital markets or more developed taxation systems. In particular, the interpretation and application of such provisions will in practice rest substantially with local tax inspectorates. In practice, interpretation by different tax inspectorates may be inconsistent or contradictory and may constitute the imposition of conditions, requirements or restrictions not provided for by existing legislation. Similarly, in the absence of binding precedents, court rulings on tax or related matters by different Russian courts relating to the same or similar circumstances may also be inconsistent or contradictory. According to the Russian Tax Code, a tax resident is an individual who spent in Russia not less than 183 days within 12 consecutive months (including days of arrival to Russia and including days of departure from Russia). Presence in Russia for tax residency purposes is not considered interrupted for an individual’s short term departure (less than 6 months) from Russia for medical treatment or education. The interpretation of this definition by the Ministry of Finance of the Russian Federation states that for tax withholding purposes an individual’s tax residence status should be determined on the date of income payment (based on the number of Russian days in the 12-month period preceding the date of payment). The individual’s final tax liability in the Russian Federation for the reporting calendar year should be determined based on his/her tax residence status for such calendar year, i.e., based on the number of Russian days in the 12-month period as of the end of such period. For the purposes of this overview, a ‘‘non-resident Noteholder’’ means (i) an individual Noteholder who has not established Russian tax residence status for the reporting calendar year as discussed above; or (ii) a legal entity or organisation in each case not organized under Russian law that holds and disposes of the Notes otherwise than through a permanent establishment in Russia. For the purposes of this overview, a ‘‘Russian resident Noteholder’’ means (i) an individual Noteholder who has established a Russian tax residence status for the reporting calendar year as discussed above; or (ii) a legal entity or organisation which is a Noteholder but is not qualified a non-resident Noteholder as defined in the previous paragraph. Russian tax residency rules may be affected by an applicable double tax treaty. It is anticipated that the Russian tax residency rules applicable to legal entities may change in the future.

Non-resident Noteholders Generally, any non-resident Noteholder should not be subject to any Russian taxes on receipt from the Issuer of amounts payable in respect of principal, premium or interest on the Notes. In respect of gain or other income realized on redemption, sale or disposal of the Notes a non-resident Noteholder generally should not be subject to any Russian taxes, unless the proceeds of such redemption, sale or other disposal of the Notes are considered as being received from a source within the Russian Federation. In the event that proceeds from sales, redemption or a disposal of Notes are considered as received from a source within the Russian Federation, the Russian tax implications should be as outlined below.

Legal entities Generally, income received by non-resident Noteholders that are legal entities or organisations from the sale or other disposition of the Notes should not be subject to Russian tax. Acquisition of the Notes by non-resident Noteholders that are legal entities and organisations should not constitute a taxable event under Russian law. Consequently, the acquisition of the Notes should not trigger any Russian tax implications for non-resident Noteholders that are legal entities and organisations.

299 Non-resident Noteholders that are legal entities or organisations should consult their own tax advisers with respect to the tax consequences of a sale or other disposal of the Notes and the tax consequences of the receipt of proceeds from a source within the Russian Federation in respect of a sale or other disposal of the Notes. Individuals If proceeds from sales, redemption or other disposal of the Notes are received from a Russian source, a non-resident Noteholder who is an individual will generally be subject to tax at a rate of 30% subject to any available double tax treaty relief as discussed below, in respect of gross proceeds from such disposal less any available cost deduction (which includes the purchase price of the Notes). According to Russian tax legislation, income received from a sale, redemption or disposition of the Notes should be treated as having been received from a Russian source if such sale, redemption or disposition occurs in Russia. Russian tax law gives no clear indication as to how to identify the source of income received from a sale, redemption or disposition of securities except that income received from the sale of securities ‘‘in Russia’’ will be treated as having been received from a source within Russia. If the disposal proceeds are paid by a Russian tax agent, which is a licensed asset manager or licensed broker that carries out operations under an asset management agreement, a brokerage agreement, an agency agreement or a commission agreement, the applicable personal income tax should be withheld at source. If the tax is not withheld, a non-resident Noteholder, who is an individual, should file a tax return and pay tax in the Russian Federation on his/her own. The taxable base should be calculated in roubles and, therefore, may be affected by changes in the exchange rate between the currency of acquisition of the Notes, the currency of disposition of the Notes and roubles. Additionally, acquisition of the Notes by a non-resident Noteholder who is an individual may constitute a taxable event pursuant to provisions of the Russian Tax Code relating to the material benefit (deemed income) received by individuals as a result of acquisition of securities. If the acquisition price of the Notes is below the lower margin of fair market value calculated under a specific procedure for the determination of market prices of securities for tax purposes, the difference may be subject to the Russian personal income tax at a rate of 30% (arguably, this would be subject to reduction or elimination under the applicable double tax treaty). As noted above with respect to the disposal of the Notes, under Russian tax legislation, taxation of income of non-resident Noteholders who are individuals will depend on whether this income would be qualified as received from Russian or non-Russian sources. Although Russian tax legislation does not contain any provisions on how the related material benefit should be sourced, the tax authorities may infer that such income should be considered as Russian source income if the Notes are purchased ‘‘in Russia’’. In the absence of any additional guidance as to what should be considered as a purchase of securities ‘‘in Russia’’, the Russian tax authorities may apply various criteria in order to determine the source of the related material benefit, including looking at the place of conclusion of the acquisition transaction, the location of the Issuer, or other similar criteria. The personal income tax rate (including tax withheld at source) may be reduced pursuant to a double taxation treaty between the Russian Federation and the tax jurisdiction of the non-resident Noteholder (see ‘‘—Tax Treaty Relief’’ below). Non-resident Noteholders, who are individuals should consult their own tax advisers with respect to the tax consequences of acquisition and disposition of the Notes and the tax consequences of the receipt of proceeds from a source within the Russian Federation in respect of a disposition of the Notes.

Tax Treaty Relief Where proceeds from the disposal of the Notes are received from a Russian source, in order for the non-resident Noteholders, whether an individual, legal entity or organization, to receive the benefits of an applicable double tax treaty, documentary evidence is required to confirm the applicability of the double tax treaty for which benefits are claimed. Currently, a non-resident Noteholder—legal entity or organization should present to the payer of income an apostilled or legalised confirmation of its tax residence, attaching a notarised translation in Russian. The confirmation should be presented before any payment is made and should be certified by the competent authority of the country of the Noteholder’s tax residence. Such confirmation is valid for the

300 calendar year in which it is issued. Non-resident Noteholders that are legal entities or organizations should consult their own tax advisers with respect to the possibilities to enjoy any double tax treaty relief and the relevant Russian procedures. A non-resident Noteholder who is an individual must provide to the tax authorities (together with other documents) a tax residency certificate issued by the competent authorities in his/her country of residence for tax purposes and a confirmation certified by the relevant foreign tax authorities of income received and the tax payment made outside Russia on income with respect to which treaty benefits are claimed. Because of uncertainties regarding the form and procedures for providing such documentary proof, individuals in practice may not be able to obtain an advance relief on receipt of proceeds from a source within Russia and obtaining a refund can be extremely difficult. Non-resident individual Noteholders should consult their own tax advisers with respect to the possibilities to enjoy any double tax treaty relief or tax refund and the relevant Russian procedures.

Resident Noteholders A Russian resident Noteholder is subject to all applicable Russian taxes and responsible for complying with any documentation requirements that may be established by law or practice in respect of gains from disposal of the Notes and interest income received on the Notes. Resident Noteholders should consult their own tax advisers with respect to their tax position regarding the Notes.

Refund of Tax Withheld For a non-resident Noteholder which is not an individual and for which double tax treaty relief is available, if Russian withholding tax on income was withheld at the source of payment, a refund of such tax is possible within three years from the end of the tax period in which the tax was withheld. In order to obtain a refund, the tax documentation confirming the right of the non-resident recipient of the income to double tax treaty relief is required. If non-resident individual Noteholders do not obtain double tax treaty relief at the time the proceeds from a disposal of the Notes are paid to such non-resident individual Noteholders and income tax is withheld by a Russian payer of the income, such non-resident individual Noteholders may apply for a refund within one year from the end of the tax period in which the tax was withheld. The documentation requirements to obtain such a refund would include a confirmation of the income received and the taxes paid in the country of tax residence of the non-resident individual Noteholders as confirmed by the relevant tax authorities of such countries. However, there can be no assurance that the refund of any taxes withheld or double tax treaty relief (as described above) will be available for such non-resident individual Noteholders. Although the Tax Code of the Russian Federation arguably contains an exhaustive list of documents and information which have to be provided by the non-resident Noteholder to the Russian tax authorities for the tax refund purposes, the Russian tax authorities may, in practice, require a wide variety of documentation confirming the right of a non-resident Noteholder to obtain tax relief available under the applicable double tax treaty. Such documentation may not be explicitly required by the Russian Tax Code and may to a large extent depend on the position of local representatives of the tax inspectorates. Obtaining a refund of Russian tax withheld may be a time consuming process requiring many efforts and no assurance can be given that such refund will be granted to the non-resident Noteholders in practice. The non-resident Noteholders should consult their own tax advisors regarding procedures required to be fulfilled in order to obtain refund of Russian income taxes, which were excessively withheld at source.

Payments under the Note Guarantees may be subject to Russian withholding tax Russian tax legislation in respect of withholding tax on guarantee payments to non-residents is complex and unclear. Non-resident Noteholders that are legal entities or individuals should consult their own tax advisors with respect to the tax consequences of the receipt of payments under the Note Guarantees, including applicability of any available double tax treaty relief. In general, payments of Russian source income made by a Russian legal entity to a non-resident Noteholder who is an individual or to a non-resident Noteholder that is a legal entity with no registered presence and no permanent establishment in the Russian Federation should be subject to Russian

301 withholding tax at prescribed tax rates, unless withholding tax is reduced or eliminated under an applicable double tax treaty. Due to the lack of clarity in Russian tax legislation and the vague wording of the Russian withholding income tax provisions, a portion of guarantee payments under the Trust Deeds relating to interest on the Notes and, to a lesser extent, a portion of guarantee payments relating to the principal amounts due under the Notes, may be subject to withholding tax at a rate of 20% in the event that such payments are made to a non-resident Noteholder that is a legal entity or organisation (in each case not organised under Russian laws and which holds and disposes of the Notes otherwise than through a permanent establishment in Russia), unless such withholding tax is reduced or eliminated pursuant to the terms of an applicable double tax treaty. Russian companies paying income to foreign recipients should act as a tax agent in respect of each payment to the recipients of the Russian source income. The Tax Code provides that Russian companies should be released from the obligation to withhold Russian withholding tax from interest payments made to foreign companies on debt obligations which arise in connection with the issuance by foreign companies of traded bonds provided that (i) there is a double tax treaty between Russia and the jurisdiction of tax residency of the foreign company receiving interest income and (ii) the foreign company receiving interest income duly confirms its tax residency. This exemption from the tax agent obligation applies from 1 January 2007 to bonds issued before 1 January 2014. The ‘‘traded bonds’’ are defined as bonds and other debt obligations listed and/or admitted to circulation on one or several foreign stock exchanges and/or the rights to which are recorded by recognised depository-clearing organisations, provided such foreign stock exchanges and depository-clearing organisations are specified in a list approved by the Federal Authority for Securities Markets in consultation with the Ministry of Finance of the Russian Federation. This fact should be confirmed by Russian companies based on information provided by foreign stock exchanges, depository-clearing organisations, offering memorandum or other documents relating to the issue of the bonds or on the basis of information from public sources. Such list was approved by the Federal Authority for Securities Markets on 25 October 2012. The DTC, Euroclear and Clearstream, Luxembourg are included in this list. In order to confirm tax residence in a jurisdiction that has a double tax treaty in effect with the Russian Federation, recipients of interest income that are legal entities are required to file a residency certificate issued by the competent tax authority of the relevant treaty country. This certificate (apostilled or legalized and translated into Russian) is then required to be filed in the Russian Federation with the payer of interest income, in its role as a withholding tax agent and renewed on a yearly basis, before the payment under the debt obligation is made. Release from the duty to act as a withholding tax agent effectively means that, in practice, withholding tax on interest payments should not arise in Russia, because currently there is no mechanism or requirement for non-resident legal entities to self-assess and pay the tax. However, there can be no assurance that such rules will not be introduced in the future, which may result in the obligation of non-resident Noteholders which are legal entities to self-assess and pay the tax. According to the Tax Code, the conditions for the release from the obligation to withhold Russian withholding tax from interest payments described herein should also apply to guarantee or suretyship payments made in respect of traded bonds and/or corresponding debt obligations as well as to other payments provided that such payments are envisaged by the terms of the relevant debt obligations or are connected with the changes in terms and conditions of the traded bonds including their early repurchase and/or redemption. The above provision may potentially be interpreted in a way that the release from the withholding tax obligation should apply only if the traded bonds are issued to finance a debt obligation provided to a Russian debtor and the recipients of guarantee payments (such as the non-resident Noteholders that are legal entities or organisations) provide the payor of Russian source income (such as Guarantors) with tax residency certificates. If the release mentioned above does not apply, Russian withholding income tax may be reduced or eliminated under provisions of a double tax treaty, if the Noteholders are residents in countries having effective double tax treaties with the Russian Federation, and the requirements established by the applicable treaty and the Russian tax legislation are met. While it may be possible for some Noteholders, who are eligible for an exemption from Russian withholding tax under double taxation treaties, to claim a refund of tax withheld, there may be considerable practical difficulties in obtaining any such refund. Furthermore, there can be no assurance that the Russian withholding tax would not be imposed on the payments made under the Note Guarantees to the non-resident Noteholders—legal entities not residing for tax purposes in countries which have concluded a double tax treaty with Russia. In such case there is

302 a risk that Russian withholding tax would be imposed on the full amount of the Note Guarantee payment, including the principal amount of the Notes. Since the above could only be relevant in case of payments made in favor of the non-resident Noteholders—legal entities residing for tax purposes in countries which do not have a double tax treaty with Russia, reduction or elimination of 20% Russian withholding tax on the basis of the double tax treaties under such circumstances should not be possible. If the guarantee payments under the Trust Deeds would be required to be made to, or to the order of, the Trustee, there is also uncertainty if the release from the obligation to withhold the Russian withholding tax from guarantee payments made to the Trustee would be available. In this respect, guarantee payments made by the Guarantors to the Trustee may be subject to Russian income tax withholding at a rate of 20% (or potentially, 30% in respect of non-resident individual Noteholders) or such other rate as may be in force at the time of payment. It is not expected that the Trustee will, or will be able to, claim a withholding tax exemption under any double tax treaty. Where Russian source income is paid to a non-resident Noteholder who is an individual, the list of Russian source income subject to Russian personal income tax is defined by Article 208 of the Tax Code. It is not clear from the provisions of the Tax Code whether payments made by the Guarantors under the Note Guarantees should be classified as income received from sources within or outside the Russian Federation. If payments made by the Guarantors under the Note Guarantees to individuals who are not tax residents of the Russian Federation are classified as income received from source in the Russian Federation, these payments may be subject to withholding tax at a rate of 30% on the gross proceeds subject to reduction or elimination under any available double tax treaty provided that conditions for application of treaty relief established by such corresponding treaty and Russian tax legislation are met. If the payments under the Trust Deeds are made to the non-resident Noteholders who are individuals and in case the tax is withheld, the non-resident Noteholders can claim a refund of Russian tax withheld (see section ‘‘—Refund of Tax Withheld’’ above). If payments under the Note Guarantees become subject to Russian withholding tax or deduction for any taxes, duties, assessments or governmental charges of any nature (as a result of which the Guarantors would have to reduce payments made under the Note Guarantees by the withheld amount), the Guarantors will be obliged (subject to certain conditions) to increase payments under the Note Guarantees so as to result in the receipt by the Trustee or another entity acting on behalf of the Noteholders of such amounts as would have been received by it if no such withholding or deduction had been required. As a result, the Group may incur expenses in excess of the amount due to the Noteholders. The Group cannot be certain that it would have sufficient funds to make any payment required under the Note Guarantees or to pay the additional amounts associated with the withholding. Further, the Group can give no assurance that its obligation to pay the additional amounts associated with the withholding tax is enforceable under Russian law. There is some uncertainty under Russian law as to the enforceability of such gross-up provisions. If the Guarantors were to fail to make tax gross-up payments in accordance with the terms of the Note Guarantees and the related provisions under the Note Guarantees were deemed to be unenforceable, the net amount of the payments made by the Guarantors to the Trustee or any other person acting on behalf of the Noteholders could be insufficient to make payment in full under the Notes.

VAT on Payments under the Note Guarantees Any payments under the Note Guarantees made by the Guarantors should not be subject to Russian VAT.

Luxembourg The following description is of a general nature only and is included herein solely for preliminary information purposes. It is a description of the material Luxembourg withholding tax consequences with respect to payments on Notes through a paying agent established in Luxembourg, and does not purport to be a comprehensive description of all of the tax considerations that may be relevant to any prospective investor and may not include tax considerations that arise from rules of general application or that are generally assumed to be known to Noteholders. This description is based on the laws in force in Luxembourg on the date of this Offering Memorandum and is subject to any change in law that may take effect after such date. It is not intended to be, nor should it be construed to be, legal or tax advice. Prospective investors in the Notes should therefore consult their own professional advisers as to the effects of state, local or foreign laws, including Luxembourg tax law, to which they may be subject.

303 Resident Noteholders Under Luxembourg tax law currently in effect and subject to the application of the Luxembourg law dated 23 December 2005, as amended (the ‘‘Luxembourg Law’’), there is no withholding tax on payments of principal, premium or interest (including accrued but unpaid interest) made to Luxembourg resident holders of Notes. There is also no Luxembourg withholding tax, upon repayment of the principal, or subject to the application of the Luxembourg Laws, upon redemption, repurchase or exchange of the Notes. Under the Luxembourg Law, a 10 per cent. Luxembourg withholding tax is levied on interest payments made by Luxembourg-based paying agents to the benefit of Luxembourg resident individual beneficial owners. This withholding tax also applies on accrued interest received upon sale, redemption or repurchase of the Notes. Such withholding tax will be in full discharge of income tax, if the beneficial owner is an individual acting in the course of the management of his/her private wealth. Responsibility for the withholding of the tax will be assumed by the Luxembourg paying agent. In cases where the withholding tax applies, it will be levied at a rate of 10%.

Non-resident Noteholders Under the Luxembourg tax law currently in effect and subject to the application of the Luxembourg laws dated 21 June 2005 implementing the EU Savings Directive and several agreements concluded between Luxembourg and certain dependent territories of Member States of the European Union (the ‘‘Territories’’), as amended (the ‘‘Luxembourg Laws’’), there is no withholding tax on payments of principal, premium or interest (including accrued but unpaid interest) made to a Luxembourg non-resident Noteholder. See ‘‘—EU Savings Directive’’. There is also no Luxembourg withholding tax upon repayment of the principal, or subject to the application of the Luxembourg Laws, upon redemption, repurchase or exchange of the Notes. Under the Luxembourg Laws, a Luxembourg-based paying agent is required to withhold tax on interest and other similar income (including reimbursement premium received at maturity) paid by it to (or under certain circumstances, to the immediate benefit of) an individual beneficial owner or a residual entity, resident or established in another Member State of the European Union or one of the Territories, unless the beneficiary of the interest payments has adequately instructed the relevant paying agent to provide details of the relevant payments of interest or similar income to the fiscal authorities of his/her/its country of residence or establishment, or, in the case of an individual beneficial owner, has provided a tax certificate issued by the fiscal authorities of his/her country of residence in the required format to the relevant paying agent. Responsibility for the withholding tax will be assumed by the Luxembourg paying agent. In cases where the withholding tax applies, it will be levied at a rate of 35 per cent. The Luxembourg government announced however on 10 April 2013 that the withholding tax system will be abolished and replaced by automatic exchange of information as from 1 January 2015. When used in this section, ‘‘interest’’, ‘‘residual entity’’ and ‘‘paying agent’’ have the meaning given thereto in the Luxembourg Laws.

EU Savings Directive Under the EU Savings Tax Directive, each Member State of the EU is required to provide to the tax authorities of another Member State details of payments of interest or other similar income paid by a person within its jurisdiction to, or secured by such a person for, an individual beneficial owner resident in, or certain limited types of entities established in, that other Member State. However, for a transitional period, Austria and Luxembourg will (unless during such period they elect otherwise) instead operate a withholding system in relation to such payments. Under such a withholding system, the beneficial owner of the interest payment must be allowed to elect that certain provision of information procedures should be applied instead of withholding. As mentioned above, Luxembourg has announced that it will elect out of the withholding system in favour of automatic exchange of information with effect from 1 January 2015. The rate of withholding is 35%. The transitional period is to terminate at the end of the first full fiscal year following agreement by certain non-EU countries to exchange of information procedures relating to interest and other similar income.

304 A number of non-EU countries and certain dependent or associated territories of certain Member States have adopted similar measures to the EU Savings Tax Directive. A proposal for amendments to the EU Savings Directive has been published, including a number of suggested changes which, if implemented, would broaden the scope of the rules described above. Investors who are in any doubt as to their position should consult their professional advisers. If a payment under the Notes were to be made by a person in a Member State or another country or territory which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment pursuant to the EU Savings Directive or any law implementing or complying with, or introduced in order to conform to the EU Savings Directive, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts under the terms of such Notes as a result of the imposition of such withholding tax. The Issuer is, however, required, for so long as the Notes are listed on the Irish Stock Exchange, to maintain a Paying Agent in a Member State that will not be obliged to withhold or deduct tax pursuant to the EU Savings Directive or any such law.

United Kingdom Provision of Information Requirements The comments below are of a general nature and are based on current United Kingdom tax law and published practice of HM Revenue & Customs (‘‘HMRC’’), the U.K. tax authorities. Such law may be repealed, revoked or modified (possibly with retrospective effect) and such practice may change, resulting in U.K. tax consequences different from those discussed below. The comments below deal only with U.K. rules relating to information that may need to be provided to HMRC in respect of certain payments on the Notes. They do not deal with any other U.K. tax consequences of acquiring, owning or disposing of the Notes. Each prospective investor should seek advice based on its particular circumstances from an independent tax adviser. Persons in the U.K. (i) paying interest to or receiving interest on behalf of another person who is an individual or a partnership containing individuals, or (ii) paying amounts due on redemption of any Notes which constitute deeply discounted securities as defined in Chapter 8 of Part 4 of the Income Tax (Trading and Other Income) Act 2005 to or receiving such amounts on behalf of another person who is an individual or a partnership containing individuals, may be required to provide certain information to HMRC regarding the identity of the payee or person entitled to the interest and, in certain circumstances, such information may be exchanged with tax authorities in other jurisdictions. However, in relation to amounts payable on the redemption of any Notes which constitute deeply discounted securities, HMRC published guidance indicates that HMRC will not exercise its power to obtain information where such amounts are paid on or before 5 April 2014. There is no guarantee that equivalent guidance will be published in respect of future years.

Cyprus The following general summary of the material Cyprus tax consequences relevant to the purchase, ownership, and disposal of the Notes and the payment of interest pursuant to the Notes is based upon the tax laws, regulations, rulings, income tax conventions (treaties), administrative practice and judicial decisions of Cyprus in effect on the date of this offering memorandum and is subject to any change that may come into effect after that date. Legislative, judicial or administrative changes or interpretations may, however, be forthcoming that could alter or modify the statements and conclusions set forth herein. Any such changes or interpretations may be retroactive and could affect the tax consequences to holders of the Notes. This summary does not purport to be a legal opinion or to address all tax aspects that may be relevant to a holder of the Notes. Each prospective holder is urged to consult its own tax adviser as to the particular tax consequences to such holder of the ownership and disposition of the Notes, including the applicability and effect of any other tax laws or tax treaties, and of pending or proposed changes in applicable tax laws as at the date of this offering memorandum, and of any actual changes in applicable tax laws after such date. Taxation of payments made under the Guarantees will depend on the tax residency status of the noteholders and nature of the payment (interest or principal on the Notes).

Tax residency and tax basis In accordance with the provisions of the Income Tax Law, Law 118(I)/2002 (as amended) (the ‘‘Income Tax Law’’), a person (natural or legal) is liable to tax on its worldwide income on the basis of residency.

305 Individuals According to the Income Tax Law an individual is considered to be a tax-resident of Cyprus if he or she is physically present in Cyprus for a period or periods exceeding in aggregate more than 183 days in any calendar year.

Companies A company is considered to be tax resident in Cyprus if its management and control is exercised in Cyprus. A non-resident company is regarded as having a ‘‘permanent establishment’’ in Cyprus if it has a fixed place of business through which the business of the company is wholly or partly carried on, including a place of management, a branch or an office.

Tax basis All Cyprus tax residents are taxed on their worldwide income. Non-Cyprus tax residents are taxed on income derived from sources in Cyprus (in the case of individuals) or from a business activity which is carried out through a permanent establishment in Cyprus (in the case of companies).

Withholding taxes on principal and interest payments Repayment of principal Repayment of principal upon redemption of the Notes will not be subject to any withholding taxes in Cyprus, irrespective of whether or not the noteholder is a resident of Cyprus or not.

Interest payments to non-residents (individuals or companies) Interest payments made by a Cyprus tax resident company to non-residents of Cyprus are not subject to any withholding taxes in Cyprus, whether the interest is paid to an individual or a company. Interest payments to residents (individuals or companies)/permanent establishments. Interest payments made by a Cyprus tax resident company to residents of Cyprus (individuals or companies) or Cyprus permanent establishments of non-resident companies, which does not arise in or is not closely connected to the ordinary course of their business, is subject to special defense contribution in Cyprus at the rate of 30% on the gross interest received. Cyprus tax resident companies that are paying interest to such Cyprus tax resident individuals or companies, are obliged to withhold the special defense contribution at source and remit the tax to the Cypriot tax authorities. No special defense contribution is withheld on interest income that arises in or is closely connected to the ordinary course of the business.

Taxation of interest income Non-resident individuals Interest received or credited by individuals who are non-tax residents of Cyprus is not subject to taxes in Cyprus.

Resident individuals Interest income received or credited by a resident individual is subject to special defense contribution at the rate of 30% on the gross interest received, unless it can be established that such interest income arises in or is closely connected to the ordinary course of the individual’s business, in which case it will be exempt from special defense contribution and subject to income tax at the rates applicable to the individual’s level of income.

306 Resident companies/permanent establishments Any interest received or credited by resident companies/permanent establishments that arises in or is closely connected to the ordinary course of the business, is subject to income tax in Cyprus at the rate of 12.5% (after deduction of allowable expenses) and is exempt from special defense contribution. Any interest received or credited by resident companies/permanent establishments that does not arise in or is not closely connected to the ordinary course of the business, is subject to special defense contribution at the rate of 30% (without deducting expenses) and is exempt from income tax.

Stamp Duty Stamp duty is charged on every document specified in the Stamp Duty Law, Law 19/1963 Law (as amended) (the ‘‘Stamp Duty Law’’) if it relates to any asset or property situated in Cyprus or relates to any matter or thing to be performed or done in Cyprus. The rate of duty applicable to a document varies according to the category of documents within which the document falls and according to the provisions relating to that category. Some documents bear fixed duty and others ad valorem duty (i.e. duty charged by reference to a value). However, stamp duty is capped at a maximum amount of e20,000. Where several documents are employed for completing a transaction (whether executed at the same time or at different times), the principal document only is chargeable with stamp duty as specified in the Stamp Duty Law. The parties may determine for themselves which of the documents so employed shall be the principal document, provided that the duty chargeable on the document so determined shall be the highest duty which would be chargeable in respect of any of the relevant documents employed. A document that is chargeable with stamp duty under the provisions of the Stamp Duty Law must be stamped (a) within 30 days of the date of its execution (if executed in Cyprus) or (b) within 30 days of its receipt in Cyprus (if executed outside Cyprus). Therefore, where a document is chargeable to stamp duty and is executed outside Cyprus, the payment of stamp duty is ‘deferred’ until such document is received in Cyprus. Any document which is stampable, but is not duly stamped, may not be admitted into evidence in civil proceedings in Cyprus and is subject to a maximum penalty equal to 20 per cent. of the amount of stamp duty that is due but unpaid.

Ukraine General This summary is based upon the Ukrainian tax laws and regulations as in effect on the date of this Offering Memorandum. Such laws and regulations are subject to change or varying interpretations, possibly with retroactive effect. Same as the other areas of the Ukrainian legislation, tax law and practice in Ukraine is not clearly established compared to more developed jurisdictions. It is possible, therefore, that the current interpretation of the law or understanding of the practice may change or that the law may be amended with retroactive effect. Accordingly, it is possible that payments to be made to the Noteholders could become subject to taxation or that rates currently in effect with respect to such payments could be increased in a way that cannot be anticipated as at the date of this Offering Memorandum.

Payments under the Note Guarantee In general, interest payments on borrowed funds made by a Ukrainian entity to a non-resident are subject to Ukrainian withholding tax at a rate of 15%, unless the withholding tax is reduced or eliminated pursuant to the terms of an applicable tax treaty. Moreover, there is a risk that the Ukrainian tax authorities may treat all the amounts payable under the Note Guarantee (and not only those in respect of the interest on borrowed funds) as the Ukrainian source income of the recipient of such payments subject to 15% withholding tax based on the catch-all clause of Article 160.1 of the Tax Code of Ukraine which considers ‘‘any other income’’ of a foreign resident received from carrying out business in Ukraine as Ukrainian source income. If any payments under the Note Guarantee are viewed to be Ukrainian source income and, thereby, subject to 15% withholding tax, the foreign beneficiary of such payments may, nevertheless, be exempt from withholding tax in Ukraine, provided such beneficiary is (i) a tax resident of a jurisdiction which has a tax treaty with Ukraine, (ii) entitled to the benefits of such tax treaty and (iii) deemed not to carry on business in Ukraine through its permanent establishment. In order to

307 benefit from the tax treaty exemption, confirmation of the current tax residency status of the foreign beneficiary must be available on or prior to the date of payment of Ukrainian source income. Under the UK-Ukraine Double Tax Treaty, as it is currently applied, payments by Transgarant Ukraine to the Security Agent under the Note Guarantee may be exempt from withholding tax in Ukraine, provided that certain conditions set forth in the UK-Ukraine Double Tax Treaty and under applicable Ukrainian law are satisfied. However, there can be no assurance that the exemption from withholding tax is, or will continue to be, available. Payments to the Security Agent under the Note Guarantee would be exempt from Ukrainian withholding tax under the UK-Ukraine Double Tax Treaty provided that the Security Agent is a resident of the United Kingdom for the purposes of the UK-Ukraine Double Tax Treaty, is the ‘‘beneficial owner’’ of the payments and is ‘‘subject to tax’’ in respect of such payments in the United Kingdom. Under applicable Ukrainian law, the Security Agent’s residence in the United Kingdom for purposes of the UK-Ukraine Double Tax Treaty will be evidenced by a certificate issued by the taxing authority in the United Kingdom. The exemption of payments from Ukrainian withholding tax will not be available under the UK-Ukraine Double Tax Treaty if the Security Agent carries on business in Ukraine through a permanent establishment situated therein, and the debt claim in respect of which the payments are made is effectively connected with such permanent establishment. Ukraine does not have an established practice of applying the concept of ‘‘beneficial ownership’’ of payments. For tax law purposes, this concept was introduced in Ukraine by the Tax Code of Ukraine. Under the Tax Code, a person that acts as agent, nominal holder (owner) or intermediary in respect of Ukrainian source income would not qualify as the ‘‘beneficial owner’’ of the income. Although the Ukrainian tax authorities rarely applied the ‘‘beneficial ownership’’ concept to deny tax treaty benefits to foreign payees in the past, it cannot be excluded that, based on the above specified provisions of the Tax Code, the Security Agent may be viewed by the Ukrainian tax authorities as a person acting as agent, nominal holder or intermediary for the Noteholders and Secured Parties, for this reason, the Security Agent may fail to satisfy the ‘‘beneficial ownership’’ test in respect of payments under the Note Guarantee. In such event, such payments would not be exempt from the Ukrainian withholding tax, and Transgarant Ukraine would be required by the terms of the Intercreditor Agreement to gross-up its payments to compensate relevant Secured Parties for such tax withholding. However, a recent interpretation of the Ukrainian tax authorities indicates that tax gross-up provisions like those contained in the Intercreditor Agreement may be seen as contravening the Ukrainian tax law and unenforceable. In addition, Article 11(7) of the UK-Ukraine Double Tax Treaty contains a ‘‘main purpose’’ anti avoidance provision, which may apply to that part of payments under the Note Guarantee which corresponds to interest payments. While there is no established practice of the Ukrainian tax authorities with respect to the application of this provision, if the Ukrainian tax authorities take the position that the main or one of the main purposes of using the United Kingdom as the Security Agent’s jurisdiction of residence for this transaction was to take advantage of the tax benefits (i.e. exemption of interest payments from withholding taxation in Ukraine) under the UK-Ukraine Double Tax Treaty, the tax authorities may potentially invoke the anti avoidance provision of Article 11(7) of the UK-Ukraine Double Tax Treaty. In such circumstances, there is a risk that payments to the Security Agent under the Note Guarantee would cease to have the benefit of the UK-Ukraine Double Tax Treaty.

Consequences of Ukrainian Withholding If Transgarant Ukraine is required to withhold any amount from any payment under its Note Guarantee, as a consequence of or pursuant to the Ukrainian tax laws, it will be obliged to pay such additional amounts as may be necessary so that the net payments received by the Security Agent or any other party will not be less than the amount the Security Agent or any other party would have received in the absence of such withholding. Ukrainian tax legislation broadly prohibits contractual provisions requiring one party to pay tax on behalf of another party. In May 2012, the State Tax Service of Ukraine issued a letter indicating that under the Tax Code of Ukraine, tax gross-up, tax reimbursement and tax indemnity clauses of agreements between Ukrainian residents and their foreign counterparties contravene the requirements of the Ukrainian legislation that prohibit shifting of the foreign counterparty’s tax payment obligation to a Ukrainian resident. Consequently, there is a risk that such restriction will also apply to gross-up provisions of the Note Guarantee and obligations of Transgarant Ukraine to pay any additional amounts thereunder. As a result, tax gross-up provisions may be declared null and void and, therefore, unenforceable against Transgarant Ukraine in Ukraine.

308 Tax on Issue of the Notes No Ukrainian withholding tax will be applicable to the issue of the Notes or principal or interest payments on the Notes, as the Notes will not be issued in Ukraine.

Tax on Redemption of Notes Principal payments on redemption of the Notes will not be subject to the Ukrainian tax, as such payments will not be made by a Ukrainian borrower.

Ukrainian Noteholders A Ukrainian resident Noteholder, i.e., a qualifying physical person or a legal entity established and existing under the Ukrainian laws, is subject to all applicable Ukrainian taxes.

Ukrainian Stamp Duty No Ukrainian stamp duty, transfer or similar tax will be payable by a Noteholder in respect of the subscription, issue, delivery or transfer of the Notes.

Double Tax Treaties Ukrainian withholding tax may be reduced, or entirely eliminated, by virtue of an applicable tax treaty on the avoidance of double taxation between Ukraine and the relevant jurisdiction. Currently Ukraine has a network of more than 60 tax treaties.

