moving forward Annual report 2012

Transcription

1 ANNUAL REPORT

2 moving forward Annual report

3 Time can be measured, but it cannot be stopped. By sweeping mankind along with the uncontrollable flow time dictates its own ifs and buts forcing people to reject the generally accepted stereotypes and thoroughly search for new development patterns, apply innovative approaches, design cutting-edge technologies. Evolvement has its definite laws: staying where you are typically means missing real opportunities. Only constant movement, while overcoming time and distance, is the soundest way to fortify the conquered positions and hit the targets. The entire history of TAIF-NK Public Stock Company is the continuous and steady progression to new objectives, fresh achievements and new reaches of success.

4 Contents Contents General Director s message 6 Chapter 1. about company 8 Chapter 5. Corporate management Background Refining sector and Company s Standing in Refining Sector The Company s business priorities Main events of the year Share capital and dividends Corporate management and control bodies Major undertaken transactions (major undertaken transactions and interested party transactions) Information on subsidiaries and affiliates Information on compliance with the Corporate Code of Conduct recommendations 59 4 Chapter 2. on the development in terms of its priority lines of business 22 Chapter 6. Key risk factors Production operation Review of the marketing activities results Main economic and financial indicators of the Company Industry related risks Country and regional risks Financial risks Legal risks 65 Chapter 3. Development prospects 36 Chapter 7. Financial statements 66 Chapter 4. Corporate and social responsibility 40 Contact details Quality, ecology, industrial and occupational safety Personnel Social policy Charity Tax payments 49

5 General Director s About company message Dear Shareholders, Colleagues and Business Partners! I bring herewith to your attention TAIF-NK Annual Report that summarizes the results of the Company s activities over the year. I am happy to note that the year was profitable and constructive to TAIF-NK. In the reporting year the Company s plants processed 8,384 thous tons of crude oil. Average utilization of the refining capacity equaled to %. Overall petroleum product output amounted to 8,132 thous tons, the Company s proceeds from sales of products, works and services amounted to over RUB 128 bln; about RUB 43 bln was directed to the budgets of different levels. The net income equaled to RUB 10,8 bln. Net assets made up RUB 36,4 bln showing a 22,2% increase at year-end. In the reporting year the Company kept on implementing its strategic initiatives which were aimed at the development and extension of the oil refining production, strengthening the Company`s position in the field, increase the assets capitalization. The Company maintained its focus on modernization of the existing process units that is CDU/VDU-7 and Middle Distillates Hydrotreating Complex of refinery, FCC unit of gasoline plant in order to increase the efficiency of production activity, to implement the resource and energy saving, environmentally-friendly technologies along with prevention, systematic decrease and avoidance of negative effect of process facilities on environment. In the reporting year the Company completely made a switchover to the diesel fuel output of EURO-5 standard, in advance fulfilled the requirements of technical regulation «On requirements to motor and aviation gasoline, diesel and whole assortment of goods produced by TAIF-NK PSC will possess the enhanced environmental characteristics, including lower sulphur content in aromatic and highly volatile hydrocarbons. Within the frame of the aforesaid project as of the end of the contracts for basic engineering and license on hydroconversion technology VEBA COMBI CRACKING (VCC) and license equipment delivery were concluded with the company Kellogg Brown and Root (USA). The company Toyo Engineering (Japan) was adopted as the designer and vendor of the equipment for VCC unit. There is plenty of work to be done ahead, but I have no doubt that the TAIF-NK PSC team will do its best for the successful realization of the Company`s long-term strategy. I express my appreciation to TAIF-NK PSC personnel for the complete professionalism and conscientious work. 6 marine fuels, jet fuels and fuel oil». I would like to express gratitude to the shareholders for their 7 28 filling stations are put into operation under the brand name of TAIF-NK PSC, 13 stations of which are served by the Company directly. The total oil products sales through the filling stations served by TAIF-NK PSC equaled to 46,6 thous tons with the increase of 22% if compared with the previous year. Beyond any doubt the Company`s most major, capitalintensive and strategically significant project is the construction of Heavy Residue Conversion Complex (HRCC), the main objective of which is the exclusion of highly sulphur fuel oil output through the increase of higher margin light products meeting the world and European quality specifications along with the refining depth increase to not less than 95%. The aforesaid project implementation makes it possible to create more than 700 new highly paid work places, to increase the budgets revenue of all levels that will result in living standards improvement of the population of Nizhnekamsk city and Nizhnekamsk district along with the economic prosperity of the Republic of Tatarstan and the Russian Federation. The mentioned above complex implementation will improve the ecological situation in the region significantly as the trust and support. I am sure that the year of 2013 will be the year of the Company`s new success a milestone of the Company`s dynamic development and enhance of production efficiency, increase in its share stock and growth of investment attractiveness. For this purpose TAIF-NK PSC possesses all things the teams of experts, high technologies, the image of a trustworthy business partner, and the most important thing is that we have a strong wish to work and achieve better results! A. K. Kalimullin TAIF-NK PSC General Director

6 about company The greatest thing is not so much where we are, but in what we are moving direction in this world Chapter 1

7 About company 1.1. Background TAIF-NK Public Stock Company was registered on July, 29th, 1998 (State Registration Certificate of legal entity No. 1018/к, issued by State Registration Chamber of the Ministry of Justice of the Republic of Tatarstan, the previous Company`s full name: TAIF-NK CJSC). The Company exists under the Civil Code of the Russian Federation, the Federal Law on Joint-Stock Companies, other 1.2. Refining sector and Company s standing Visbreaking unit with capacity of thous tons/year regulatory legal acts of the Russian Federation and the Charter of TAIF-NK PSC. in refining sector by feedstock was built in 2003; 10 for high-grade fuels. 11 TAIF-NK`s key activities are the following: oil refining, oil products and their derivatives sales; building and operation of petrochemical industrial productions. The Company carries out its activities for hydrocarbon crude processing and oil products sales in accordance with the licenses (authorizations) for implementation of the following activities: operation of chemically hazardous production facilities, operation of fire and explosion hazardous production facilities, hazardous wastes collection, utilization, detoxification, transportation and handling (storage), operation of hydraulic engineering structures, TAIF-NK PSC consists of two large production complexes refinery and gasoline plant about company hazardous cargo handling operations for railway transportation. TAIF-NK PSC consists of two large production complexes refinery and gasoline plant. Refinery comprises the following units: CDU/VDU-7 primary oil distillation unit with capacity of thous tons/year by feedstock was constructed in 1979 and revamped in 2003 and within the period of 2008 ; Middle Distillates Hydrotreating Complex was put into operation in 2002, and it comprises the following units: hydrogen generation unit with capacity of thous tons/year by product; kerosene hydrotreating unit with capacity of 610 thous tons/year by product; diesel fuel hydrotreating unit with capacity of thous tons/year by feedstock was revamped within the period 2011 ; sulphur recovery unit with capacity of thous tons/year by product; unit for production of road bitumen with capacity of 102 thous tons/year by feedstock (BND 60/90) was put into operation in Gasoline plant comprises the following units: Fluid catalytic cracking unit with capacity of 1000 thous tons/year by feedstock was put into operation in 2006; gas condensate primary distillation unit with capacity of 1000 thous tons/year by feedstock was put into operation in 2006; high-octane motor gasoline components MTBE and TAME production units with capacity of 24.8 and thous tons by product respectively were put into operation in 2009; commercial gasoline compounding with capacity of 600 thous tons by product. As can be seen from the above nearly all main process facilities of TAIF-NK PSC were either constructed or revamped through the latest 10 years. The intensive development and appliance of modern foreign and national technologies in the enterprise s construction and revamping allowed the Company to take a 6th place among the oil refineries of Russia in feed processing depth. Crude oil is the base component of economies of many countries, particularly, the economy of Russia that disposes of the sizeable hydrocarbon reserves along with the fuel-andenergy complex. In the reporting year Russia was the world-wide leader by hydrocarbon resources upstream: in Russia the growth of crude-oil with gas condensate output equaled to 1,3% up to 518 mln tons in comparison with In oil exports from the Russian Federation amounted to 239 mln tons being shortened to 1% in comparison with the year of In the feed processing on the Russian refineries increased to 4% if compared with the previous year and amounted to more than 268 mln tons of crude-oil and gas condensate. In the key factor affecting the refining industry of Russia was the revamping of the Russian refineries according to the quadripartite agreements concluded in 2011 with the State representing by the Federal Antimonopoly Service of Russia, Russian Federal Service for Ecological, Technical Nearly all main process facilities of TAIF-NK PSC were either constructed or revamped through the latest 10 years and Atomic Supervision and Federal Agency on Technical Regulating and Metrology pursuant to which the refineries should provide the sufficient production and supply of the qualitative oil products to the domestic market meeting the requirements of the technical regulation «On requirements to motor and aviation gasoline, diesel and marine fuels, jet fuels and fuel oil». The Russian Federation governmental policy aimed to the sector development is also supported by the existing calculation system of the crude and oil products export taxes «60-66», introduction of the protective duty for motor gasolines export at the rate of 90% of the crude duty and increase of excise taxes for the low-grade motor fuels along with the introduction of decreasing coefficient As reported by Ministry of Energy of the Russian Federation in the oil companies invested about RUB 190 bln to the refineries modernization, and in 2013 the investments for the given goals can be increased almost twice and will be equaled to more than RUB 350 bln.* TAIF-NK PSC is one of the leading oil products market players of Russia and the Republic of Tatarstan. In the Company`s share in the total oil-feed processing amounted to 3,1% in the Russian Federation and 53,7% in the Republic of Tatarstan. In this case the Company produces 100% of jet fuel, 95,7% of diesel fuels, 87,8% of motor gasolines, 54,5% of straight-run gasoline and 50,5% of fuel oil out of the total volume of oil products yielded in the Republic of Tatarstan. One of the more marketable Company`s products are the motor gasolines of EURO-4 environmental standard. * E- magazine «Neftegazovaya Vertical» (

