BRUNSWICK RAIL FINANCE LIMITED - Perfect...

BRUNSWICK RAIL FINANCE LIMITED(a private limited company incorporated under the laws of Ireland)

US$ 600,000,000 6.5% Guaranteed Notes due 2017

unconditionally and irrevocably guaranteed by

Brunswick Rail Limited

OOO Brunswick Rail Leasing

OOO Brunswick Rail Service

OOO Brunswick Trans

OOO Brunswick Wagon Leasing

Issue Price: 100%

Brunswick Rail Finance Limited, a company incorporated under the laws of Ireland (the “Issuer”), is offering an aggregate principal amount ofUS$ 600,000,000 6.5% Guaranteed Notes due 2017 (the “Notes”). Brunswick Rail Limited, OOO Brunswick Rail Leasing, OOO Brunswick RailService, OOO Brunswick Trans and OOO Brunswick Wagon Leasing (the “Guarantors”) will unconditionally and irrevocably guarantee on a jointand several basis the due and prompt payment of all amounts at any time becoming due and payable in respect of each of the Notes under thedeeds of guarantee (each a “Guarantee” and together, the “Guarantees”). The Notes will be constituted under a trust deed to be entered intobetween Citibank, N.A., London Branch (the “Trustee”) and the Issuer on 1 November 2012 (the “Trust Deed”). The Notes will be subject to, andhave the benefit of, the Trust Deed.

The Issuer will pay interest on the Notes at an annual rate equal to 6.5% of their outstanding principal amount. Interest on the Notes is payablesemi-annually in arrear on 1 May and 1 November of each year, commencing on 1 May 2013. Payments on the Notes (including payments by aGuarantor under each Guarantee or otherwise under the Trust Deed) will be made without withholding or deduction for or on account of taxes,unless such withholding or deduction is required by law. In the event of any withholding or deduction for or on account of taxes of Ireland,Bermuda, or the Russian Federation, the Issuer or (as the case may be) a Guarantor will, subject to certain exceptions and limitations, payadditional amounts to the holder of any Note to the extent described under “Terms and Conditions of the Notes”. The Issuer may redeem the Notesin whole but not in part at 100% of the principal amount thereof, plus accrued and unpaid interest, in the event of certain taxation changes andotherwise as described under “Terms and Conditions of the Notes—Redemption and Purchase—Redemption for Tax Reasons”. The Issuer mayalso redeem the Notes, in whole or in part, at any time, having given not less than 30 nor more than 60 days’ notice to Noteholders, at theirprincipal amount plus the Make Whole Premium (as defined in Condition 6.5(b) of the Notes (“Terms and Conditions of the Notes—Redemptionand Purchase—Optional Redemption at Make Whole”)), together with accrued interest, including step-up interest, if any, to the redemption date(see Condition 6.5 of the Notes (“Terms and Conditions of the Notes—Redemption and Purchase—Optional Redemption at Make Whole”)). If theGroup experiences certain kinds of changes in control or if the Group fails to add additional guarantors of the Notes in accordance with Condition4.13 of the Notes (“Terms and Conditions of the Notes—Covenants—Additional Guarantors”), it must offer to purchase the Notes.

The Notes will be senior unsecured obligations of the Issuer and will rank equally in right of payment with the Issuer’s other existing and futureunsecured and unsubordinated indebtedness. Each of the Guarantees will be senior unsecured obligations of the respective Guarantor and willrank equally in right of payment with all existing and future senior unsecured and unsubordinated obligations of such Guarantor.

This document (the “Prospectus”) constitutes a “prospectus” for the purposes of the Directive 2003/71/EC (the “Prospectus Directive”). TheRegulated Market is a regulated market for the purposes of the Markets in Financial Instruments Directive 2004/39/EC. This Prospectus has beensubmitted for approval to the Financial Services Authority in its capacity as competent authority under the Financial Services and Markets Act 2000(“FSMA”) (the “UK Listing Authority”) and as competent authority under the Prospectus Directive. Application has been made to the UK ListingAuthority for the Notes to be admitted to the official list of the UK Listing Authority (the “Official List”) and to the London Stock Exchange plc (the“London Stock Exchange”) for the Notes to be admitted to trading on the London Stock Exchange’s Regulated Market (the “Regulated Market”).No certainty can be given that the application will be granted. Furthermore, admission of the Notes to the Official List and trading on its regulatedmarket is not an indication of the merits of the Issuer, the Guarantors, the Notes or the Guarantees. References in this Prospectus to Notes being“listed” (and all related references) shall mean that such Notes have been admitted to trading on the regulated market of the London StockExchange. There can be no assurance that a trading market in the Notes will develop or be maintained.

AN INVESTMENT IN THE NOTES INVOLVES A HIGH DEGREE OF RISK. SEE THE SECTION OF THIS PROSPECTUSENTITLED “RISK FACTORS” BEGINNING ON PAGE 20 OF THIS PROSPECTUS.

The Notes and the Guarantees (the “Securities”) have not been and will not be registered under the U.S. Securities Act of 1933, asamended (the “Securities Act”), or under any securities laws of any other jurisdiction. Subject to certain exemptions, or transactions notsubject to, the Securities Act, the Securities may not be offered or sold within the United States. The Securities will be offered and soldoutside the United States to non-U.S. persons in offshore transactions as defined in and in reliance on Regulation S under the SecuritiesAct and in the United States to qualified institutional buyers (“QIBs”) (within the meaning of Rule 144A under the Securities Act), inreliance on an exemption from registration pursuant to Rule 144A under the Securities Act (“Rule 144A”). Prospective purchasers of theSecurities are hereby notified that the seller of the Securities may be relying on the exemption from the provisions of Section 5 of theSecurities Act provided by Rule 144A. Neither the United States Securities and Exchange Commission (“SEC”) nor any state securitiescommission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this Prospectus. Anyrepresentation to the contrary is a criminal offence. The Notes are subject to restrictions on transferability and resale and may not betransferred or resold except as permitted under the Securities Act and applicable state securities laws pursuant to registrationthereunder or exemption therefrom. For a description of these and certain further restrictions on the transfer of the Notes, see “TransferRestrictions, Clearing and Settlement”.

The Notes will be offered and sold in minimum denominations of US$ 200,000 and integral multiples of US$ 1,000 in excess thereof. The Notesthat are being offered and sold in accordance with Regulation S (the “Regulation S Notes”) will initially be represented by beneficial interests in aRegulation S global note (the “Regulation S Global Note”) in registered form, without interest coupons attached, which will be registered in thename of a nominee for and will be deposited with a common depositary for Euroclear Bank S.A./N.V. (“Euroclear”) and Clearstream Banking,societe anonyme (“Clearstream, Luxembourg”) on or about 1 November 2012 (the “Closing Date”). Notes which are offered and sold in relianceon Rule 144A will initially be represented by beneficial interests in a global note (the “Rule 144A Global Note” and, together with the Regulation SGlobal Notes, the “Global Notes”) in registered form, without interest coupons attached, which will be deposited on or about the Closing Date witha custodian for, and registered in the name of Cede & Co. as nominee for, The Depository Trust Company (“DTC”). Beneficial interests in theGlobal Notes will be shown on, and transfers thereof will be effected only through, records maintained by DTC, Euroclear and Clearstream,Luxembourg, and their account holders. Definitive notes in respect of beneficial interests in the Regulation S Global Note and Rule 144A GlobalNote (“Regulation S Definitive Notes” and “Rule 144A Definitive Notes”, respectively, and together, the “Definitive Notes”) will not be issuedexcept as described under “Summary of Provisions of the Notes while in Global Form—Exchange of the Global Notes for Definitive Notes”.

The Notes are expected to be rated BB- by Standard & Poor’s Credit Market Services Europe Limited (“S&P”) and Ba3 by Moody’s InvestorsService Limited (“Moody’s”). A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension orwithdrawal at any time by the assigning rating organization. Each of Moody’s and S&P (which each provide ratings in relation to the Group and theNotes) are established in the European Union and registered in accordance with Regulation (EU) No 1060/2009 (the “CRA Regulation”).

Joint Lead Managers and Joint Bookrunners

Goldman SachsInternational

Raiffeisen BankInternational AG UBS Investment Bank VTB Capital

The date of this Prospectus is 26 October 2012

IMPORTANT INFORMATION ABOUT THE OFFERING

For information about the Issuer, Brunswick Rail Limited (the “Parent”) and the Parent’ssubsidiaries (together, the “Group”), the Guarantors, this offering (the “Offering”) and theterms and conditions of the Notes and the Guarantees, you should rely only on the informationcontained in this Prospectus. Goldman Sachs International, Raiffeisen Bank International AG,UBS Limited and VTB Capital plc (collectively, the “Joint Lead Managers” and each a “JointLead Manager”), the Issuer, the Guarantors and Citibank, N.A., London Branch (the “Trustee”)have not authorized any person to provide you with different information. If anyone providesyou with different or inconsistent information, you should not rely on it. You should assumethat, unless otherwise indicated, the information appearing in this Prospectus is accurate as ofthe date of this Prospectus only. The Issuer’s and the Guarantors’ business, financialcondition, results of operations and the information set forth in this Prospectus may havechanged since that date.

THE NOTES ARE OF A SPECIALIST NATURE AND SHOULD ONLY BE BOUGHT AND TRADEDBY INVESTORS WHO ARE PARTICULARLY KNOWLEDGEABLE IN INVESTMENT MATTERS. ANINVESTMENT IN THE NOTES IS SPECULATIVE, INVOLVES A HIGH DEGREE OF RISK AND MAYRESULT IN THE LOSS OF ALL OR PART OF THE INVESTMENT.

The Issuer and the Parent each accepts responsibility for the information contained in this Prospectus.To the best of the knowledge and belief of the Issuer and the Parent each (having taken all reasonablecare to ensure that such is the case), the information contained in this Prospectus is in accordancewith the facts and does not omit anything likely to affect the import of such information. Each Guarantoraccepts responsibility for the information contained in this Prospectus relating to itself and to itsGuarantee. To the best of the knowledge and belief of each Guarantor (each of which has taken allreasonable care to ensure that such is the case), the information contained in this Prospectus relatingto itself and its Guarantee is in accordance with the facts and does not omit anything likely to affect theimport of such information.

The Issuer and the Parent, each having made all reasonable inquiries, confirm that (i) this Prospectuscontains all information with respect to the Issuer, the Group, the Notes and the Guarantees that ismaterial to the Offering; (ii) such information is true and accurate in every material respect and is notmisleading in any material respect; (iii) the opinions, assumptions and intentions expressed in thisProspectus on the part of the Issuer are honestly held or made, have been reached after consideringall relevant circumstances, are based on reasonable assumptions and are not misleading in anymaterial respect; (iv) this Prospectus does not contain any untrue statement of a material fact nor doesit omit to state a material fact necessary to make the statements herein, in light of the circumstancesunder which they were made, not misleading; and (v) all proper inquiries have been made to ascertainand verify the foregoing.

Notwithstanding the preceding paragraph, the Issuer and the Guarantors obtained the market dataused in this Prospectus from internal surveys, industry sources, government sources and publiclyavailable information. Although the Issuer and the Parent believe that their sources are reliable,information and data from industry and government sources has not been independently verified by theIssuer, the Guarantors, the Joint Lead Managers or the Trustee or any of their respective affiliates oragents. None of the Issuer, the Guarantors, the Joint Lead Managers or the Trustee nor any of theirrespective affiliates or agents make any representation or warranty relating thereto other than therepresentation made by the Issuer and Guarantors in “Information Extracted from Third Parties”.

Each Noteholder participating in the Offering will be deemed to have made certain acknowledgments,representations and agreements as set forth under the section of this Prospectus entitled “TransferRestrictions, Clearing and Settlement”. The Notes and the Guarantees have not been registered underthe Securities Act or any state securities laws or the laws of any other jurisdiction, are subject torestrictions on transferability and resales, and unless so registered, may not be transferred or resoldexcept pursuant to an applicable exemption from, or in a transaction not subject to, the registrationrequirements of the Securities Act and other applicable securities laws.

Neither the Joint Lead Managers nor the Trustee makes any representation or warranty, express orimplied, as to the accuracy or completeness of any of the information in this Prospectus or any other

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information supplied in connection with the Notes and Guarantees. Each person receiving thisProspectus acknowledges that such person has not relied on any of the Joint Lead Manager or theTrustee in connection with its investigation of the accuracy of such information or its investmentdecision. Each person contemplating accepting the Offering and making an investment in the Notesmust make its own investigation and analysis of the creditworthiness of the Issuer and the Guarantorsand its own determination of the suitability of such investment, with particular reference to its owninvestment objectives and experience, and any other factors that may be relevant to it in connectionwith such investment. No person has been authorized in connection with the Offering to make orprovide any representation or information regarding the Issuer, the Guarantors, the Notes or theGuarantees other than as contained in this Prospectus. Any such representation or information shouldnot be relied upon as having been authorized by the Issuer, the Guarantors, the Joint Lead Managersor the Trustee.

Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note in the Offering shallin any circumstances create any implication that there has been no adverse change, or any eventreasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issueror the Guarantors since the date of this Prospectus. Unless otherwise indicated, all information in thisProspectus is given as of the date hereof. Neither the Issuer, nor the Guarantors nor any other personassumes any obligation (and expressly declares that it has no such obligation) to update or changeany information contained in this Prospectus once there is no longer a requirement under theProspectus Directive for the Prospectus to be updated.

This Prospectus does not constitute an offer of, or the solicitation of an offer to buy or an invitation tosubscribe for or purchase, by or on behalf of the Issuer, the Guarantors, the Joint Lead Managers orother person, the Notes in any jurisdiction where it is unlawful to make such an offer or solicitation. Thedistribution of this Prospectus and the offering, sale and delivery of the Notes in the Offering in certainjurisdictions may be restricted by law. Persons into whose possession this Prospectus comes arerequired by the Joint Lead Managers, the Issuer, the Guarantors and the Trustee to inform themselvesabout and to observe any such restrictions. This Prospectus may not be used for, or in connection with,any offer to, or solicitation by, anyone in any jurisdiction or under any circumstances in which suchoffer or solicitation is not authorized or is unlawful. For a description of certain further restrictions onoffers, sales, deliveries and transfers of the Notes and distribution of this information, see the section ofthis Prospectus entitled “Subscription and Sale” and “Transfer Restrictions, Clearing and Settlement”.

None of the Issuer, the Guarantors, the Joint Lead Managers, the Trustee or any of their respectiveaffiliates or agents makes any representation about the legality of the acceptance of the Offering or thepurchase of, or exchange for, the Notes by an investor under applicable investment or similar laws.Each prospective investor is advised to consult its own counsel and business adviser as to legal,business and related matters concerning the acceptance of the Offering and the Notes. The contentsof this Prospectus are not to be construed as legal, business or tax advice. Prospective purchasersshould be aware that they might be required to bear the financial risks of an investment in the Notes foran indefinite period of time.

Each prospective purchaser of the Notes must comply with all applicable laws and regulations in forcein any jurisdiction in which it purchases, offers or sells the Notes and must obtain any consent,approval or permission required of it for the purchase, offer or sale by it of the Notes under the lawsand regulations in force in any jurisdiction to which it is subject or in which it makes such purchases,offers or sales, and none of the Issuer, the Guarantors, the Joint Lead Managers or the Trustee or anyof their respective affiliates or agents shall have any responsibility therefor.

The Issuer may withdraw the Offering at any time and the Issuer and the Joint Lead Managers reservethe right to reject any offer to purchase the Notes in whole or in part and to sell to any prospectiveinvestor less than the full amount of Notes sought by such investor. In connection with the Offering, theJoint Lead Managers and any of their affiliates, acting as investors for their own accounts, may purchaseNotes and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own accountsin such Notes and other securities of the Issuer or the Guarantors or related investments in connectionwith the Offering or otherwise. Accordingly, references in this Prospectus to the Notes being issued,offered, acquired, placed or otherwise dealt in should be read as including any issue or offer to, oracquisition, placing or dealing by, the Joint Lead Managers and any of their affiliates acting as investorsfor their own accounts. The Joint Lead Managers do not intend to disclose the extent of any suchinvestment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

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The Notes have not been recommended by or approved by the SEC or any other federal or statesecurities commission or regulatory authority, nor has any commission or regulatory authority passedupon the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminaloffense.

Any investment in Notes does not have the status of a bank deposit and is not within the scope of thedeposit protection scheme operated by the Central Bank of Ireland. The Issuer is not and will not beregulated by the Central Bank of Ireland as a result of issuing the Notes

STABILIZATION

IN CONNECTION WITH THE ISSUE OF THE NOTES, GOLDMAN SACHS INTERNATIONAL (THE“STABILIZING MANAGER”) (OR PERSONS ACTING ON ITS BEHALF) MAY OVER ALLOTNOTES OR EFFECT TRANSACTIONS WITH A VIEW TO SUPPORTING THE MARKET PRICE OFTHE NOTES AT A LEVEL HIGHER THAN THAT WHICH MIGHT OTHERWISE PREVAIL.HOWEVER, THERE IS NO ASSURANCE THAT THE STABILIZING MANAGER (OR PERSONSACTING ON ITS BEHALF) WILL UNDERTAKE STABILIZATION ACTION. ANY STABILIZATIONACTION MAY BEGIN ON OR AFTER THE DATE ON WHICH ADEQUATE PUBLIC DISCLOSUREOF THE TERMS OF THE OFFERING OF THE NOTES IS MADE AND, IF BEGUN, MAY BE ENDEDAT ANY TIME, BUT IT MUST END NO LATER THAN THE EARLIER OF 30 DAYS AFTER THEISSUE DATE OF THE NOTES AND 60 DAYS AFTER THE DATE OF ALLOTMENT OF THE NOTES.ANY STABILIZATION ACTION OR OVER-ALLOTMENT MUST BE CONDUCTED BY THERELEVANT STABILIZING MANAGER (OR PERSONS ACTING ON ITS BEHALF) INACCORDANCE WITH ALL APPLICABLE LAWS AND RULES.

AVAILABLE INFORMATION

The Issuer and Guarantors have agreed that, so long as any Notes are “restricted securities” within themeaning of Rule 144(a)(3) of the US Securities Act, the Issuer and Guarantors will, during any periodin which it is neither subject to Section 13 or 15(d) of the US Securities Exchange Act of 1934, asamended (the “Exchange Act”) nor exempt from reporting thereunder pursuant to Rule 12g3-2(b)under the US Exchange Act, provide to any holder or beneficial owner of any such “restricted security”,or to any prospective purchaser of such restricted security designated by such holder or beneficialowner, the information specified in, and meeting the requirements of, Rule 144A(d)(4) of the USSecurities Act upon the request of such holder or beneficial owner.

NOTICE TO INVESTORS IN THE U.S.

THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATESSECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION IN THEUNITED STATES OR ANY OTHER REGULATORY AUTHORITY IN THE UNITED STATES NORHAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITSOF THE SECURITIES OR THE ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TOTHE CONTRARY IS A CRIMINAL OFFENCE IN THE UNITED STATES.

THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE SECURITIESACT, AND SUBJECT TO CERTAIN EXCEPTIONS, MAY NOT BE OFFERED OR SOLD WITHINTHE UNITED STATES. THE SECURITIES ARE BEING OFFERED AND SOLD TO NON U.S.PERSONS OUTSIDE THE UNITED STATES IN RELIANCE ON REGULATION S AND BY THEJOINT LEAD MANAGERS THROUGH THEIR RESPECTIVE REGISTERED BROKER-DEALERAFFILIATES INSIDE THE UNITED STATES TO QUALIFIED INSTITUTIONAL BUYERS WITHINTHE MEANING OF RULE 144A OF THE SECURITIES ACT, IN RELIANCE ON THE EXEMPTIONFROM REGISTRATION PROVIDED BY RULE 144A (SEE “SUBSCRIPTION AND SALE”).PROSPECTIVE PURCHASERS ARE HEREBY NOTIFIED THAT SELLERS OF ANY RULE 144ANOTE MAY BE RELYING UPON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OFTHE SECURITIES ACT PROVIDED BY RULE 144A.

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NOTICE TO NEW HAMPSHIRE RESIDENTS

NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR ALICENSE HAS BEEN FILED UNDER RSA 421-B OF THE NEW HAMPSHIRE REVISED STATUTESANNOTATED, 1955, (“RSA”) AS AMENDED, WITH THE STATE OF NEW HAMPSHIRE NOR THEFACT THAT A SECURITY IS EFFECTIVELY REGISTERED OR A PERSON IS LICENSED IN THESTATE OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE NEW HAMPSHIRESECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE, COMPLETEAND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN EXEMPTION OREXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT THESECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONSOF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY, ORTRANSACTION. IT IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVEPURCHASER, CUSTOMER OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THEPROVISIONS OF THIS PARAGRAPH.

INTERNAL REVENUE SERVICE CIRCULAR 230 DISCLOSURE

PURSUANT TO INTERNAL REVENUE SERVICE CIRCULAR 230, THE GROUP HEREBY INFORMSYOU THAT THE DESCRIPTION SET FORTH HEREIN WITH RESPECT TO U.S. FEDERAL TAXISSUES WAS NOT INTENDED OR WRITTEN TO BE USED, AND SUCH DESCRIPTION CANNOTBE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES THAT MAYBE IMPOSED ON THE TAXPAYER UNDER THE US INTERNAL REVENUE CODE. SUCHDESCRIPTION WAS WRITTEN TO SUPPORT THE MARKETING OF THE NOTES. TAXPAYERSSHOULD SEEK ADVICE BASED ON THE TAXPAYER’S PARTICULAR CIRCUMSTANCES FROMAN INDEPENDENT TAX ADVISOR.

NOTICE TO INVESTORS IN THE UK

This Prospectus is only directed at persons who (i) are outside the United Kingdom or (ii) areinvestment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act2000 (Financial Promotion) Order 2005 (the “Financial Promotion Order”) or (iii) are persons fallingwithin Article 49(2)(a) to (e) of the Financial Promotion Order (all such persons together being referredto as “relevant persons”). This Prospectus must not be acted on or relied on by persons who are notrelevant persons. Any investment or investment activity to which this communication relates isavailable only to relevant persons and will be engaged in only with relevant persons. Any person whois not a relevant person should not act or rely on this communication.

NOTICE TO RUSSIAN INVESTORS

This Prospectus should not be considered as an offer or advertisement of the Notes in the RussianFederation and is not an offer, or an invitation to make offers, to purchase any Notes in the RussianFederation. Neither the Notes nor any prospectus or other document relating to them have been or willbe registered with the Federal Service for Financial Markets and are not intended for “placement” or“circulation” in the Russian Federation in terms of Russian securities laws. Any information on theNotes set out in this Prospectus is intended for, and addressed to, persons outside of the RussianFederation. The Notes may not be offered, sold or delivered in the Russian Federation or to or for thebenefit of any persons (including legal entities) resident, incorporated, established or having their usualresidence in the Russian Federation or to any person located within the territory of the RussianFederation except as may be permitted by applicable Russian law.

NOTICE TO BERMUDIAN INVESTORS

Securities may be offered or sold in Bermuda only in compliance with the provisions of the InvestmentBusiness Act 2003, the Exchange Control Act 1972 and related regulations of Bermuda which regulatethe sale of securities in Bermuda. In addition, specific permission is required from the BermudaMonetary Authority (the “BMA”), pursuant to the provisions of the Exchange Control Act 1972 andrelated regulations. The BMA, the Minister of Finance of Bermuda and the Registrar of Companiesaccept no responsibility for the financial soundness of any proposal or for the correctness of any of thestatements made or opinions expressed in this Prospectus or in any prospectus supplement.

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LIMITATION ON ENFORCEABILITY OF CIVIL LIABILITIES

The Issuer’s and Guarantors’ presence outside the United Kingdom and the United States may limityour legal recourse against the Issuer and the Guarantors. The Issuer is a private limited companyincorporated under the laws of Ireland and the Guarantors are incorporated under the laws of eitherBermuda or the Russian Federation. The Issuer’s and the Guarantors’ directors and executive officersnamed in this Prospectus reside outside the United Kingdom and the United States. All or a substantialportion of the Guarantors’ assets and the assets of the Guarantors’ officers and directors are alsolocated principally in Russia. As a result, it may not be possible for the Trustee, acting on behalf ofNoteholders or, in certain circumstances, a Noteholder, to:

• effect service of process within the United Kingdom or the United States on the Issuer or theGuarantors or on the Issuer’s or the Guarantors’ officers and directors named in thisProspectus; or

• obtain or enforce English or U.S. court judgments against the Issuer, the Guarantors, theIssuer’s or Guarantors’ officers and directors on any basis, including actions under the civilliability provisions of English law or U.S. securities laws.

Under the terms of the Trust Deed and the Guarantees, the Issuer and the Guarantors will appoint anagent for service of process in London, England, for claims under the Trust Deed and the Guarantees.It is possible that a Russian court will not recognize this appointment. The Issuer and the Guarantorswill not appoint an agent for service of process in the United States. It may be difficult for the Trustee,acting on behalf of Noteholders, to enforce, in original actions brought in courts in jurisdictions locatedoutside the United Kingdom or United States, liabilities predicated upon English law or U.S. securitieslaws. In addition, judgments rendered by a court in any jurisdiction outside the Russian Federation willbe recognized by courts in Russia only if an international treaty providing for the recognition andenforcement of judgments in civil cases exists between the Russian Federation and the country wherethe judgment is rendered and/or a federal law of the Russian Federation providing for the mutualrecognition and enforcement of foreign court judgments is in effect. No such treaty exists between theUnited States and the Russian Federation, or between the United Kingdom and the RussianFederation, for the reciprocal recognition and enforcement of foreign court judgments in civil andcommercial matters. However, according to recent trends in Russian court practice, a foreign judgmentcan be recognized and enforced in the Russian Federation based on the principles of reciprocity andinternational comity, provided, however, that there is a bilateral or multilateral treaty to which theRussian Federation and the relevant foreign country are parties. Currently there exist at least twocases in which Russian courts recognized and enforced the foreign court judgments based on suchprincipals (an English court judgment in one instance and a Dutch court judgment in another instance).However, in the absence of established court practices, it is difficult to predict whether a Russian courtwill be inclined in any particular case to recognize and enforce an English court judgment on thesegrounds. These limitations may deprive the Trustee of effective legal recourse for claims related toyour investment in the Notes.

The Notes, the Guarantees and the Trust Deed are governed by the laws of England and the Issuerhas agreed in the Trust Deed and each of the Guarantors has agreed in the Guarantees that disputesarising thereunder and under the Notes are subject to arbitration in accordance with the Rules ofArbitration of the London Court of International Arbitration, also known as LCIA, with the seat of anysuch arbitration in London, England. See “Terms and Conditions of the Notes—Condition 19.Governing Law, Jurisdiction and Arbitration”. Ireland, Bermuda and the Russian Federation are partiesto the United Nations (New York) Convention on the Recognition and Enforcement of Foreign ArbitralAwards 1958 (the “New York Convention”). Consequently, an arbitral award from an arbitral tribunalin the United Kingdom, or the United States would generally be recognized and enforced in theRussian Federation on the basis of the rules of the New York Convention and enforcement in Irelandor Bermuda of an arbitral award rendered in the United Kingdom or the United States will be subject tothe provisions of the New York Convention. However, it may be difficult to enforce arbitral awards inthe Russian Federation due to:

• the limited experience of Russian courts in international commercial transactions;

• official and unofficial political resistance to the enforcement of awards against Russiancompanies in favor of foreign investors; and

• the inability of Russian courts to enforce such orders and corruption.

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See “Risk Factors—Risks Related to Russia and Other Emerging Markets—Legislative and LegalRisks Relating To Russia—Lack of independence and experience of the judiciary, the difficulty ofenforcing court decisions and governmental discretion in enforcing claims could prevent the Group orthe Noteholders from obtaining effective redress in a court proceeding, which could have an adverseeffect on the Group’s business or the value of the Notes”.

Russian courts generally only recognize foreign court judgments or arbitral awards pursuant to bilateralor multilateral treaty arrangements. The possible need to re-litigate on the merits in the RussianFederation a court judgment obtained elsewhere may significantly delay the enforcement of suchjudgment. Under current Russian law, certain amounts may be payable upon the initiation of any actionor proceeding related to the Notes, the Guarantees or the Trust Deed in any Russian court. Theseamounts in many instances depend on the amount of the relevant claim.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus contains “forward-looking statements”. Forward-looking statements are not historicalfacts and can often be identified by the use of terms like “estimates”, “projects”, “anticipates”,“expects”, “intends”, “believes”, “will”, “may”, “should”, “plans”, “target, “aim” or the negative of theseterms, and similar statements of a future or forward-looking nature. All forward-looking statements,including discussions of strategy, plans, objectives, goals and future events or performance, involverisks and uncertainties.

While these statements are based on sources believed to be reliable and on Group’s management’scurrent knowledge and best belief, they are merely estimates or predictions and cannot be relied upon.The Group cannot assure you that the indicated, expressed or implied future results will be achieved.The following factors and features are exposed to risks and uncertainties which may cause the Group’sactual results to differ materially from the results indicated, expressed or implied in the forward-lookingstatements used in this Prospectus:

• the Group’s ability to service its existing indebtedness;

• demand in the Russian rail transportation market;

• the Group’s ability to fund its growth;

• potential postponement or cancellation of certain steps towards the further reform of theRussian rail transportation market;

• services provided by Russian Railways;

• the Group’s ability to procure new rolling stock;

• the Group’s dependency on few large clients;

• condition of ageing infrastructure in Russia;

• changes in political, social, legal or economic conditions in Russia and the other marketswhich affect the Group’s operations;

• the Group’s ability to respond to legal and regulatory developments and restrictions in relationto the industries in which the Group operates;

• adverse changes in the Group’s liquidity, capital resources or capital expenditures;

• the Group’s ability to successfully implement any of its business strategies;

• the Group’s expectations about demand for its services;

• competition in the marketplace;

• inflation and fluctuations in currency exchange rates and interest rates;

• the Group’s success in identifying other risks to its business and managing the risks of theaforementioned factors; and

• those described in the part of this Prospectus entitled “Risk Factors”, which should be read inconjunction with the other cautionary statements that are included in this Prospectus.

