2009 Taif-nk English

CONTENTS

General Director's Message 4

Chapter I. Oil Refining in Russia 6

Chapter II. Company’s Standing in Oil Refining Industry 12

Chapter III. Technical and Economic Performance 20

Chapter IV. Industrial Safety and Personnel Health Issues 32

Chapter V. Integrated Management System 38

Chapter VI. Social and HR Policy 42

Chapter VII. Company’s Development Prospects 48

Chapter VIII. Corporate Management Structure 52

Chapter IX. Major Risks Associated with Company’s Businesses 60

Chapter X. Financial Statements 66

Company's Contact Details 72

Reliability is the property of an object

to maintain through time the values of all parameters within fixed limits.

The notion of reliability is intuitively associated with impermissibility of any failures during operation.

Scientists have created a whole theory of reliability which is based upon a number of factors such as operational

availability, high accessibility, durability, operating capability, and conservability. These properties are also deemed to be

an indicator of stable operation of a company, an enterprise or a bank since the stable operation guarantees reliable and timely fulfillment of commitments made. What else makes a company reliable? It’s a sound financial position that enables the company not only to survive the crisis but also to develop, move onward and implement new projects. It’s availability of highly qualified management, a well thought-out strategy and sufficient

resources. That is why the company recognizes and respects those values only that have been proved in practice. Being

reliable does not mean tomerely possess knowledge and practical experience gained over years but

also to do for the generations to come the same things that the previous

generations did for us reliably.

I bring herewith to your attention TAIF-NK 2009 Annual Report which summarizes the results of the Company’s core business activities over the reporting period. The previous year was rather challenging, however it was the period of the Company’s steady progress. We proved our reliability as an investment oriented company. We significantly strengthened our processing capability, with having achieved unprecedented results in a variety of activities.

In 2009 the Company's units refined as much as 8,059.6 thousand tons of crude oil. The primary feedstock refining capacity utilization averaged 100.7% over the reporting period.

The crude refining cost dropped by 1.83% in 2009 vs. 2008. The oil product output equaled RUB 74.9 bln. Motor gasoline supply within the Republic of Tatarstan increased to 46% in 2009 up from 37% in 2008, with this type

of fuel having high quality and meeting EURO-4 requirements. In 2009 the total amount of tax charges paid by the Company to all level budgets and non-budgetary funds equaled

RUB 14.8 bln. Net proceeds made up RUB 617 mln at year end. The amount of dividends paid out of the previous years’ revenues

made up RUB 2.5 bln. We put into commercial operation own TAME and MTBE Units in order to obtain high-octane blending components

for gasoline production. The manufacture of TAME and MTBE furthered enhancement of motor gasoline quality and helped lessen the Company’s dependence on external suppliers of octane-increasing components.

We have moved to the next stage of the Company’s strategic development by proceeding to the Heavy Residue Conversion Complex (HRCC) Project implementation. The HRCC Project will allow maximization of the Company’s earning power along with strengthening the resistance to external risks and supplying the feedstock to TAIF Group subsidiaries in light of the petrochemical enterprises development program.

Launching of the Heavy Residue Conversion Complex is supposed to expand the Company’s oil refining throughput from the current 7 mln tpa up to 9.1 mln tpa and increase the production of straight-run gasoline by 59%, motor gasoline by 38%, diesel fuel more than twofold.

We are optimistic about the future since the period of economic slump is not just the time of losses but the time of new potentialities for realization of which we have everything at our disposal as far as we have the time which can be used for making a decisive dash and we have efficient and united personnel as well as cutting edge technologies available.

Looking back at the previous year and summing up the results attained I would like to emphasize that the tasks we’ve got will demand maximum concentration of our efforts. We will have to demonstrate not only the flexibility and ability to keep the high level of results but also the capability to adequately and effectively respond to the challenges of the modern world.

I am sure we are bound to be successful.

DEar SharEhOlDErS, INvESTOrS aND BuSINESS ParTNErS!

TAIF-NK General Directoralexander a. Babynin

5

GENERAL DIRECTOR’S MESSAGE

To be reliable is...

ChaPTEr I

OIL REFINING IN RUSSIA

is to provide backup

ANNUAL REPORT PSC “TAIF-NK” 2009 CHAPTER I OIL REFINING IN RUSSIA

98

CruDE OIl rEfININg DyNamICS IN ruSSIa

Russian plants utilize nearly all range of refining technologies employed throughout the world. However, the proportion between the technologies that allow increasing the oil conversion rate thus im-proving the quality of fuels and the technologies that relate to the pri-mary crude distillation is considerably lagging behind the global rates.

Upgrading of refining capacities and increase of oil conversion rate are the matter of top priority for the national industry. Modern-ization of the refining and petrochemical sectors will allow making the best use of the two competitive advantages of Russia: high scien-tific and technical potential and rich reserves of hydrocarbons. As far as the refining sector, application of the latest scientific and techno-logical achievements will produce the tangible business effect since up-to-date approaches can make it possible to offer considerably more expensive and higher quality products in the domestic and world markets. The switch from feedstock exporting to end product export-ing will allow Russia to change its status of a feedstock supplier and obtain substantially higher revenues from the export sales, while the refiners can achieve the synergic effect as a result of reduced invest-

190mln tons

195mln tons

211mln tons

220mln tons

229mln tons

236mln tons

236mln tons

Sources:1. InfoTECH. Oil & Gas Bulletin, Issue №1 2008, Issue №1 2009, Issue №1 2010;2. Federal State Statistics Service of the Russian Federation and Federal State Unitary Enterprise “Fuel and Energy Complex Central Dispatch Service”.

2003 2004 2005 2006 2007 2008 2009

The oil refining industry is the most important sec-tor inthe oil complex. It is the industry that determines efficiency of the use ofhydrocarbons as feedstock. Its proper functioning assures adequate satisfaction of the Russian market demand for motor fuels, lubricants and other oil products without which normal functioning of transport infrastructure, economic and strategic safety on the state level would be impossible.

Today the Russian oil refining sector is presented by twenty sev-en largest refineries. The location of oil refining plants within the Rus-sian Federation is determined by the peculiarities of the oil refining industry development in the Soviet Union time. Therefore most of the refineries in Russia were constructed during the period of late 1940s till mid 1960s when location of new construction sites was selected so that future oil refining facilities were in close proximity to the places of oil product concentrated consumption like Ryazan Region, Yaroslavl Re-gion, Gorky Region, Leningrad Region, the Krasnodar Territory and Si-beria where two largest refineries – in Omsk and Angarsk – were built. At the same time the redundant oil production grew in the Urals and the Volga region, in particular, a number of new refineries were built in Bashkiria, Samara and Perm Regions. The situation was determined by the fact that the Urals and the Volga regions represented the biggest crude oil stock production centers until late 1960s.

It was Achinsk refinery commissioned in 1982 that became the first refining plant in Russia constructed after 1966. Besides, in 1979 JSC Nizhnekamskneftekhim mastered crude oil processing with a view to satisfy the need of feedstock for downstream produc-tion of petrochemicals.

Russia is the 4th country in the world in terms of the crude intake and the 3rd after the USA and China in terms of the refining capacity.

It is worth noting that today the average oil conversion rate obtained at Russian refineries varies between 71–72% which is an ev-idence of high residual oil content in the oil products. For reference, the oil conversion rate in Europe comes up to 85-90%, while in the USA it is 95%.

Today the russian oil refining sector is presented by twenty seven

largest refineries

ANNUAL REPORT PSC “TAIF-NK” 2009 CHAPTER I OIL REFINING IN RUSSIA

10 11

ruSSIaN rEfINErIES OvErvIEw: OIl CONvErSION raTES

Novo-Ufimsky Refinery 6,641.0 759.8 87.1 1 72.0 80.0 85.2Omsk Refinery 18,431.7 2,332.8 85.8 2 82.8 84.4 81.9Ufaneftekhim 7,590.2 1,080.6 84.3 3 75.5 76.9 79.5Volgogradneftepererabotka 11,259.3 1,919.8 81.4 4 81.7 81.5 80.7Permnefteorgsintez 12,654.8 2,315.4 80.2 5 83.2 85.2 83.7Ukhtaneftepererabotka 4,242.8 809.4 79.4 6 59.2 76.0 81.1Ufimsky Refinery 6,515.2 1,355.7 77.7 7 77.0 80.1 78.3Angarsk Petrochemicals Company 9,534.0 2,247.9 74.9 8 76.4 78.2 77.8TAIF-NK 8,059.6 2,055.2 73.3 9 44.4 71.1 74.1Salavatnefteorgsintez 5,643.1 1,446.0 72.9 10 64.1 78.1 77.8Moscow Refinery 10,002.6 2,604.9 72.5 11 67.5 59.7 66.4Novokuibyshev Refinery 7,362.0 2,044.0 70.7 12 74.5 71.0 70.7Saratov Refinery 5,761.1 1,632.4 70.2 13 64.0 70.8 72.2Ryazan Refinery 14,372.7 4,643.5 66.2 14 61.4 66.3 66.6Kirishinefteorgsintez 20,416.0 6,687.1 65.7 15 61.6 66.5 65.5Yaroslavnefteorgsintez 13,628.2 4,480.7 65.6 16 62.6 66.8 66.1Syzran Refinery 6,385.5 2,136.3 65.0 17 69.2 68.9 66.3Achinsk Refinery 7,101.9 2,592.6 62.0 18 66.4 61.1 62.2Nizhegorodnefteorgsintez 15,797.4 5,832.8 61.6 19 62.6 64.6 63.4Khabarovsk Refinery 2,987.5 1,103.8 61.6 19 65.4 61.6 61.6Orsknefteorgsintez 5,089.8 1,909.9 61.0 20 67.3 62.8 59.9Komsomolsk Refinery 7,299.8 2,815.0 59.9 21 58.1 60.8 58.5Kuibyshev Refinery 6,665.8 2,757.9 57.1 22 67.4 62.9 59.4KrasnodarEkoneft 2,461.0 1,032.7 56.5 23 62.4 59.8 55.4Tuapse Refinery 5,221.2 2,266.4 55.1 24 56.1 56.5 55.4Afipsky Refinery 2,602.3 1,208.0 52.1 25 52.3 52.4 50.4

Total for Russia 235,728.4 64,433.5 71.2 - 67.6 71.7 71.5

COMPANY / PLANT CRUDE INTAKE,thousand tons

RESIDUALOIL YIELD,

thousand tons

OIL CONVERSION RATE

%

OIL CONVERSION RATE%

RATING

2009 2001 2007 2008

Sources:1. InfoTECH Oil & Gas Bulletin, Issue №1 2008, Issue №1 2009, Issue №1 2010;2. Refiners and Petrochemical Association;3. TAIF-NK Proprietary Data.

ments and operational costs, utilization of land resources, improved logistics, industrial design engineering, enhanced environmental characteristics and industrial safety.