8 About company Dinamics of gasolines consumption in the Republic of Tatarstan in comparison with Privolzhsky Federal District and the Russian Federation (l/man) TAIF-NK`s share in the total volume of diesel fuel exported from Russia equals to about 2,8%. The Company exported about 55% of the total sales of the aforesaid product. Sales of TAIF-NK`s products is done through: direct sales; stock exchange (ZAO Saint-Petersburg International Mercantile Exchange); electronic trade platform OnlineContract; home network of filling stations. In the reporting year the Company completely made a switchover to the diesel fuel output (summer and winter type) of EURO-5 standard, in advance fulfilled the requirements of technical regulation «On requirements to motor and aviation gasoline, diesel and marine fuels, jet fuels and fuel oil» The principal competitors of TAIF-NK PSC when delivered oil products to the domestic and foreign markets are the Tatneft named after Shashin V. D., ОАО HK Tatnefteproduct, Russian Federation Privolzhsky Federal District Republic of Tatarstan 12 Russian vertically-integrated oil companies such as: ОАО ANK ОАО ANK «Bashneft, ОАО NK LUKOIL. 13 Source: InfoTEK magazine Privolzhsky Federal District in which territory the Company performs its production operation is characterized by the high concentration of refining capacities along with the best technical-and-economic indexes in the Russian Federation that leads to the high competition in the region. Bashneft, ОАО Rosneft, ОАО Gazprom neft, ОАО TNK-BP Holding, ОАО Surgutneftegas, ОАО NK LUKOIL, ОАО Tatneft named after Shashin V. D. and their subsidiaries and affiliates in the different market segments. The principal competitors of TAIF-NK PSC on the oil products retail market in the Republic of Tatarstan are ОАО In motor gasolines consumption in the Republic of Tatarstan equaled to l/man and 54.5 tons/1 km of road that is above the average indexes of Privolzhsky Federal District and Russia. In the reporting year the Company completely made a switchover to the diesel fuel output (summer and winter type) of EURO-5 standard, in advance fulfilled the requirements of technical regulation «On requirements to motor and aviation gasoline, diesel and marine fuels, jet fuels and fuel oil». The confirmation of TAIF-NK`s products compliance with the technical regulation requirements is the availability TAIF-NK PSC takes a 6th place among the oil refineries of Russia in feed processing depth of the declaration and certificates for the following assortment: diesel fuel EURO-5 grades А,В,С,D,E; unleaded motor gasoline grade Regular-92 EURO-4; unleaded motor gasoline grade Premium Euro-95 EURO-4; jet fuel grade RТ; aviation gas turbine fuel grade JET А-1; fuel oil М-100; low-viscosity marine fuel. The petrochemical complex OAO Nizhnekamskneftechim of the Republic of Tatarstan is the consumer of all straight-run gasoline volume produced by the Company. The essential part of fuel oil produced by TAIF-NK PSC is exported, amounting more than 3% of the total volume of Russian export supply of the product.

9 About company Key performance indicators of Russian main refineries in Key performance indicators of Russian main refineries in No. Refinery Refining Depth, % Crude Intake, thous tons CDU Utilization Ratio, % No. Refinery Refining Depth, % Crude Intake, thous tons CDU Utilization Ratio, % 1. Ufaneftekhim* , Omsk Refinery , Volgogradneftepererabotka , Novo-Ufimsky Refinery* , Permnefteorgsintez* , TAIF-NK* , Kuibyshev Refinery* , Gazprom neftekhim Salavat* , Angarsk Petrochemical Company , Novokuibyshev Refinery* , TANECO* , Ufimsky Refinery* , Saratov Refinery* , Syzran Refinery* , Moscow Refinery , Orsknefteorgsintez* , Ryazan Refinery , Yaroslavnefteorgsintez , Nizhegorodnefteorgsintez* , Khabarovsk Refinery , Komsomolsk Refinery , Achinsk Refinery , Ukhtaneftepererabotka , Kirishinefteorgsintez , Krasnodareconeft , Afipsky Oil Refinery , Tuapse Refinery , Total for Russian Federation , TAIF-NK PSC share, % 3.1 total for Privolzhsky Federal District 107,506.7 TAIF-NK PSC share, % 7.8 total for Republic of Tatarstan 15,613.9 TAIF-NK PSC share, % 53.7 * Making part of Privolzhsky Federal District (PFD) Sources: InfoTEK magazine, proprietary information

10 About company Basic oil products output in the Russian Federation (thous tons) No. Company/Refinery Motor gasoline Diesel fuel Fuel oil Straight-run gasoline Angarsk Petrochemical Company 1, , , , , , , , , Afipsky Oil Refinery , , , , , , Achinsk Refinery VNK 1, , , , , , , , , volgogradneftepererabotka 1, , , , , , , , , gazprom neftekhim Salavat* , , , , , , Kirishinefteorgsintez 2, , , , , , , , , Komsomolsk Refinery , , , , , , , , Krasnodareconeft , , , Kuibyshev Refinery* 1, , , , , , , moscow Refinery 2, , , , , , , , , Nizhegorodnefteorgsintez* 2, , , , , , , , , Novokuibyshev Refinery* , , , , , , Novo-Ufimsky Refinery* 1, , , , , , Omsk Refinery 3, , , , , , , , , Orsknefteorgsintez* , , , , , , Permnefteorgsintez* 1, , , , , , , , , Ryazan Refinery 2, , , , , , , , , Saratov Refinery* , , , , , , , Syzran Refinery* , , , , , , , , TAIF-NK* , , , , , , , , , TANECO* , , Tuapse Refinery , , , , , , Ufaneftekhim* 1, , , , , , Ufimsky Refinery* 1, , , , , , , , , Ukhtaneftepererabotka , , , , , Khabarovsk Refinery , , , yaroslavnefteorgsintez 2, , , , , , , , , Total for Republic of Tatarstan , , , , , , , , ,154.3 TAIF-NK PSC share, % Total for Privolzhsky Federal District 14, , , , , , , , , , , ,012.4 TAIF-NK PSC share, % Total for Russian Federation 36, , , , , , , , , , , ,706.2 TAIF-NK PSC share, % * Making part of Privolzhsky Federal District (PFD) Sources: InfoTEK magazine, proprietary information