Applicability of Double Tax Treaty Relief Where taxable income is received from a Ukrainian source, in favour of a non-resident Noteholder, whether an individual or a legal entity, to enjoy the benefits of an applicable double tax treaty, documentary evidence is required to confirm the applicability of the double tax treaty relief. In practice, a tax residency certificate submitted by a non-resident is deemed to be a sufficient basis for such entitlement. Ukrainian law contains guidelines on the form and substance of a tax residency certificate which must be followed for the certificate to be recognized by the Ukrainian authorities. Generally, a tax residency certificate must be submitted to the Ukrainian entity responsible for the withholding of the Ukrainian tax prior to the transfer of the relevant payments to the non-resident Noteholder.

309 TRANSFER RESTRICTIONS Because of the following restrictions, you are advised to consult legal counsel prior to making any offer, resale or other transfer offered hereby.

Rule 144A Notes Each purchaser of Rule 144A Notes, by accepting delivery of this Offering Memorandum and the relevant Notes, will be deemed to have represented, agreed and acknowledged that: 1. It is (a) a QIB that is also a QP, (b) not a broker-dealer that owns and invests on a discretionary basis less than U.S.$25 million in securities of unaffiliated issuers, (c) not a participant-directed employee plan, such as a 401(k) plan, (d) acquiring such Notes for its own account, or for the account of one or more QIBs each of which is also a QP, (e) not formed for the purpose of investing in the Notes or the Issuer, and (f) aware, and each beneficial owner of such Notes has been advised, that the seller of such Notes to it may be relying on Rule 144A. 2. It will (a) along with each account for which it is purchasing, hold and transfer beneficial interests in the relevant Rule 144A Notes in a principal amount that is not less than U.S.$200,000, and (b) provide notice of these transfer restrictions to any subsequent transferees. In addition, it understands that the Issuer may receive a list of participants holding positions in its securities from one or more book-entry depositories. 3. It understands that the Rule 144A Notes and the Note Guarantees have not been and will not be registered under the Securities Act and may not be offered, sold, pledged or otherwise transferred except (a) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believe is a QIB that is also a QP purchasing for its own account or for the account of one or more QIBs that are also QPs each of which is purchasing not less than U.S.$200,000 principal amount of Notes or (b) in an offshore transaction to a person that is not a U.S. person (within the meaning of Regulation S) in accordance with Rule 903 or Rule 904 of Regulation S under the Securities Act, and in each case in accordance with any applicable securities laws of any State or other jurisdiction of the United States. 4. It understands that the Issuer has the power under the Trust Deeds on behalf of itself and the Guarantors to compel any beneficial owner of Rule 144A Notes that is not a QIB and a QP to sell its interest in the relevant Rule 144A Notes, or may sell such interest on behalf of, or purchase such interest from, such owner at a price equal to the least of (x) the purchase price therefor paid by the beneficial owner, (y) 100% of the principal amount thereof or (z) the fair market value thereof. The Issuer has the right on behalf of itself and the Guarantors to refuse to honor the transfer of an interest in the Rule 144A Notes to a U.S. person who is not a QIB and a QP. 5. It understands that the Rule 144A Notes, unless otherwise agreed between the Issuer and the Trustee in accordance with applicable law, will bear a legend to the following effect: THIS NOTE AND THE NOTE GUARANTEES IN RESPECT THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE ‘‘SECURITIES ACT’’) OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH RULE 144A UNDER THE SECURITIES ACT (‘‘RULE 144A’’) TO A PERSON THAT THE HOLDER AND ANY PERSON ACTING ON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A ‘‘QIB’’) THAT IS A QUALIFIED PURCHASER (A ‘‘QP’’) WITHIN THE MEANING OF SECTION 2(a)(51) OF THE U.S. INVESTMENT COMPANY ACT OF 1940 (THE ‘‘INVESTMENT COMPANY ACT’’) PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB THAT IS ALSO A QP WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT SUCH OFFER, SALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT, AND IN AN AMOUNT FOR EACH ACCOUNT OF NOT LESS THAN U.S.$200,000 PRINCIPAL AMOUNT OF NOTES OR (2) OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT A U.S. PERSON IN ACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT (‘‘REGULATION S’’), AND IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES, AND THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY

310 PURCHASER FROM IT OF THE NOTES IN RESPECT HEREOF OF THE RESALE RESTRICTIONS REFERRED TO ABOVE. ANY TRANSFER IN VIOLATION OF THE FOREGOING WILL BE OF NO FORCE OR EFFECT, WILL BE VOID AB INITIO AND WILL NOT OPERATE TO TRANSFER ANY RIGHTS TO THE TRANSFEREE, NOTWITHSTANDING ANY INSTRUCTIONS TO THE CONTRARY TO THE ISSUER OF THIS NOTE, THE TRUSTEE OR ANY INTERMEDIARY. NO REPRESENTATION CAN BE MADE AS TO THE AVAILABILITY OF ANY EXEMPTION UNDER THE SECURITIES ACT FOR RESALES OF THIS NOTE. IF THE BENEFICIAL OWNER HEREOF IS A U.S. PERSON WITHIN THE MEANING OF REGULATION S, SUCH BENEFICIAL OWNER HEREOF REPRESENTS THAT (1) IT IS A QIB THAT IS ALSO A QP; (2) IT IS NOT A BROKER-DEALER THAT OWNS AND INVESTS ON A DISCRETIONARY BASIS LESS THAN U.S.$25,000,000 IN SECURITIES OF UNAFFILIATED ISSUERS; (3) IT IS NOT A PARTICIPANT-DIRECTED EMPLOYEE PLAN, SUCH AS A 401(k) PLAN; (4) IT IS HOLDING THIS NOTE FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QIB THAT IS ALSO A QP; (5) IT WAS NOT FORMED FOR THE PURPOSE OF INVESTING IN THE ISSUER OR THIS NOTE; (6) IT, AND EACH ACCOUNT FOR WHICH IT HOLDS NOTES, WILL HOLD AND TRANSFER AT LEAST U.S.$200,000 IN PRINCIPAL AMOUNT OF NOTES; (7) IT UNDERSTANDS THAT THE ISSUER MAY RECEIVE A LIST OF PARTICIPANTS HOLDING POSITIONS IN ITS SECURITIES FROM ONE OR MORE BOOK-ENTRY DEPOSITORIES AND (8) IT WILL PROVIDE NOTICE OF THE FOREGOING TRANSFER RESTRICTIONS TO ITS SUBSEQUENT TRANSFEREES. THE BENEFICIAL OWNER HEREOF HEREBY ACKNOWLEDGES THAT, IF AT ANY TIME WHILE IT HOLDS AN INTEREST IN THIS NOTE IT IS A PERSON WHO IS NOT A QIB THAT IS ALSO A QP, THE ISSUER MAY ON BEHALF OF ITSELF AND THE GUARANTORS (A) COMPEL IT TO SELL ITS INTEREST IN THIS NOTE TO A PERSON (1) WHO IS ALSO A QIB THAT IS ALSO A QP AND WHO IS OTHERWISE QUALIFIED TO PURCHASE THIS NOTE IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OR (2) IN AN OFFSHORE TRANSACTION TO A PERSON THAT IS NOT A U.S. PERSON IN ACCORDANCE WITH RULE 903 OR 904 OF REGULATION S OR (B) COMPEL THE BENEFICIAL OWNER TO SELL ITS INTEREST IN THIS NOTE TO THE ISSUER OR AN AFFILIATE OF THE ISSUER OR TRANSFER ITS INTEREST IN THIS NOTE TO A PERSON DESIGNATED BY OR ACCEPTABLE TO THE ISSUER AT A PRICE EQUAL TO THE LEAST OF (X) THE PURCHASE PRICE THEREFOR PAID BY THE BENEFICIAL OWNER, (Y) 100% OF THE PRINCIPAL AMOUNT THEREOF OR (Z) THE FAIR MARKET VALUE THEREOF. THE ISSUER HAS THE RIGHT ON BEHALF OF ITSELF AND THE GUARANTORS TO REFUSE TO HONOR A TRANSFER OF AN INTEREST IN THIS NOTE TO A PERSON WHO IS NOT A QIB AND A QP. THE ISSUER AND THE GUARANTORS HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE INVESTMENT COMPANY ACT. EACH BENEFICIAL OWNER HEREOF OR OF ANY INTEREST HEREIN IS DEEMED TO REPRESENT, WARRANT AND AGREE THAT FOR SO LONG AS IT HOLDS THIS NOTE OR ANY INTEREST HEREIN (1) IT IS NOT AND IS NOT USING ASSETS OF A BENEFIT PLAN INVESTOR (AS DEFINED IN SECTION 3(42) OF THE UNITED STATES EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (‘‘ERISA’’), OR A GOVERNMENTAL, CHURCH OR NON-U.S. PLAN THAT IS SUBJECT TO ANY FEDERAL, STATE, LOCAL OR NON-U.S. LAW THAT IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE UNITED STATES INTERNAL REVENUE CODE OF 1966, AS AMENDED (THE ‘‘CODE’’) OR ANY ENTITY WHOSE ASSETS ARE TREATED AS ASSETS OF ANY SUCH PLAN, UNLESS THE ACQUISITION HOLDING AND DISPOSITION OF THIS NOTE OR ANY INTEREST HEREIN DOES NOT VIOLATE SECTION 406 OF ERISA, SECTION 4975 OF THE CODE OR ANY OTHER STATUTE, REGULATION, ADMINISTRATIVE DECISION, POLICY OR ANY OTHER LEGAL AUTHORITY APPLICABLE TO SUCH PLAN AND WILL NOT SUBJECT THE ISSUER TO ANY SUCH STATUTE, REGULATION, ADMINISTRATIVE DECISION, POLICY OR OTHER LEGAL AUTHORITY, AND (2) IT WILL NOT SELL OR OTHERWISE TRANSFER THIS NOTE OR ANY INTEREST THEREIN TO ANY PERSON WITHOUT FIRST OBTAINING THESE SAME FOREGOING DEEMED REPRESENTATIONS, WARRANTIES AND AGREEMENTS. ‘‘BENEFIT PLAN INVESTORS’’ INCLUDE (1) ANY EMPLOYEE BENEFIT PLAN (AS DEFINED IN SECTION 3(3) OF ERISA), THAT IS SUBJECT TO PART 4 OF TITLE I OF ERISA, (2) ANY PLAN TO WHICH SECTION 4975 OF THE CODE APPLIES, INCLUDING, WITHOUT LIMITATION, INDIVIDUAL RETIREMENT ACCOUNTS AND KEOGH PLANS (EACH OF (1) AND (2) A ‘‘PLAN’’), AND (3) ANY ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF A PLAN’S INVESTMENT IN THE ENTITY PURSUANT TO THE PLAN ASSET REGULATION ISSUED BY THE

311 UNITED STATES DEPARTMENT OF LABOR, 29 C.F.R. SECTION 2510.3-101, AS MODIFIED BY SECTION 3(42) OF ERISA (INCLUDING, FOR THIS PURPOSE, THE GENERAL ACCOUNT OF AN INSURANCE COMPANY, ANY OF THE UNDERLYING ASSETS OF WHICH CONSTITUTE ‘‘PLAN ASSETS’’ UNDER SECTION 401(c) OF ERISA, OR A WHOLLY OWNED SUBSIDIARY THEREOF). THE ISSUER ON BEHALF OF ITSELF AND THE GUARANTORS MAY COMPEL EACH BENEFICIAL OWNER HEREOF TO CERTIFY PERIODICALLY THAT SUCH OWNER IS A QIB AND A QP. 6. At the time of its purchase and throughout the period in which it holds such Notes or any interest therein: (1) it is not and is not using assets of a Benefit Plan Investor (as defined in Section 3(42) of ERISA), or a governmental, church or non-U.S. plan that is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code or any entity whose assets are treated as assets of any such plan, unless the acquisition, holding and disposition of the Notes or any interest therein (x) does not violate Section 406 of ERISA, Section 4975 of the Code or any other statute, regulation, administrative decision, policy or any other legal authority applicable to such plan, and (y) will not subject the Issuer to any such provision of ERISA or the Code or any other statute, regulation, administrative decision, policy or other legal authority, and (2) it will not sell or otherwise transfer any such note or interest to any person without first obtaining these same foregoing deemed representations, warranties and agreements. ‘‘Benefit Plan Investors’’ include (1) any employee benefit plan (as defined in Section 3(3) of ERISA), that is subject to Part 4 of Subtitle B of Title I of ERISA, (2) any plan to which Section 4975 of the Code applies, including, without limitation, individual retirement accounts and Keogh plans (each of (1) and (2) a ‘‘Plan’’), and (3) any entity whose underlying assets include plan assets by reason of a Plan’s investment in the entity pursuant to the Plan Asset Regulation issued by the United States Department of Labor, 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA (including, for this purpose, the general account of an insurance company, any of the underlying assets of which constitute ‘‘plan assets’’ under section 401(c) of ERISA, or a wholly- owned subsidiary thereof). It acknowledges that the Issuer, the Guarantors, FESCO, the Registrar, the Joint Bookrunners and their respective affiliates, and others will rely upon the truth and accuracy of the above acknowledgements, representations and agreements and agrees that, if any of the acknowledgements, representations or agreements deemed to have been made by it by its purchase of Rule 144A Notes is no longer accurate, it shall promptly notify the Issuer, the Guarantors, FESCO and the Joint Bookrunners. If it is acquiring any Notes as a fiduciary or agent for one or more investor accounts who are QIBs that are also QPs, it represents that it has sole investment discretion with respect to each such account, and that it has full power to make the above acknowledgements, representations and agreements on behalf of each such account. The purchaser and any fiduciary causing it to acquire an interest in any Notes agrees to indemnify and hold harmless the Issuer, the Guarantors, the Joint Bookrunners and the Trustee and their respective affiliates, from and against any cost, damage or loss incurred by any of them as a result of any of the foregoing representations and agreements being or becoming false. In the event that the Issuer determines that any Note is held by a Benefit Plan Investor, the Issuer may cause a sale or transfer of such Note. Any purported acquisition or transfer of any Note or beneficial interest therein to an acquirer or transferee that does not comply with the requirements of this paragraph 6 shall be null and void ab initio. 7. It understands that the Rule 144A Notes will be evidenced by the Restricted Global Certificates. Before any interest in a Restricted Global Certificate may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in an Unrestricted Global Certificate, it will be required to provide a Transfer Agent with a written certification (in the form provided in the Paying Agency Agreements) as to compliance with applicable securities laws. Prospective purchasers are hereby notified that sellers of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.

312 Regulation S Notes Each purchaser of Regulation S Notes, by accepting delivery of this Offering Memorandum and the relevant Regulation S Notes, will be deemed to have represented, agreed and acknowledged that: 1. It is, or at the time Regulation S Notes are purchased will be, the beneficial owner of such Regulation S Notes and (a) it is not a U.S. person and it is located outside the United States (within the meaning of Regulation S) and (b) it is not an affiliate of the Issuer, the Guarantors or FESCO or a person acting on behalf of such an affiliate. 2. It understands that the Regulation S Notes and the Note Guarantees have not been and will not be registered under the Securities Act and that, prior to the expiration of the distribution compliance period (as such terms are defined in Rule 902 of Regulation S), which is deemed to include the 40-day period after commencement of the Offering or the Issue Date, whichever is later, it will not offer, sell, pledge or otherwise transfer such Notes except (a) in accordance with Rule 144A to a person that it and any person acting on its behalf reasonably believes is a QIB that is also a QP purchasing for its own account or for the account of a QIB that is also a QP or (b) to a person that is not a U.S. person within the meaning of Regulation S in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S, in the case of (a) and (b), in accordance with any applicable securities laws of any state or other jurisdiction of the United States. 3. It understands that the Regulation S Notes will be evidenced by the Unrestricted Global Certificates. Before any interest in an Unrestricted Global Certificate may be offered, sold, pledged or otherwise transferred to a person who takes delivery in the form of an interest in a Restricted Global Certificate, it will be required to provide a Transfer Agent with a written certification (in the form provided in the Paying Agency Agreements) as to compliance with applicable securities laws. 4. At the time of its purchase and throughout the period in which it holds such Notes or any interest therein: (1) it is not and is not using assets of a Benefit Plan Investor (as defined in Section 3(42) of ERISA), or a governmental, church or non-U.S. plan that is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code or any entity whose assets are treated as assets of any such plan, unless the acquisition, holding and disposition of the Notes or any interest therein (x) does not violate Section 406 of ERISA, section 4975 of the Code or any other statute, regulation, administrative decision, policy or any other legal authority applicable to such plan, and (y) will not subject the Issuer to any such provision of ERISA or the Code or any other statute, regulation, administrative decision, policy or other legal authority, and (2) it will not sell or otherwise transfer any such note or interest to any person without first obtaining these same foregoing representations and warranties. ‘‘Benefit Plan Investors’’ include a Plan (as defined above) and any entity whose underlying assets include plan assets by reason of a Plan’s investment in the entity pursuant to the Plan Asset Regulation issued by the United States Department of Labor, 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA (including, for this purpose, the general account of an insurance company, any of the underlying assets of which constitute ‘‘plan assets’’ under section 401(c) of ERISA, or a wholly- owned subsidiary thereof). It acknowledges that the Issuer, the Guarantors, FESCO, the Registrar, the Joint Bookrunners and their affiliates and others will rely upon the truth and accuracy of the above acknowledgements, representations and agreements and agrees that, if any of the acknowledgements, representations or agreements deemed to have been made by it by its purchase of Notes is no longer accurate, it shall promptly notify the Issuer, the Guarantors, FESCO and the Joint Bookrunners. If it is acquiring any Notes as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to each of those accounts and that it has full power to make the above acknowledgements, representations and agreements on behalf of each account. The purchaser and any fiduciary causing it to acquire an interest in any Notes agrees to indemnify and hold harmless the Issuer, the Guarantors, the Joint Bookrunners and the Trustee and their respective affiliates, from and against any cost, damage or loss incurred by any of them as a result of any of the foregoing representations and agreements being or becoming false. In the event that the Issuer determines that any Note is held by a Benefit Plan Investor, the Issuer may cause a sale or transfer of such Note. Any purported acquisition or transfer of any Note or beneficial interest therein to an acquirer or transferee that does not comply with the requirements of this paragraph 4 shall be null and void ab initio.

313 PLAN OF DISTRIBUTION Each of Goldman Sachs International, ING Bank N.V., London Branch and Raiffeisen Bank International AG (together, the ‘‘Joint Bookrunners’’) has in a subscription agreement with respect to the 2018 Notes dated 23 April 2013 among the Issuer, the Joint Bookrunners and the Guarantors (the ‘‘2018 Subscription Agreement’’) upon the terms and subject to the conditions contained therein, severally agreed to subscribe and pay for the aggregate principal amounts of the 2018 Notes as set out opposite its name below at their issue price of 100% of their principal amount.

Principal Amount of the 2018 Notes (U.S.$ million) Goldman Sachs International ...... 270.8 ING Bank N.V., London Branch ...... 114.6 Raiffeisen Bank International AG ...... 114.6 Total ...... 500.0

Each of the Joint Bookrunners has in a subscription agreement with respect to the 2020 Notes dated 23 April 2013 among the Issuer, Joint Bookrunners and the Guarantors (the ‘‘2020 Subscription Agreement’’, and together with the 2018 Subscription Agreement, the ‘‘Subscription Agreements’’) upon the terms and subject to the conditions contained therein, severally agreed to subscribe and pay for the aggregate principal amounts of the 2020 Notes as set out opposite its name below at their issue price of 100% of their principal amount.

Principal Amount of the 2020 Notes (U.S.$ million) Goldman Sachs International ...... 162.5 ING Bank N.V., London Branch ...... 68.75 Raiffeisen Bank International AG ...... 68.75 Total ...... 300.0

The Joint Bookrunners shall make any offers and sales into the United States, to the extent necessary, through their U.S. registered broker-dealer affiliates. The Joint Bookrunners are entitled to fees and reimbursement of certain expenses pursuant to the Subscription Agreements, which, in aggregate, are estimated to be U.S.$4 million. The Joint Bookrunners are entitled in certain circumstances to be released and discharged from their obligations under the Subscription Agreements prior to the closing of the issue of the Notes.

Selling Restrictions United States The Notes and the Note Guarantees have not been and will not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons, except in certain transactions exempt from the registration requirements of the Securities Act. Each Joint Bookrunner has agreed, severally and not jointly, that, except as permitted by the Subscription Agreements, it will not offer or sell the Notes (1) as part of its distribution at any time or (2) otherwise until completion of the distribution compliance period, which is deemed to include the 40-day period after commencement of the Offering or the Issue Date, whichever is later, within the United States to, or for the account or benefit of, U.S. persons, and it will have sent to each dealer to which it sells Notes (other than a sale pursuant to Rule 144A) during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Notes within the United States or to, or for the account or benefit of, U.S. persons. Terms used in this paragraph have the meanings given to them by Regulation S. The Notes are being offered and sold outside of the United States in reliance on Regulation S. The Subscription Agreements provide that the Joint Bookrunners may directly or through their respective U.S. broker-dealer affiliates arrange for the offer and resale of the relevant Notes in the United States only to persons whom they reasonably believe are QIBs and QPs who can represent that (a) they are QPs

314 who are QIBs within the meaning of Rule 144A; (b) they are not broker-dealers that own and invest on a discretionary basis less than U.S.$25 million in securities of unaffiliated issuers; (c) they are not participants in directed employee plans, such as a 401(k) plan; (d) they are acting for their own account, or the account of one or more QIBs each of which is a QP; (e) they are not formed for the purpose of investing in the Issuer or the Notes; (f) each account for which they are purchasing will hold and transfer at least U.S.$200,000 in principal amount of the Notes at any time; (g) they understand that the Issuer may receive a list of participants holding positions in its securities from one or more book-entry depositaries; and (h) they will provide notice of the transfer restrictions set forth in this Offering Memorandumto any subsequent transferees. In addition, until 40 days after the commencement of the Offering or the Issue Date, whichever is later, an offer or sale of Notes within the United States by a dealer that is participating in the offering may violate the registration requirements of the Securities Act if such offer or sale is made otherwise than in accordance with Rule 144A. The Issuer and the Joint Bookrunners reserve the right to reject any offer to purchase the Notes, in whole or in part, for any reason. This Offering Memorandum does not constitute an offer to any person in the United States or to any U.S. person other than any QIB who is also a QP and to whom an offer has been made directly by one of the Joint Bookrunners or its relevant U.S. broker-affiliate. Distribution of this Offering Memorandum by any non-U.S. person outside the United States or by any QIB who is a QP within the United States to any U.S. person or any person within the United States other than any QIB who is a QP, and those persons, if any, retained to advise such person outside the United States or QIB who is a QP with respect thereto, is unauthorised, and any disclosure without the prior written consent of the Issuer of any of its contents to any such U.S. person outside the United States or any person within the United States other than any QIB who is a QP and those persons, if any, retained to advise such U.S. person outside the United States or QIB who is a QP, is prohibited.

United Kingdom Each Joint Bookrunner has severally and not jointly nor jointly and severally agreed that: 1. it has only communicated or caused to be communicated, and will only communicate or cause to be communicated, any invitation or inducement to engage in investment activity (within the meaning of section 21 of the FSMA) received by it in connection with the issue or sale of any Notes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer or the Guarantors; and 2. it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom.

Russian Federation Each Joint Bookrunner has severally and not jointly nor jointly and severally agreed that the Notes will not be offered, transferred or sold as part of their initial distribution or at any time thereafter to or for the benefit of any persons (including legal entities) resident, incorporated, established or having their usual residence in the Russian Federation or to any person located within the territory of the Russian Federation unless and to the extent otherwise permitted under Russian Law.

European Economic Area In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a ‘‘Relevant Member State’’), and with effect from and including the date on which the Prospectus Directive is implemented in that Relevant Member State (the ‘‘Relevant Implementation Date’’) an offer of Notes which are the subject of the offering contemplated by this Offering Memorandum cannot be made to the public in that Relevant Member State except that, with effect from and including the Relevant Implementation Date, an offer of such Notes to the public may be made in that Relevant Member State at any time: (a) at any time to any legal entity which is a qualified investor as defined in the Prospectus Directive; (b) at any time to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150 natural or legal persons (other than qualified

315 investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the Issuer; or (c) at any time in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of Notes referred to in (a) to (c) above shall require the Issuer to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive. For the purposes of this provision: • the expression an ‘‘offer of Notes to the public’’ in relation to any Notes in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the Notes to be offered so as to enable an investor to decide to purchase or subscribe the Notes, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State; • the expression ‘‘Prospectus Directive’’ means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in the Relevant Member State; and • the expression ‘‘2010 PD Amending Directive’’ means Directive 2010/73 EU.

Ukraine The Notes shall not be offered for circulation, distribution, placement, sale, purchase or other transfer in the territory of Ukraine unless and to the extent otherwise permitted under the laws of Ukraine.

Other Relationships The Joint Bookrunners and their respective affiliates may have performed various financial advisory, investment banking and commercial banking services for, and may arrange loans and other non-public market financing for, and enter into derivative transactions with, with FESCO and its affiliates (including its shareholders, the Issuer and the Guarantors) and for which they may receive customary fees and expenses. The Joint Bookrunners and their respective affiliates may provide such services in the future.

316 CLEARING AND SETTLEMENT Book-Entry Procedures for the Global Note Certificates Custodial and depository links are to be established between Euroclear, Clearstream, Luxembourg and DTC to facilitate the initial issue of the Notes and cross-market transfers of the Notes associated with secondary market trading. See ‘‘—Book-Entry Ownership’’ and ‘‘—Settlement and Transfer of Notes’’.

Euroclear and Clearstream, Luxembourg Euroclear and Clearstream, Luxembourg each hold securities for their customers and facilitate the clearance and settlement of securities transactions through electronic book-entry transfer between their respective accountholders. Indirect access to Euroclear and Clearstream, Luxembourg is available to other institutions which clear through or maintain a custodial relationship with an accountholder of either system. Euroclear and Clearstream, Luxembourg provide various services including safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg also deal with domestic securities markets in several countries through established depository and custodial relationships. Euroclear and Clearstream, Luxembourg have established an electronic bridge between their two systems across which their respective customers may settle trades with each other. Their customers are worldwide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations. Investors may hold their interests in the Unrestricted Global Certificates directly through Euroclear or Clearstream, Luxembourg if they are accountholders (‘‘Direct Participants’’) or indirectly (‘‘Indirect Participants’’, and together with Direct Participants, ‘‘Participants’’) through organisations which are accountholders therein.

DTC DTC has advised the Issuer as follows: DTC is a limited-purpose trust company organised under the laws of the State of New York, a ‘‘banking organisation’’ under the laws of the State of New York, a member of the U.S. Federal Reserve System, a ‘‘clearing corporation’’ within the meaning of the New York Uniform Commercial Code and a ‘‘clearing agency’’ registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants (‘‘DTC Participants’’) and facilitate the clearance and settlement of securities transactions between DTC Participants through electronic computerised book-entry changes in accounts of its DTC Participants, thereby eliminating the need for physical movement of certificates. DTC Participants include securities brokers and dealers, banks, trust companies, clearing corporations and certain other organisations. Indirect access to DTC is available to others, such as banks, securities brokers, dealers and trust companies that clear through or maintain a custodial relationship with a DTC Participant, either directly or indirectly. Investors may hold their interests in the Restricted Global Certificates directly through DTC if they are DTC Participants in the DTC system or indirectly through organisations which are DTC Participants in such system. DTC has advised the Issuer that it will take any action permitted to be taken by a holder of Notes only at the direction of one or more DTC Participants and only in respect of such portion of the aggregate principal amount of the relevant Restricted Global Certificate as to which such DTC Participant or DTC Participants has or have given such direction.

Book-Entry Ownership Euroclear and Clearstream, Luxembourg The Unrestricted Global Certificates will each have an ISIN and a Common Code and will be registered in the name of a nominee for, and deposited with a common depositary on behalf of, Euroclear and Clearstream, Luxembourg. The address of Euroclear is 1 Boulevard du Roi Albert 11, B-1210 Brussels, Belgium, and the address of Clearstream, Luxembourg is 42 Avenue J.F. Kennedy, L-1855, Luxembourg.

317 DTC The Restricted Global Certificates will have a CUSIP number, an ISIN and a Common Code and will be deposited with a custodian (the ‘‘Custodian’’) for, and registered in the name of a nominee of, DTC. The Custodian and DTC will electronically record the principal amount of the Notes held within the DTC system. The address of DTC is 55 Water Street, New York, New York 10041, United States of America.

Relationship of Participants with Clearing Systems Each of the persons shown in the records of Euroclear, Clearstream, Luxembourg or DTC as the holder of a Note evidenced by a Global Certificate must look solely to Euroclear, Clearstream, Luxembourg or DTC (as the case may be) for his share of each payment made by the Issuer to the holder of such Global Note Certificate and in relation to all other rights arising under that Global Note Certificate, subject to and in accordance with the respective rules and procedures of Euroclear, Clearstream, Luxembourg or DTC (as the case may be). The Issuer expects that, upon receipt of any payment in respect of Notes evidenced by a Global Certificate, the common depositary by whom such Note is held, or nominee in whose name it is registered, will immediately credit the relevant participants’ or accountholders’ accounts in the relevant clearing system with payments in amounts proportionate to their respective beneficial interests in the principal amount of the relevant Global Certificate as shown on the records of the relevant clearing system or its nominee. The Issuer also expects that payments by Direct Participants or DTC Participants (as the case may be) in any clearing system to owners of beneficial interests in such Global Certificate held through such Direct Participants or DTC Participants (as the case may be) in any clearing system will be governed by standing instructions and customary practices. Save as aforesaid, such persons shall have no claim directly against the Issuer in respect of payments due on the Notes for so long as the Notes are evidenced by such Global Certificate and the obligations of the Issuer will be discharged by payment to the registered holder, as the case may be, of such Global Certificate in respect of each amount so paid. None of the Issuer, the Trustee or any Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of ownership interests in any Global Certificate or for maintaining, supervising or reviewing any records relating to such ownership interests.

Settlement and Transfer of Notes Subject to the rules and procedures of each applicable clearing system, purchases of Notes held within a clearing system must be made by or through Direct Participants or DTC Participants (as the case may be), which will receive a credit for such Notes on the clearing system’s records. The ownership interest of each actual purchaser of each such Note (the ‘‘Beneficial Owner’’) will in turn be recorded on the Direct Participant’s, Indirect Participant’s or DTC Participant’s records (as the case may be). Beneficial Owners will not receive written confirmation from any clearing system of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct Participant, Indirect Participant or DTC Participant (as the case may be) through which such Beneficial Owner entered into the transaction. Transfers of ownership interests in Notes held within the clearing system will be affected by entries made on the books of Direct Participants, Indirect Participants or DTC Participants (as the case may be) acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in such Notes, unless and until interests in any Global Certificate held within a clearing system are exchanged for Individual Certificates in definitive form. No clearing system has knowledge of the actual Beneficial Owners of the Notes held within such clearing system and their records will reflect only the identity of the Direct Participants or DTC Participants (as the case may be) to whose accounts such Notes are credited, which may or may not be the Beneficial Owners. The Direct Participants or the DTC Participants (as the case may be) will remain responsible for keeping account of their holdings on behalf of their customers. Conveyance of notices and other communications by the clearing systems to Direct Participants or DTC Participants (as the case may be), by Direct Participants to Indirect Participants, and by Direct Participants, Indirect Participants or DTC Participants (as the case may be) to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. The laws of some jurisdictions may require that certain persons take physical delivery in definitive form of securities. Consequently, the ability to transfer interests in the Global Certificates to such persons may

318 be limited. In particular, because DTC can only act on behalf of DTC Participants the ability of a person having an interest in a Restricted Global Certificate to pledge such interest to persons or entities that do not participate in DTC, or otherwise take actions in respect of such interest, may be affected by the lack of a physical certificate in respect of such interest.

Trading between Euroclear and/or Clearstream, Luxembourg Participants Secondary market sales of book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg to purchasers of book-entry interests in the Notes held through Euroclear or Clearstream, Luxembourg will be conducted in accordance with the normal rules and operating procedures of Euroclear and Clearstream, Luxembourg and will be settled using the procedures applicable to conventional Eurobonds.

Trading between DTC Participants Secondary market sales of book-entry interests in the Notes between DTC Participants will occur in the ordinary way in accordance with DTC rules and will be settled using the procedures applicable to U.S. corporate debt obligations in DTC’s Same-Day Funds Settlement system in same-day funds, if payment is effected in U.S. Dollars, or free of payment, if payment is not effected in U.S. Dollars. Where payment is not effected in U.S. Dollars, separate payment arrangements outside DTC are required to he made between DTC Participants.

Trading between DTC Seller and Euroclear/Clearstream, Luxembourg Purchaser When book-entry interests in Notes are to be transferred from the account of a DTC Participant holding a beneficial interest in a Rule 144A Global Note Certificate to the account of a Euroclear or Clearstream, Luxembourg accountholder wishing to purchase a beneficial interest in an Unrestricted Global Certificate (subject to the certification procedures provided in the relevant Paying Agency Agreements), the DTC Participant will deliver instructions for delivery to the relevant Euroclear or Clearstream, Luxembourg accountholder to DTC by 12:00 p.m., New York time, on the settlement date. Separate payment arrangements are required to be made between the DTC Participant and the relevant Euroclear or Clearstream, Luxembourg Participant. On the settlement date, the custodian of the Restricted Global Certificate will instruct the Registrar to (1) decrease the amount of Notes registered in the name of Cede & Co. and evidenced by such Restricted Global Certificate and (2) increase the amount of Notes registered in the name of the nominee of the common depository for Euroclear and Clearstream, Luxembourg and evidenced by the Unrestricted Global Certificate. Book-entry interests will be delivered free of payment to Euroclear or Clearstream, Luxembourg, as the case may be, for credit to the relevant accountholder on the first business day following the settlement date.

Trading between Euroclear/Clearstream, Luxembourg Seller and DTC Purchaser When book-entry interests in the Notes are to be transferred from the account of a Euroclear or Clearstream, Luxembourg accountholder to the account of a DTC Participant wishing to purchase a beneficial interest in a Restricted Global Certificate (subject to the certification procedures provided in the Paying Agency Agreements), the Euroclear or Clearstream, Luxembourg accountholder must send to Euroclear or Clearstream, Luxembourg delivery free of payment instructions by 7:45 p.m., Brussels / Luxembourg time, one business day prior to the settlement date. Euroclear or Clearstream, Luxembourg, as the case may be, will in turn transmit appropriate instructions to the common depository for Euroclear and Clearstream, Luxembourg and the Registrar to arrange delivery to the DTC Participant on the settlement date. Separate payment arrangements are required to be made between the DTC Participant and the relevant Euroclear or Clearstream, Luxembourg accountholder, as the case may be. On the settlement date, the common depositary for Euroclear and Clearstream, Luxembourg will (a) transmit appropriate instructions to the custodian of the Restricted Global Certificate who will in turn deliver such book-entry interests in the Notes free of payment to the relevant account of the DTC Participant and (b) instruct the Registrar to (1) decrease the amount of Notes registered in the name of the nominee of the common depository for Euroclear and Clearstream, Luxembourg and evidenced by the Unrestricted Global Certificate; and (2) increase the amount of Notes registered in the name of Cede & Co. and evidenced by the Restricted Global Certificate. Although Euroclear, Clearstream, Luxembourg and DTC have agreed to the foregoing procedures in order to facilitate transfers of beneficial interest in Global Certificates among participants and

319 accountholders of Euroclear, Clearstream, Luxembourg and DTC, they are under no obligation to perform or continue to perform such procedure, and such procedures may be discontinued at any time. None of the Issuer, the Trustee or any Agent will have the responsibility for the performance, by Euroclear, Clearstream, Luxembourg or DTC or their respective Direct Participants, Indirect Participants or DTC Participants, as the case may be, of their respective obligations under the rules and procedures governing their operations.