From the strategic viewpoint it is essential for the refining sector to address the issue of efficient refining of the so-called heavy residues. Development of the oil refining industry as a middle level chain in the oil-gas-chemical complex of the Republic of Tatarstan is meant for diversification and damping of the oil-gas-chemical complex against any negative influence of the market. The known strategic “sensitivity” of the regional oil exploration and production sector linked to the high volume of very heavy, sulfurous and scaven-ger crude in the overall oil production structure can partly be leveled by the growing volume of intraregional crude refining and production of petrochemical products. It also corresponds to the worldwide trends in terms of wider use of hydrocarbons for petrochemicals production as well as higher integration and interrelationship between oil pro-duction, refining and petrochemical sectors in the single complex of plants, assets and managerial functions.

Oil refining development projects bring about a pronounced social and economic effect which is associated with the contribution into the regional and national gross output by way of installing new production capacities, with the increase in budget system revenues, with creation of new workplaces, with the growing degree of effec-tiveness and innovativeness of the economy. The direct effect is sup-posed to be produced by greenfield projects envisaged for construc-tion of new refining and petrochemical facilities, whereas the indirect effect will be produced by development of a cluster based on newly installed capacities and including the production units within various industry sectors and economy as a whole taking into account science and education as well.

from the strategic viewpoint it is essential for the refining sector

to address the issue of efficient refining of the so-called heavy

residues


COMPANY’S STANDING IN OIL REFINING INDUSTRY

ChaPTEr IIto be a guide

CHAPTER IIANNUAL REPORT PSC “TAIF-NK” 2009 COMPANY’S STANDING IN OIL REFINING INDUSTRY

1514

The scientific and methodological support of the RT grade jet fuel production at the Company's facilities along with monitor-ing of the use of RT grade jet fuel in aircrafts were provided under the guidance of FSUE SRDE of Civil Aviation (FGUP GosNII GA). To that end a number of the Tatarstan Airlines' aircrafts were used for testing the RT grade jet fuel under the Monitoring Programme of TAIF-NK's RT Grade Jet Fuel Use for Civil Aircrafts According to GOST 10227-86.

TaIf-NK SalEaBlE PrODuCT STruCTurE

Diesel Fuel 1,714,843 23.7 1,918,103 25.8 1,980,706 25.4Straight-Run Gasoline 1,238,844 17.1 1,333,858 17.9 1,453,728 18.6Kerosene / Aviation Kerosene 384,093 5.3 268,959 3.6 374,972 4.8Road Bitumen 60,386 0.8 75,202 1.0 65,746 0.8Motor Gasoline 488,692 6.8 627,050 8.4 549,361 7.0Vacuum Gas Oil 690,873 9.6 662,055 8.9 599,342 7.7Heating Oil 413,575 5.7 382,318 5.1 451,918 5.8Residual Oil (Mazut) 1,959,429 27.1 1,871,598 25.2 2,055,234 26.4Others 280,677 3.9 295,228 4.0 266,078 3.4

Total 7,231,412 100.0 7,434,371 100.0 7,797,083 100.0

PRODUCT QUANTITY tons

QUANTITY tons

QUANTITY tons

PERCENTAGE%

PERCENTAGE%

PERCENTAGE%

2007 2008 2009

During 2008–2009 there was a growth in saleable product output by 3% and 5% correspondingly

TAIF-NK at present is the “heart” of oil refining in the Republic of Tatarstan, being known as a producer of a wide range of oil prod-ucts. The Company’s aggregate crude intake amounts to 8 mln tpa, with the CDU/VDU design capacity of 7 mln tpa and the Gas Conden-sate Processing Plant design capacity of 1 mln tpa.

Despite the location in Tatarstan, the Company is situated within the area of highly concentrated refining capacities. The refiner-ies which operate in the neighboring regions have sufficient resources to promote oil products (namely, gasoline and diesel) to the Tatarstan market.

Meanwhile the gasoline produced by the Company is advan-tageously more competitive since the product meets the EURO-4 requirements. Furthermore, there are resources available for 100% production of EURO-4 certified diesel fuel.

During 2008–2009 there was a growth in saleable product output by 3% and 5% correspondingly. At that diesel fuel, straight-run gasoline, aviation kerosene and motor gasoline accounted for the largest percentage (more than 50%) in the Company's saleable prod-uct structure.

In 2009 the Company put into operation own TAME and MTBE units designed for production of high octane blending components to obtain high quality gasoline under the Company's oil product up-grading program. The launch of the TAME and MTBE units furthered advancement of the qualitative parameters of motor gasoline, helped lessen the Company's dependence on suppliers of octane-increasing components as well as improve the technical and economic perfor-mance in terms of motor fuels production.

In July 2009 the Company commenced commercial produc-tion of RT grade jet fuel. The event was preceded by successful pass-ing the flight testing and obtaining the certificate of compliance with the requirements imposed on superior grade oil products. Conse-quently, the RT grade jet fuel produced by the Company gained an ac-cess to the Russian market, while the Company got the right to sell the product to a wide range of inland customers.

The Company’s aggregate crude intake amounts to 8 mln tpa,

with the CDu/vDu design capacity of 7 mln tpa and

the gas Condensate Processing Plant design capacity of 1 mln tpa


16 17

AVIATION KEROSENE STRAIGHT-RUN GASOLINE RESIDUAL OIL (MAzUT)

2007 2007 20072008 2008 20082009 2009 2009

Sources:1. InfoTECH Oil & Gas Bulletin, Issue №1 2008, Issue №1 2009, Issue №1 2010;2. TAIF-NK Proprietary Data.

OIl PrODuCT OuTPuT STruCTurE IN ruSSIa DurINg 2007–2009

1 Angarsk Petrochemicals Company 2,802.0 2,994.4 2,907.0 1,272.0 1,269.9 1,285.2 469.8 422.5 159.4 65.0 514.0 528.7 2,089.2 1,969.3 2,247.9 2 Afipsky Refinery 673.8 651.9 780.0 - - - 3.5 30.3 46.6 567.0 508.6 505.4 1,284.8 1,189.8 1,208.0 3 Achinsk Refinery 2,037.6 2,152.5 2,295.6 1,129.8 1,208.2 1,205.5 325.6 340.2 282.4 168.0 172.8 301.7 2,327.3 2,458.7 2,592.6 4 Volgogradneftepererabotka 2,458.3 2,876.5 3,200.0 1,165.5 1,461.2 1,482.5 860.7 931.8 900.2 551.2 380.5 392.5 2,005.7 1,916.9 1,919.8 5 Kirishinefteorgsyntez 4,849.1 5,013.4 5,002.4 2,198.1 2,333.6 2,378.1 741.1 779.8 743.4 - - - 6,440.8 6,749.4 6,687.1 6 Komsomolsk Refinery 1,829.4 1,984.6 2,095.1 458.9 449.7 403.0 320.3 328.4 276.1 792.8 854.9 1044.8 2,775.7 2,913.6 2,815.0 7 Krasnodareconeft 804.7 823.6 818.5 - - - 59.3 58.3 47.9 495.2 509.5 502.2 957.5 1,113.1 1,032.7 8 Kuibyshev Refinery* 2,225.6 2,186.9 2,203.6 1,070.9 981.2 974.3 - - - 92.3 152.2 178.5 2,452.6 2,511.8 2,757.9 9 Moscow Refinery 2,777.3 2,674.3 2,675.4 2,305.4 2,175.2 2,321.7 531.1 554.4 617.0 198.5 170.8 241.1 2,621.2 2,647.5 2,604.9 10 Nizhegorodnefteorgsintez* 4,035.6 4,126.0 3,856.8 1,986.0 1,987.9 2,047.9 815.3 878.1 648.9 226.6 120.1 68.6 5,981.3 5,874.6 5,832.8 11 Novokuibyshev Refinery* 2,144.0 2,119.5 2,106.1 1,091.7 1,070.2 1,097.6 311.4 344.2 345.1 177.1 186.2 177.6 2,014.2 2,064.8 2,044.0 12 Novo-Ufimsky Refinery* 2,260.1 1,770.0 1,907.4 1,672.2 1,440.7 1,337.4 74.9 71.9 20.8 180.6 504.0 377.3 1,097.6 898.8 759.8 13 Omsk Refinery 5,261.7 6,051.5 5,677.7 3,488.6 3,610.4 3,639.2 1,273.8 1,244.7 1,333.6 - - - 3,610.9 3,052.5 2,332.8 14 Orsknefteorgsintez* 1,340.2 1,356.5 1,414.3 731.1 684.6 715.6 248.9 284.5 278.9 48.4 38.8 45.7 1,847.8 1,897.1 1,909.9 15 Permnefteorgsintez* 3,687.4 3,902.1 4,084.3 1,401.3 1,645.6 1,765.4 758.9 775.8 675.7 334.6 519.6 507.0 1,745.4 1,833.4 2,315.4 16 Ryazan Refinery 4,016.8 4,089.8 3,765.1 3,078.0 3,126.8 2,765.8 888.3 888.3 831.8 128.2 18.1 - 4,690.7 4,749.3 4,643.5 17 Salavatnefteorgsintez* 2,332.7 2,245.5 1,804.4 841.4 731.3 745.5 - - - 347.5 338.9 277.2 1,342.1 1,321.1 1,446.0 18 Saratov Refinery* 1,850.1 1,971.3 1,672.2 805.8 841.2 781.3 - - - 141.2 69.2 - 1,503.4 1,746.5 1,632.4 19 Syzran Refinery* 2,067.0 1,997.4 2,100.3 1,046.3 970.9 979.6 174.5 149.8 32.5 223.0 266.6 242.6 1,973.0 2,086.8 2,136.3 20 TAIF-NK* 1,716.3 1,918.6 1,980.7 489.1 627.5 549.4 - 44.7 77.4 1,238.8 1,333.9 1,453.7 1,959.4 1,875.6 2,055.2 21 Tuapse Refinery 1,764.5 1,771.5 1,706.0 269.6 258.0 221.9 - - - 756.0 769.4 839.8 2,262.0 2,254.9 2,266.4 22 Ufaneftekhim* 2,619.3 3,305.3 3,227.7 1,740.4 2,035.5 2,003.8 - - - - - - 1,270.2 1,422.4 1,080.6 23 Ufimsky Refinery* 2,225.4 2,179.8 2,087.0 1,497.1 1,545.9 1,676.8 - - - 643.5 516.9 526.0 1,234.3 1,244.4 1,355.7 24 Ukhtaneftepererabotka 1,127.2 1,021.9 1,137.9 355.9 303.6 394.1 18.1 26.7 32.1 163.4 186.5 121.4 986.0 660.2 809.4 25 Khabarovsk Refinery 533.6 644.2 319.0 344.6 341.7 399.1 186.1 208.6 157.7 269.4 352.8 183.0 1,179.6 1,247.3 1,103.8 26 Yaroslavnefteorgsintez 3,810.3 4,145.4 3,728.6 2,289.3 2,283.7 2,325.4 700.6 737.3 746.8 461.8 493.7 608.8 3,979.5 4,370.8 4,480.7 27 Tatneft (mini-refinery)* 74.8 104.8 98.9 58.3 68.6 70.2 - - - - - - - - - 28 Maryisky Refinery* 342.7 208.1 41.6 - - - - - - 158.9 134.6 122.6 103.7 274.8 395.2 Total for Tatarstan republic 1,791.1 2,023.4 2,079.6 547.4 696.1 619.6 - 44.7 77.4 1,238.8 1,333.9 1,453.7 1,959.4 1,875.6 2,055.2 AIF-NK share. % 95.8 94.8 95.2 89.35 90.15 88.67 - 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Total for the Pfr** 28,921.2 29,391.8 28,585.3 14,431.6 14,631.1 14,744.8 2,383.9 2,549.0 2,079.3 3,590.2 3,879.1 3,528.8 24,525.0 25,052.1 25,721.2 TAIF-NK share. % 5.9 6.5 6.9 3.39 4.29 3.73 - 1.75 3.72 34.51 34.39 40.61 7.99 7.49 7.99 Total for the russian federation 66,354.0 69,019.2 67,348.4 35,105.4 35,746.1 35,775.9 9,007.8 9,335.6 8,490.8 11,863.9 10,182.0 10087.3 62,434.0 63,901.4 64,433.5 TAIF-NK share. % 2.59 2.78 2.94 1.39 1.76 1.54 - 0.48 0.91 10.44 13.10 14.41 3.14 2.94 3.19