11 About company 1.3. The Company s business priorities home network strengths the Company s competitive positions. According to the program it is planned to construct and purchase gas filling stations for retail sale of motor gasoline and in-house diesel fuels in order to meet population and enterprises demands of high quality motor fuels. The Company implements the measures of revamping and re-equipment of the operating facilities in order to improve production efficiency and implementation of environmentally friendly, resource and energy saving technologies as well as to reduce negative impact of operating facilities on the environment: The main TAIF-NK s business priorities are the development of the crude oil refining capacities with the aim to attain to a greater refining depth, production of high performance and competitive oil products conforming to the world environmental standards The CDU/VDU-7 revamping project involves fulfillment of updated industrial safety rules, implementation of the automated process control system, enhancement of the column equipment operational efficiency, reduction of energy consumption through installation of additional heat exchangers and revamping the heaters to increase in efficiency factor, as well as increase in heaters capacities up to 7.3 MTPA for feedstock. The project is currently being on its completion stage. The main TAIF-NK s business priorities are the development of the crude oil refining capacities with the aim to February attain to a greater refining depth, production of high performance and competitive oil products conforming to the world and Root (USA) signed the contract for Basic Engineering TAIF-NK PSC and Engineering Company Kellogg Brown environmental standards, as well as intermediate products Package for the main HRCC Unit Vacuum Residue Hydroconversion Unit based on proprietary process of VEBA COMBI production in order to be in great demand in the chemical and petrochemical industries of the Republic of Tatarstan. CRACKING. TAIF-NK implements the construction of Heavy Residue Conversion Complex Project in order to fulfill the specified tasks project involves Gas Oil Hydrotreating Unit capacity in- with TAIF-NK s industrial facilities and the way of TAIF-NK s Middle Distillates Hydrotreating Complex revamping TAIF-NK PSC successfully passed out compliance audit of Middle Distillates Hydrotreating Complex (Section 300) revamping. the integrated management system for compliance with the the completion of which will permit TAIF-NK to be more modern Refinery in Russia and to achieve greater refining depth oil production and Hydrogen Plant capacity increasing creasing by 2.3 MTPA for feedstock with zero heating requirements of three international standards, in particular, ISO 9001:2008 Quality Management System, ISO 14001:2004 TAIF-NK PSC was awarded with the Diploma of «Health, targeted to be no less than 95% for crude oil, to increase in by 4 KTPA for product and increasing elemental sulphur Environmental Management Systems, OHSAS 18001:2007 Safety and Environment 2011» in the nomination of «High profit and significantly increase in the value of tax payments production by 50 KTPA. Occupational Health and Safety Management System. level of Health, Safety and Environment, implementation of into the budgets of all levels. unique for the region innovative projects and information FCCU revamping project with increasing the unit s capacity by 1.1 MTPA for feedstock includes FCCU switch- March transparency». The program implementation of the filling stations ing to process hydrotreated feedstock and increasing the capacity up to 1.1 MTPA for feedstock Main events of the year TAIF-NK PSC Refinery laboratory was pronounced the winner of the competition «For the best achievements in testing (measuring) in 2011» in nomination of «Refinery Oil products tests». Labor collective conference took place in TAIF-NK PSC. A Collective Bargaining Agreement for 2011 was summarized and the new one was approved for. TAIF-NK PSC entered into agreement with Design Institute SoyuzKhimPromProject for general engineering of Heavy Residue Conversion Complex. TAIF-NK PSC received the new pattern of certificate «Crude oil processing and oil products production including production, storage and unloading of Aviation Fuels». April Mr. Shatalov Deputy Minister of Finance of the Russian Federation visited the Company. He acquainted The first stage of Section 300 revamping and installation of process equipment was finished at TAIF-NK s Middle Distillates Hydrotreating Complex. May According to Decree of the Government of the Russian Federation 485 dated May 16, TAIF-NK was awarded with a prize of Russian Federation Government regarding to product quality at the year end TAIF-NK PSC annual general meeting approved annual report for 2011 as well as annual financial statements for Net profit received at year-end 2011 was distributed and Board of Directors and Auditing committee of the Company was elected. June TAIF-NK PSC and Engineering Company Kellogg Brown and Root (USA) signed the contract for Basic Engineering Package for the main HRCC Unit Vacuum Residue Hydroconversion Unit based on proprietary process of VEBA COMBI CRACKING TAIF-NK PSC started to produce (100%) Diesel Fuel summer type of EURO-5 environmental standard.

12 About company In June R. Minnikhanov, President of Tatarstan Republic, participated in the Ceremony dedicated to starting commercial operation of Diesel Fuel of EURO-5 environmental standard R. Minnikhanov, President of Tatarstan Republic, participated in the Ceremony dedicated to starting commercial operation of Diesel Fuel of EURO-5 environmental standard. TAIF-NK PSC received the certificate for road petroleum bitumen BND 60/90 production. This certificate was received in the system of facultative certification regarding to public road system «AVTODORCERT». TAIF-NK PSC received certificate of conformance of Euro-5 Diesel Fuel for moderate climate. August Mr. Novak, Minister of Energy of the Russian Federation visited the Company. He was shown the newest Euro5 Diesel Fuel Plant and the scheme of Heavy Residue Conversion Complex. September and companies at the annually competition «ECOleader» prepared by Ministry of environment & mineral resources of Tatarstan Republic. By the results of International Exhibition «Oil, Gas, Petrochemistry-» TAIF-NK PSC was awarded with the 1st Grade Diploma in nomination of «Products with new or improved properties» for development and implementation of Diesel Fuel Euro-5 as well as received a Diploma in nomination of «Implementation of environmentally friendly technologies to produce Euro-5 Diesel Fuels» given by Union of Oil and Gas Producers of Russia. October The Russian Federation Government prize distribution for high oil product quality occurred in the House of Government of the Russian Federation on October 25,. Dmitry Medvedev Chairman of the Government of the Russian Federation gave over awards. Mr. Kalimullin General Director of TAIF-NK received a prize and RF Government Laureate diploma. TAIF-NK PSC and Toyo Engineering (Japan) signed a Long Lead Equipment Procurement Contract for VEBA COMBI CRACKING unit of Heavy Residue Conversion Complex. November TAIF-NK PSC became a prize winner in competition of «100 Best Goods of Russia» and «Best Products and services of the Republic of Tatarstan». The following oil products became prize winners on Tatarstan level: Unleaded Motor Gasoline Premium Euro-95, Road Construction Petroleum Bitumen BND 60/90, Diesel Fuel EURO Class, Jet Fuel RT grade. Road Petroleum Bitumen BND 60/90 became a prize winner on Federal level. TAIF-NK PSC and Kellogg Brown and Root (USA) entered into Agreement to supply Proprietary Equipment for VEBA COMBI CRACKING. R. Minnikhanov, President of Tatarstan Republic, participated in Groundbreaking Ceremony dedicated to commencement of the Heavy Residual Conversion Complex construction based on unique technology of VEBA COMBI TAIF-NK PSC acquired a license for Ultra Low Sulphur Diesel Fuel production from Shell Research Limited (Great Britain). July CRACKING. Participants of ceremony put into the founda- License Agreement and Basic Engineering Design tion the Capsule with a Commemorative Message for Generations. According to Decree of the Government of the Russian Federation 485 dated May 16, TAIF-NK was awarded with a prize of Russian Federation Government regarding to product quality December TAIF-NK PSC and Toyo Engineering (Japan) signed the second Long Lead Equipment Procurement Contract for VEBA COMBI CRACKING unit of Heavy Residue Conversion Complex. Toyo Engineering is selected as Detailed Engineering Contractor and equipment supplier (ЕР Contractor) for VEBA COMBI CRACKING unit. Contract were concluded with AXENS (France) to revamp FCC Hydrotreating Section of Gasoline Plant with implementation of selective hydrogenation process. TAIF-NK PSC and Shell Global Solution International BV (the Netherlands) entered into agreement for Feasibility Study development in order to revamp ULS Diesel Fuel Production Plant. TAIF-NK PSC became a winner in nomination of «Effective ecological program» among all-russian enterprises In November R. Minnikhanov, President of Tatarstan Republic, participated in Groundbreaking Ceremony dedicated to commencement of the Heavy Residual Conversion Complex construction

13 ON THE DEVELOPMENT IN TERMS OF ITS PRIORITY LINES OF BUSINESS The only way to achieve stable strength of life incessantlymove is to forward Chapter 2

14 On the development On the development in terms of its priority lines of business Marketable products output in (%) 2.1. Production operation During the reported year, the Company processed 8,383.7 thousand tons of crude oil, the average production capacity was %. Primary feedstock processing in (thous tons) TAIF-NK s refining depth was 75% in the accounting year and it considerably exceeded average industry all-russian index which was 71.2% in. The share of target products in the Company s total output in the accounting year remained at the level of 2011 and amounted to 72.9%. Total volume of TAIF-NK s marketable products was 8,132 thous tons in. Motor Gasoline 7.2 Straight-run gasoline and stable natural gasoline 21.0 Kerosene and Aviation Kerosene 3.7 Heating Oil 6.4 Vacuum Gas Oil 8.8 Fuel Oil 24.8 Diesel Fuel 23.6 Other Oil Products 4.5 Crude oil 7,380.7 Total volume of Straight-run gasoline and stable natural gasoline production was thousand tons in 24 that is 4.7 % higher than the previous year figure. 25 Gas Condensate 1,003.0 Total volume of kerosene and aviation kerosene production increased in 2.9% in comparison with 2011 and amounted to thousand tons. In the reporting year 1,916.0 thousand tons of diesel fuel was produced. Production of diesel fuel with sulfur Quality structure of Diesel fuel produced (%) content 10 ppm max made up 49.2% in total motor fuel output. Feedstock processing ratio (thous tons) Refining depth in (%) , , , Average refining depth in the Russian Federation TAIF-NK`s refining depth Diesel fuel with sulfur content ppm max Diesel fuel with sulfur content 10 ppm max Diesel fuel with sulfur content 500 ppm max