These factors and the other risk factors described in this Prospectus (in the section entitled “RiskFactors”) are not necessarily all of the important factors that could cause the Group’s actual results todiffer materially from those expressed in any of the Group’s forward-looking statements. Otherunknown or unpredictable factors also could harm the future results of the Group. Under nocircumstances should the inclusion of such forward-looking statements in this Prospectus be regardedas a representation or warranty by the Group, the Joint Lead Managers, or any other person withrespect to the achievement of results set out in such statements or that the underlying assumptionsused will in fact be the case. The forward-looking statements included in this Prospectus are made onlyas of the date of this Prospectus and the Group cannot assure you that projected results or events willbe achieved. Except to the extent required by law, the Group disclaims any obligation to update orrevise any of these forward-looking statements, whether as a result of new information, future eventsor otherwise.

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PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Financial Information

This Prospectus describes matters that relate generally to Brunswick Rail Limited, an exemptedcompany incorporated with limited liability under Bermuda law (the “Parent”), and its subsidiaries,including the Issuer and the Guarantors. References to the “Group” are to the Parent and itssubsidiaries.

This Prospectus includes the following financial information, beginning on page F-2: (i) the auditedconsolidated financial statements of the Group as of and for the years ended December 31, 2011,2010 and 2009, prepared in accordance with International Financial Reporting Standards (“IFRS”) asissued by the International Accounting Standards Board (“IASB”), and presented in US dollars (the“Group’s Audited Financial Statements”); and (ii) the unaudited interim condensed consolidatedfinancial information of the Group as of and for the six months ended June 30, 2012, with comparativefinancial information for the six months ended June 30, 2011, prepared in accordance withInternational Accounting Standard 34 “Interim financial reporting”, and presented in US dollars (the“Group’s Unaudited Interim Financial Statements” and, together with the Group’s Audited FinancialStatements, the “Group’s Financial Statements”).

This Prospectus does not include any financial information of the Issuer. The Issuer, Brunswick RailFinance Limited, was incorporated in Ireland on October 2, 2012, with registered number 518323, as aprivate company with limited liability under the Companies Acts 1963 – 2012 of Ireland (the“Companies Acts”). The registered office of the Issuer is 31 Fitzwilliam Square, Dublin 2, Ireland, andits telephone number is + 353 1 905 8020. The Issuer is a wholly-owned subsidiary of the Parent. TheIssuer is organized as a special purpose company and was established to raise capital by the issue ofdebt securities and to use amounts equal to the proceeds of each such issuance to advance loans toGroup companies. Since its incorporation, the Issuer has not engaged in any material activities otherthan those incidental to its registration as a private company under the Companies Acts and thoserelated to the issue of the Notes.

Non-IFRS and Last Twelve Months Financial Information

In this Prospectus, certain non-IFRS measures, such as net debt, Adjusted EBITDA, Adjusted EBITDAmargin and Adjusted EBITDA per railcar, are presented. The Group’s management believes that thesenon-IFRS measures provide valuable information to readers because they enable the reader to focusmore directly on the underlying day-to-day performance of the Group’s business, and are frequentlyused by securities analysts, investors and other interested parties in the evaluation of companies in therail transportation sector.

Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA per railcar are measures of theGroup’s operating performance that are not required by, or prepared in accordance with, IFRS. All ofthese supplemental measures of the Group’s operating performance have limitations as analytical toolsand should not be considered in isolation from, or as a substitute for, analysis of the Group’s operatingresults, liquidity or discretionary cash, or as alternatives to revenue, profit, cash flows from operatingactivities or any other measures of performance as reported under IFRS. For example, AdjustedEBITDA, Adjusted EBITDA margin and Adjusted EBITDA per railcar:

• do not reflect the impact of finance costs on the Group’s operating performance, which can besignificant and could further increase if the Group incurs more borrowings;

• do not reflect the impact of foreign exchange translation gains and losses;

• do not reflect the impact of income taxes on the Group’s operating performance;

• do not reflect the impact of depreciation on the Group’s performance. The railcars of theGroup which are being depreciated will require replacement in the future and suchdepreciation expense may approximate the cost of replacing these assets in the future.Adjusted EBITDA, Adjusted EBITDA margin and Adjusted EBITDA per railcar do not reflectthe Group’s future cash requirements for these replacements;

• do not reflect the impact of impairment gains and losses on revaluation of railcars;

• do not reflect gain on acquisition of subsidiary;

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• do not reflect the effect of hedging with non-derivatives; and

• exclude share-based compensation relating to management incentive and exit bonus plans.

Other companies in the Group’s industry may calculate these measures differently from the way inwhich the Group does, limiting its usefulness as comparative measures.

For a reconciliation of Adjusted EBITDA to net profit/(loss) for the period and net debt to totalborrowings including current portion of the Group, see “Selected Consolidated Financial and OtherInformation”.

In this Prospectus, the Group presents unaudited financial information for the twelve months endedJune 30, 2012. This financial information has been calculated by adding the financial information forthe year ended December 31, 2011, from the Group’s Audited Financial Statements, to the financialinformation for the six months ended June 30, 2012, from the Group’s Unaudited Interim FinancialStatements, and subtracting the financial information for the six months ended June 30, 2011, from theGroup’s Unaudited Interim Financial Statements. The Group’s management believes that thepresentation of unaudited financial information for the twelve months ended June 30, 2012, is useful toinvestors because it presents information about how the Group’s business has performed in thetwelve-month period immediately preceding the date of the Group’s most recent interim financialstatements, which allows investors to review the Group current performance trends over a full yearperiod, and because it presents results for four consecutive quarters, which presentation compensatesfor seasonal factors that might influence results in a particular quarter within the year.

Rounding

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

Presentation of Currencies

In this Prospectus:

• “Rouble”, “Roubles” or “RUB” refers to the lawful currency of the Russian Federation;

• “US dollar”, “US dollars”, “USD” or “US$” refers to the lawful currency of the United States ofAmerica; and

• “Euro”, “EUR” or “€” refers to the single currency of the participating member states in theThird Stage of the European Economic and Monetary Union of the Treaty Establishing theEuropean Community, as in effect as of the date of this Prospectus.

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Exchange Rate Information

The table below sets forth, for the periods and dates indicated, certain information regarding theexchange rate between the Rouble and the U.S. dollar. This information is based on the exchangerates quoted by the Central Bank of the Russian Federation (the “CBR”), which uses a compositepricing source. Fluctuations in the exchange rate between the Rouble and the U.S. dollar in the pastwill not necessarily be indicative of fluctuations that may occur in the future. The above rates may differfrom the actual rates used in the preparation and presentation of the Group’s Financial Statements andother financial information appearing in this Prospectus.

RUB per US$ 1.00

High LowPeriod

average(1)Period

end

Year ended December 31,2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.43 28.67 31.93 30.242010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.78 28.93 30.38 30.482011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.68 27.26 29.39 32.19Month ended in 2012January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.93 30.36 31.24 30.36February . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.41 28.95 29.89 28.95March . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.66 28.95 29.33 29.33April . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29.80 29.27 29.49 29.36May . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.45 29.37 30.80 32.45June . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34.04 32.13 32.88 32.82July . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.99 31.95 32.52 32.18August . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.54 31.48 31.96 32.29September . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.57 30.59 31.52 30.92Period from October 1 (to October 13) . . . . . . . . . . . . . . . . . . . . . . . . . 31.25 30.97 31.12 30.97

Source: CBR

(1) The period average in respect of a year is calculated as the average of the exchange rates on the last business day of eachmonth for the relevant annual period. The period average in respect of a month is calculated as the average of the exchangerates for each business day in the relevant month.

No representation is made that the Rouble or US dollar amounts referred to herein could have been orcould be converted into Roubles or US dollars, as the case may be, at any particular rate or at all.

Information Extracted From Third Parties

Some of the statistical and market information presented in the Prospectus, including information aboutthe Russian transportation sector, the Russian economy in general and related subjects, has beenobtained from the following third-party sources:

• the CBR;

• Neo Centre Consulting Group;

• Federal Service for State Statistics of the Russian Federation and its predecessors(“Rosstat”);

• Finam Investment Company;

• Ministry of Economic Development of the Russian Federation and its predecessors (“MED”);

• U.S. Department of Transportation;

• U.S. Central Intelligence Agency;

• Association of American Railroads;

• National Bureau of Statistics of China;

• Eurostat;

• U.S. International Trade Commission;

• Publicly available industry researches published by industry consulting firms (including,INFOLine and Expert RA; Industrial Cargoes magazine; “Mineral Fertilizers” magazine;Economist Intelligence Unit (“EIU”)); and

• Joint Stock Company Russian Railways (“Russian Railways”).

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Market studies are often based on information or assumptions that may not be accurate or appropriate,and their methodology is inherently predictive and speculative. Prospective investors should note thatcertain estimates made by the Group may be based on such third-party information.

The Issuer has derived substantially all of the information contained in this Prospectus concerning theGroup’s competitors from publicly available information, such as its competitor’s annual reports andother publicly available economic and industry research reports, and have accurately reproduced suchinformation and, as far as the Issuer is aware and is able to ascertain from such information, no factshave been omitted that would render the reproduced information inaccurate or misleading. The Issuerhas relied on the accuracy of this information without independent verification.

In addition, some of the third party information contained in this Prospectus has come from official datareleased by Russian government agencies and the CBR. The official data published by Russianfederal, regional and local government agencies may be substantially less complete or researchedthan similar data from more developed countries. Official statistics, including those released by theCBR, may also be produced on different bases than those used in more developed countries. Anydiscussion of matters relating to the Russian Federation in the Prospectus must, therefore, be subjectto uncertainty due to concerns about the completeness or reliability of available official and publicinformation.

The third party information used has been accurately reproduced and where it appears in thisProspectus, the source of such third party information is named. As far as the Issuer or each of theGuarantors is aware and is able to ascertain from information published by the cited third parties, nofacts have been omitted that would render the reproduced information inaccurate or misleading.Nevertheless, prospective investors are advised to consider this information with caution. Neither theGroup nor the Joint Lead Managers have independently verified the figures, market data or otherinformation on which third parties have based their studies.

Certain Defined Terms

In this Prospectus:

• “Board of Directors” means the Parent’s board of directors;

• “BRIC” means Brazil, Russia, India and China;

• “CAGR” means compound annual growth rate;

• “CEO” means the chief executive officer;

• “CFO” means chief financial officer;

• “CIS” means the following countries which are members or associate members of theCommonwealth of Independent States: Armenia, Azerbaijan, Belarus, Kazakhstan,Kyrgyzstan, Moldova, the Russian Federation, Tajikistan, Turkmenistan, Ukraine andUzbekistan;

• “Conditions” refers to the Terms and Conditions of the Notes. See “Terms and Conditions ofthe Notes”;

• “GDP” means gross domestic product;

• “Group” means the Parent and its subsidiaries;

• “LIBOR” means the London interbank offered rate which is the rate of interest at which banksborrow funds from each other, in marketable size, in the London interbank market;

• “OAO” means an open joint stock company incorporated under the laws of Russia;

• “OOO” means a limited liability company incorporated under the laws of Russia;

• “RAS” means the Russian Accounting Standards;

• “Region” means any of the constituent territories of Russia;

• “Tax Code” means the Tax Code of the Russian Federation, as amended (Part 1, datedJuly 31, 1998, No. 146-FZ; Part 2, dated August 5, 2000, No. 117-FZ);

• “VAT” means value-added tax; and

• “ZAO” means a closed joint stock company incorporated under the laws of Russia.

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TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS . . . . . . . . . . . . . . . . . 1PRESENTATION OF FINANCIAL AND OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . 2OVERVIEW OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION . . . . . . . . . . . . . . . . . . . 53MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57INDUSTRY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106REGULATION OF RAILWAY TRANSPORTATION AND LEASING BUSINESS IN RUSSIA . . . . 125DIRECTORS AND SENIOR MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134MAJOR SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141TRANSACTIONS WITH RELATED PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144DESCRIPTION OF THE ISSUER AND THE GUARANTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145DESCRIPTION OF CERTAIN INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151TERMS AND CONDITIONS OF THE NOTES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157SUMMARY OF PROVISIONS OF THE NOTES WHILE IN GLOBAL FORM . . . . . . . . . . . . . . . . . 203TRANSFER RESTRICTIONS, CLEARING AND SETTLEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 206TAX CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215CERTAIN ERISA CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228SUBSCRIPTION AND SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233INDEPENDENT AUDITORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235GLOSSARY OF TECHNICAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

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OVERVIEW OF THE GROUP

This section of the Prospectus contains basic information about the Group, its industry and theOffering. You should read the entire Prospectus carefully, including the “Risk Factors” and the Group’sFinancial Statements included elsewhere in this Prospectus.

Business

The Group is the largest privately owned operating lessor of freight railcars in Russia by number ofrailcars as at June 30, 2012, according to INFOLine data. The Group believes that it is one of very fewoperating lessors of railcars in Russia that offer multi-year operating leases, which results in apredictable revenue base, a consistently high railcar utilization rate, close to 100% since 2006, stabilityof the Group’s financial profile and reduced exposure to market volatility as demonstrated by thefinancial performance of the Group throughout its existence, including during the global financialdownturn of 2008-2009. Since September 2011, the Group has offered freight forwardingtransportation services to its clients, through its fully-owned transportation subsidiary, ZAO ProfTrans.

The Group’s fleet represented 2.0% of the total freight railcar fleet in Russia as of June 30, 2012, and12% of the Russian operating lease market, as of June 30, 2012, according to INFOLine data. TheGroup owned 22,734 railcars as of June 30, 2012 and 22,005 railcars as of the date of the Prospectus,due to the expiration and termination of finance leases relating to 729 railcars. Its railcar fleet consistsof a variety of railcars configured to transport various dry bulk products, as well as liquids and othercommodities, and has an average age of 4.8 years, compared to the market average of approximately16 years and a technical useful life of 22 to 40 years, according to INFOLine data. The Group believesthat the quality, versatility and relative low average age of its railcars make its fleet easily marketable,result in low maintenance costs and have allowed it to maintain a consistently high utilization rate.

The Group leases its railcars under operating lease contracts to a selected number of leading Russianindustrial and transportation companies operating in a variety of sectors, including coal, chemicals, oiland gas, transportation and ferrous metals. As of June 30, 2012, the Group had 30 leasing clients. TheGroup believes that this diversity of end-markets amongst its clients limits its exposure to a particularsector. The Group primarily offers multi-year operating leases, with terms ranging between one andseven years, with the majority of the contracts signed having terms of two to three years. As ofJune 30, 2012, the average length of outstanding contracts was 2.9 years. Since 2009, the Group hassuccessfully renewed over 81% of its operating leases in terms of the number of railcars with the sameclient.

The Group owns an array of railcars that enables it to cater to its clients’ diverse and high-volumetransportation needs. Its fleet primarily consists of general purpose and semi-specialized types ofrailcars, allowing it to redeploy its railcars for different uses at competitive market rates. The Group’sfleet comprises (a) primarily gondolas, which are used for the transportation of coal, ore, crushed stoneand other bulk freight, (b) mineral hoppers, which are mainly used for the carriage of fertilizers and(c) tank cars which are used to carry liquids, such as oil and petroleum products. Gondolas, mineralhoppers and tank cars represent 70%, 15% and 10% of the Group’s total fleet as of June 30, 2012,respectively. The Group’s fleet also includes boxcars and platform cars, which represent 2% and 3% ofthe Group’s total fleet as at June 30, 2012, respectively.

In 2011, the Group’s net revenue was US$ 183.9 million, Adjusted EBITDA was US$ 139.6 million, andAdjusted EBITDA margin was 75.9%. For the six months ended June 30, 2012, the Group’s netrevenue was US$ 150.5 million, Adjusted EBITDA was US$ 124.3 million, and Adjusted EBITDAmargin was 82.2%. For the twelve months ended June 30, 2012, the Group’s net revenue was US$271.9 million, Adjusted EBITDA was US$ 214.4 million, and Adjusted EBITDA margin was 78.7%. Asat June 30, 2012, total assets of the Group were US$ 1.55 billion and net debt was US$ 570 million,and, as at December 31, 2011, total assets of the Group were US$ 1.52 billion and net debt was US$628 million. The Group has also received a long-term corporate credit rating of BB- from Standard andPoor’s and a long-term corporate credit rating of Ba3 from Moody’s.

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Key Strengths

The Group believes its key strengths include:

• robust business model with proven resilience;

• strong market position in a fast growing railcar operating leasing market;

• high quality asset base;

• strong track-record of financial performance;

• strong financial discipline and proven experience in international financial markets;

• defendable market position with high barriers to new entrants;

• significant knowledge of the Russian operating leasing, railcar and transportation markets;

• sophisticated risk management; and

• experienced management team and continued shareholder support.

Strategy

The Group’s vision is to maintain its status as one of the largest and most profitable railcar operatingleasing companies in Russia by ongoing value-creating investments in the size and quality of its fleet,expanding into new markets and other rail related asset classes and procuring in-house maintenancecapabilities. Over the next five years, the Group will seek to continue leveraging its industry expertiseand client base, focus on quality of services, maintaining its strong financial position and theexperience and dedication of its management team to continue delivering strong growth, highoperating margins and stable operating cash flows to the Group’s investors. Among the key strategiesof the Group are to:

• continue focusing on its core competency of railcar operating leasing;

• maintain solid capital structure and prudent financial policies;

• maintain high quality client portfolio;

• further strengthen the Group’s leadership position by opportunistically increasing the size ofthe Group’s fleet;

• selectively invest in next generation railcars;

• expand opportunistically into new markets and new asset classes; and

• develop fully integrated maintenance and repair capabilities.

Recent Developments

Expiration and Termination of Finance Lease Contracts

In line with Group’s strategy to end all of its finance leases contracts by 2019, the followingtransactions took place in the third quarter of 2012: (i) in August 2012, finance leases covering 700gondolas with Mechel matured; and (ii) in September 2012, the Group terminated certain finance leasecontracts and sold 29 platform cars to OOO PTNK. As a result, the Group currently has 341 railcarsunder finance lease and expects to have 208 railcars under finance lease by year end 2012.

Repurchase of Shares in Connection with the ProfTrans Acquisition

In July 2012, the Group repurchased shares of the Parent that had been issued in connection with theGroup’s acquisition of ZAO ProfTrans, and as at July 2, 2012, the Group was fully discharged from itsobligations to the sellers of ZAO ProfTrans.

Risk Factors

An investment in the Notes involves a high degree of risk, including, but not limited to, risks associatedwith the following matters:

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Risks Relating To The Group’s Business And Industry

• The Group is dependent on the demand in the Russian rail transportation market, which inturn depends on certain key economic sectors.

• The Group’s business is heavily dependent on the services provided by Russian Railways.

• The Group is dependent on a few large clients.

• The Group is subject to risks relating to the potential postponement or cancellation of certainsteps towards the further reform of the Russian rail transportation market.

• The Group may be unable to re-lease its rolling stock for an acceptable rate in the future.

• The Group may be subject to increasing competition from other railcar lessors, railcarmanufacturers and rail transportation companies.

• A significant reduction of railcar prices may affect the Group’s business.

• Expansion of the Group’s business may place a strain on its financial condition andorganizational resources.

Risks Relating To The Group’s Financial Condition

• The Group has significant indebtedness, including secured indebtedness, which couldmaterially adversely affect its operations, particularly under the current market conditions.

• Covenants in the Group’s financing agreements and the Notes may limit its flexibility, andbreach of such covenants may negatively affect its financial position.

• The Group is subject to foreign exchange translation risk.

• The Group is subject to interest rate risk.

• The Group is subject to credit risk.

Risks Relating To Russia And Other Emerging Markets

• Political and governmental instability, including conflicts among federal, regional and localauthorities and other political conflicts, could create an uncertain operating environment thathinders long-term planning ability and could have an adverse effect on the Group’s business,results of operations, financial condition and prospects.

• Social instability, particularly that caused by worsening economic conditions and turmoil in theRussian financial markets, could lead to labor and social unrest, increased support forrenewed centralized authority, nationalism or violence.

• The reversal of reform policies or government policies targeted at specific individuals orcompanies could have an adverse effect on the Group’s business as well as investments inRussia more generally.

• Crime and corruption could create a difficult business climate in Russia.

• Emerging markets such as Russia are generally subject to greater risks than more developedmarkets, and global financial or economic crises or even turmoil in any large emerging marketcountry could have an adverse effect on the Group’s business.

• Economic instability in Russia could have an adverse effect on the Group’s business.

• The physical infrastructure in Russia is not always maintained in good condition, which maylead to interruptions in effective financial and economic activity.

• Weaknesses relating to the Russian legal system create an uncertain environment forinvestment and business activity in Russia and thus could have a material adverse effect onthe Group’s business.

• Government action could have an adverse effect on the Group’s business.

• Russian legislation may not adequately protect against expropriation and nationalization.

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Risks Relating To The Notes

• The Group will have the ability to incur more debt.

• The Notes may be structurally subordinated to subsidiary debt and to secured creditors.

• The Issuer is a special purpose entity and is dependent on the operating subsidiaries of theGroup to meet its financial obligations.

• The Issuer and the Guarantors may be unable to repay the Notes at maturity.

• Enforcing the rights of a holder of the Notes across multiple jurisdictions may prove difficult.

• The Notes may be redeemed prior to maturity.

• Modification, waivers and substitution may occur without the Noteholders’ consent.

• The Issuer is subject to risks related to the location of its center of main interest, theappointment of examiners and the claims of preferred creditors under Irish Law.

Risks Relating To Taxation

• Russian tax laws, regulations and court practice are subject to frequent change, varyinginterpretations and inconsistent and selective enforcement.

• The Group may encounter difficulties associated with recovery of VAT paid to vendors or atcustoms.

• Risk of unjustified tax benefit for the Group.

• Payments required under the Guarantees may be subject to Russian withholding tax.

• Tax might be withheld on dispositions of the Notes in Russia, reducing their value.

• Russian transfer pricing rules may adversely affect the Group’s business, financial conditionand results of operations.

• Current Russian thin capitalization rules could affect the ability of Russian subsidiaries todeduct interest on certain borrowings.

Summary Consolidated Financial And Other Information

The following summary consolidated financial information presents selected historical consolidatedfinancial information as of and for the three years ended December 31, 2011, 2010 and 2009 and as ofand for the six months ended June 30, 2012 and 2011. The consolidated income statement data,selected consolidated cash flows data and selected consolidated balance sheet data as of and for theyears ended December 31, 2011, 2010 and 2009, set forth below have been extracted without materialadjustment from, and should be read in conjunction with, the Group’s Audited Financial Statements,which are included elsewhere in this Prospectus. The consolidated income statement data, selectedconsolidated cash flows data and selected consolidated balance sheet data as of and for the sixmonths ended June 30, 2012 and 2011, set forth below have been extracted without materialadjustment from, and should be read in conjunction with, the Group’s Unaudited Interim FinancialStatements, which are included elsewhere in this Prospectus. Investors should not rely on interimresults as being indicative results the Group may expect for the full year. The unaudited financialinformation for the twelve months ended June 30, 2012, has been calculated by adding the financialinformation for the year ended December 31, 2011, from the Group’s Audited Financial Statements, tothe financial information for the six months ended June 30, 2012, and subtracting the financialinformation for the six months ended June 30, 2011, from the Group’s Unaudited Interim FinancialStatements.

Prospective investors should read the following summary consolidated financial information inconjunction with the information contained in “Presentation of Financial and Other Information”, “RiskFactors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”,“Business” and the Group’s Financial Statements appearing elsewhere in this Prospectus.

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CONSOLIDATED INCOME STATEMENT DATA

Six months endedJune 30,

Twelvemonths ended

June 30, Year ended December 31,

2012 2011 2012(1) 2011 2010 2009

(in US$ thousands)Operating lease income . . . . . . . . . . . . . . . . 130,319 59,535 229,867 159,083 85,674 75,184Finance lease income . . . . . . . . . . . . . . . . . 1,101 3,007 3,454 5,360 6,638 9,624Transportation income – operator’s

services . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,757 — 39,224 19,467 — —

Gross revenue . . . . . . . . . . . . . . . . . . . . . . 151,177 62,542 272,545 183,910 92,312 84,808Hedging with non-derivatives effect . . . . . . (668) — (668) — — —

Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . 150,509 62,542 271,877 183,910 92,312 84,808

Railcar depreciation . . . . . . . . . . . . . . . . . . . (51,940) (25,346) (92,987) (66,393) (30,886) (25,866)Depot repairs . . . . . . . . . . . . . . . . . . . . . . . . (3,150) (922) (5,074) (2,846) (1,812) (1,181)Railcar insurance . . . . . . . . . . . . . . . . . . . . . (101) (89) (226) (214) (193) (212)Other railcar expenses . . . . . . . . . . . . . . . . . (262) (271) (689) (698) (382) (102)Transportation services subcontracted . . . . (5,192) — (15,091) (9,899) — —Other transportation services expenses . . . (1,141) — (1,758) (617) — —

Professional fees . . . . . . . . . . . . . . . . . . . . . (1,327) (1,407) (3,503) (3,583) (1,785) (1,594)Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,940) (3,425) (10,992) (9,477) (6,037) (4,896)Share based compensation . . . . . . . . . . . . . (1,907) (2,712) (2,247) (3,052) (1,338) (2,348)Other operating expenses . . . . . . . . . . . . . . (2,487) (1,881) (6,146) (5,540) (2,268) (1,783)Property tax . . . . . . . . . . . . . . . . . . . . . . . . . (8,318) (5,549) (16,361) (13,592) (8,823) (7,725)Provision for bad debts . . . . . . . . . . . . . . . . (149) — (149) — — (425)Other income . . . . . . . . . . . . . . . . . . . . . . . . 34 406 1,646 2,018 247 66Reversal of impairment/(impairment loss)

on revaluation of railcars . . . . . . . . . . . . . 4,106 5,774 501 2,169 36,959 (30,785)Gain on acquisition of subsidiary . . . . . . . . — — 10,421 10,421 — —Finance income . . . . . . . . . . . . . . . . . . . . . . 610 108 840 338 89 119Finance costs . . . . . . . . . . . . . . . . . . . . . . . . (33,119) (17,103) (57,102) (41,086) (23,850) (22,684)Net foreign exchange translation gains/

(losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,987 13,361 (48,856) (61,482) (3,771) (9,733)

Profit/(loss) before tax . . . . . . . . . . . . . . . . 67,213 23,486 24,104 (19,623) 48,462 (24,341)Income tax (expense)/credit . . . . . . . . . . . . (16,018) (7,818) (7,374) 826 (8,390) 8,510

Net profit/(loss) for the period . . . . . . . . . 51,195 15,668 16,730 (18,797) 40,072 (15,831)

SELECTED CONSOLIDATED CASH FLOWS DATA


Twelvemonths ended


2012 2011 2012(1) 2011 2010 2009

(in US$ thousands)Cash flows from operating activities . . . . . . 132,092 51,031 247,131 166,070 87,881 76,904Cash flows used in investing activities . . . . (32,947)(275,665) (275,655) (518,373) (72,800) (38,939)Cash flows (used in)/from financing

activities . . . . . . . . . . . . . . . . . . . . . . . . . . . (62,420) 178,159 58,676 299,255 65,136 (39,516)Net (decrease)/increase in cash and cash

equivalents . . . . . . . . . . . . . . . . . . . . . . . . 36,725 (46,475) 30,152 (53,048) 80,217 (1,551)Cash and cash equivalents(2) . . . . . . . . . . . 86,731 57,565 86,731 50,847 104,500 24,343

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SELECTED CONSOLIDATED BALANCE SHEET DATA

As at June 30, As at December 31,

2012 2011 2010 2009

(in US$ thousands)

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 114,383 100,773 132,753 65,858Cash and cash equivalents . . . . . . . . . . . . . . . 104,231 66,797 112,450 30,293Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,392,557 1,382,595 613,856 338,152Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,551,359 1,516,415 825,788 504,419Total borrowings, including current portion . . . 674,443 694,592 272,935 298,924Mezzanine loan . . . . . . . . . . . . . . . . . . . . . . . . . 69.256 64.433 — —Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 897,693 899,279 343,507 332,184Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653,666 617,136 482,281 172,235

NON-IFRS FINANCIAL MEASURES AND OTHER OPERATING INFORMATION

Non-IFRS Financial Measures


Twelvemonths ended


2012 2011 2012 2011 2010 2009

Adjusted EBITDA(1)(3) (in US$ thousands) . . . 124,266 49,484 214,416 139,634 71,386 67,029Adjusted EBITDA margin(4) (in %) . . . . . . . . . . 82.2 79.1 78.7 75.9 77.3 79.0Adjusted EBITDA per railcar(5) (in US$

thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . 5,642 3,428 10,559 8,292 5,958 6,406


2012 2011 2010 2009

(in US$ thousands)

Net debt(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,212 627,795 160,485 268,631

Other Operating Information


Twelvemonths ended


2012 2011 2012 2011 2010 2009

Average number of railcars(7) . . . . . . . . . . . 22,026 14,434 20,306 16,839 11,982 10,463Average age of railcar fleet(8) (in years) . . . 4.8 3.5 4.8 4.4 3.6 3.2Utilization rate(9) (in %) . . . . . . . . . . . . . . . . 100.0 99.8 100.0 100.0 99.5 100.0Average daily operating lease rate per

railcar(10) (in US$) . . . . . . . . . . . . . . . . . . 37 29 37 35 25 24Average remaining length of operating

leases(11) (in years) . . . . . . . . . . . . . . . . . 2.9 3.2 2.9 3.4 3.1 3.9

(1) Calculated by adding the corresponding financial information for the year ended December 31, 2011, to the correspondingfinancial information for the six months ended June 30, 2012, and subtracting the corresponding financial information for thesix months ended June 30, 2011.