Pre-issue Trades Settlement It is expected that delivery of Notes will be made against payment therefor on the Issue Date, which could be more than three business days following the date of pricing. Settlement procedures in different countries will vary. Purchasers of Notes may be affected by such local settlement practices, and purchasers of Notes between the relevant date of pricing and the Issue Date should consult their own advisers.

320 CERTAIN U.S. EMPLOYEE BENEFIT PLAN CONSIDERATIONS Subject to certain restrictions described below, Notes are permitted to be acquired by employee benefit plans as described in Section 3(3) of the U.S. Employee Retirement Income Security Act of 1974, as amended (‘‘ERISA’’) that are subject to Title I of ERISA (collectively, ‘‘ERISA Plans’’), plans not subject to ERISA but subject to Section 4975 of the U.S. Internal Revenue Code of 1986, as amended (the ‘‘Code’’), including IRAs, Keogh Plans which cover only self-employed persons and their spouses and other employee benefit plans which cover only the owners of a business (collectively, ‘‘4975 Plans’’), or by entities whose underlying assets include plan assets by reason of an investment in the entity by ERISA Plans or 4975 Plans or otherwise (collectively, ‘‘Plan Asset Entities’’). ERISA Plans, 4975 Plans and Plan Asset Entities are collectively referred to as ‘‘Benefit Plan Investors’’. Subject to certain restrictions described below, Notes are permitted to be acquired by a governmental plan (as defined in Section 3(32) of ERISA), church plan (as defined in Section 3(33) of ERISA) or non-U.S. plan (as described in Section 4(b)(4) of ERISA) that is subject to any federal, state, local or non-U.S. law that is substantially similar to the provisions of Section 406 of ERISA or Section 4975 of the Code or any entity whose assets are treated as assets of any such plan (collectively, ‘‘Non-ERISA Plans’’). ERISA imposes fiduciary standards and certain other requirements on ERISA Plans and on those persons who are fiduciaries with respect to ERISA Plans. 4975 Plans are subject to certain restrictions similar to ERISA’s prohibited transaction rules. Non-ERISA Plans are subject to applicable state, local, federal or non-U.S. law, as well as the restrictions of duties of common law, and may also be subject to prohibited transaction provisions that operate similarly to those under ERISA. Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets of Benefit Plan Investors and certain persons (referred to as ‘‘parties in interest’’ or ‘‘disqualified persons’’) having certain relationships to such plans, unless a statutory or administrative exemption is applicable to the transaction (each a ‘‘prohibited transaction’’). A party in interest or disqualified person who engages in a non-exempt prohibited transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code. In addition, the fiduciary of the Benefit Plan Investor that is engaged in such a non-exempt prohibited transaction may be subject to penalties under ERISA and the Code. Certain exemptions from the prohibited transaction provisions of Section 406 of ERISA and Section 4975 of the Code may be applicable, however, in certain cases, depending in part on the type of fiduciary making the decision on behalf of the Benefit Plan Investor to acquire any Notes and the circumstances under which such decision is made. Included among these exemptions are Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Code (relating to transactions with certain service providers) and Prohibited Transaction Class Exemption (‘‘PTCE’’) 91-38 (relating to investments by bank collective investment funds), PTCE 84-14 (relating to transactions effected by ‘‘qualified professional asset managers’’), PTCE 95-60 (relating to transactions involving insurance company general accounts), PTCE 90-1 (relating to investments by insurance company pooled separate accounts) and PTCE 96-23 (relating to transactions determined by certain ‘‘in-house asset managers’’). There can be no assurance that any of these exemptions or any other exemption will be available with respect to any particular transaction involving Notes. Benefit Plan Investors and Non-ERISA Plans and entities that include the assets of Non-ERISA Plans are permitted to acquire the Notes subject to certain restrictions described below. In addition, the fiduciary of a Benefit Plan Investor or Non-ERISA Plan must consider ERISA, the Code and any other applicable state, local, federal or non-U.S. laws, if any, imposed upon such plan before purchasing a Note or any interest therein. BY ITS PURCHASE AND HOLDING OF A NOTE OR ANY INTEREST THEREIN, THE PURCHASER AND/OR HOLDER THEREOF AND EACH TRANSFEREE WILL BE DEEMED TO HAVE REPRESENTED AND WARRANTED AT THE TIME OF ITS PURCHASE AND THROUGHOUT THE PERIOD THAT IT HOLDS SUCH NOTE OR INTEREST THEREIN, THAT (1) EITHER (I) IT IS NOT AND WILL NOT BE (A) AN EMPLOYEE BENEFIT PLAN AS DESCRIBED IN SECTION 3(3) OF ERISA THAT IS SUBJECT TO THE PROVISIONS OF TITLE I OF ERISA, (B) A PLAN TO WHICH SECTION 4975 OF THE CODE APPLIES OR (C) AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE PLAN ASSETS BY REASON OF AN INVESTMENT IN THE ENTITY BY A PERSON DESCRIBED IN (A) OR (B) ABOVE OR OTHERWISE, A GOVERNMENTAL, CHURCH OR NON-U.S. PLAN THAT IS SUBJECT TO ANY FEDERAL, STATE, LOCAL OR NON-U.S. LAW THAT IS SUBSTANTIALLY SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE OR ANY ENTITY WHOSE ASSETS ARE TREATED AS ASSETS OF ANY SUCH PLAN OR (II), THE ACQUISITION, HOLDING AND DISPOSITION OF THE NOTE OR ANY

321 INTEREST THEREIN DOES NOT VIOLATE SECTION 406 OF ERISA, SECTION 4975 OF THE CODE OR ANY OTHER STATUTE, REGULATION, ADMINISTRATIVE DECISION, POLICY OR ANY OTHER LEGAL AUTHORITY APPLICABLE TO SUCH PLAN AND WILL NOT SUBJECT THE ISSUER TO ANY SUCH STATUTE, REGULATION, ADMINISTRATIVE DECISION, POLICY OR OTHER LEGAL AUTHORITY, AND (2) IT WILL NOT SELL OR OTHERWISE TRANSFER THE NOTE OR ANY INTEREST THEREIN TO ANY PERSON WITHOUT FIRST OBTAINING THESE SAME FOREGOING DEEMED REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The foregoing is not intended to be exhaustive, and the law governing investments by Benefit Plan Investors and Non-ERISA Plans is subject to extensive administrative and judicial interpretations. The foregoing discussion should not be construed as legal advice. Any potential purchaser of Notes should consult counsel with respect to issues arising under ERISA, the Code and other applicable laws and make their own independent decisions.

322 LEGAL MATTERS AND INDEPENDENT AUDITORS Legal Matters Certain legal matters in connection with the Offering will be passed upon for us, the Issuer and the Guarantors with respect to the laws of England and the United States by Cleary Gottlieb Steen & Hamilton LLP, with respect to the laws of the Russian Federation by Cleary Gottlieb Steen & Hamilton LLC, with respect to the laws of Ukraine by Vasil Kisil & Partners, with respect to the laws of Cyprus by Antis Triantafyllides & Sons LLC and with respect to the laws of Luxembourg by Elvinger, Hoss & Prussen. Certain legal matters in connection with the Offering will be passed upon for the Joint Bookrunners with respect to the laws of England and the United States by Allen & Overy LLP and with respect to the laws of the Russian Federation by Allen & Overy Legal Services.

Independent Auditors The Financial Statements included in this Offering Memorandumhave been audited by ZAO KPMG (‘‘KPMG’’), independent auditors, of 10 Presnenskaya Naberezhnaya, Moscow, Russian Federation, 123317, as stated in their reports appearing herein. KPMG is a member of the Russian Chamber of Auditors (Auditorskaya palata Rossii) and the Institute of Professional Accountants of Russia (Institut professionalnih buhgalterov Rossii).

323 GENERAL INFORMATION 1. The Notes have been accepted for clearance through Euroclear, Clearstream, Luxembourg and DTC. 2. The Common Code and ISIN numbers for the 2018 Regulation S Notes are 092033490 and XS0920334900, respectively, and the Common Code and ISIN numbers for the 2020 Regulation S Notes are 092033503 and XS0920335030, respectively. 3. The Common Code, CUSIP and ISIN numbers for the 2018 Rule 144A Notes are 092071251, 307322 AA5 and US307322AA57, respectively, and the Common Code, CUSIP and ISIN numbers for the 2020 Rule 144A Notes are 092071308, 307322 AB3, and US307322AB31, respectively. 4. The address of Euroclear is 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium; the address of Clearstream, Luxembourg is 42 Avenue JF Kennedy, L-1855 Luxembourg; and the address for DTC is 55 Water Street, New York, NY 10041, United States of America. 5. It is expected that listing of the Notes on the Official List of the Irish Stock Exchange and admission of the Notes to trading on the Global Exchange Market of the Irish Stock Exchange will be granted on or before 2 May 2013. 6. Copies of the following documents may be inspected in hard copy at the registered office of the Issuer and the Guarantors and at the offices of the Principal Paying Agent in London during usual business hours on any weekday (Saturdays and public holidays excepted) for so long as the Notes are listed on the Irish Stock Exchange: (a) a copy of this Offering Memorandum, together with any supplement to this Offering Memorandum; (b) the articles of association of the Issuer; (c) a copy of the charter or, as the case may be, articles of incorporation of each of the Guarantors; (d) the Financial Statements; (e) the Deed of Guarantee and Deed of Confirmation; (f) the Intercreditor Agreement; (g) the Paying Agency Agreements; and (h) the Trust Deeds, which include the forms of the Global Note Certificates and Individual Certificates in definitive form. 9. The issue of the Notes was authorised by a resolutions of the board of directors of the Issuer on 23 April 2013, and each Note Guarantee was authorised by a decision of the relevant Guarantor’s board of directors. 10. No consents, approvals, authorisations or orders of any regulatory authorities other than as disclosed in the Offering Memorandum are required by the Issuer or any of the Guarantors under the laws of Ireland, Luxembourg, Cyprus, Ukraine or the Russian Federation for issuing the Notes or the giving of the Note Guarantees. 11. Since 4 April 2013, the date of incorporation of the Issuer, there has been no material adverse change in the financial position or prospects of the Issuer. The Issuer has no subsidiaries. 12. Save for the fees payable to the Joint Bookrunners, the Trustee and the Agents, so far as the Issuer is aware, no person involved in the issue of the Notes has an interest that is material to the issue of the Notes. 13. Except as disclosed in this Offering Memorandum, there has been no significant change in our financial or trading position since 31 December 2012, nor has there been any material adverse change in our prospects since 31 December 2012. 14. Except as disclosed in this Offering Memorandum, there has been no significant change in the financial or trading position of any of the Guarantors since 31 December 2012, nor has there been any material adverse change in the prospects of any of the Guarantors since 31 December 2012.

324 15. Except as disclosed in this Offering Memorandum, there have been no governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which any of the Issuer, the Guarantors or the Group is aware), since the date of its incorporation in relation to the Issuer and during the previous 12 months in relation to the Guarantors or us, which may have, or have had in the recent past, significant effects on the Issuer’s, the Guarantors’ or our financial position or profitability. 16. Upon application of the use of proceeds from the Offering, there will be no encumbrances on the assets of either Transgarant or VKT that could materially affect the ability of Transgarant or VKT to meet its obligations under its Note Guarantee. Although Transgarant and VKT may be affected by some or all of the risks set out in ‘‘Risk Factors’’, including those risks enumerated under ‘‘Risk Factors—Risks Relating to the Notes, Our Indebtedness and Our Structure’’, we do not believe there are any risks specific to Transgarant or VKT that could adversely impact the ability of Transgarant or VKT to meet its obligations under its Note Guarantee. 17. The Trust Deeds provide, inter alia, that the Trustee may rely on any certificate or report prepared by accountants pursuant to the Trust Deeds (whether or not addressed to the Trustee), notwithstanding whether or not the accountants’ liability in respect thereof is limited by a monetary cap or otherwise. 18. TMF Trustee Limited is a professional trustee company, which is providing its services in relation to the Notes on an arm’s length basis in consideration of a fee. Under the terms of the Trust Deeds, the power of appointing new trustees is vested in the Issuer (with the prior written consent of FESCO) but a trustee so appointed must in the first place be approved by an Extraordinary Resolution of Noteholders. The Noteholders have the power, exercisable by Extraordinary Resolution, to remove any trustee or trustees. The removal of any trustee is only effective if following the removal there remains a trustee (being a trust corporation) in office after such removal. In addition, TMF Trustee Limited or any other trustee duly appointed may retire at any time upon giving not less than three months notice in writing to the Issuer (copied to FESCO). The retirement of any trustee is only effective if, following the retirement, there remains a trustee (being a trust corporation) in office after such retirement. If the trustee has given notice of its desire to retire and the Issuer is unable to procure a new trustee to be appointed and the Issuer has not by the expiry of such notice (with the prior written consent of FESCO) appointed a new trustee, the trustee shall have the power of appointing new trustee(s). 19. The expenses associated with the admission to trading on the Global Exchange Market of the Irish Stock Exchange of the Notes are expected to be approximately e5,000. 20. The Issuer does not intend to provide any post-issuance transaction information regarding the Notes or the Note Guarantees. 21. The language of this Offering Memorandum is English. Certain legislative references and technical terms have been cited in their original language in order that the correct technical meaning may be ascribed to them under applicable law. 22. Arthur Cox Listing Services Limited is acting solely in its capacity as listing agent for the Issuer in relation to the Notes and is not itself seeking admission of the Notes to the Official List of the Irish Stock Exchange or to trading on the Global Exchange Market of the Irish Stock Exchange.

325 (This page has been left blank intentionally.) INDEX TO THE FINANCIAL STATEMENTS

Page IFRS Consolidated Financial Statements and Independent Auditors’ Report of the Group as of 31 December 2012 and for the years ended 31 December 2012 and 2011 Contents ...... F-2 Independent Auditors’ Report ...... F-3 Consolidated Statement of Financial Position ...... F-5 Consolidated Income Statement ...... F-6 Consolidated Statement of Comprehensive Income ...... F-7 Consolidated Statement of Changes in Equity ...... F-8 Consolidated Statement of Cash Flows ...... F-10 Notes to the Consolidated Financial Statements ...... F-12

IFRS Consolidated Financial Statements and Independent Auditors’ Report of the Group as of 31 December 2011 and for the years ended 31 December 2011 and 2010 Contents ...... F-55 Independent Auditors’ Report ...... F-56 Consolidated Statement of Financial Position ...... F-57 Consolidated Income Statement ...... F-58 Consolidated Statement of Comprehensive Income ...... F-59 Consolidated Statement of Changes in Equity ...... F-60 Consolidated Statement of Cash Flows ...... F-62 Notes to the Consolidated Financial Statements ...... F-64

F-1 FAR-EASTERN SHIPPING COMPANY PLC. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS 31 December 2012

CONTENTS

Page Auditors’ Report ...... F-3 Consolidated Statement of Financial Position ...... F-5 Consolidated Income Statement ...... F-6 Consolidated Statement of Comprehensive Income ...... F-7 Consolidated Statement of Changes in Equity ...... F-8 Consolidated Statement of Cash Flows ...... F-10 1. Organisation and Trading Activities ...... F-12 2. Basis of Preparation ...... F-12 3. Accounting Policies ...... F-15 4. Goodwill ...... F-25 5. Fleet ...... F-27 6. Rolling Stock ...... F-29 7. Other Tangible Fixed Assets ...... F-30 8. Investments in Associates and Joint Ventures ...... F-31 9. Other Non-Current Assets ...... F-32 10. Inventories ...... F-33 11. Accounts Receivable ...... F-33 12. Assets Held-for-Sale ...... F-34 13. Other Current Assets ...... F-34 14. Cash and Cash Equivalents ...... F-34 15. Accounts Payable ...... F-34 16. Loans Payable and Finance Leases Obligations ...... F-35 17. Other Non-Current Liabilities ...... F-36 18. Current and Deferred Tax ...... F-37 19. Shareholders’ Equity ...... F-38 20. Share-Based Payments ...... F-38 21. Business Segmental Analysis ...... F-39 22. Revenue ...... F-42 23. Operating Expenses ...... F-42 24. Administrative Expenses ...... F-42 25. Other Finance Income and Costs ...... F-43 26. Other Income and Expenses ...... F-43 27. Impairment loss on Tangible Fixed Assets ...... F-43 28. (Loss)/Earnings per Share ...... F-43 29. Acquisitions of Subsidiary ...... F-44 30. Contingencies and Commitments ...... F-45 31. Financial Risk Management Objectives and Policies ...... F-47 32. Related Party Transactions ...... F-53 33. Events subsequent to the reporting date ...... F-54

F-2 3APR201304355759

Auditors’ Report

To the Shareholders FAR-EASTERN SHIPPING COMPANY PLC. (FESCO) We have audited the accompanying consolidated financial statements of FAR-EASTERN SHIPPING COMPANY PLC. (FESCO) (the ‘‘Company’’) and its subsidiaries (the ‘‘Group’’), which comprise the consolidated statement of financial position as at 31 December 2012, and the consolidated statements of income, comprehensive income, changes in equity and cash flows for 2012, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on the fair presentation of these consolidated financial statements based on our audit. We conducted our audit in accordance with Russian Federal Auditing Standards and International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

AUDITED ENTITY: Far-Eastern Shipping Company PLC. (FESCO), a company Independent auditor: ZAO KPMG, a company incorporated under the Laws of the incorporated under the Laws of the Russian Federation on the basis of the act of the Russian Federation, a part of the KPMG Europe LLP group, and a member firm of the Head of Administration of Frunzenskiy district of Vladivostok (Primorskiy region) on KPMG network of independent member firms affiliated with KPMG International 3 December 1992 No. 467 AOO. Cooperative (‘‘KPMG International’’), a Swiss entity.

Entered in the Unified State Register of Legal Entities on 28 December 2007 by Registered by the Moscow Registration Chamber on 25 May 1992, Registration Vladivostok Inter-Regional Tax of Frunzenskiy district of the Ministry for Taxes and No. 011.585. Duties of the Russian Federation, Registration No. 1022502256127, Certificate series 25 No. 002932105. Entered in the Unified State Register of Legal Entities on 13 August 2002 by the Moscow Inter-Regional Tax Inspectorate No. 39 of the Ministry for Taxes and Duties 29 Serebryanicheskaya Naberezhnaya, Vladivostok, Primorskiy Kray, Russian of the Russian Federation, Registration No. 1027700125625, Certificate series 77 Federation 109028 No. 005721432.

Member of the Non-commercial Partnership ‘‘Chamber of Auditors of Russia’’. The Principal Registration Number of the Entry in the State Register of Auditors and Audit Organisations: No. 10301000804.

F-3 We believe that the audit evidence we have obtained is sufficient and appropriate to express an opinion on the fair presentation of these consolidated financial statements.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2012, and its financial performance and its cash flows for 2012 in accordance with International Financial Reporting Standards.

3APR201304383591 Romanenko A.M., Director, power of attorney dated 1 October 2010 No. 47/10 ZAO KPMG 2 April 2013 Moscow, Russian Federation

F-4 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Financial Position As at 31 December 2012

31 December 31 December USD mln Note 2012 2011 ASSETS Non-Current Assets Fleet ...... 5 87 382 Rolling stock ...... 6 498 505 Other tangible fixed assets ...... 7 409 161 Goodwill ...... 4 280 214 Other intangible assets ...... 3 2 Investments in associates and joint ventures ...... 8 359 105 Other equity investments ...... 2 199 Other non-current assets ...... 9 565 313 Total non-current assets ...... 2,203 1,881 Current Assets Inventories ...... 10 26 25 Accounts receivable ...... 11 190 178 Current tax assets ...... 14 10 Assets held for sale ...... 12 12 — Other current assets ...... 13 3 8 Cash and cash equivalents ...... 14 232 232 Total current assets ...... 477 453 Total Assets ...... 2,680 2,334 EQUITY AND LIABILITIES Shareholders’ Equity ...... 19 Share capital ...... 57 57 Share premium ...... 777 999 Treasury shares ...... — (336) Retained earnings ...... 814 889 Reserves ...... (125) (182) Equity attributable to owners of the Company ...... 1,523 1,427 Non-controlling interests ...... 9 14 Total equity ...... 1,532 1,441 Non-current liabilities Long term loans and finance lease obligations ...... 16 701 499 Deferred tax liability ...... 18 57 35 Other long term liabilities ...... 17 16 27 Total non-current liabilities ...... 774 561 Current Liabilities Accounts payable ...... 15 147 128 Current tax liabilities ...... 2 5 Liabilities held for sale ...... 6 — Short term loans and finance lease obligations ...... 16 219 199 Total current liabilities ...... 374 332 Total liabilities ...... 1,148 893 Total equity and liabilities ...... 2,680 2,334

3APR201304373537 3APR201304363875 Y.B. Gilts, President A.A.Sugrey, Deputy CFO

Date: 02 April 2013

The accompanying notes on pages F-12 to F-54 form an integral part of these consolidated financial statements.

F-5 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Income Statement For the year ended 31 December 2012

USD mln Note 2012 2011 Revenue ...... 22 1,197 1,029 Operating expenses ...... 23 (793) (680) Gross profit before depreciation and amortization ...... 404 349 Depreciation and amortisation ...... 5,6,7 (100) (82) Administrative expenses ...... 24 (157) (133) Impairment loss on tangible fixed assets ...... 27 (96) (47) Other expenses, net ...... 26 (28) (5) Profit from operating activity ...... 23 82 Interest expense ...... (53) (45) Foreign exchange gain ...... 1 15 Other finance income, net ...... 25 5 1 Share of profit of equity accounted investees ...... 8 45 7 Profit before income tax ...... 21 60 Income tax expense ...... 18 (38) (31) (Loss)/profit for the year ...... (17) 29 Attributable to: Owners of the Company ...... (20) 19 Non-controlling interest ...... 3 10 Basic (loss)/profit per share ...... 28 (USD 0.007) USD 0.008 Diluted (loss)/profit per share ...... (USD 0.007) USD 0.008

The accompanying notes on pages F-12 to F-54 form an integral part of these consolidated financial statements.

F-6 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Comprehensive Income For the year ended 31 December 2012

USD mln 2012 2011 (Loss)/profit or the year ...... (17) 29 Other comprehensive income/(loss): Revaluation of fleet ...... (6) 4 Deferred tax charge on revaluation of fleet ...... — (1) Effect of foreign currency translation ...... 28 (37) Net change in fair value of available-for-sale financial asset ...... 20 (73) Correction of the cost of tangible fixed assets, net of deferred tax ...... — 2 Other comprehensive (loss)/ income for the year ...... 42 (105) Total comprehensive income/(loss) for the year ...... 25 (76) Total comprehensive (loss)/ income attributable to: Ordinary shareholders of the Company ...... 22 (85) Non-controlling interests ...... 3 9

The accompanying notes on pages F-12 to F-54 form an integral part of these consolidated financial statements.

F-7 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Changes in Equity For the year ended 31 December 2012

Attributable to equity holders of the Company Share Share Treasury Investment Cash Non- capital premium shares Retained Revaluation fair value Translation flow controlling Total USD mln (Note 19) (Note 19) (Note 19) earnings reserve reserve reserve hedge Total interest equity Balance at 1 January 2011 . 57 999 (336) 870 29 24 (130) 3 1,516 11 1,527 Profit for the year ...... — — — 19 — — — — 19 10 29 Other comprehensive income/(loss) Effect of foreign currency translation ...... — — — — — — (36) — (36) (1) (37) Revaluation of fleet, net of deferred tax ...... — — — — 3 — — — 3 — 3 Release from revaluation reserve ...... — — — 2 (2) — — — — — — Net change in fair value of available-for-sale financial assets ...... — — — — — (73) — — (73) — (73) Correction of the cost of tangible fixed assets, net of deferred tax (Note 6) .... — — — 2 — — — — 2 — 2 Total other comprehensive income/(loss) ...... — — — 4 1 (73) (36) — (104) (1) (105) Total comprehensive income/(loss) for the year — — — 23 1 (73) (36) — (85) 9 (76) Transactions with owners, recorded directly in equity Dividends declared ...... — — — — — — — — — (5) (5) Total contributions by and distributions to owners . . — — — — — — — — — (5) (5) Acquisition of non-controlling interests without a change in control ...... — — — (4) — — — — (4) (1) (5) Total transaction with owners ...... — — — (4) — — — — (4) (6) (10) Balance at 31 December 2011 ...... 57 999 (336) 889 30 (49) (166) 3 1,427 14 1,441

The accompanying notes on pages F-12 to F-54 form an integral part of these consolidated financial statements.

F-8 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Changes in Equity For the year ended 31 December 2012 (Continued)

Attributable to equity holders of the Company Share Share Treasury Investment Cash Non- capital premium shares Retained Revaluation fair value Translation flow controlling Total USD mIn (Note 19) (Note 19) (Note 19) earnings reserve reserve reserve hedge Total interest equity Balance at 1 January 2012 . 57 999 (336) 889 30 (49) (166) 3 1,427 14 1,441 Loss for the year ...... — — — (20) — — — — (20) 3 (17) Other comprehensive income/(loss) Effect of foreign currency translation ...... — — — — — — 28 — 28 — 28 Revaluation of fleet, net of deferred tax ...... — — — — (6) — — — (6) — (6) Release from revaluation reserve ...... — — — 11 (11) — — — — — — Disposal of cash flow hedge . — — — 3 — — — (3) — — — Net change in fair value of available-for-sale financial assets ...... — — — — — 20 — — 20 — 20 Disposal of available-for-sale financial assets, see Note 8 — — — (29) — 29 — — — — — Total other comprehensive income/(loss) ...... — — — (15) (17) 49 28 (3) 42 — 42 Total comprehensive income/(loss) for the year — — — (35) (17) 49 28 (3) 22 3 25 Transactions with owners, recorded directly in equity Acquisition of non-controlling interests without a change in control (Note 29) ..... — — — (40) — — — — (40) (17) (57) Acquisition of subsidiaries(Note 29) .... — — — — — — — — — 9 9 Disposal of treasury shares (Note 19) ...... (222) 336 — — — — — 114 — 114 Total transaction with owners ...... — (222) 336 (40) — — — — 74 (8) 66 Balance at 31 December 2012 ...... 57 777 — 814 13 — (138) — 1,523 9 1,532

The availability of the Company’s retained earnings for distribution to shareholders is determined by the Company’s Charter and by Russian law and does not correspond with the figures shown above. The Company’s retained earnings available for distribution under Russian Accounting Standards as at 31 December 2012 were USD 330 million (as at 31 December 2011 USD 240 million).

The accompanying notes on pages F-12 to F-54 form an integral part of these consolidated financial statements.

F-9 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Cash Flows For the year ended 31 December 2012

USD mln Note 2012 2011 Cash flows from operating activities (Loss)/profit for the year ...... (17) 29 Adjustments for: Depreciation and amortisation ...... 100 82 Impairment losses ...... 96 47 Loss on disposal of tangible fixed assets ...... 2 — Foreign exchange differences ...... (1) (15) Net finance costs ...... 48 44 Share of profit of equity accounted investees ...... (45) (7) Income tax expense ...... 38 30 Other income and expense ...... (8) 3 Cash from operating activities before changes in working capital and provisions ...... 213 213 Change in inventories ...... 1 (3) Change in trade and other receivables ...... (10) (22) Change in trade and other payables ...... 19 18 Cash flows from operations before income taxes paid ...... 223 206 Income tax paid ...... (54) (34) Cash flows from operating activities ...... 169 172

The accompanying notes on pages F-12 to F-54 form an integral part of these consolidated financial statements.

F-10 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Cash Flows For the year ended 31 December 2012 (Continued)

USD mln Note 2012 2011 Cash flows from investing activities Expenditure on vessels under construction ...... 5 (9) (25) Refund from cancellation of construction contract ...... — 1 Expenditure on non-current assets ...... (1) — Expenditure on other fixed assets ...... 7 (48) (110) Expenditure on drydocking ...... 5 (7) (8) Proceeds on disposal of fleet ...... 5 186 5 Proceeds on disposal of other fixed assets ...... 26 4 Acquisition of equity-accounted investee ...... 8 (40) (5) Other investments acquired ...... (1) (106) Acquisition of subsidiaries, net of cash acquired ...... 29 18 (45) Prepayments for investments ...... 9 (2) (293) Proceeds on sale of investments ...... — 1 Dividends received ...... 10 2 Long-term loans issued ...... (540) (6) Short-term loans/investments received ...... 11 — Finance lease received ...... 2 1 Interest received ...... 12 11 Net cash used in investing activities ...... (383) (573) Cash flows from financing activities Proceeds from borrowings ...... 588 501 Repayment of borrowings ...... (411) (345) Finance charges ...... (53) (46) Financial instruments liability paid ...... (32) (10) Dividends paid ...... — (8) Proceeds on sale of treasury shares ...... 114 — Acquisition of non-controlling interests ...... — (4) Net cash from financing activities ...... 206 88 Effect of exchange rate fluctuations on cash and cash equivalents ...... 8 (11) Net increase/(decrease) in Cash and cash equivalents ...... — (324) Cash and cash equivalents at 1 January ...... 232 556 Cash and cash equivalents at 31 December ...... 14 232 232

The accompanying notes on pages F-12 to F-54 form an integral part of these consolidated financial statements.

F-11 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012

1. Organisation and Trading Activities Far-Eastern Shipping Company PLC. (FESCO or Company) was privatised and became a joint stock company governed by the laws of the Russian Federation on 3 December 1992. The Company’s registered office and principal place of business is: 29 Serebryanicheskaya Naberezhnaya, Moscow, Russian Federation 109028. In December 2012 Maple Ridge Limited, ultimately controlled by Mr. Ziaudin Magomedov, acquired control over Fesco. To finance the acquisition, the Group entered into several bank loan facilities in the aggregate amount of USD 540 million, which were on-lent to the Group’s new shareholders, see Notes 9 and 16. Additionally, the Group subsidiaries issued guarantees for the bank facilities obtained by the new shareholders for the aggregate amount of USD 400 million. The principal activity of the Group has traditionally been shipping (ship owning, ship management, chartering out and line operating). In recent years FESCO has been transformed into an intermodal logistics Group focused on Russia, offering a full range of logistical solutions through a combination of shipping, rail, trucking and port services.

2. Basis of Preparation (a) Basis of preparation These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’) as issued by the International Accounting Standards Board (‘‘IASB’’). The preparation of consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of selecting and applying accounting policies. The areas involving a higher degree of judgement or complexity, or areas where estimates are significant to the financial statements are disclosed in Note 2c. The significant accounting policies adopted by the Group have been consistently applied with those of the prior period. The consolidated financial statements are prepared on the historical cost basis except that derivative financial instruments, investments at fair value through profit and loss and financial investments classified as available-for-sale are stated at fair value. Group’s vessels are stated at fair value at each reporting date based on valuation performed by an independent professional appraiser as disclosed in Note 5. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. (b) Basis of consolidation These financial statements include the accounts of FESCO and its subsidiaries. The principal subsidiaries of the Group are as follows:

Country of Percentage Name Incorporation Holding Activity Bodyguard Shipping Company Limited ..... Cyprus 100% Ship owning Diataxis Shipping Company Limited ...... Cyprus 100% Ship owning Yerakas Shipping Company Limited ...... Cyprus 100% Ship owning Antilalos Shipping Company Limited ...... Cyprus 100% Ship owning Carmina Maritime Ltd ...... Marshall 100% Ship owning Islands Udarnik Maritime Ltd...... Marshall 100% Ship owning Islands Marline Shipping Company Limited ...... Cyprus 100% Ship owning Marview Shipping Company Limited ...... Cyprus 100% Ship owning

F-12 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

2. Basis of Preparation (Continued)

Country of Percentage Name Incorporation Holding Activity FESCO Agencies N.A., Inc...... USA 100% Shipping agency Astro-Moon Shipping Company Limited .... Cyprus 100% Ship owning Anouko Shipping Company Limited ...... Cyprus 100% Ship owning FESCO Lines China, Co., Ltd...... China 100% Shipping agency Firm Transgarant LLC ...... Russia 100% Holding company for transportation services group FIT LLC ...... Russia 100% Transport and forwarding services VKT LLC ...... Russia 75% Container terminal VMTP PLC ...... Russia 96% Commercial Port TRANSFES Co., Ltd ...... Russia 100% Shipping agency and operations Dalreftrans Co, Ltd ...... Russia 100% Transport and forwarding services ESF...... Russia 100% Shipping agency and operations FESCO Lines Hong Kong Limited ...... China 100% Shipping agency FESCO Agency Lines HK Limited ...... Hong Kong 100% Shipping agency FESCO Lines Management Limited ...... Hong Kong 100% Financial management FESCO Container Services Company Limited Cyprus 100% Line operator FESCO Ocean Management Limited ...... Cyprus 100% Shipping operations Maritime and Intermodal Logistics USA 100% Container freight services Systems Inc...... Remono Shipping Company Limited ...... Cyprus 100% Freight forwarder Shonstar Limited ...... British Virgin 100% Share options for Group’s Islands management FESCO Transportation Group Ltd ...... Russia 100% Managing company

Subsidiaries.

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Group. Certain subsidiaries, associate companies and joint ventures that are neither individually nor in aggregate material to the results, cash flows or financial position of the Group are not consolidated. These investments are recorded as available-for-sale investments at fair value as estimated by management. Where it is not possible to estimate fair values reliably, they are recorded at historical cost less applicable impairment.

Joint ventures and associates (equity accounted investees).

Joint ventures are those companies and other entities in which the Group, directly or indirectly, undertake an economic activity that is subject to joint control. Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies Joint ventures and associates are accounted for using the equity method. The consolidated financial statements include the Group’s share of the income and expenses of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that joint

F-13 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

2. Basis of Preparation (Continued) control/significant influence commences until the date that joint control/significant influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued, except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Transactions eliminated on consolidation.

Intra-group balances and transactions, and any unrealised income and expenses arising from intra- group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Acquisitions from entities under common control.

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established; for this purpose comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group’s controlling shareholder’s consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity except that any share capital of the acquired entities is recognised as part of share premium. Any cash paid for the acquisition is recognised directly in equity. (c) Critical accounting estimates and judgements in applying accounting policies The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes: 1. Impairment of goodwill and tangible fixed assets, see Note 4 and Notes 5,6,7 2. Determination of the fair value of the Group’s fleet, see Note 5 3. Russian taxation contingencies, see Note 30(c) (d) Segmental Reporting The Group has four operating segments: shipping, which operates on a global basis; liner and logistics; railway transportation services which operate in Russia and other countries of the CIS and ports which include Russian-based port and sea terminal. A segmental analysis has been included in Note 21.