15 On the development In the reporting year thousand tons of motor gasoline was produced. In the production of motor gasoline Premium Euro-95 was increased on 70.8% Overall output of motor gasoline of grades Regular-92 and Premium EURO-95 (thous tons) Review of the marketing activities results Total sales in the reporting year made up 8,024 thousand tons of oil products. In proceeds from products Total sales in the reporting year made up 8,024 thousand tons of oil products In the reporting year thousand tons of motor gasoline was produced that is 3.8 thousand tons more than the figures of Fuel produced in the reporting year meets EURO-4 environment standard, at that 95.2% of the overall volume of produced fuel is Regular-92, the most marketable fuel, and 4.8% is motor gasoline Premium Euro-95. In the production of motor gasoline Premium Euro-95 was increased on 70.8% Structure of proceeds from sales of exported products in according to delivery destinations (%) Far abroad 83 sales made up RUB bln. In the reporting year the major portion of the proceeds volume amounting to 51.4% is comprised with exported marketing products. Geography of the exported products delivery destination is wide and includes countries near and far abroad. Nearly 86% of the total volume of proceeds from export in accounted for the proceeds from sales of diesel fuel, fuel oil, vacuum gasoil and stable natural gasoline. Near abroad 17 Nearly 91% of the total volume of proceeds from 26 Actual utility consumption 27 in sales at the domestic market in accounts for the total proceeds from sales of straight-run gasoline, stable No. Description Unit of measurement Quantity Amount excluding VAT, (RUB mln) 1. Electricity thous kw-h 295, Thermal energy gkal 364, Natural gas thous nm 3 51, Diesel Fuel 32.0 Structure of proceeds from sales of exported products in (%) Vacuum Gas Oil 13.5 Stable natural gasoline 12.7 Kerosene and Aviation Kerosene 8.5 Heating Oil 3.1 Fuel Oil 27.5 Other Products 2.7

16 On the development Structure of proceeds from sales products at the domestic market in (%) Straight-run gasoline and stable natural gasoline 36.2 Motor Gasoline 15.1 Heating Oil 13.7 Heavy gas oil 1.8 Kerosene and Aviation Kerosene 1.5 In the total volume of TAIF-NK PSC retail sales of the oil products via gas filling stations made up 46.6 thous tons, that is 22% higher than similar indicators for the previous year. Such increase is the result of high-quality motor fuels production, balanced price policy, gas filling stations revamping and enlargement of customer base. In comparing to 2011 the volume of proceeds from TAIF-NK PSC gas filling stations increased for 25.9% and made up more than RUB 1.0 bln. Structure of proceeds from retail sales of oil products via own gas filling stations network in (%) The number of legal entities doing their business under non-cash transactions using TAIF-NK PSC fuel cards has increased by 1.3 comparing with the previous year The number of legal entities doing their business under non-cash transactions using TAIF-NK PSC fuel cards has increased by 1.3 comparing with the previous year. natural gasoline, diesel fuel, motor gasoline and heating oil. Fuel Oil 1.3 Regular TAIF-NK sells 3 types of fuel at retail; the most marketable fuel type is motor gasoline of Regular-92 EURO-4 Diesel Fuel 26.5 Other Products 3.9 grade. 28 Premium ЕURO-95 Gasoline Structure of proceeds from sales products at the domestic market in according to delivery destinations (%) Diesel Fuel 15.6 In June, all TAIF-NK gas filling stations have begun to sell summer diesel fuel of EURO-5 environmental standard, and in December, winter diesel fuel of EURO-5 environmental standard; presently all TAIF-NK gas filling stations sell the motor fuels of high class only. Considering domestic market geography, due to capacities and own gas filling station network, market of is priority destination of sales. In percentage terms part of oil products sales in the Republic of Tatarstan in in monetary terms from the total volume of delivery to the domestic market made up 84.5%. The Republic of Tatarstan 84.5 In the total volume of TAIF-NK PSC retail sales of the oil products via gas filling stations made up 46.6 thous tons, that is 22% higher than similar indicators for the previous year. The Russian Federation 15.5 The main wholesale buyers of the oil products at the domestic market are OJSC Nizhnekamskneftechim, OOO Karsar, OAO HK Tatnefteproduct, Tatneft Group.

17 On the development Geography of the gas filling stations working under taif-nk brand Operated Gas Stations: PSC TAIF-NK ООО Karsar ООО Chulman-trans 12 Gas St-s in Kazan Staraya Yumjya Isakovo Gas st. No. 11 P241 KAZAN Shali Gas st. No. 10 Mamadysh Mendeleevsk Yelabuga Naberezhnye Chelny Nizhnekamsk Melekes Menzelinsk Sosnovyi Bor Laishevo Kamskie Polyany Zainsk Buinsk Tetushi Almetyevsk Jalil Aznakayevo P241 Leninogorsk Bugulma

18 On the development 2.3. Main economic and financial indicators of the Company Saleable product output (RUB bln) Products sales (RUB bln) Technical and economic indicators No. Units Description of Measurement 1. Refining volume thous tons 8,106 8,319 8, Saleable products thous tons 7,884 8,075 8, Saleable products RUB bln Proceeds from Sales RUB bln EBITDA RUB bln Investment RUB bln Tax payments and charges RUB bln Headcount man 2,796 2,820 2, Added value RUB bln The high level of the Company production operation, Positive trend of saleable products output steady rise available resources effective management (natural, human, is kept at TAIF-NK in due to modernization programs Assets RUB bln financial, innovation and technology resources), activity di- realization, production efficiency improvement owing to Net assets RUB bln versification owing to high-efficiency projects, capitalization and credit rating rise enabled to achieve high results of operational and financial activities in. gained experience and scientific and technological potential. Index of physical volume of production was %. In, TAIF-NK PSC saleable product output increased by 3.9% as compared to the previous year and made up RUB bln. Feedstock refining output (mln tons) Investments (RUB bln) Assets (RUB bln) Net assets (RUB bln)

19 On the development In TAIF-NK achieved results made it possible to transfer into the different level budgets the amount by RUB 4.7 bln higher if compared with the year of 2011 In, the added value was RUB 16.7 bln, with that the maximum percentage was the production profit (76%). In TAIF-NK achieved results made it possible to transfer into the different level budgets the amount by RUB 4.7 bln higher if compared with the year of EBITDA was RUB 15 bln characterizing a high effectiveness of activity and reliability of TAIF-NK PSC. In the reporting year the net assets equaled to RUB 36.4 bln. The positive dynamics of TAIF-NK PSC net assets growth at the stable level of the registered capital is the reflection of the fact that the Company is in the constant progress and this growth takes place generally due to the internal sources. Non-current and current assets ratio shows that current assets prevail within the Company assets and equal to 71% of total assets. Current assets structure indicates a prevailing share of high liquid current assets having a positive impact on the liquidity ratio. Values of current liquidity ratio and quick liquidity ratio are defined as a ratio of current (turnover) assets amount and high liquid current assets amount respectively to shortterm liabilities amount. Values of current and quick liquidity equaled to 1.6 and 1.23 correspondingly in indicate a reasonable ratio of current assets to short-term liabilities amount that enables the Company to discharge its liabilities in a short time. Non-current and current assets ratio as of (%) Current assets 71 Non current assets 29 Financial statement indicators Current assets structure as of (%) 34 No. Indicators Standard Equity to total assets financial stability index Cash 28 Accounts receivable 12 Stocks 19 Values of equity to total assets and financial stability index indicate that 50% of the Company`s assets are financed by means of stable sources in the form of the own assets and long-term liabilities. Values of turnover ratios indicate that upon the average the turnover of the Company`s total capital takes place 2 times a year, the turnover of the current assets take place 2.6 times a year, characterizing the effective usage of the current assets. Financial investments 28 Other current assets 13 Capital and Current Assets Turnover Indicators Current liquidity No. Indicators No. Indicators Standard 1. Total assets turnover ratio Current assets turnover ratio Current liquidity ratio > Quick liquidity ratio >

20 development prospects The principle of any progress is to reach the absolute limit and take one more stepfurther small Chapter 3