(2) At June 30, 2012 there is an amount of US$17.5 million (June 30, 2011: US$ 15.95 million; 2011: US$ 15.95 million; 2010:US$ 7.95 million, 2009: US$ 5.95 million) that relates to restricted cash which is not available for general use by the Groupand has therefore been excluded from cash and cash equivalents.

(3) Adjusted EBITDA is defined as net profit/(loss) for the period of the Group before taking into account finance costs, financeincome, income tax expense/(credit), net foreign exchange translation gains and losses, depreciation and amortization,impairment gains and losses on revaluation of railcars, share-based compensation, gain on acquisition of subsidiary andhedging with non-derivative effect.

(4) Adjusted EBITDA margin means Adjusted EBITDA divided by gross revenue, expressed as a percentage.(5) Adjusted EBITDA per railcar means Adjusted EBITDA divided by average number of railcars in each period.(6) Net debt is defined as total borrowings, including the current portion, less cash and cash equivalents.(7) Average number of railcars is determined by averaging the total number of railcars owned by the Group at the end of each

quarter. The average number of railcars is unaudited and is based on information provided by the Group.(8) Average age of railcar fleet is determined at the end of each reporting period.(9) Utilization rate is determined at the end of each reporting period. Excludes railcars used in the Group’s freight forwarding

services.

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(10) Average daily operating lease rate per railcar is determined at the end of each reporting period.(11) Average remaining length of operating leases is determined at the end of each reporting period for the total railcar fleet.

Reconciliation of Non-IFRS Financial Measures

A reconciliation of the Adjusted EBITDA to the net profit/(loss) for the period of the Group is as followsfor the periods indicated:


Twelvemonths

ended June 30, Year ended December 31,

2012 2011 2012(1) 2011 2010 2009

(in US$ thousands)Net profit/(loss) for the period . . . . . . . . 51,195 15,668 16,730 (18,797) 40,072 (15,831)

plus/(minus):Income tax expense/(credit) . . . . 16,018 7,818 7,374 (826) 8,390 (8,510)Finance costs . . . . . . . . . . . . . . . . 33,119 17,103 57,102 41,086 23,850 22,684Finance income . . . . . . . . . . . . . . (610) (108) (840) (338) (89) (119)Foreign exchange translation

(gains)/losses . . . . . . . . . . . . . . (25,987) (13,361) 48,855 61,481 3,771 9,733Railcar depreciation . . . . . . . . . . . 51,940 25,346 92,987 66,393 30,886 25,866Other depreciation and

amortization . . . . . . . . . . . . . . . 122 80 215 173 127 73(Reversal of impairment)/

impairment loss on revaluationof railcars . . . . . . . . . . . . . . . . . (4,106) (5,774) (501) (2,169) (36,959) 30,785

Share based compensation . . . . . 1,907 2,712 2,247 3,052 1,338 2,348Gain on acquisition of

subsidiary . . . . . . . . . . . . . . . . . — — (10,421) (10,421) — —Hedging with non-derivative

effect . . . . . . . . . . . . . . . . . . . . . 668 — 668 — — —

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . 124,266 49,484 214,416 139,634 71,386 67,029


A reconciliation of net debt to total borrowings of the Group is as follows as at the dates indicated:

As atJune 30, As at December 31,

2012 2011 2010 2009

(in US$ thousands)

Total borrowings, including current portion . . . . . . . . . . . . 674,443 694,592 272,935 298,924Less:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . 104,231 66,797 112,450 30,293

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,212 627,795 160,485 268,631

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THE OFFERING

The following is an overview of the terms of the Notes. This overview is extracted from, and should beread in conjunction with, the full text of the Terms and Conditions of the Notes, the Guarantees and theTrust Deed constituting the Notes, which prevail to the extent of any inconsistency with the terms setout in this overview. Capitalized terms used herein and not otherwise defined have the respectivemeanings given to such terms in the Terms and Conditions of the Notes.

Issuer . . . . . . . . . . . . . . . . . . . . . . . . . Brunswick Rail Finance Limited incorporated under the laws ofIreland, on October 2, 2012, having its registered address at 31Fitzwilliam Square, Dublin 2, Ireland.

Guarantors . . . . . . . . . . . . . . . . . . . . . The Parent, OOO Brunswick Rail Leasing, OOO Brunswick RailService, OOO Brunswick Trans and OOO Brunswick WagonLeasing. Except for the Parent, which is the ultimate holdingcompany of the Group, the Guarantors collectively generated89.8% of the Group’s consolidated revenue for the six monthsended June 30, 2012, 96.2% of the Group’s Adjusted EBITDAfor the six months ended June 30, 2012, and collectively held97.5% of Group’s consolidated total assets as of June 30,2012. The financial data of the Guarantors, excluding theParent, used for the calculation of the above ratios is the standalone IFRS financial data, before the elimination of intra-Grouptransactions.

Issue Amount . . . . . . . . . . . . . . . . . . US$ 600,000,000 aggregate principal amount of 6.5%.Guaranteed Notes due 2017

Joint Lead Managers andBookrunners . . . . . . . . . . . . . . . . . Goldman Sachs International, Raiffeisen Bank International

AG, UBS Limited and VTB Capital plc

Issue Price . . . . . . . . . . . . . . . . . . . . . 100% of the principal amount of the Notes

Closing Date . . . . . . . . . . . . . . . . . . . 1 November 2012

Maturity Date . . . . . . . . . . . . . . . . . . . 1 November 2017

Trustee . . . . . . . . . . . . . . . . . . . . . . . . Citibank, N.A., London Branch

Registrar . . . . . . . . . . . . . . . . . . . . . . . Citigroup Global Markets Deutschland, AG

Transfer and Paying Agents . . . . . . Citibank, N.A., London Branch

Principal Paying Agent . . . . . . . . . . Citibank, N.A., London Branch

Interest . . . . . . . . . . . . . . . . . . . . . . . . The Notes will accrue interest from the date of their issuance ata rate equal to 6.5% per annum, payable semi-annually inarrear on 1 May and 1 November of each year, commencing on1 May 2013.

Commencing on any Step-Up Date included in this Prospectus,which will occur on the last day of the second financial quarterfollowing the delivery of a Contracted Railcar ComplianceCertificate, if the Parent is unable to incur US$ 1.00 ofadditional indebtedness under Condition 4.1(a), interest willaccrue at a rate of 1.25% per annum payable semi-annually inarrear on each interest payment date listed above until anyStep-Down Date, occurring on any financial reporting date noearlier than the last day of the financial quarter following anyStep-Up Date, where the Parent is able to incur US$ 1.00 ofadditional indebtedness under Condition 4.1(a), after whichinterest will continue to accrue at a rate of 6.5% per annum.

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Form . . . . . . . . . . . . . . . . . . . . . . . . . . The Notes will be issued in registered form. The Notes will be indenominations in aggregate principal amount of US$ 200,000each and integral multiples of US$ 1,000 thereafter and will berepresented by global note certificates. The global notecertificates will be exchangeable for Notes in individual form inthe limited circumstances specified in the global notecertificates.

Status of the Notes . . . . . . . . . . . . . . The Notes will constitute direct, unsubordinated and (subject tothe Limitation on Liens covenant in Condition 4.6) unsecuredobligations of the Issuer which rank pari passu and ratablywithout preference among themselves and at least equally withall other present and future unsecured and unsubordinatedobligations of the Issuer. Each Guarantee constitutes direct,unsubordinated and unsecured obligations of the relevantGuarantor ranking at least equally with all other present andfuture unsecured and unsubordinated obligations of suchGuarantor.

Guarantee . . . . . . . . . . . . . . . . . . . . . Each Guarantee will constitute a direct, unsubordinated and(subject to the Limitation on Liens covenant in Condition 4.6)unsecured obligation of each Guarantor ranking at least equallywith all other present and future unsecured and unsubordinatedobligations of each Guarantor.

Use of Proceeds . . . . . . . . . . . . . . . . The fees and expenses associated with the Offering areestimated to be approximately US$ 15.9 million. The Groupexpects the aggregate net proceeds of the issuance of theNotes to be approximately US$ 584.1 million.

The Group will use the aggregate net proceeds from theissuance of the Notes (i) to provide OOO Brunswick WagonLeasing with funds to repay any outstanding amounts (US$196.7 million as of the date of this Prospectus), together withprepayment fees and transaction expenses under the US$ 290million loan entered into with EBRD, (ii) to provide OOOBrunswick Wagon Leasing with funds to repay any outstandingamounts (US$ 83.3 million as of the date of this Prospectus),together with prepayment fees and transaction expenses underthe US$ 130 million loan entered into with IFC (together withthe US$ 290 million loan entered into with EBRD, “EBRD/IFCFacility”) and (iii) to use any net proceeds in excess of thoseamounts for the acquisition of railcars and general corporatepurposes.

For more information regarding the EBRD/IFC Facility, see thesections of this Prospectus entitled “Description of CertainIndebtedness”, “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations—Liquidity andCapital Resources—Capital resources”.

Redemption for Tax Reasons . . . . . The Notes may be redeemed at the option of the Issuer inwhole, but not in part, at any time, at 100% of the principalamount thereof together with interest accrued to the date fixedfor redemption including any step-up interest in the event thatadditional amounts are due under Condition 6.2 of the “Termsand Conditions of the Notes” as a result of any change in, oramendment to, the laws or regulations of Ireland, Bermuda or

15

the Russian Federation occurring on or after the Issue Date.See “Terms and Conditions of the Notes—Redemption andPurchase—Redemption for Tax Reasons”.

Redemption on Change ofControl . . . . . . . . . . . . . . . . . . . . . . Upon certain Change of Control events included in this

Prospectus, each of the Noteholders shall have the right toexercise its Change of Control Put Option in respect of all orpart of its Notes, following which the Issuer shall redeem theNotes in relation to which the Change of Control Put Option hasbeen duly exercised at 101% of the principal amount thereof,together with interest accrued and unpaid as of the redemptiondate including step-up interest, if any. See “Terms andConditions of the Notes—Redemption and Purchase—Redemption upon a Change of Control”.

Redemption upon AdditionalGuarantee Event . . . . . . . . . . . . Upon the occurrence of an Additional Guarantee Event

included in this Prospectus, each of the Noteholders shall havethe right to exercise its Additional Guarantee Event Put Optionin respect of all or part of its Notes, following which the Issuershall redeem the Notes in relation to which the AdditionalGuarantee Event Put Option has been duly exercised at 101%of the principal amount thereof, together with interest accruedand unpaid as of the redemption date, including step-upinterest, if any. See “Terms and Conditions of the Notes—Redemption and Purchase—Redemption upon AdditionalGuarantee Event”.

Optional Redemption at MakeWhole . . . . . . . . . . . . . . . . . . . . . . . The Notes may be redeemed at the option of the Issuer in

whole, but not in part, at any time at 100% of the principalamount thereof then outstanding plus the Make WholePremium equal to the greater of (a) 1% of the principal amountof the Notes then outstanding or (b) the sum of the presentvalues of the remaining scheduled payments of principal andinterest, including any step-up interest, on the Notes to beredeemed discounted to the date of redemption at theapplicable treasury rate, plus 50 basis points, together withinterest accrued and unpaid as of the redemption date. See“Terms and Conditions of the Notes—Redemption andPurchase—Optional Redemption at Make Whole”.

Covenants . . . . . . . . . . . . . . . . . . . . . The Terms and Conditions of the Notes contain restrictions oncertain activities of the Issuer, the Guarantors and certainsubsidiaries of the Group, including, without limitation:

(i) limitation on the incurrence of liens;

(ii) limitation on the incurrence of indebtedness;

(iii) limitation on restricted payments;

(iv) limitation on restrictions on distributions from RestrictedSubsidiaries (as defined under “Terms and Conditions ofthe Notes”);

(v) limitation on sales of assets and subsidiary stock;

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(vi) limitation on affiliate transactions;

(vii) limitation on lines of business;

(viii) limitation on certain mergers and consolidations;

(ix) limitation on layering;

(x) maintenance of guarantors;

(xi) requirements for the maintenance of authorizations andproperty;

(xii) requirements for the payment of taxes and other claims;

(xiii) requirement for the provision of certain financialinformation;

(xiv) limitations on sale or issuing of voting stock of RestrictedSubsidiaries.

There are significant exceptions to the requirements containedin these covenants. See “Terms and Conditions of theNotes—Covenants” for a further description of the restrictionsand definitions set forth above.

Events of Default . . . . . . . . . . . . . . . In the case of an Event of Default as defined in the “Terms andConditions of the Notes” section of this Prospectus, the Trusteemay, subject as provided in the Trust Deed, give notice to theIssuer and the Guarantors that the Notes are immediately dueand repayable. Events of Default include, among others:

(i) failure by the Issuer or, as the case may be, any of theGuarantors to pay any amounts due under the Notes, andif such failure to pay relates to interest or Step-Up Interest,the failure continues for 7 calendar days;

(ii) breach of other obligations by the Issuer or any of theGuarantors (other than failure to add a Guarantor) underthe Notes, the Trust Deed or the Guarantees;

(iii) cross-default (for a payment default) or cross-acceleration(for all other defaults);

(iv) inability to pay debts as they fall due;

(v) non-compliance by the Issuer, any of the Guarantors orany of Restricted Subsidiaries with an order or judgment ofa judicial or administrative authority;

(vi) liquidation, examinership, insolvency, winding up of theIssuer or Guarantor;

(vii) unenforceability or illegality; and

(viii) nationalization or seizure of the assets of the Issuer, any ofthe Guarantors or any of the Restricted Subsidiaries.

Rating . . . . . . . . . . . . . . . . . . . . . . . . . The Notes are expected to be rated BB- by S&P and Ba3 byMoody’s. Credit ratings assigned to the Notes do notnecessarily mean they are a suitable investment for you. Arating is not a recommendation to buy, sell or hold securitiesand may be subject to revision, suspension or withdrawal atany time by the assigning rating organization. Similar ratings ondifferent types of Notes do not necessarily mean the same

17

thing. The ratings do not address the likelihood that theprincipal on the Notes will be prepaid, paid on an expected finalpayment date or paid on any particular date before the legalfinal maturity date of the Notes. The ratings do not address themarketability of the Notes or any market price. Any change inthe credit ratings of the Notes, the Issuer or the Guarantorscould adversely affect the price that a subsequent purchaserwill be willing to pay for the Notes. The Issuer consulted threerating agencies regarding the potential provision of ratings forthe Notes. Based on preliminary feedback from these ratingorganizations in October 2011, the Issuer requested S&P andMoody’s to issue such ratings. If the other rating organizationrated the securities, we cannot assure you that the rating thatsuch other rating organization would assign to the securitieswould not be lower than the ratings assigned by S&P andMoody’s. Ratings of the Notes by S&P and Moody’s arenot necessarily indicative of the ratings that may in the futurebe issued in respect of the Notes by other rating agencies, ifrequested by the Issuer. The Group recommends that youanalyze the significance of each rating independently from anyother rating. Each of Moody’s and S&P are established in theEuropean Union and registered in accordance with the CRARegulation.

Withholding Tax . . . . . . . . . . . . . . . . All payments on the Notes or under the Guarantees by or onbehalf of the Issuer or the Guarantors shall be made free andclear of, and without withholding or deduction for or on accountof, any taxes, duties, assessments or governmental charges ofwhatsoever nature, unless such withholding or deduction isrequired by applicable laws or regulations. If any suchwithholding or deduction for or on account of taxes of Ireland,Bermuda or the Russian Federation is so required, the Issueror (as the case may be) the Guarantors shall pay suchadditional amounts as will result in the receipt by theNoteholders of such amounts as would have been received bythem in respect of such Notes or Guarantees if no suchwithholding or deduction had been made or required to bemade. See “Terms and Conditions of the Notes—Taxation”.

Listing . . . . . . . . . . . . . . . . . . . . . . . . . Application has been made to the UK Listing Authority for theNotes to be admitted to the Official List and to the LondonStock Exchange for the Notes to be admitted to trading on theRegulated Market. No certainty can be given that theapplication will be granted.

Transfer Restrictions . . . . . . . . . . . . The Notes and the Guarantees have not been and will not beregistered under the Securities Act and, subject to certainexceptions, the Notes may not be offered or sold within theUnited States. The Notes may be sold in other jurisdictions onlyin compliance with applicable laws. See the sections of thisProspectus entitled “Transfer Restrictions, Clearing andSettlement” and “Subscription and Sale”.

Governing Law . . . . . . . . . . . . . . . . . The Notes, the Trust Deed, the Guarantees and the AgencyAgreement and any non-contractual matters arising therewithwill be governed by English law.

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Security Codes . . . . . . . . . . . . . . . . . . Regulation S Notes: ISIN: XS0850393264Common Code: 085039326

Rule 144A Notes: CUSIP: 117381AA1ISIN: US117381AA17Common Code: 085043188

Clearing . . . . . . . . . . . . . . . . . . . . . . . Euroclear and Clearstream, Luxembourg (in the case of theRegulation S Notes) and DTC (in the case of the Rule 144ANotes).

Yield . . . . . . . . . . . . . . . . . . . . . . . . . . The annual yield of the Notes when issued is 6.5%. The annualyield is calculated at the Issue Date on the basis of the IssuePrice. It is not an indication of future yield.

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RISK FACTORS

Each of the Issuer and the Guarantors believes that the following factors may affect its ability to fulfillits obligations under the Notes. All of these factors are contingencies which may or may not occur andnone of the Issuer or the Guarantors is in a position to express a view on the likelihood of any suchcontingency occurring.

Factors which each of the Issuer and the Guarantors believes may be material for the purpose ofassessing the market risks associated with the Notes are also described below.

Each of the Issuer and the Guarantors believes that the factors described below represent the principalrisks inherent in investing in the Notes, but the Issuer or the Guarantors may be unable to pay interest,principal or other amounts on or in connection with the Notes for other reasons, and none of the Issueror the Guarantors represents that the statements below regarding the risks of holding the Notes areexhaustive. Additional risks that may not be known to each of the Issuer and the Guarantors at thistime, or those that each of the Issuer and the Guarantors currently believes to be immaterial, couldhave a material adverse effect on each of the Issuer, the Guarantors and the Group’s business,financial condition, results of operations and prospects.

An investment in the Notes involves a high degree of risk. Prospective investors should considercarefully, among other matters, the risks set forth below, which represent the principal risks relating tothe Issuer, the Guarantors, the Group, the Group’s industry and the Notes, and the other informationcontained elsewhere in this Prospectus, prior to making any investment decision with respect to theNotes. The order in which the following risks are presented is not intended to be an indication of theprobability of their occurrence or the magnitude of their potential effects.

RISKS RELATING TO THE GROUP’S BUSINESS AND INDUSTRY

The Group is dependent on the demand in the Russian rail transportation market, which in turndepends on certain key economic sectors.

The Group’s core business of railcar operating leasing is heavily dependent on the demand for railcarsand the rail transportation services in Russia in general, which in turn is significantly influenced by thegeneral economic condition in Russia and trends in certain key economic sectors. Particularly, the keyclients of the Group are predominantly engaged in the production, or transportation and shipment, ofvarious commodities, such as coal, oil products and oil, construction materials, metals and ores, theshipment of which make up the bulk of freight rail volumes in Russia. Commodity prices havehistorically been cyclical and sensitive to domestic and international changes in supply and demandand can be expected to fluctuate significantly in the future. The Russian markets for such commoditiescontribute significantly to the GDP in Russia, which prior to mid-2008 had experienced strong growth,increasing from US$ 260 billion in 2000 to US$ 1,677 billion in 2008, according to Rosstat. Similarly,according to Rosstat, freight rail turnover, driven by growth in the Russian economy and commoditiesmarkets, grew by a CAGR of 5.5% during the period from 2000 to 2008. However, in the last quarter of2008 the Russian economy in general and the metallurgical and construction industries in particular,experienced sharp declines in demand due to the global economic downturn. Decreases in demandled to a corresponding negative trend in the volume of freight rail turnover in Russia, which continuedinto early 2009. Since February 2009, volumes of freight rail turnover have started to recoverincreasing by 52% from a low of 123.4 billion tons in January 2009 to 188.1 billion tons in December2011, according to Rosstat. The positive trend has continued throughout the first half of 2012.Similarly, according to the EIU, Russian GDP is forecasted to increase 58.3% to US$ 1,936 billion byyear end 2012 from US$ 1,223 billion in 2009. However, the overproduction of gondolas and theweakening of the coal prices, among other factors, have affected the gondola daily spot rate. Given theGroup’s dependence on trends in the Russian economy and in the commodities and freight railtransportation markets in particular, deterioration of macroeconomic conditions could materially impairthe Group’s growth prospects and could have a material adverse effect on its business, results ofoperations, financial condition and prospects.

The Group’s business is heavily dependent on the services provided by Russian Railways.

Russian Railways is the dominant company in the Russian railway sector with its current subsidiaries(including OAO “Freight Two” (“Freight Two”)) controlling the country’s largest fleet of rolling stock. It

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also plays a monopolistic role as the sole railway infrastructure operator, and it enjoys aclose-to-monopoly position in the provision of locomotive services. Although the share of transportationservices in the Group’s revenue is relatively minor, it nevertheless depends on the railwayinfrastructure, on services provided by, and on operating information generated by, Russian Railways.

For instance, Russian Railways is the current principal provider of maintenance services of the Group,and any defects in the provision of these services could have a material adverse effect on the Group’srolling stock. In addition, as part of the reform of the Russian Railways, it is currently in the process ofselling its maintenance assets to private investors. As of June 30, 2012, 17 depots have been sold,while three railcar repair companies owning a national repair network with 112 depots in total areexpected to be privatized in 2013 (Source: Russian Railways). It is currently unclear whether such salewill affect the quality of maintenance services provided to the Group.

Russian Railways is also the sole operator of the Russian railway network and charges the clients ofthe Group for the use of the railway infrastructure and for the provision of locomotive services. Thesecharges are regulated by the Federal Tariff Service (“FST”), a Russian federal government agency,and are an important component of the rail transportation price. If the infrastructure and locomotiveservices tariffs charged by Russian Railways are increased significantly in the future, they may makefreight transport by rail less attractive in comparison to other forms of transport, which may reducedemand for the Group’s services from its clients and, thus, materially adversely affect the Group’sbusiness, results of operations, and financial condition.

Russian Railways’ close-to-monopolistic role in the locomotive services market, including the provisionof locomotive crews, means that the Group’s clients have to rely on Russian Railways for the operationof the railcars leased from the Group. Should locomotive services provided by Russian Railways ceaseto be available for the Group’s clients for any reason or at acceptable rates, the Group’s clients mayseek alternative means of transportation of their products and cargo. This would result in the loss ofsuch clients by the Group and in turn may have a material adverse effect on the Group’s business,results of operations, financial condition, and prospects.

In addition, the Group uses statistical data provided by Russian Railways for its business planning andother purposes. Incomplete or unreliable information could prejudice the evaluation of thetransportation market trends by the Group.

Although the Group believes that it has historically enjoyed a good relationship with Russian Railways,there is no assurance that it will be able to preserve this relationship in the future. Additionally, thecurrent Russian Railways’ wholly-owned subsidiary, Freight Two, to a certain extent competes with theGroup in the Russian railcar operating leasing market, although currently this is not a core businessline for Freight Two. There can be no assurance that, because of the Group’s dependence on themaintenance services provided by Russian Railways, the Group will not become subject to competitivepressures exerted by Russian Railways or that the Group’s competitors, including Freight Two, will notreceive better treatment in terms of service levels and delivery times than those received by the Group.If the Group’s relationship with Russian Railways deteriorates or if such competitive pressures manifestthemselves or increase, the Group’s business, results of operations, financial condition and prospectsmay be materially adversely affected.

The Group is dependent on a few large clients.

The client base of the Group is significantly concentrated, with five key clients, SUEK, ZarechnayaMine (U-Trans), UralChem-Trans, ZapSibTransservice, UKAS, accounting for more than 48% of therailcars leased out by the Group and 54% of the Group’s operating lease revenue for the six monthsended June 30, 2012 (see “Business—Operations—Client Base”). The Group’s single largest client,SUEK, accounted for approximately 15% of the railcars leased out by the Group and 15% of theGroup’s operating lease revenue for the six months ended June 30, 2012. The operating results of theGroup will continue in the foreseeable future to depend on the Group’s ability to enter into agreementswith most of these clients. There can be no assurance that the Group will retain its clients in the future,or that its clients, if lost, could be easily replaced by other clients on comparable terms and/or volumesor at all. If the Group loses any of these key clients and is not able to replace its business, the Group’sbusiness, results of operations, financial condition and prospects may be materially adversely affected.

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The Group is subject to risks relating to the potential postponement or cancellation of certainsteps towards the further reform of the Russian rail transportation market.

In 2001, Russia’s Ministry of Railways embarked on a comprehensive railway structural reformprogram consisting of three phases that set out strategic priorities for the rail industry up to 2010 andbeyond, with the aim of improving the efficiency and profitability of rail services in Russia andencouraging investment for modernization. The Group takes the structural reform program into accountwhen developing its business plan and strategy, and the postponement or cancellation of the reformprogram may significantly disrupt the Group’s current or future business. There have already been anumber of delays in implementation of the reform program. The first phase was scheduled forcompletion in 2002, but was completed only in 2003 with the establishment of Russian Railways. Thesecond phase was to be completed by 2005, but certain second-phase reform objectives have yet tobe accomplished, such as decreasing cross-subsidization of passenger transportation. Implementationof the third phase, which began in 2006 and was scheduled to end in 2010, is far from being finished.In addition, Freight Two, which, according to INFOLine data, is one of the largest Russian railcar fleetowners, continues to be wholly-owned by Russian Railways as of the date of this Prospectus and thetiming for its privatization is currently unclear.

Demand for railcar operating leasing services is subject to the entry into the market of new activeprivate railway freight transportation companies; however, the fulfillment of the stated objective of thereform program to turn the rail transportation sector into a fully competitive market has not been fullyrealized so far. Russian Railways remains the largest provider of locomotive services in Russia, andthe timing of the reform program’s plan to liberalize the regulation of locomotive market is uncertain.Moreover, the Russian Ministry of Transport and Russian Railways are currently debating the status ofthe reform, and Russian Railways has publicly indicated that it does not fully support further reform orthe introduction of private locomotive operators. Failure of, or delay in, the liberalization of thelocomotive sector may affect the Group strategy, which envisages the future acquisition of locomotivesby the Group.

In addition, in light of the significant delays in cargo railway transportation in Russia in 2011, caused bylogistic issues, Russian Railways has initiated discussions with the Russian Government with an aim toresolve this problem by temporarily leasing the railcars currently owned by Freight Two and receivingthe right to lease a certain amount of railcars owned by private operators at a fixed tariff, whereby theprivate operators would be bound to enter into such lease agreements at Russian Railways’ request.These discussions resulted in the adoption by the Russian Government of the Regulation No. 1051dated December 20, 2011, which, however, only permitted the Russian Railways to lease railcars fromprivate operators on a voluntary basis. The lease tariffs imposed for these purposes by the FST wereapproximately 1.5 times lower than the prevailing market rates, accounting for almost zero participationon the part of the private operators and the ultimate failure of the entire effort.

Any future negative developments that prevent or otherwise delay the liberalization of the railwayindustry could materially adversely affect the Group’s business, results of operations, financialcondition and prospects.

The Group’s customers may decide to buy rather than lease railcars.

The Group, like other railcar operating leasing companies, is dependent upon decisions by its clients tolease rather than buy their railcars. If the clients of the Group decide to buy a larger percentage of therailcars they operate for any reason, the Group’s utilization rates would decrease, resulting indecreased lease income, increased storage and remarketing costs, and lower operating revenues andcash flow. Most of the factors affecting the decision of the Group’s customers to lease or buy theirequipment are outside the Group’s control, and include the customer’s access to lower-cost bankfinancing, the consolidation of the commodities and transportation industries and improvements ininformation technology. The materialization of any of such trends could materially adversely affect theGroup’s business, results of operations, financial condition and prospects.

The Group may be unable to re-lease its rolling stock for an acceptable rate in the future.