F-14 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

3. Accounting Policies (a) Functional and Presentation Currency The presentation currency used in the preparation of these consolidated financial statements is the U.S. Dollar (‘‘USD’’). The functional currency of each Group entity is the currency of the primary economic environment in which the entity operates. For the purpose of the consolidated financial statements, the results and financial position of each entity are translated to USD as stated below. In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are translated into functional currency at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Foreign currency differences arising in translation are recognised in the income statement, except for differences arising on the translation of available-for-sale equity instruments. The results and financial position of each Group entity whose functional currency is different from USD, are translated into the presentation currency as follows: (i) assets and liabilities at each reporting date are translated at the closing rate at this date; (ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and (iii) all resulting exchange differences are recognised as a separate component of equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the translation reserve is transferred to the income statement. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely to occur in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised directly in equity. None of the Group entities has a functional currency which is a currency of hyperinflational economy. All financial information presented in USD has been rounded to the nearest million. The Russian rouble is not a fully convertible currency outside of the Russian Federation and, accordingly, any conversion of RUB amounts to USD should not be construed as a representation that RUB amounts have been, could be, or will be in the future, convertible into USD at the exchange rate shown, or at any other exchange rate. At 31 December 2012, the official rate of exchange, as determined by the Central Bank of the Russian Federation, was USD 1 = RUB 30.3727 (31 December 2011 USD 1 = RUB 32.196).

Fleet

The fleet is stated on an individual vessel basis at market value as assessed by independent professional valuers and supported by calculations of value in use. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Revaluations are performed annually.

F-15 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

3. Accounting Policies (Continued) A revaluation increase is recognised in revaluation reserve in equity except to the extent that it reverses a previous revaluation deficit on the same asset recognised in the income statement, in which case it is recognised in the income statement. A revaluation decrease is recognised in the income statement except to the extent that it reversed the previous revaluation surplus on the same asset recognised directly in equity, in which case it is recognised directly in equity. At the year end a portion of the revaluation reserve, which is equal to the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset’s original cost is transferred from the revaluation reserve to retained earnings. Other fixed assets are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the asset. Vessels in course of construction include advances to shipyards, supervision fees, professional fees, finance costs and interest capitalised. Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment. Dry-docking and special survey costs (‘‘Dry-docking costs’’) are recognised as a separate component of the vessel and are capitalised as incurred during the period of the dry-docking programme.

Subsequent costs

The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of that item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred.

Fleet depreciation

Depreciation is charged on a straight-line basis in the income statement on net book value less an estimated scrap value, based on anticipated useful lives of 25 years from date of building of the vessel.

Other fixed assets depreciation

Other fixed assets are depreciated on a straight line basis to their residual values at the following annual rates:

Buildings ...... 3–10% Rolling stock ...... 4–20% Machinery, equipment and other fixed assets ...... 5–33% Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease. Land is not depreciated.

Residual values

The residual value of an asset is the estimated amount that the Group would currently obtain from the disposal of the asset less the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. The residual value of an asset is nil if the Group expects to use the asset until the end of its physical life. The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each balance sheet date.

F-16 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

3. Accounting Policies (Continued) (b) Impairment of non-financial assets. The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of material impairment. If any such indication exists, recoverable amounts are estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the ‘‘cash-generating unit’’). The goodwill acquired in a business acquisition, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in the income statement unless it reverses a previous revaluation recognised in equity in which case it is recognised in equity. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (c) Dry-docking and special surveys Dry-docking and special survey costs are capitalised and depreciated on a straight-line basis over a period of five years. Any unamortised amounts are derecognised when the next dry dock / special survey occurs or on disposal of the vessel to which the costs relate. (d) Inventories Inventories are stated at the lower of cost, calculated on a FIFO basis, and net realisable value. Inventories comprise bunkers, victualling , stores, spares and materials for construction. Net realisable value is the estimated amount an item could be sold for less any selling expenses. (e) Revenue recognition The Group derives revenue from the following main sources: • ‘‘freight and hire’’ revenue from sea transportation; • agency fees for arranging transportation; • provision of transportation services using own and leased wagons (operators’ business); • revenue from stevedoring services; • revenue from rentals.

F-17 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

3. Accounting Policies (Continued) The Group recognises revenue on an accruals basis at the fair value of the consideration received or receivable. Revenue is presented in the income statement net of VAT and discounts.

Freight and hire Revenue from transportation services rendered is recognised in the income statement in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion is assessed by reference to the number of days completed out of the total estimated number of days in a particular transportation route/charter. Estimated losses on transportation in progress are recognised at the time such losses become evident.

Transportation agency fee In certain cases Group’s subsidiaries act as a legal intermediary for transportation organizations and pay transport fees on behalf of its clients. These fees, which are reimbursed by the Group’s clients, are not included in sales or cost of sales. Consequently, only the Group’s fees for intermediary activities are recognised as sales. Debtors and liabilities that occur in accordance with these activities are recognized as accounts receivable and accounts payable respectively.

Transportation services (operator’s business) The Group also organizes transportation for clients and provides similar services using its own or leased wagons. Normally, a transportation tariff charged by the Russian Railway is re-charged to the counterparty (the Company acts as an agent). For this type of activity, the Group’s revenue comprises operator’s fee. The costs of sales for this type of activity generally includes transportation fees charged by transportation organizations for transportation of empty wagons (those are not re-charged to the counterparty), depreciation, repairs and maintenance costs for owned

Revenue from port and stevedoring services Port and stevedoring services represent cargo handling and storage in port and terminal. The revenue is recognised in the income statement in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion is assessed by reference to the surveys of work performed.

Revenues from rentals Revenue earned by the Group from rentals is recognised on a straight line basis over the term of the rent agreements. (f) Classification of financial assets

Non-derivative financial instruments. Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Accounting for finance income and costs is discussed in note 3(v).

F-18 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

3. Accounting Policies (Continued) Held-to-maturity investments. If the Group has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method, less any impairment losses.

Available-for-sale financial assets. The Group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, and foreign exchange gains and losses on available-for-sale monetary items recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to the income statement.

Other. Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. Investments in equity securities that are not quoted on a stock exchange are principally valued using valuation techniques such as discounted cash flow analysis, option pricing models and comparisons to other transactions and instruments that are substantially the same. Where fair value cannot be estimated on a reasonable basis by other means, investments are stated at cost less impairment losses.

Derecognition of financial assets. The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. (g) Derivative financial instruments The Group’s activities expose it to the financial risks arising from changes in foreign currency exchange rates and interest rates. The Group uses foreign exchange forward contracts and interest rate swap contracts to hedge these exposures. The Group does not use derivative financial instruments for speculative purposes. All derivative financial instruments are initially recognised at their fair value; attributable transaction costs are recognised in the income statement when incurred. Subsequent to initial recognition, derivatives are measured at fair value. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity. The gain or loss relating to the ineffective portion of designated cash flow hedge, changes in the fair value of designated fair value hedges and changes in the fair value of derivatives which do not meet the criteria for hedge accounting including, instances where sufficient hedge documentation is not available, is recognised in the income statement. Amounts recognised in equity are recycled in the income statement in the period in which the hedged item is recognised in the income statement, in the same line of the income statement as the recognised hedged item. (h) Financial liabilities and equity instruments issued by the Company. Debt and equity instruments are classified as either financial liabilities or as equity instruments in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Financial liabilities are classified as either financial liabilities at Fair Value Through Profit or Loss or ‘‘other financial liabilities’’.

F-19 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

3. Accounting Policies (Continued) Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Fair value is obtained through discounting future cash flows at the current market interest rate applied to financial instruments with similar terms. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire. (i) Impairment of financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to the income statement. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in the income statement. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity. (j) Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. (k) Repurchase of share capital When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to / from the share premium. (i) Operating leases

Where the Group is a lessee Where Group company is a lessee in a lease which does not transfer substantially all the risks and rewards incidental to ownership from the lessor to the Group, the total lease payments, including those on expected termination, are charged to profit or loss on a straight-line basis over the period of the lease.

F-20 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

3. Accounting Policies (Continued) Where the Group company is a lessor Assets leased to third parties under operating leases are included in property, plant and equipment in the statement of financial position. They are depreciated over their expected useful lives. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term. (m) Finance leases

Where the Group is a lessee Where a Group company is a lessee in a lease which transfers substantially all the risks and rewards incidental to ownership to the Group, the assets leased are capitalised in property, plant and equipment at the commencement of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of future finance charges, are included in borrowings. The interest cost is charged to the income statement over the lease period using the effective interest method. Assets acquired under finance leases are depreciated over the shorter of useful life and the lease term if the Group is not reasonably certain that it will obtain ownership by the end of the lease term.

Where the Group is a lessor Assets leased out under finance lease agreements are recognized in the statement of financial position and presented as receivable at an amount equal to the net investment in the lease. The income on the finance lease is recognized as interest income and is based on the pattern reflecting a constant periodic rate of return on the Company’s net investment in the finance lease. (n) Employee benefits

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans, including Russia’s State pension fund, are recognised in the income statement when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

Defined benefit plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value, and any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on Russian Government bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. When the benefits of a plan are improved, the portion of the increased benefit relating to past service by employees is recognised in profit or loss on a straight-line basis over the average period until the benefits become vested. To the extent that the benefits vest immediately, the expense is recognised immediately in profit or loss.

F-21 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

3. Accounting Policies (Continued) The Group recognises all actuarial gains and losses arising from defined benefit plans in profit or loss in the period in which they arise. (o) Current and deferred tax Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax assets and liabilities are calculated in respect of temporary differences using the balance sheet liability method. Deferred income taxes are provided for all temporary differences arising between the tax basis of assets and liabilities and their carrying values for financial reporting purposes. A deferred tax asset is recorded only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes, penalties and late-payment interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Group to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact the tax expense in the period that such a determination is made. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. (p) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. (q) Earnings per share The Group presents basic and diluted earnings per share (‘‘EPS’’) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.

F-22 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

3. Accounting Policies (Continued) (r) Goodwill arising on acquisition Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is tested annually for impairment and carried at cost less accumulated impairment losses. Negative goodwill (excess of the fair value of the share in net assets acquired over consideration paid) is recognised in the income statement. Any excess of the consideration paid to acquire a non-controlling interest over the book value of the non-controlling interest is recognised in equity. (s) Other intangible assets Other intangible assets are recognised at cost less accumulated amortisation and impairment losses. Amortisation is charged on a straight line basis over the useful life (generally five years), representing management’s estimate of the period during which the Group is expected to benefit from these assets. (t) Dividends Dividends are recognised as a deduction from equity in the period in which they are approved by the shareholders. (u) Share–based payments The Group has a share option scheme to incentivise certain key members of management (see Note 20 for a fuller description of the scheme). Due to the cash settlement option held by employees, the scheme is treated as creating a liability rather than an equity obligation. The fair value of the options outstanding is estimated by the Group at each balance sheet date using the Black-Scholes option pricing model. For each option granted a liability based over the vesting period is recognised with a corresponding charge to the income statement (employee expenses). (v) Finance income and costs Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as it accrues in the income statement, using the effective interest method. Dividend income is recognised in the income statement on the date that the Group’s right to receive payment is established. Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, dividends on preference shares classified as liabilities, changes in the fair value of financial assets at fair value through profit or loss and impairment losses recognised on financial assets. All borrowing costs are recognised in the income statement using the effective interest method, except to the extent that they relate to acquisition of qualifying assets, in which case they are capitalized in the cost of such assets. (w) Guarantees The Group considers that financial guarantee contracts entered into by the Group to guarantee the indebtedness of parties under common control are insurance arrangements, and accounts for themas such. In this respect, the Group treats the guarantee contract as a contingent liability until

F-23 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

3. Accounting Policies (Continued) such time as it becomes probable that the Group will be required to make a payment under the guarantee.

Adoption of new and revised standards and interpretations. A number of new standards and interpretations are not yet effective as of the reporting date, and have not been applied in preparing these consolidated interim financial statements. • IAS 28 (2011) Investments in Associates and Joint Ventures combines the requirements in IAS 28 (2008) and IAS 31 that were carried forward but not incorporated into IFRS 11 and IFRS 12. The amended standard will become effective for annual periods beginning of or after 1 January 2013 with retrospective application required. • Amendments to IFRS 7 Financial Instruments: Disclosures — Offsetting Financial Assets and Financial Liabilities contain new disclosure requirements for financial assets and liabilities that are offset in the statement of financial position or subject to master netting arrangements or similar agreements. The amendments are effective for annual periods beginning on or after 1 January 2013, and are to be applied retrospectively. • IFRS 9 Financial Instruments will be effective for annual periods beginning on or after 1 January 2015. The new standard is to be issued in phases and is intended ultimately to replace International Financial Reporting Standard IAS 39 Financial Instruments: Recognition and Measurement. The first phase of IFRS 9 was issued in November 2009 and relates to the classification and measurement of financial assets. The second phase regarding classification and measurement of financial liabilities was published in October 2010. The remaining parts of the standard are expected to be issued during 2013. The Group recognises that the new standard introduces many changes to the accounting for financial instruments and is likely to have a significant impact on Group’s consolidated financial statements. The impact of these changes will be analysed during the course of the project as further phases of the standard are issued. The Group does not intend to adopt this standard early. • IFRS 10 Consolidated Financial Statements will be effective for annual periods beginning on or after 1 January 2013. The new standard supersedes IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation — Special Purpose Entities. IFRS 10 introduces a single control model which includes entities that are currently within the scope of SIC-12 Consolidation — Special Purpose Entities. Under the new three-step control model, an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with that investee, has the ability to affect those returns through its power over that investee and there is a link between power and returns. Consolidation procedures are carried forward from IAS 27 (2008). When the adoption of IFRS 10 does not result a change in the previous consolidation or non-consolidation of an investee, no adjustments to accounting are required on initial application. When the adoption results a change in the consolidation or non-consolidation of an investee, the new standard may be adopted with either full retrospective application from date that control was obtained or lost or, if not practicable, with limited retrospective application from the beginning of the earliest period for which the application is practicable, which may be the current period. • IFRS 11 Joint Arrangements will be effective for annual periods beginning on or after 1 January 2013 with retrospective application required. The new standard supersedes IAS 31 Interests in Joint Ventures. The main change introduced by IFRS 11 is that all joint arrangements are classified either as joint operations, in which case these arrangements are treated similarly to jointly controlled assets/operations under IAS 31s, or as joint ventures, for which the equity method only is applied. The type of arrangement is determined based on the rights and obligations of the parties to the arrangement arising from joint arrangement’s structure, legal form, contractual arrangement and other facts and circumstances. When the adoption of IFRS 11 results a change in the accounting

F-24 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

3. Accounting Policies (Continued) model, the change is accounted for retrospectively from the beginning of the earliest period presented. • IFRS 12 Disclosure of Interests in Other Entities will be effective for annual periods beginning on or after 1 January 2013. The new standard contains disclosure requirements for entities that have interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. Interests are widely defined as contractual and non-contractual involvement that exposes an entity to variability of returns from the performance of the other entity. The expanded and new disclosure requirements aim to provide information to enable the users to evaluate the nature of risks associated with an entity’s interests in other entities and the effects of those interests on the entity’s financial position, financial performance and cash flows. • IFRS 13 Fair Value Measurement will be effective for annual periods beginning on or after 1 January 2013. The new standard replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value measurement guidance. It provides a revised definition of fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. IFRS 13 does not introduce new requirements to measure assets or liabilities at fair value, nor does it eliminate the practicability exceptions to fair value measurement that currently exist in certain standards. The standard is applied prospectively. Comparative disclosure information is not required for periods before the date of initial application. • Amendment to IAS 1 Presentation of Financial Statements: Presentation of Items of Other Comprehensive Income. The amendment requires that an entity present separately items of other comprehensive income that may be reclassified to profit or loss in the future from those that will never be reclassified to profit or loss. Additionally, the amendment changes the title of the statement of comprehensive income to statement of profit or loss and other comprehensive income. However, the use of other titles is permitted. The amendment shall be applied retrospectively from 1 July 2012. • Amendments to IAS 32 Financial Instruments: Presentation — Offsetting Financial Assets and Financial Liabilities specify that an entity currently has a legally enforceable right to set-off if that right is not contingent on a future event; and enforceable both in the normal course of business and in the event of default, insolvency or bankruptcy of the entity and all counterparties. The amendments are effective for annual periods beginning on or after 1 January 2014, and are to be applied retrospectively. The Group has not yet analysed the likely impact that adoption of these new standards will have on its financial position or performance.

4. Goodwill

Accumulated impairment Gross amount loss Carrying amount USD mln At 1 January 2011 ...... 241 (40) 201 Additions ...... 26 — 26 Translation difference ...... (13) — (13) At 31 December 2011 ...... 254 (40) 214 Additions (Note 29) ...... 55 — 55 Translation difference ...... 11 — 11 At 31 December 2012 ...... 320 (40) 280

F-25 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

4. Goodwill (Continued) Goodwill has been allocated to groups of cash generating units (CGU’s) which represent the lowest level within the Group at which goodwill is monitored by management for internal reporting purposes. The carrying amount of goodwill, net of impairment, allocated to each CGU is as follows:

31 December 31 December 2012 2011 USD mln FIT LLC and its subsidiaries ...... 4 4 FESCO ESF Limited and its subsidiaries ...... 6 6 Firm Transgarant LLC and its subsidiaries ...... 73 69 Commercial Port of Vladivostok (VMTP) ...... 53 — VKT LLC ...... 144 135 280 214

The Group uses discounted cash flow techniques and fair value less costs to sell determined by an independent appraisal company to arrive at the recoverable amounts of the cash generating units for the purposes of a impairment testing. The particular key assumptions used in the impairment testing, discount and growth rates for each CGU for the years 2012 and 2011 were as follows:

Terminal Discount growth 2012 rate rate Key assumptions FIT LLC and its subsidiaries ...... 16% 3% Container volume (intermodal transportation and container forwarding services): increase from 211,636 TEU in 2013 to 242,353 TEU in 2017 Firm Transgarant LLC and its subsidiaries 16% 3% Revenue growth: increase from USD 325 million in 2013 to USD 400 million in 2017 FESCO ESF Limited and its subsidiaries ...... 14.2% 3% Container volume: increase from 97,768 TEU in 2013 to 106,864 TEU in 2017 VKT LLC ...... 15.36% 3% Throughput of containers: increase from 547,313 TEU in 2013 to 642,721 TEU in 2017 Commercial Port of Vladivostok (VMTP) 15.36% 3% Throughput of containers: increase from 547,313 TEU in 2013 to 642,721 TEU in 2017

F-26 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

4. Goodwill (Continued)

Terminal Discount growth 2011 rate rate Key assumptions FIT LLC and its subsidiaries ...... 15.90% 3% Container volume (intermodal transportation and container forwarding services): increase from 127,617 TEU in 2012 to 138,439 TEU in 2016 FESCO ESF Limited and its subsidiaries ...... 11.25% 3% Container volume: increase from 102,216 TEU in 2012 to 125,503 TEU in 2016 VKT LLC ...... 14.92% 3% Throughput of containers: increase from 379,408 TEU in 2012 to 457,837 TEU in 2016 Recoverable amount for CGU’s exceed carrying values and, therefore, no impairment was recognised. The table below details sensitivity analysis for each CGU :

Discount rate Impairment loss Revenue Impairment loss USD mln USD mln FIT LLC and its subsidiaries ...... +1% — 2% — Firm Transgarant LLC and its subsidiaries . . +1% — 2% — FESCO ESF Limited and its subsidiaries . . . +1% — 2% (4) VKT LLC ...... +1% — 2% — Commercial Port of Vladivostok (VMTP) . . . +1% — 2% —

5. Fleet

Carrying value 31 December 31 December 2012 2011 USD mln (a) Fleet ...... 80 313 (b) Deferred dry docking expenses ...... 7 21 (c) Vessels under construction ...... — 48 87 382 Total deadweight tonnage ...... 283 700

F-27 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

5. Fleet (Continued)

Valuation Depreciation Net Book Value USD mln At 1 January 2011 ...... 307 — 307 Depreciation charge for the year ...... — (12) (12) Disposals ...... (5) — (5) Revaluation ...... (50) 12 (38) Transfer from Vessels under construction ...... 61 — 61 At 31 December 2011 ...... 313 — 313 Depreciation charge for the year ...... — (12) (12) Disposals ...... (176) 3 (173) Transfers to current assets held-for-sale ...... (4) 1 (3) Revaluation ...... (110) 8 (102) Transfer from Vessels under construction ...... 57 — 57 At 31 December 2012 ...... 80 — 80

In December 2012, the Group sold 11 vessels to its former controlling shareholder for a consideration of USD 158 million. The gain on disposal of USD 10 million is recognized in the income statement. The Group reviews the carrying value of the fleet on an annual basis. In determining an appropriate carrying value the Company relies on the opinion of expert third party valuers. The valuers determine by reference to recent sales transactions of similar vessels the amount a vessel could be sold for, assuming that the vessel is in reasonable condition. Management critically reviews the valuation arrived at by the valuers and also produces calculations of value in use based on discounted anticipated future cash flows. The valuation basis utilised implicitly includes the value of dry docking in the overall valuation. Management, therefore, deducts the net book value of capitalised dry dock from the valuation and account, for such dry dock at historical cost less accumulated depreciation. At 31 December 2012, the estimated scrap value of the Group’s fleet was calculated based on an estimate of USD 390 per LWT (31 December 2011: USD 455). This change in accounting estimate was made in reaction to the decrease in international steel prices. This change in accounting estimate resulted in an increase in the depreciation charge for the year ended 31 December 2012 of USD 0.7 million. The fleet includes 11 vessels, fully depreciated, with an aggregate scrap value of USD 25 million at 31 December 2012 (21 vessels with scrap value of USD 69 million at 31 December 2011). Had the vessels been carried at the historical cost, the carrying amount would have been USD 74 million at 31 December 2012 (31 December 2011 — USD 257 million). The fleet was revalued as at 31 December 2012 by independent professional brokers with reference to the observable market transactions with comparable vessels. The resulting revaluation decrease of USD 102 million has been recognised in the revaluation reserve (USD 6 million decrease) and the income statement (USD 96 million decrease). At 31 December 2012, 10 vessels in the Group’s fleet with a net book value of USD 49 million were insured for hull and machinery risks with western underwriters, a further 13 vessels with a net book value of USD 31 million were insured with Russian underwriters. The total insured value amounted to USD 137 million. 13 vessels with a net book value of USD 46 million are pledged as security to guarantee the Group’s obligations under ING Bank N.V. and Raffaisenbank loans (Note 16).

F-28 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

5. Fleet (Continued) Movements during the period on deferred dry docking expenses were:

Cost Depreciation Net Book Value USD mln At 1 January 2011 ...... 39 (18) 21 Additions ...... 7 — 7 Charge for the year ...... — (8) (8) Amortised dry dock write off ...... (3) 3 — Release on disposal of fleet ...... (1) 1 — Transfer from Vessels under construction ...... 1 — 1 At 31 December 2011 ...... 43 (22) 21 Additions ...... 6 — 6 Charge for the year ...... — (7) (7) Amortised dry dock write off ...... (4) 4 — Transfers to assets held-for-sale ...... (5) 2 (3) Release on disposal of fleet ...... (21) 11 (10) At 31 December 2012 ...... 19 (12) 7

Movements during the period on vessels under construction were:

31 December 31 December 2012 2011 USD mln At the beginning of the period ...... 48 84 Expenditure incurred during the year ...... 9 25 Capitalised borrowing costs ...... — 1 Transferred to fleet during the year ...... (57) (62) At the end of the period ...... — 48

6. Rolling Stock

Cost Depreciation Net Book Value USD mln At 1 January 2011 ...... 421 (104) 317 Correction of the cost of tangible fixed assets ...... 2 — 2 Additions ...... 201 — 201 Addition on acquisition ...... 55 — 55 Depreciation charge ...... — (40) (40) Disposals ...... (3) 2 (1) Translation difference ...... (37) 8 (29) At 31 December 2011 ...... 639 (134) 505 Additions ...... 37 — 37 Depreciation charge ...... — (48) (48) Disposals ...... (24) 3 (21) Translation difference ...... 29 (4) 25 At 31 December 2012 ...... 681 (183) 498

Rolling stock includes assets held under finance leases with a net book value of USD 147 million (at 31 December 2011 — USD 153 million).

F-29 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

6. Rolling Stock (Continued) At 31 December 2012, rolling stock with a carrying amount of USD 127 million (31 December 2011 — USD 219 million) are subject to registered debentures to secure bank loans (Note 16). As at 31 December 2012, rolling stock with a net book value of USD 256 million was insured with Russian insurance companies. The total insured value is USD 405 million (31 December 2011 — USD 539 million with a net book value of USD 351 million).

7. Other Tangible Fixed Assets

Plant, Buildings and Machinery Assets under Cost Infrastructure and Other construction Total USD mln At 1 January 2011 ...... 82 151 10 243 Additions ...... 1 18 24 43 Reclass ...... — (1) — (1) Transfer ...... 2 2 (4) — Disposals ...... — (5) (1) (6) Impairment ...... (4) — (1) (5) Translation difference ...... (2) (4) (3) (9) At 31 December 2011 ...... 79 161 25 265 Additions ...... 7 31 1 39 Acquisition through a business combination (Note 29) 154 88 7 249 Transfer ...... — 4 (4) — Disposals ...... (5) (5) (1) (11) Translation difference ...... — 1 — 1 At 31 December 2012 ...... 235 280 28 543 Depreciation At 1 January 2011 ...... 21 69 — 90 Depreciation charge for the year ...... 4 16 — 20 Eliminated on disposal ...... — (4) — (4) Translation difference ...... (1) (1) — (2) At 31 December 2011 ...... 24 80 — 104 Depreciation charge for the year ...... 7 25 — 32 Eliminated on disposal ...... — (3) — (3) Translation difference ...... — 1 — 1 At 31 December 2012 ...... 31 103 — 134 Net Book Value At 1 January 2011 ...... 61 82 10 153 At 31 December 2011 ...... 55 81 25 161 At 31 December 2012 ...... 204 177 28 409

Plant, machinery and other fixed assets include containers held under finance lease with a net book value of USD 15 million (31 December 2011 — USD 18 million) and plant and mashinery with a net book value of USD 2.8 million (31 December 2011 — USD 3.5 million). At 31 December 2012, fixed assets with a carrying amount of USD 66 million (31 December 2011 — USD 22 million) are pledged as a security to guarantee the Group’s loan obligations (Note 16).

F-30 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

8. Investments in Associates and Joint Ventures Equity accounted investments represent investments in joint ventures and associates.

Country of Percentage Name incorporation Holding Activity OJSC TransContainer ...... Russia 23.67% Intermodal Container Operations ‘‘Russkaya Troyka’’ ...... Russia 50% Intermodal Container Operations Trans Russia Agency Japan Co. Ltd . . Japan 50% Agency services International Paint (East Russia) Limited ...... Hong Kong 49% Ship Paint Production ‘‘SHOSHTRANS’’ JVCSC ...... Uzbekistan 25% Forwarding services MB — Fesco Trans ...... Cyprus 49% Forwarding services FESCO BLG Automobile Logistics Russia Limited ...... Cyprus 50% Agency stevedoring services Movements in joint ventures and associated companies consolidated on an equity basis are as follows:

31 December 31 December 2012 2011 USD mln Balance as at 1 January ...... 105 101 Share of results of equity accounted investees ...... 45 7 Consolidation of VMTP (Note 29) ...... (90) — Additions ...... 303 5 Dividends paid ...... — 4 Dividends received ...... (11) (1) Translation differences ...... 7 (11) Balance as at 31 December ...... 359 105

During 2012, the Group purchased a 5.17% equity stake in the form of Global Depositary Receipt (‘‘GDR’’) of OJSC TransContainer which resulted in OJSC TransContainer becoming an associate with a 23.67% equity stake at 31 December 2012. Prepayment for the GDR was made in December 2011. The payment made in 2012 was USD 40 million. Management decided to account for acquisition using ‘‘cost approach’’. As a result, cumulative loss in the amount of USD 29 million recognized previously in other comprehensive income was transferred to retained earnings.

F-31 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

8. Investments in Associates and Joint Ventures (Continued) Summary financial information for equity-accounted investees, not adjusted for the percentage ownership held by the Group, is as follows:

Non- Non- Current current Total Current current Total Profit/ Reporting date assets assets assets liabilities liabilities liabilities Income Expenses (loss) USD mln 2012 TransContainer .... 31 December 293 1,649 1,942 360 299 659 1,094 (958) 136 M-Port (joint venture) . . . 31 December — — — — — — 37 (29) 8 Russkaya Troyka (joint venture) . . . 31 December 23 55 78 19 13 32 32 (18) 14 Other companies . . 31 December 23 2 25 15 — 15 43 (38) 5 339 1,706 2,045 394 312 706 1,206 (1,043) 163 2011 M-Port (joint venture) . . . 31 December 43 143 186 18 40 58 149 (143) 6 Russkaya Troyka (joint venture) . . . 31 December 12 49 61 7 24 31 23 (18) 5 Other companies . . 31 December 27 2 29 17 1 18 30 (28) 2 82 194 276 42 65 107 202 (189) 13

Goodwill in amount of USD 28 million related to OJSC TransContainer and FESCO BLG is included into the investments in associates and joint ventures. The fair value of OJSC TransContainer shares and GDR’s held by the Group, based on the quotations in MICEX and LSE, at 31 December 2012 is USD 462 million.

9. Other Non-Current Assets

31 December 31 December 2012 2011 USD mln Prepayment for investment, at cost ...... 2 293 Non-current portion of finance lease receivable, at amortized cost ..... 5 7 Long term bank deposit, at cost ...... — 2 Prepayments for fixed assets, at cost ...... 2 4 Other long term prepayments, at cost ...... — 2 Long term loans to related party, at amortized cost ...... 542 1 Other non-current assets ...... 4 4 Lease right ...... 10 — 565 313

In December 2012, the Group issued loans to its intermediate shareholder in the aggregate total amount of USD 540 million. The loans are USD denominated, bear interest at Libor+6.6 to 7.6% per annum. The loan with the aggregated amount of USD 140 million is repayable in 2014. The other loan with the aggregate amount of USD 400 million is repayable, together with any accrued interest, on 31 December 2019. Prepayments for fixed assets represent prepayments for equipment. The lease right was acquired on consolidation of VMTP, see Note 29.

F-32 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

9. Other Non-Current Assets (Continued) The Group leases railroad platforms to one of its joint ventures. The lease agreement provides for ownership transfer of assets to the lessee at the end of the lease term for nominal consideration. The contractual interest rate on the platforms leased is 13.2%. Lease receivables as at 31 December are scheduled as follows:

31 December 2012 31 December 2011 Present value Present value Minimum lease of minimum Minimum lease of minimum payments lease payments payments lease payments USD mln USD mln Within one year ...... 3 2 3 2 Two to five years ...... 5 5 8 7 8 7 11 9 Less: future finance charges ...... (1) (2) Present value of lease obligations . . . 7 9 Less current portion ...... (2) (2) Non-current portion ...... 5 7

10. Inventories

31 December 31 December 2012 2011 USD mln Bunkers ...... 16 17 Stores and spares ...... 5 4 Victualing ...... — — Other stocks and raw materials ...... 5 4 26 25

11. Accounts Receivable

31 December 31 December 2012 2011 USD mln Trade debtors ...... 77 66 VAT receivable ...... 36 48 Prepayments to OJSC ‘‘Russian Railways’’ ...... 17 19 Amounts due from associates and joint ventures ...... 2 4 Other debtors and prepayments ...... 86 72 Allowance for impairment ...... (28) (31) 190 178

F-33 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

12. Assets Held-for-Sale

31 December 31 December 2012 2011 USD mln Vessels held for sale ...... 6 — Other assets held for sale ...... 6 — 12 —

13. Other Current Assets

31 December 31 December 2012 2011 USD mln Loans and promissory notes issued to related parties, at cost ...... 1 — Short term finance lease receivable, at amortized cost ...... 2 2 Short term bank deposit, at cost ...... — 6 38

14. Cash and Cash Equivalents

31 December 31 December 2012 2011 USD mln Bank accounts and cash in hand ...... 232 227 Restricted deposits ...... — 5 232 232

15. Accounts Payable

31 December 31 December 2012 2011 USD mln Trade creditors ...... 57 37 Fair value of interest swap contracts ...... — 11 Taxes payable, other than income tax ...... 12 7 Interest payable ...... 3 3 Amounts due to associates and joint ventures ...... — 2 Short term share based payments (Note 20) ...... 2 — Other creditors and accruals ...... 73 68 147 128

As at 31 December 2012, the Group did not have any of interest rate swap contracts.

F-34 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

16. Loans Payable and Finance Leases Obligations (a) Loans payable 31 December 31 December 2012 2011 USD mln Loans and other obligations comprise: Secured loans At fixed rate 0.3%–5% ...... — 44 At fixed rate 5%–10% ...... 198 254 At variable rates 0.25%–5% above Libor/Euribor/Mosprime ...... 52 257 At variable rates 5%–9.5% above Libor/Euribor/Mosprime ...... 540 — 790 555 Unsecured loans At fixed rate 1.5%–5% ...... 1 — 1— Obligations under finance leases at fixed rate 6% ...... 22 21 Obligations under finance leases at fixed rate 7.7%–18.3% ...... 107 122 129 143 920 698 Repayable within the next twelve months ...... 219 199 Long term balance ...... 701 499 920 698

In December 2012, Halimeda International Limited, a Group subsidiary, signed a number of linked forward and swap agreements with banks for its 23.67% share in OJSC TransContainer. The forward agreements stipulate future payment to the banks, in four installments, of a cash equivalent of the fair value of 23.67% shares in Transcontainer as determined at the installment payment date in exchange for USD 447.5 million in cash received from the banks upfront. The first installment occurs 12 months from the date of transaction, and following installments are due every 3 months thereafter. The swap agreements exchange USD 307.5 mln in cash paid to the banks upfront for four future installments paid by the banks equal to i) USD 76.875 million plus ii) the difference (positive or negative) between the fair value of 23.67% of the shares in TransContainer at the installment payment date and its initial fair value at the moment of signing the agreement. The installment payment dates under the swap agreements match those of the forward agreements. The swap and forward agreements contain netting provisions and Halimeda receives and pays cash on a net basis. The swap agreement stipulates payment of Libor+6.5% interest on the net balance due to the banks. The economic substance of the transactions is a receipt by Halimeda of USD 140 million of loan with the repayments scheduled in four equal quarterly installments starting 12 months from the date of agreement. The shares of Trasncontainer were transferred as collateral for the banks to secure Halimeda’s obligations under the agreements in conjunction with guarantees issued by a related party to the banks. The proceeds from the Halimeda forward-swap agreements were issued to a related party, which is an intermediate shareholder of Fesco. In accordance with loan facility agreement, mentioned in Note 1, Halimeda is restricted from obtaining loans from other Fesco Group companies in order to serve the forward-swap loan. Effectively, the forward-swap loan may be served though dividend income from TransContainer, proceeds from sales of shares in TransContainer (if any) and cash received from repayment of loan due from the related party.