21 Development prospects Development prospects TAIF-NK PSC Simplified flow diagram after HRCC project implementation The most large-scale, capital intensive and strategically significant project of TAIF-NK PSC is the Heavy Residue Conversion Complex construction (HRCC). The HRCC construction is intended to eliminate highsulphur fuel oil production and to increase the yield of higher margin light products meeting the world and European quality requirements, along with the refining depth increase to not less than 95%. The HRCC will include the Vacuum Residue Hydroconversion Unit as per Veba Combi Cracking (VCC) technology 38 developed by engineering company Kellogg Brown and Root 39 (USA), Hydrogen Production unit, Sulphur Recovery Unit, several auxiliary units and tank storage farms. VCC unit, Hydrogen Production Unit, Sulphur Recovery Unit and off-site facilities commissioning is to be in VCC unit capacity is 2.7 MTPA of Vacuum Residue and up to 0.7 MTPA of Vacuum Gas Oil. Within the frame of the aforesaid project as of the end of the Contract for Basic Engineering Package, VCC process License Agreement and Proprietary Equipment Supply Agreements were concluded with Kellogg Brown and Root company. The company Toyo Engineering (Japan) was adopted as the designer and vendor of the equipment for VCC unit. The most large-scale, capital intensive and strategically significant project of TAIF-NK PSC is the Heavy Residue Conversion Complex construction TAIF-NK PSC HRCC construction has a budget and social significance. It is planned to create more than seven hundred new highly paid work places, and attract up to five thousand workers for the period of HRCC construction, it will enable to improve the quality of citizens life of Nizhnekamsk and the Republic of Tatarstan. Project implementation will allow the rise of added value from oil refining due to change-over to more profitable light oil products. Thus it will enable to increase the receipt of tax and other payments to all level budgets up to RUB 57.8 bln, including to the federal budget up to RUB 50.4 bln, to the regional budget up to RUB 7.4 bln (including the inflation expectations at the prices of the year 2017). TAIF-NK PSC strategic development includes the expansion of own gas filling station network considering the construction and obtainment of gas filling stations for the retail sales of own-produced Motor Gasoline and Diesel Fuel, the arrangement of the existing plants revamping and upgrading to increase its effectiveness, as well as resource saving, energy-saving, environmentally efficient technologies implementation: CDU/VDU-7, Middle Distillates Hydrotreating Complex, Catalytic Cracking Unit. The production of Naphtha will increase by 0.6 MTPA, Liquefied Petroleum Gas by 0.3 MTPA, Diesel Fuel by 2.2 MTPA, Kerosene by 0.3 MTPA due to TAIF-NK PSC strategic development plans realization including implementation measures for HRCC project, revamping of Middle Distillates Hydrotreating Complex and Catalytic Cracking unit with the capacity increase in 2017 in comparison with. TAIF-NK assortment of goods will possess the enhanced environmental characteristics, in particularly lower sulphur content (no more than 10 mg/kg in motor gasolines and diesel fuels), in aromatic and highly volatile hydrocarbons. Crude Oil Natural Gas TAIF-NK PSC Existing Production Hydrogen Production Unit Vacuum Residue Vacuum Gas Oil Hydrogen VCC Acid Gas VCC VGO Propan-Butane Fraction Naphtha EURO-5 Diesel Fuel TAIF-NK PSC Existing Fluid Catalytic Cracking Unit Sulphur Recovery Unit

22 Corporate and social responsibility Every man is a creative cause of what happens, the primum mobile with an original movement Chapter 4

23 Corporate and social responsibility Corporate and social responsibility Environmental protection costs in (RUB mln) 4.1. Quality, ecology, industrial and occupational safety The Company has implemented, certified and put into service the integrated management system with regard to quality, industrial safety, occupational health and safety, and Land conservation 4.7 environment policy so as to assure compliance with the international TAIF-NK PSC treats the environmental protection and standards ISO 9001:2008 «Quality Management ecological safety issue as one of the essential prerequisites for Miscellaneous environmental System», ISO 14001:2004 «Environmental management system», successful operation and development of business. related arrangements 1.9 OHSAS 18001:2007 «Occupational Health and Safety Management System», EN/AS 9100:2009 «Quality Management The interface agreement between the Ministry of En- System Requirements For Aviation, Space And Devironment & Natural Resources of the Republic of Tatarstan 42 fense Organizations». and TAIF-NK PSC was concluded for the purpose of measures 43 TAIF-NK PSC integrated management system enables to reveal and remove systematically and promptly any possible failures of the existing management system in order to prevent and exclude their further appearance, satisfying at maximum the customers` requirements for the high quality of oil products. The confirmation of the TAIF-NK PSC integrated management system efficiency is that the Company became a winner in a competition for award of the Russian Federation Government of 2011 in the field of quality and annual recognition of the products in a contest «100 best products of Russia». TAIF-NK PSC treats the environmental protection and ecological safety issue as one of the essential prerequisites for successful operation and development of business Policy on Quality, Industrial Safety, Occupational Health and Safety, and Environmental Protection is approved in the Company which is a basis for a functioning and constant improvement of integrated management system in accordance with the principles and requirements of the international standards. implementation of the long-term purpose-oriented program «Environmental protection of Nizhnekamsk and Nizhnekamsk Municipal District for the period of 2015» approved by the Resolution of the Cabinet of Ministers of the Republic of Tatarstan dated No The program includes the environmental protection measures intended for prevention, systematic reduction and minimization of the negative environmental impact from the production facilities. The cost of the environmental protection arrangements of the Company totaled about RUB 1.6 bln in the reporting year. The environmental impact is minimized owing to the employment of new resource saving technologies and stateof-the-art process techniques as well as the compliance with both the international and domestic environmental legislation and ecological safety and environmental protection standards. The positive results of the environmental activity of the Company were marked during the annual contest ECO-Leader Ambient air protection under the auspices of the Ministry of Environment & Natural Resources of the Republic of Tatarstan, and TAIF-NK PSC became a prize-taker in nomination «For the effective ecological program» between enterprises and organizations of national importance for the results of System of the operational control in TAIF-NK PSC includes the following: registration of TAIF-NK PSC facilities in the State Register of hazardous production facilities (currently this State Register contains 18 facilities of TAIF-NK); acquisition and execution of the activity according to the licenses (approvals) on specific types of activity; hazardous production facilities insurance and declaring, liability insurance of hazardous production facilities owners; arrangement and functioning of non-professional emergency response teams and arrangement of volutary fire guard; conduction of emergency response drills concerning the elimination of emergency situations. Water resources conservation 63.3 Improvement of production and consumption wastes disposal procedures 8.2 For the purpose of industrial safety improvement at the Company subdivisions the Consolidated work plan on provision of industrial safety at TAIF-NK PSC hazardous production facilities is elaborated each year. In order to provide the industrial safety much attention is paid to timely realization of the reconstruction, revamping and technical upgrading of the production facilities. The cost of the industrial safety provision made up approximately RUB 135 mln in the reporting year. No emergency situations and accidents occurred at TAIF-NK PSC industrial facilities owing to the effective work under the industrial safety. The commitments the Company had taken with regard to occupational safety were embodied in the reporting year by means of: arrangement of comprehensive and targeted preventive control inspections of the Company s structural

24 Corporate and social responsibility Non-occurrence of accidents and occupational diseases in the Company proves the effectiveness of work in the sphere of occupational safety in divisions regarding the occupational safety, industrial and fire safety. During the scheduled shutdown for maintenance and repair, a series of audits were conducted to verify the observation of the state and local regulatory acts in the field of health and safety by the Company s employees and contractors; training and further examination of 1766 employees from the Company s staff for safety knowledge assessment; periodical arrangement of physical and chemical factors instrumental gauging at working places and in subdivisions of the Company. The Company carries out provisional and periodic medical check-ups and other types of medical examination with a view to watch over the personnel s health. Safety Agreement as well as the Action Plan on Improvement of Working Conditions based on the Workplaces Assessment Findings. In November TAIF-NK confirmed once again its existing Safety Certificate compliance with occupational safety measures taken by the Company and specified by the government regulatory requirements on occupational safety. Non-occurrence of accidents and occupational diseases in the Company proves the effectiveness of work in the sphere of occupational safety in. Costs for the implementation of labour safety and labour arrangements in the reporting year made up RUB 78.8 mln Personnel TAIF-NK s stable development is primarily the result of purposeful, coordinated and responsible work of all Company s employees. The TAIF-NK s main aspects in personnel management policy are as follows: human resource planning for effective implementation of the short-term and long-term business strategy and Company s plans; qualitative selection of qualified employees of different level; ensuring of competitive salary level; enabling of training and skill improvement; ensuring of safe and comfortable labor conditions; In the total amount of funds allocated for occupational arrangement of review contest on occupational safety, health, industrial safety and environmental protection strict compliance of labour and civil legislation require- 44 industrial and fire safety, holding meetings to discuss made up about RUB 1.8 bln. ments personnel health and safety related issues; 45 development of motivational system corresponding to skill level and personal contribution to the Company s development; social protection improvement; creating an atmosphere based on open mutual respect. As of 31st December, TAIF-NK PSC employs 2,952 persons, where nearly 31% are women. Nearly 46% of TAIF-NK PSC employees are under 35 years of age. Average age of employees in the reporting year was 39.5 years old. HR structure by occupation category for (%) Managers 12.4 Technicians and office staff 22.4 Workers 65.2 The Company`s personnel is provided with detergents and neutralizing agents, special certified overalls, footwear and other means of personal protection, milk. As at the end of reporting period the Company conducted the certification procedure at 1323 work places to check the labor conditions. In accordance with the Production Inspection Program regarding assurance of compliance with the sanitary and epidemiological requirements, measurements were taken at work places to verify conformance to the specified sanitary norms and regulations. The activities for improvement of labor conditions were implemented under the elaborated by the Company Occupational Health and Dynamics of the personnel educational level (%) Description Higher education Secondary professional education Elementary professional education Secondary education Primary education