Company/plantItemNo.

DIESEL FUEL MOTOR GASOLINE

2007 20072008 20082009 2009

* – are included into the Privolzhsky Federal Region (VFD)** – Privolzhsky Federal Region


1918

In light of the Company’s Jet A-1 aviation fuel commercial pro-duction programme the following arrangements were made:

• TAIF-NKJetA-1aviationfuelcertificationwascarriedout,sub-sequently a compliance certificate was obtained to confirm ful-fillment of requirements of the Technical regulations on motor gasoline, aviation gasoline, diesel and marine fuels, jet engine fuels and residual oil as well as GOST 10227-86 requirements;

• international inspection of Jet A-1 fuel productionwas con-ducted at the Company by IАТА inspectors.

TAIF-NK now is ready for commercial production of Jet A-1 aviation fuel.

Since the Technical regulations on motor gasoline, aviation gasoline, diesel and marine fuels, jet engine fuels and residual oil became effective TAIF-NK carried out a variety of activities pertaining to oil product compliance verification against the requirements envis-aged in the Technical Regulations. The work was conducted in coop-eration with representatives of zAO “RSMT “Test-Tatarstan” and JSC

“Volga Raw Hydrocarbons Research Institute” Test Center for Crude Oils, Oil Products and Gases.

The oil product testing has been completed with positive out-come. Declarations of oil product conformity with the Technical Regu-lations have been issued to TAIF-NK.

In 2009 TAIF-NK started production of diesel fuel containing anti-wear additive and recommended for Emission Class 2 automotive vehicles.

Owing to the positive results after testing in the JSC “Volga Raw Hydrocarbons Research Institute” Test Center for Crude Oils, Oil Products and Gases TAIF-NK obtained declarations of conformity for summer diesel fuel L-0,05-62 and winter diesel fuel z-0,05-35 con-firming fulfillment of requirements of the Technical Regulations.

The oil product testing has been completed with positive outcome. Declarations of oil product conformity with the Technical regulations have been issued to TaIf-NK

Based on the successful outcome of the RT grade jet fuel test-ing within the scope of GOST 10227-86 as well as a comprehensive toolbox of qualification assessment and successful monitoring of use of the jet fuel in civil aircrafts during 2008–2009, Federal Agency of Air Transport (Rosaviation) recommended that the TAIF-NK's RT grade jet fuel should be used in civil air-crafts without any restrictions. FSUE SRDE of Civil Aviation (FGUP GosNII GA) issued the Compliance Cer-tificate thereby recognizing the Company's product conformity with the Technical regulations on motor gasoline, aviation gasoline, diesel and marine fuels, jet engine fuels and residual oil as well as GOST 10227-86 requirements.

The design capacity of the Company’s RT grade jet fuel produc-tion line is 610 thous tpa. TAIF-NK is planning to increase the output up to 1.6 mln. tpa by 2016.

With the view of diversification and satisfaction of consumer's aviation fuel demand TAIF-NK in 2009 successfully carried out a certi-fication procedure aimed to ascertain usability of the Company's avia-tion fuel for Jet A -1 jet engines.

The design capacity of the Company’s rT grade

jet fuel production line is 610 thous tpa.

TaIf-NKis planning to increase the output

up to 1.6 mln. tpa by 2016

TaIf-NK SalEaBlE PrODuCT DIagram fOr 2009

DIESEL FUEL 26,4%

MOTOR GASOLINE 7%

STRAIGHT-RUN GASOLINE 18,6% VACUUM GAS OIL 7,7%

KEROSENEAVIATION KEROSENE 4,8%

ROAD BITUMEN 0,8%

HEATING OIL 5,8%

RESIDUAL OIL(MAzUT) 26,4% OTHERS PRODUCTS 3,4%


TECHNICAL AND ECONOMIC PERFORMANCE

ChaPTEr IIIto stand up

to the circumstances

CHAPTER IIIANNUAL REPORT PSC “TAIF-NK” 2009 TECHNICAL AND ECONOMIC PERFORMANCE

22 23

In 2009 the catalytic cracking unit (FCCU) installed at the Com-pany’s Gasoline Plant processed 935 thous tons, with the FCCU capaci-ty of 880 thous tpa. Thus, the FCCU capacity utilization averaged 106% over the reporting year.

Designed for the vacuum gasoil cracking reaction using the microspherical zeolite-containing catalyst, the FCCU was put into operation in 2005 with a view to obtain such products as:

- high-octane blending component of commercial gasoline;- butane-butylene fraction;- propane-propylene fraction;- light cycle oil;- heavy cycle oil;- dry hydrocarbon gas;- sour (H2S containing) gas.

2007 2008 2009

fCCu CaPaCITy uTIlIzaTION

FCCU Capacity = 880 thous tpaFeedstock Throughput Volume

721,260tons

849,960tons

934,643tons

In 2009 the Company produced 549.4 thous. tons of gasoline and 1,980.7 thous tons of diesel fuel, of which 431.7 thous tons of gasoline and 765.9 thous tons of diesel fuel was supplied to the domestic market, while 127.2 thous tons of gasoline and 1,186.0 thous tons of diesel fuel was exported

Notwithstanding the negative economic environment caused by the global recession the Company during the reporting year man-aged not only to maintain its position but also improved a number of significant performance indicators.

Over the reporting year the Company’s refining throughput amounted to 8,059.6 thousand tons for feedstock, which made up 105% of the 2008 throughput. The primary crude oil capacity utiliza-tion averaged 100.7% in 2009. At year end the Company’s CDU/VDU (Primary Crude Oil Distillation Unit) was operated at 104.2%, while the Gas Condensate Processing Unit was operated at 76.4%.

Over the reporting year the Company’s refining throughput amounted to 8,059.6 thousand tons for feedstock, which made up 105%

of the 2008 throughput

2007 2008 2009

8,000,000tons

8,000,000tons

8,000,000tons

7,556,008tons

7,672,020tons

8,059,619tons

TaIf-NK CaPaCITy uTIlIzaTION

Total Design Throughput Capacity for FeedstockFeedstock Throughput Volume


2524

The Company’s light oil product output increased in 2009 and made up 63.48% as compared to 2008

2007

2007

2008

2008

2009

2009

lIghT OIl PrODuCT SamPlINg aT COmPaNy’S PrODuCTION faCIlITIES

COmPaNy’S fEEDSTOCK rEfININg COST DECrEaSE

Light Oil Product Sampling

Refining Cost Index

100.00% 99.88

%

98.05%

62.60%59.62

%

63.48%

The gas condensate processing unit (GCPU) installed at the Company’s Gasoline Plant and featuring the throughput capac-ity of 1 mln tpa processed 764.5 thous. in 2009. Thus, the GCPU capac-ity utilization averaged 76% over the reporting period.

The GCPU is designed for processing gas condensate feedstock with a view to obtain the following range of products:

- straight-run gasoline;- stable gaseous gasoline;- diesel fuel;- propane-butane fraction;- residual oil (mazut).

2007 2008 2009

gCPu CaPaCITy uTIlIzaTION

ПGCPU Design Capacity = 1 mln tpaFeedstock Throughput Volume

505,101tons

683,219tons

764,468tons

The Company’s light oil product output increased

in 2009 and made up 63.48% as compared to 2008

During 2007–2009 the Company’s feedstock refining cost was decreasing. In 2008 there was recorded just a 0.12% drop as com-pared to 2007, whereas in 2009 the feedstock refining cost went down by 1.83% vs the previous year of 2008.