The Group’s business depends on earning revenues from its rolling stock assets for their entireexpected useful lives, which is generally anticipated to be at least 22 years for the majority types of

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railcars, and minimizing costs associated with those assets over the same period. The inability to utilizea vehicle for its entire expected useful life at an acceptable rate could negatively impact the Groupbecause it would not be able to realize the full value that it expected to earn from that vehicle. If theGroup fails to re–lease available rolling stock at an acceptable rate before it is due for retirement fromservice, the Group’s business, financial condition, results of operations or prospects could be materiallyadversely affected. The Group’s ability to re–lease available rolling stock may be affected by, amongother things, the perceived attractiveness among its clients of ordering newly–built rolling stock ascompared to re–leasing older assets. In this assessment of rolling stock requirements, a client’sdecision to order newly–built rolling stock may be influenced by price, operating characteristics such ascapacity and reliability, track access costs, exchange rate movements (insofar as they affect theaffordability of rolling stock manufactured outside of Russia), the cost of servicing/maintenance andchanges in technology generally. The client’s decision may also be influenced by its ability to fund newrolling stock and underwrite residual value at an appropriate cost as well as the client’s ability to satisfyaffordability criteria for the rail network as established by the relevant regulator. Failure to fully utilizerolling stock over its useful economic life at an acceptable rate could materially adversely affect theGroup’s business, results of operations, financial condition and prospects.

The Group may be subject to increasing competition from other railcar operating leasingcompanies, railcar manufacturers and rail transportation companies.

The Russian railcar transportation market, in general, and railcar operating leasing business, inparticular, is becoming increasingly competitive. Railcar operating leasing is relatively new to Russia.Currently, the Group believes it enjoys a strong position in the railcar operating leasing market; it wasthe first company to sign a railcar operating lease contract in Russia in 2004 and, according toINFOLine data, it was the largest private railcar operating leasing company in terms of the number ofrailcars owned as of June 30, 2012. However, it may become more difficult for the Group to maintainits market position in the future if and when operating leasing becomes the preferred way of securingaccess to rolling stock for freight owners and transport companies in Russia, as it already has for theirEuropean and North American peers. Although the Group perceives such growth as an opportunityrather than a threat, there can be no assurance that no new market players will emerge or that theexisting market participants, primarily providers of rail transportation services and railcarmanufacturers, will not refocus their services offering to focus on railcar operating leasing rather thantransportation and manufacturing, respectively.

Many of the existing rail market participants have a much larger fleet than the Group. RussianRailways, through its ownership of Freight Two and other operating subsidiaries, remains the largestrolling stock operator in Russia. Certain other rolling stock operators also have fleets that exceed thoseof the Group. Some of these companies are already providing operating leases, such as UniversalCargo Logistics Holdings, which controls both OAO “Freight One” (“Freight One”) and IndependentTransportation Company (“NTK”), and Globaltrans Investment plc (“Globaltrans”). As of June 30,2012, according to INFOLine data, Freight One had 21,167 railcars on operating lease and Globaltranshad 11,240 railcars on operating lease (compared to 19,683 railcars leased out as of the end of thesame period by the Group). Although, unlike the Group, transportation companies focus on providingshort-term operating leases primarily to maximize utilization of their fleets, they may shift their strategyto make operating leasing a core focus of their business in the future.

In addition, the Group’s competitors may have more resources and better access to clients. Forexample, Freight Two may benefit from Russian Railway’s existing relationships with clients. Inaddition, there can be no assurance that some of the Group’s smaller competitors will not merge in thefuture, potentially creating larger private competitors. Increased competition may lead to adversechanges in the prevailing pricing conditions, which could materially adversely affect the Group’sprofitability. Although the Group believes that, to date, it has been able to compete successfully, therecan be no assurance that it will be able to do so in the future, and any failure to do so may have amaterial adverse effect on the Group’s business, results of operations, financial condition andprospects.

Failure to meet clients’ expectations could damage the Group’s client relationships and itsbusiness reputation.

The Group’s clients rely on the Group for the provision of high-quality railcars and the availability ofrolling stock. To meet client’s expectations, the Group must ensure that a sufficient number of railcars

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can be delivered to clients upon their request in a timely manner and in accordance with a client’sproduction cycle and that any railcars provided are of sufficient quality and possess the requisitecertifications necessary to avoid delays when dispatching. The Group may be unable to meet suchclient expectations due to, for example, insufficient availability of rolling stock. In addition, the ability tomeet the client’s expectations is often outside the direct control of the Group. For example, the Grouprelies on third parties, primarily its suppliers, to deliver the railcars to the lessees, who in turn rely onRussian Railways for locomotive services and infrastructure usage. A significant delay in the delivery ofrailcars could lead to significant business interruption for, and/or material losses sustained by, theGroup’s client. Similarly, damage to the railcars being dispatched to the client due to derailment ormishandling could also result in client dissatisfaction with the provision of the Group’s services. Failureto meet client expectations could lead to a significant loss of client business by the Group and/orimpairment of the Group’s business reputation which, in turn, could have a material adverse effect onthe Group’s business, results of operations, financial condition and prospects. See also “—The Groupis dependent on a few large clients”.

A significant reduction of railcar prices may affect the Group’s business.

Prices for new railcars have shown significant volatility over the last five years and there can be noassurance that future prices will not fall below the levels at which the Group acquired its railcars, whichcould occur for any reason, including, but not limited to, unfavorable economic outlook and lowdemand for railcars. Such decreases would likely result in a reduction of the market rates for operatingleases which in turn may result in the Group’s inability to receive the expected revenue derived fromthe railcars. A decrease in the price of railcars would also affect the value of the railcars the Groupholds, which could lead to impairment in the value of its assets and an increase in the Group’sleverage. Furthermore, some of the Group’s outstanding loans contain financial covenants whichreference the market value of the railcars owned or leased by the Group. A significant decline in railcarprices may result in a breach of these covenants. As a result, a significant reduction of railcar pricesmay have a material adverse effect on the Group’s business, results of operations, financial conditionand prospects.

Expansion of the Group’s business may place a strain on its financial condition andorganizational resources.

The success of the Group’s business strategy is dependent, among other things, on the proposedexpansion of the Group’s railcar fleet and client base, which will likely involve significant capitalexpenditures. The Group plans to increase its fleet of railcars to 40,000 in the medium term (see“Business—Strategy—Further strengthen the Group’s leadership position by opportunisticallyincreasing the size of the Group’s fleet”). This fleet expansion is expected to be financed through cashgenerated from the Group’s operations and, where necessary, with the proceeds of external debt andequity financing. Any expansion pursued by the Group will likely have a substantial effect on theGroup’s capital structure and cashflows and may restrict the Group’s liquidity, which could affect theability of the Group to meet its existing obligations. If the Group’s expansion substantially constrains itsliquidity position, it could have a material adverse effect on the Group’s business, results of operations,financial condition or prospects.

Moreover, there can be no assurance that the Group’s existing resources will be sufficient forsupporting the proposed expansion of the Group’s railcar fleet, or that the Group will be able to acquirethe necessary additional resources on commercially acceptable terms, or at all. In particular, there canbe no assurance that the Group’s existing sales, logistics and managerial capabilities, which are keyelements of the efficiency and reliability of the Group’s business, will continue to support the Group’sbusiness at the requisite levels of efficiency if and when the Group’s fleet, operational reach and clientbase are expanded as contemplated by the Group’s strategy.

The proposed expansion of the Group’s business may also put a strain on the Group’s managementresources, distracting the Group’s managers from their current tasks and/or require additionalmanagement resources to be deployed by the Group. See also “—The Group’s competitive positionand prospects depend on the expertise and experience of its key managers, as well as on its ability tocontinue to attract, retain and motivate qualified personnel” below.

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Any failure by the Group to acquire, maintain and deploy adequate management, sales, logistics,administrative, technical and financial resources to support its proposed expansion, could underminethe Group’s business strategy, which could have a material adverse effect on the Group’s business,results of operations, financial condition and prospects.

Expansion through acquisitions entails certain risks and the Group may experience problemsin integrating and managing new acquisitions.

The Group has in the past expanded, and may in the future expand, its operations throughacquisitions. For example, between August and October 2011, the Group completed the acquisition of100% of shares in ZAO ProfTrans and the asset acquisition of 100% interest in OOO Brunswick Trans.These companies in aggregate account for 17% of the Group’s total railcar fleet as of June 30, 2012.Pursuing an acquisition strategy entails certain risks, including the failure to identify suitable acquisitiontargets and/or the failure to conduct appropriate due diligence on the target’s operations and/orfinancial condition, the overvaluation of such target and thus the payment of consideration greater thanthe acquisition’s market value, the incurrence of significantly higher than anticipated financing-relatedrisks and operating expenses, and the discovery of larger than anticipated or previously undisclosedliabilities. Acquiring additional businesses could also place increased pressures on the Group’s cashflows, especially if the acquisition is paid for in cash. Additionally, if an acquisition is not completed, itmay adversely impact the strategic objectives of the Group. If any such risks materialize in conjunctionwith an acquisition, this could have a material adverse effect on the Group’s business, results ofoperations, financial condition and prospects.

In addition, the Group may experience problems in integrating acquisitions into its business andmanaging them optimally. These risks include failing to effectively assimilate and integrate theoperations and personnel of an acquired company into the Group’s business, failing to install andintegrate all necessary systems and controls, including logistics and distribution facilities andarrangements, conflicts between majority and minority shareholders, hostility and/or lack ofcooperation from the management of the target and the potential loss of the target’s clients. This couldhave a material adverse effect on the Group’s business, results of operations, financial condition andprospects.

Notwithstanding anything in this risk factor, this risk factor should not be taken to imply that the Issuerwill be unable to comply with its obligations as a company with securities admitted to the Official List.

Issues related to the procurement of new rolling stock may limit the Group’s operations.

There are a relatively limited number of certified and quality rolling stock manufacturers in the CIS, andtheir output is limited by existing production capacities. In addition, the adaptability of thesemanufacturers’ production facilities from one type of railcar to another is limited. The Group’sprocurement policies further limit the number of railcar suppliers it may rely on, with only 16 suppliershaving been approved as suppliers as of June 30, 2012. Furthermore, a significant part of the rollingstock fleet operated by Russian Railways (including Freight Two) is at an advanced age and mayrequire replacement in the near future, which could increase the level of demand and competition for,and the purchase price of, new rolling stock purchases in the Russian rail transportation market.Production of new railcars almost ceased during the 1990s, and although by the end of the 2010s itreached levels similar to those achieved during the end of the Soviet period, the bottleneck that wascreated in the interim has created substantial pressure on the manufacturing capacity. Imports of asubstantial number of railcars from foreign suppliers is unlikely to occur primarily due to the stringenttechnical and certification requirements that may prevent the effective operation of certain types ofrailcars in Russia.

Furthermore, there can be no assurance that the Group will continue to be able to source sufficientsupplies of new rolling stock for its fleet on commercially acceptable terms, without significant delay orat all. If the Group is unable to acquire the requisite quantity of new rolling stock on commerciallyacceptable terms or experiences delays or failures in delivery of rolling stock, its business, results ofoperations, financial condition and prospects may be materially adversely affected.

In addition, there can be no assurance that the Group’s suppliers will be able to supply railcars of theappropriate quality to the Group in the future. For example, between April and June 2005, the Group

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had to stop the operation of 129 hoppers supplied to it by the Stakhanovsky Wagon Plant because ofcertain defects in railcar body welding. The Group was able to recover the cost of the repairs on thesehoppers and its lost profits for the time when the hoppers were out of operation. However, there can beno assurance that the Group will be able to do so in the future. Delivery of defective rolling stock maymaterially adversely affect the Group’s reputation and its business, results of operations, financialcondition and prospects.

The Group’s business and operations depend on the expertise and experience of its keymanagers, as well as on its ability to continue to attract, retain and motivate qualifiedpersonnel.

The Group’s business and operations are dependent on retaining the services of, or if they leave theGroup promptly obtaining equally qualified replacements for, certain key members of its managementteam, including, among others, Mr. Vladimir Lelekov, the Chief Executive Officer of the Group, NicolasPascault, the Chief Financial Officer of the Group, and other members of the Group’s seniormanagement team. Although the Group has employment agreements with these key managers andseeks to incentivize them through a share option program (see “Directors and Senior Management—Share-Based Compensation”) and other benefits, the retention of their services cannot be guaranteed.Should they decide to leave the Group, it may find it difficult to replace them promptly with othermanagers of sufficient expertise and experience. The Group does not have key-man insurance in placein respect of its senior managers.

The Group’s future success will also depend, in part, on its ability to continue to attract, retain andmotivate qualified personnel, in particular experienced management and sales personnel. Competitionin Russia for such personnel with relevant expertise is intense, due to the small number of qualifiedindividuals with suitable practical experience in the rail industry. Should the Group lose any of its keysenior managers, or be unable to attract or retain sufficient qualified personnel for its requirements, thiscould have a material adverse effect on its business, results of operations, financial condition andprospects.

Existing IFRS accounting models for leases may be subject to change.

The IASB intends to issue a revised standard for lease accounting. If the new standard for leaseaccounting follows ED/2010/9 Leases, the exposure draft of the proposed new standard published inAugust 2010, it will lead to substantial changes to the way the Group reports its leasing activities andmay significantly affect the Group’s overall business model. Uncertainty remains over the content andtiming (both in terms of publication and implementation) of a new standard for lease accounting. Ascurrently proposed, the IASB intends to require lessees to capitalize operating lease assets andliabilities on their balance sheets. As a result, there is a risk that as a result of the adoption of a newaccounting standard, operating leases will become financially less attractive to the Group’s clientsleading them to procure rail transportation by other means, which may require the Group tosubstantially change its business model. Moreover, the new standard for lease accounting may requirethe Group to restate its financial statements, and could be misunderstood by the users of the Group’sfinancial statements, who may find the new accounting policies harder to interpret and the Group’sperformance more difficult to understand as a result of such restatements. Any changes to the existingIFRS accounting models for leases and any uncertainty in relation to their implementation could have amaterial adverse effect on the Group’s results of operations, financial condition and prospects.

A major accident or derailment could result in substantial property loss, business disruption orreputational damage to the Group.

Rolling stock owners are subject to accidents and derailments, both as a result of operational failuresand as a result of the specific materials being transported. Although under Russian law, liability forthese types of accidents or derailments is likely to be attributed to the transportation company or theowner of the cargo being transported and/or Russian Railways as the operator of the railwayinfrastructure, there can be no assurance that the Group would always be able to attributeresponsibility to, and recover from, a third party in connection with such accidents or derailments. Amajor rail accident or derailment may also disrupt the Group’s services. In addition, the Group may nothave sufficient insurance in place to cover the costs of such loss or disruption (see “—The Group’sinsurance policies may be insufficient to cover certain losses”). Any negative publicity concerning any

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accident or derailment could also have a material adverse effect on the perception of the Group andthe attractiveness of its services in the future. Accordingly, a major accident or derailment could have amaterial adverse effect on the Group’s business, results of operations, financial condition andprospects.

Russian railway infrastructure is ageing and is not always in good state of repair.

The physical infrastructure and other assets owned and operated by Russian Railways, particularly itsrail network, largely date back to Soviet times and have, in many cases, not been adequatelymaintained. There can be no assurance that the age and insufficient funding and maintenance of asubstantial part of the Russian railway network and other infrastructure operated by Russian Railwayswill not in the future negatively affect the useful life of the Group’s railcars and increase itsmaintenance costs. This could have a material adverse effect on the Group’s business, results ofoperations, financial condition and prospects.

The Group’s insurance policies may be insufficient to cover certain losses.

The Group carries insurance for all of its rolling stock in line with market practice in the RussianFederation, but does not carry insurance policies similar to standard practice in more developedmarket economies of North America and Europe. For example, the Group generally does not carrybusiness interruption insurance. The Group’s failure to carry business interruption insurance meansthat if the Group suffers an interruption in its ability to operate, there will be no operating revenues topay its obligations, which may result in the Group selling assets at distressed prices, an inability toobtain credit or insolvency, or a breach of covenants in the Group’s existing loan agreements (see also“—Covenants in the Group’s financing agreements and the Notes may limit its flexibility, and breach ofsuch covenants may negatively affect its financial position”). If such uninsured events were to occurand the Group were liable for them, the Group could experience significant disruption in its operationsand/or requirements to make significant payments, for which it would not be compensated, which inturn could have a material adverse effect on the Group’s business, results of operations, financialcondition and prospects.

The Group’s information technology systems may fail or be perceived to be insecure.

The Group’s business is dependent on the successful and uninterrupted functioning of its informationtechnology systems and their integration with the information technology systems of Russian Railways.These systems are licensed by the Group and are customized to its needs or delivered to the Groupand maintained according to its needs by third parties under service agreements. The Group relies onthese systems for complex logistical, dispatching and tracking tasks that are critical to its clients’ needsand central to the Group’s business. Although the Group has not experienced any significant failures orinterruptions with respect to its information systems in the past, there can be no assurance that such afailure or interruption will not occur in the future. The Group is currently not insured against anyadverse effects from interruptions or failures of its information technology systems. Moreover, thelicenses for the use of the Group’s IT systems may be withdrawn or invalidated, the serviceagreements for their use may be terminated or their use may become commercially unattractive, due tothe lack of technical support by the relevant developer or otherwise. Any actual or perceivedinterruptions or failures in the Group’s information technology systems may compromise the Group’sability to provide its leasing services, as well as lead to costly delays in the delivery of railcars, and/orotherwise lead to a significant loss of client business, which could have a material adverse effect onthe Group’s business, results of operations, financial condition and prospects.

In addition, the Group’s business depends on its ability to protect its information technology systemsfrom the intrusion of third parties who may attempt to enter its computer networks through the internetor otherwise. The Group cannot be certain that it will be able to protect its information technologysystems from third party attacks or attempts to gain access to its systems. If such attacks occur, theGroup may encounter theft or destruction of its data. In addition, disgruntled employees may causesimilar damage to, or take similar actions with respect to, the Group’s information technology systemsand data to which they have access or to which they gain unauthorized access. If such damage or theftoccurs, it may materially adversely affect the Group’s business, results of operations, financialcondition and prospects.

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RISKS RELATING TO THE GROUP’S FINANCIAL CONDITION

The Group has significant indebtedness, including secured indebtedness, which couldmaterially adversely affect its operations particularly under the current market conditions.

The business of railcar operating leasing is capital-intensive, and the Group has significantindebtedness, including borrowings from banks and its shareholders. As at June 30, 2012, theaggregate amount of its current and non-current borrowings was US$ 674 million and its net debt (totalborrowings, including the current portion, less cash and cash equivalents of the Group) was US$ 570million. Among other things, the Group’s indebtedness could potentially: (a) limit its ability to obtainadditional financing and refinance existing indebtedness, especially in light of the current marketconditions; (b) limit its flexibility in planning for, or reacting to, changes in the markets in which itcompetes which may place the Group at a competitive disadvantage; (c) render it more vulnerable togeneral adverse economic and industry conditions; (d) require it to dedicate a substantial part of itscash flow to debt service; or (e) in the event of enforcement of any security relating to theindebtedness, result in a loss of certain of its assets.

The Group’s ability to make payments on its indebtedness (including the Notes) depends upon itsability to maintain its operating performance at a certain level, which is subject to general economicand market conditions and to financial, business and many other factors, which the Group cannotcontrol. If the Group’s cash flow from operating activities becomes insufficient, the Group may berequired to take certain actions, including delaying or reducing capital or other expenditures, selling itsassets or other properties or seeking additional equity capital in an attempt to restructure or refinanceits indebtedness. The Group may be unable to take any of these actions on favorable terms or in atimely manner and the Group would be at risk of defaulting on any such indebtedness (including theNotes), however currently the Group does not expect to default on any such indebtedness (includingthe Notes).

Shares and participation interests in certain of the significant subsidiaries of the Group, a significantpart of the Group’s rolling stock, some of the Group’s bank accounts and rights under certain operatinglease contracts are pledged to secure its debt obligations, and failure to service such debt obligationsor comply with the covenants under the Group’s financing arrangements leading to an enforcement ofsuch pledges may result in the loss of the Group’s control over a material part of its business and/orassets.

If the Group cannot service its debt, refinance its existing debt as it comes due or obtain additionalfunding or obtain funding on commercially reasonable terms, such failure could have a materialadverse effect on its business, results of operations, financial condition and prospects.

Covenants in the Group’s financing agreements and the Notes, may limit its flexibility, andbreach of such covenants may negatively affect its financial position.

The Group’s financing agreements and the Notes contain restrictive covenants that require it to abstainfrom certain actions. In addition, some of these financing agreements and the Notes require that theGroup complies with various financial covenants, maintains various financial ratios (including a debtservice coverage ratio and a leverage ratio as defined in the various financing agreements) or refrainsfrom incurring additional indebtedness over certain threshold levels. Many of the Group’s financingagreements and the Notes contain restrictive or negative covenants and other restrictions which mayaffect its ability or the ability of its subsidiaries to obtain loans, pay dividends, dispose of or acquireassets, execute contracts out of the ordinary course of business, or create security. Some of thesefinancing agreements and the Notes, contain restrictive conditions imposing limitations on change ofcontrol, ownership, corporate structure, reorganizations and mergers. See “Description of CertainIndebtedness”, “Management’s Discussion and Analysis of Financial Condition and Results ofOperations—Liquidity and Capital Resources—Capital resources” and “Terms and Conditions of theNotes”. Such covenants may limit the Group’s operational flexibility, and a breach thereof may result ina default on the instruments regulating the respective debt. These covenants, or a default on them, andinability to cure the default or refinance the debt could have a material adverse effect on the Group’sbusiness, results of operations, financial condition and prospects.

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The Group is subject to foreign exchange translation risk.

Currently, the Group’s borrowings are denominated in US dollars and the majority of operating leaserates charged by it under the lease contracts are in US dollars as well payable by the lessees inRoubles according to the official exchange rate of the CBR at the date of payment. However, theGroup expects that clients may request for Rouble denominated operating lease contracts in the futurewhich may increase the Group’s exposure to foreign exchange risk. In addition, although the functionalcurrency of the Group is the Rouble, the Group’s reporting currency is the US dollar. Accordingly,fluctuations in the Rouble/US dollar exchange rate can have a significant effect on the Group’sreported results from period to period. Such fluctuations have been significant in recent years. FromDecember 31, 2009 to June 30, 2012, although the Rouble has depreciated against the US dollar by8.5%, according to the CBR, there have been significant fluctuations in the exchange rate during thisperiod. The Group’s currency exchange gains/(losses) in 2009, 2010, 2011 and six months endedJune 30, 2012 were US$ (9.7) million, US$ (3.8) million, US$ (61.5) million and US$ 26 million,respectively. Starting in the second quarter of 2012, the Group has applied hedge accounting withnon-derivatives as described in “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Significant Factors Affecting Results of Operations—Foreign currencyfluctuations”. The Group’s exposure to such fluctuations could have a material adverse effect on theGroup’s business, results of operations, financial condition and prospects.

The Group is subject to interest rate risk.

The Group enters into multi-year operating lease contracts with its clients with the operating leaserates fixed for the entire term of the contract whereas the majority of the Group’s loans contain floatinginterest rates. As a result, the Group’s income and operating cash flows are exposed to changes in themarket interest rates as an increase in interest rates would increase its overall financing costs whereasno corresponding adjustment would take place in the fixed rate operating lease contracts with itsclients. Since 2007, the Group has managed its interest rate exposure through the use of interest rateswaps, as is further described in “Management’s Discussion and Analysis of Financial Condition andResults of Operations—Quantitative and Qualitative Disclosure about Market and Other Risks—Interest Rate Risk”. In addition, the Group is exposed to fair value interest rate risk through marketvalue fluctuations of loans, lease liabilities and lease receivables with fixed interest rates. To the extentsuch risks materialize, they could have a material adverse effect on the Group’s business, results ofoperation, financial condition and prospects.

The Group is subject to credit risk.

The Group has developed a comprehensive credit policy to evaluate its prospective clients’creditworthiness, quality of their reporting and accounting and their exposure to legal, regulatory andother risks. Most of the Group’s clients are leading businesses in their respective industries. However,there can be no assurance that the Group’s clients will not experience financial difficulties which couldlead to failures or delays in the repayment of obligations, or that the Group’s clients will be able toreturn the railcars leased from the Group in case of client insolvency. For example, during the recenteconomic downturn a few of the Group’s clients defaulted on their lease payments and demandedreduction of lease rates. The Group was able to settle these cases without significant losses by filingcourt claims and successfully obtaining rulings, enforcing the security and negotiating new contractterms. In addition, OAO Baikal Pulp and Paper Plant, one of the Group’s clients, went bankrupt and theGroup had to create provisions for the receivables due in the amount of US$ 557.2 thousand, as atDecember 31, 2010. In June 2011, the Group sold these receivables to a third party for US$372.6 thousand, resulting in a write-off of US$ 184.6 thousand. There is no assurance that the Group’scredit policy will be effective in the future in which case the Group’s business, results of operations,financial condition and prospects may be materially adversely affected.

RISKS RELATING TO RUSSIA AND OTHER EMERGING MARKETS

The Group’s business and substantially all of its assets, are located in Russia. There are certain risksassociated with an investment in Russia.

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Political and Social Risks Relating to Russia

Political and governmental instability, including conflicts among federal, regional and localauthorities and other political conflicts, could create an uncertain operating environment thathinders long-term planning ability and could have an adverse effect on the Group’s business,results of operations, financial condition and prospects.

Since 1991, Russia has sought to transform itself from a one-party state with a centrally plannedeconomy to a democracy with a market-oriented economy. As a result of the sweeping nature of thereforms, and the limited success of some of them, the Russian political system remains vulnerable topopular dissatisfaction, as well as to unrest by some social and ethnic groups. Political conditions inRussia were highly volatile in the 1990s, as evidenced by frequent conflicts among executive,legislative and judicial authorities, negatively affecting Russia’s business and investment climate.

Mr. Vladimir Putin who was President of the Russian Federation from 2000 until 2008 re-occupied thispost in April 2012 following the Presidential election in March 2012. In 2008, he stood down asPresident and Mr. Dmitry Medvedev was elected as the new President of the Russian Federation. OnMay 8, 2008, Mr. Dmitry Medvedev appointed Mr. Vladimir Putin to the position of Prime Minister of theRussian Federation. In 2011, Mr. Vladimir Putin indicated his intention to stand for re-election asPresident in the elections for the President of the Russian Federation which took place March 2012.On May 8, 2012, Mr. Vladimir Putin appointed Mr. Dmitry Medvedev to the position of Prime Minister ofthe Russian Federation.

During Mr. Putin’s and Mr Medvedev’s tenure as President, the Russian political system and therelationship between the President, the Russian Government and the Russian Parliament have beengenerally stable. There have been, however, public protests in Moscow and other urban areasfollowing the recent elections for the State Duma in December 2011 alleging that the elections weresubject to substantial electoral fraud, as well as opposing a public “transfer” of power authorization byMr. Dmitry Medvedev in favor of Mr. Vladimir Putin which occurred at the United Russia party congresson September 24, 2011 where Mr. Dmitry Medvedev proposed that the congress support thecandidacy of Prime Minister Mr. Vladimir Putin for President. The Prime Minister at that time,Mr. Vladimir Putin rejected calls by opposition leaders that the elections for the State Duma beannulled and re-run, but instituted limited political reforms. Similar protests took place following thepresidential elections in March 2012 which resulted in re-election of Mr. Vladimir Putin.

Shifts in governmental policy and regulation in Russia may be less predictable than in many Westerndemocracies and could disrupt or reverse political, economic and regulatory reforms. Current andfuture changes in the parliament or the government, major policy shifts or lack of consensus betweenthe President of Russia, the Russian Government, Russia’s parliament and powerful economic groupscould lead to political instability which could have a material adverse effect on the value of investmentsrelating to Russia, including the value of the Notes.

Russia is a federation of various sub-federal political units. Lack of consensus between the RussianGovernment and local or regional authorities often resulted in the past in the enactment of conflictinglegislation at various levels. For example, conflicting laws have been enacted in areas such aslicensing. Some of these laws and governmental and administrative decisions implementing them, aswell as certain transactions consummated pursuant to them, have in the past been challenged in theRussian courts, and such challenges may occur in the future. The lack of consensus among variousauthorities within Russia may hinder the Group’s long-term planning efforts and creates uncertainties inits operating environment, which may prevent it from effectively and efficiently carrying out its businessstrategy.

Emerging markets like Russia are also subject to heightened volatility based on economic instabilityand military and political conflicts. For example, a military conflict in August 2008 between Russia andGeorgia involving South Ossetia and Abkhazia contributed to significant overall price declines on theRussian stock exchanges. The emergence of any new conflicts or an escalation of existing tensions inthe region could negatively affect the economy of Russia and other countries that are involved. Inaddition, the key suppliers of railcars for the Group, including Azovmash and Stakhanovksiy WagonPlant, are located in Ukraine and any future political tensions between Russia and Ukraine ordeterioration of relations between Russia and Ukraine may result in limitation of the supply of railcarsto the Group.

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Political tensions or conflicts between Russia and other countries may lead to reduced liquidity, tradingvolatility and significant reductions in the price of listed Russian securities, with a resulting negativeeffect on the liquidity and trading prices of the Notes and on the Group’s ability to raise debt or equitycapital in the international capital markets. Elsewhere, ethnic, religious, historical and other divisionshave, on occasion, given rise to tensions and, in certain cases, military conflict and terrorist attacks.Thus, the conflict in Chechnya brought normal economic activity within Chechnya to a halt for a periodof time while also negatively affecting the economic and political situation in neighboring regions.Terrorist attacks have also been reported on a periodic basis in the neighboring republics of Ingushetiaand Dagestan. Violence and attacks also spread to other parts of Russia, including regions where theGroup maintains a significant presence. As part of the Chechnya regional tensions, terrorist attackshave been carried out in several Russian cities. Most recently, on January 24, 2011, a suicide bombattack took place at Moscow’s Domodedovo airport, which, as reported, resulted in the death of morethan 35 people and injuries to many more. In the future, such tensions, military conflicts or terroristactivities could have significant political consequences, including the imposition of a state ofemergency in some or all regions of Russia. Moreover, any terrorist attacks and the resultingheightened security measures may cause disruptions to domestic commerce and could have amaterial adverse effect on the Group’s business, results of operations, financial condition andprospects.