25 Corporate and social responsibility The Company pays special attention for well-timed staff recruitment. Professional recruitment of the TAIF-NK PSC Expenses for employees training (RUB mln) Dynamics of labour productivity (RUB mln per year/man) expenses for employees transportation to work and personnel is based on Company s demand on employees of vice versa; appropriate levels of qualification and qualification requirements periodic, planned and other medical examinations of 46 to the employees. the employees; 47 The Company has organized HR reserve comprising of successful and promising employees to arrange conditions for professional and career advancement. Training, continuing education and advanced training of the Company s workers are provided in Petrochemistry and Oil Refining Technical School, and as for labour and industrial safety issues personnel are trained in the Private Educational Institution of Initial Professional and Additional Education «Bezopasnost truda» in Nizhnekamsk. Advanced training of TAIF-NK PSC managers and technicians is carried out in the additional professional training institutes, modern educational technologies institutes and other educational Description years 1,491 1,388 1, years years years and older The Company has organized HR reserve comprising of successful and promising employees to arrange conditions for professional and career advancement Age structure (man) institutions in the Republic of Tatarstan and the Russian Federation. In, 696 workers attended training, continuing education and advance training courses, 216 managers and technicians attended short-term skills improvement courses. The total amount of the funds directed to the training course of the Company`s employees equaled to RUB 20.6 mln in the reporting year Social policy High level of quality indexes of material and technical means, production process development, investments utilization degree as well as high level of labour, production and management organization; favourable socio-psychological environment in TAIF-NK PSC has enabled to improve labour productivity indexes Primarily TAIF-NK social policy is focused on improvement of employees quality of life. In view of this the Company enhances the employees social package every year. The social package includes guarantees and compensations as required by labour legislation, additional payments provided by the Company s local acts as well: supplemental payments to employees for holiday; material assistance to employees; single-time payment to employees on retirement; Primarily TAIF-NK social policy is focused on improvement of employees quality of life. In view of this the Company enhances the employees social package every year additional payment to employees for meal, provision free of charge milk; employees insurance under program of optional medical insurance and optional accident insurance; material support of pensioners, families with children and disabled children; subsidized trips to children s camps and sanatoriums; festive events arrangement (Chemist Day, New Year). Total amount of expenses for social policy in made up nearly RUB mln. The Company participates in the republican program «Social Mortgage». The total area of apartments given to TAIF-NK PSC employees under this program in the year under report is sq. meters.

26 Corporate and social responsibility 4.4. Charity TAIF-NK PSC is one of the major budget revenue generating enterprise in the region. The Company takes an active part in arrangement and implementation of the comprehensive social and economic programs on municipal and republican scale, namely the Company renders charitable assistance to the social welfare institutions, institutions of health care, education, physical fitness and sport, low-income citizens and pensioners. In the reporting year the Company has assisted organizations like Nizhnekamsk Special Comprehensive Secondary School No.18, Municipal Budgetary General Education Institution Boarding School «Cadet boarding school», VESTA Social Assistance Center, the youth children organization «Galaktika», The Republic Municipal Budgetary Pre-school Education Institution Total amount of funds given for charity and sponsor of Tatarstan «Combined Kindergarten No. 68», Nizhnekamsk branch of support equaled to RUB 1.3 bln in the Russia Paratroopers Union, Municipal Budgetary General Education Institution Comprehensive Secondary School No. 29, Nizhnekamsk Central Regional Multi-filed Hospital, Tatar Variety Theater «Muncha tashy», Public Fund for Culture and Art Development, religious organizations, Comprehensive Secondary School No. 5 located in Almetyevsk. Annually the Company takes part in the charity events. The Company has provided assistance to children from needy families under the Republican campaign «Please assist in preparing for schooling», as well as to handicapped people within the handicapped persons decade, and to the supported veterans in honor of War Victory Day celebration. TAIF-NK is also actively involved and provides all-round support for various municipal events such as «The Pancake Week», Sabantui, City s Day and New Year s Day. TAIF-NK provides a great support to the development of sport in the Republic of Tatarstan. The Company is the main sponsor of FC «Rubin» (Kazan) and sports team «MX- Autosport». In the reporting year the following sporting events were held with the support of TAIF-NK: international football tournament among juniors dedicated to the memory of V. V. Vinnikov, annual international wrestling tournament, the international wu-shu tournament, city boxing tournament dedicated to the memory of Yu. V. Tyunin etc Tax payments Gross proceeds (RUB bln) Data on payments to the budgets (RUB bln) Dynamics of indirect taxes share in gross proceeds TAIF-NK PSC charges and pays taxes and duties in due time in compliance with the established procedure according to the tax and revenue legislation of the Russian Federation. In, TAIF-NK PSC tax payments have increased in comparison with 2011 for 12.3% and made up about RUB 42.8 bln. Growth made up 89.4% in comparison with the year of Structure of tax payments to the budgets in (%) 123,8 170,0 181,3 The Russian Federation % 26.9% 29.1% The Company takes an active part in arrangement and implementation of the comprehensive social and economic programs on municipal and republican scale, namely the Company renders charitable assistance to the social welfare institutions, institutions of health care, education, physical fitness and sport, low-income citizens and pensioners Net proceed Indirect taxes (excise taxes, export customs duties, VAT)

27 Corporate management Wherever you go, if youwant to move on, you must push your way Chapter 5

28 Corporate management Corporate management Vladimir V. Presnyakov Chairman of the Board of Directors Deputy General Director Petrochemicals and Refining TAIF PSC 5.1. Share capital and dividends 5.2. Company s corporate management and control bodies Year of birth: 1951 Education background: higher education Has no participating interest in TAIF-NK s authorized capital Does not hold any of TAIF-NK shares As of , TAIF-NK PSC authorized capital The Company s governing bodies in the reporting year amounted to RUB (five billion eight hundred were as follows: fifty one million and seventy seven thousand) which is divided the General Shareholders Meeting; into registered ordinary shares making up Board of Directors; (five billion eight hundred fifty one million and seventy Sole executive body (General Director). Rustem N. seven thousand) pieces having par value of RUB 1 (One) per Sulteev share. The TAIF-NK PSC sole shareholder is TAIF PSC. First Deputy General Director 52 The Company s dividend policy is based on the following Production and Commerce TAIF PSC 53 principles: reasonable allocation of profit taking into account sole shareholder interests as well as Company s demand on development; enhance the Company s investment appeal and increase its capitalization; respect and observance of shareholder rights provided by the Russian Federation legislation, Company s Articles of Association and its in-house documents. According to the sole shareholder s resolution No.10/05-12 dd 10 May, the current Company s Board of Directors was elected consisting of the following officials: Year of birth: 1954 Education background: higher education Has no participating interest in TAIF-NK s authorized capital Does not hold any of TAIF-NK shares The source of dividends is a net profit gained by the Company. Net profit is derived from the Company`s accounts and financial statements as compiled in accordance with the requirements of the Russian legislation. The amount of paid out dividends equaled to RUB 4.1 bln in. Guzeliya M. Safina Deputy General Director Economics and Finance TAIF PSC Year of birth: 1955 Education background: higher education Has no participating interest in TAIF-NK s authorized capital Does not hold any of TAIF-NK shares

29 Corporate management Abdulkhamit A. Nazmutdinov Transport Advisor Deputy General Director Production and Commerce TAIF PSC Amil K. Kalimullin General Director TAIF-NK PSC Year of birth: 1949 Education background: higher education Has no participating interest in TAIF-NK s authorized capital Does not hold any of TAIF-NK shares Year of birth: 1950 Education background: higher education Has no participating interest in TAIF-NK s authorized capital Does not hold any of TAIF-NK shares Andrei V. Sarkin Alexander Z. Fridman Head of Corporate Property and Investments Management 54 TAIF PSC 55 Year of birth: 1960 Education background: higher education Has no participating interest in TAIF-NK s authorized capital Does not hold any of TAIF-NK shares Year of birth: 1952 Education background: higher education Has no participating interest in TAIF-NK s authorized capital Does not hold any of TAIF-NK shares Dmitry I. Teslenko Artemy A. Osipyan Head of Financial and Economic Department TAIF PSC Year of birth: 1961 Education background: higher education Has no participating interest in TAIF-NK s authorized capital Does not hold any of TAIF-NK shares Year of birth: 1944 Education background: higher education Has no participating interest in TAIF-NK s authorized capital Does not hold any of TAIF-NK shares