Over the reporting year the Company produced marketable oil products in the amount equivalent to RUB 74.9 bln. The sales amount equaled RUB 74.4 bln. The Company’s net proceeds amounted to RUB 617 mln RUB in 2009.


26 27

Thousand tons Thousand tons

Thousand tons Thousand tons% %

INCLUDING TAIF-NK INCLUDING TAIF-NK

2008 2009

CONSOlIDaTED DaTa: OIl PrODuCT OuTPuT aND SalES DurINg 2007–2009

PARAMETERS

2007

Thousand tons

Thousand tons %

INCLUDING TAIF-NK

Sources:1. InfoTECH Oil&Gas Bulletin, Issue №1 2008, Issue №1 2009, Issue №1 2010.2. TAIF-NK Proprietary Data.

* – Russian Federation** – Privolzhsky Federal Region

Primary Refining RF* 228,598.3 7,556.0 3.3 236,301.1 7,672.0 3.2 235,728.4 8,059.62 3.4 PFR** 94,885.4 7,556.0 8.0 96,970.8 7,672.0 7.9 95,511.7 8,059.62 8.4 Tatarstan 7720.9 7,556.0 97.9 7,876.6 7,672.0 97.4 8,244.8 8,059.62 97.7

Straight-Run Gasoline Production RF 11,863.9 1,016.5 8.6 10,182.0 1,032.0 10.1 10,087.3 1,003.6 9.9 Tatarstan 1,016.5 1,016.5 100.0 1,032.0 1,032.0 100.0 1,003.6 1,003.6 100.0

Motor Gasoline Production RF 35,105.4 489.1 1.4 35,746.1 627.5 1.8 35,775.9 549.4 1.5 Tatarstan 547.4 489.1 89.4 696.1 627.5 90.1 619.6 549.4 88.7

Marketing Export 6,096.2 275.1 4.5 4,570.3 236.1 5.2 4,500.6 127.2 2.8 RF 29,457.3 205.9 0.7 31,175.8 382.5 1.2 31,222.3 431.7 1.4 Incl. Tatarstan 663.6 128.3 19.3 768.1 282.4 36.8 809.0 373.1 46.1

Diesel Fuel Production RF 66,354.0 1,716.3 2.6 69,019.2 1,918.6 2.8 67,348.4 1,980.7 2.9 Tatarstan 1,791.1 1,716.3 95.8 2,023.4 1,918.6 94.8 2,079.6 1,980.7 95.2

Marketing Export 32,097.2 1,028.0 3.2 33,810.0 873.6 2.6 37,460.6 1,186.0 3.2 RF 34,256.8 661.7 1.9 35,209.2 1,045.9 3.0 31,789.3 765.9 2.4 Incl. Tatarstan 855.6 314.0 36.7 958.2 621.6 64.9 936.1 572.9 61.2

Fuel Oil Residue Production RF 62,434.0 1,959.4 3.3 63,901.4 1,875.6 2.9 64,433.5 2,055.2 3.2 Tatarstan 1,959.4 1,959.4 100.0 1,875.6 1,875.6 100.0 2,055.2 2,055.2 100.0

Marketing Export 55,374.2 1,287.7 2.3 44,037.0 1,336.3 3.0 63,850.6 1,697.6 2.7 RF 22,400.4 637.7 2.8 19,864.4 581.1 2.9 15,882.4 344.1 2.2 Incl. Tatarstan 103.1 66.6 64.6 278.8 224.9 80.7 147.3 30.7 20.8


2928

KEy PErfOrmaNCE INDICaTOrS Of CauCaSuS POrT ENTErPrISES BEINg SNrg lOgISTIC lTD. SuBSIDIarIES

SNrg lOgISTIC lTD. IS TaIf-NK'S SuBSIDIary

ThE POrT Of CauCaSuS

In 2009 TAIF-NK worked busily on optimization of operation of the enterprises located within the Port of Caucasus which are SNRG Logistic Ltd.'s subsidiaries and affiliates.

SNRG Logistic Limited is a TAIF-NK’s subsidiary. The efforts made were aimed at integration of the three terminal companies to form a single corporation in order to allow significant reduction of duplicate managerial functions and maximize the use of labor force and financial resources. The next year the work described above is go-ing to be continued.

In the reporting year a SNRG Logistic Ltd. Business Plan of the Caucasus Port Development Investment Project was worked out and approved by SNRG Logistic Ltd. shareholders. The criteria speci-fied in the Business Plan will provide the basis for long-term planning of terminal companies' operation within the next 5 years.

REVENUES NET INCOME

2008-167.9RUB mln

2009114.5RUB mln

2008378.9RUB mln

2009564.9RUB mln

In the reporting year a SNrg logistic ltd. Business Plan of the Caucasus Port Development Investment Project was worked out and approved by SNrg logistic ltd. shareholders. The criteria specified in the Business Plan will provide the basis for long-term planning of terminal companies' operation within the next 5 years

Over the reporting year the Company produced marketable oil products in the amount equivalent to RUB 74.9 bln. The sales amount equaled RUB 74.4 bln. The Company’s net proceeds amounted to RUB 617 mln RUB in 2009.

2007– 2009 TEChNICal aND ECONOmIC PErfOrmaNCE (ruB mm)

Tax PaymENTS TO BuDgETS (ruB mln)

Marketable Product Output 65,358 89,131 74,933Sales Total 64,621 89,149 74,394Including Exporting 35,241 43,793 40,499EBITDA 9,168 10,695 4,092Accrued Taxes 10,393 15,888 12,681Profit Before Taxes 6,086 7,100 912Earnings 4,582 5,272 617Assimilated Investment Funds (without VAT) 8,732 2,027 990Net Assets 5,436 16,557 14,770

Russian Federation Budget 9,478 12,223 14,578Tatarstan Republic Budget including Budgetary Trust Funds 956 2,627 120Local Budget 44 51 83

Total 10,478 14,901 14,782

The Company charges and pays taxes and duties in due time in compliance with the established procedure and according to the tax and revenue legislation of the Russian Federation. By the aggregate amount of tax payments due to different level budgets TAIF-NK is one of the major regional and federal taxpayers. The total aggregate amount of tax accruals paid by the Company equaled RUB 14.8 bln. in 2009.

Tax aCCrualS aND ChargES

DESCRIPTION

BUDGET

2007

2007

2008

2008

2009

2009

rEfININg OuTPuT aND SalES Of marKETaBlE PrODuCTS

regular EurO-92 gasoline accounts for 76% of the whole

TaIf-NK's retail sales, thus making the essential part of the Company's retail trading


30 31

average sales volume through the Company’s retail network increased by 1.4 times during January – December 2009, i.e. from 1,357.2 tons at the reporting year beginning to 1,877.2 tons per month at year end

JANUARY JULY DECEMBER

1,357.2tons

1,513.6tons

1,877.2tons

TaIf-NK OIl PrODuCT rETaIl SalES IN 2009

TAIF-NK gas filling stations offer motor fuel of various grades such as gasoline Normal-80, diesel fuel recommended for Emission Class 2 automotive vehicles, gasoline Regular EURO-92 conforming to the EURO-4 requirements, and gasoline Premium EURO-95. Regular EURO-92 gasoline accounts for 76% of the whole TAIF-NK's retail sales, thus making the essential part of the Company's retail trading.

The high quality of motor fuels produced by the Company along with a well-balanced pricing policy regarding motor fuels mar-keting through own retail chain led to the increase in the average sales volume via the Company’s retail network by 1.4 times during January – December 2009, i.e. from 1,357.2 tons at the reporting year beginning up to 1,877.2 tons per month at the reporting year-end.

Average sales volume through the Company’s retail network increased by 1.4 times during January – December 2009, i.e. from 1,357.2 tons at the reporting year beginning to 1,877.2 tons per month at year end.

OIl PrODuCT rETaIl TraDE

TaIf-NK rETaIl* SalES vOlumE PEr EaCh fuEl TyPE IN 2009

PREMIUM EURO-95 GASOLINE 7%

NORMAL-80 GASOLINE 8%

DIESEL FUEL 9%

REGULAR EURO-92 GSOLINE 76%

18 thousand tons

* Currently TAIF-NK's own retail network includes 8 fuel filling stations

In Russia the main tendency in development of the fuel retail business was reported to be creation of multi-functional complexes to offer customer service at the highest world levels. At the same time the current environment in the Russian retail sales market has its own peculiarities which correspondingly impact on overall fuel retail busi-ness strategies.

For instance, in overseas markets the qualitative characteris-tics of marketable fuels are nearly identical and not subject to par-ticular suppliers' specifications, whereas in Russia the quality of a fuel is one of the key factors of competitive ability. Sensitivity of widely used and relatively expensive foreign brand motor vehicles to fuel quality is the reason why car owners take special care when choosing a gas filling station.

For the purpose of expansion of its own retail network TAIF-NK in February 2009 acquired 99.9% shares of Tatneftekhim-Solvalyub zAO (TATSOL zAO) which possesses as much as ten retail sites located within the Republic of Tatarstan.

The Company is planning to construct four gas filling stations to be located in Leninogorsk, Yelabuga, Naberezhnye Chelny in 2010. Altogether by 2015 it is scheduled to have as much as 200 gas filling stations within TAIF-NK's overall retail network.


ChaPTEr Ivto aim at perfection

INDUSTRIAL SAFETYAND PERSONNEL HEALTH ISSUES

CHAPTER IVANNUAL REPORT PSC “TAIF-NK” 2009 INDUSTRIAL SAFETY AND PERSONNEL HEALTH ISSUES

3534

In the reporting year the Company carried out a series of ac-tivities related to identification and preparation of documentation for further registration of the MTBE and TAME production lines with the Russian Federal Service for Environmental, Technological and Nuclear Supervision (RosTekhNadzor). TAIF-NK took measures aimed to verify and assure compliance with license requirements in the Company's subdivisions subject to the licenses that had been obtained to allow operation of chemically and explosion hazardous production facili-ties and carrying out hazardous cargo handling operations for railway transportation.

In pursuance of the requirements of the Federal Law On Haz-ardous Production Facilities Safety, the Company takes steps relevant to insurance of liability for any damage to life or health or property of third persons and environment in case of a failure at hazardous pro-duction facilities located within the Company's battery limits.