F-35 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

16. Loans Payable and Finance Leases Obligations (Continued) For currency and maturity analysis of loans and other obligations see Note 31. Fixed assets pledged as a security for loans are disclosed in Notes 5, 6, 7. The Group was in compliance with covenants as at 31 December 2012. (b) Finance Leases obligations The Group partially finances the purchase of wagons and containers through leasing and sale-leaseback transactions with leasing companies. All the lease agreements provide for ownership transfer of assets to the Group at the end of the lease terms for a nominal consideration. The Group’s finance leases mainly relate to acquisition of containers and railroad platforms. The average effective interest rate on the wagon lease liability is 13% (2011: 13%) and on the container lease liability it is 6%. Minimum lease payments and future interest element are estimated based on the rates applicable to each individual lease contract. Lease payments as at each reporting date are scheduled as follows:

31 December 2012 31 December 2011 Present value Present value Minimum lease of minimum Minimum lease of minimum payments lease payments payments lease payments USD mln USD mln Within one year ...... 38 23 38 21 Two to five years ...... 125 100 146 110 Over five years ...... 6 6 14 12 169 129 198 143 Less: future finance charges ...... (40) (55) Present value of lease obligations . . . 129 143 Less current portion ...... (23) (21) Non-current portion ...... 106 122

17. Other Non-Current Liabilities

31 December 31 December 2012 2011 USD mln Fair value of interest rate swap ...... — 21 Defined benefit obligations ...... 5 2 Long term share based payments (Note 20) ...... 1 4 Other non-current liabilities ...... 10 — 16 27

F-36 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

18. Current and Deferred Tax Companies within the Group are subject to taxation in different jurisdictions. The most significant tax expense arises in entities incorporated in the Russian Federation.

31 December 31 December 2012 2011 USD mln Current tax expense Current period ...... 49 30 Adjustment for prior periods ...... — — 49 30 Deferred tax expense Origination and reversal of temporary differences ...... (11) 1 (11) 1 Total income tax expense ...... 38 31

Reconciliation of effective tax rate:

31 December 31 December 2012 2011 USD mln % USD mln % Profit before income tax ...... 21 100 60 100 Income tax at applicable tax rate of 20% (2011: 20%) ...... 4 20 12 20 Effect of income taxed at different rates ...... 21 100 10 17 Income tax on dividends ...... 2 10 — — Non-deductible expenses/non taxable income, net ...... 4 20 7 12 Unrecognised deferred tax liability on investments in joint ventures . (2) (10) — — Change in unrecognised deferred tax asset ...... 9 42 2 3 38 182 31 52

The Group’s deferred tax liability mainly arises in entities incorporated in Russia and the effect of deferred taxation in other jurisdictions is not material. Movements in temporary differences were the following:

Balance Recognised Addition on Balance 1 January in profit or acquisition of Translation 31 December 2012 loss subsidiary differences 2012 USD mln Vessels ...... (14) 8 — — (6) Deferred dry docking ...... (1) 1 — — — Other fixed assets ...... (52) 7 (33) (3) (81) Assets under construction ...... 1 — — — 1 Accounts receivable ...... 3 — — — 3 Accounts payable ...... 23 (4) 1 2 22 Provisions, accruals and deferred income ...... 1 — — — 1 Tax loss carry-forwards ...... 4 (1) — — 3 (35) 11 (32) (1) (57)

F-37 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

18. Current and Deferred Tax (Continued)

Balance Recognised Balance 1 January in profit or Addition on Translation 31 December 2011 loss acquisition differences 2011 Vessels ...... (17) 4 — (1) (14) Deferred dry docking ...... (2) 1 — — (1) Other fixed assets ...... (27) (21) (8) 4 (52) Assets under construction ...... — 1 — — 1 Accounts receivable ...... 2 1 — — 3 Accounts payable ...... 4 16 5 (2) 23 Provisions, accruals and deferred income ...... 1 — — — 1 Tax loss carry-forwards ...... 6 (3) 2 (1) 4 (33) (1) (1) — (35)

Unrecognised deferred tax asset The Group has unrecognized DTA at the amount of USD 13 million as of 31 December 2012 (31 December 2011: USD 4 million).

Unrecognised deferred tax liability A temporary difference of USD 168 million relating to investments in subsidiaries and joint ventures has not been recognised as the Group is able to control the timing of reversal of the difference, and reversal is not expected in the foreseeable future.

19. Shareholders’ Equity

31 December 31 December 2012 2011 USD mln Authorised number of shares (1 Rouble per share) ...... 3,643,593,000 3,643,593,000 Issued number of shares ...... 2,951,250,000 2,951,250,000 Share capital (USD mln) ...... 57 57

31 December 31 December 2012 2011 Number of shares Treasury shares held by: Far Eastern Shipping Company PLC ...... — 55,783 Neteller Holdings Limited ...... — 393,650,024 — 393,705,807

USD 394 million of treasure shares representing approximately 13% of all issued shares have been sold to a related party for the total cash consideration of USD 114 million.

20. Share-Based Payments The Group has a share option programme for management. The Group’s obligations may be settled in shares or in cash at the choice of the employee. Vesting of the options is subject to the individuals concerned remaining employees at the end of the specified period, although leavers may have a pro-rata entitlement. The employees are not required to achieve any other non-market or market based performance conditions.

F-38 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

20. Share-Based Payments (Continued) The accumulated liability from recognised grants amounts to USD 2.8 million (31 December 2011 — USD 3.9 million). The fair value of options granted under the Group’s share option scheme were calculated at the period end using a Black-Scholes option pricing model with the following key assumptions:

2012 2011 Stock price, USD ...... 0.31 0.27 Exercise price, USD ...... 0.32 0.32–0.456 Risk-free rate ...... 0.16%–0.21% 0.25%–0.31% Volatility ...... 51.16%–67.52% 87.30%–91.56% Time to expiration ...... 0.11–1.5 years 1.9–2.5 years The stock price was obtained from Russian Trading System (RTS) data on the balance sheet date. The risk-free rate is based on an estimate of returns on US two-four year Treasury bonds. Volatility is based upon historical record of share price with reference to the period of time from the reporting date to expected exercise date ranging from 0.11 to 1.5 years. The method corresponds to level 3 of the hierarchy of determination of the fair values. The variables set out above resulted in a value per option of 6.54 cents. This value is sensitive to changes in volatility. An increase in the assumed volatility to 100% will result in an increase in the option value to 11.79 cents. A decrease to 20% volatility will result in a decrease of the option value by 3.04 cents. The movement in options to subscribe for shares under the Group’s share option scheme is shown in the table below.

2012 2011 Weighted Weighted average average Number of exercise price, Number of exercise price, share option USD share option USD Outstanding at 1 January ...... 71,643,593 0.339 54,643,593 0.32 Granted during the year ...... — — 17,000,000 0.40 Forfeited during the year ...... (15,000,000) 0.388 — — Outstanding at 31 December ...... 56,643,593 0.320 71,643,593 0,339 Options granted to 15 directors and senior executives were outstanding at 31 December 2012.

21. Business Segmental Analysis For management purposes, the Group is organised into four major operating divisions — shipping, liner and logistics, railway services and ports. The Group also includes certain companies that cannot be allocated to a specific division; these include investing and managing companies. These divisions are

F-39 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

21. Business Segmental Analysis (Continued) the basis on which the Group reports its operating segment information. The services provided by each of these divisions are as follows:

Shipping The shipping division is involved in ship ownership, ship management, chartering out and provision of agency services. These activities are carried out on a cabotage, cross trade and import-export basis. The vessels operated by the shipping division are largely container vessels and bulk carriers. Liner and The Liner and logistics division operates liner services and provides freight forwarding Logistics services both for containers and break-bulk cargoes. Railway The railway services division provides services both as an operator and an agent. Services When acting as an operator it renders services for containerised and bulk cargoes using locomotives, railway wagons, hoppers, steel-pellet wagons and tank wagons owned by the division or leased by it under finance leases. In addition it uses rolling stock hired on short term operating leases. Ports The ports division owns and operates port facilities and container terminals in Russia and provides cargo handling, stevedoring, container storage and rental and related port services and facilities. Segmental reporting information is submitted to management of the Group on a regular basis as part of the management reporting process. It is used to assess the efficiency of the segments and to take decision on the allocation of resources. Segment information for the main reportable segments of the Group for the period ended 31 December 2012 is set out below.

Liner and Railway Investment in Eliminations/ Shipping Logistics services Ports Corporate TransContainer Adjustments Total USD mln External sales ...... 99 622 343 133 — — — 1,197 Inter-segment sales .... 42 1 4 45 — — (92) — Segment revenue ...... 141 623 347 178 — — (92) 1,197 Segment expenses (*) . . (151) (581) (180) (92) (47) — 101 (950) Segment result ...... (10) 42 167 86 (47) 247 Segment non-cash items: Depreciation and amortization ...... (22) (13) (48) (15) (2) — — (100) Impairment reversal on tangible fixed assets . . (96) — — — — — — (96) Other material items of income/expense: Other income and expenses ...... 1 1 8 (6) (22) — (10) (28) Interest expense, share of profit/(loss) of associates and income tax expense: Interest expense ...... (12) (2) (40) (3) (8) — 12 (53) Share of profit of equity accounted investees . . — 1 7 4 2 31 — 45 Income tax expense .... 9 (10) (21) (15) (1) — — (38)

F-40 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

21. Business Segmental Analysis (Continued) Segment information for the main reportable segments of the Group for the year ended 31 December 2011 is set out below.

Liner and Railway Eliminations/ Shipping Logistics services Ports Corporate Adjustments Total USD mln External sales ...... 114 565 301 49 — — 1,029 Inter-segment sales ...... 45 2 7 28 — (82) — Segment revenue ...... 159 567 308 77 — (82) 1,029 Segment expenses (*) ...... (154) (518) (174) (29) (31) 93 (813) Segment result ...... 5 49 134 48 (31) 11 216 Segment non-cash items: Depreciation and amortization ...... (23) (12) (42) (4) (1) — (82) Impairment loss on tangible fixed assets ...... (42) — — (5) — — (47) Other material items of income/ expense: Other income and expenses ...... (2) 2 (2) — (3) — (5) Interest expense, share of profit/(loss) of associates and income tax expense: Interest expense ...... (8) (3) (35) (1) (6) 8 (45) Share of profit of equity accounted investees ...... 1 — 3 3 — — 7 Income tax expense ...... 1 (10) (14) (8) — — (31)

Segmental assets and liabilities

Assets Liabilities 31 December 31 December 31 December 31 December 2012 2011 2012 2011 USD mln Shipping (Global) ...... 189 561 66 250 Liner and logistics (Global) ...... 218 186 113 88 Railway services (Russia) ...... 619 681 306 426 Stevedoring services (Russia) ...... 818 440 517 19 Total of all segments ...... 1,844 1,868 1,002 783 Goodwill ...... 280 214 — — Other items not attributable to a specific segment ...... 556 252 146 109 Consolidated ...... 2,680 2,334 1,148 892

F-41 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

21. Business Segmental Analysis (Continued) Other segmental information

Acquisition of segment Investments in equity assets accounted investees 31 December 31 December 31 December 31 December 2012 2011 2012 2011 USD mln Shipping (Global) ...... 17 36 1 1 Liner and logistics (Global) ...... 9687 Railway services (Russia) ...... 39 332 23 15 Stevedoring services (Russia) ...... 35 276 — 82 Investment in TransContainer ...... — — 327 — 100 650 359 105

(*) Segment expenses include operating expenses and administrative expenses.

22. Revenue

2012 2011 USD mln Transportation services (operators’ business) ...... 900 814 Hire and freight ...... 101 115 Port and stevedoring services ...... 132 49 Revenue from rentals ...... 57 39 Agency fees ...... 7 12 1,197 1,029

23. Operating Expenses

2012 2011 USD mln Railway infrastructure tariff and transportation services ...... 526 443 Voyage and vessel running cost ...... 91 111 Payroll expenses ...... 89 62 Stevedoring expenses ...... 36 8 Operating lease ...... 42 48 Non-profit based taxes ...... 9 8 793 680

24. Administrative Expenses

2012 2011 USD mln Salary and other staff related costs ...... 93 86 Professional fees ...... 21 8 Office rent ...... 8 8 Other administrative expenses ...... 35 31 157 133

F-42 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

24. Administrative Expenses (Continued) Salary and other staff related costs include share based payment release in amount of USD 1 million (2011: USD 0.8 million release).

25. Other Finance Income and Costs

2012 2011 USD mln Interest income ...... 10 12 Changes in fair value of financial instruments ...... (4) (11) Other expenses ...... (1) — 51

26. Other Income and Expenses

2012 2011 USD mln Loss on sale of vessels ...... (2) — Bad debt charge ...... (2) (6) Other (expenses)/income ...... (24) 1 (28) (5)

27. Impairment loss on Tangible Fixed Assets

2012 2011 USD mln Fleet impairment charge (Note 5) ...... (96) (42) Impairment of other fixed assets and assets under construction ...... — (5) (96) (47)

28. (Loss)/profit per Share Basic (loss)/profit per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the year, excluding those held by Group companies. For diluted earnings per share, the weighted average number of ordinary shares outstanding is adjusted to assume conversion of all potential dilutive ordinary shares. These represent share options granted to management.

31 December 31 December 2012 2011 USD (Loss)/profit for the year ...... (19,762,000) 19,253,000 Weighted average number of shares in issue (note 19) ...... 2,742,132,381 2,557,544,193 Basic (loss)/profit per share ...... (0.007) 0.008

F-43 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

28. (Loss)/profit per Share (Continued)

31 December 31 December 2012 2011 USD (Loss)/profit for the period, adjusted for stock option expense .... (20,881,484) 18,466,861 Weighted average number of shares in issue, adjusted for stock options (note 20) ...... 2,739,998,236 2,537,879,704 Diluted (loss)/profit per share ...... (0.007) 0.008

Since the assumed exercise of the options is anti-dilutive during 2012, the diluted loss per share equals basic loss per share.

29. Acquisitions of Subsidiary On 31 March 2012, the Group obtained control over Commercial Port of Vladivostok by acquiring 45.6% of shares and voting interests in the company. As a result, the Group’s equity interest in Commercial Port of Vladivostok increased from 50% to 95.6%. In the nine month period to 31 December 2012, Commercial Port of Vladivostok contributed revenue of USD 74 million and profit of USD 15 million to the Group results. If the acquisition had occurred on 1 January 2012, the consolidated revenue of the Group would have been USD 1,229 million and the consolidated net loss of the Group for the year would have been USD 10 million. The acquisition of the subsidiary had the following effect on the Group’s assets and liabilities at the date of acquisition:

Recognised fair values on acquisition USD mln Non-current assets Property, plant and equipment ...... 249 Prepayments for fixed assets ...... 13 Other non-current assets ...... 13 Current assets Inventories ...... 2 Trade and other receivables ...... 5 Cash and cash equivalents ...... 18 Other current assets ...... 23 Non-current liabilities Loans and borrowings ...... (24) Deferred tax liabilities ...... (32) Other non-current liabilities ...... (18) Current liabilities Loans and borrowings ...... (8) Trade and other payables ...... (7) Non-controlling interests ...... (9) Net identifiable assets ...... 225 Goodwill ...... 55 Carrying value of previously held shareholding ...... 90 Cash paid in 2011 ...... 190 Cash acquired in 2012 ...... 18 Net cash outflow in the statement of cash flows ...... 172

F-44 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

29. Acquisitions of Subsidiary (Continued) Goodwill arose as an expectation of synergy in the container business of the combined port which will include Commercial Sea port and container terminal. The carrying value of the existing 50% of shares in Commercial Port of Vladivostok approximates the fair value. Therefore, no remeasurement gain was recognised when control was obtained. As part of business combination of Commercial Port of Vladivostok, the Group increased its shareholding in VCT from 75% to 99%. The consideration paid for the minority stake in VCT in 2011 amounted to USD 57 million. The acquisition of non-controlling interest resulted in a decrease of retained earnings by USD 40 million.

30. Contingencies and Commitments (a) Operating lease commitments — where a Group company is the lessee The Group leases rolling stock, berths and office premises under non-cancellable lease agreements. As at 31 December 2012 all non-cancellable operating lease agreements are for a period of less than 12 months with renewal options. At 31 December 2012, the Group had the following outstanding commitments under non-cancellable operating leases.

31 December 31 December 2012 2011 USD mln Within one year ...... 12 21 In two to five years ...... 21 20 After five years ...... 70 — 103 41

(b) Guarantees issued to related parties To finance the acquisition of Fesco, the new shareholders obtained a bank loan in the aggregate amount of USD 400 million. Some of the Group’s subsidiaries act as guarantors for such bank loans.

(c) Taxation contingencies The Group operates in several jurisdictions with significantly different taxation systems. Management believes that the Group’s shipping and holding companies incorporated in foreign jurisdictions are not subject to taxes outside their countries of incorporation. However, there is a risk that the taxation authorities of higher tax jurisdictions may attempt to subject the Group’s earnings to income taxes of a particular jurisdiction. Should the taxation authorities be successful in assessing additional taxes, late payment interest and imposing fines on this basis, the impact on these financial statements could be significant. Russian tax law and practice are not as clearly established as those of more developed market economies. Russian tax laws, regulations and court practice are subject to frequent change, varying interpretation and inconsistent and selective enforcement. As a result, sometimes taxpayers are being challenged as to structures and transactions which have not been challenged or litigated as a result of prior tax audits. Taxation of companies in the transportation and freight forwarding industry in particular has historically been a vague area in the Russian tax legislation leaving a room for interpretation by the tax authorities. From 1 January 2011, amendments of Russian tax legislation related to VAT treatment of transportation and related services (in particular, application of the 0% VAT rate) came into force. The VAT law was further changed with effect from 1 October 2011. However, certain ambiguity as to VAT treatment of

F-45 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

30. Contingencies and Commitments (Continued) some transportation and related services still remain and the new rules have not yet been tested in courts. Therefore, the interpretations of the new law by the Russian tax authorities and by the customers of the Group transportation companies could differ from that taken by the Group and the effect on these consolidated financial statements if the resulting disputes are not resolved in favour of the company could be material. The taxation system in the Russian Federation continues to evolve is relatively new and is characterised by numerous taxes and frequently changing legislation, which is often unclear, contradictory, and subject to interpretation. Often, different interpretations exist amongst numerous taxation authorities and jurisdictions. Taxes are subject to review and investigation by a number of authorities, who are able by law to impose severe fines, penalties and interest charges. The tax authorities are increasingly taking a more assertive position in their interpretation and enforcement of tax legislation. In particular, on 1 January 2012 a law came into force that completely replaced the existing Russian transfer pricing rules with new ones making Russian transfer pricing rules closer to OECD guidelines, but creating additional uncertainty in practical application of tax legislation in certain circumstances. For instance, when determining controllable types of transactions which are not limited to sales of goods, work and services, but may include other types of transactions as well. The new transfer pricing rules introduce an obligation of taxpayers to prepare transfer pricing documentation with respect to controlled transactions and prescribe a new basis and mechanisms for assessing additional taxes in case prices in the controlled transactions differ from the market level. For example, the new transfer pricing rules eliminated the 20-percent price safe harbour that existed under the previous transfer pricing rules applicable to transaction on or prior to 31 December 2011. The new transfer pricing rules primarily apply to cross-border transactions between related parties as well as certain cross-border transactions between independent parties, as determined under the Russian Tax Code. In addition, the rules apply to in-country transactions between related parties if the accumulated annual volume of the transactions between the same parties exceeds a particular threshold (RUB3 billion in 2012, RUB2 billion in 2013, and RUB1 billion in 2014 and thereafter). Penalty for underpayment of tax arising from non-compliance with the new transfer pricing rules will apply from 2014 (inclusive) with increase of the penalty rate from 20% in 2014 to 40% of underpaid tax starting from 2017. It is difficult to predict how such rules will be interpreted by the Russian tax authorities, but it is generally expected that the Russian tax authorities will be able to enforce the new transfer pricing rules more effectively than the previous ones. Taking into account that there is no practice of applying the new transfer pricing rules by the tax authorities and courts, that the rules are themselves vague and contain gaps and that practically all large Group companies in Russia are engaged in transactions that may be subject to control under the new rules, there is a risk that the Russian tax authorities could attempt to assess additional taxes and late payment interest on Russian Group companies on the basis of such new rules. Should the Russian taxation authorities be successful in that challenge , the impact on these financial statements could be significant. The above circumstances may create tax risks in Russia substantially more significant than in other countries. Management believes that it has adequately provided for tax liabilities based on its interpretation of tax legislation (including new Russian transfer pricing rules). However, the interpretations of the relevant authorities could differ and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant.

F-46 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

30. Contingencies and Commitments (Continued) (d) Business environment Part of the Group’s operations is located in the Russian Federation and Ukraine. Consequently, the Group is exposed to the economic and financial markets of the Russian Federation and Ukraine which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in the Russian Federation. The consolidated financial statements reflect management’s assessment of the impact of the Russian and Ukrainian business environment on the operations and the financial position of the Group. The future business environment may differ from management’s assessment.

31. Financial Risk Management Objectives and Policies Capital Risk Management The Group manages its capital to ensure that it can continue to operate and expand their operations while at the same time maximising returns to shareholders through the optimisation of the debt-equity balance. This strategy remains unchanged from prior year. The Group is financed by a combination of borrowing and equity attributable to shareholders. Borrowing comprises long and short term loans (as disclosed in Note 16) and is monitored net of cash and cash equivalents. Equity attributable to shareholders comprises issued share capital, share premium, retained earnings and other reserves less treasury shares (as disclosed in notes 19). The Group is not subject to externally imposed capital requirements other than those included, from time to time, in the financial covenants associated with bank borrowing and those, imposed by the Russian legislation. The Board of Directors monitors the capital structure of the Group taking into account the costs and risks associated with each category of capital. The Group’s net debt to equity ratio is the primary tool used in the monitoring process. No formal targets have been set to maintain a net debt to equity ratio on a definite level. The Group’s net debt to equity ratio at the year end was as follows:

31 December 31 December 2012 2011 USD mln Net debt Long term loans and finance lease obligations ...... 701 499 Short term loans and finance lease obligations ...... 219 199 Less cash and cash equivalents ...... (232) (232) 688 466 Equity attributable to equity shareholders of the Company ...... 1,523 1,427 Net debt to equity ratio ...... 45% 33%

Major categories of financial instruments. The Group’s principle financial liabilities comprise borrowings, finance leases, trade and other payables. The main risks arising from the Group’s financial instruments are market risk which includes foreign currency and interest rate risk, credit and liquidity risks. The Board of Directors has overall responsibility for the establishment and overseeing of the Group’s risk management framework. The Group Audit Committee is responsible for developing and monitoring the Group’s risk management policies.

F-47 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

31. Financial Risk Management Objectives and Policies (Continued) The Group’s Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

(a) Credit risk Credit risk is the risk that a customer may default or not meet its obligations to the Group on a timely basis, leading to financial losses to the Group.

Trade and other receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry and country in which the customer operates, has less of an influence on a credit risk. There is no concentration of credit risk with a single customer. Each company within the Group establishes its own credit policy taking into account the specifics of the sector and the company’s customer base. The majority of the Group’s customers have been transacting with the Group companies for many years and losses arising from this category of customer are infrequent. Policies established by Group companies for new customers will generally involve some form of credit check based on the available information. Where a customer is not deemed creditworthy, the Group will generally only offer services on a prepayment basis. The Group has provided fully for all receivables over one year because historical experience is such that receivables that are past due beyond one year are generally not recoverable. The Group’s maximum exposure to credit risk in relation to each class of recognised financial asset is the carrying amount of those assets as stated in the balance sheet and was as follows:

31 December 31 December 2012 2011 USD mln Investments available-for-sale ...... — 197 Long term loans issued to a related party ...... 542 — Prepayment for investment, at cost ...... 2 293 Accounts receivable ...... 190 178 Current tax assets ...... 14 10 Other current assets ...... 1 8 Cash and cash equivalents ...... 232 232 981 918

F-48 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

31. Financial Risk Management Objectives and Policies (Continued) The ageing profile of trade receivables was:

31 December 2012 31 December 2011 USD mln Total book Allowance for Total book Allowance for value impairment value impairment Current ...... 50 — 33 — Overdue 90 days ...... 3 — 5 — Overdue 91 days to one year ...... 2 — 7 2 Overdue more than one year ...... 22 22 21 21 77 22 66 23

During the year, the Group had the following movement in allowance for trade receivables:

31 December 31 December 2012 2011 USD mln Balance as at 1 January ...... 23 27 Uncollectible receivables written off during the year ...... (4) (6) Increase in allowance ...... 3 2 Balance as at 31 December ...... 22 23

Other assets of the Group with exposure to credit risk include cash and advances to suppliers. Cash is placed with reputable banks. Advances to suppliers mainly include prepayments for transportation services and prepayments to Russian Railway. Management does not expect these counterparties to fail to meet their obligations.

(b) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Currency risk The Group is exposed to currency risk on sales, purchases, finance leases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily the RUB and USD. Borrowings and interest thereon are generally denominated in currencies that match the cash flows generated by the underlying operations of the Group, this providing an economic hedge. In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.

F-49 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

31. Financial Risk Management Objectives and Policies (Continued) At 31 December 2012, the Group had the following monetary assets and liabilities denominated in currencies other than the functional currency of the respective Group entity:

Other USD RUB currencies USD mln Assets Other non-current assets ...... 407 1 — Accounts receivable ...... 17 5 3 Other current assets ...... 2 — — Bank and cash balances ...... 31 — 16 Intra-group assets ...... 50 2 — 507 8 19 Liabilities Accounts payable ...... 24 7 3 Loans and other obligations ...... 403 13 27 Intra-group liabilities ...... 107 69 — 534 89 30 (27) (81) (11)

Other currencies include EURO primarily. At 31 December 2011, the Group had the following monetary assets and liabilities denominated in currencies other than the functional currency of the respective Group entity.

Other USD RUB currencies USD mln Assets Other non-current assets ...... 7 — — Accounts receivable ...... 15 13 4 Other current assets ...... 2 — — Bank and cash balances ...... 19 2 3 Intra-group assets ...... 55 40 — 98 55 7 Liabilities Accounts payable ...... 7 7 5 Loans and other obligations ...... 66 24 8 Intra-group liabilities ...... 119 66 — 192 97 13 (94) (42) (6)

F-50 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

31. Financial Risk Management Objectives and Policies (Continued) Foreign currency sensitivity analysis The table below details the Group’s sensitivity to strengthening/weakening of USD against the RUB by 10% which represents management’s assessment of the possible change in foreign currency exchange rates.

RUB/USD impact 31 December 31 December 31 December 31 December USD mln 2012 2012 2011 2011 RUB/USD RUB/USD RUB/USD RUB/USD +10% 10% +10% 10% Profit or (loss) ...... 3 (3) 9 (9)

Interest rate risk Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Group’s interest risk mainly arises from its debt obligations in particular non-current borrowings. Borrowing at variable rates exposes the Group to cash flow interest rate risk. Lending at fixed rates or the purchase of debt instruments at fixed rates expose the Group to changes in the fair value. The Group reviews its debt portfolio and monitors the changes in the interest rate environment to ensure that interest payments are within acceptable levels. Information relating to interest rates on the Group’s borrowings is disclosed in Note 16.

Structure of interest rate risk. At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments, excluding the effect of derivative financial instruments, was:

Carrying amount 31 December 31 December 2012 2011 USD mln Fixed rate instruments Cash and cash equivalents ...... 74 159 Loans and promissory notes receivable ...... 2 1 Long term deposits ...... — 2 Finance lease receivable ...... 7 9 Borrowings and finance lease obligations ...... (328) (440) (245) (269) Variable rate instruments Loans receivable ...... 540 — Borrowings ...... (592) (257) (52) (257)

Interest rate sensitivity analysis The table below details the Group’s sensitivity to increase or decrease of floating interest rates by 1%. The analysis was applied to financial instruments based on the assumption that the amount of financial instruments outstanding as at the balance sheet date was outstanding for the whole year.

F-51 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

31. Financial Risk Management Objectives and Policies (Continued) The change in Libor/Euribor/Mosprime by 1% would not have resulted in a significant impact on the Group’ results.

(c) Fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

31 December 2012 Level 1 Level 2 Level 3 USD mln Share-based payments liability ...... — — (3) — — (3)

31 December 2011 Level 1 Level 2 Level 3 USD mln Investments available for sale ...... 197 — — Share-based payments liability ...... — — (4) Interest rate swap liability ...... — (32) — 197 (32) (4)

(d) Liquidity risk Liquidity risk is the risk that the Group will not be able to settle all liabilities as they fall due. The Group has in place a detailed budgeting and cash flow forecasting process to help ensure that it has sufficient cash to meet its payment obligations.

F-52 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

31. Financial Risk Management Objectives and Policies (Continued) Loans, borrowings, finance lease and other payables

Minimum Carrying future Less than 3-6 6-12 1-5 Later than value payment 3 month month month years 5 years USD mln As at 31 December 2012 Loans and interest payable ...... 794 1,013 27 27 206 752 1 Finance leases ...... 129 169 10 10 18 125 6 Trade and other payables ...... 104 104 104 — — — — Share-based payments ...... 3 3 2 — — — 1 Defined benefit obligations ...... 5 5 — — — — 5 Total ...... 1,035 1,294 143 37 224 877 13 As at 31 December 2011 Loans and interest payable ...... 557 638 22 109 79 377 51 Finance leases ...... 143 198 10 9 19 146 14 Interest swap ...... 32 33 3 4 5 21 — Trade and other payables ...... 75 75 74 1 — — — Share-based payments ...... 4 4 — — — 4 — Defined benefit obligations ...... 2 2 — — — 2 — Total ...... 813 950 109 123 103 550 65

32. Related Party Transactions For the purposes of these financial statements, parties are considered to be related if both parties are under common control or one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. During the period seven individuals were considered to be the Group’s key management and directors (2011 — ten individuals). Their remuneration during the period was as follows:

31 December 31 December 2012 2011 USD mln Salaries ...... 3 3 Bonuses ...... 3 2 Board of directors remuneration ...... 2 1 86

During the year the share option liability decreased resulting in a gain of USD 1 million.

F-53 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2012 (Continued)

32. Related Party Transactions (Continued) Guarantees issued to shareholders amount to USD 400 million at 31 December 2012 (2011 — nil).

31 December 31 December 2012 2011 Nature of balances USD mln Statement of financial position Associates ...... — 2 Agency and other service Associates ...... 2 — Trade receivables Joint Venture Company ...... — (2) Trade payables Joint Venture Company ...... 1 2 Trade receivables Joint Venture Company ...... — (13) Loan payable Joint Venture Company ...... 1 2 Loan issued Related through common shareholder ...... 541 — Loan issued Related through common shareholder ...... 2 Interest receivable Related through common shareholder ...... 4 — Payables on behalf of related party Related through common shareholder ...... — 72 Cash and cash equivalents Joint Venture Company ...... 7 9 Finance lease receivable Non-consolidated subsidiaries .... (1) — Loan payable

31 December 31 December 2012 2011 Nature of transactions USD mln Income Statement Non-consolidated subsidiary purchases ...... (1) (1) Agency Services Associates purchases ...... (3) (2) Agency services, rent and security expenses Joint Venture Company purchases (9) (10) Agency, transportation and stevedoring services Joint Venture Company sales .... 2 3 Transportation services Joint Venture Company ...... 1 2 Finance lease and interest income Related through common shareholder ...... 4 3 Interest income Related through common shareholder ...... (4) — Consulting expenses

33. Events subsequent to the reporting date In February 2013, the Group pledged shares of certain group subsidiaries, including all shares in VMTP and 50% shareholding in VCT to secure liabilities of the related parties under long-term bank loan facilities agreements.

F-54 FAR-EASTERN SHIPPING COMPANY PLC. AND ITS SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS 31 December 2011

CONTENTS

Page Independent Auditors’ Report ...... F-56 Consolidated Statement of Financial Position ...... F-57 Consolidated Income Statement ...... F-58 Consolidated Statement of Comprehensive Income ...... F-59 Consolidated Statement of Changes in Equity ...... F-60 Consolidated Statement of Cash Flows ...... F-62 1. Organisation and Trading Activities ...... F-64 2. Basis of Accounts Preparation ...... F-64 3. Accounting Policies ...... F-67 4. Goodwill ...... F-77 5. Other Intangible Assets ...... F-78 6. Fleet ...... F-79 7. Rolling Stock ...... F-81 8. Other Tangible Fixed Assets ...... F-81 9. Investments in Associates and Joint Ventures ...... F-82 10. Other equity investments ...... F-84 11. Other Non-Current Assets ...... F-84 12. Inventories ...... F-85 13. Accounts Receivable ...... F-85 14. Other Current Assets ...... F-86 15. Cash and Cash Equivalents ...... F-86 16. Accounts Payable ...... F-86 17. Loans Payable and Finance Leases Obligations ...... F-86 18. Other Non-Current Liabilities ...... F-88 19. Current and Deferred Tax ...... F-88 20. Shareholders’ Equity ...... F-90 21. Share-Based Payments ...... F-90 22. Business Segmental Analysis ...... F-91 23. Revenue ...... F-94 24. Operating Expenses ...... F-94 25. Administrative Expenses ...... F-94 26. Other Financial Income and Cost ...... F-94 27. Loss on Disposal of Tangible Fixed Assets ...... F-95 28. Reversal of/(Impairment loss) on Tangible Fixed Assets ...... F-95 29. Profit per Share ...... F-95 30. Acquisitions of Subsidiary ...... F-96 31. Derivatives ...... F-97 32. Contingencies and Commitments ...... F-98 33. Financial Risk Management Objectives and Policies ...... F-99 34. Related Party Transactions ...... F-105 35. Events Subsequent to the Reporting Date ...... F-106 Consolidated Schedule of Fleet at 31 December 2011 ...... F-108

F-55 3APR201304355759

Independent Auditors’ Report To the Board of Directors of FAR-EASTERN SHIPPING COMPANY PLC. (FESCO) We have audited the accompanying consolidated financial statements of FAR-EASTERN SHIPPING COMPANY PLC. (FESCO) (the ‘‘Company’’) and its subsidiaries (the ‘‘Group’’), which comprise the consolidated statement of financial position as at 31 December 2011, and the consolidated statements of income, comprehensive income, changes in equity and cash flows for the year then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as at 31 December 2011, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

3APR201304380648 ZAO KPMG 16 April 2012

ZAO KPMG, a company incorporated under the Laws of the Russian Federation, a subsidiary of KPMG Europe LLP, and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (‘‘KPMG International’’), a Swiss entity.