30 Corporate management Company s Board of Directors had been acted till 10th May (was elected by the shareholder s resolution dd 25 April 2011) R. N. Sulteev V. V. Presnyakov A. K. Shigaboutdinov R. A. Shigaboutdinov A. A. Babynin TAIF-NK PSC General Director is elected by the Company s Board of Directors for a period of 3 (three) years. Amil K. Kalimullin was elected as TAIF-NK PSC General Director by the Resolution of the Board of Director dd 22 October Amil K. Kalimullin General Director TAIF-NK PSC Year of birth: 1950 Education background: higher education Has no participating interest in TAIF-NK s authorized capital Does not hold any of Company s shares. Changes in the TAIF-NK PSC Board of Directors Company s Board of Directors acting since 10th May (was elected by the shareholder s resolution dd 10 May ) R. N. Sulteev V. V. Presnyakov G. M. Safina A. V. Sarkin A. A. Nazmutdinov D. I. Teslenko The Audit Committee was elected in pursuance of the TAIF-NK PSC shareholder s resolution dated 10 May, consisting of: Rushan R. Shamgunov Audit Committee Chairman Head of Petrochemicals and Oil Refining Department TAIF PSC Year of birth: 1978 Education background: higher education Does not hold any of Company s shares. Venera Kh. Mustafina Head of Foreign Trading Department, Production and Sales Division TAIF PSC Year of birth: 1976 Education background: higher education Does not hold any of Company s shares. Luiza V. Yeryashkina Senior Economist Oil & Gas and Chemical Complex Controlling, Financial and Economic Department TAIF PSC Year of birth: 1984 Education background: higher education Does not hold any of Company s shares. Tatyana A. Abayeva Accountant Consolidated Statements Service, Accounting Department TAIF PSC Year of birth: 1987 Education background: higher education Does not hold any of Company s shares. A. K. Kalimullin Guzeliya R. Abzalina Year of birth: 1977 A. Z. Fridman Education background: higher education A. A. Osipyan Does not hold any of Company s shares In the year under report, no remunerations (reimbursement of expenses) were paid to the members of the The Company s Body to Approve the Transaction Person Interested in Transaction The Board of Directors TAIF-NK PSC Subject: Loan Agreement Parties: TAIF-NK PSC (Lender), Y yughimterminal OOO (Lendee) * The above-mentioned information is given subject to requirements of compliance with the Russian Federation Personal Information Protection Act Information on interested part transactions undertaken Board of Directors. The only member of the Company s corporate body who received remuneration for managerial functions in is the sole executive body TAIF-NK PSC General Director. The amount of remuneration to the person representing the TAIF-NK s sole executive body is determined in accordance with the relevant labour contract as well as the Company s in-house regulations.* 5.3. Major undertaken transactions (a list of major undertaken transactions and interested party transactions) No deals recognizable as major transactions according to the Federal Law On Joint-Stock Companies were undertaken by the Company in. Essential Conditions Total transaction amount: RUB 28,776,000

31 Corporate management The Company s Body to Approve the Transaction Person Interested in Transaction Information on interested party transactions undertaken (extension) Essential Conditions The Board of Directors TAIF-NK PSC Subject: Real Estate Mortgage Agreement Parties: TAIF-NK PSC (Pledgee), Y yughimterminal OOO (Pledger) Transaction amount: RUB 7,957, Information on compliance with the Corporate Code of Conduct recommendations The information is disclosed in accordance with the requirements of the Regulations on Information Disclosure Information on TAIF-NK PSC compliance with the Corporate Code of Conduct recommendations Clauses of the Corporate Code of Conduct by Issuers of Issue-grade Securities as approved under Order No /пз-н dd 04 October 2011 issued by the FFMS of the Russian Federation as well as under the Guideline No /р «The Recommended Approaches to Presentation of Information On Compliance with the Corporate Code of Conduct in Joint-Stock Company Annual Reports» as issued by the FCSM of the Russian Federation under the date of 30 April Compliance (Yes/No) Remarks Parties: TAIF-NK PSC (Pledgee), Y yu-svl ZAO (Pledger) Transaction amount: RUB 15,318,632 and 38 kopecks The Board of Directors TAIF-NK PSC Subject: Movable Estate Pledge Agreement The shareholders should be provided with access to the list of Yes Item 14.8 persons authorized to participate in the General Shareholders` of TAIF-NK PSC Parties: Meeting from the General Shareholders` Meeting starting notice Articles of Association Y until the attendee General Shareholders` Meeting closing TAIF-NK PSC (Pledgee), yughimterminal OOO (Pledger) date, in case of an absentee General Shareholders` Meeting until the ballots submission cutoff date Transaction amount: RUB 5,509,684 and 30 kopecks 58 The articles of association of the joint-stock company should stip- Yes Item The Board of Directors TAIF-NK PSC Subject: Real Estate Mortgage Agreement ulate that the board of directors shall be given authority for approval of the company s financial and business plan on yearly basis The articles of association of the joint-stock company should stipulate that the board of directors shall be granted the right to give approval to any contractual terms and conditions jointly with the general director Yes of TAIF-NK PSC Articles of Association Item of TAIF-NK PSC Articles of Association 5.4. Information on subsidiaries and affiliates TAIF-NK PSC holds shares and stakes in the equity capitals of the following companies: LLC «TAIF-NK-AZS» (since 2007) the core business activity is leasing of property; SVL. Terminal OOO, YU-SVL ООО (YU-SVL ZAO before ), Yughimterminal ООО, Solvalub Shipping ZАО; Chulman-Trans ООО (since 2010) the core business activity is transhipment and retail trade of oil products. The articles of association of the joint-stock company should stipulate that the Board of Directors shall be elected on cumulative voting basis The scope of the joint-stock company s in-house documents should include the procedure for the Board of Directors meetings The joint-stock company s Articles of association or in-house documents should contain a provision that any major transaction shall be approved prior to its consummation Yes Yes Yes Item 15.6 of TAIF-NK PSC Articles of Association Items of TAIF-NK PSC Articles of Association, Article 8 of Regulations on TAIF-NK PSC Board of Directors Items , of TAIF-NK PSC Articles of Association «SNRG Logistic Limited» (since 2008) a company holding companies conducting tran-shipping activities in Port Kavkaz: The joint-stock company should have its own website intended to show any company related information on regular basis Yes portal/company.aspx?id=14456

32 KEY RISK FACTORS Moving forward is only possible with a strong belief in achieving the objective Chapter 6

33 Key risk factors Risk management is an integral part of TAIF-NK s internal environment and incorporates the following: implementation of risk-oriented approach to all aspects of operational and managerial activities; performing systematic analysis of the identified risks; Generation of the risk control system and the system of monitoring the risk management operating efficiency; understanding by all Company s employees of fundamental principles and approaches to risk management accepted in the Company; Key rick factor 6.1. Industry related risks TAIF-NK s core business operations is processing of crude oil and gas condensate and oil products sales, so the Company is subject to risks which are traditionally common to oil and gas processing industry, namely: Risks associated with potential changes of prices for crude oil adjustment of salable products structure, depending ensuring the required regulatory and methodological and oil products on demand, price proposals of the oil products market support; participants. The Company fully recognizes the responsibility for creating safe working conditions and maintaining favourable 62 allocation of authorities and responsibility for risk management among TAIF-NK s structural subdivisions. Fluctuations of crude oil prices, and correspondingly, 63 Risks of access to transportation infrastructure The Company s aim in risk management is ensuring additional guarantees in achieving strategic objectives on account of early warning, risk detection and assurance of maximum risk management efficiency. The key target of the risk management process in TAIF-NK is assurance of the operation process continuity and operations stability by means of threats warning and limitation of severity of Company s activities exposure to external and internal unfavourable factors. oil products prices caused by oil reserves status, decisions of OPEC, geopolitical situation (instability associated with outbreak of armed conflicts or acts of terrorism), growth/ drawdown of alternative energy forms share, investors expectations, seasonal increase of fuel consumption, condition of primary commodity markets, condition of equity and currency markets, world and regional level of demand and supply and other factors, may have a great impact on the Company economics. Mitigation of risk of price changes for feedstock is achieved by executing long-term contracts with crude oil and gas condensate suppliers. TAIF-NK PSC has sufficient opportunities for commodity flows redistribution depending on conditions at the external and internal markets which contributes to mitigation of risks associated with fluctuations of prices for oil products. The advantage in carrying out export activities is that when contracting the volumes the Company doesn t fix a price for a long-run period which enables to swiftly respond to the market situation. Risks associated with industrial competition In the Russian oil processing industry there is intense competition between Russian oil companies and independent refineries in terms of principal directions of production and administrative activities. In order to mitigate risks associated with industrial competition, TAIF-NK carries out a set of measures: implementation of strategically important project of constructing a Heavy residue conversion complex in order to exclude production of heavy oil products (fuel oil, vacuum gas oil), export duties on which reduced attractiveness of these oil products export sales; constant market monitoring and bringing in new buyers in order to tap new market segments; When transporting feedstock, energy commodities and products TAIF-NK mainly depends on transportation capacities of the following government monopolies: JSC AK Transneft, OJSC AK Transnefteproduct, JSC Russian Railways, as well as of OJSC Gazprom in terms of consumed gas transportation. In order to minimize influence of such risks the Company carries out a set of measures aimed to: long-term planning of commodities flow, timely backing up of oil and oil products circulation rates and of railway vehicles capacities; effective commodities flows redistribution in means of transport; search for and elaboration of alternative feedstock suppliers and ways of products delivery (including obtaining control over terminals operating activity in terms of oil products trans-shipment, development of own gas filling station network). Risks associated with rising of tariff rates for energy commodities Risks of increase in TAIF-NK s expenditures due to increase of energy costs related to growth of tariffs in the Russian Federation energy industry may have an unfavourable impact on the Company s business operation. To mitigate this kind of risk, Company s expenditures are optimized and energy-efficient technologies are implemented. Solution to the issue of energy supply is facilitated by close cooperation with enterprises of the petrochemical and energy complexes of the Tatarstan Republic, control of expenditures types, budgeting, monitoring world-wide and sector-wide trends. Environmental risks and risks of industrial safety environment and industrial safety, continuously controls its operations in order to ensure compliance with corresponding environmentally-friendly standards, and implements environmental protection programs. TAIF-NK s policy with regard to control over industrial safety and environment protection is focused on ensuring compliance with applicable legal requirements by means of investing significant funds into compliance with requirements of industrial safety standards and enforcement of environmental protection measures, including application of technologies providing mitigation of the negative impact on the environment. The Company s aim in risk management is ensuring additional guarantees in achieving strategic objectives on account of early warning, risk detection and assurance of maximum risk management efficiency