Taking into account the positive findings of the technical sur-vey performed by Suregrove Limited in respect of TAIF-NK's engineer-ing risks and overall industrial safety, in the reporting year the amount of the insurance premium payable to the insurer was reduced.

TAIF-NK continuously takes preventive measures and actions of control aimed at detection, prevention and elimination of industrial safety requirements violation within the Company’s subdivisions.

TAIF-NK annually conducts emergency response drills and exercise routines in its subdivisions in order to train personnel skills applicable to cases of failures.

TaIf-NK continuously takes preventive measures and actions

of control aimed at detection, prevention and elimination

of industrial safety requirements violation within the Company’s

subdivisions

In accordance with the Company's Health, Safety and Envi-ronmental Protection Policy, the main objectives regarding assurance of the industrial safety are as follows:

• improved and enhanced control in the course of productionto verify compliance with the industrial safety requirements;

• introductionofapplicableup-to-datemethodsandtechniquessufficient to provide personnel occupational safety;

• planning and introduction of preventive measures aimedat preclusion against failures and accidents during produc-tion;

• Company manpower's safety assurance during fulfillmentof any assigned work;

• improvementofpersonnelcompetence.

For the implementation of the objectives declared by the Com-pany with respect to the industrial safety a variety of consistent activi-ties has been carried out, in particular:

• assuranceoftheindustrialsafetyrequirementsintheoperat-ing organization;

• evaluationof industrial safetyassurance in theoperatingor-ganization, including assessment by way of relevant checks and expertises;

• elaborationofmeasuresdesigned for improvementof indus-trial safety measures and prevention of environmental dam-age;

• verification of compliancewith the industrial safety require-ments established by the federal laws and other normative legal acts;

• coordination of activities aimed at failure prevention at haz-ardous production facilities and assurance of readiness to lo-calization of failures and elimination of consequences;

• monitoringoftimelycarryingoutnecessarytestingandtech-nical inspection of equipment and hardware employed at haz-ardous production facilities; repair, maintenance and verifica-tion of instrumentation and controls;

• monitoring of compliance with industrial discipline require-ments.

INDuSTrIal SafETy

PErSONNEl hEalTh aND SafETy

Taking into account the positive findings of the technical survey performed by Suregrove limited in respect of TaIf-NK's engineering risks and overall industrial safety, in the reporting year the amount of the insurance premium payable to the insurer was reduced

The tasks and objectives which the Company assigns regard-ing personnel health and safety are set forth in the TAIF-NK Corporate Policy on Quality, Industrial Safety, Personnel Health and Safety, and Environmental Protection.

Company's commitments with respect to personnel health and safety are embodied through:

• comprehensive and special-purpose inspections being con-ducted at the Company's subdivisions subject to the approved consolidated work plan of the administrative and technical de-partments for carrying out supervision and preventive inspec-tions of the status of personnel health and safety, industrial safety and fire safety activities;

CHAPTER IVANNUAL REPORT PSC “TAIF-NK” 2009 INDUSTRIAL SAFETY AND PERSONNEL HEALTH ISSUES

36 37

As far as the environmental safety assurance, the Company primarily seeks after enhancement of environmental efficiency, com-pliance with environmental norms, planning and implementation of preventive measures aimed at mitigating the negative impact on the environment.

Over 2009 the total amount of pollutant emissions was re-duced by 989 tons from the standard values. The reduction of pol-lutant emissions was mainly due to the Company's implementation of environmental protection actions.

Following the results of the 2009 ECOleader Annual Repub-lican Contest held under the auspices of the Cabinet of Ministers of the Republic of Tatarstan and the Ministry of Environment and Nat-ural Resources of the Republic of Tatarstan, TAIF-NK was announced the winner among the Category II enterprises in the Emissions Reduc-tion Activities nomination.

ECOlOgy & ENvIrONmENTal PrOTECTION

2007 2008 2009

0.00212

0.00209

0.00205

ChaNgES IN SPECIfIC QuaNTITy Of POlluTaNT EmISSIONS

(ton of contaminants/tonof feedstock)

As a major regional oil refiner within the Republic of Tatarstan, TAIF-NK is reported to be the largest consumer of utilities among other regional manufacturers. On the background of the steep rise in tariffs for utilities, the issue of energy conservation turns out to be a factor of managing the Company’s profitable operation.

The Company carries out various activities in accordance with the corporate 2007-2010 Energy Conservation Program.

In 2009 in order to reduce energy expenditures in the produc-tion costs a number of arrangements related to energy conservation were made by the Company, in particular:

• revamping of installed process units with implementationof new technologies;

• improvementofcontrolsystemsandenergyconsumptionac-counting systems;

ENErgy CONSErvaTION

The Company managed to make use of the visbreaker

sweet hydrocarbon gas by burning the overall volume

of effluent gases in CDu/vDu heaters, owing to which

the residual oil consumption in the reporting year decreased

by 48%as compared to 2008

• replacement of out-dated equipment with new equipmenthaving improved performance;

• increaseduseofwasteenergy;• introduction and improvement of the information system

which allows collection and analysis of utilities consumption data as well as planning of energy consumption optimization measures.The Company managed to make use of the Visbreaker sweet

hydrocarbon gas by burning the overall volume of effluent gases in CDU/VDU heaters, owing to which the residual oil consumption in the reporting year decreased by 48% as compared to 2008.

The CDU/VDU & MDHC Steam Pipeline System Modernization Project is being implemented to increase the share of refinery pro-duced steam in the total heat consumption volume. Implementation of the Project will allow more flexible redistribution of refinery pro-duced thermal energy at alterations in steam consumption by process units during different periods as well as reduction of steam consump-tion by the neighboring power plant.

In the reporting year the audit firm Gelit-Expert OOO conduct-ed an energy audit on the Company's premises. Findings of the energy audit confirmed the effectiveness of the TAIF-NK' approach to the use of energy resources.

• training and further examination of personnel for safetyknowledge assessment;

• formalizationofrequireddocumentation;• holdingmeetings to discuss personnel health and safety re-

lated issues.With a view to provide health support to the staff involved

in their respective callings and prevent occupational diseases, timely organization of regular checkups and other types of medical examina-tions have been envisaged at the Company.

Necessary arrangements are made on regular basis to provide the Company's staff with milk, detergents and neutralizing agents, with certified (declared to conform to the established requirements) special clothes, footwear and other means of personal protection.

In accordance with the Programme of production control aimed to ensure compliance with the sanitary and epidemiological requirements, there are samples being regularly taken on the Com-pany's premises to verify conformity of the work places to the estab-lished norms and regulations. In 2009 the Company proceeded to as-sessment of professional risks and potential impacts on personnel health. The assessment activity is scheduled to be completed in 2010.

For the sake of prevention of occupational injuries and with the view of strengthening personnel's interest in safety activities the Company's subdivisions arrange half-yearly review competitions dedicated to health and safety, industrial safety and fire safety issues.


ChaPTEr vto remain constant

INTEGRATED MANAGEMENT SYSTEM

CHAPTER VANNUAL REPORT PSC “TAIF-NK” 2009 INTEGRATED MANAGEMENT SYSTEM

4140

The Company carries out regular activities on improvement of the management system, analysis and optimization of the system of awareness and interaction between structural subdivisions, distri-bution of responsibility and authority, the aim of which is to raise ef-ficiency of decision making on management level.

The Company has commenced and continues the work related to the improvement of planning its business activities and identifica-tion of efficiency criteria for each subdivision with regard to net profit generation.

Within the framework of optimization of the management system the Company continues to work on the Project of Creation of TAIF-NK Business Activities Computerized Management System Based on SAP software (Systeme, Anwendungen und Produkte in der Datenverarbeitung / Systems, Applications and Products in Data Pro-cessing). The main mission of the Project is:

• analyzetheCompany'sexistingbusinessprocessesandelabo-rate a conceptual design of the target model of the Company’s business processes taking into account the existing TAIF-NK's Computerized Management System;

• formalize TAIF-NK's target business processes with a viewto increase the Company's operation efficiency. An acknowledgement of the Company's management sys-

tem's effective functioning and the Company's leading role on the republican level was the Diploma issued by the Republic of Ta-tarstan's Cabinet Council for Achievement of Significant Results in the Sphere of uality and a commemorative token which were presented to TAIF-NK according to the results of the Tatarstan Republic Govern-mental Quality Contest.

TAIF-NK has introduced and certified and maintains the inte-grated management system for compliance with the requirements of four international standards, in particular, ISO 9001:2008 Quality Management System, ISO 14001:2004 Environmental Management System, OHSAS 18001:2007 Occupational Health and Safety Manage-ment System, AS 9100 B Quality Systems. Aeronautics & Astronautics.

The certification covers the whole spectrum of oil produce, namely, vacuum gas oil, sulphur, naphtha, aviation kerosene, jet fuel, diesel fuel, straight-run gasoline, fuel oil and residual oil, bitumen, motor gasoline, low-viscosity marine fuel, heating oil, heavy gas oil, butane-butylene fraction, propane-butane fraction, propane-propyl-ene fraction, stable gaseous gasoline, export grade process fuel.

TAIF-NK's integrated management system enables to system-atically and immediately detect and eliminate any possible shortcom-ings in the existing management system for the purpose of further prevention and elimination thereof by as much as possible fulfillment of requirements of customers and shareholders pertaining to supply of high quality oil products.

In February 2009 the Company successfully passed the first compliance audit aimed at assessment of the Company's management system conformity with the requirements of the international stan-dards, namely, ISO 9001:2008, ISO 1400:2004, and OHSAS 18001:2007. In December 2009 the second compliance audit of the Company's in-tegrated management system was performed to verify conformance to the requirements of AS 9100 B standard. According to the second AS 9100 B compliance audit findings, the Company collected 92.3 points. The score surpassed the results of the certification audit conducted in November 2008 (91.07 points).