Social instability, particularly that caused by worsening economic conditions and turmoil in theRussian financial markets, could lead to labor and social unrest, increased support for renewedcentralized authority, nationalism or violence.

In the past, the failure of the Russian Government to adequately address social problems led to laborand social unrest. The worsening economic conditions and turmoil in the financial markets in Russiaduring the 2008-2009 financial crisis resulted in higher unemployment, reduction of salaries, the failureof enterprises to pay full salaries on time and the failure of salaries and benefits generally to keep pacewith the increasing cost of living. These conditions led to a certain amount of labor and social unrestthat may be repeated in the future if the Russian financial markets suffer another significant downturn.For instance, in June 2009, workers of Pikalevsky Alumina Refinery Plant blocked the highwaydemanding payment of overdue wages. Such labor and social unrest could have political, social andeconomic consequences, such as increased support for a renewal of centralized authority, increasednationalism, including support for re-nationalization of property, or expropriation of, or restrictions on,foreign involvement in the economy of Russia as well as increased violence. Any of theseconsequences could have an adverse effect on confidence in Russia’s political and social environmentand the value of investments in Russia, restrict the Group’s operations and lead to a loss of revenue,or otherwise have a material adverse effect on its business, results of operations, financial conditionand prospects.

The reversal of reform policies or government policies targeted at specific individuals orcompanies could have an adverse effect on the Group’s business as well as investments inRussia more generally.

Although recent political reforms in Russia over the past decade have aimed to make Russia a morestable and conducive environment to investment, any significant struggle over the direction of futurereforms or the reversal of the reform process could lead to a deterioration in Russia’s investmentclimate that might constrain the Group’s ability to obtain financing in the international capital markets,reduce business volume or otherwise have a material adverse effect on the Group’s business, resultsof operations, financial condition and prospects.

In the recent past, Russian authorities have prosecuted some Russian companies, their seniormanagers and their shareholders on tax evasion and related charges. In some cases, the result ofsuch prosecutions has been the imposition of prison sentences for individuals and/or significant claimsfor unpaid taxes with respect to companies such as Yukos, Mechel, TNK-BP and VimpelCom. Someanalysts contend that such prosecutions demonstrate a willingness to reverse key political andeconomic reforms of the 1990s. Other analysts, however, believe that these prosecutions are isolatedevents that relate to the specific individuals and companies involved and do not signal any deviationfrom broader political and economic reforms or a wider program of asset redistribution.

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Crime and corruption could create a difficult business climate in Russia.

The political and economic changes in Russia in the 1990s and 2000s have resulted in a decrease inthe effectiveness of actions of law enforcement authorities against crime and corruption. The local andinternational press has reported that significant organized criminal activity has arisen, particularly inlarge metropolitan centers. Property crime in large cities has increased substantially. In addition, localand international press have reported high levels of corruption both in governmental agencies and ingovernment controlled corporations in Russia, including the bribing of government officials for thepurpose of instigating investigations by government agencies. Press reports have also describedinstances in which government officials engaged in selective investigations and prosecutions to furthertheir commercial interests or those of certain individuals. In November 2009, a lawyer at the Moscowlaw firm Firestone Duncan, Sergey Magnitsky died in Butyrskaya prison in Moscow after nearly a yearof imprisonment awaiting trial. He was arrested in November 2008 after he testified against RussianInterior Ministry officials involved in a tax raid on Hermitage Capital Management offices, whoseinterests Magnitsky represented. Magnitsky was charged with colluding with two subsidiaries ofHermitage Capital Management to evade taxes. Additionally, some members of the Russian media arealleged regularly to publish disparaging articles in return for payment. The presence of organized orother crime, the demands of corrupt officials or potential future claims that the Group has beeninvolved in official corruption could result in negative publicity or disrupt its ability to conduct thebusiness effectively, which could have a material adverse effect on the Group’s business, results ofoperations, financial condition and prospects.

Incomplete, unreliable or inaccurate official data and statistics could create uncertainty.

The official data published by Russian federal, regional and local government agencies aresubstantially less complete or reliable than those of some of the more economically developedcountries of Europe and the United States. Official statistics may also be produced on different basesthan those used in more economically developed countries. Additionally, the Group relies on and refersto information and statistics from various third-party sources and its own internal estimates. Forexample, some of the information contained in this Prospectus concerning the Group’s competitors hasbeen extracted from publicly available information, including press releases. The Group believes thatthese sources and estimates are reliable, but has not independently verified them. However, to theextent that such sources or estimates are based on official data released by Russian federal, regionaland local government agencies, they will be subject to some possible uncertainty. Any discussion ofmatters relating to Russia in this Prospectus is, therefore, subject to uncertainty due to concerns aboutthe completeness or reliability of available official and public information.

Economic Risks Relating to Russia

Emerging markets such as Russia are generally subject to greater risks than more developedmarkets, and global financial or economic crises or even turmoil in any large emerging marketcountry could have an adverse effect on the Group’s business.

Russia’s economy is vulnerable to market downturns and economic slowdowns elsewhere in the world,and, generally, investing in emerging markets such as Russia is only suitable for sophisticatedinvestors who fully appreciate that these markets are subject to greater risk than more developedmarkets, including in some cases significant legal, economic and political risks. Investors should alsonote that emerging markets such as Russia are subject to rapid change and that the information setout in this Prospectus may become outdated relatively quickly. Global financial or economic crises oreven financial turmoil in any large emerging market country tend to adversely affect prices in debt andequity markets of most or all emerging market countries as investors move their money to more stable,developed markets. The Russian economy has not completely stabilized yet and further economicinstability in Russia, or a recurrence of a global financial crisis, or an increase in the perceived risksassociated with investing in emerging economies could dampen foreign investment in Russia andadversely affect the Russian economy. In addition, during such times, businesses that operate inemerging markets can face severe liquidity constraints as foreign funding sources are withdrawn.Accordingly, investors should exercise particular care in evaluating the risks involved and must decidefor themselves whether, in light of those risks, their investment is appropriate. Potential investors areurged to consult with their own legal and financial advisers before making an investment in the Notes.

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Economic instability in Russia could have an adverse effect on the Group’s business.

From 2000 through the first half of 2008, Russia experienced rapid growth in its GDP, higher taxcollections and increased stability of the Rouble, providing a certain degree of economic soundness.However, beginning in the second half of 2008 the Russian economy was adversely affected by theglobal financial and economic crisis, that manifested itself through extreme volatility in debt and equitymarkets, reductions in foreign investment and sharp decreases in GDP around the world. Any newwave of the economic crisis could have a negative effect on the expansion and profitability of theGroup’s business.

Any of the following risks, which the Russian economy has experienced at various times in the pastand some of which occurred during the recent crisis, may have or have already had a significantadverse effect on the investment climate in Russia and, in turn, may burden or have already burdenedthe Group’s operations:

• significant declines in GDP;

• high levels of inflation;

• sudden price declines or increases in the natural resource sector;

• increasing debt/GDP ratio;

• instability in the local currency market;

• lack of reform in the banking sector and a weak banking system providing limited liquidity toRussian enterprises;

• a significant decline in reserves of the CBR;

• the use of fraudulent bankruptcy actions in order to take unlawful possession of property;

• growth of a black- and grey-market economy;

• pervasive capital flight;

• corruption and the penetration of organized crime into the economy;

• significant increases in unemployment and underemployment;

• the impoverishment of a large portion of the Russian population;

• a large number of unprofitable enterprises which continue to operate due to deficiency in theexisting bankruptcy procedure;

• prevalent practice of tax evasion; and

• increased presence of the state in the economy.

The Russian economy has been subject to abrupt downturns in the past. For example, on August 17,1998, in the face of a rapidly deteriorating economic situation, the Russian Government defaulted onits sovereign Rouble-denominated securities, the CBR stopped its support of the Rouble and atemporary moratorium was imposed on certain hard currency payments. These actions resulted in animmediate and severe devaluation of the Rouble and a sharp increase in the rate of inflation, adramatic decline in the prices of Russian debt and equity securities and an inability of Russian issuersto raise funds in the international markets. These problems were aggravated by the near collapse ofthe Russian banking sector in connection with the same events. This further impaired the ability of thebanking sector to act as a reliable source of liquidity to Russian companies and resulted in thewidespread loss of bank deposits.

In late 2008 and early 2009, Russia’s foreign currency sovereign credit rating was downgraded, inlarge part due to the impact of the recent financial and economic crisis that began in the second half of2008. Later, the leading international rating agencies upgraded their outlook for Russia. Although theRussian economy continues to stabilize, if any of the major international credit rating agencies issues afurther negative credit assessment, foreign investment may decline and the cost of borrowing for theRussian Government, and for Russian corporations, respectively, may increase. The impact of therecent global financial and economic crisis on the Russian economy led to, among other things, areduction in the disposable income of the general population, a crisis of bank liquidity, a significantdepreciation of the Rouble against the U.S. Dollar and Euro, the rise of unemployment and an increasein the inflation rate.

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In addition, since Russia produces and exports large quantities of crude oil, natural gas and othercommodities, its economy is particularly vulnerable to fluctuations in the prices of crude oil, natural gasand other commodities on the world market. The world market reached record high levels in mid-2008and then experienced significant decreases during the 2008 crisis, particularly in the price of crude oil,which decreased by approximately 70% in the second half of 2008. Although since the beginning of2009 the price of crude oil has increased by approximately 113% (source: Finam InvestmentCompany), there is no assurance that, in the event of a new wave of the economic crisis, it would notdecrease again. Any decline in the price of crude oil, natural gas and other commodities could disruptthe Russian economy.

Any deterioration in the general economic conditions in Russia could have a material adverse effect onthe Group’s business, results of operations, financial condition and prospects.

Inflation could increase the costs incurred by the Group.

The Russian economy has been characterized by high rates of inflation in the past. According toRosstat, the annual inflation rate was approximately 9.7% in 2006, 9.0% in 2007, 13.3% in 2008, 8.8%in 2009, 8.8% in 2010 and 6.1% in 2011. According to Rosstat, inflation was 3.8% in the first half of2012. Certain of the Group’s costs are sensitive to rises in the general price level in Russia and due tocompetitive pressures or regulatory constraints the Group may not be able to increase its pricessufficiently to preserve the margins. As a result, high rates of inflation could increase costs, and therecan be no assurance that the Group will be able to maintain or increase the margins, which may havea material adverse effect on its business, results of operations, financial condition and prospects.

The physical infrastructure in Russia is not always maintained in good condition, which maylead to interruptions in effective financial and economic activity.

Russia’s physical infrastructure is largely outdated and has not been adequately funded andmaintained over the past two decades. Russia’s physical infrastructure could disrupt the transportationof goods, supplies and communications and may add costs to doing business in Russia. The rail androad networks, power-generation and transmission networks, communication systems and buildingstock are particularly affected. Road conditions throughout Russia are poor, with many roads notmeeting minimum requirements for use and safety. Power disruptions also occur: for example, theelectricity blackout in December 2010 affected the normal business activity of Moscow and theMoscow Region and its infrastructure. In August 2009, an accident occurred at the Sayano-Shushenskaya Hydroelectric Power Plant, the largest hydro power plant in Russia in terms of installedcapacity, when water from the Yenisei River flooded the turbine and transformer rooms at the powerplant’s dam, killing more than 70 people and causing billions of Roubles in damage. As a result of theaccident, the plant has halted power production, leading to severe power shortages for both residentialand industrial consumers in the region.

The Russian Government is actively pursuing the reorganization of the nation’s rail, electricity andtelephone systems. Any such reorganization may result in increased charges and tariffs while failing togenerate the anticipated capital investment needed to repair, maintain and improve these systems.

The poor condition or further deterioration of Russia’s physical infrastructure may harm the nationaleconomy, disrupt the transportation of goods and supplies, add costs to doing business in Russia andinterrupt the Group’s business operations, which could have a material adverse effect on its business,results of operations, financial condition and prospects.

The Russian banking system remains underdeveloped.

Russia’s banking and other financial systems are not well developed or well regulated, and Russianlegislation relating to banks and bank accounts may be subject to varying interpretations andinconsistent application. The 1998 financial crisis resulted in the bankruptcy and liquidation of manyRussian banks and almost entirely eliminated the developing market for commercial bank loans at thattime. From April to July 2004, the Russian banking sector experienced further serious turmoil. As aresult of various market rumors and certain regulatory and liquidity problems, several privately ownedRussian banks experienced liquidity problems and were unable to attract funds on the interbankmarket or from their client base. Simultaneously, they faced large withdrawals of deposits by both retail

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and corporate customers. Several of these privately owned Russian banks collapsed or ceased orseverely limited their operations. Russian banks owned or controlled by the Russian Government andforeign-owned banks generally were not adversely affected by the turmoil.

Many Russian banks also do not meet international banking standards, and the transparency of theRussian banking sector still lags behind internationally accepted norms in certain respects. Bankingsupervision is also often inadequate, and, as a result, many Russian banks do not follow existing CBRregulations with respect to lending criteria, credit quality, loan loss reserves, diversification of exposureor other requirements. For example, it was widely reported in the Russian press that VTB Bank’s (thesecond largest Russian bank) acquisition of a controlling stake in the Bank of Moscow (a top-5 Russianbank that was controlled by the Moscow administration and its management) revealed serious issuesin the Bank of Moscow’s loan portfolio, resulting in VTB Bank and the Russian Deposit InsuranceAgency being required to inject a significant amount of capital into it. The imposition of more stringentregulations or interpretations could lead to determinations of inadequate capital and the insolvency ofsome banks.

Prior to the onset of the recent global financial crisis, there was a rapid increase in lending by Russianbanks, which many believe had been accompanied by deterioration in the credit quality of theborrowers. In addition, a robust domestic corporate debt market was leading Russian banks toincreasingly hold large amounts of Russian corporate Rouble-denominated bonds in their portfolios,which further deteriorated the risk profile of Russian bank assets.

The recent global financial crisis led to the collapse or bailout of some Russian banks and to significantliquidity constraints for others. Profitability levels of most Russian banks were adversely affected.Moreover, the global crisis prompted the Russian Government to inject substantial funds into thebanking system amid reports of difficulties among Russian banks and other financial institutions. Thecontinuation of the banking crisis or the bankruptcy or insolvency of the banks in which the Groupholds its funds could prevent it from accessing these funds or affect its ability to complete bankingtransactions in Russia, or may result in the loss of deposits altogether, which could have a materialadverse effect on the Group’s business, results of operations, financial condition and prospects.

Legislative and Legal Risks Relating to Russia

Weaknesses relating to the Russian legal system create an uncertain environment forinvestment and business activity in Russia and thus could have a material adverse effect on theGroup’s business.

Risks associated with the Russian legal system include, to varying degrees, the following:

• inconsistencies between: (i) federal laws; (ii) decrees, orders and regulations issued by thePresident, the Russian Government and federal ministers; and (iii) regional and local laws,rules and regulations;

• a lack of judicial and administrative guidance on interpreting legislation as well as a lack ofsufficient commentaries on judicial rulings and legislation;

• the relative unavailability of Russian legislation and court decisions in an organized mannerthat facilitates understanding of such legislation and court decisions;

• the relative inexperience of jurists, judges and courts in interpreting newly adopted legislationand complex commercial arrangements;

• substantial gaps in the legal framework due to the delay or absence of implementingregulations for certain legislation;

• a lack of judicial independence from political, social and commercial forces;

• problematic and time-consuming enforcement of both Russian and non-Russian judicialorders and international arbitration awards;

• a high degree of discretion on the part of governmental authorities, leaving significantopportunities for arbitrary and capricious government action; and

• bankruptcy procedures that are not well developed and are subject to abuse.

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Legislation relating to disclosure and reporting requirements and anti-money laundering legislation hasonly relatively recently been enacted in the Russian Federation. The concept of management ordirectors owing fiduciary duties to their companies or shareholders is new to Russian law. Additionally,the relatively recent enactment of many laws and the lack of consensus about the aims, scope, contentand pace of economic and political reforms have resulted in ambiguities, inconsistencies andanomalies in the Russian legal system. The enforceability and underlying constitutionality of morerecently enacted laws are in doubt, and many new laws remain untested. Moreover, the courts havelimited experience in interpreting and applying many aspects of business and corporate law. Russianlegislation also often contemplates implementing regulations that have not yet been promulgated,leaving substantial gaps in the regulatory infrastructure.

In addition, there is no assurance that favorable court decisions will not be reconsidered in the future.For example, in accordance with a recent resolution adopted by the Supreme Arbitrazh Court of theRussian Federation, a judgment challenged in the course of supervisory proceedings can bereconsidered in light of discovery of new facts, provided that since the delivery of such judgment,application of legal provisions on which it is based has been changed by a resolution of the SupremeArbitrazh Court of the Russian Federation. As a result of such change, a litigant may not be able tobenefit from a previous application or court practice used in its favor.

Any or all of these weaknesses could affect the Group’s ability to enforce its legal rights in Russia,including rights under the contracts, or to defend against claims by the third parties in Russia.

Shareholder liability under Russian corporate law could result in the Group becoming liable forthe obligations of its Russian subsidiaries.

Russian law generally provides that participants of a limited liability company are not liable for theobligations of such a company and bear only the risk of loss of their investment. This may not be thecase, however, when one legal entity is capable of determining decisions made by another entity. Thelegal entity capable of determining such decisions is called the effective parent entity (osnovnoyeobshchestvo in Russian). The legal entity whose decisions are capable of being so determined iscalled the effective subsidiary entity (docherneye obshchestvo in Russian). The effective parent bearsjoint and several liability for transactions entered into by the effective subsidiary in carrying outbusiness decisions if:

• the effective parent gives binding instructions to the effective subsidiary; and

• the right of the effective parent to give binding instructions is set forth in the charter of theeffective subsidiary or in a contract between such entities.

Moreover, under Russian law, an effective parent is secondarily liable for an effective subsidiary’sdebts if an effective subsidiary becomes insolvent or bankrupt as a result of the action of an effectiveparent. In these instances, the other shareholders of the effective subsidiary may claim compensationfor the effective subsidiary’s losses from the effective parent that causes the effective subsidiary totake action or fail to take action knowing that such action or failure to take action would result in losses.Accordingly, in the Parent’s position as an effective parent, it could be liable in some cases for thedebts of its effective subsidiaries, which may have a material adverse effect on its business, results ofoperations, financial condition and prospects.

Government action could have an adverse effect on the Group’s business.

Government authorities have a high degree of discretion in the Russian Federation and at timesappear to act selectively or arbitrarily, without hearing or prior notice, and sometimes in a manner thatmay not be in full accordance with the law or that may be influenced by political or commercialconsiderations. Moreover, the Russian Government also has the power in certain circumstances, byregulation or government act, to interfere with the performance of, nullify or terminate contracts.Unlawful, selective or arbitrary governmental actions have reportedly included denial or withdrawal oflicenses, sudden and unexpected tax audits or investigations, criminal prosecutions and civil actions.Federal and local government entities also appear to have used common defects in matterssurrounding share issuances and registration as pretexts for court claims and other demands toinvalidate such issuances or registrations or to void transactions, seemingly for political purposes. S&Phas expressed concerns that “Russian companies and their investors can be subjected to governmentpressure through selective implementation of regulations and legislation that is either politically

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motivated or triggered by competing business groups.” In this environment, the Group’s competitorsmay receive preferential treatment from the government, potentially giving them a competitiveadvantage.

Higher government scrutiny, unlawful, selective or arbitrary government action, if directed at theGroup’s operations, could lead to the loss of assets, termination of contracts, civil and administrativelitigation, criminal proceedings and imprisonment of key personnel, any of which could have a materialadverse effect on its business, results of operations, financial condition and prospects.

The Group is periodically subject to tax and other inspections, pursuant to which the authorities mayseek to assess additional tax liabilities or impose administrative liability which may include evenforfeiture of equipment and products, and suspension of operations, which may have a materialadverse effect on the Group’s business, results of operations, financial condition and prospects.

Lack of independence and the inexperience of the judiciary, the difficulty of enforcing courtdecisions and governmental discretion in enforcing claims could prevent the Group or theNoteholders from obtaining effective redress in a court proceeding, which could have anadverse effect on the Group’s business or the value of the Notes.

The independence of the judicial system, the investigative authorities and the prosecutor general’soffice and their immunity from economic, political and nationalistic influences in Russia is less thancomplete. The court system is often understaffed and underfunded. Judges are generallyinexperienced in the area of business and corporate law. Judicial precedents generally have no bindingeffect on subsequent decisions. Not all Russian legislation and court decisions are readily available tothe public or organized in a manner that facilitates understanding. The Russian judicial system can beslow, and court orders are not always enforced or followed by law enforcement agencies. Additionally,the press has often reported that court claims and governmental prosecutions are sometimesinfluenced by or used in furtherance of political aims or private interests. The Group may be subject tosuch claims and may not be able to receive a fair hearing. All of these factors make judicial decisionsin Russia difficult to predict and effective redress uncertain and could have a material adverse effect onthe Group’s business, results of operations, financial condition and prospects.

Forced liquidation of some of the Group’s subsidiaries due to insufficient or negative netassets could have an adverse effect on its operations.

In accordance with Russian legislation, in the event that a Russian company’s net assets at the end ofthe year followed its second or any subsequent financial year, as stated in its annual balance sheetprepared under Russian Accounting Standards (“RAS”), fall below its charter capital, within the next 6months the company must decrease its charter capital to that level or liquidate. If a limited liabilitycompany fails to comply with either of the requirements stated above within a “reasonable period”, itscreditors may accelerate their claims or demand early performance of obligations to them and claimdamages, and governmental authorities may seek involuntary liquidation of the company. On occasion,courts have ordered the involuntary liquidation of a company for having net assets less than theminimum charter capital required by law, even if the company had continued to fulfill its obligations andhad net assets in excess of the minimum statutory amount at the time of liquidation. Certain of theGroup’s subsidiaries have had net assets less than their charter capital or less than the minimumcharter capital required by law. For instance, Guarantors of the Notes OOO Brunswick Rail Serviceand OOO Brunswick Rail Leasing showed negative net assets in 2008 due to the effect of significantforeign exchange translation losses due to revaluation of borrowings caused by appreciation of Roubleagainst US Dollar. By the end of 2009, this problem had been cured. These subsidiaries did not file forliquidation because the Group believed that, as long as a subsidiary continues to fulfill its obligations,the risk of liquidation or creditor’s claims for early performance of obligations is remote. However, if inthe future, involuntary liquidation or acceleration of claims with respect to the Group’s subsidiarieswere to occur, this could have an adverse effect on its business, results of operations, financialcondition and prospects.

Russian legislation may not adequately protect against expropriation and nationalization.

The Russian Government has enacted legislation to protect foreign investment and other propertyagainst expropriation and nationalization. In the event that such property is expropriated or

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nationalized, legislation provides for fair compensation. However, there is no assurance that suchprotections would be enforced. Expropriation or nationalization of the Group’s assets could have amaterial adverse effect on its business, results of operations, financial condition and prospects.

Restrictive currency regulations may adversely affect the Group’s business and financialcondition.

Notwithstanding significant recent liberalization of the Russian currency control regime and theabolishment of certain restrictions from January 1, 2007, under Federal Law No. 173-FZ “On CurrencyRegulation and Currency Control” dated December 10, 2003, as amended (the “Currency Law”),current regulations still contain a number of limitations on foreign currency operations. In particular,Russian companies must notify Russian tax authorities on opening, closing or changes of details ofbank accounts denominated in any currency with banks located outside of the Russian Federation.Such a notification must be filed within one month from the date on which such an account was openedor closed or on which the account details were changed. Moreover, certain currency control restrictionswere not repealed from January 1, 2007, and these include a general prohibition of foreign currencyoperations between Russian companies (except for the operations specifically listed in the CurrencyLaw and the operations between the authorized banks specifically listed in the CBR regulations) andthe requirement to repatriate, subject to certain exemptions, export-related earnings to Russia.Restrictions on the Group’s ability to conduct some of these transactions could increase its costs, orprevent it from continuing necessary business operations, or from successfully implementing itsbusiness strategy, which could have a material adverse effect on the Group’s business, results ofoperations, financial condition and prospects.

As a result of the current state of the banking sector, considerable delays may occur in the transfer offunds within, and the remittance of funds out of, Russia. Any delay or other difficulty in transferring orremitting funds could limit the ability to meet payment and debt obligations as they become due, whichcould result in the acceleration of debt obligations and cross-defaults and, in turn, have a materialadverse effect on the Group’s business, results of operations, financial condition and prospects.

RISKS RELATING TO THE NOTES, THE ISSUER AND THE GUARANTEES

The Group will have the ability to incur substantially more debt.

The Group will be able to incur substantially more debt in the future. The limitations on incurrence ofindebtedness in the Conditions permit the Issuer, Parent and restricted subsidiaries to borrowadditional amounts so long as its leverage ratio does not exceed 4 to 1 and its consolidated coverageratio is at least 2 to 1. In addition, the Conditions permit the Issuer, Parent and restricted subsidiaries toincur certain indebtedness even when those ratios are not met, including the ability to purchase, undercertain circumstances, railcars or other assets related to the Group’s business, directly or indirectly, inan amount not to exceed 10% of the Group’s consolidated total assets. Please see “Terms andConditions of the Notes”. Unrestricted subsidiaries, in accordance with the Conditions, are not limitedby the amount of indebtedness they may incur. In addition, debt permitted to be incurred by theGroup’s subsidiaries, other than the Issuer, may be structurally senior to the Notes and, in certaincircumstances, may be secured. If new debt, in particular secured or structurally senior debt, is addedto the current debt levels, the magnitude of the risks related to the Group’s indebtedness describedabove could increase, and the foregoing factors could have an adverse effect on its ability to payamounts due in respect of the Notes.

The Notes may be structurally subordinated to subsidiary debt and to secured creditors.

The Group’s operations are principally conducted through its operating subsidiaries in Russia.Accordingly, the Issuer is and will be dependent on the operations of these companies (which, like theIssuer, are under the control of the Parent) to service its indebtedness, including the Notes. However,even though several of the operational subsidiaries will act as Guarantors, not all will. In particular, theGroup’s non-guarantor subsidiaries, including ProfTrans Group and OOO Brunswick Rail Managementwhich, in the aggregate, account for 2.5% of its assets and will not guarantee the Notes. The Notes willbe structurally subordinated to the claims of all secured and unsecured creditors, including tradecreditors, of the Group’s non-guarantor subsidiaries, and to all secured creditors of the Group and itssubsidiaries. As at June 30, 2012, the Group’s total secured gross debt amounted to US$ 533 million

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and 34% of its assets were subject to security. It is anticipated, after giving effect to the issuance of theNotes and the application of the proceeds therefrom as described in “Use of Proceeds” that thesecurity related to the EBRD/IFC Facility and the IFC Loan will no longer be in place. However,execution risk exists with respect to the release of such security, and there can be no guarantee thatthe security will be timely released or released at all. In addition, as at June 30, 2012, the Group’snon-Guarantor subsidiaries had indebtedness in the aggregate principal amount of approximatelyUS$ 12 million, all of which is unsecured and which will be structurally senior to the Notes. In the eventof an insolvency, bankruptcy, liquidation, reorganization, examination, dissolution or winding-up of thebusiness of any subsidiary of the Group, creditors of a non-Guarantor subsidiary and secured creditorsof a Guarantor subsidiary generally will have the right to be paid in full before any distribution is madeto the Issuer or payments are made to the Noteholders.

The Issuer is a special purpose entity and is dependent on the operating subsidiaries of theGroup to meet its financial obligations.

The Group will use the net proceeds from the issue of the Notes (i) to provide OOO Brunswick WagonLeasing with funds to repay any outstanding amounts (US$ 196.7 million as of the date of thisProspectus), together with prepayment fees and transaction expenses, to EBRD under the EBRD/IFCFacility, (ii) to provide OOO Brunswick Wagon Leasing with funds to repay any outstanding amounts(US$ 83.3 million as of the date of this Prospectus), together with prepayment fees and transactionexpenses, to IFC under the EBRD/IFC Facility and (iii) to use any net proceeds in excess of thoseamounts for acquisition of railcars and general corporate purposes. The Issuer has insufficient netassets, other than amounts due to it from the Group’s subsidiaries, including the Guarantors, in respectof any inter-company loans, to meet its obligations to pay interest and other amounts payable inrespect of the Notes. The Issuer would, therefore, in the absence of other funding sources, have to relyon the Group’s subsidiaries, including the Guarantors, contributing funds to it to meet such obligations.Certain of the Group’s operating subsidiaries are and may, from time to time, be subject to restrictionson their ability to make distributions and loans, including as a result of restrictive covenants in the loanagreements, foreign exchange and other regulatory restrictions.

The claims of Noteholders may be limited in the event that the Issuer or any of the Group’soperating subsidiaries are declared bankrupt.

Bermudian, and Russian bankruptcy laws often differ from the bankruptcy laws of Ireland and Englandand the United States, and are subject to varying interpretations. It is difficult to predict how claims ofthe Noteholders against the Issuer or any of the Group’s operating subsidiaries would be resolved inthe event of bankruptcy. In the event of bankruptcy, the obligations to the Noteholders could besubordinated to the following obligations:

• workplace injury obligations;

• severance pay and employment related obligations;

• other secured creditors;

• tax and other payment obligations to the government; and

• liabilities arising from the liquidation of the estate.