34 Key risk factors TAIF-NK s policy with regard to control over industrial safety and environment protection is focused on ensuring compliance with applicable legal requirements by means of investing significant funds into compliance with requirements of industrial safety standards and enforcement of environmental protection measures, including application of technologies providing mitigation of the negative impact on the environment changes in legislation including tax legislation which can result in additional Company s obligations. Economic risks may be related to the status of government obligations to pay subsidies, status of gold and forex reserves, changes in exchange rate, etc. Risks which are associated with social and economic as well as political processes in the Russian Federation are beyond Company s control. TAIF-NK PSC performs regular monitoring of projects and adopted legislative acts which enables to adjust Company s business operation in a timely manner in order to minimize the specified risks. The second factor of mitigating a currency-related risk is the redirection of a part of currency earnings to financing of the imported equipment supply within construction of Heavy Residue Conversion Complex Legal risks Performing its business activities on the territory of the Russian Federation, TAIF-NK PSC is susceptible to potential occurrence of legal risks, associated with changes in currency regulation, tax and anti-trust legislation, customs control and duties regulation. Credit risks associated with failure to perform by the contracting parties of obligations to pay for supplied products are minor for TAIF-NK PSC The Company organizes its operation based on accurate compliance with legislation, follows and responds swiftly to changes in the legislation, as well as the Company strives for a meaningful dialogue with regulatory authorities in matters of law norms interpretation. Process risks, associated with failure of production equipment may lead to stoppage of production and failure to achieve projected operational and financial indicators Financial risks 64 In order to exclude the effect of these risks on the Company s business operation, the following measures are taken: timely 65 detection of such risks, planned preventative maintenance is performed, technical upgrading and modernization of production facilities, strict compliance with process operating regulations, recruitment and training of qualified personnel, annual overhaul, monitoring of the equipment technical condition, performance of laboratory investigations, implementation of automated control systems and other activities. Credit risk Credit risks associated with failure to perform by the contracting parties of obligations to pay for supplied products are minor for TAIF-NK PSC. The Company mitigates this group of risks using financial instruments by means of advanced payments and bank guarantees Country and regional risks Risks associated with TAIF-NK s operation on the territory of the Republic of Tatarstan and the Russian Federation can be divided into political and economic risks. Political risks are: political course deviation that may influence country s investment attractiveness and lead to limitation of potential attraction of foreign capital; Currency risk Risks of unfavorable changes of currency rates when converting dollar-denominated export receivables into Russian rubles to cover expenses are minimized in TAIF-NK PSC. This is stipulated by the fact that crude oil prices are quoted in US dollars. In its turn crude oil is the basic feedstock for the Company and takes up the largest proportion in the cost structure, and the prices for marketable products are quoted based on the crude oil price, which allows insuring earnings from considerable currency fluctuations.

35 Financial statements Life is like riding a bicycle. To keep your balance, you must keep moving Chapter 7

36 Financial statements Financial statements Balance sheet as of 31 december (RUB thous) Description Line code As of 31 Dec As of 31 Dec 2011 As of 31 Dec 2010 Balance sheet as of 31 december (RUB thous) LIABILITIES ASSETS Description Line code As of 31 Dec As of 31 Dec 2011 As of 31 Dec 2010 I. Non-current assets Treasury stocks 1320 ( ) ( ) ( ) Revaluation of non-current assets 1340 Intangible assets ,389 1,796 1,499 Additional capital (without revaluation) ,677 18,677 Results of studies and developments ,300 Reserve funds , , ,550 Intangible development assets 1130 Retained earning (retained loss) ,203,601 23,608,937 13,810, Tangible development assets 1140 Fixed assets ,993,773 15,021,294 15,658,313 Total for Section III ,365,909 29,771,241 19,954,107 Income-bearing investments in tangible assets ,344 35,751 37,647 IV. Long-term liabilities 69 Financial investments ,464,418 2,464,569 2,627,969 Long-term loan funds 1410 Deferred tax assets ,868 52,940 27,425 Deferred tax liabilities , , ,254 Other non-current assets , , ,505 Reserves for contingent liabilities 1430 Total for Section I ,211,828 17,960,733 18,683,658 Other long-term liabilities 1450 Total for Section IV , , ,254 II. Current assets Inventory ,205,560 7,397,677 5,843,014 Value added tax on acquired assets ,927,804 1,604,296 1,218,047 Receivables ,945,376 5,074,409 5,283,893 Financial investments ,304,600 35,539 35,539 Monetary funds ,384,702 17,089,867 4,302,264 Other current assets ,370,819 2,082,709 1,093,337 III. Capital and reserves Statutory capital (share capital, statutory fund, shareholder contributions) ,851,077 5,851,077 5,851,000 V. Short-term liabilities Short-term loan funds ,016,349 Short-term accounts payable ,061,580 20,553,726 14,847,637 Unearned income 1530 Estimated liabilities ,974 44,951 28,293 Other short-term liabilities ,336 47,299 21,112 Total for Section II ,138,861 33,284,497 17,776,094 BALANCE ,350,689 51,245,230 36,459,752 Total for Section V ,146,689 20,646,008 15,913,391 BALANCE ,350,689 51,245,230 36,459,752

37 Financial statements Profit and loss statement (RUB thous) Profit and loss statement (RUB thous) Description Line code As of Jan-Dec As of Jan-Dec 2011 Description Line code As of Jan-Dec As of Jan-Dec 2011 Revenues ,597, ,268,968 FOR REFERENCE ONLY Cost of sales 2120 (104,751,348) (94,519,203) The result of non-current assets evaluation, Gross margin (loss) ,846,312 29,749,765 not included into the net income (loss) over the period 2510 Business expenses 2210 (8,845,260) (7,375,082) The result of other operations, not included into Administrative expenses 2220 (2,282,799) (2,110,884) the net income (loss) over the period , Profit (loss) on sales ,718,253 20,263,799 Gross financial result of the period ,764,966 15,908,019 Income from partnership with third companies ,890 34,764 Base profit (loss) per share Interests receivable ,331, ,160 Interests payable 2330 (65,299) (14,152) Other revenues ,366,238 82,195,183 Other expenses 2350 (102,760,498) (82,797,781) Profit (loss) before taxation ,627,490 19,990,973 Current income tax 2410 (2,816,309) (3,883,132) including permanent tax liabilities (assets) , ,311 Change of deferred tax liabilities 2430 (27,050) (244,545) Change of deferred tax assets 2450 (17,954) 26,171 Others 2460 (1,211) (125) Net income (loss) ,764,966 15,889,342 Diluted earning (loss) per share 2910 Authenticity of the data presented in the Company s Annual Report has been approved by TAIF-NK Audit Committee General Director A. K. Kalimullin Chief Accountant D. R. Kuramshina