The international certification authority recognized that all the business processes applied to the operation of the refinery, the gasoline plant, the management apparatus and the department of oil product retail sales complied with the requirements of the inter-national standards.

according to the second aS 9100 B compliance audit findings,

the Company collected 92.3 points. The score surpassed the results

of the certification audit conducted in November 2008 (91.07 points)

maNagEmENT SySTEm

ChaPTEr vI


to keep being at one’s best

SOCIAL AND HR POLICY

CHAPTER VIANNUAL REPORT PSC “TAIF-NK” 2009 SOCIAL AND HR POLICY

44 45

Higher Education 37 38 39Secondary Professional Education 24 23 23Elementary Professional Education 21 29 28Secondary Education 18 10 10

Average Age of Staff (years) 38 38 38Staff age range: 18-35 1,292 1,389 1,38136-40 275 313 33141-50 772 785 73051-60 359 423 499

DESCRIPTION

INDICATOR

2009

2009

2007

2007

2008

2008

hr EDuCaTIONal STruCTurE (%)

QuaNTITaTIvE aND agE CharaCTErISTICS (Number of People)

7 employees of the Company hold the degree of Candidate of Science

The number of working young people under 35 years old amounted to 1,381 people, or 46.96% of the whole quantity the Com-pany’s personnel at year-end.

One of the Company’s primary objectives in its relationship with the personnel is continuous improvement of HR skill level to meet the challenges of modern production and social environment.

Training of employees is carried out on the basis of detailed study of the Company’s demands.

Training, continuing education and advanced training of the Company’s manpower are provided at the professional college No. 44 based in Nizhnekamsk.

The main objective of TAIF-NK's HR Policy is to involve highly qualified specialists in the production activities and to make the best use of the theoretical and practical knowledge of the Company's per-sonnel for making a stable profit through manufacture of competitive products.

The Company’s staff policy priorities are as follows:• identification of factors which influence the manpower re-

quirement in accordance with the Company’s development strategy, the amount of produce, the technologies employed for production etc;

• analysesofprofessionalandqualificationstructureofthe em-ployed manpower and the Company’s demand for labor re-sources;

• definition of qualitative (detection of compliance with theprofessional and qualification requirements, analysis of per-sonnel’s abilities necessary for fulfillment of the production plan) and quantitative (prediction of general demand for per-sonnel, assessment of staff rotation) requirements in terms of labor resources.

TAIF-NK HR Structure is characterized by the following criteria:

Amount of Employed Staff 2,698 100 2,920 100 2,941 100Including Managers 326 12 356 12 357 12Technicians 466 17 513 18 528 18Office Staff 82 3 85 3 76 3Workers 1,824 68 1,966 67 1,980 67

DESCRIPTION

NUMBER OF PEOPLE

NUMBER OF PEOPLE

NUMBER OF PEOPLE

2007 2008 2009

% % %

hr STruCTurE By OCCuPaTION CaTEgOry

The main objective of TaIf-NK's hr Policy is to involve

highly qualified specialists in the production activities

and to make the best use of the theoretical and

practical knowledge of the Company's personnel

hr POlICy OBJECTIvES aND fuNDamENTalS

CHAPTER VIANNUAL REPORT PSC “TAIF-NK” 2009 SOCIAL AND HR POLICY

46 47

PSC “TAIF-NK” contributes to solving important social problems of employees and their families. Particularly, in 2009 contraction relations on voluntary medical insurance between OJSC “AlfaStrakhovanie” and PSC “TAIF-NK” were prolonged. Such fact enabled Company’s employees to obtain different kinds of medical and health improvement services in the clinics of Tatarstan Republic in 2009 as well.

The provision of employees with the comfortable housing is performed because of the Company’s participation in the republican program “Social mortgage”. 20 apartments were secured to the employees of the Company in 2009.

The social policy of PSC “TAIF-NK” is realized by the Company providing the following guaranties and social benefits to the personnel, including:

• socialpaymentincaseofchildbirthand(or)childadoption;• monthly financial assistance forwomenwho are on a child-

rearing leave;• financialassistanceformedicalandpreventivemeasures;• monthlyone-timepaymentformeals;

In 2009 for the purpose of charity support PSC “TAIF-NK” expended over 6.8 mln RUB to:

• socialwelfareinstitutions;• institutionsofhealthcare,education,science,physicalfitness

and sports;• low-incomecitizens.

PSC “TAIF-NK” takes an active part in realization of social and charity projects. Implementation of such programs considerably contributes to the development of the town and region, and testifies the Company’s high social responsibility to citizens of the Republic of Tatarstan. Currently the social activity falls beyond the scope of charity, becoming a part of business activity and is carried out by all the Company’s subdivisions.

SOCIal rESPONSIBIlITy PSC “TaIf-NK” takes an active part in realization of social andcharity projects. Implementation of such programs considerably contributes to the development of the town

A contract for managers and specialists’ qualification improve-ment was concluded between TAIF-NK and the Institute of Advanced Professional Training based at Kazan State Technology University in or-der to improve professional skills of the Company’s top management and technicians.

In 2009 as much as 2,836 employees of the Company were trained using various educational forms in total amount of RUB 22.9 mln.

The Company pays great attention to adaptation of new employ-ees at the enterprise. Occupational adaptation includes active master-ing of professional and additional skills, as required, and development of abilities. To this end the Company arranges occupational training for new comers.

Staff rotation is provided for adequate evaluation of labor po-tential and more efficient use of their professional, intellectual and cre-ative abilities. The rotation is envisaged on regular basis subject to job categories.

Any Company’s worker having relevant education, practical knowledge, professional skills, business, personal and ethical qualities required to fulfill his job duties can become a candidate for introduc-tion into the TAIF-NK HR Pool. Introduction into the Company’s HR Pool enables an employee to count on taking on a higher salary job position if a vacancy appears in the Company.

Such an approach to organization of production activities makes it possible to avoid the professional “standstill” of manpower and effectively utilize labor resources.

2007 2008 2009

12,200thous. RUB

13,600thous. RUB

22,930thous. RUB

TaIf-NK PErSONNEl TraININg COSTS

In 2009 as much as 2,836 employees of the Company were trained using

various educational forms in total amount of ruB 22.9 mln


COMPANY’S DEVELOPMENT PROSPECTS

ChaPTEr vIIto use brains

CHAPTER VIIANNUAL REPORT PSC “TAIF-NK” 2009 COMPANY’S DEVELOPMENT PROSPECTS

5150

To date TAIF-NK has worked on a number of technical and com-mercial proposals regarding the HRCC Project, which were presented by such companies as Chevron Lummus Global, UOP Limited, GS E&C, Lurgi GmbH, Chiyoda Corporation.

The contracts for basic design engineering and provision of li-censes for the deasphalting and hydro cracking technologies have been entered into by TAIF-NK and UOP Ltd.

The HRCC Project implementation will help boost the output of the most valuable petrochemical feedstock, i.e. naphtha and LPG as well as Euro-5 diesel fuel. Moreover, it will enable the Company to increase the output of straight-run gasoline by 59%, motor gasoline by 38%, diesel fuel more than twofold.

It is worth noting the HRCC Project envisaged by TAIF-NK has an evident social and economic effect associated with the guaranteed contribution to the RGP (regional gross product) and the NGP (national gross product) owing to the new production lines as well as with in-creased income of the budget system, creation of new job places, and higher level of performance and innovativeness of the national econ-omy in general.

HYDROCRACKING UNIT

GASIFICATION COMPLEX EXISTING FCC

SOLVENT DEASPHALTING UNIT

SImPlIfIED hrCC BlOCK DIagram

Vacuum Gas Oil LPG

Euro-5 Motor Gasoline

Hydrocracker Residue

Hydrogen

Naphtha to Petrochemical Complex

Jet Fuel

EURO-5 Diesel Fuel

Deasphalted Oil

Vacuum Residue

Asphalt

Putting the heavy residue Conversion Complex into operation will allow the Company to avoid production of low-liquidity residual oil while boosting production of more valuable light oil products meeting the European quality standards owing to higher conversion rate

The strategic target is operation of a modern complex with crude oil throughput capacity of up to 10 mln tpa and the conversion rate of up to 98.5%.

Improvement of oil products quality to achieve compliance with the EURO-5 international requirements as well as the level speci-fied by the Russian Federation legislation by 2015, increase of the con-version rate, reduction of crude processing costs (primarily, the cost of utilities and the purchase cost of motor gasoline components) are the activities vital for effective development of the Company’s oil refining complex in the tightening competition.

Attainment of the strategic target should be based on creation of a modern enterprise capable to keep pace with the global leaders in terms of the technological level through effective utilization the Com-pany’s existing production base. It is supposed to be the enterprise with hydrocarbon feedstock (crude oil and gas condensate) through-put capacity of up to 10.1 mln tpa and conversion rate up to 98.5% ca-pable to produce oil products in conformity with the European quality standards and the regulations set by the Russian Federation legislation. To this end a comprehensive development programme of the existing crude oil processing capacities is expected to be realized by TAIF-NK in the mid-term future (2010-2015).

In the reporting year the Company proceeded with implemen-tation of the Heavy Residue Conversion Complex Project (HRCC Project). Putting the Heavy Residue Conversion Complex into operation will al-low the Company to avoid production of low-liquidity residual oil while boosting production of more valuable light oil products meeting the Eu-ropean quality standards owing to higher conversion rate. Another im-portant issue is feasibility to increase the crude intake up to 1.8 mln tpa. Owing to the commercial operation of the HRCC the Company’s total feedstock throughput capacity will amount to 10.1 mln tpa taking into account the gas condensate intake of 1 mln tpa.

The HRCC will comprise solvent deasphalting unit, vacuum distillates hydrocracker, atmospheric distillates hydrotreater, gasifica-tion complex with HPU (hydrogen production unit) as well as a number of ancillary units and tank farms.

The strategic target is operation of a modern complex

with crude oil throughput capacity of up to 10.1 mln tpa and

the conversion rate of up to 98.5%

COmPaNy’S DEvElOPmENT PrOSPECTS

ChaPTEr vIII


CORPORATE MANAGEMENT STRUCTURE

to master the situation

CHAPTER VIIIANNUAL REPORT PSC “TAIF-NK” 2009 CORPORATE MANAGEMENT STRUCTURE

54 55

II. Information on additional capital issues:

1. Category and type: common registered non-documentary stock• Totalamount:991,651RUB• Totalnumberofshares:991,651pieces• Parvalue:1rouble/piece• Dateofregistration:June29,2006• Registrationnumber:1-01-50545-К-001D• Thestateregistrationbody:FFMSoftheRussianFederation• Wayofdistribution:closesubscription

Cancellation date of the individual number: December 18, 2007

2. Category and type: common registered non-documentary stock• Totalamount:5,850,000,000RUB• Totalnumberofshares:5,850,000,000pieces• Parvalue:1rouble/piece• Dateofregistration:November22,2007• Registrationnumber:1-01-50545-К-002D• Thestateregistrationbody:FFMSoftheRussianFederation• Wayofdistribution:closesubscription

Cancellation date of the individual number: July 8, 2008

PSC “TAIF-NK” dividend policy is based on the balance of interests of the Company and its sole shareholder, on increasing of the investment appeal of PSC “TAIF-NK” and its capitalization, on the respect and strict observation of the shareholder’s rights incorporated in the existing legislation of the Russian Federation, in the Company Charter and in its internal documents.