F-56 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Financial Position As at 31 December 2011

31 December 31 December Note 2011 2010 ‘000 USD ASSETS Non-Current Assets Fleet ...... 6 381,591 411,605 Rolling stock ...... 7 504,660 316,881 Other tangible fixed assets ...... 8 161,019 152,916 Goodwill ...... 4 213,873 200,252 Other intangible assets ...... 5 1,606 5,731 Investments in associates and joint ventures ...... 9 105,267 100,634 Other equity investments ...... 10 199,079 165,042 Other non-current assets ...... 11 313,293 30,721 Total non-current assets ...... 1,880,388 1,383,782 Current Assets Inventories ...... 12 25,142 21,341 Accounts receivable ...... 13 178,189 147,288 Current tax assets ...... 9,730 2,455 Other current assets ...... 14 8,113 2,160 Cash and cash equivalents ...... 15 231,576 556,288 Total current assets ...... 452,750 729,532 Total Assets ...... 2,333,138 2,113,314 EQUITY AND LIABILITIES Shareholders’ Equity ...... 20 Share capital ...... 57,230 57,230 Share premium ...... 999,494 999,494 Treasury shares ...... (336,104) (336,104) Retained earnings ...... 889,352 870,357 Reserves ...... (183,464) (75,092) Equity attributable to owners of the Company ...... 1,426,508 1,515,885 Non-controlling interests ...... 14,396 11,409 Total equity ...... 1,440,904 1,527,294 Non-current liabilities Long term loans and finance lease obligations ...... 17 498,511 302,746 Deferred tax liability ...... 19 34,546 32,987 Other long term liabilities ...... 18 27,136 27,285 Total non-current liabilities ...... 560,193 363,018 Current Liabilities Accounts payable ...... 16 128,561 98,497 Current tax liabilities ...... 4,542 2,114 Short term loans and finance lease obligations ...... 17 198,938 122,391 Total current liabilities ...... 332,041 223,002 Total liabilities ...... 892,234 586,020 Total equity and liabilities ...... 2,333,138 2,113,314

S.V. Generalov, President Y.B. Gilts, Vice President and CFO

3APR201304365712 3APR201304373537 Date: 16 April 2012 The accompanying notes on pages F-64 to F-107 from an integral part of these consolidated financial statements.

F-57 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Income Statement For the year ended 31 December 2011

Note 2011 2010 ‘000 USD Revenue ...... 23 1,028,755 800,591 Operating expenses ...... 24 (679,825) (544,224) Gross profit before depreciation and amortization ...... 348,930 256,367 Depreciation and amortisation ...... 5,6,7,8 (81,733) (72,817) Administrative expenses ...... 25 (133,191) (98,737) Impairment (loss)/reversal on tangible fixed assets, net ...... 28 (46,615) 38,644 Loss on disposal of tangible fixed assets ...... 27 (312) (5,239) Bad debt charge ...... (6,322) (4,122) Other income ...... 818 7,186 Profit from operating activity ...... 81,575 121,282 Interest expense ...... (45,121) (53,973) Foreign exchange gain/(loss) ...... 14,522 (2,487) Result on disposal of investments ...... — 419,918 Other financial income/(expenses), net ...... 26 1,351 (13,895) Share of profit of equity accounted investees ...... 9 6,715 5,920 Profit before income tax ...... 59,042 476,765 Income tax expense ...... 19 (29,905) (20,897) Profit for the year ...... 29,137 455,868 Attributable to: Owners of the Company ...... 19,253 449,352 Non-controlling interest ...... 9,884 6,516 Basic profit per share ...... 29 USD 0.008 USD 0.176 Diluted profit per share ...... USD 0.008 USD 0.175

The accompanying notes on pages F-64 to F-107 form an integral part of these consolidated financial statements.

F-58 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Comprehensive Income For the year ended 31 December 2011

2011 2010 ‘000 USD Profit for the year ...... 29,137 455,868 Other comprehensive income/(loss): Revaluation of fleet ...... 3,515 416 Deferred tax charge on revaluation of fleet ...... (878) (1,123) Transfer of changes in fair value of cash flow hedge to income statement ...... — 5,334 Effect of foreign currency translation ...... (37,867) (8,787) Net change in fair value of available-for-sale financial assets ...... (72,708) 23,711 Release from revaluation of available-for-sale investments on disposal ...... — (220,849) Release from currency translation reserve on disposal of available-for-sale investments ...... — (29,601) Correction of the cost of tangible fixed assets, net of deferred tax ...... 2,211 5,568 Other comprehensive (loss)/income for the year .... (105,727) (225,331) Total comprehensive (loss)/income for the year ..... (76,590) 230,537 Total comprehensive (loss)/income attributable to: Ordinary shareholders of the Company ...... (85,450) 224,052 Non-controlling interests ...... 8,860 6,485

The accompanying notes on pages F-64 to F-107 form an integral part of these consolidated financial statements.

F-59 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Changes in Equity For the year ended 31 December 2011

Attributable to equity holders of the Company Share Share Treasury Investment Cash Non- capital premium shares Retained Revaluation fair value Translation flow controlling Total ‘000 USD (Note 20) (Note 20) (Note 20) earnings reserve reserve reserve hedge Total interest equity Balance at 1 January 2010 ...... 57,230 999,494 (336,104) 404,519 40,314 220,849 (92,050) (2,419) 1,291,833 7,773 1,299,606 Profit for the year ...... — — —449,352 — — — — 449,352 6,516 455,868 Other comprehensive income/(loss) Effect of foreign currency translation . . . — — — — — — (8,756) — (8,756) (31) (8,787) Revaluation of fleet, net of deferred tax . — — — — (707) — — — (707) — (707) Release from revaluation reserve ..... — — — 10,918 (10,918) — — — — — — Net change in fair value of available-for-sale financial assets . . . . — — — — — 23,711 — — 23,711 — 23,711 Release from revaluation of available-for-sale investments on disposal ...... — — — — — (220,849) (29,601) — (250,450) — (250,450) Transfer of changes in fair value of cash flow hedge to income statement . . . . — — — — — — — 5,334 5,334 — 5,334 Correction of the cost of tangible fixed assets, net of deferred tax (Note 7) . . — — — 5,568 — — — — 5,568 — 5,568 Total other comprehensive income/(loss) ...... — — — 16,486 (11,625) (197,138) (38,357) 5,334 (225,300) (31) (225,331) Total comprehensive income/(loss) for the year ...... — — —465,838 (11,625) (197,138) (38,357) 5,334 224,052 6,485 230,537 Transactions with owners, recorded directly in equity Dividends declared ...... — — — — — — — — — (2,849) (2,849) Total contributions by and distributions to owners ...... — — — — — — — — — (2,849) (2,849) Total transaction with owners ...... — — — — — — — — — (2,849) (2,849) Balance at 31 December 2010 ..... 57,230 999,494 (336,104) 870,357 28,689 23,711 (130,407) 2,915 1,515,885 11,409 1,527,294

The accompanying notes on pages F-64 to F-107 form an integral part of these consolidated financial statements.

F-60 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Changes in Equity For the year ended 31 December 2011 (Continued)

Attributable to equity holders of the Company Share Share Treasury Investment Cash Non- capital premium shares Retained Revaluation fair value Translation flow controlling Total ‘000 USD (Note 20) (Note 20) (Note 20) earnings reserve reserve reserve hedge Total interest equity Balance at 1 January 2011 ...... 57,230 999,494 (336,104) 870,357 28,689 23,711 (130,407) 2,915 1,515,885 11,409 1,527,294 Profit for the year ...... — — — 19,253 — — — — 19,253 9,884 29,137 Other comprehensive income/(loss) Effect of foreign currency translation . . . — — — — — — (36,843) — (36,843) (1,024) (37,867) Revaluation of fleet, net of deferred tax . . — — — — 2,637 — — — 2,637 — 2,637 Release from revaluation reserve ..... — — — 1,458 (1,458) — — — — — — Net change in fair value of available-for-sale financial assets . . . . — — — — — (72,708) — — (72,708) — (72,708) Correction of the cost of tangible fixed assets, net of deferred tax (Note 7) . . . — — — 2,211 — — — — 2,211 — 2,211 Total other comprehensive income/(loss) ...... — — — 3,669 1,179 (72,708) (36,843) — (104,703) (1,024) (105,727) Total comprehensive income/(loss) for the year ...... — — — 22,922 1,179 (72,708) (36,843) — (85,450) 8,860 (76,590) Transactions with owners, recorded directly in equity Dividends declared ...... — — — — — — — — — (4,576) (4,576) Total contributions by and distributions to owners ...... — — — — — — — — — (4,576) (4,576) Acquisition of non-controlling interests without a change in control ...... — — — (3,927) — — — — (3,927) (1,297) (5,224) Total transaction with owners ...... — — — (3,927) — — — — (3,927) (5,873) (9,800) Balance at 31 December 2011 ...... 57,230 999,494 (336,104) 889,352 29,868 (48,997) (167,250) 2,915 1,426,508 14,396 1,440,904

The availability of the Company’s retained earnings for distribution to shareholders is determined by the Company’s Charter and by Russian law and does not correspond with the figures shown above. The Company’s retained earnings available for distribution under Russian Accounting Standards as at 31 December 2011 were USD 240 million (as at 31 December 2010 USD 250 million).

The accompanying notes on pages F-64 to F-107 form an integral part of these consolidated financial statements.

F-61 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Cash Flows For the year ended 31 December 2011

‘000 USD Note 2011 2010 Cash flows from operating activities Profit for the year ...... 29,137 455,868 Adjustments for: Depreciation and amortisation ...... 81,733 72,817 Impairment losses/(reversal) ...... 46,615 (37,950) Loss on disposal of tangible fixed assets ...... 312 5,239 Foreign exchange differences ...... (14,522) 2,487 Net finance costs/(income) ...... 43,770 (352,050) Share of profit of equity accounted investees ...... (6,715) (5,920) Income tax expense ...... 29,905 20,897 Share options (release)/expense ...... (786) 3,093 Other income and expense ...... 3,760 — Cash from operating activities before changes in working capital and provisions ...... 213,209 164,481 Change in inventories ...... (3,417) (3,016) Change in trade and other receivables ...... (21,752) (22,555) Change in trade and other payables ...... 18,376 10,817 Cash flows from operations before income taxes paid ...... 206,416 149,727 Income tax paid ...... (33,799) (14,596) Income tax received ...... — 5,640 Cash flows from operating activities ...... 172,617 140,771

The accompanying notes on pages F-64 to F-107 form an integral part of these consolidated financial statements.

F-62 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries

Consolidated Statement of Cash Flows For the year ended 31 December 2011 (Continued)

‘000 USD Note 2011 2010 Cash flows from investing activities Expenditure on vessels under construction ...... 6 (24,552) (36,859) Refund from cancellation of construction contract ...... 1,100 25,139 Expenditure on other fixed assets ...... 8 (109,837) (52,612) Expenditure on drydocking ...... 6 (7,863) (8,609) Proceeds on disposal of fleet ...... 4,773 114,664 Proceeds on disposal of other fixed assets ...... 3,645 2,422 Acquisition of equity-accounted investee ...... 9 (4,765) (1,644) Other investments acquired ...... 10 (105,902) (139,268) Acquisition of subsidiaries, net of cash acquired ...... 30 (45,390) — Prepayments for investments ...... 11 (292,935) — Proceeds on sale of investments ...... 664 869,469 Dividends received ...... 2,140 2,516 Short-term loans /investments (issued)/received ...... (6,301) (2,784) Finance lease received ...... 588 780 Interest received ...... 10,563 5,349 Net cash (used in)/ generated from investing activities ...... (574,072) 778,563 Cash flows from financing activities Proceeds from borrowings ...... 501,275 280,472 Repayment of borrowings ...... (344,930) (649,832) Finance charges ...... (45,534) (57,617) Financial instruments liability paid ...... (10,518) (9,811) Decrease in overdraft ...... — (1,530) Dividends paid ...... (8,270) (2,849) Acquisition of non-controlling interests ...... (4,194) — Net cash generated from/(used in) financing activities ...... 87,829 (441,167) Effect of exchange rate fluctuations on cash and cash equivalents . (11,086) (4,067) Net (decrease)/increase in Cash and cash equivalents ...... (324,712) 474,100 Cash and cash equivalents at 1 January ...... 556,288 82,188 Cash and cash equivalents at 31 December ...... 15 231,576 556,288

The accompanying notes on pages F-64 to F-107 form an integral part of these consolidated financial statements.

F-63 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011

1. Organisation and Trading Activities Far-Eastern Shipping Company PLC. (FESCO) was privatised and became a joint stock company governed by the laws of the Russian Federation on 3 December 1992. The Company’s registered office and principal place of business is: 15 Aleutskaya Street, Vladivostok, Primorskiy Kray, Russian Federation 690091. The Company’s immediate parent entity is SVG Holdings S.A. Luxemburg and Mr Sergey Generalov is considered to be the Company’s ultimate controlling party. The principal activity of FESCO and its subsidiaries (the Group) has traditionally been shipping (ship owning, ship management, chartering out and line operating). In recent years FESCO has been transformed into an intermodal logistics Group focused on Russia, offering a full range of logistical solutions through a combination of shipping, rail, trucking and port services.

2. Basis of Accounts Preparation (a) Basis of preparation These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (‘‘IFRS’’) as issued by the International Accounting Standards Board (‘‘IASB’’). The preparation of consolidated financial statements requires the use of certain critical accounting estimates. It also requires management to exercise its judgement in the process of selecting and applying accounting policies. The areas involving a higher degree of judgement or complexity, or areas where estimates are significant to the financial statements are disclosed in Note 2c. The significant accounting policies adopted by the Group have been consistently applied with those of the prior period. The consolidated financial statements are prepared on the historical cost basis except that derivative financial instruments, investments at fair value through profit and loss and financial investments classified as available-for-sale are stated at fair value. Group’s vessels are stated at fair value at each reporting date based on valuation performed by an independent professional appraiser as disclosed in Note 6. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. (b) Basis of consolidation These financial statements include the accounts of FESCO and its subsidiaries. The principal subsidiaries of the Group are as follows:

Country of Percentage Name Incorporation Holding Activity Bodyguard Shipping Company Limited ..... Cyprus 100% Ship owning Diataxis Shipping Company Limited ...... Cyprus 100% Ship owning Yerakas Shipping Company Limited ...... Cyprus 100% Ship owning Antilalos Shipping Company Limited ...... Cyprus 100% Ship owning Carmina Maritime Ltd ...... Marshall 100% Ship owning Islands Kirdischev Maritime Ltd ...... Marshall 100% Ship owning Islands Angara Maritime Ltd ...... Marshall 100% Ship owning Islands Ob Maritime Ltd ...... Marshall 100% Ship owning Islands Kraynev Maritime Ltd...... Marshall 100% Ship owning Islands

F-64 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

2. Basis of Accounts Preparation (Continued)

Country of Percentage Name Incorporation Holding Activity Udarnik Maritime Ltd...... Marshall 100% Ship owning Islands Yenisey Maritime Ltd ...... Marshall 100% Ship owning Islands Marline Shipping Company Limited ...... Cyprus 100% Ship owning Marview Shipping Company Limited ...... Cyprus 100% Ship owning FESCO Agencies N.A., Inc...... USA 100% Shipping agency Astro-Moon Shipping Company Limited .... Cyprus 100% Ship owning Mar Space Shipping Company Limited ..... Cyprus 100% Ship owning Lightview Shipping Company Limited ...... Cyprus 100% Ship owning Star Warm Shipping Company Limited ..... Cyprus 100% Ship owning Anouko Shipping Company Limited ...... Cyprus 100% Ship owning FESCO Lines China, Co., Ltd...... China 100% Shipping agency Firm Transgarant LLC ...... Russia 100% Holding company for transportation services group FIT LLC ...... Russia 100% Transport and forwarding services VKT LLC ...... Russia 75% Container terminal TRANSFES Co., Ltd ...... Russia 100% Shipping agency and operations Dalreftrans Co, Ltd ...... Russia 100% Transport and forwarding services ESF...... Russia 100% Shipping agency and operations FESCO Lines Hong Kong Limited ...... China 100% Shipping agency FESCO Agency Lines HK Limited ...... Hong Kong 100% Shipping agency FESCO Lines Management Limited ...... Hong Kong 100% Financial management FESCO Container Services Company Limited Cyprus 100% Line operator FESCO Ocean Management Limited ...... Cyprus 100% Shipping operations Maritime and Intermodal Logistics Systems Inc...... USA 100% Container freight services Remono Shipping Company Limited ...... Cyprus 100% Freight forwarder Shonstar Limited ...... British Virgin 100% Share options for Group’s Islands management FESCO Transportation Group Ltd ...... Russia 100% Managing company

Subsidiaries.

Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that currently are exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control effectively commences until the date that control effectively ceases. The accounting policies of subsidiaries have been changed where necessary to align them with the policies adopted by the Group. Certain subsidiaries, associate companies and joint ventures that are neither individually nor in aggregate material to the results, cash flows or financial position of the Group are not consolidated. These investments are recorded as available-for-sale investments at fair value as estimated by management. Where it is not possible to estimate fair values reliably, they are recorded at historical cost less applicable impairment.

F-65 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

2. Basis of Accounts Preparation (Continued) Joint ventures and associates (equity accounted investees).

Joint ventures are those companies and other entities in which the Group, directly or indirectly, undertake an economic activity that is subject to joint control. Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies Joint ventures and associates are accounted for using the equity method. The consolidated financial statements include the Group’s share of the income and expenses of equity accounted investees, after adjustments to align the accounting policies with those of the Group, from the date that joint control/significant influence commences until the date that joint control/significant influence ceases. When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of that interest (including any long-term investments) is reduced to nil and the recognition of further losses is discontinued, except to the extent that the Group has an obligation or has made payments on behalf of the investee.

Transactions eliminated on consolidation.

Intra-group balances and transactions, and any unrealised income and expenses arising from intra- group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Acquisitions from entities under common control.

Business combinations arising from transfers of interests in entities that are under the control of the shareholder that controls the Group are accounted for as if the acquisition had occurred at the beginning of the earliest comparative period presented or, if later, at the date that common control was established; for this purpose comparatives are restated. The assets and liabilities acquired are recognised at the carrying amounts recognised previously in the Group’s controlling shareholder’s consolidated financial statements. The components of equity of the acquired entities are added to the same components within Group equity except that any share capital of the acquired entities is recognised as part of share premium. Any cash paid for the acquisition is recognised directly in equity. (c) Critical accounting estimates and judgements in applying accounting policies The preparation of consolidated financial statements in conformity with IFRSs requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the following notes: 1. Impairment of goodwill and tangible fixed assets, see Note 4 and Notes 7,8 2. Determination of the fair value of the Group’s fleet, see Note 6 3. Russian taxation contingencies, see Note 32(d) (d) Segmental Reporting The Group has four operating segments: shipping, which operates on a global basis, intermodal services, railway transportation services which operate in Russia and other countries of the CIS and Russian-based port and sea terminal. A segmental analysis has been included in Note 22.

F-66 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

3. Accounting Policies (a) Functional and Presentation Currency The presentation currency used in the preparation of these financial statements is the U.S. Dollar (‘‘USD’’). The functional currency of each Group entity is the currency of the primary economic environment in which the entity operates. For the purpose of the consolidated financial statements, the results and financial position of each entity are translated to USD as stated below. In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are translated into functional currency at the rates of exchange prevailing at the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing at the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing at the date when the fair value was determined. Foreign currency differences arising in translation are recognised in the income statement, except for differences arising on the translation of available-for-sale equity instruments. The results and financial position of each Group entity whose functional currency is different from USD, are translated into the presentation currency as follows: (i) assets and liabilities at each reporting date are translated at the closing rate at this date; (ii) income and expenses for each income statement are translated at average exchange rates (unless this average is not a reasonable approximation of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions); and (iii) all resulting exchange differences are recognised as a separate component of equity. When a foreign operation is disposed of, in part or in full, the relevant amount in the translation reserve is transferred to the income statement. Foreign exchange gains and losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely to occur in the foreseeable future, are considered to form part of a net investment in a foreign operation and are recognised directly in equity. None of the Group entities has a functional currency which is a currency of hyperinflational economy. All financial information presented in USD has been rounded to the nearest thousand. The Russian rouble is not a fully convertible currency outside of the Russian Federation and, accordingly, any conversion of RUB amounts to USD should not be construed as a representation that RUB amounts have been, could be, or will be in the future, convertible into USD at the exchange rate shown, or at any other exchange rate. At 31 December 2011, the official rate of exchange, as determined by the Central Bank of the Russian Federation, was USD 1 = RUB 32.196 (31 December 2010 USD 1 = RUB 30.48).

Fleet The fleet is stated on an individual vessel basis at market value as assessed by independent professional valuers and supported by calculations of value in use. Any accumulated depreciation at the date of revaluation is eliminated against the gross carrying amount of the asset and the net amount is restated to the revalued amount of the asset. Revaluations are performed annually.

F-67 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

3. Accounting Policies (Continued) A revaluation increase is recognised in revaluation reserve in equity except to the extent that it reverses a previous revaluation deficit on the same asset recognised in the income statement, in which case it is recognised in the income statement. A revaluation decrease is recognised in the income statement except to the extent that it reversed the previous revaluation surplus on the same asset recognised directly in equity, in which case it is recognised directly in equity. At the year end a portion of the revaluation reserve, which is equal to the difference between depreciation based on the revalued carrying amount of the asset and depreciation based on the asset’s original cost is transferred from the revaluation reserve to retained earnings. Other fixed assets are stated at cost less accumulated depreciation and impairment. Cost includes expenditure that is directly attributable to the acquisition of the asset. Vessels in course of construction include advances to shipyards, supervision fees, professional fees, finance costs and interest capitalised. Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment. Dry- docking and special survey costs (‘‘Dry-docking costs’’) are recognised as a separate component of the vessel and are capitalised as incurred during the period of the dry-docking programme.

Subsequent costs The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of that item if it is probable that the future economic benefits embodied within the part will flow to the Group and its cost can be measured reliably. The costs of the day-to-day servicing of property, plant and equipment are recognised in the income statement as incurred.

Fleet depreciation Depreciation is charged on a straight-line basis in the income statement on net book value less an estimated scrap value, based on anticipated useful lives of 25 years from date of building of the vessel.

Other fixed assets depreciation Other fixed assets are depreciated on a straight line basis to their residual values at the following annual rates:

Buildings ...... 3–10% Rolling stock ...... 4–20% Machinery, equipment and other fixed assets ...... 5–33% Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, where shorter, over the term of the relevant lease. Land is not depreciated.

Residual values The residual value of an asset is the estimated amount that the Group would currently obtain from the disposal of the asset less the estimated costs of disposal, if the asset were already of the age and in the condition expected at the end of its useful life. The residual value of an asset is nil if the Group expects to use the asset until the end of its physical life. The assets’ residual values and useful lives are reviewed and adjusted if appropriate, at each balance sheet date.

F-68 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

3. Accounting Policies (Continued) (b) Impairment of non-financial assets. The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each balance sheet date to determine whether there is any indication of material impairment. If any such indication exists, recoverable amounts are estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date. The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets that generate cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the ‘‘cash-generating unit’’). The goodwill acquired in a business acquisition, for the purpose of impairment testing, is allocated to cash-generating units that are expected to benefit from the synergies of the combination. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment loss is recognised in the income statement unless it reverses a previous revaluation recognised in equity in which case it is recognised in equity. Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. (c) Dry-docking and special surveys Dry-docking and special survey costs are capitalised and depreciated on a straight-line basis over a period of five years. Any unamortised amounts are derecognised when the next dry dock / special survey occurs or on disposal of the vessel to which the costs relate. (d) Inventories Inventories are stated at the lower of cost, calculated on a weighted average basis, and net realisable value. Inventories comprise bunkers, victualling stocks, stores, spares and materials for construction. Net realisable value is the estimated amount an item could be sold for less any selling expenses. (e) Revenue recognition The Group derives revenue from the following main sources: • ‘‘freight and hire’’ revenue from sea transportation; • agency fees for arranging transportation; • provision of transportation services using own and leased wagons (operators’ business);

F-69 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

3. Accounting Policies (Continued) • revenue from stevedoring services; • revenue from rentals. The Group recognises revenue on an accruals basis at the fair value of the consideration received or receivable. Revenue is presented in the income statement net of VAT and discounts.

Freight and hire Revenue from transportation services rendered is recognised in the income statement in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion is assessed by reference to the number of days completed out of the total estimated number of days in a particular transportation route/charter. Estimated losses on transportation in progress are recognised at the time such losses become evident.

Transportation agency fee In certain cases Group’s subsidiaries act as a legal intermediary for transportation organizations and pay transport fees on behalf of its clients. These fees, which are reimbursed by the Group’s clients, are not included in sales or cost of sales. Consequently, only the Group’s fees for intermediary activities are recognised as sales. Debtors and liabilities that occur in accordance with these activities are recognized as accounts receivable and accounts payable respectively.

Transportation services (operator’s business) The Group also organizes transportation for clients and provides similar services using its own or leased wagons. Normally, a transportation tariff charged by the Russian Railway is recharged to the counterparty (the Company acts as an agent). For this type of activity, the Group’s revenue comprises operator’s fee. The costs of sales for this type of activity generally includes transportation fees charged by transportation organizations for transportation of empty wagons (those are not re-charged to the counterparty), depreciation, repairs and maintenance costs for owned

Revenue from port and stevedoring services Port and stevedoring services represent cargo handling and storage in port and terminal. The revenue is recognised in the income statement in proportion to the stage of completion of the transaction at the balance sheet date. The stage of completion is assessed by reference to the surveys of work performed.

Revenues from rentals Revenue earned by the Group from rentals is recognised on a straight line basis over the term of the rent agreements. (f) Classification of financial assets

Non-derivative financial instruments. Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents, loans and borrowings, and trade and other payables.

F-70 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

3. Accounting Policies (Continued) Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition non-derivative financial instruments are measured as described below. Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable on demand and form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Accounting for finance income and costs is discussed in note 3(v).

Held-to-maturity investments. If the Group has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Held-to-maturity investments are measured at amortised cost using the effective interest method, less any impairment losses.

Available-for-sale financial assets. The Group’s investments in equity securities and certain debt securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, and foreign exchange gains and losses on available-for-sale monetary items recognised directly in equity. When an investment is derecognised, the cumulative gain or loss in equity is transferred to the income statement.

Other. Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. Investments in equity securities that are not quoted on a stock exchange are principally valued using valuation techniques such as discounted cash flow analysis, option pricing models and comparisons to other transactions and instruments that are substantially the same. Where fair value cannot be estimated on a reasonable basis by other means, investments are stated at cost less impairment losses.

Derecognition of financial assets. The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire; or it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. (g) Derivative financial instruments The Group’s activities expose it to the financial risks arising from changes in foreign currency exchange rates and interest rates. The Group uses foreign exchange forward contracts and interest rate swap contracts to hedge these exposures. The Group does not use derivative financial instruments for speculative purposes. All derivative financial instruments are initially recognised at their fair value; attributable transaction costs are recognised in the income statement when incurred. Subsequent to initial recognition, derivatives are measured at fair value. The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in equity. The gain or loss relating to the ineffective portion of designated cash flow hedge, changes in the fair value of designated fair value hedges and changes in the fair value of derivatives which do not meet the criteria for hedge accounting including, instances where sufficient hedge documentation is not available, is recognised in the income statement. Amounts recognised in equity are recycled in the income statement in the period in

F-71 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

3. Accounting Policies (Continued) which the hedged item is recognised in the income statement, in the same line of the income statement as the recognised hedged item. (h) Financial liabilities and equity instruments issued by the Company. Debt and equity instruments are classified as either financial liabilities or as equity instruments in accordance with the substance of the contractual arrangement. An equity instrument is any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities. Equity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs. Financial liabilities are classified as either financial liabilities at Fair Value Through Profit or Loss or ‘‘other financial liabilities’’. Other financial liabilities, including borrowings, are initially measured at fair value, net of transaction costs. Fair value is obtained through discounting future cash flows at the current market interest rate applied to financial instruments with similar terms. Other financial liabilities are subsequently measured at amortised cost using the effective interest method, with interest expense recognised on an effective yield basis. The Company derecognises financial liabilities when, and only when, the Company’s obligations are discharged, cancelled or they expire. (i) Impairment of financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount, and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its fair value. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to the income statement. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in the income statement. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity. (j) Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects. (k) Repurchase of share capital When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, and is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a

F-72 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

3. Accounting Policies (Continued) deduction from total equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to / from retained earnings. (l) Operating leases

Where the Group is a lessee Where a Group is a lessee in a lease which does not transfer substantially all the risks and rewards incidental to ownership from the lessor to the Group, the total lease payments, including those on expected termination, are charged to profit or loss on a straight-line basis over the period of the lease.

Where the Group company is a lessor Assets leased to third parties under operating leases are included in property, plant and equipment in the balance sheet. They are depreciated over their expected useful lives. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term. (m) Finance leases

Where the Group is a lessee Where a Group company is a lessee in a lease which transfers substantially all the risks and rewards incidental to ownership to the Group, the assets leased are capitalised in property, plant and equipment at the commencement of the lease at the lower of the fair value of the leased asset and the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of future finance charges, are included in borrowings. The interest cost is charged to the income statement over the lease period using the effective interest method. Assets acquired under finance leases are depreciated over the shorter of useful life and the lease term if the Group is not reasonably certain that it will obtain ownership by the end of the lease term.

Where the Group is a lessor Assets leased out under finance lease agreements are recognized in the statement of financial position and presented as receivable at an amount equal to the net investment in the lease. The income on the finance lease is recognized as interest income and is based on the pattern reflecting a constant periodic rate of return on the Company’s net investment in the finance lease. (n) Defined contribution plans. A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans, including Russia’s State pension fund, are recognised in the income statement when they are due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

F-73 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

3. Accounting Policies (Continued) (o) Current and deferred tax Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years. Deferred tax assets and liabilities are calculated in respect of temporary differences using the balance sheet liability method. Deferred income taxes are provided for all temporary differences arising between the tax basis of assets and liabilities and their carrying values for financial reporting purposes. A deferred tax asset is recorded only to the extent that it is probable that taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised. Deferred tax assets and liabilities are measured at tax rates that are expected to apply to the period when the asset is realised or the liability is settled, based on tax rates that have been enacted or substantively enacted at the balance sheet date. Deferred tax is not recognised for the following temporary differences: the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit, and differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognised for taxable temporary differences arising on the initial recognition of goodwill. In determining the amount of current and deferred tax the Group takes into account the impact of uncertain tax positions and whether additional taxes, penalties and late-payment interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgments about future events. New information may become available that causes the Group to change its judgment regarding the adequacy of existing tax liabilities; such changes to tax liabilities will impact the tax expense in the period that such a determination is made. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously. (p) Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. (q) Earnings per share The Group presents basic and diluted earnings per share (‘‘EPS’’) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary shares, which comprise convertible notes and share options granted to employees.

F-74 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

3. Accounting Policies (Continued) (r) Goodwill arising on acquisition Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary at the date of acquisition. Goodwill on acquisition of subsidiaries is tested annually for impairment and carried at cost less accumulated impairment losses. Negative goodwill (excess of the fair value of the share in net assets acquired over consideration paid) is recognised in the income statement. Any excess of the consideration paid to acquire a non-controlling interest over the book value of the non-controlling interest is recognised in equity. (s) Other intangible assets Other intangible assets are recognised at cost less accumulated amortisation and impairment losses. Amortisation is charged on a straight line basis over the useful life (generally five years), representing management’s estimate of the period during which the Group is expected to benefit from these assets. (t) Dividends Dividends are recognised as a deduction from equity in the period in which they are approved by the shareholders. (u) Share-based payments The Group has a share option scheme to incentivise certain key members of management (see Note 21 for a fuller description of the scheme). Due to the cash settlement option held by employees, the scheme is treated as creating a liability rather than an equity obligation. The fair value of the options outstanding is estimated by the Group at each balance sheet date using the Black-Scholes option pricing model. For each option granted a liability based over the vesting period is recognised with a corresponding charge to the income statement (employee expenses). (v) Finance income and costs Finance income comprises interest income on funds invested (including available-for-sale financial assets), dividend income, gains on the disposal of available-for-sale financial assets, changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognised as it accrues in the income statement, using the effective interest method. Dividend income is recognised in the income statement on the date that the Group’s right to receive payment is established. Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, dividends on preference shares classified as liabilities, changes in the fair value of financial assets at fair value through profit or loss and impairment losses recognised on financial assets. All borrowing costs are recognised in the income statement using the effective interest method, except to the extent that they relate to acquisition of qualifying assets, in which case they are capitalized in the cost of such assets.

Adoption of new and revised standards and interpretations. A number of new standards and interpretations are not yet effective as of the reporting date, and have not been applied in preparing these consolidated interim financial statements. • IFRS 9 Financial Instruments will be effective for annual periods beginning on or after 1 January 2015. The new standard is to be issued in phases and is intended ultimately to replace International

F-75 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

3. Accounting Policies (Continued) Financial Reporting Standard IAS 39 Financial Instruments: Recognition and Measurement. The first phase of IFRS 9 was issued in November 2009 and relates to the classification and measurement of financial assets. The second phase regarding classification and measurement of financial liabilities was published in October 2010. The remaining parts of the standard are expected to be issued during 2012. The Group recognises that the new standard introduces many changes to the accounting for financial instruments and is likely to have a significant impact on Group’s consolidated financial statements. The impact of these changes will be analysed during the course of the project as further phases of the standard are issued. The Group does not intend to adopt this standard early. • IFRS 10 Consolidated Financial Statements will be effective for annual periods beginning on or after 1 January 2013. The new standard supersedes IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation — Special Purpose Entities. IFRS 10 introduces a single control model which includes entities that are currently within the scope of SIC-12 Consolidation — Special Purpose Entities. Under the new three-step control model, an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with that investee, has the ability to affect those returns through its power over that investee and there is a link between power and returns. Consolidation procedures are carried forward from IAS 27 (2008). When the adoption of IFRS 10 does not result a change in the previous consolidation or non-consolidation of an investee, no adjustments to accounting are required on initial application. When the adoption results a change in the consolidation or non-consolidation of an investee, the new standard may be adopted with either full retrospective application from date that control was obtained or lost or, if not practicable, with limited retrospective application from the beginning of the earliest period for which the application is practicable, which may be the current period. Early adoption of IFRS 10 is permitted provided an entity also early-adopts IFRS 11, IFRS 12, IAS 27 (2011) and IAS 28 (2011). • IFRS 12 Disclosure of Interests in Other Entities will be effective for annual periods beginning on or after 1 January 2013. The new standard contains disclosure requirements for entities that have interests in subsidiaries, joint arrangements, associates and unconsolidated structured entities. Interests are widely defined as contractual and non-contractual involvement that exposes an entity to variability of returns from the performance of the other entity. The expanded and new disclosure requirements aim to provide information to enable the users to evaluate the nature of risks associated with an entity’s interests in other entities and the effects of those interests on the entity’s financial position, financial performance and cash flows. Entities may early present some of the IFRS 12 disclosures early without a need to early-adopt the other new and amended standards. However, if IFRS 12 is early-adopted in full, then IFRS 10, IFRS 11, IAS 27 (2011) and IAS 28 (2011) must also be early-adopted. • IFRS 13 Fair Value Measurement will be effective for annual periods beginning on or after 1 January 2013. The new standard replaces the fair value measurement guidance contained in individual IFRSs with a single source of fair value measurement guidance. It provides a revised definition of fair value, establishes a framework for measuring fair value and sets out disclosure requirements for fair value measurements. IFRS 13 does not introduce new requirements to measure assets or liabilities at fair value, nor does it eliminate the practicability exceptions to fair value measurement that currently exist in certain standards. The standard is applied prospectively with early adoption permitted. Comparative disclosure information is not required for periods before the date of initial application. The impact of these new standards has not been determined by the Group yet.