In the event of insolvency, Irish, Bermudian, and Russian bankruptcy laws may adversely affect theGroup’s ability to make payments to the Noteholders.

The Group cannot assure the Noteholders that an active trading market will develop for theNotes.

The Notes have not been registered under the Securities Act or any U.S. state securities laws and maynot be offered or sold except in a transaction exempt from, or not subject to, the registrationrequirements of the Securities Act and applicable state securities laws. Although the Group has appliedto list the Notes on the Official List of the UKLA and admit the Notes to trading on the RegulatedMarket of the London Stock Exchange, it cannot assure the Noteholders that its application will begranted or an active trading market for the Notes will develop. The Group does not know the extent towhich investor interest will lead to the development of an active trading market or how liquid that

39

market might be, nor can it make any assurances regarding the ability of Noteholders to sell theirNotes or the price at which the Notes might be sold. In the event an active trading market for the Notesfails to develop, the market price of the Notes could be adversely affected.

The market price of the Notes may be volatile.

The market price of the Notes could be subject to significant fluctuations in response to actual oranticipated variations in the Group’s own and its competitors’ operating results, adverse businessdevelopments, changes to the regulatory environment in which the Group operates, changes infinancial estimates by securities analysts, and the actual or expected sale of a large number of Notes,as well as other factors. Historically, the market for non-investment grade debt, such as the Notes, hasbeen subject to disruptions that have caused substantial volatility in the prices of such securities. Anysuch disruptions may harm Noteholders. In addition, in recent years the global financial markets,including emerging markets, have experienced significant price and volume fluctuations that, ifrepeated in the future, could adversely affect the market price of the Notes without regard to theGroup’s results of operations, prospects or financial condition.

The market price of the Notes could be affected by any change in the credit ratings of the Notes. TheNotes are expected to be rated BB- by S&P and Ba3 by Moody’s. In the event of any downgrade in theNotes’ ratings by S&P, Moody’s or another rating agency, or in the event that S&P, Moody’s or anyother rating agency indicates that it is considering such downgrading, the market price of the Notescould be materially adversely affected. In addition, any such change or development may increase theGroup’s cost of borrowing or affect its ability to obtain debt financing in the future.

Enforcing the rights of a holder of the Notes across multiple jurisdictions may prove difficult.

The Issuer is incorporated under the laws of Ireland; the Notes will be guaranteed by the Parent, OOOBrunswick Rail Leasing, OOO Brunswick Rail Service, OOO Brunswick Trans and OOO BrunswickWagon Leasing, which are organized under the laws of the Russian Federation and Bermuda, and thetransaction documents in relation to the issuance of the Notes are governed by English law. Therefore,the rights of the Noteholders under the Notes and the Guarantees will be subject to the laws of morethan one jurisdiction, and there can be no assurance that the Noteholders will be able to effectivelyenforce their rights in multiple bankruptcy, insolvency, administration, examinership or similarproceedings. Moreover, such multi-jurisdictional proceedings are typically complex and costly forcreditors and often result in substantial uncertainty and delay in the enforcement of the Noteholders’rights.

The Notes may be redeemed prior to maturity.

The Terms and Conditions of the Notes provide that the Notes are redeemable at the Issuer’s option incertain circumstances, or at any time at the Issuer’s discretion subject to the payment of the MakeWhole Premium as defined in Condition 6.5(b) of the Terms and Conditions of the Notes, and,accordingly, the Issuer may choose to redeem the outstanding Notes at times when prevailing interestrates may be relatively low. In such circumstances, an investor may not be able to reinvest theredemption proceeds in a comparable security at an effective interest rate as high as that of the Notes.Even if the Issuer does not exercise its option to redeem the Notes, its ability to do so may adverselyaffect the value of the Notes.

As the Global Notes are held by or on behalf of Euroclear, Clearstream, Luxembourg and DTC,the Noteholders will have to rely on their procedures for transfer, payment and communicationwith the Issuer and/or the Guarantors.

The Notes will be represented by the Global Notes except in certain limited circumstances describedtherein. The Regulation S Global Note will be registered in the name of a nominee of, and depositedwith the Common Depositary for Euroclear and Clearstream, Luxembourg. The Rule 144A Global Notewill be registered in the name of a nominee of, and deposited with a custodian for, DTC. Except incertain limited circumstances described in the Global Notes, the Noteholders will not be entitled toreceive definitive Notes. Euroclear, Clearstream, Luxembourg and DTC will maintain records of thebeneficial interests in the Global Notes. While the Notes are represented by the Global Notes, theNoteholders will be able to trade their beneficial interests only through Euroclear, Clearstream,Luxembourg and DTC.

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The Issuer and the Guarantors will discharge their payment obligations under the Notes by makingpayments through DTC or to the Common Depositary for Euroclear and Clearstream, Luxembourg fordistribution to their account holders. A holder of a beneficial interest in the Global Notes must rely onthe procedures of DTC, Euroclear and Clearstream, Luxembourg to receive payments under theNotes. The Issuer and the Guarantors have no responsibility or liability for the records relating to, orpayments made in respect of, beneficial interests in the Global Notes.

Holders of beneficial interests in the Global Notes will not have a direct right to vote in respect of theNotes. Instead, such holders will be permitted to act only to the extent that they are enabled by DTC,Euroclear and Clearstream, Luxembourg to appoint appropriate proxies.

Modification, waivers and substitution may occur without the Noteholders’ consent.

The Terms and Conditions of the Notes contain provisions for calling meetings of Noteholders toconsider matters affecting their interests generally. These provisions permit defined majorities to bindall Noteholders, including Noteholders who did not attend and vote at the relevant meeting andNoteholders who voted in a manner contrary to the majority.

The Terms and Conditions of the Notes also provide that the Trustee may agree, without the consentof Noteholders, to (i) any modification of any of the provisions of the Trust Deed, the Notes, theGuarantees, the Agency Agreement or the Conditions which in the Trustee’s opinion is of a formal,minor or technical nature or is made to correct a manifest error or to comply with mandatory provisionsof law, and (ii) any other modification to the Trust Deed, the Guarantees, the Agency Agreement, theNotes or the Conditions (except as mentioned in the Trust Deed), and any waiver or authorization ofany breach or proposed breach, of any of the provisions of the Trust Deed, the Agency Agreement, theGuarantees, the Notes or the Conditions which is, in the opinion of the Trustee, not materiallyprejudicial to the interests of the Noteholders. The Trustee may, without the consent of theNoteholders, determine that any Event of Default or Potential Event of Default (as defined in the Termsand Conditions of the Notes) should not be treated as such, provided that, in the opinion of theTrustee, the interests of Noteholders will not be materially prejudiced thereby. The Trustee may,without the consent of the Noteholders, agree to the substitution, in place of the Issuer, of any otherentity as the principal debtor under the Trust Deed and the Notes, provided that certain conditions aremet.

The Notes are subject to restrictions on transfer.

The Notes are being offered and sold in the United States in reliance on Rule 144A to purchasers whoare QIBs and outside the United States to non-U.S. Persons in reliance on Regulation S. Eachpurchaser of Notes pursuant to Rule 144A will be deemed to have represented to the Issuer that it is aQIB. Each purchaser of the Notes pursuant to Regulation S will be deemed to have represented to theIssuer that it is not a U.S. person within the meaning of Regulation S and is not acquiring Notes for theaccount or benefit of any U.S. person and that it is purchasing the Notes in an offshore transactionwithin the meaning of Regulation S.

The Notes have not been and will not be registered under the Securities Act, and the Issuer will not beregistered under the Investment Company Act. All sales and resales of the Notes in the United Statesor to U.S. Persons must be made pursuant to an exemption from the registration requirements of theSecurities Act. See “Transfer Restrictions, Clearing and Settlement”.

Certain transactions contemplated in connection with the offering of the Notes could constituteprohibited transactions under ERISA, the Internal Revenue Code, or similar laws.

The United States Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and theUnited States Internal Revenue Code of 1986, as amended (the “Code”), set forth certain restrictionson employee benefit plans and certain other plans and entities. Certain transactions contemplated inconnection with the offering of the Notes could be deemed to constitute direct or indirect prohibitedtransactions under ERISA or the Code. A prohibited transaction may result in an excise tax, penalty orother liabilities under ERISA or the Code, unless exemptive relief is available. Attention is drawn to thesection of this prospectus entitled “Certain ERISA Considerations”, in which any purchaser or holder ofNotes and any subsequent transferee of Notes is deemed to have made representations that (1) either

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it is not investing assets of a benefit plan that is subject to ERISA or to Section 4975 of the Code or(ii) its purchase and holding of the Notes will not result in a nonexempt prohibited transaction underSection 406 of ERISA or Section 4975 of the Code (or, in the case of a governmental, church ornon-U.S. employee benefit plan, any such substantially similar federal, State or local law, or non-U.S.law) and (2) it will not sell or otherwise transfer such Notes otherwise than to a purchaser or transfereethat is deemed to represent and agree with respect to its purchase and holding of such Notes to thesame effect as the purchaser’s representation and agreement set forth in this sentence.

The Noteholders face risks associated with possible changes in law.

The Terms and Conditions of the Notes are based on English law in effect as at the date of thisProspectus. The descriptions of legal matters and tax analysis elaborated in this Prospectus are basedon relevant laws and regulations as currently in force. No assurance can be given as to the impact ofany possible judicial decision or change to the laws and regulations or administrative practice after thedate of this Prospectus. If the laws and regulations are amended, such amendments could have animpact on the rights and obligations of the Noteholders and the tax treatment of (income derived from)the Notes.

Exchange rate fluctuations and exchange controls may negatively affect the Noteholders’interests.

The Issuer will pay principal and interest on the Notes in U.S. dollars (the “Specified Currency”). Thispresents certain risks relating to currency conversions if an investor’s financial activities aredenominated principally in a currency or currency unit (the “Investor’s Currency”) other than theSpecified Currency. These include the risk that exchange rates may significantly change (includingchanges due to devaluation of the Specified Currency or revaluation of the Investor’s Currency) andthe risk that authorities with jurisdiction over the Investor’s Currency may impose or modify exchangecontrols. An appreciation in the value of the Investor’s Currency relative to the Specified Currencywould decrease (i) the Investor’s Currency equivalent yield on the Notes, (ii) the Investor’s Currencyequivalent value of the principal payable on the Notes and (iii) the Investor’s Currency equivalentmarket value of the Notes. Government and monetary authorities may impose (as some have done inthe past) exchange controls that could materially adversely affect an applicable exchange rate. As aresult, investors may receive less interest or principal than expected, or no interest or principal.

Changes in interest rate may adversely affect the value of the Notes.

Investment in the Notes involves the risk that subsequent changes in market interest rates mayadversely affect the value of the Notes.

The Issuer is subject to risks related to the location of its center of main interest, theappointment of examiners and the claims of preferred creditors under Irish Law.

COMI

The Issuer has its registered office in Ireland. As a result, there is a rebuttable presumption that itscenter of main interests (“COMI”) is in Ireland and consequently that any main insolvency proceedingsapplicable to it would be governed by Irish law. In the decision by the European Court of Justice (the“ECJ”) in relation to Eurofood IFSC Limited, the ECJ restated the presumption in Council Regulation(EC) No. 1346/2000 of May 29, 2000 on Insolvency Proceedings that the place of a company’sregistered office is presumed to be the company’s COMI and stated that the presumption can only berebutted if “factors which are both objective and ascertainable by third parties enable it to beestablished that an actual situation exists which is different from that which locating it at the registeredoffice is deemed to reflect.” As the Issuer has its registered office in Ireland, has Irish directors, isregistered for tax in Ireland and has an Irish corporate services provider, the Issuer does not believethat factors exist that would rebut this presumption, although this would ultimately be a matter for therelevant court to decide, based on the circumstances existing at the time when it is asked to make thatdecision.

Preferred Creditors

If the Issuer becomes subject to an insolvency proceeding and the Issuer has obligations to creditorsthat are treated under Irish law as creditors that are senior relative to the Noteholders, the Noteholders

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may suffer losses as a result of their subordinated status during such insolvency proceedings. Inparticular, under Irish law, the claims of unsecured creditors of the Issuer rank behind other creditors(including fees, costs and expenses of any examiner appointed, certain capital gains tax liabilities andclaims of the Irish Revenue Commissioners for certain unpaid taxes).

Examinership

Examinership is a court procedure available under the Companies (Amendment) Act 1990, asamended to facilitate the survival of Irish companies in financial difficulties. The Issuer, the directors ofthe Issuer, a contingent, prospective or actual creditor of the Issuer, or shareholders of the Issuerholding, at the date of presentation of the petition, not less than one-tenth of the voting share capital ofthe Issuer are each entitled to petition the court for the appointment of an examiner. The examiner,once appointed, has the power to halt, prevent or rectify acts or omissions, by or on behalf of thecompany after his appointment and, in certain circumstances a negative pledge given by the companyprior to his appointment will not be binding on the company. Furthermore, where proposals for ascheme of arrangement are to be formulated, the company may, subject to the approval of the court,affirm or repudiate any contract under which some element of performance other than the paymentremains to be rendered both by the company and the other contracting party or parties.

During the period of protection, the examiner will compile proposals for a compromise or scheme ofarrangement to assist in the survival of the company or the whole or any part of its undertaking as agoing concern. A scheme of arrangement may be approved by the High Court of Ireland (the “HighCourt”) when a minimum of one class of creditors, whose interests are impaired under the proposals,has (i) voted in favor of the proposals and (ii) the High Court is satisfied that such proposals are fairand equitable in relation to any class of members or creditors who have not accepted the proposalsand (iii) whose interests would be impaired by implementation of the scheme of arrangement and theproposals are not unfairly prejudicial to any interested party.

If an examiner were appointed while any amounts due by the Issuer under the Notes were unpaid, theprimary risks to the holders of Notes would be as follows:

• the Trustee, acting on behalf of Noteholders, would not be able to enforce rights against theIssuer during the period of examinership;

• a scheme of arrangement may be approved involving the writing down of the debt due by theIssuer to the Noteholders irrespective of the Noteholders’ views;

• the examiner may set aside any negative pledge in the Notes prohibiting the creation ofsecurity or the incurring of borrowings by the Issuer to enable the examiner to borrow to fundthe Issuer during the protection period;

• in the event that a scheme of arrangement is not approved and the Issuer subsequently goesinto liquidation, both the examiner’s and liquidator’s remuneration and expenses (includingcertain borrowings incurred by the examiner on behalf of the Issuer and approved by the HighCourt) will take priority over the monies and liabilities which from time to time are or maybecome due, owing or payable by the Issuer to the Noteholders under the Notes or thetransaction documents in connection therewith;

• while a company is under the protection of the Court, no action can be taken to enforceguarantees against persons who have guaranteed the debts of the company. Whether thisprohibition under Irish law would be effective in the pursuit of a foreign guarantee is a matterof the governing law of the guarantee and/or the guarantor’s residence; and

• where a creditor receives notice of a meeting of creditors convened by the examiner toconsider and vote on his proposals for a scheme of arrangement and that creditor’s debt isguaranteed by a third party, then the creditor must, within very tight deadlines, offer theguarantor the opportunity to attend and vote at the meeting in place of the creditor. If this offeris not made in writing within the statutory time period, the creditor loses its right to pursue theguarantor pursuant to the guarantee.

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RISKS RELATING TO TAXATION

Taxation Risks Relating to Russia

Russian tax laws, regulations and court practice are subject to frequent change, varyinginterpretations and inconsistent and selective enforcement.

Russian companies are subject to a broad range of taxes and other compulsory payments imposed atthe federal, regional and local levels, which include, among others, profits tax, value added tax (“VAT”),property tax and payroll related insurance payments. Russian laws related to these taxes such as theTax Code and regulations relating thereto have been in force for a relatively short period of time ascompared to tax legislation in more developed market economies and the Russian Government’simplementation of such legislation is often unclear or inconsistent. Historically, the system of taxcollection in the Russian Federation has been relatively ineffective, resulting in continuous changesbeing introduced into existing laws and the interpretation thereof and which sometimes occur at shortnotice and apply retrospectively.

Although the quality of the Russian tax legislation has generally improved with the introduction of theRussian Tax Code, the possibility exists that Russia may impose arbitrary and/or onerous taxes andpenalties in the future, which could adversely affect the Group’s business. Russia’s inefficient taxcollection system increases the likelihood of such events. A large number of changes have beenintroduced to various chapters of the Russian Tax Code since its adoption.

Since Russian federal, regional and local tax laws and regulations are subject to frequent change and,in addition, some sections of the Tax Code are comparatively new, interpretation and application ofthese laws and regulations is often unclear, unstable or non-existent. Different interpretations of taxregulations may exist both among and within government bodies at the federal, regional and locallevels, increasing the number of existing uncertainties and leading to the inconsistent enforcement ofthese tax laws and regulations in practice.

Taxpayers, the Russian Ministry of Finance and the Russian tax authorities often interpret tax lawsdifferently. In some instances, the Russian tax authorities have applied new interpretations of tax lawsretroactively. The current practice is that private clarifications to specific taxpayers’ queries with respectto particular situations issued by the Russian Ministry of Finance are not binding on the Russian taxauthorities and there can be no assurance that the Russian tax authorities will not take positionscontrary to those set out in the private clarification letters issued by the Russian Ministry of Finance.During the past several years the tax authorities have shown a tendency to take more assertivepositions in their interpretation of tax legislation which has led to an increased number of material taxassessments issued by them as a result of tax audits of companies operating in various industries.

As taxpayers and the Russian tax authorities often interpret tax laws differently, the taxpayers oftenhave to resort to court proceedings to defend their positions against the Russian tax authorities. In theabsence of binding precedent or consistent court practice, rulings on tax or other related matters takenby different courts relating to the same or similar circumstances may also be inconsistent orcontradictory.

The Russian tax system is, therefore, impeded by the fact that at times it continues to be characterizedby inconsistent judgments of local tax authorities and the failure by these tax authorities to addressmany of the existing problems. It is, therefore, possible that transactions and activities of the Groupthat have not been challenged in the past may be challenged in the future, which may have a materialadverse effect on the Group’s business, financial condition, results of operations and prospects.

Tax declarations together with related documentation are subject to review and investigation by theRussian tax authorities, which are authorized by Russian law to impose severe fines and penalties ontaxpayers. Generally, tax declarations remain open and subject to inspection by the Russian taxauthorities for a period of three calendar years immediately preceding the year in which the decision toconduct a tax audit is taken. Tax audits can however go beyond this general three-year term to coverthe tax period for which an amended tax return (if any) has been filed. The fact that a year has beenreviewed by the Russian tax authorities does not prevent further review of that year, or any tax returnapplicable to that year, from any further reviews during the three-year limitation period (or the periodextended by filing an amended tax return, as discussed above). In particular, a repeat tax audit may beconducted (i) by the Russian tax authority superior to that which has carried out the initial audit as a

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measure of control over the activities of lower-level Russian tax authorities, or (ii) in connection with thereorganization or liquidation of a taxpayer, or (iii) as a result of the filing by such taxpayer of anamended tax return decreasing the tax payable to the revenue. Therefore, previous tax audits do notnecessarily preclude subsequent claims relating to the audited period.

It should be noted, however, that on March 17, 2009, the Russian Constitutional Court issued adecision which deems unconstitutional provisions of the Tax Code allowing to perform such repeat taxaudits by a higher tax authority for the same tax period where there has been a court decision taken inrespect of the tax dispute between the relevant taxpayer and the relevant tax authority over taxationmatters raised during the initial tax audit. Currently, there is quite limited court practice relating to theapplication of this decision by Russian courts.

The statute of limitations for tax liabilities and penalties for a tax offence is three years from the date onwhich it was committed or from the next date following the date of the end of the tax period duringwhich the tax offence was committed (depending on the nature of the tax offence). On July 14, 2005,the Russian Constitutional Court issued a decision that allows the statute of limitations for tax liabilitiesand penalties to be extended beyond the three-year period set forth in the Tax Code if a courtdetermines that a taxpayer has obstructed or hindered a tax audit. Moreover, the Tax Code providesfor the extension of the three year statute of limitations for tax penalties if the taxpayer obstructed theperformance of the tax audit and that this has become an insurmountable obstacle for the tax audit.Because the terms “obstructed”, “hindered” and “insurmountable obstacles” are not specifically definedin the Russian law, the Russian tax authorities may attempt to interpret these terms broadly, effectivelylinking any difficulty experienced in the course of their tax audit with obstruction created by thetaxpayer and use that as a basis to seek tax adjustments and penalties beyond the three-year term.Therefore, the statute of limitations is not entirely effective with respect to liability for payment of taxesin Russia. In addition to the usual tax burden imposed on Russian taxpayers, these conditionscomplicate relevant business decisions. This uncertainty could possibly expose the Group to significantfines and penalties and to enforcement measures, despite the Group’s best efforts at compliance, andcould result in a greater than expected tax burden. There can be no assurance that the Russian taxauthorities will not become more intrusive and aggressive in respect of future tax audits. All of thesefactors could have a material adverse effect on the Group’s business, financial conditions, results ofoperations and prospects and on the value of the Notes.

A Russian company of the Group applies regional tax benefits. No assurance can be given that theRussian tax authorities will not challenge the application of such tax benefits. The imposition ofadditional tax liabilities in this case may have a material adverse effect on the Group’s business,revenues, financial condition, results of operations and prospects.

The Group operates in various jurisdictions and includes companies incorporated outside of Russia.Russian tax laws do not provide detailed rules on taxation of foreign companies in Russia or operationsof Russian companies abroad. The Tax Code contains a concept of permanent establishment inRussia as a means for taxing foreign legal entities which carry out regular entrepreneurial activities inRussia beyond preparatory and auxiliary activities. However, the practical application of the concept ofa permanent establishment under Russian law is not well developed and foreign companies havingeven limited operations in Russia, which would not normally satisfy the conditions for creating apermanent establishment under international rules, may be at risk of being treated as having apermanent establishment in Russia and be liable to Russian taxation and have obligations to withholdRussian taxes from payments to foreign individuals and legal entities as a tax agent. It is possible thatwith the evolution of these rules or changes in the approach of the Russian tax authorities, the Groupcould be subject to additional taxation in Russia in respect of operations outside of Russia.

Although the Group intends to conduct its affairs so that foreign entities of the Group are not treated ashaving a permanent establishment in Russia, no assurance can be given that activities of these foreignentities will not be treated as creating a permanent establishment in Russia and subjected to Russiantax in a manner similar to the taxation of a Russian legal entity. Only the amount of the income of aforeign entity that is attributable to its permanent establishment should be subject to taxation in Russia.

Pursuant to the new transfer pricing rules (see—“Russian transfer pricing rules may adversely affectthe Group’s business, financial condition and results of operations” below), the amount of the incomeof a foreign entity that is attributable to its permanent establishment is to be measured based on the

45

functions carried out by a Russian permanent establishment, accepted economic (commercial) risksattributable to such activity and the assets deployed. In order to determine the amount of income of aforeign entity that is attributable to a permanent establishment in Russia, the Russian tax authoritiesmay perform a functional analysis of an activity performed by a foreign entity in the territory of Russia.However, the practice of application of these rules is not developed since such approach wasintroduced from 1 January 2012. There is, therefore, a risk that the Russian tax authorities might seekto assess Russian tax on the entire amount of income of a foreign company.

Recent events in the Russian Federation suggest that the Russian tax authorities may be more activelyseeking to investigate and assert that foreign entities operate through a permanent establishment inRussia. Having a permanent establishment in Russia may also lead to other adverse tax implications,including challenging a reduced withholding tax rate under an applicable double tax treaty, a potentialeffect on VAT and property tax obligations. There is also a risk that penalties could be imposed by theRussian tax authorities for the failure to register a permanent establishment with the Russian taxauthorities. Any such taxes or penalties could have a material adverse effect on the business, financialcondition, results of operations or prospects of the Group.

Furthermore, Russian tax legislation in effect on the date of this Prospectus does not contain a conceptof tax residency for legal entities. Russian companies are taxed on their worldwide income whilstforeign entities are taxed in Russia on income attributable to a permanent establishment and onRussian source income. The Russian government has been considering the introduction of the conceptof tax residency for legal entities to the domestic tax law, in particular, for the purposes of preventingtax evasion. The same suggestion has been made by the Russian Government in the Main Directionsof Russian Tax Policy for 2013 and the planned period of 2014-2015. It has been proposed todetermine the tax residency of legal entities based on a number of criteria similar to those used indouble tax treaties concluded by the Russian Federation. No assurance can be currently given as towhether and when these suggestions will be enacted, their exact nature, their potential interpretationby the Russian tax authorities and the possible impact on the foreign entities of the Group or theIssuer. The Group may not rule out that as a result of the introduction of these changes certaincompanies of the Group might be deemed to become Russian tax residents, subject to all applicableRussian taxes, which could have a material adverse effect on the business, prospects, financialcondition and results of operations of the Group.

These facts create tax risks in Russia that may be substantially more significant than typically found incountries with more developed tax systems. Despite the Russian Government’s steps to reduce theoverall tax burden on taxpayers in recent years, Russia’s largely ineffective tax collection system andcontinuing budgetary funding requirements increase the likelihood that arbitrary or onerous taxes andpenalties will be imposed in the future and additional revenue raising measures would be introduced.Although it is unclear how these measures would operate, these uncertainties could possibly exposethe Group to a greater than expected tax burden, significant fines, penalties and potentially severeenforcement measures despite its best efforts at compliance, and could have a material adverse effecton the Group’s business, results of operations, financial condition and prospects. Moreover, despitethe reduction of the overall tax burden, certain companies and industries are being challenged withregard to their structure, arrangements and transactions which have not been challenged or litigated inprior tax audits. Russian companies of the Group may, therefore, be subject to greater than expectedtax burdens, significant fines and penalties and enforcement measures, which could have a materialadverse effect on the Group’s business, financial condition, results of operations or prospects.

Current Russian tax legislation is, in general, based upon the formal manner in which transactions aredocumented, and it construes transactions based on their form rather than substance. However, theRussian tax authorities are increasingly taking a “substance over form” approach. While certainreductions in the rates, such as for profits tax, have been made, it is expected that Russian taxlegislation will become more sophisticated and introduce additional tax-raising measures. Although it isunclear how these provisions will operate, the introduction of new provisions may affect the Group’soverall tax efficiency and, consequently, result in additional taxes becoming payable. Although theGroup attempts to minimize its tax exposure with effective tax planning, it cannot offer investors anyassurances that the effective tax burden will not increase. Additional tax exposure could adverselyaffect the Group’s business. results of operations, financial condition and prospects. See also “—Riskof unjustified tax benefit for the Group”.

46

The Group may encounter difficulties associated with recovery of VAT paid to vendors or atcustoms.

The Group regularly becomes entitled to VAT refunds in substantial amounts.

Under the Tax Code, the Group is entitled to reimbursement of the excess of VAT paid to vendors or atcustoms (“Input VAT”) over VAT collected from the clients (“Output VAT”), either through cashrefunds or offset against future tax liabilities. Many Russian companies, especially those involved in theleasing business, encounter difficulties with obtaining a VAT refund or VAT offset. The reason for thetax authorities’ reluctance to refund VAT to leasing companies or offset it against their future VATpayments is that the assets used in leasing operations create added value over a prolonged period oftime, and thus, for the same asset, the Output VAT is effectively paid by a lessor in installments in thecourse of multiple years, while the Input VAT is subject to refund or offset in whole at the verybeginning of this period.

The amount of VAT reimbursement is subject to obligatory confirmation by the tax authorities. Inpractice, the tax authorities are often overly formalistic and aggressive in interpretations of VATlegislation when confirming the VAT reimbursement, especially if the taxpayer is making a claim for aVAT refund in cash. As a result, obtaining a VAT refund is usually a time-consuming and burdensomeprocess. In practice, the taxpayer often has to appeal to the court for a VAT refund or for an offsetagainst future tax liabilities, and the Group regularly litigates against tax authorities in order to enforceits right for such refunds or offsets. See “Business—Litigation and Other Proceedings—Disputes withthe Russian Tax Authorities”.

Despite the Group’s successful efforts at compliance, there remains the risk that some subsidiaries ofthe Parent may not recover the Input VAT or that the recovery may take a significant amount of time.This may have a material adverse effect on the Group’s business, results of operations, financialcondition and prospects.

Risk of unjustified tax benefit for the Group.

In its decision No. 138-O of July 25, 2001, the Russian Constitutional Court introduced the concept of“a taxpayer acting in bad faith” without clearly stipulating the criteria for its application. Similarly, thisconcept is not defined by in Russian tax law or other Russian laws. Nonetheless, in practice theRussian tax authorities have made increasing use of this concept, including denying the taxpayers’right to rely on the letter of the tax law. Based on the available court practice the tax authorities andcourts often exercise significant discretion in interpreting this concept in a manner that is unfavorable totaxpayers.