In 2009 the Company paid dividends in the amount of 2.5 bln RUB.

maJOr TraNSaCTIONS aND INTErESTED ParTy TraNSaCTIONS

SharE CaPITal aND DIvIDEND POlICy

PCS “TAIF-NK” didn’t make any major transactions in 2009.

INTErESTED ParTy TraNSaCTIONS, maDE By ThE COmPaNy IN 2009

Contract of tenancy Rent payment is

305,224.25 RUB per month

(including VAT)

PSC “TAIF-NK”(Lessor)

CJSC “TATSOL”(Lessee)

A. Babynin Board of Directors

TRANSACTION PARTIES INTERESTED PARTY(PARTIES)

ESSENTIAL TERMS OF TRANSACTION

THE COMPANY’S MANAGEMENTBODY APPROVING TRANSACTION

Structure of the share capital as of 31st of December, 2009The statutory capital of PSC “TAIF-NK” is 5,851,000,000 RUB.

I. main information of capital issue:

1. Category and type: common registered non-documentary stock• Totalamount:8,349RUB• Totalnumberofshares:8,349pieces• Parvalue:1rouble/piece• Dateofregistration:July29,1998• Registrationnumber:1-01-50545-К• Thestateregistrationbody:FCSMoftheRussianFederation• Wayofdistribution:distributionatissue

In 2009 the Company paid dividends in the amount of 2.5 bln ruB


56 57

maNagEmENT BODIES

It is not advisable to elect to the board of directors a person who is a member of the board of directors, the General director, a member of a management body or an employee of legal entity competing with the Company.

It is advisable that the Company’s Charter provide for the election of mem-bers of the board of directors by cumulative voting.

The Company should develop and incorporate into its internal documents procedures for conducting meetings of the Board of directors.

The Company’s Charter or the internal documents stipulate that major transactions should be approved prior to their consummation.

The Company should have a website Internet; and the information about the Company should be regularly disclosed through this website.

The system of the Company’s governing bodies includes: • Generalshareholdersmeeting(Shareholder’sresolution);• Company’sBoardofDirectors;• Soleexecutivebody–GeneralDirector.

ARTICLE OF THE CORPORATE GOVERNANCE CODE

№ NOTES

Observed

Observed

Observed

Observed

Observed

6

7

8

9

10

INfOrmaTION ON ThE aDhErENCE TO ThE COrPOraTE gOvErNaNCE CODE

The information is disclosed in accordance with the Order № 06-117/пз-н of FFMS of the Russian Federation dated October 10, 2006 “Con-cerning the approval of the regulations for information disclosure by the emitters of equity securities” and the Instruction N 03-849/р of FCSM of the Russian Federation dated April 30, 2003.

Company should enable shareholders to study the lists of persons authorized to participate in the General shareholders meeting at any time from the mo-ment of notice and until the General shareholders meeting held in person is over, or, in case of the General shareholders meeting held by means of ab-sentee ballots, until the last date for submitting voting ballots.

Company should enable shareholders to study the information (materials), subject to provision in preparation to the General shareholders meeting by electronic means, including Internet.

The shareholders should have the right to propose agenda items and call for the General shareholders meeting. Companies should not require that a shareholder appearing in the register produce any documents as the evidence of rights. It is recommended instead that the company should check the existence of the shareholder’s specific rights against the register. Provided the right to shares is recorded in a deposit account, it is recom-mended that a current statement of the account be regarded as an ample proof of the shareholder’s right to the shares.

The Company’s Charter should assign the annual approval of procedures for financial and business plan of the Company to the authority of the board of directors.

The Charter of the Company states that the approval of the terms and con-ditions of the employment contracts with the General director is included in the responsibilities of the Board of Directors.

ARTICLE OF THE CORPORATE GOVERNANCE CODE

№ NOTES

Observed

Observed

Observed

Observed

Observed

1

2

3

4

5


5958

The company’s supervisory body is the Company’s audit committee:

The Chairman of the audit committeeDmitriy I. TeslenkoHead of financial and economic department, PSC “TAIF”Education background: higher educationGraduated from Leningrad Institute of Fine Mechanics and OpticsHolds no shares of the Company

members of the audit committeeAlbert F. SulteevDeputy manager of production and sales department, PSC “TAIF”Education background: higher education Graduatedfrom Kazan State University Holds no shares of the Company

Olga A. KuznetsovaService lead accountant for RAS, PSC “TAIF”Education background: higher education Graduatedfrom Kazan State Finance and Economics UniversityHolds no shares of the Company

Venera Kh. MustafinaSenior economist of production and sales department , PSC “TAIF”Education background: higher education Graduatedfrom Kazan State Finance and Economics UniversityHolds no shares of the Company

Natalya V. SokolnikovaDeputy manager of planning and economic departmentfor cost optimization and analysis of results of PSC “TAIF-NK”Education background: higher education Graduatedfrom Nizhnekamsk Institute of Chemistry and TechnologyHolds no shares of the Company

РThe amount of remuneration of the person, being the PSC “TAIF-NK” sole executive body incumbent, obtained by him in 2009 made 8,915,000 RUB. The remunerations, reimbursements of expenses were not paid out to PSC “TAIF-NK” Board of Directors members in 2009.

ThE COmPaNy’S BOarD Of DIrECTOrS

rustem N. Sulteev Chairman of the Board of Directors Deputy General Director for Production and Sale – First Deputy, PSC “TAIF”Year of birth: 1954Education background: higher educationGraduated from Kazan Institute of Civil Engineering

Holds no shares of the Company

vladimir v. Presnyakov Deputy General Director for Petrochemicals and Refining, PSC “TAIF”Year of birth: 1951Education background: higher education Graduated from Kazan Chemical and Technological Institute


albert K. ShigaboutdinovGeneral Director of PSC “TAIF”

Year of birth: 1952Education background: higher

education Graduated from Kazan Aeronautical Institute


alexander a. BabyninGeneral Director of PSC “TAIF-NK”

Year of birth: 1972Education background: higher

education Graduated from Priazovsky State Technical

University


ruslan a. ShigaboutdinovDeputy General Director for Corporate Governance of Property and Investments, PSC “TAIF”Year of birth: 1976Education background: higher education Graduated from Kazan State University


Information on changes in the com-position of the Board of Directors of PSC “TaIf-NK” occurred in 2009: the composition of the Board of Directors of PSC “TAIF-NK” was re-elected to a new term in the former composition (Shareholder’s reso-lution №22/06-09 dated 22.06.2009).Sole executive body – General DirectorAlexander A. BabyninHolds no shares of the Company


MAJOR RISKS ASSOCIATED WITH COMPANY’S BUSINESSES

ChaPTEr Ixto be well prepared for all eventualities

CHAPTER IXANNUAL REPORT PSC “TAIF-NK” 2009 MAJOR RISKS ASSOCIATED WITH COMPANY’S BUSINESSES

62 63

Optimal distribution of debts by their repayment dates is very important for PSC “TAIF-NK” in order to eliminate the negative impact of the credit risk.

Interest rate risk. Being a large loan debtor, PSC “TAIF-NK” is subjected to risks connected with changes of interest rates. The greater part of the debt portfolio of PSC “TAIF-NK” is represented by the loan denominated in US dollars. The interest rate for the loan servicing is based on the Libor floating rate. Increase in the cost of cred-it can have a negative impact on the financial results of the Company. For that purpose transaction on fixing of the interest rate level in part of currency credits are handled.

Growth of TAIF-NK’s credit capacity as well as structuring of the credit portfolio between the different kinds of lending institu-tions allows choosing the best interest rates which is an important fac-tor of reducing of the cost of borrowed funds. As a result, for instance, for the period from 2006 to 2009 average credit rates are reduced from 8.39% to 4.24% per annum, correspondingly.

Exchange rate risk. A considerable part of PSC “TAIF-NK” proceeds is formed by export operations concerning oil products mar-keting. Consequently fluctuations in rates of foreign exchange towards the rouble have an impact on the results of financial and operational activities of PSC “TAIF-NK” what is the factor of the exchange rate risk.

The exchange rate risk of the Company significantly re-duces due to the expenses expressed in US dollars (long-term credit in US dollars). The structure of revenues and debt liabilities operate as a hedging mechanism of exchange rate risk where multidirectional factors compensate each other.

Inflation risk. The change of consumer price index has a cer-tain impact on the financial situation of the company. The inflation risk is taken into account in drafting financial schemes of PSC “TAIF-NK”. The existing and projected inflation levels are far from critical values for PSC “TAIF-NK” and the industry in general. On this basis, in the future the impact of inflation factors on the financial stability of the Com-pany is not significant.

growth of TaIf-NK’s credit capacity as well as structuring of the credit portfolio between the different kinds of lending institutions allows choosing the best interest rates which is an important factor of reducing of the cost of borrowed funds

The main factor of branch risk is the possible destabilization of price policy that is connected with political and economical situa-tion not only in Russia but overseas.

The oil refining industry has its specific risks that include the volatility of world prices for crude oil and competitiveness among oil companies.

At present PSC “TAIF-NK” and OJSC “Tatneft” named after V.D. Shashin has established close mutually beneficial cooperation in the oil supplies. This cooperation guarantees supplies of feedstock of good quality in due time and at market price.

Technological innovation development by competitors which considerably reduces operating costs and increases the quality of out-put products can also constitute a threat for the Company’s economic security.

To minimize these risks the Company is constructing new plants and is upgrading the existing ones in order to increase the depth of feedstock processing and to produce high quality products meeting EURO-4 and EURO-5 standards.

Integration of PSC “TAIF-NK’ into the petrochemical complex within the framework of “TAIF” Group of companies considerably reduces external risks related to the appreciation of petrochemical and refined feedstock and intermediate products, used by the Com-pany in its production.