F-76 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

4. Goodwill

Accumulated impairment Gross amount loss Carrying amount ‘000 USD At 1 January 2010 ...... 243,936 (40,298) 203,638 Translation difference ...... (3,386) — (3,386) At 31 December 2010 ...... 240,550 (40,298) 200,252 Additions (Note 30) ...... 26,425 — 26,425 Translation difference ...... (12,804) — (12,804) At 31 December 2011 ...... 254,171 (40,298) 213,873

Goodwill has been allocated to groups of cash generating units (CGU’s) which represent the lowest level within the Group at which goodwill is monitored by management for internal reporting purposes. The carrying amount of goodwill, net of impairment, allocated to each CGU is as follows:

31 December 31 December 2011 2010 ‘000 USD FIT LLC and its subsidiaries ...... 3,572 3,773 FESCO ESF Limited and its subsidiaries ...... 6,035 6,171 Firm Transgarant LLC and its subsidiaries ...... 68,877 47,282 VKT LLC ...... 135,389 143,026 213,873 200,252

The Group uses discounted cash flow techniques and fair value less costs to sell determined by independent appraisal company to arrive at the recoverable amounts of the cash generating units for the purposes of an impairment testing. The particular key assumptions used in the impairment testing, discount and growth rates for each CGU for the years 2011 and 2010 and were as follows:

Terminal Discount growth 2011 rate rate Key assumptions FIT LLC and its subsidiaries ...... 15.90% 3% Container volume (intermodal transportation and container forwarding services): increase from 127,617 TEU in 2012 to 138,439 TEU in 2016 FESCO ESF Limited and its subsidiaries ...... 11.25% 3% Container volume: increase from 102,216 TEU in 2012 to 125,503 TEU in 2016 VKT LLC ...... 14.92% 3% Throughput of containers: increase from 379,408 TEU in 2012 to 457,837 TEU in 2016 The recoverable amount of Firm Transgarant LLC and its subsidiaries as at 31 December 2011 was determined by reference to its fair value less costs to sell determined by independent appraisal company. Such approach was used due to announced plans to sell non-container railroad business of Firm Transgarant LLC and its subsidiaries (note 35).

F-77 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

4. Goodwill (Continued)

Terminal Discount growth 2010 rate rate Key assumptions FIT LLC and its subsidiaries ...... 15.50% 3% Container volume (intermodal transportation and container forwarding services): increase from 67,345 TEU in 2011 to 79,488 TEU in 2016 FESCO ESF Limited and its subsidiaries ...... 11.41% 3% Container volume: increase from 94,644 TEU in 2011 to 125,503 TEU in 2016 Firm Transgarant LLC and its subsidiaries ...... 14.84% 3% Revenue growth: increase from USD 269 million in 2011 to USD 790 million in 2016 VKT LLC ...... 13.61% 3% Throughput of containers: increase from 287,738 TEU in 2011 to 379,683 TEU in 2016 Recoverable amount for CGU’s exceed carrying values and therefore no impairment was recognised. The table below details sensitivity analysis for each CGU:

Discount rate Impairment loss Revenue Impairment loss ‘000 USD ‘000 USD FIT LLC and its subsidiaries ...... +1% 2% — FESCO ESF Limited and its subsidiaries . . . +1% — 2% — VKT LLC ...... +1% — 2% — The reduction of estimated selling price less costs to sell by 5% would not result in an impairment of Firm Transgarant LLC and its subsidiaries.

5. Other Intangible Assets

Cost Amortisation Net Book Value ‘000 USD At 1 January 2010 ...... 12,974 (5,054) 7,920 Written off ...... (621) — (621) Additions ...... 115 — 115 Charge for the year ...... — (1,683) (1,683) At 31 December 2010 ...... 12,468 (6,737) 5,731 Written off ...... (2,612) — (2,612) Additions ...... 169 — 169 Charge for the year ...... — (1,682) (1,682) At 31 December 2011 ...... 10,025 (8,419) 1,606

Other intangible assets comprise mainly computer software and contract rights acquired from third parties.

F-78 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

6. Fleet

Carrying value 31 December 31 December 31 December 2011 2010 2009 ‘000 USD (a) Fleet ...... 313,783 307,256 339,716 (b) Deferred dry docking expenses ...... 19,552 20,090 18,671 (c) Vessels under construction ...... 48,256 84,259 66,202 381,591 411,605 424,589 Total deadweight tonnage ...... 699,653 704,349 812,359

Valuation Depreciation Net Book Value ‘000 USD At 1 January 2010 ...... 339,716 — 339,716 Depreciation charge for the year ...... — (15,477) (15,477) Disposals ...... (92,693) 2,188 (90,505) Revaluation ...... 60,233 13,289 73,522 At 31 December 2010 ...... 307,256 — 307,256 Depreciation charge for the year ...... — (12,024) (12,024) Disposals ...... (4,543) — (4,543) Revaluation ...... (49,933) 12,024 (37,909) Transfer from Vessels under construction ...... 61,003 — 61,003 At 31 December 2011 ...... 313,783 — 313,783

The Group reviews the carrying value of the fleet on an annual basis. In determining an appropriate carrying value the Company relies on the opinion of expert third party valuers. The valuers determine by reference to recent sales transactions of similar vessels the amount a vessel could be sold for, assuming that the vessel is in a reasonable condition. Management critically reviews the valuation arrived at by the valuers and also produces calculations of value in use based on discounted anticipated future cash flows. The valuation basis utilised implicitly includes the value of dry docking in the overall valuation. Management therefore deduct the net book value of capitalised dry dock from the valuation and account for such dry dock at historical cost less accumulated depreciation. During the year the following vessels were transferred from the shipyard (see Note 6(c)): mv ‘‘FESCO Saratov’’ 57,000 DWT Dry cargo bulk vessel August 2011 mv ‘‘FESCO Simferopol’’ 57,000 DWT Dry cargo bulk vessel November 2011 At 31 December 2011, the estimated scrap value of the Group’s fleet was calculated based on an estimate of USD 455 per LWT (31 December 2010: USD 420). This change in accounting estimate was made in reaction to the increase in international steel prices. This change in accounting estimate resulted in a decrease of depreciation charge for the year ended 31 December 2011 by USD 0.6 million. The fleet includes 21 vessels fully depreciated with an aggregate scrap value of USD 69 million at 31 December 2011 (16 vessels with scrap value of USD 51 million at 31 December 2010). Had the vessels been carried at the historical cost, the carrying amount would have been USD 257 million at 31 December 2011 (31 December 2010 — USD 210 million). The fleet was revalued as at 31 December 2011 by independent professional brokers with reference to the observable market transactions with the comparable vessels. The resulting revaluation decrease of

F-79 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

6. Fleet (Continued) USD 37.9 million has been recognised in the revaluation reserve (USD 3.5 million increase) and the income statement (USD 41.4 million decrease). At 31 December 2011, 20 vessels in the Group’s fleet with a net book value of USD 228 million were insured for hull and machinery risks with western underwriters. Further 25 vessels with a net book value of USD 86 million were insured with Russian underwriters. The total insured value amounted to USD 389 million. 24 vessels with a net book value of USD 253 million are pledged as a security to guarantee the Group’s obligations under ING Bank N.V. Raffaisenbank and Citibank International plc loans (Note 17). Movements during the period on deferred dry docking expenses were:

Cost Depreciation Net Book Value ‘000 USD At 1 January 2010 ...... 36,651 (17,980) 18,671 Additions ...... 9,249 — 9,249 Charge ...... — (7,471) (7,471) Amortised dry dock write off ...... (5,397) 5,397 — Release on disposal of fleet ...... (1,368) 1,009 (359) At 31 December 2010 ...... 39,135 (19,045) 20,090 Additions ...... 6,930 — 6,930 Charge for the year ...... — (8,129) (8,129) Amortised dry dock write off ...... (3,409) 3,409 — Release on disposal of fleet ...... (1,205) 766 (439) Transfer from Vessels under construction ...... 1,100 — 1,100 At 31 December 2011 ...... 42,551 (22,999) 19,552

Movements during the period on vessels under construction were:

31 December 31 December 2011 2010 ‘000 USD At 1 January 2010 ...... 84,259 66,202 Expenditure incurred during the year ...... 24,552 51,067 Capitalised borrowing costs ...... 1,697 1,453 Transferred to fleet during the year ...... (62,103) — Impairment ...... (149) (34,463) At 31 December 2011 ...... 48,256 84,259

Details of the Group’s commitments in respect of vessels under construction are given in Note 32(a).

F-80 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

7. Rolling Stock

Cost Depreciation Net Book Value ‘000 USD At 1 January 2010 ...... 409,133 (75,940) 333,193 Correction of the cost of tangible fixed assets ...... 6,986 — 6,986 Additions in the year ...... 14,061 — 14,061 Depreciation charge for the year ...... — (31,594) (31,594) Disposals ...... (3,568) 1,325 (2,243) Translation difference ...... (5,715) 2,193 (3,522) At 31 December 2010 ...... 420,897 (104,016) 316,881 Correction of the cost of tangible fixed assets ...... 2,211 — 2,211 Additions ...... 200,898 — 200,898 Addition on acquisition ...... 55,353 — 55,353 Depreciation charge ...... — (40,083) (40,083) Disposals ...... (3,156) 1,861 (1,295) Translation difference ...... (37,175) 7,870 (29,305) At 31 December 2011 ...... 639,028 (134,368) 504,660

Rolling stock includes assets held under finance leases with a net book value of USD 153 million (at 31 December 2010 — USD 48 million). At 31 December 2011 rolling stock with a carrying amount of USD 219 million (31 December 2010 — USD 133 million) are subject to registered debenture to secure bank loans (Note 17). As at 31 December 2011 rolling stock with a net book value of USD 351 million was insured with Russian insurance companies. The total insured value is USD 539 million (at 31 December 2010 — USD 265 million with a net book value of USD 176 million).

8. Other Tangible Fixed Assets

Plant, Buildings and Machinery Assets under Cost Infrastructure and Other construction Total ‘000 USD At 1 January 2010 ...... 70,970 145,613 2,237 218,820 Additions ...... 14,487 11,748 7,749 33,984 Transfer ...... 1 102 (103) — Disposals ...... (3) (5,468) — (5,471) Translation difference ...... (3,141) (1,016) (87) (4,244) At 31 December 2010 82,314 150,979 9,796 243,089 Additions ...... 865 18,113 23,632 42,610 Addition on acquisition ...... 209 131 — 340 Reclass ...... 329 (1,084) 16 (739) Transfer ...... 2,420 1,796 (4,216) — Disposals ...... (447) (4,611) (707) (5,765) Impairment ...... (3,545) — (1,497) (5,042) Translation difference ...... (3,409) (4,489) (1,983) (9,881) At 31 December 2011 ...... 78,736 160,835 25,041 264,612

F-81 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

8. Other Tangible Fixed Assets (Continued)

Plant, Buildings and Machinery Assets under Cost Infrastructure and Other construction Total ‘000 USD Depreciation At 1 January 2010 ...... 18,251 60,425 — 78,676 Depreciation charge for the year ...... 2,538 14,054 — 16,592 Eliminated on disposal ...... — (4,542) — (4,542) Translation difference ...... (24) (529) — (553) At 31 December 2010 ...... 20,765 69,408 — 90,173 Addition on acquisition ...... 29 45 — 74 Depreciation charge for the year ...... 3,537 16,278 — 19,815 Eliminated on disposal ...... (341) (3,692) — (4,033) Translation difference ...... (462) (1,974) — (2,436) At 31 December 2011 ...... 23,528 80,065 — 103,593 Net Book Value At 1 January 2010 ...... 52,719 85,188 2,237 140,144 At 31 December 2010 ...... 61,549 81,571 9,796 152,916 At 31 December 2011 ...... 55,208 80,770 25,041 161,019

Plant, machinery and other fixed assets include containers held under finance lease with a net book value of USD 18 million (at 31 December 2010 — USD 23 million) and plant and mashinery with a net book value of USD 3.5 million (at 31 December 2010 — nil). At 31 December 2011 fixed assets with a carrying amount of USD 22 million (31 December 2010 — USD 11 million) are pledged as a security to guarantee the Group’s loan obligations (Note 17).

9. Investments in Associates and Joint Ventures Equity accounted investments represent investments in joint ventures and associates.

Country of Percentage Name incorporation Holding Activity ‘‘M-Port’’ (Commercial Port of Vladivostok) ...... Russia 50% Commercial Port Intermodal Container ‘‘Russkaya Troyka’’ ...... Russia 50% Operations Technical, crewing and safety management FESCO Wallem Shipmanagement Limited ...... Hong Kong 50% services provider Trans Russia Agency Japan Co. Ltd ...... Japan 50% Agency services International Paint (East Russia) Limited ...... Hong Kong 49% Ship Paint Production ‘‘SHOSHTRANS’’ JVCSC ...... Uzbekistan 25% Forwarding services MB — Fesco Trans ...... Cyprus 49% Forwarding services Transorient Shipping Co., Ltd .... South Korea 49% Maritime general agency FESCO BLG Automobile Logistics Russia Limited ...... Cyprus 50% Agency stevedoring services

F-82 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

9. Investments in Associates and Joint Ventures (Continued) Movements in joint ventures and associated companies consolidated on an equity basis are as follows:

31 December 31 December 2011 2010 ‘000 USD Balance as at 1 January ...... 100,634 100,883 Share of results of equity accounted investees ...... 6,715 5,920 Additions ...... 4,765 1,644 Dividends paid ...... 4,254 2,875 Dividends received ...... (1,357) (9,921) Translation differences ...... (9,744) (767) Balance as at 31 December ...... 105,267 100,634

50% shareholding of FESCO BLG Automobile Logistics Russia Limited, agency stevedoring company, was acquired by the Group in December 2011 for total cash consideration of USD 4.8 million. Summary financial information for equity-accounted investees, not adjusted for the percentage ownership held by the Group:

Reporting Current Non-current Total Current Non-current Total Profit/ date assets assets assets liabilities liabilities liabilities Income Expenses (loss) ‘000 USD 2011 M-Port (joint venture) . . . 31 December 42,659 143,428 186,087 17,722 40,257 57,979 148,209 (142,568) 5,641 Russkaya Troyka (joint venture) ...... 31 December 12,408 48,978 61,386 6,544 24,253 30,797 22,640 (18,195) 4,445 Fesco Wallem (joint venture) ...... 31 December 2,261 69 2,330 1,860 — 1,860 2,664 (2,622) 42 Trunsrussia agency (joint venture) ...... 31 December 5,145 43 5,188 4,993 157 5,150 2,484 (2,480) 4 International Paint (associate) ...... 31 December 3,547 32 3,579 2,437 — 2,437 15,207 (12,224) 2,983 Shoshtrans (associate) . . 31 December 4,596 399 4,995 2,697 — 2,697 352 (161) 191 Transorient (associate) . . 31 December 5,129 517 5,646 4,091 74 4,165 2,369 (2,612) (243) MB — Fesco Trans (associate) ...... 31 December 4,439 128 4,567 1,099 — 1,099 8,261 (7,759) 502 FESCO BLG (joint venture) 31 December 1,723 — 1,723 474 — 474 — — — 81,907 193,594 275,501 41,917 64,741 106,658 202,186 (188,621) 13,565

2010 M-Port (joint venture) . . . 31 December 5,060 164,837 169,897 1,789 32,963 34,752 109,040 (93,660) 15,380 Russkaya Troyka (joint venture) ...... 31 December 6,798 55,478 62,276 6,427 27,821 34,248 12,090 (16,075) (3,985) Fesco Wallem (joint venture) ...... 31 December 1,167 100 1,267 838 — 838 2,575 (2,422) 153 Trunsrussia agency (joint venture) ...... 31 December 3,592 43 3,635 3,331 134 3,465 2,188 (2,393) (205) International Paint (associate) ...... 31 December 2,979 45 3,024 2,094 — 2,094 10,453 (8,099) 2,354 Shoshtrans (associate) . . 31 December 3,331 520 3,851 2,217 — 2,217 1,044 (1,144) (100) Transorient (associate) . . 31 December 5,347 512 5,859 4,191 — 4,191 2,097 (2,572) (475) MB — Fesco Trans (associate) ...... 31 December 4,295 155 4,450 1,239 — 1,239 4,774 (4,635) 139 32,569 221,690 254,259 22,126 60,918 83,044 144,261 (131,000) 13,261

Goodwill in amount of USD 22 million related to VMTP and FESCO BLG is included into the investments in associates and joint ventures.

F-83 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

10. Other equity investments

31 December 31 December 2011 2010 ‘000 USD (a) Investments available-for-sale ...... 196,854 162,979 (b) Other investments ...... 2,225 2,063 199,079 165,042

Investments available for sale are comprised of 18.5% shares and Global Depository Receipts (GDR) of TransContainer OJSC. As at the year end the fair value of investments in OJSC TransContainer was determined by reference to the quotations of shares and GDRs on the relevant stock exchange of USD 75/share and USD 7.8/GDR respectively. The resulting fair value of the shares was 19.9% lower than the cost of acquisition of such shares. Given the historically significant volatility of these shares and the increase in the fair value subsequent to the balance sheet date by more than 30%, management believes that the investments are not impaired at the balance sheet date. In July 2011 the Group entered into Repurchase Agreement (REPO) with ING Bank N.V. The Group has pledged 5,210,540 Global Depositary Receipts and 1,166,690 ordinary shares of TransContainer OJSK as a security for a short term loan to the total amount of USD 84 million.

11. Other Non-Current Assets

31 December 31 December 2011 2010 ‘000 USD Prepayment for investment, at cost ...... 292,935 — Non-current portion of finance lease receivable, at amortized cost ..... 6,787 8,636 Long term bank deposit, at cost ...... 1,944 3,361 Prepayments for fixed assets, at cost ...... 3,865 12,879 Other long term prepayments, at cost ...... 2,577 2,291 Long term loan to related party, at cost ...... 1,575 2,660 Other non-current assets ...... 3,610 894 313,293 30,721

Prepayments for investments represent prepayment for 2.6% of share capital of TransContainer OJSC in a form of Global Depository Receipts (GDR) to the total amount of USD 46.4 million and 100% of shares of Transportnaya Companiya CJSK, which main asset is 47.78% shares in Commercial Port of Vladivostok, to the total amount of USD 246.5 million. Prepayments for fixed assets represent prepayments for equipment. The Group leases railroad platforms to one of its joint ventures. The lease agreement provides for ownership transfer of assets to the lessee at the end of the lease term for nominal consideration. The contractual interest rate on the platforms leased is 13.2%.

F-84 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

11. Other Non-Current Assets (Continued) Lease receivables as at 31 December are scheduled as follows:

31 December 2011 31 December 2010 Present value Minimum Present value Minimum lease of minimum lease of minimum payments lease payments payments lease payments ‘000 USD ‘000 USD Within one year ...... 2,895 1,851 2,231 740 Two to five years ...... 8,187 6,787 11,082 8,636 11,082 8,638 13,313 9,376 Less: future finance charges ...... (2,444) (3,937) Present value of lease obligations ...... 8,638 9,376 Less current portion ...... (1,851) (740) Non-current portion ...... 6,787 8,636

12. Inventories

31 December 31 December 2011 2010 ‘000 USD Bunkers ...... 16,661 13,975 Stores and spares ...... 4,047 3,851 Victualing ...... 371 426 Other stocks and raw materials ...... 4,063 3,089 25,142 21,341

13. Accounts Receivable

31 December 31 December 2011 2010 ‘000 USD Trade debtors ...... 66,277 66,298 VAT receivable ...... 48,289 45,258 Receivable from KUKE ...... — 1,100 Prepayments to OJSC ‘‘Russian Railways’’ ...... 18,683 18,944 Amounts due from associates and joint ventures ...... 4,393 5,213 Amounts due from non-consolidated subsidiaries ...... 23 782 Other debtors and prepayments ...... 71,949 41,544 Allowance for impairment ...... (31,425) (31,851) 178,189 147,288

F-85 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

14. Other Current Assets

31 December 31 December 2011 2010 ‘000 USD Loans and promissory notes issued to related parties, at cost ...... — 1,354 Short term finance lease receivable, at amortized cost ...... 1,851 740 Short term portion of interest rate swap, at fair value ...... 20 66 Short term bank deposit, at cost ...... 6,242 — 8,113 2,160

15. Cash and Cash Equivalents

31 December 31 December 2011 2010 ‘000 USD Bank accounts and cash in hand ...... 227,235 554,305 Restricted deposits ...... 4,341 1,983 231,576 556,288

16. Accounts Payable

31 December 31 December 2011 2010 ‘000 USD Trade creditors ...... 36,542 36,535 Fair value of interest swap contracts (Note 31) ...... 10,585 11,625 Taxes payable, other than income tax ...... 7,290 4,805 Interest payable ...... 3,119 1,539 Amounts due to associates and joint ventures ...... 2,447 2,587 Amounts due to non-consolidated subsidiaries ...... 141 — Other creditors and accruals ...... 68,437 41,406 128,561 98,497

17. Loans Payable and Finance Leases Obligations (a) Loans payable 31 December 31 December 2011 2010 ‘000 USD Loans and other obligations comprise: Secured loans At fixed rate 0.3%–5% ...... 43,419 52,993 At fixed rate 5%–10% ...... 253,903 43,892 At fixed rate 10%–15% ...... — 248 At variable rates 0.25%–5% above Libor/Euribor/Mosprime ...... 257,259 202,868 At variable rates 5%–9.5% above Libor/Euribor/Mosprime ...... — 52,611 554,581 352,612

F-86 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

17. Loans Payable and Finance Leases Obligations (Continued)

31 December 31 December 2011 2010 ‘000 USD Unsecured loans At fixed rate 9.5%–11% ...... — 26,249 — 26,249 Obligations under finance leases at fixed rate 6% ...... 20,826 25,001 Obligations under finance leases at fixed rate 7.7%–18.3% ...... 122,042 21,275 142,868 46,276 697,449 425,137 Repayable within the next twelve months ...... 198,938 122,391 Long term balance ...... 498,511 302,746 697,449 425,137

For currency and maturity analysis of loans and other obligations see Note 33. Fixed assets pledged as a security for loans are disclosed in Notes 6, 7, 8. The Group was in compliance with covenants as at 31 December 2011.

(b) Finance Leases obligations The Group partially finances the purchase of wagons and containers through leasing and sale-leaseback transactions with leasing companies. All the lease agreements provide for ownership transfer of assets to the Group at the end of the lease terms for a nominal consideration. The Group’s finance leases mainly relate to acquisition of containers and railroad platforms. The average effective interest rate on the wagon lease liability is 13% (2010: 14.35%) and on the container lease liability it is 6%. Minimum lease payments and future interest element are estimated based on the rates applicable to each individual lease contract. Lease payments as at reporting date are scheduled as follows:

31 December 2011 31 December 2010 Present value Present value Minimum lease of minimum Minimum lease of minimum payments lease payments payments lease payments ‘000 USD ‘000 USD Within one year ...... 37,919 20,666 13,806 9,984 Two to five years ...... 145,867 109,622 39,508 30,212 Over five years ...... 14,029 12,580 6,962 6,080 197,815 142,868 60,276 46,276 Less: future finance charges ...... (54,947) (14,000) Present value of lease obligations . . . 142,868 46,276 Less current portion ...... (20,666) (9,984) Non-current portion ...... 122,203 36,292

F-87 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

18. Other Non-Current Liabilities

31 December 31 December 2011 2010 ‘000 USD Fair value of interest rate swap (Note 31) ...... 21,411 21,072 Defined benefit obligations ...... 1,642 832 Share based payments (Note 21) ...... 3,903 4,690 Other non-current payables ...... 180 691 27,136 27,285

19. Current and Deferred Tax Companies within the Group are subject to taxation in different jurisdictions. The most significant tax expense arises in entities incorporated in the Russian Federation.

31 December 31 December 2011 2010 ‘000 USD Current tax expense Current period ...... 28,952 20,592 Adjustment for prior periods ...... — (1,129) 28,952 19,463 Deferred tax expense Origination and reversal of temporary differences ...... 953 1,434 953 1,434 Total income tax expense ...... 29,905 20,897

Reconciliation of effective tax rate:

31 December 31 December 2011 2010 ‘000 USD % ‘000 USD % Profit before income tax ...... 59,042 100 476,765 100 Income tax at applicable tax rate of 20% (2010: 20%) ...... 11,808 20 95,353 20 Effect of income taxed at (lower)/higher rates ...... 9,177 16 (78,539) (16) Income tax on intra group dividends ...... — — 525 0 Non-deductible temporary differences, net ...... 6,824 11 6,625 0 Under/(over) provided in prior periods ...... — — (1,129) 0 Change in unrecognised deferred tax asset ...... 2,096 4 (1,938) 0 29,905 51 20,897 4

The Group’s deferred tax liability mainly arises in entities incorporated in Russia and the effect of deferred taxation in other jurisdictions is not material.

F-88 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

19. Current and Deferred Tax (Continued) Movements in temporary differences were the following:

(Charge)/ Charge Balance release to to equity Balance 1 January income for Addition on Translation for the 31 December 2011 the year acquisition differences year 2011 ‘000 USD Vessels ...... (17,086) 4,186 — — (878) (13,778) Deferred dry docking ..... (2,460) 798 — — — (1,662) Other fixed assets ...... (26,925) (20,781) (7,903) 4,019 — (51,590) Assets under construction . . 78 594 — (43) — 629 Inventories ...... 50 (175) — — — (125) Accounts receivable ...... 2,387 1,262 240 (259) 3,630 Accounts payable ...... 4,336 16,302 4,692 (2,099) — 23,231 Provisions, accruals and deferred income ...... 1,064 352 — (56) — 1,360 Other ...... (49) (64) — 2 — (111) Tax loss carry-forwards .... 5,618 (3,427) 1,841 (162) — 3,870 (32,987) (953) (1,130) 1,402 (878) (34,546)

Balance (Charge)/ Charge 1 January release to to equity Balance 2010 income for Translation for the 31 December (Restated) the year differences year 2010 ‘000 USD Vessels ...... (14,913) (1,049) — (1,124) (17,086) Deferred dry docking ...... (2,314) (146) — — (2,460) Other fixed assets ...... (31,974) 6,378 68 (1,397) (26,925) Assets under construction ...... 321 (243) — — 78 Inventories ...... 26 29 (5) — 50 Accounts receivable ...... 6,520 (4,097) (36) — 2,387 Accounts payable ...... 6,415 (2,049) (30) — 4,336 Provisions, accruals and deferred income ...... 734 519 (189) — 1,064 Other ...... (93) (27) 71 — (49) Tax loss carry-forwards ...... 6,415 (749) (48) — 5,618 (28,863) (1,434) (169) (2,521) (32,987)

Unrecognized deferred tax asset The Group has unrecognized DTA at the amount of USD 4.1 million as of 31 December 2011 (31 December 2010: USD 2.3 million).

Unrecognised deferred tax liability A temporary difference of USD 152 million relating to investments in subsidiaries and joint ventures has not been recognised as the Group is able to control the timing of reversal of the difference, and reversal is not expected in the foreseeable future.

F-89 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

20. Shareholders’ Equity

31 December 31 December 2011 2010 ‘000 USD Authorised number of shares (1 Rouble per share) ...... 3,643,593,000 3,643,593,000 Issued number of shares ...... 2,951,250,000 2,951,250,000 Share capital (‘000 USD) ...... 57,230 57,230

As at 30 December 2011 and 31 December 2010 the Group held 393,705,807 of its own shares which were purchased for USD 336 million, being approximately 13% of the shares in issue.

31 December 31 December 2011 2010 Number of shares Treasury shares held by: Far Eastern Shipping Company PLC ...... 55,783 55,783 Neteller Holdings Limited ...... 393,650,024 393,650,024 393,705,807 393,705,807

157 million of treasure shares are loaned to related party for a fee in the amount of 0.3% per annum of the market value of the shares. The shares were returned to the Group subsequent to the balance sheet date.

21. Share-Based Payments In January 2011, the Board of Directors of the Company took a decision to grant additional share options within share option program of the Group, resulting an increase in a number of share options to 71,643,593 shares. Exercise price is established at USD 0.32–0.456 at the expiry period of 3.5 years. The Group’s obligations may be settled in shares or in cash at the choice of the employee. Vesting of the options is subject to the individuals concerned remaining employees at the end of the specified period, although leavers may have a pro-rata entitlement. The employees are not required to achieve any other non-market or market based performance conditions. The accumulated liability from recognised grants amounts to USD 3.9 million (31 December 2010 — USD 4.7 million). The fair values of options granted under the Group’s share option scheme were calculated at the period end using a Black-Scholes option pricing model with the following key assumptions:

2011 2010 Stock price, USD ...... 0.27 0.54 Exercise price, USD ...... 0.32–0.456 0.32 Risk-free rate ...... 0.25%–0.31% 1.02% Volatility ...... 87.30%–91.56% 137.50% Time to expiration ...... 1.9–2.5 years 3 years Fair value of share based payments at grant date was USD 5 million. The stock price was obtained from Russian Trading System (RTS) data on the balance sheet date. The risk-free rate is based on an estimate of returns on US two-four year Treasury bonds. Volatility is based upon historical record of share price with reference to the period of time from the reporting date to expected exercise date ranging from 1.9 to 2.5 years. The method corresponds to level 3 of the hierarchy of determination of the fair values.

F-90 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

21. Share-Based Payments (Continued) The variables set out above resulted in a value per option of 11.28 cents. This value is sensitive to changes in volatility. An increase in the assumed volatility to 200% will result in an increase in price to 22.05 cents. A decrease to 50% volatility will result in a decrease of price by 5.43 cents. The movement in options to subscribe for shares under the Group’s share option scheme is shown in the table below.

2011 2010 Weighted average Weighted average Number of exercise price, Number of exercise price, share option USD share option USD Outstanding at 1 January ...... 54,643,593 0.32 27,941,076 0.5385 Granted during the year ...... 17,000,000 0.40 54,643,593 0.32 Forfeited during the year ...... — — 27,941,076 0.5385 Outstanding at 31 December ...... 71,643,593 0,339 54,643,593 0.32 Options granted to 17 directors and senior executives were outstanding at 31 December 2011. The scheme is funded by shares held by a Group company (Note 20).

22. Business Segmental Analysis For management purposes, the Group is organised into four major operating divisions — shipping, liner and logistics, railway services and ports. The Group also includes certain companies that cannot be allocated to a specific division; these include investing and managing companies. These divisions are the basis on which the Group reports its operating segment information. The services provided by each of these divisions are as follows:

Shipping The shipping division is involved in ship ownership, ship management, chartering out and provision of agency services. These activities are carried out on a cabotage, cross trade and import-export basis. The vessels operated by the shipping division are largely container vessels and bulk carriers. Liner and Logistics The Liner and logistics division operates liner services and provides Railway Services freight forwarding services both for containers and break-bulk cargoes. The railway services division provides services both as an operator and an agent. When acting as an operator it renders services for containerised and bulk cargoes using locomotives, railway wagons, hoppers, steel-pellet wagons and tank wagons owned by the division or leased by it under finance leases. In addition it uses rolling stock hired on short term operating leases. Ports The ports division owns and operates port facilities and container terminals in Russia and provides cargo handling, stevedoring, container storage and rental and related port services and facilities. Segmental reporting information is submitted to management of the Group on a regular basis as part of the management reporting process. It is used to assess the efficiency of the segments and to take decision on the allocation of resources.

F-91 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

22. Business Segmental Analysis (Continued) Segment information for the main reportable segments of the Group for the period ended 31 December 2011 is set out below.

Liner and Railway Eliminations/ Shipping Logistics services Ports Corporate Adjustments Total ‘000 USD External sales ...... 114,726 564,030 301,106 48,893 — — 1,028,755 Inter-segment sales ...... 44,818 2,513 6,847 28,134 — (82,312) — Segment revenue ...... 159,544 566,543 307,953 77,027 (82,312) 1,028,755 Total segment operating expenses ...... (154,299) (518,364) (173,688) (28,697) (30,860) 92,892 (813,016) Segment result ...... 5,245 48,179 134,265 48,330 (30,860) 10,580 215,739 Segment non-cash items: Depreciation and amortization ...... (23,097) (11,997) (41,121) (4,228) (1,290) — (81,733) Impairment reversal on tangible fixed assets .... (41,573) — — (5,042) — — (46,615) Bad debt (charge)/release . . (2,257) 553 (1,498) (222) (2,898) — (6,322) Other material items of income/expense: (Loss)/profit on disposal of tangible fixed assets .... — 1,034 (1,022) (324) — (312) Interest expense, share of profit/(loss) of associates and income tax expense: Interest expense ...... (8,309) (2,703) (35,117) (751) (5,537) 7,296 (45,121) Share of profit/(loss) of equity accounted investees ...... 1,483 190 2,222 2,820 — — 6,715 Income tax expense ...... 761 (9,343) (13,237) (8,312) 226 — (29,905) Segment information for the main reportable segments of the Group for the year ended 31 December 2010 is set out below.

Liner and Railway Eliminations/ Shipping Logistics services Ports Corporate Adjustments Total ‘000 USD External sales ...... 132,320 428,091 205,738 34,442 — — 800,591 Inter-segment sales ...... 27,417 2,183 2,889 24,320 — (56,809) — Segment revenue ...... 159,737 430,274 208,627 58,762 — (56,809) 800,591 Total segment operating expenses ...... (143,338) (366,323) (152,329) (24,281) (23,522) 66,832 (642,961) Segment result ...... 16,399 63,951 56,298 34,481 (23,522) 10,023 157,630 Segment non-cash items: Depreciation and amortization (25,217) (10,548) (32,181) (3,490) (1,381) — (72,817) Impairment reversal on tangible fixed assets ..... 38,644 — — — — — 38,644 Bad debt (charge)/release . . . (1,747) (2,264) 117 (61) (167) — (4,122)

F-92 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

22. Business Segmental Analysis (Continued)

Liner and Railway Eliminations/ Shipping Logistics services Ports Corporate Adjustments Total ‘000 USD Other material items of income/expense: Profit on disposal of available-for-sale investments ...... ————419,918 — 419,918 (Loss)/profit on disposal of tangible fixed assets ..... (4,855) 1,579 (2,075) 11 101 — (5,239) Interest expense, share of profit/(loss) of associates and income tax expense: Interest expense ...... (16,083) (2,807) (25,699) (329) (26,825) 17,770 (53,973) Share of profit/(loss) of equity accounted investees ..... 1,103 (78) (2,795) 7,690 — — 5,920 Income tax expense ...... (3,054) (7,699) (2,192) (7,774) (178) — (20,897)

Segmental assets and liabilities

Assets Liabilities 31 December 31 December 31 December 31 December 2011 2010 2011 2010 ‘000 USD Shipping (Global) ...... 561,363 635,101 249,732 241,569 Liner and logistics (Global) ...... 185,723 172,993 87,988 73,316 Railway services (Russia) ...... 681,290 435,410 425,874 224,030 Stevedoring services (Russia) ...... 439,933 145,624 19,213 17,774 Total of all segments ...... 1,868,309 1,389,128 782,807 556,689 Goodwill ...... 213,873 200,252 — — Other items not attributable to a specific segment ...... 250,956 523,934 109,427 29,331 Consolidated ...... 2,333,138 2,113,314 892,234 586,020

Other segmental information

Acquisition of Investments in equity segment assets accounted investees 31 December 31 December 31 December 31 December 2011 2010 2011 2010 ‘000 USD Shipping (Global) ...... 35,901 82,032 1,121 1,074 Liner and logistics (Global) ...... 6,054 3,580 7,280 2,350 Railway services (Russia) ...... 332,062 14,876 15,294 14,014 Stevedoring services (Russia) ...... 276,120 7,987 81,572 83,196 650,137 108,475 105,267 100,634

F-93 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

23. Revenue

2011 2010 ‘000 USD Transportation services (operators’ business) ...... 814,211 607,913 Hire and freight ...... 114,702 132,320 Port and stevedoring services ...... 48,559 34,436 Revenue from rentals ...... 39,235 16,739 Agency fees ...... 12,048 9,183 1,028,755 800,591

24. Operating Expenses

2011 2010 ‘000 USD Railway infrastructure tariff and transportation services ...... 444,066 319,611 Voyage and vessel running cost ...... 110,726 92,935 Payroll expenses ...... 62,196 52,249 Stevedoring services ...... 7,659 11,296 Operating lease ...... 47,579 60,003 Non-profit based taxes ...... 7,599 8,130 679,825 544,224

25. Administrative Expenses

2011 2010 ‘000 USD Salary and other staff related costs ...... 86,315 54,648 Professional fees ...... 7,766 12,174 Office rent ...... 8,113 6,468 Other administrative expenses ...... 30,997 25,447 133,191 98,737

Salary and other staff related costs include share based payment release in amount of USD 0.8 million (2010: USD 3 million release).