On October 12, 2006, the Plenum of the Russian Supreme Arbitrazh Court issued Resolution No. 53(“Resolution No. 53”) which introduced a concept of an “unjustified tax benefit”. This concept isdefined mainly by reference to specific examples of such tax benefits (e.g., received in connection withthe transactions that have no reasonable business rationale) which may lead to disallowance of theapplication of such benefits for tax purposes. To date, there has been little guidance or interpretation ofthis concept by the tax authorities or by the courts, but it is apparent that the Russian tax authoritiesactively seek to apply this concept when challenging tax positions taken by the taxpayers. Although theexplicit intention of this resolution was to combat the abuses of tax law, based on the available courtpractice relating to Resolution No. 53, it can be concluded that the tax authorities have started applyingthe “unjustified tax benefit” concept in a broader sense than may have been initially intended by theRussian Supreme Arbitrazh Court. Importantly, there are some cases where this concept has beenapplied by the Russian tax authorities in order to disallow benefits granted by double tax treaties. Todate in the majority of cases where this concept has been applied, the courts have ruled in favor oftaxpayers, but there is no assurance that the courts will follow these precedents in the future.Furthermore, Ruling of the Plenum of the Russian Supreme Court No. 64 “Concerning the PracticalApplication by Courts of Criminal Legislation Concerning Liability for Tax Crimes” dated December 28,2006, is indicative of the trend to broaden the application of criminal liability for tax violations.

If the Russian tax authorities conclude that any intra-Group transactions, as well as transactionsperformed with third parties, are aimed at receiving an unjustified tax benefit, the Russian taxauthorities may treat the transactions as resulting in an “unjustified tax benefit” for any of the partiesinvolved, which may lead to the imposition of additional taxes payable by the Group.

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Payments required under the Guarantees may be subject to Russian withholding tax.

Generally, no withholding tax obligations should arise upon making payments under the Guarantees bythe Russian Guarantors to Non-Resident Noteholders–Legal Entities (as defined in section “TaxConsiderations – Russian Taxation”) by virtue of the exemption envisaged by Federal Law No. 97-FZdated 29 June 2012 “On introduction of amendments in part one and two of the Tax Code of theRussian Federation and article 26 of Federal law on banks and banking activity” (“Law 97-FZ”). Law97-FZ provides that Russian companies which make payments in favor of foreign legal entities uponthe execution of the guarantee or suretyship should be released from the obligation to withhold taxfrom such payments provided that certain conditions are met. See Section “Tax Considerations—Russian Taxation”.

The Group believes that it should be possible to satisfy conditions established by Law 97-FZ andobtain a release from the obligation to withhold tax from payments made under the Guarantees.However, there can be no assurance that the condition relating to listing and/or admission to trading onone of the specified foreign exchanges and/or registration in foreign depository/clearing organizationswill be satisfied. See Section “Tax Considerations—Russian Taxation”.

The release from the obligation to withhold tax from interest and other payments described herein willapply in respect of issued bonds (such as the Notes) that are issued before 1 January 2014.

Furthermore, there can be no assurance that the Russian withholding tax would not be imposed on thepayments made under the Guarantees to the Non-Resident Noteholders—Legal Entities not residingfor tax purposes in countries which have concluded a double tax treaty with Russia. In such casesthere is a risk that Russian withholding tax at a tax rate of 20% would be imposed on the full amount ofthe Guarantee payment, including the principal amount of the Notes.

Importantly, Law 97-FZ does not provide an exemption to the foreign interest income recipients fromRussian withholding tax, although currently there is no requirement or mechanism in the Russian taxlegislation for foreign income recipients which are the legal entities to self-assess and pay the tax tothe Russian tax authorities if such tax was not withheld at source. The Russian Ministry of Finance hasacknowledged in an information letter published on its website that the release of Russian companiesfrom the obligation to act as a tax agent means, in effect, that tax at source within Russia should notarise in connection with Eurobonds, since there is neither a mechanism nor obligation for anon-resident to independently calculate and pay such tax. There can be no assurance that such ruleswill not be introduced in the future or that the Russian tax authorities would not make attempts tocollect the tax from the foreign income recipients including the Non-Resident Noteholders—LegalEntities and/or the Trustee.

Payments under the Guarantees to a Non-Resident Noteholder–Individual (as defined in section “TaxConsiderations—Russian Taxation”) made by the Guarantors may be subject to Russian withholdingtax. In this case, depending on how these payments would be effected, either the full amount ofpayment or a part of such payments (covering the interest on the Notes) would be subject to the 30%tax which may be withheld at the source or paid on a self-assessed basis. This tax may be subject torelief or reduced tax rate under the terms of an applicable double tax treaty concluded between Russiaand the country of tax residency of a particular Noteholder. See “Tax Considerations—RussianTaxation”.

Given the uncertainties regarding the form and procedures for providing the documentary support, it isunlikely that Non-Resident Noteholders–Individuals in practice would be able to obtain advance treatyrelief, while obtaining a refund of the taxes withheld can be extremely difficult, if not impossible. See“Tax Considerations—Russian Taxation”.

If payments under the Guarantees become subject to Russian withholding tax or deduction for anytaxes, duties, assessments or governmental charges of any nature (as a result of which the Guarantorswould have to reduce payments made under the Guarantees by the withheld amount), the Guarantorswill be obliged (subject to certain conditions) to increase payments under the Guarantees so as toresult in the receipt by the Trustee acting on behalf of the Noteholders of such amounts as would havebeen received by it if no such withholding or deduction had been required (except in circumstancesspecified in “Terms and Conditions of the Notes—Redemption and Purchase—Redemption for TaxReasons”). As a result, the Group could incur expenses well in excess of the amount due to the

48

Noteholders. The Group cannot be certain that it would have sufficient funds to make any paymentrequired under the Guarantees or to pay the additional amounts associated with the withholding.Further, the Group can give no assurance that its obligation to pay the additional amounts associatedwith the withholding tax is enforceable under Russian law.

There is some uncertainty under Russian law as to the enforceability of such gross-up provisions. If theGuarantors were to fail to make tax gross-up payments in accordance with the terms of theGuarantees and the related provisions under the Guarantees were deemed to be unenforceable, thenet amount of the payments made by the Guarantors to the Trustee acting on behalf of theNoteholders could be insufficient to make payment in full under the Notes.

Tax might be withheld on dispositions of the Notes in Russia, reducing their value.

Where proceeds from the sale or other disposition of the Notes are deemed to be received from asource within the Russian Federation by a Non-Resident Noteholder—Individual, Russian personalincome tax at a tax rate of 30% (or such other tax rate as may be effective at the time of such sale orother disposal) will apply to the gross amount of sales or other disposal proceeds realized upon suchsale or other disposal of the Notes less any available duly documented cost deductions (including theacquisition cost of the Notes), provided that the documentation supporting cost deductions is providedto the person obliged to calculate and withhold Russian personal income tax in a timely manner.Although Russian personal income tax rate may technically be reduced or eliminated under provisionsof an applicable double tax treaty concluded between Russia and the country of tax residency of aparticular Noteholder, subject to timely compliance by that Noteholder with the respective treatyclearance formalities, in practice individuals may not be able to obtain the advance treaty relief inrelation to sales or disposal proceeds and/or accrued interest income, as may be relevant, from asource within the Russian Federation, whilst obtaining a refund of Russian personal income tax thatwas excessively withheld in relation to this income can be extremely difficult, if not impossible.Furthermore, even though currently the Russian Tax Code is typically interpreted such as only aRussian professional asset manager or broker, or another person (including a foreign company with apermanent establishment or, any registered presence, in Russia or an individual entrepreneur locatedin Russia) carrying out operations for the benefit of a Non-Resident Noteholder—Individual and actingunder an asset management, a brokerage, an agency, a commission or a commercial mandateagreements is required to withhold Russian personal income tax from payment to a Non-RussianNoteholder—Individual associated with the sale or other disposition of securities, there is no guaranteethat other Russian companies or foreign companies with a permanent establishment or anotherregistered presence in Russia or an individual entrepreneur located in the Russian Federation wouldnot seek to withhold Russian personal income tax under these circumstances.

The imposition or the possibility of imposition of this withholding tax could adversely affect the value ofthe Notes. See “Tax Considerations—Russian Taxation”.

Russian transfer pricing rules may adversely affect the Group’s business, financial conditionand results of operations.

Russian transfer pricing legislation which was effective before 1 January 2012 was broad in scope andvaguely drafted, generally leaving wide scope for interpretation at the discretion of the Russian taxauthorities and courts, and there was limited guidance as to how these rules should have been applied.Moreover, in the event that a transfer pricing adjustment was made by the Russian tax authorities, thetransfer pricing rules did not provide for an offsetting adjustment to the related counterparty in therelevant transaction.

New Russian transfer pricing legislation came into force on 1 January 2012. The list of “controlled”transactions under this new legislation includes transactions performed with related parties and certaintypes of cross-border transactions. This new legislation has considerably increased the complianceburden for the taxpayers compared to the law which was in effect before 2012 due to, inter alia, shiftingthe burden of proving market prices from the Russian tax authorities to the taxpayer. Although the newlegislation is supposed to be in line with international transfer pricing principles developed by theOECD, there are certain significant differences of how these principles are reflected in the local rules. Itis currently difficult to evaluate what effect these new provisions may have on the Group.

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Accordingly, due to the uncertainties in the interpretation of transfer pricing legislation which was ineffect before 2012 and the recently introduced new transfer pricing legislation, no assurance can begiven that the Russian tax authorities will not challenge the Group’s prices and make adjustmentswhich could affect the Group’s tax position unless the Group is able to justify the use of market priceswith respect to “controlled” transactions supported by the appropriate transfer pricing documentation.The imposition of additional tax liabilities under the Russian transfer pricing legislation may have amaterial adverse effect on the Group’s business, revenues, financial condition, results of operationsand prospects.

Russian subsidiaries of the Group cannot be consolidated for tax purposes under current taxlegislation.

A new concept of consolidated taxpayer (“Tax Group”) was incorporated into the Russian Tax Codeand became effective from January 1, 2012. The new rules introduce consolidated tax reporting thatenables the consolidation of the financial results of Russian companies for corporate tax purposeswhich form one group. There are several requirements which should be met to create a consolidatedtax group, including thresholds established for the level of revenue and the amount of corporateincome tax payable by the Tax Group.

The Group believes that its Russian subsidiaries do not satisfy some of these requirements. Newconsolidation rules in their current version are unlikely to apply to the Group and thus the Russiansubsidiaries of the Group cannot use the benefits envisaged by the consolidated taxpayer regime andtax losses incurred by any Russian subsidiary of the Group cannot be used to reduce the tax liability ofany other Russian subsidiary of the Group, which complicates tax planning within the Group.

Current Russian thin capitalization rules could affect the ability of Russian subsidiaries todeduct interest on certain borrowings.

Russian tax legislation includes thin capitalization rules which limit the amount of interest that can bededucted by Russian subsidiaries of the Group for corporate income tax purposes on “controlled”debts. The rules apply to loans and other debt taken out by a Russian company (“controlled debt”)from: (i) a foreign entity (“foreign parent”) which owns, directly or indirectly, more than 20% of theRussian company’s share capital; (ii) a Russian company affiliated to such foreign parent; (iii) anylender if the loan is guaranteed or otherwise secured by such foreign parent or its Russian affiliates.The deductibility of interest is restricted to the extent that the foreign controlled debt exceeds netassets by more than three times (12.5 times for the organizations which are solely involved in financelease operations). Interest on excess debt is non-deductible and treated as a dividend subject towithholding tax. In the event that the taxpayer has negative net assets, the whole amount of interestaccrued on the controlled debt will be non-deductible and treated as a dividend.

Currently, the practical implementation of these rules by the tax authorities is quite controversial due todifferent clarifications issued by the regulatory authorities especially regarding guarantees issued withrespect to loans provided by third parties. Furthermore, there is a lack of a unified approach of thecourts on the application of these rules as well.

Russian subsidiaries of the Group may be affected by the thin capitalization rules if at any timeRussian legal entities which are Group members receive loans qualifying as controlled debt. In thisevent, the whole amount of interest accrued on the controlled debt could be non-deductible and treatedas a dividend under Russian domestic rules, representing an additional tax burden for the Group,which could also have a material adverse effect on the Group’s business, prospects, financial conditionand results of operations.

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USE OF PROCEEDS

The fees and expenses associated with the Offering are estimated to be approximately US$ 15.9million. The Group expects the aggregate net proceeds of the issuance of the Notes to beapproximately US$ 584.1 million.

The Group will use the aggregate net proceeds from the issuance of the Notes: (i) to provide OOOBrunswick Wagon Leasing with funds to repay any outstanding amounts (US$ 196.7 million as of thedate of this Prospectus), together with prepayment fees and transaction expenses, to EBRD under theEBRD/IFC Facility; (ii) to provide OOO Brunswick Wagon Leasing with funds to repay any outstandingamounts (US$ 83.3 million as of the date of this Prospectus), together with prepayment fees andtransaction expenses, to IFC under the EBRD/IFC Facility; and (iii) to use any net proceeds in excessof those amounts for the acquisition of railcars and general corporate purposes.

For more information regarding the EBRD/IFC Facility, see the sections of this Prospectus entitled“Description of Certain Indebtedness”, “Management’s Discussion and Analysis of Financial Conditionand Results of Operations—Liquidity and Capital Resources—Capital resources”.

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CAPITALIZATION

The following table sets forth the Group’s consolidated capitalization on an actual basis as of June 30,2012:

As at June 30,2012

(in US$thousands)

Borrowings:Bank borrowings

Current bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,918Non-current bank borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 443,507

Finance lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,018

Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674,443

Mezzanine facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69,256

Equity:Share capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204,621Share premium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142,290Other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 265,583Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,801Non-Controlling Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,371

Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653,666

Total capitalization(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,397,365

(1) Calculated as a sum of total borrowings, the Mezzanine Facility and total equity.

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SELECTED CONSOLIDATED FINANCIAL AND OTHER INFORMATION

The following summary consolidated financial information presents selected historical consolidatedfinancial information as of and for the three years ended December 31, 2011, 2010 and 2009 and as ofand for the six months ended June 30, 2012 and 2011. The consolidated income statement data,selected consolidated cash flows data and selected consolidated balance sheet data as of and for theyears ended December 31, 2011, 2010 and 2009 set forth below have been extracted without materialadjustment from, and should be read in conjunction with, the Group’s Audited Financial Statements,which are included elsewhere in this Prospectus. The consolidated income statement data, selectedconsolidated cash flows data and selected consolidated balance sheet data as of and for the sixmonths ended June 30, 2012 and 2011 set forth below have been extracted without materialadjustment from, and should be read in conjunction with, the Group’s Unaudited Interim FinancialStatements, which are included elsewhere in this Prospectus. Investors should not rely on interimresults as being indicative results the Group may expect for the full year. The unaudited financialinformation for the twelve months ended June 30, 2012, has been calculated by adding the financialinformation for the year ended December 31, 2011, from the Group’s Audited Financial Statements, tothe financial information for the six months ended June 30, 2012, and subtracting the financialinformation for the six months ended June 30, 2011, from the Group’s Unaudited Interim FinancialStatements.

Prospective investors should read the following summary consolidated financial information inconjunction with the information contained in “Presentation of Financial and Other Information”, “RiskFactors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”,“Business” and the Group’s Financial Statements appearing elsewhere in this Prospectus.

CONSOLIDATED INCOME STATEMENT DATA


Twelvemonths ended


2012 2011 2012(1) 2011 2010 2009

(in US$ thousands)Operating lease income . . . . . . . . . . . . . . . . . 130,319 59,535 229,867 159,083 85,674 75,184Finance lease income . . . . . . . . . . . . . . . . . . 1,101 3,007 3,454 5,360 6,638 9,624Transportation income – operator’s

services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,757 — 39,224 19,467 — —

Gross revenue . . . . . . . . . . . . . . . . . . . . . . . . 151,177 62,542 272,545 183,910 92,312 84,808Hedging with non-derivatives effect . . . . . . . (668) — (668) — — —

Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 150,509 62,542 271,877 183,910 92,312 84,808Railcar depreciation . . . . . . . . . . . . . . . . . . . . (51,940) (25,346) (92,987) (66,393) (30,886) (25,866)Depot repairs . . . . . . . . . . . . . . . . . . . . . . . . . (3,150) (922) (5,074) (2,846) (1,812) (1,181)Railcar insurance . . . . . . . . . . . . . . . . . . . . . . (101) (89) (226) (214) (193) (212)Other railcar expenses . . . . . . . . . . . . . . . . . . (262) (271) (689) (698) (382) (102)Transportation services subcontracted . . . . . (5,192) — (15,091) (9,899) — —Other transportation services expenses . . . . (1,141) — (1,758) (617) — —Professional fees . . . . . . . . . . . . . . . . . . . . . . (1,327) (1,407) (3,503) (3,583) (1,785) (1,594)Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,940) (3,425) (10,992) (9,477) (6,037) (4,896)Share based compensation . . . . . . . . . . . . . . (1,907) (2,712) (2,247) (3,052) (1,338) (2,348)Other operating expenses . . . . . . . . . . . . . . . (2,487) (1,881) (6,146) (5,540) (2,268) (1,783)Property tax . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,318) (5,549) (16,361) (13,592) (8,823) (7,725)Provision for bad debts . . . . . . . . . . . . . . . . . (149) — (149) — — (425)Other income . . . . . . . . . . . . . . . . . . . . . . . . . 34 406 1,646 2,018 247 66Reversal of impairment/(impairment loss) on

revaluation of railcars . . . . . . . . . . . . . . . . . 4,106 5,774 501 2,169 36,959 (30,785)Gain on acquisition of subsidiary . . . . . . . . . . — — 10,421 10,421 — —Finance income . . . . . . . . . . . . . . . . . . . . . . . 610 108 840 338 89 119Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . (33,119) (17,103) (57,102) (41,086) (23,850) (22,684)Net foreign exchange translation gains/

(losses) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,987 13,361 (48,856) (61,482) (3,771) (9,733)

Profit/(loss) before tax . . . . . . . . . . . . . . . . . 67,213 23,486 24,104 (19,623) 48,462 (24,341)Income tax (expense)/credit . . . . . . . . . . . . . (16,018) (7,818) (7,374) 826 (8,390) 8,510

Net profit/(loss) for the period . . . . . . . . . . 51,195 15,668 16,730 (18,797) 40,072 (15,831)

53

SELECTED CONSOLIDATED CASH FLOWS DATA


Twelvemonths ended


2012 2011 2012(1) 2011 2010 2009

(in US$ thousands)

Cash flows from operatingactivities . . . . . . . . . . . . . . . . . . . . 132,092 51,031 247,131 166,070 87,881 76,904

Cash flows used in investingactivities . . . . . . . . . . . . . . . . . . . . (32,947) (275,665) (275,655) (518,373) (72,800) (38,939)

Cash flows (used in)/from financingactivities . . . . . . . . . . . . . . . . . . . . (62,420) 178,159 58,676 299,255 65,136 (39,516)

Net (decrease)/increase in cashand cash equivalents . . . . . . . . . 36,725 (46,475) 30,152 (53,048) 80,217 (1,551)

Cash and cash equivalents(2) . . . . . 86,731 57,565 86,731 50,847 104,500 24,343

SELECTED CONSOLIDATED BALANCE SHEET DATA


2012 2011 2010 2009

(in US$ thousands)

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,383 100,773 132,753 65,858Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . 104,231 66,797 112,450 30,293Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,392,557 1,382,595 613,856 338,152Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,551,359 1,516,415 825,788 504,419Total borrowings, including current portion . . . . . . . . . . . 674,443 694,592 272,935 298,924Mezzanine loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69.256 64.433 — —Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 897,693 899,279 343,507 332,184Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653,666 617,136 482,281 172,235

NON-IFRS FINANCIAL MEASURES AND OTHER OPERATING INFORMATION

Non-IFRS Financial Measures


Twelvemonths ended


2012 2011 2012 2011 2010 2009

Adjusted EBITDA(1)(3) (in US$thousands) . . . . . . . . . . . . . . . . . . . . . . 124,266 49,484 214,416 139,634 71,386 67,029

Adjusted EBITDA margin(4) (in %) . . . . . 82.2 79.1 78.7 75.9 77.3 79.0Adjusted EBITDA per railcar(5) (in US$

thousands) . . . . . . . . . . . . . . . . . . . . . . 5,642 3,428 10,559 8,292 5,958 6,406

As at June30, 2012 2011

As at December 31,2010 2009

(in US$ thousands)

Net debt(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,212 627,795 160,485 268,631

54

Other Operating Information


Twelvemonths ended


2012 2011 2012 2011 2010 2009

Average number of railcars(7) . . . . . . . . . . . 22,026 14,434 20,306 16,839 11,982 10,463Average age of railcar fleet(8) (in years) . . . 4.8 3.5 4.8 4.4 3.6 3.2Utilization rate(9) (in %) . . . . . . . . . . . . . . . . 100.0 99.8 100.0 100.0 99.5 100.0Average daily operating lease rate per

railcar(10) (in US$) . . . . . . . . . . . . . . . . . . 37 29 37 35 25 24Average remaining length of operating

leases(11) (in years) . . . . . . . . . . . . . . . . . 2.9 3.2 2.9 3.4 3.1 3.9


(2) At June 30, 2012, there is an amount of US$ 17.5 million (June 30, 2011: US$ 15.95 million; 2011: US$ 15.95 million; 2010:US$ 7.95 million, 2009: US$ 5.95 million) that relates to restricted cash which is not available for general use by the Groupand has therefore been excluded from cash and cash equivalents.

(3) Adjusted EBITDA is defined as net profit/(loss) for the period of the Group before taking into account finance costs, financeincome, income tax expense/(credit), net foreign exchange translation gains and losses, depreciation and amortization,impairment gains and losses on revaluation of railcars, share-based compensation, gain on acquisition of subsidiary andhedging with non-derivative effect.

(4) Adjusted EBITDA margin means Adjusted EBITDA divided by gross revenue, expressed as a percentage.(5) Adjusted EBITDA per railcar means Adjusted EBITDA divided by average number of railcars in each period.(6) Net debt is defined as total borrowings, including the current portion, less cash and cash equivalents.(7) Average number of railcars is determined by averaging the total number of railcars owned by the Group at the end of each

quarter. The average number of railcars is unaudited and is based on information provided by the Group.(8) Average age of railcar fleet is determined at the end of each reporting period.(9) Utilization rate is determined at the end of each reporting period. Excludes railcars used in the Group’s freight forwarding

services.(10) Average daily operating lease rate per railcar is determined at the end of each reporting period.(11) Average remaining length of operating leases is determined at the end of each reporting period for the total railcar fleet.

55

Reconciliation of Non-IFRS Financial Measures

A reconciliation of the Adjusted EBITDA to the net profit/(loss) for the period of the Group is as followsfor the periods indicated:


Twelvemonthsended


2012 2011 2012(1) 2011 2010 2009

(in US$ thousands)

Net profit/(loss) for the period . . . . . . . . 51,195 15,668 16,730 (18,797) 40,072 (15,831)

plus/(minus):Income tax expense/(credit) . . . . 16,018 7,818 7,374 (826) 8,390 (8,510)Finance costs . . . . . . . . . . . . . . . 33,119 17,103 57,102 41,086 23,850 22,684Finance income . . . . . . . . . . . . . . (610) (108) (840) (338) (89) (119)Foreign exchange translation

(gains)/losses . . . . . . . . . . . . . . (25,987) (13,361) 48,855 61,481 3,771 9,733Railcar depreciation . . . . . . . . . . 51,940 25,346 92,987 66,393 30,886 25,866Other depreciation and

amortization . . . . . . . . . . . . . . . 122 80 215 173 127 73(Reversal of impairment)/

impairment loss on revaluationof railcars . . . . . . . . . . . . . . . . . (4,106) (5,774) (501) (2,169) (36,959) 30,785

Share based compensation . . . . 1,907 2,712 2,247 3,052 1,338 2,348Gain on acquisition of

subsidiary . . . . . . . . . . . . . . . . . — — (10,421) (10,421) — —Hedging with non-derivative

effect . . . . . . . . . . . . . . . . . . . . . 668 — 668 — — —

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . 124,266 49,484 214,416 139,634 71,386 67,029


A reconciliation of net debt to total borrowings of the Group is as follows as at the dates indicated:

As atJune 30, As at December 31,

2012 2011 2010 2009

(in US$ thousands)

Total borrowings, including current portion . . . . . . . . . . . . 674,443 694,592 272,935 298,924Less:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . 104,231 66,797 112,450 30,293

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 570,212 627,795 160,485 268,631

56

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS

The following discussion and analysis should be read in conjunction with the Group’s Audited FinancialStatements and the Group’s Unaudited Interim Financial Statements included elsewhere in thisProspectus and the sections of this Prospectus entitled “Presentation of Financial and OtherInformation” and “Selected Consolidated Financial and Other Information”. This discussion containsforward-looking statements that involve risks and uncertainties. The Group’s actual results could differmaterially from those anticipated in the forward-looking statements as a result of numerous factors,including the risks discussed in the section of this Prospectus entitled “Risk Factors” and elsewhere inthis Prospectus.

Overview

The Group is the largest privately owned operating lessor of freight railcars in Russia by number ofrailcars as at June 30, 2012, according to INFOLine data. The Group believes that it is one of very fewoperating lessors of railcars in Russia that offer multi-year operating leases, which results in apredictable revenue base, a consistently high railcar utilization rate, close to 100% since 2006, stabilityof the Group’s financial profile and reduced exposure to market volatility as demonstrated by thefinancial performance of the Group throughout its existence, including during the global financialdownturn of 2008-2009. Since September 2011, the Group has offered freight forwardingtransportation services to its clients, through its fully-owned transportation subsidiary, ZAO ProfTrans.

The Group’s fleet represented 2.0% of the total freight railcar fleet in Russia as of June 30, 2012, and12% of the Russian operating lease market, as of June 30, 2012, according to INFOLine data. TheGroup owned 22,734 railcars as of June 30, 2012 and 22,005 railcars as of the date of the Prospectus,due to the expiration and termination of finance leases relating to 729 railcars. Its railcar fleet consistsof a variety of railcars configured to transport various dry bulk products, as well as liquids and othercommodities, and has an average age of 4.8 years, compared to the market average of approximately16 years and a technical useful life of 22 to 40 years, according to INFOLine data. The Group believesthat the quality, versatility and relative low average age of its railcars make its fleet easily marketable,result in low maintenance costs and have allowed it to maintain a consistently high utilization rate.

The Group leases its railcars under operating lease contracts to a selected number of leading Russianindustrial and transportation companies operating in a variety of sectors, including coal, chemicals, oiland gas, transportation and ferrous metals. As of June 30, 2012, the Group had 30 leasing clients. TheGroup believes that this diversity of end-markets amongst its clients limits its exposure to a particularsector. The Group primarily offers multi-year operating leases, with terms ranging between 1 and7 years, with the majority of the contracts signed having terms of 2 to 3 years. As of June 30, 2012, theaverage length of outstanding contracts was 2.9 years. Since 2009, the Group has successfullyrenewed over 81% of its operating leases in terms of the number of railcars with the same client.

The Group owns an array of railcars that enables it to cater to its clients’ diverse and high-volumetransportation needs. Its fleet primarily consists of general purpose and semi-specialized types ofrailcars, allowing it to redeploy its railcars for different uses at competitive market rates. The Group’sfleet comprises (a) primarily gondolas, which are used for the transportation of coal, ore, crushed stoneand other bulk freight, (b) mineral hoppers, which are mainly used for the carriage of fertilizers and(c) tank cars which are used to carry liquids, such as oil and petroleum products. Gondolas, mineralhoppers and tank cars represent 70%, 15% and 10% of the Group’s total fleet as of June 30, 2012,respectively. The Group’s fleet also includes boxcars and platform cars, which represent 2% and 3% ofthe Group’s total fleet as of June 30, 2012, respectively.

In 2011, the Group’s net revenue was US$ 183.9 million, Adjusted EBITDA was US$ 139.6 million, andAdjusted EBITDA margin was 75.9%. For the six months ended June 30, 2012, the Group’s netrevenue was US$ 150.5 million, Adjusted EBITDA was US$ 124.3 million, and Adjusted EBITDAmargin was 82.2%. For the twelve months ended June 30, 2012, the Group’s net revenue wasUS$ 271.9 million, Adjusted EBITDA was US$ 214.4 million, and Adjusted EBITDA margin was 78.7%.As at June 30, 2012, total assets of the Group were US$ 1.55 billion and net debt was US$ 570 million,and, as at December 31, 2011, total assets of the Group were US$ 1.52 billion and net debt wasUS$ 628 million. The Group has also received a long-term corporate credit rating of BB- from S&P anda long-term corporate credit rating of Ba3 from Moody’s.

57

Significant Factors Affecting Results of Operations

The Group’s financial results have been, and may continue to be, affected by a number of factors,including those set forth below.

Macroeconomic factors

The Group’s results are heavily dependent on the demand for railcars and the rail transportationservices in Russia, which in turn is significantly influenced by the macroeconomic climate both globallyand in Russia and trends in certain key economic sectors. Particularly, freight rail volumes in Russialargely comprise bulk commodities, such as coal, oil and oil products, construction materials, metalsand ores and the demand for these products has a significant effect on transportation volumes. Thekey clients of the Group are predominantly engaged in the production of various bulk commodities,such as coal, chemicals, steel and ores. In addition, a significant part of the Group’s client portfoliocomprises companies operating in the transportation sector, whose clients are also predominatelyengaged in the production of various commodities. Demand for commodities significantly impacts thedemand for the Group’s services and has an effect on the Group’s revenue, margins and pricing.