BraNCh rISKS

fINaNCIal rISKS

Credit risk. Many Russian companies faced the problem of credit resources attraction due to the world financial crisis. The posi-tive history of cooperation with creditors, business activity and credit-ability enabled PSC “TAIF-NK” to attract in 2009 the loan funds in due time and in the required amounts for financing its activities.

The company is also the borrower on the global debt market, where the debt servicing obligation is denominated in US dollars. The foreign currency revenue allows minimizing the influence of cred-it risk factors and untimely fulfillment of the Company’s obligations to the creditors.

CHAPTER IXANNUAL REPORT PSC “TAIF-NK” 2009 MAJOR RISKS ASSOCIATED WITH COMPANY’S BUSINESSES

6564

lEgal rISKS

consistence of legal system and its aptitude to regular changes are related to the external factors of the legal risk appearance. Beyond that point to the risk factors they relate the incorrect enforcement of oreign state law and (or) the standards of international law, impos-sibility of solving the individual questions by means of negotiations and as a result – the Company’s appeal to the law courts for the pur-pose of such questions regulation and also the violation of the contract terms by the Company’s contractors.

In order to provide the minimization of legal risk, the Company legal service takes the following measures:

• continuousmonitoringoftheRussianFederationlegislation;• conducting of operations on informing and explanation

to the employees and the Company’s services about the chang-es in regulatory legal acts of the Russian Federation including local acts;

• regular training of lawyers for the career progression pro-gram; conducting consultations with the qualified specialists of PSC “TAIF” and the TAIF Group of Companies;

• the regular workon creationof theeffectiveand local rule-making.In prospective view, the general legal risks reduction can

be predicted in connection with filling of the gaps in the law by ju-dicial practice and permanent perfection of tax and currency laws of the Russian Federation.

The insurance complex system including property insurance, liability insurance and insurance against construction and assembly risks and others is used in PSC “TAIF-NK” for the purpose of minimizing the insurance risk. This system is treated as one of the key support-ing mechanisms for the stable strategic development of the Company in the long term prospect, as the instrument of Company’s protection from the uncompensated financial losses which arise in the industrial accidents or any kinds of industrial emergencies.

The insurance work in PSC “TAIF-NK” is based on the unified principles and methodology of insurance process organization and has a complex character. Under this work, the system of insurance risks monitoring, insurance contracts, and quality of insurance cov-erage is established. This system is based on the list of requirements, criteria of quality (reliability) determination of the insurance company and its insurance services.

The result of the conducted operations is deemed to be the qualitative insurance coverage of PSC “TAIF-NK” which allows en-forcing the absolute rights and property interests of the shareholder as to the safekeeping of property and exclusion of uncompensated losses (indemnities) from the production accidents.

rISK Of PrOPErTy lOSSThe insurance work in PSC “TaIf-NK” is based on the unified principles

and methodology of insurance process organization

and has a complex character

The result of the conducted operations is deemed to be the qualitative insurance coverage of PSC “TaIf-NK” which allows enforcing the absolute rights and property interests of the shareholder as to the safekeeping of property and exclusion of uncompensated losses (indemnities) from the production accidents

The legal risks management is performed by the legal ser-vice of the Company in order to reduce (exclude) the possible losses. The uprising of legal risk can be determined by both internal factors and external ones. The non-observance of Russian Federation law by the Company including the adoption of local acts which are un-comfortable to the regulatory legal acts and also the terms of trans-actions violation by the Company are related to the internal factors. The imperfection of government legal frame which is stated in the ab-sence of sufficient legal regulations of several social relations, the in-


ChaPTEr x

FINANCIAL STATEMENTS

to value the attained results

CHAPTER XANNUAL REPORT PSC “TAIF-NK” 2009 FINANCIAL STATEMENTS

68 69

BalaNCE ShEET aS Of DECEmBEr 31, 2009* (Continued)

III. Capital and reserves Equity 410 5,851,000 5,851,000Treasury Shares 411 - -Additional Capital 420 - -Reserve Capital 430 263,628 263,628Retained Profit (Uncovered Loss) 470 10,492,169 8,655,498 Total for Section III 490 16,606,797 14,770,126

Iv. . long-term liabilities Loans and Credits 510 12,737,352 7,059,905Deferred Tax Liabilities 515 258,628 468,967Other long-term Liabilities 520 - - Total for Section Iv 590 12,995,980 7,528,872

v. Short-term liabilities Loans and Credits 610 1,833 2,761,713Accounts Payable 620 4,927,476 12,902,488Liabilities to Shareholders on Income Payment 630 - -Deferred Income 640 - -Provisions for Future Expenses 650 - 58,650Other short-term Liabilities 660 - 50,141 Total for Section v 690 4,929,309 15,772,992

BalaNCE 700 34,532,086 38,071,990

LIABILITIES LINE CODE REPORTING YEAR BEGINNING

REPORTING YEAR-END

1 2 3 4

BalaNCE ShEET aS Of DECEmBEr 31, 2009 * (thousand ruB)

I. Non-current assets Intangible Assets 110 - 1,590Fixed Assets 120 15,167,774 14,155,629Construction in Progress 130 1,737,850 1,095,297Income-bearing Investments in Material Assets 135 11,455 34,937Long-term Investments 140 2,521,561 3,457,375Deferred tax Assets 145 37,400 44,944Other non-current Assets 150 3,930 2,275 Total for Section I 190 19,479,970 18,792,047

II. Current assets Stocks 210 2,818,155 5,679,531VAT for Purchased Assets 220 800,158 1,425,820Accounts Receivable(settlement is expected in over 12 monthsafter the reporting date) 230 - - Accounts Receivable(settlement is expected during 12 monthsafter the reporting date) 240 5,722,273 7,873,167Short-term Financial Investment 250 3,539,500 2,350,910Cash 260 2,171,751 770,915Other current Assets 270 279 1,179,600 Total for Section II 290 15,052,116 19,279,943

BalaNCE 300 34,532,086 38,071,990

ASSETS LINE CODE REPORTING YEAR BEGINNING

REPORTING YEAR-END

1 2 3 4

CHAPTER XANNUAL REPORT PSC “TAIF-NK” 2009 FINANCIAL STATEMENTS

7170

PrOfIT / lOSS STaTEmENT* (Continued)

PrOfIT / lOSS STaTEmENT* (thousand ruB)

revenues and Expenses from Ordinary activities Revenues from Sales, Products, Activities, Services (net)(excluding VAT, Excises and Similar Compulsory Payments) 010 74,393,796 89,148,809Cost of Sold Goods, Activities and Services 020 (63,501,145) (72,713,540)Gross Profit 029 10,892,651 16,435,269Business Expenses 030 (6,759,660) (4,714,802)

INDICATOR

Code

FOR REPORTING PERIOD

SAME PERIOD PREVIOUS YEAR

1

1

2

2

3

3

4

4

General Director

Chief Accountant

* The reliability of data, contained in the Annual report of the Company, is confirmed by the Company’s audit committee

STaTEmENT Of valuE ChargED ON Off-BalaNCE aCCOuNTS

Rented Assets 910 741,214 871,435Material Assets under Custody 920 196 46Goods Accepted on Commission 930 - - Bad Debt Written Off to Losses 940 2,483 3,098Collateral Received 950 - -Collateral Paid 960 5,323,561 7,439,663Housing Depreciation 970 - -Depreciation of Land Improvement Facilitiesand Other Similar Ones 980 512 672Intangible Assets Obtained for Use 990 57,448 56,934Strict Reporting Forms - -

LINE CODE REPORTING YEAR BEGINNING

REPORTING YEAR-END

1 2 3 4

A. Babynin

D. Kuramshina

Administrative Expenses 040 (1,165,204) (1,269,369)Profit (loss) on Sales 050 2,967,787 10,451,098Other revenues and Expenses Interests Receivable 060 30,572 247,570Interests Payable 070 (567,164) (779,866)Income from Partnership with Third Companies 080 548 -Other Revenues 090 56,771,942 57,090,472Other Expenses 100 (58,291,109) (59,909,421)Profit (loss) Before Tax 140 912,028 7,099,853Deferred Tax Assets 141 32,823 21,817Deferred tax Liabilities 142 (205,357) 48,208Current Income Tax 150 (109,268) (1,896,525)Tax Sanctions 180 (13,580) (1,065)Deferred Tax Assets for Previous Taxation Period 181 (25,280) 1,4506Deferred Tax Liabilities for Previous Taxation Periodза прошлый налоговый период 182 (4,982) 142Income Tax for Previous Taxation Period 183 30,268 (15,376)Net Income (loss) Over reporting Period 190 616,652 5,271,560

FOR REFERENCE ONLY: Permanent Tax Liabilities (Assets) 200 99,390 123,519

COmPaNy'S CONTaCT DETaIlS

Public Stock Company “TaIf-NK” (PSC “TaIf-NK”)

Place of location and postal addressPSC “TAIF-NK”, PO 20, OPS-11, Nizhnekamsk, 423570, Republic of Tatarstan, Russian FederationTel.: +7 (8555) 38-16-16; fax: +7 (8555) 38-17-17e-mail: [email protected] address: www.taifnk.ru

registrarLimited Liability Company “Euro-Asian Registrar“ - Kazan branch

Place of location and postal address6, Vishnevskiy Street, Kazan, 420043, Republic of Tatarstan, Russian FederationTel.: +7 (843) 236-27-52; fax: +7 (843) 236-27-52e-mail: [email protected] address: www.erd.ru

licenseNumber: 10-000-1-00332Date of issue: March 10, 2005Expiration date: unlimitedThe body that issued the license: Federal service for financial markets

Information on the Company’s auditorLimited Liability Company “FBK Povolzhie” Place of location and postal address: 10, Prospekt Yamashev Street, Kazan, 420080, Republic of Tatarstan, Russian FederationTel.: +7 (843) 555-64-94; +7 (843) 555-60-67e-mail: [email protected] address: www.acg-pkf.ru

licenseNumber: Е 002876Date of issue: December 10, 2002Valid until: unlimitedThe body that issued the license: Ministry of Finance of the Russian Federation

72

ANNUAL REPORT PSC “TAIF-NK” 2009

2009 Taif-nk English

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