26. Other Finance Income and Costs

2011 2010 ‘000 USD Interest income ...... 12,354 6,648 Changes in fair value of financial instruments ...... (10,800) (19,707) Other expenses ...... (203) (836) 1,351 (13,895)

F-94 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

27. Loss on Disposal of Tangible Fixed Assets

2011 2010 ‘000 USD Loss on sale of vessels ...... (837) (5,182) Gain/(loss) on disposal of other fixed assets ...... 525 (57) (312) (5,239)

28. Reversal of/(Impairment loss) on Tangible Fixed Assets

2011 2010 ‘000 USD Fleet impairment (charge)/reversal (Note 6) ...... (41,424) 73,107 Impairment of vessels under construction (Note 6) ...... (149) (34,463) Impairment of other fixed assets and assets under construction (note 8) ...... (5,042) — (46,615) 38,644

29. Profit per Share Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the year, excluding those held by Group companies. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive ordinary shares. These represent share options granted to management.

31 December 31 December 2011 2010 USD Profit for the year ...... 19,253,000 449,352,000 Weighted average number of shares in issue (note 20) ...... 2,557,544,193 2,557,544,193 Basic profit per share ...... 0.008 0.176

31 December 31 December 2011 2010 USD Profit for the period, adjusted for stock option expense ...... 18,466,861 452,445,000 Weighted average number of shares in issue, adjusted for stock options (note 21) ...... 2,537,879,704 2,579,564,745 Diluted profit per share ...... 0.008 0.175

Since the exercise of the option results in anti-dilutive effect the diluted earnings per share equal to basic ones.

F-95 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

30. Acquisitions of Subsidiary On 07 July 2011 the Group obtained control over MetizTrans Group railway operator by acquiring 100% of shares and voting interests in OOO MetizTrans, OOO Investconsulting and OOO TEK MetizTrans. The acquisition was made from a member of management of the Group. In the six months period to 31 December 2011 MetizTrans Group contributed revenue of USD 19 million and profit of USD 4 million to the Group results. It was not practicable to estimate what consolidated revenue and consolidated result for the year would have been if the acquisition of MetizTrans Group had occurred on 1 January 2011 since the acquired companies did not prepare consolidated financial statements. The acquisition of the subsidiary had the following effect on the Group’s assets and liabilities at the date of acquisition:

Recognised fair values on acquisition ‘000 USD Non-current assets Property, plant and equipment ...... 55,619 Current assets Inventories ...... 384 Trade and other receivables ...... 11,377 Cash and cash equivalents ...... 3,827 Non-current liabilities Loans and borrowings ...... (10,210) Finance lease liability ...... (26,239) Deferred tax liabilities ...... (1,130) Current liabilities Loans and borrowings ...... (1,036) Finance lease liability ...... (2,054) Trade and other payables ...... (7,746) Net identifiable assets ...... 22,792 Goodwill ...... 26,425 Consideration paid ...... 49,217 Cash acquired ...... 3,827 Net cash outflow in the cash flow statement ...... 45,390

Subsequent to the balance sheet date, the Group decided to sell its non-container railroad business (note 35).

F-96 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

31. Derivatives To manage its exposure to variability in cash flows arising from interest rate and exchange rate fluctuations, the Group uses a number of derivative financial instruments:

31 December 2011 31 December 2010 Derivative Derivative Derivative Derivative assets liabilities assets liabilities ‘000 USD ‘000 USD Non-current Interest rate swaps ...... — (19,709) 24 (17,530) Cross currency interest rate swaps ...... — (1,702) — (3,542) — (21,411) 24 (21,072) Current Interest rate swaps ...... 20 (8,886) 66 (8,062) Cross currency interest rate swaps ...... — (1,699) — (3,563) 20 (10,585) 66 (11,625) 20 (31,996) 90 (32,697)

As at 31 December 2011, the Group held a number of interest rate swap contracts for hedging the interest rate risk, namely: • Interest rate swap contracts with VTB intended for hedging the interest rate risk arising from external borrowings. The contracts to swap Libor against fixed rates vary from 3.62% to 6.04% per annum with maturities on 1 May 2012, 29 September 2013, 31 January 2016, 30 October 2022 and 30 December 2022. Notional amount of hedged facilities equals to USD 114.2 million (2010: USD 129.2 million); • Interest rate swap contracts with Citibank. The swap contracts set out Libor floor rate and cap rate at 4.70% and 5.95% respectively. The Group is required to make payment to Citibank when Libor is below the floor rate and receive payment when Libor exceeds the cap rate. Maturity date of the agreement is 30 June 2022 and 30 September 2022. Notional amount of hedged facilities equals to USD 61 million (2010: USD 67 million); • Interest rate swap contracts with international bank: the contracts swap Libor 3M against fixed rate of 2.64% with the maturity date during 2013. Notional amount of hedged facilities equals to USD 53.8 million (2010: USD 68 million). Additionally, the Group has entered into cross currency interest rate swap contract with Merrill Lynch Bank, intended for hedging the exchange rate and interest rate risks. In accordance with the swap contract terms, the company pays 3-month London Interbank Offered Rate (‘‘Libor’’) + 4.35% and 3-month Libor + 4.05% in United States Dollars in exchange for 3-month Mosprime + 2.85% and 3-month Mosprime + 3.15% in Russian Roubles. The agreement is valid for the period from 20 June 2008 to 5 September 2012. Notional amount of hedged facilities equals to USD 15.6 million (2010: USD 36.1 million). The management considered that these financial instruments do not meet all the required characteristics of hedge accounting and all changes in the fair value of derivatives are recognised in the income statement. The fair value of swap is determined by brokers using financial models which correspond to level ‘‘2’’ of the hierarchy of the fair values. For maturity analysis of cash flows hedges see Note 33. The fair value of the swaps equals their book values.

F-97 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

32. Contingencies and Commitments (a) Capital commitments The Group’s commitments which mainly relate to new buildings fall due as follows:

31 December 31 December 2011 2010 ‘000 USD In one year ...... 8,744 42,746 Total outstanding commitment ...... 8,744 42,746

At 31 December 2011 the Group has no other capital commitment (2010: USD 6.6 million for acquisition of rolling stock). (b) Operating lease commitments — where a Group company is the lessee The Group leases rolling stock, berths and office premises under non-cancellable lease agreements. As at the year end all non-cancellable operating lease agreements are for a period of less than 12 months with renewal options. At 31 December 2011, the Group had the following outstanding commitments under non-cancellable operating leases.

31 December 31 December 2011 2010 ‘000 USD Within one year ...... 21,422 22,019 In two to five years ...... 19,879 11,963 41,301 33,982

(c) Operating lease commitments — where a Group company is the lessor Operating lease proceeds receivable by the Group under a non-cancellable operating lease contract (including long-term time charter) are as follows:

31 December 31 December 2011 2010 ‘000 USD Within one year ...... 15,906 21,842 15,906 21,842

(d) Taxation contingencies The Group operates in several jurisdictions with significantly different taxation systems. Management believes that the Group’s shipping and holding companies incorporated in foreign jurisdictions are not subject to taxes outside their countries of incorporation. However, there is a risk that the taxation authorities of higher tax jurisdictions may attempt to subject the Group’s earnings to income taxes of a particular jurisdiction. Should the taxation authorities be successful in assessing additional taxes, late payment interest and imposing fines on this basis, the impact on these financial statements could be significant. Russian tax law and practice are not as clearly established as those of more developed market economies. Russian tax laws, regulations and court practice are subject to frequent change, varying interpretation and inconsistent and selective enforcement. As a result, sometimes taxpayers are being challenged as to structures and transactions which have not been challenged or litigated as a result of prior tax audits. Taxation of companies in the transportation and freight forwarding industry in particular

F-98 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

32. Contingencies and Commitments (Continued) has historically been a vague area in the Russian tax legislation leaving a room for interpretation by the tax authorities. From 1 January 2011 amendments into Russian tax legislation related to VAT treatment of transportation and related services (in particular, application of the 0% VAT rate) came into force. The VAT law was further changed with effect from 1 October 2011. However, certain ambiguity as to VAT treatment of some transportation and related services still remain and the new rules have not yet been tested in courts. Therefore, the interpretations of the new law by the Russian tax authorities and by the customers of the Group transportation companies could differ from that taken by the Group and the effect on these consolidated financial statements if the resulting disputes are not resolved in favour of the company could be material. The taxation system in the Russian Federation is relatively new and is characterised by numerous taxes and frequently changing legislation, which is often unclear, contradictory, and subject to interpretation. Often, different interpretations exist amongst numerous taxation authorities and jurisdictions. Taxes are subject to review and investigation by a number of authorities, who are able by law to impose severe fines, penalties and interest charges. The tax authorities are increasingly taking a more assertive position in their interpretation and enforcement of tax legislation. These facts may create tax risks in Russia substantially more significant than in other countries. Management believes that it has adequately provided for tax liabilities based on its interpretation of tax legislation. However, the interpretations of the relevant authorities could differ and the effect on these consolidated financial statements, if the authorities were successful in enforcing their interpretations, could be significant. (e) Business environment Part of the Group’s operations is located in the Russian Federation and Ukraina. Consequently, the Group is exposed to the economic and financial markets of the Russian Federation and Ukraina which display characteristics of an emerging market. The legal, tax and regulatory frameworks continue development, but are subject to varying interpretations and frequent changes which together with other legal and fiscal impediments contribute to the challenges faced by entities operating in the Russian Federation. The consolidated financial statements reflect management’s assessment of the impact of the Russian and Ukrainian business environment on the operations and the financial position of the Group. The future business environment may differ from management’s assessment.

33. Financial Risk Management Objectives and Policies Capital Risk Management The Group manages its capital to ensure that it can continue to operate and expand their operations while at the same time maximising returns to shareholders through the optimisation of the debt-equity balance. This strategy remains unchanged from prior year. The Group is financed by a combination of borrowing and equity attributable to shareholders. Borrowing comprises long and short term loans (as disclosed in Note 18) and is monitored net of cash and cash equivalents. Equity attributable to shareholders comprises issued share capital, share premium, retained earnings and other reserves less treasury shares (as disclosed in notes 21). The Group is not subject to externally imposed capital requirements other than those included, from time to time, in the financial covenants associated with bank borrowing and those, imposed by the Russian legislation. The Board of Directors monitors the capital structure of the Group taking into account the costs and risks associated with each category of capital. The Group’s net debt to equity ratio is the primary tool used in the monitoring process. No formal targets have been set to maintain a net debt to equity ratio on a definite level.

F-99 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

33. Financial Risk Management Objectives and Policies (Continued) The Group’s net debt to equity ratio at the year end was as follows:

31 December 31 December 2011 2010 ‘000 USD Net debt Long term borrowing ...... 498,511 302,746 Short term borrowing ...... 198,938 122,391 Less bank and cash balances ...... (231,576) (556,288) 465,873 (131,151) Equity attributable to equity shareholders of the Company ...... 1,426,508 1,515,885 Net debt to equity ratio ...... 33% —

Major categories of financial instruments. The Group’s principle financial liabilities comprise borrowings, finance leases, trade and other payables. The main risks arising from the Group’s financial instruments are market risk which includes foreign currency and interest rate risk, credit and liquidity risks. The Board of Directors has overall responsibility for the establishment and overseeing of the Group’s risk management framework. The Group Audit Committee is responsible for developing and monitoring the Group’s risk management policies. The Group’s Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee. (a) Credit risk Credit risk is the risk that a customer may default or not meet its obligations to the Group on a timely basis, leading to financial losses to the Group.

Trade and other receivables The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry and country in which the customer operates, has less of an influence on a credit risk. There is no concentration of credit risk with a single customer. Each company within the Group establishes its own credit policy taking into account the specifics of the sector and the company’s customer base. The majority of the Group’s customers have been transacting with the Group companies for many years and losses arising from this category of customer are infrequent. Policies established by Group companies for new customers will generally involve some form of credit check based on the available information. Where a customer is not deemed creditworthy the Group will generally only offer services on a prepayment basis. The Group has provided fully for all receivables over one year because historical experience is such that receivables that are past due beyond one year are generally not recoverable.

F-100 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

33. Financial Risk Management Objectives and Policies (Continued)

The Group’s maximum exposure to credit risk in relation to each class of recognised financial asset is the carrying amount of those assets as stated in the balance sheet and was as follows:

31 December 31 December 2011 2010 ‘000 USD Investments available-for-sale ...... 196,854 162,979 Prepayment for investment, at cost ...... 292,935 — Accounts receivable ...... 178,189 147,288 Current tax assets ...... 9,730 2,455 Other current assets ...... 8,113 2,160 Cash and cash equivalents ...... 231,576 556,288 917,397 871,170

The ageing profile of trade receivables was:

31 December 2011 31 December 2010 Total book Allowance for Total book Allowance for value impairment value impairment ‘000 USD Current ...... 32,870 95 35,901 3,326 Overdue 90 days ...... 5,317 202 4,114 190 Overdue 91 days to one year ...... 7,257 1,936 4,177 854 Overdue more than one year ...... 20,833 20,649 22,106 22,106 66,277 22,882 66,298 26,476

During the year, the Group had the following movement on allowance for trade receivables:

31 December 31 December 2011 2010 ‘000 USD Balance as at 1 January ...... 26,476 27,078 Uncollectible receivables written off during the year ...... (5,948) (4,396) Increase in allowance ...... 2,354 3,794 Balance as at 31 December ...... 22,882 26,476

Other assets of the Group with exposure to credit risk include cash and advances to suppliers. Cash is placed with reputable banks. Advances to suppliers mainly include prepayments for transportation services and prepayments to Russian Railway. Management does not expect these counterparties to fail to meet their obligations. (b) Market risk Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

Currency risk The Group is exposed to currency risk on sales, purchases, finance leases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, primarily the RUB and USD.

F-101 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

33. Financial Risk Management Objectives and Policies (Continued) Borrowings and interest thereon are generally denominated in currencies that match the cash flows generated by the underlying operations of the Group, this providing an economic hedge. In respect of other monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances. At 31 December 2011, the Group had the following monetary assets and liabilities denominated in currencies other than the functional currency of the respective Group entity:

Other USD RUB currencies ‘000 USD Assets Other non-current assets ...... 6,787 — — Accounts receivable ...... 14,995 12,792 3,513 Other current assets ...... 1,851 — — Bank and cash balances ...... 19,148 2,167 3,268 Intra-group assets ...... 15,722 40,579 — 58,503 55,538 6,781 Liabilities Accounts payable ...... 7,106 6,986 5,113 Loans and other obligations ...... 65,683 24,351 7,898 Intra-group liabilities ...... 18,050 66,031 277 90,839 97,368 13,288 (32,336) (41,830) (6,507)

Other currencies include EURO primarily. At 31 December 2010, the Group had the following monetary assets and liabilities denominated in currencies other than the functional currency of the respective Group entity.

Other USD RUB currencies ‘000 USD Assets Other non-current assets ...... 8,636 869 — Accounts receivable ...... 11,889 8,610 11,499 Other current assets ...... 740 — — Bank and cash balances ...... 9,271 1,991 5,294 Intra-group assets ...... 10,533 17,797 228 41,069 29,267 17,021 Liabilities Accounts payable ...... 7,283 6,615 7,780 Loans and other obligations ...... 76,757 16,703 4,162 Intra-group liabilities ...... 33,461 10,986 277 117,501 34,304 12,219 (76,432) (5,037) 4,802

F-102 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

33. Financial Risk Management Objectives and Policies (Continued) The Group has entered into a number of currency options as a part of managing its exposure to foreign currency risks. The option contracts are stated at their fair value with the movements in fair value recognised in the profit and loss, see Note 31.

Foreign currency sensitivity analysis The table below details the Group’s sensitivity to strengthening/weakening of USD against the RUB by 10% which represents management’s assessment of the possible change in foreign currency exchange rates.

RUB/USD impact 31 December 31 December 31 December 31 December 2011 2011 2010 2010 RUB/USD RUB/USD RUB/USD RUB/USD +10% 10 +10% 10% ‘000 USD Profit or (loss) ...... 3,234 (3,234) 7,643 (7,643)

Interest rate risk Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rates. The Group’s interest risk mainly arises from its debt obligations in particular non-current borrowings. Borrowing at variable rates exposes the Group to cash flow interest rate risk. Lending at fixed rates or the purchase of debt instruments at fixed rates expose the Group to changes in the fair value. The Group constantly reviews its debt portfolio and monitors the changes in the interest rate environment to ensure that interest payments are within acceptable levels. Information relating to interest rates on the Group’s borrowings is disclosed in Note 17.

Structure of interest rate risk. At the reporting date the interest rate profile of the Group’s interest-bearing financial instruments, excluding the effect of derivative financial instruments, was:

Carrying amount 31 December 31 December 2011 2010 ‘000 USD Fixed rate instruments Cash and cash equivalents ...... 159,429 490,000 Loans and promissory notes receivable ...... 1,575 4,014 Long term deposits ...... 1,944 3,361 Finance lease receivable ...... 8,638 9,376 Borrowings and finance lease obligations ...... (440,190) (169,658) Receivables from KUKE and shipyard ...... — 1,100 (268,604) 338,193 Variable rate instruments Borrowings ...... (257,259) (255,479) (257,259) (255,479)

F-103 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

33. Financial Risk Management Objectives and Policies (Continued) Interest rate sensitivity analysis The table below details the Group’s sensitivity to increase or decrease of floating interest rates by 1%. The analysis was applied to loans and borrowings (financial liabilities) based on the assumption that the amount of liability outstanding as at the balance sheet date was outstanding for the whole year.

LIBOR impact MOSPRIME impact 31.12.2011 31.12.2011 31.12.2011 31.12.2011 Interest rate +1% Interest rate 1% Interest rate +1% Interest rate 1% ‘000 USD ‘000 USD ‘000 USD ‘000 USD (1,337) 1,337 (184) 184 (c) Fair value hierarchy The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows: • Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities. • Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). • Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

31 December 2011 Level 1 Level 2 Level 3 ‘000 USD Investments available for sale ...... 196,854 — — Share-based payments liability ...... — — (3,903) Interest rate swap liability ...... — (31,996) — 196,854 (31,996) (3,903)

31 December 2010 Level 1 Level 2 Level 3 ‘000 USD Investments available for sale ...... 162,979 — — Share-based payments liability ...... — — (4,690) Interest rate swap liability ...... — (32,697) — 162,979 (32,697) (4,690)

(d) Liquidity risk Liquidity risk is the risk that the Group will not be able to settle all liabilities as they fall due. The Group has in place a detailed budgeting and cash flow forecasting process to help ensure that it has sufficient cash to meet its payment obligations.

F-104 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

33. Financial Risk Management Objectives and Policies (Continued) Loans, borrowings, finance lease and other payables

Minimum Carrying future Less than 3-6 6-12 Later than value payment 3 month month month 1-5 years 5 years ‘000 USD As at 31 December 2011 Loans ...... 554,581 554,581 11,908 102,539 63,826 329,898 46,410 Interest payable on loans ...... 3,119 84,042 9,539 7,323 14,967 47,288 4,925 Finance leases ...... 142,868 197,815 10,114 9,269 18,536 145,867 14,029 Interest swap ...... 31,996 32,681 2,406 3,892 4,972 21,411 — Trade and other payables ...... 74,633 74,633 73,707 512 129 285 — Share-based payments ...... 3,903 3,903 — — — 3,903 — Defined benefit obligations ...... 1,642 1,642 — — — 1,642 — Other non-current payables ..... 180 180 — — — 180 Total ...... 812,922 949,477 107,674 123,535 102,430 550,474 65,364 As at 31 December 2010 Loans ...... 378,861 378,861 35,095 17,596 59,714 207,611 58,843 Interest payable on loans ...... 1,539 51,339 4,627 4,906 8,118 28,207 5,481 Finance leases ...... 46,276 60,275 5,846 2,752 5,207 39,508 6,962 Interest swap ...... 32,697 32,697 2,028 3,550 6,047 21,068 4 Trade and other payables ...... 75,681 75,681 70,205 3,636 1,840 — — Share-based payments ...... 4,690 4,690 — — — 4,690 — Defined benefit obligations ...... 832 832 — — — 832 — Other non-current payables ..... 691 691 — — — 691 — Total ...... 541,267 605,066 117,801 32,440 80,926 302,607 71,290

34. Related Party Transactions For the purposes of these financial statements, parties are considered to be related if both parties are under common control or one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. During the period ten individuals were considered to be the Group’s key management and directors (2010 — eleven individuals). Their remuneration during the period was as follows:

31 December 31 December 2011 2010 ‘000 USD Salaries ...... 2,692 1,727 Bonuses ...... 2,066 2,638 Board of directors remuneration ...... 1,252 638 6,010 5,003 Share options expense ...... — 3,093 6,010 8,096

F-105 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

34. Related Party Transactions (Continued) During the year the share option liability decreased resulting in a gain of USD 0.8 million.

31 December 31 December Statement of financial position 2011 2010 Nature of balances ‘000 USD Non-consolidated subsidiaries .... 23 781 Trade receivables Non-consolidated subsidiaries .... (141) — Trade payables Associates ...... 1,550 3,502 Agency and other service Joint Venture Company ...... (2,169) (2,485) Trade payables Joint Venture Company ...... 2,475 1,609 Trade receivables Non-consolidated subsidiaries .... — 699 Loan issued Joint Venture Company ...... (12,702) — Loan payable Related through management .... 143 — Loan issued Joint Venture Company ...... 1,800 2,660 Loan issued Related through common 72,157 148,281 Cash and cash equivalents shareholder ...... Joint Venture Company ...... 8,638 9,376 Finance lease receivable

31 December 31 December Income Statement 2011 2010 Nature of transactions ‘000 USD Non-consolidated subsidiary (1,494) (1,148) Agency Services purchases ...... Non-consolidated subsidiary sales . 190 236 Agency Services Associates purchases ...... (2,204) (3,644) Agency services, rent and security expenses Joint Venture Company purchases . (4,674) (5,849) Agency, transportation and stevedoring services Joint Venture Company sales ..... 2,588 1,914 Transportation services Joint Venture Company ...... 1,771 1,571 Finance lease and interest income Related through common 2,962 641 Interest income shareholder ...... Related through common (288) — Interest expense shareholder ...... Related through common — (27,000) Selling expenses related to shareholder ...... disposal of investment

35. Events Subsequent to the Reporting Date a) In January, 2012 Group has announced its plan to sell non-container railroad business of Transgarant Group. This decision was made within container business development strategy framework. Structure of the transaction suggests fitting platforms and warehouse complex Stroyoptorg will stay in Group. At the moment Group is actively searching for the buyer and plans to close the transaction in first half-year, 2012; b) 2.6% of Global Depository Receipts (GDR) of TransContainer OJSC was delivered to the Group in January 2012. As a consequence TransContainer became an associate of the Group; c) FESCO Smolensk, a 57,000 dwt dry cargo bulk vessel, was delivered to the Group on 19 January 2012; d) 100% of shares of Transportnaya Companiya CJSK, which in turn owns 47.78% shares of Commercial Port of Vladivostok, were delivered to the Group in March 2012. As a result, the

F-106 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Notes to the Consolidated Financial Statements — 31 December 2011 (Continued)

35. Events Subsequent to the Reporting Date (Continued) commercial Port of Vladivostok became a Group subsidiary. The Group has not completed the accounting for business combination yet; e) In March 2012 the Group voluntary prepaid loan facility arranged by SMBC in the total amount of USD 47 million. This prepayment was made as part of Transgarant sale process; f) In March 2012 the Group entered into a short-term loan for the amount of USD 46.25 million; g) Subsequent to the balance sheet date the Group classified certain non-current assets with the carrying value of USD 96 million as held-for-sale. The Group management expects to realize these assets at their fair values.

F-107 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Consolidated Schedule of Fleet at 31 December 2011 Unaudited

Year of Deadweight Bulk Building Tonnage Book Value Insured Value ‘000 USD ‘000 USD Ivan Makarin ...... 1982 19,252 3,680 3,700 Kapitan Tsirul ...... 1982 19,252 3,680 3,700 Cheremkhovo ...... 1984 23,242 3,697 3,875 Chelyabinsk ...... 1984 23,242 3,697 3,875 Fesco Aleksandrov ...... 1986 24,105 3,511 3,875 Fesco Angara ...... 1985 37,155 3,677 8,375 Fesco Yenisei ...... 1985 37,178 3,666 8,375 Fesco Ob ...... 1986 36,690 4,671 8,625 Amur...... 1997 7,207 4,984 5,750 Ussuri ...... 2002 7,212 5,986 6,750 Khudozhnik Kraynev ...... 1986 24,105 3,529 3,875 Fesco Saratov ...... 2011 57,000 27,996 28,500 Fesco Simpferopol ...... 2011 57,000 27,959 28,000 372,640 100,733 117,275 Container Kapitan Krems ...... 1980 5,720 1,918 2,100 Kapitan Gnezdilov ...... 1980 5,720 1,918 2,100 Kapitan Sergiyevskiy ...... 1981 5,629 1,918 2,100 Kapitan Artyukh ...... 1986 9,141 2,438 2,550 Krasnogvardeyets ...... 1986 9,141 2,438 2,550 Kapitan Lyashenko ...... 1987 8,717 2,631 2,750 Khudozhnik N. Rerikh ...... 1989 8,579 2,631 2,750 Kapitan Afanasyev ...... 1998 23,380 7,398 10,750 Kapitan Maslov ...... 1998 23,380 7,394 10,750 Vladivostok ...... 1998 23,380 8,372 11,750 Fesco Trader ...... 1997 15,231 5,634 8,250 Fesco Voyager ...... 1998 15,231 5,996 8,750 Fesco Ascold ...... 2006 13,760 13,334 16,500 Fesco Vitim ...... 2008 22,750 21,367 27,500 Fesco Voronezh ...... 2008 22,750 21,340 27,500 Fesco Vladimir ...... 2009 22,750 22,293 28,500 Fesco Diomid ...... 2009 42,274 34,243 46,000 277,533 163,263 213,150 General Cargo Pioner Kirgizii ...... 1978 6,780 1,849 1,800 Abakan ...... 1990 7,365 2,575 3,625 Fesco Shatrova ...... 1990 7,365 2,321 3,625 Fesco Ilyinskiy ...... 1990 7,365 2,146 3,625 Fesco Sinegorsk ...... 1991 7,365 2,522 3,625 Fesco Vysokogorsk ...... 1991 7,365 2,567 3,625 Vasiliy Golovnin ...... 1988 10,700 6,743 6,750 54,305 20,723 26,675

F-108 FAR-EASTERN SHIPPING COMPANY PLC. and its subsidiaries Consolidated Schedule of Fleet at 31 December 2011 (Continued) Unaudited

Year of Deadweight Bulk Building Tonnage Book Value Insured Value ‘000 USD ‘000 USD Ro-Ro Igarka ...... 1983 23,024 4,921 5,125 Anatoliy Kolesnichenko ...... 1985 22,845 5,003 5,375 Kapitan Man ...... 1985 22,845 5,003 5,375 Vasiliy Burkhanov ...... 1986 22,845 5,003 5,375 Fesco Gavriil ...... 1976 4,600 2,547 2,700 Fesco Nikolay ...... 1984 5,500 2,965 3,125 Fesco Uelen ...... 2006 3,023 2,368 3,250 Fesco Ulan Ude ...... 1985 3,199 1,254 2,250 107,881 29,064 32,575 Total 812,359 313,783 389,675

F-109 ISSUER Far East Capital Limited S.A. 13-15, avenue de la Liberte´ L-1931 Luxembourg Grand Duchy of Luxembourg

FESCO Far-Eastern Shipping Company PLC (FESCO) 15 Aleutskaya Street Vladivostok Primorskiy Kray 690091 Russian Federation

HOLDCO GUARANTORS Maple Ridge Limited Elvy Limited 8 Koronias, Pot. Germasogeias Agias Eirinis, 30, 4042 Limassol 3095 Limassol Cyprus Cyprus Wiredfly Investments Ltd. Rikima Holdings Limited 3 Kyriakou Matsi 115 Griva Digeni, Roussos Limassol Trident Centre, Tower, Floor 5, 3101 Limassol Flat/Office 5A Cyprus 3040 Limassol Cyprus Calamita Trading Ltd. Mirihia Holdings Limited Vovosa Co Ltd. Agias Eirinis, 30, Agias Eirinis, 30, Agias Eirinis, 30, 3095 Limassol 3095 Limassol 3095 Limassol Cyprus Cyprus Cyprus

THE SUBSIDIARY GUARANTORS Limited Liability Remono Shipping FESCO Ocean Dalreftrans Co., Ltd. LLC ‘‘Firm Company Company Limited Management Limited 4th floor, ‘‘Transgarant’’ FESCO Integrated 284 Arch. 1 Kostaki Pantelidi, 7a Ulitsa Morozova Bldg. 1 24 Ulitsa Company Makariou III, Kolokasides Building, 690065 Vladivostok Radio Bldg. 7 12a 2-oy Fortuna Court, 3rd floor Russian Federation 105005 Moscow Yuzhnoportovy 2nd floor, 1010 Nicosia Russian Federation Proezd Block B, P.C. 3105 Cyprus 109432 Moscow Limassol Russian Federation Cyprus Subsidiary LLC ‘‘FESCO Rail’’ LLC ‘‘TEK Metiztrans’’ OJSC ‘‘Commercial CJSC ‘‘Vladivostok Enterprise 29 Serebryanicheskaya 9 Krasnokazarmennaya Port of Vladivostok’’ Container Terminal’’ ‘‘Transgarant— Naberezhnaya Ulitsa 111250 9 Ulitsa Strelnikova 9 Ulitsa Strelnikova Ukraine’’ 109028 Moscow Moscow Primorsky Kray Primorsky Kray Bldg. 2, 5 Ulitsa Russian Federation Russian Federation 690950 Vladivostok 690065 Vladivostok Dmitrova Russian Federation Russian Federation 03150 Kiev Ukraine

SECURITY PROVIDERS Merbau Synergy Limited Sian Participation Corp. Tryreefer Shipping Company Limited Akara Bldg., MMG Trust (BVI) Corp. 1 Costakis Pantelides Ave., 3rd floor 24 De Castro Street, Wickhams Cay 1 P.O. Box 958, Pasea Estate 1010 Nicosia Road Town, Tortola, Road Town, Tortola, Cyprus British Virgin Islands British Virgin Islands

Eustacia Finance Limited Limited Liability Company ‘‘National M-Port Trident Trust Co. (BVI) Ltd. Container Company’’ 29 Serebryanicheskaya Naberezhnaya, Trident Chambers 29 Serebryanicheskaya Naberezhnaya, 109028 Moscow P.O. Box 146 109028 Moscow Russian Federation Road Town, Tortola Russian Federation British Virgin Islands

Kalentio Trading Limited Arch. Makariou III, 284 Fortuna Court Block B, 2nd Floor, 3105 Limassol Cyprus JOINT BOOKRUNNERS Goldman Sachs International ING Bank N.V., London Branch Raiffeisen Bank International AG Peterborough Court 60 London Wall Am Stadtpark 9 133 Fleet Street London EC2M 5TQ 1030 Vienna London EC4A 2BB United Kingdom Austria United Kingdom

TRUSTEE PRINCIPAL PAYING AGENT AND REGISTRAR TRANSFER AGENT TMF Trustee Limited Citibank, N.A., London Branch Citigroup Global Markets 6 St Andrew St Citigroup Center Deutschland AG London EC4A 3AE Canada Square Reuterweg 16 United Kingdom Canary Wharf Frankfurt Am Main 60323 London E14 5LB Germany United Kingdom

LEGAL ADVISERS TO THE ISSUER, FESCO AND GUARANTORS as to English and U.S. law as to Ukrainian law as to Russian law Cleary Gottlieb Steen & Vasil Kisil & Partners Cleary Gottlieb Steen & Hamilton LLP 17/52A Bogdana Khmelnytskogo St. Hamilton LLC City Place House Kyiv Paveletskaya Square 2/3 55 Basinghall Street 01030 Ukraine 115054 Moscow London EC2V 5EH Russian Federation United Kingdom

as to Luxembourg law as to Cypriot law Elvinger, Hoss & Prussen Antis Triantafyllides & Sons LLC 2, Place Winston Churchill 2-4 Arch Makarios Ave. Capital Center, L-1340 Luxembourg 9th floor Grand Duchy of Luxembourg P.O. Box 21255 1505 Nicosia Cyprus

LEGAL ADVISERS TO THE JOINT BOOKRUNNERS as to English and U.S. law as to Luxembourg law as to Russian law Allen & Overy LLP Allen & Overy Luxembourg Allen & Overy Legal Services One Bishops Square 33, avenue J.F. Kennedy Dmitrovsky pereulok, 9 London E1 6AD L-1855 Luxembourg 107031 Moscow United Kingdom Grand Duchy of Luxembourg Russia

LEGAL ADVISER TO THE TRUSTEE As to English law Allen & Overy LLP One Bishops Square London E1 6AD United Kingdom

AUDITORS TO FESCO ZAO KPMG Naberezhnaya Tower Complex, Block C 10 Presnenskaya Naberezhnaya 123317 Moscow Russian Federation

LISTING AGENT Arthur Cox Listing Services Limited Earlsfort Centre Earlsfort Terrace Dublin 2 Ireland Merrill Corporation Ltd, London 13ZBB72801