Bulk commodities contribute significantly to the GDP in Russia, which prior to mid-2008 hadexperienced strong growth, increasing from US$ 432 billion in 2003 to US$ 1,677 billion in 2008,according to Rosstat. Similarly, according to Rosstat, freight rail turnover, driven by growth in theRussian economy and commodities markets, grew by a CAGR of 5.5% during the period from 2000 to2008. Decreases in demand for certain commodities in the last quarter of 2008 and in 2009 led to acorresponding negative trend in the volume of freight rail transportation in Russia, with 1,108.2 milliontons transported in 2009, compared to 1,303.7 million tons transported in 2008, according to Rosstat.This decrease in demand and the financial difficulties that the Group’s clients faced during the globalfinancial turmoil resulted in an average 17% reduction in the Group’s railcar operating lease rates in2009 compared to 2008. However, this reduction in rates did not have a negative effect on the Group’srevenue in 2009 as the revenue generated by 2,910 railcars acquired by the Group in the course of2008 was not recognized for the full year in 2008 compared to 2009 when the Group had them utilizedand generated profit for the full reporting period.

Since 2010, in line with the recovery of the Russian economy, volumes of freight rail turnover havestarted to recover increasing by 52% from a low of 123.4 billion tons in January 2009 to 188.1 billiontons in December 2011, according to Rosstat. This increase in demand has largely been driven by anincrease in the demand for bulk commodities produced by the Group’s clients and the customers of theGroup’s clients that are transportation companies. With the recovery of the Russian economybeginning in 2010, the Group’s operating lease rates increased by 28% in average during the sixmonths ended June 30, 2012, compared to the same period in 2011. Decreasing raw material pricesand general market sentiment have recently led to a sharp weakening of market conditions and hastriggered requests from clients, in particular coal industry clients, for temporary rate reductions. TheGroup has agreed to temporary cuts for approximately 3 to 4 months in its daily rates of 5% to 15%with five of its clients in exchange for lease extensions of the same duration. Based on the currentcontracts, the total impact on Adjusted EBITDA for 2012 is expected to be less than US$ 2 million in2012. Based on preliminary discussions with clients, the Group expects further moderation in operatinglease rates for certain railcar types, notably gondolas, with expected improvement of the marketenvironment in 2013.

58

The table below shows the correlation between the average market price for certain bulk commoditiesand average daily railcar operating lease rates charged by the Group for gondolas and mineralhoppers from January 1, 2009 through September 30, 2012 on a quarterly basis.

Period

average dailyGroup operatinglease rate for a

gondola(1)

average marketprice of coal(per ton)(2)

average marketprice of steel

(per ton)(2)

average dailyGroup operatinglease rate for a

mineral hopper(1)

average marketprice of carbamide

(per ton)(2)

(in US$)

Q1 2009 30 68 396 24 270Q2 2009 28 63 384 22 257Q3 2009 26 65 523 22 263Q4 2009 26 74 503 22 267Q1 2010 26 88 576 22 299Q2 2010 26 93 636 22 259Q3 2010 26 95 583 22 290Q4 2010 27 103 598 22 368Q1 2011 28 116 733 22 376Q2 2011 31 113 696 23 405Q3 2011 33 116 694 23 503Q4 2011 36 114 609 23 461Q1 2012 38 112 611 25 402Q2 2012 39 97 569 27 482Q3 2012 39 91 549 28 396

(1) Source: Group analysis(2) Source: Industrial Cargoes; Group analysis

Market price of the railcars

The Group’s operating lease pricing is primarily determined by the prevailing prices in the market.Operating lease rates and the price of a new railcar are in strong correlation with each other: the higherthe price of a new railcar, the higher its daily operating lease rate. In negotiating operating lease ratesthe Group takes into consideration a number of factors in addition to the market price of railcars,including the type of operating lease contract and the length of the contract.

The table below shows the correlation between the average market price for gondolas and mineralhoppers and average daily railcar operating lease rates charged by the Group for gondolas andmineral hoppers as well as the comparative daily market operating lease rates from January 1, 2009,through September 30, 2012, on a quarterly basis.

Period

average dailyGroup operating

lease rate fora gondola(1)

average dailymarket operatinglease rate for a

gondola(2)

averagepurchase priceof a gondola(2)

(’000)

averagedaily Group

operating leaserate for a mineral

hopper(1)

average dailymarket operatinglease rate for a

mineralhopper(2)

averagepurchase price

of a mineralhopper(2)

(’000)

(in US$)

Q1 2009 30 22 41.6 24 16 52.7Q2 2009 28 23 39.6 22 17 44.6Q3 2009 26 26 37.7 22 16 41.1Q4 2009 26 27 41.2 22 19 43.9Q1 2010 26 29 44.7 22 21 46.7Q2 2010 26 31 52.8 22 22 57.8Q3 2010 26 34 58.3 22 20 62.4Q4 2010 27 43 63.8 22 27 64.7Q1 2011 28 44 72.1 22 30 73.4Q2 2011 31 48 79.7 23 32 88.1Q3 2011 33 52 78.5 23 32 85.9Q4 2011 36 50 74.2 23 33 83.1Q1 2012 38 50 72.9 25 34 81.8Q2 2012 39 43 72.1 27 36 79.9Q3 2012 39 36 67.0 28 36 77.8

(1) Source: Group analysis(2) Source: Industrial Cargoes; Group analysis

59

The market price for railcars significantly affects the Group’s results as its operating lease rates are instrong correlation with the railcar market price. In addition, the Group recognizes gains or losses on therevaluation of its railcars based on their market value.

The Group revalues its railcar fleet on a quarterly basis based on the reports of the independentappraiser Neo Centre Consulting Group, one of the leading Russian appraisers, according to ExpertRA. The railcar revaluation is based on the market prices of the equipment being appraised.Accordingly, when the railcar market price increases, the railcar valuation increases, and when therailcar market price drops, the railcar valuation drops.

During the economic downturn the railcar market prices significantly dropped. As a result, in the yearended December 31, 2009, the Group had impairment losses on revaluation of railcars recognized inits income statement in the amount of US$ 30,785 thousand. In 2010, the railcar market started torecover and market prices for railcars increased which had a positive effect on the valuation of theGroup’s railcars. As a result, in the years ended December 31, 2010 and 2011 and in the six monthsended June 30, 2012, the Group recognized reversal of impairment on revaluation of railcars in theamount of US$ 36,959 thousand, US$ 2,169 thousand and US$ 4,106 thousand, respectively.

Expansion of the Group’s fleet

The Group’s revenue and net expenses depend, in part, on the size of the Group’s fleet. As part of itsstrategy, the Group significantly expanded its fleet of rolling stock in recent years, focusing ongondolas and mineral hoppers. The size of the fleet has significantly increased from 10,403 railcars asof January 1, 2009, to 22,734 railcars (including 500 prepaid but undelivered railcars) as of June 30,2012. The Group invested US$ 861,796 thousand in the acquisition of rolling stock during this periodwhich includes US$ 689,052 thousand as cash consideration paid and the rest amount represents thefinance lease facilities which were obtained for the acquisition of ZAO ProfTrans and OOO BrunswickTrans. The expansion of the Group’s fleet also results in the increase of its net expenses (mainlydepreciation). For example, railcar depreciation has increased from US$ 25,866 thousand for the yearended December 31, 2010, to US$ 66,393 thousand for the year ended December 31, 2011 (US$51,940 thousand for the six months ended June 30, 2012).

Subject to the demand for railcars, availability of financing as well as a sufficient quantity of railcarsavailable at acceptable prices, the Group aims to increase its fleet to 40,000 railcars in the mediumterm which will result in significant expenditures. The Group plans to spend a majority of the netproceeds of the Offering remaining after repayment of the EBRD/IFC Facility in 2012 and 2013 on theacquisition of new rolling stock. Although investments in rolling stock will increase its capitalexpenditures and net expenses, the Group believes that those investments will ultimately drive higherrevenue growth as the rail transportation market grows. See “Business—Strategy—Further strengthenthe Group’s leadership position by opportunistically increasing the size of the Group’s fleet”.

Foreign currency fluctuations

The Group’s Financial Statements are presented in US dollars which is the Group’s presentationcurrency. Items included in the financial statements of each of the Group’s operating entities aremeasured in Roubles as the currency of the primary economic environment in which the entitiesoperate (the “functional currency”). The results and financial position of each of the Group’soperating entities are translated into US dollars using the official exchange rates of the CBR inaccordance with IAS 21 “The Effects of Changes in Foreign Exchange Rates”, whereby assets andliabilities are translated at the closing rate prevailing at the date of the balance sheet presented,income and expense items are translated into US dollars at the average monthly exchange rates for allperiods presented and share capital and reserves are translated at historic exchange rates. Allresulting foreign currency exchange rate differences are recognized as a separate component ofequity.

The Group has US$/RUB exposure on the carrying amount of the railcar fleet which is reflected as aRouble asset in the accounting records of the Group’s Russian subsidiaries and then translated intoUS$ in the Group’s Financial Statements while a majority of the Group’s borrowings are denominatedin US$ (83% as of June 30, 2012). A strengthening of the Rouble against the US dollar means a higher

60

US$ carrying amount of the Group’s railcar fleet and vice versa. Since the Group’s borrowings are inUS$, the translation effect of the assets is not balanced by a similar translation effect of the liabilities.The difference is accounted in translation reserve. There is no exposure on the cash flows.

The monetary assets and liabilities of the Group that are denominated in US dollars are initiallyrecorded by the Group’s entities in their functional currency at the exchange rates to the US dollarprevailing at the relevant date. Such monetary assets and liabilities are then retranslated into USdollars at the exchange rate prevailing at each subsequent balance sheet date, or, if earlier, the date ofsettlement. The Group recognizes the resulting exchange rate difference between the date such assetsor liabilities were originally recorded and such subsequent balance sheet date or, if earlier, the date ofsettlement, as foreign exchange losses or gains in the Group’s consolidated income statement.

In order to provide a natural hedge for the Group’s borrowings, the Group matches the currency of itsborrowings with the currency of its lease contracts. However, a substantial part of the Group’sexpenses are denominated in Roubles. The Group is considering making future borrowing in Roublesin line with the increased demand from its clients for Rouble-denominated leases.

To manage the Group’s US dollar borrowing exposure, the Group adopted hedge accounting withnon-derivative financial liabilities in accordance with IAS 39 “Financial Instruments: Recognition andMeasurement” beginning with its June 30, 2012 financial statements under which the Group hasdefined:

- the hedged item as its forecasted revenue stream generated from operating lease contracts ofcertain Russian entities denominated in US$;

- the hedging instrument is the outstanding balance of the US$ denominated borrowings withsyndicated banks (parties’ external to the group), matching a certain amount of US$denominated forecasted revenues with interest and principal payments of the US$denominated borrowings; and

- the hedged risk is a spot foreign currency risk of the forecasted revenue due to themovements in the US$/RUB exchange rates.

Under IAS 39, hedge accounting with non-derivative financial liabilities allows the Group to initiallyrecognize the gain or loss of the foreign exchange differences on the US$ denominated borrowings inother comprehensive income (“OCI”). The Group recycles the amount of foreign exchange differencesassociated with repayments of its US$ denominated borrowings that have been recognized in equity toprofit and loss when such repayments occur. For the six months ended June 30, 2012, the Groupdeferred US$ 36,906 thousand net foreign exchange translation losses (gross of related tax) in OCIand recycled US$ 668 thousand to profit and loss.

Railway reform and relationship with Russian Railways

The ongoing Russian railway reform as well as the Group’s relationship with Russian Railways haveimpacted and are expected to impact the results of the Group in the future. Russian Railways rendersmaintenance services for the Group’s railcars and provides locomotives to it for transportation of newrailcars from its suppliers and to its clients for transportation of goods.

The depots the Group uses for maintenance and repairs of the Group’s railcars are currently owned byRussian Railways or its subsidiaries but are expected to be privatized in the future. According to theGroup’s strategy, the Group intends to expand its asset base and complement its revenue growth byacquiring and leasing locomotives in the future. If the Government and Russian Railways decide not toliberalize the locomotive market, the Group’s strategy may change and its results may be impacted.The Group may also consider acquiring depots to control its maintenance costs which are expected togrow in line with the increase in the number of railcars leased under full-service contracts. Should theGroup fail to acquire a sufficient number of depots for any reason (e.g., postponement of privatizationof depots by Russian Railways or loss of privatization tenders), its maintenance costs may increasewhich will impact the net expenses of the Group and its profitability.

In addition, the efficiency of Freight Two, the subsidiary of the Russian Railways, in providing thefreight railcar transportation services to its clients impacts the demand for the railcars of other playersin the Russian transportation market, including the Group.

61

Recent Developments

Expiration and Termination of Finance Lease Contracts

In line with the Group’s strategy to end all of its finance leases contracts by 2019, the followingtransactions took place in the third quarter of 2012: (i) in August 2012, finance leases covering 700gondolas with Mechel matured; and (ii) in September 2012, the Group terminated certain finance leasecontracts and sold 29 platform cars to OOO PTNK. As a result, the Group currently has 341 railcarsunder finance lease and expects to have 208 railcars under finance lease by year end 2012.

Repurchase of Shares in Connection with the ProfTrans Acquisition

In July 2012, the Group repurchased shares of the Parent that had been issued in connection with theGroup’s acquisition of ProfTrans, and as at July 2, 2012, the Group was fully discharged from itsobligations to the sellers of ZAO ProfTrans.

Current Trading and Prospects

Since June 30, 2012, the Group has continued to perform in line with management’s expectations.Management of the Group has positive expectations regarding the Group’s financial and operatingperformance over the next twelve months. In particular, management currently believes that theRussian railcar industry market in which the Group operates will continue to grow and the demand inrail transportation and, consequently, railcar operating leasing will continue to grow in line with thegrowth in the commodities markets. According to Russian Railways, the volume of freighttransportation for the first six months of 2012 grew by 3.5%, compared to the same period in 2011. Asat September 30, 2012, rail transportation volumes were 3.6% higher compared to September 30,2011, and 4.3% higher compared to September 30, 2010. In accordance with the Group’s estimates,its revenue and related margins for the year ended December 31, 2012, are expected to exceed therevenue and related margins for the year ended December 31, 2011.

Description of Key Consolidated Income Statement Line Items

Set forth below is a brief description of the composition of the key line items on the Group’sconsolidated income statement for the periods presented.

Revenue

To date, the Group has derived its revenue primarily through the leasing of rolling stock underoperating lease contracts, including triple-net and full service leasing, and from transportation services(since September 2011). The Group also derives revenue from finance leases, which since 2010, theGroup has ceased offering. Current finance lease contracts will be allowed to expire or will beconverted into operating leases.

For the six months ended June 30, 2012, operating leases accounted for 86.6% of the Group’s fleetand 86.2% of the Group’s gross revenue. At the end of 2012 the Group anticipates to have 208 railcarsin finance lease and to end all of its finance lease contracts by 2019.

In August 2011, the Group completed the acquisition of 100% of shares in ZAO ProfTrans, a medium-sized Russian transportation group with a fleet of 1,647 railcars owned or held on the basis ofoperating and finance lease. ZAO ProfTrans mainly offers rail-based freight forwarding services to itsclients which are shown as a separate line item of the Group’s revenue in the Group’s FinancialStatements since September 2011.

Operating lease income

Operating lease income is derived from the lease payments made by the Group’s clients undertriple-net operating lease contracts and full-service operating lease contracts.

Under triple-net operating lease contracts, the clients accept full responsibility for depot repair, whilethe Group is responsible for capital repair and wheel-set replacement.

In a full-service lease, the Group assumes depot repair risk in addition to the residual value risk. Underthese contracts, the Group accepts responsibility for railcar maintenance that is included in the leaserate. The related maintenance expenses are reflected in the “depot repairs” line item.

62

The Group’s business plan envisages that full-service leases will become the predominant type ofoperating leasing starting from 2013 due to the increasing demand from clients for these services.Given that the maintenance costs offered by the Group under the full-service leases are predictable,management does not envisage any significant increase in operating costs from switching the majorityof its railcar portfolio to full-service leases.

All newly-acquired railcars generate lease income from the date of acceptance of the railcar by theclient. If the date of acceptance is not the first date of the financial year, the railcars leased under suchlease contract will generate lease income for the remaining part of the year whereas in the followingyear these railcars will generate lease income for the entire period.

Finance lease income

Finance lease income is derived from the lease payments made by the Group’s clients under financelease contracts.

Transportation income—operator’s services

Transportation income is derived from the payments made by the Group’s clients for rail-based freightforwarding services provided by ZAO ProfTrans. Transportation income is recognized net of RussianRailways tariffs.

Hedging with non-derivatives effect

Beginning with its June 30, 2012 unaudited interim financial statements, the Group has applied hedgeaccounting with non-derivative financial liabilities in accordance with IAS 39. Please see “—SignificantFactors Affecting Results of Operations—Foreign currency fluctuations.”

Net expenses

Net expenses of the Group include railcar depreciation, depot repairs, railcar insurance, other railcarexpenses, transportation services subcontracted, other transportation services expenses, provision forbad debts, professional fees, staff costs, share based compensation, other operating expenses,property tax, other income, reversal of impairment/impairment loss on revaluation of railcars, financeincome, finance costs and net foreign exchange translation gains/losses.

Railcar depreciation

Railcar depreciation consists of depreciation for wheelsets and the remaining part of a railcar and iscalculated using the straight-line method to allocate their cost to their residual values over theestimated useful lives. The estimated useful life of wheelsets is five to ten years and the estimateduseful life of the remaining part of the railcar is 22 to 40 years, depending on the railcar type.

Depot repairs

Depot repairs represent expenses for railcar maintenance which for the majority of the Group’s railcarsis performed initially in two or three years following their production (depending on the railcar type) andthen every year thereafter.

Other railcar expenses

Other railcar expenses represent railcar parking costs, costs for transportation of railcars to depot or to/from lease based on the lease contract terms, spare parts storage expenses, railcar cleaning servicesexpenses and fees payable for access to the online data provided by Russian Railways.

Transportation services subcontracted

Transportation services subcontracted represent fees payable by ZAO ProfTrans to third partyproviders of railcars that ZAO ProfTrans uses to render transportation services when it does not haveits own railcars available but has strong demand from its clients.

Other transportation services expenses

Other transportation services expenses are other expenses incurred through the Group’s operation oftransportation services which are mainly represented by railway tariff for idle time.

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Professional fees

Professional fees consist of fees payable by the Group to its external consultants, including auditors,tax, legal and M&A advisors, appraisers and public relations agencies.

Staff costs

Staff costs consist of remuneration payable to the Group’s employees, including salaries and bonuses,mandatory contributions to the Russian pension fund, medical insurance fund and social insurancefund, private medical insurance and other staff costs.

Share-based compensation

The share-based compensation includes the cash-settled share-based payment to the exit bonus plansand bonus entitlement for the Management Incentive Plan. See “Directors and Senior Management—Share-Based Compensation”.

Other operating expenses

Other operating expenses primarily represent office rental expenses, travel costs, marketing andadvertising expenses, directors’ fees and communication costs.

Property tax

The property tax rate is determined by Russian regional authorities within the limits established by theRussian Tax Code. Railcars held by the Group’s Russian operating subsidiaries that are mainlyregistered in Moscow are subject to property tax which is calculated as 2.2% on the average net bookvalue of a railcar under Russian accounting standards. In connection with railcars purchased by OOOBrunswick Trans, the Group benefits from a 0% property tax exemption granted by the Ekaterinburglocal government. The exemption applies for a three-year period starting from the year the purchasedrailcars are recognized on the balance sheet of OOO Brunswick Trans.

Provision for bad debts

Provision for bad debts relates to impairments the Group recognizes for receivables the Group doesnot believe it is likely to recover in accordance with IAS 39. These receivables primarily relate to ZAOProfTrans’ and its activity prior to its acquisition by the Group.

Reversal of impairment/impairment loss on revaluation of railcars

The Group revalues its railcar fleet on a quarterly basis to reflect the fair value of its main asset inaccordance with the provisions under IAS 16 “Property, plant and equipment”. Valuations are carriedout by the independent appraiser Neo Centre Consulting Group, one of the leading Russianappraisers, according to Expert RA. Railcar valuation is based on the market value of the equipmentbeing appraised.

Finance costs

Finance costs primarily consist of interest incurred on the Group’s borrowings and the fair market valueof the losses on interest rate swaps.

Net foreign exchange translation gains/losses

Net foreign exchange translation gains/losses represent mainly net foreign exchange translation gains/losses on financing instruments held by the Group recognized in Bermuda and Russia. Starting in thesecond quarter of 2012, the Group adopted the provisions of IAS 39 and applied hedge accountingwith non-derivative financial liabilities to mitigate its exposure to foreign currency risk and the volatilityof the Group’s earnings, as described in “—Significant Factors Affecting Results of Operations—Foreign currency fluctuations”.

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Income tax expense/credit

Income tax expense/credit is represented by the income tax payable/receivable by the Group. Theincome tax rate is determined by the local legislation of the country of incorporation of each Groupcompany. At present, no income, profit or capital gains taxes are levied in Bermuda and, to the extentsuch taxes are levied, as the Parent and other Group companies registered in Bermuda have receivedan exemption from the Bermuda Government from all local income, withholding and capital gains taxesuntil March 31, 2035. Group companies registered in Cyprus are subject to income tax at the rate of10%. Group companies registered in Russia are subject to income tax at the rate of 20%.

For semi-annual accounts, income tax expense is recognized based on the management’s bestestimate of weighted average annual income tax rate expected for the full financial year.

Results of Operations

For the six months ended June 30, 2012 compared to six months ended June 30, 2011

The following discussion is based on, and should be read in conjunction with, the Group’s UnauditedInterim Financial Statements, included in this Prospectus beginning on page F-61.

The following table sets forth each of the Group’s interim condensed consolidated income statementline items for the six months ended June 30, 2012 and 2011:

For the six monthsended June 30,

2012 2011

(in US$ thousands)

Operating lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,319 59,535Finance lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,101 3,007Transportation income – operator’s services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,757 —

Gross revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,177 62,542Hedging with non-derivatives effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (668) —

Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,509 62,542Railcar depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51,940) (25,346)Depot repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,150) (922)Railcar insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (101) (89)Other railcar expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (262) (271)Transportation services subcontracted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,192) —Other transportation services expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,141) —Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,327) (1,407)Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,940) (3,425)Share based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,907) (2,712)Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,487) (1,881)Property tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,318) (5,549)Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (149) —Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 406Reversal of impairment on revaluation of railcars . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,106 5,774Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610 108Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,119) (17,103)Net foreign exchange translation gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,987 13,361

Profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,213 23,486Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,018) (7,818)

Net profit for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,195 15,668

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Revenue

The following table sets forth the breakdown of the Group’s total revenue for the six months endedJune 30, 2012 and 2011:


2012 2011

(in US$ thousands)

Full service operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,255 13,718Triple-net operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,064 45,817

Operating lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,319 59,535Finance lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,101 3,007Transportation income – operator’s services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,757 —

Gross revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151,177 62,542Hedging with non-derivatives effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (668) —

Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,509 62,542

Total net revenue increased by US$ 87,967 thousand, or 140.7%, from US$ 62,542 thousand for thesix months ended June 30, 2011 to US$ 150,509 thousand for the six months ended June 30, 2012.This increase was primarily due to the increase in the size of the Group’s railcar fleet from 16,318railcars to 22,234 railcars (excluding 500 prepaid but undelivered railcars as at June 30, 2012) all ofwhich were successfully leased to the Group’s clients or used in the Group’s freight forwardingservices, and the increase in daily operating lease rates at contract renewal due to positive marketconditions. In particular, revenue from full-service operating leases grew by 448.6% from US$ 13,718thousand to US$ 75,255 thousand, revenue from triple-net operating leases grew by 20.2% fromUS$ 45,817 thousand to US$ 55,064 thousand and the aggregate operating lease income grew by118.9% from US$ 59,535 thousand to US$ 130,319 thousand. Increase in revenue from full-serviceoperating leases is in line with the Group’s strategy to focus on full-service leases as its principalproduct. Finance lease income decreased by 63.4% from US$ 3,007 thousand to US$ 1,101 thousanddue to earlier termination of a finance lease contract covering a total number of 550 railcars inNovember 2011, the termination of a finance lease contract covering a total number of 250 railcars andsubsequent re-exectution as operating lease contracts in November 2011 in relation to the acquisitionof ZAO ProfTrans, and partial repayment of existing finance leases by the Group’s clients. No newfinance lease contracts were signed starting from 2010 in accordance with the Group’s strategy to stopoffering this product to its clients. ZAO ProfTrans, acquired by the Group in August 2011, which mainlyprovides railway transportation services, had total revenues of US$ 19,757 thousand for the six monthsended June 30, 2012. The Group’s net revenues were adjusted by US$ 668 thousand for the effect ofhedging with non-derivatives in accordance with IAS 39, which the Group started to apply from thesecond quarter of 2012.

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Net expenses

The following table sets forth a breakdown of the Group’s net expenses for the six months endedJune 30, 2012 and 2011:


2012 2011

(in US$ thousands)

Railcar depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51,940) (25,346)Depot repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,150) (922)Railcar insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (101) (89)Other railcar expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (262) (271)Transportation services subcontracted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,192) —Other transportation services expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,141) —Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,327) (1,407)Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,940) (3,425)Share based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,907) (2,712)Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,487) (1,881)Property tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,318) (5,549)Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (149) —Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 406Reversal of impairment on revaluation of railcars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,106 5,774Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 610 108Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (33,119) (17,103)Net foreign exchange translation gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,987 13,361

Total net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (83,296) (39,056)

The Group’s total net expenses increased by US$ 44,240 thousand or 113.3%, from US$ 39,056thousand for the six months ended June 30, 2011, to US$ 83,296 thousand for the six monthsended June 30, 2012, primarily due to the increase in railcar depreciation costs, finance costs andexpenses related to transportation services as a result of the ProfTrans acquisition in August 2011,which was partly offset by net foreign exchange translation gains.


Railcar depreciation increased by US$ 26,594 thousand, or 104.9%, from US$ 25,346 thousand for thesix months ended June 30, 2011, to US$ 51,940 thousand for the six months ended June 30, 2012.The increase was due to the increase of the size of the Group’s railcar fleet from 16,318 railcars as atJune 30, 2011, to 22,234 railcars (excluding 500 prepaid but undelivered railcars) as at June 30, 2012,and to an increase in the fair market value of the Group’s railcars.

Depot repairs

Depot repairs increased by US$ 2,228 thousand, or 241.6%, from US$ 922 thousand for the sixmonths ended June 30, 2011, to US$ 3,150 thousand for the six months ended June 30, 2012. Theincrease was due to the increase of the share of full service operating leases of the Group, increase ofdepot repair prices and the acquisition of 1,000 used railcars from NTS in July 2011.

Railcar insurance

Railcar insurance increased by US$ 12 thousand, or 13.5%, from US$ 89 thousand for the six monthsended June 30, 2011, to US$ 101 thousand for the six months ended June 30, 2012. The increase wasdue to an increase in the number of railcars insured but was substantially offset by a reduction ininsurance premiums.


Other railcar expenses decreased by US$ 9 thousand, or 3.3%, from US$ 271 thousand for the sixmonths ended June 30, 2011, to US$ 262 thousand for the six months ended June 30, 2012. For the

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six months ended June 30, 2011, the majority of other railcar expenses is represented by expenses forinitital railcar relocation for several operating lease clients. For the six months ended June 30, 2012,the majority of other railcar expenses relates to a fee for access to the Russian Railways database.


During the six months ended June 30, 2012, the Group incurred expenses on the transportationservices subcontracted in the amount of US$ 5,192 thousand. These expenses relate to fees paid byZAO ProfTrans to third party providers of railcars that ZAO ProfTrans contracted to rendertransportation services in the instance of ZAO ProfTrans having a shortage of its own fleet.


During the six months ended June 30, 2012, other expenses relating to transportation servicesamounted to US$ 1,141 thousand. These expenses mainly represent Russian Railways rail tariffs foridle time.

Professional fees

Professional fees decreased by US$ 80 thousand, or 5.7%, from US$ 1,407 thousand for the sixmonths ended June 30, 2011, to US$ 1,327 thousand for the six months ended June 30, 2012. Thedecrease was due to the decrease in the use of external consultants in connection with merger andacquisition activity of the Group.

Staff costs

Staff costs increased by US$ 1,515 thousand, or 44.2%, from US$ 3,425 thousand for the six monthsended June 30, 2011, to US$ 4,940 thousand for the six months ended June 30, 2012. The increasewas mostly due to the increase of personnel from 61 people as at June 30, 2011, to 104 people as atJune 30, 2012. The acquisition of ZAO ProfTrans and the Group’s organic growth resulted in 43 newemployees joining the Group since June 30, 2011.

Share based compensation

Share-based compensation decreased by US$ 805 thousand, or 29.7%, from US$ 2,712 thousand forthe six months ended June 30, 2011 to US$ 1,907 thousand for the six months ended June 30, 2012.The decrease primarily results from the fact that the expense of US$2,712 thousand represents thecumulative fair value of the benefit for the period from October 2009 to June 2011 allocated on a timeapportioned basis whereas the US$1,907 represents only the expense for the six months endedJune 30, 2012.


Other operating expenses increased by US$ 606 thousand, or 32.2%, from US$ 1,881 thousand forthe six months ended June 30, 2011, to US$ 2,487 thousand for the six months ended June 30, 2012.The increase resulted from the acquisition of ZAO ProfTrans and organic growth of the Group as wellas an increase in the Parent’s Board of Directors’ fees.

Property tax

Property tax increased by US$ 2,769 thousand, or 49.9%, from US$ 5,549 thousand for the six monthsended June 30, 2011, to US$ 8,318 thousand for the six months ended June 30, 2012. The increasewas due to the increase in the size of the Group’s railcar fleet.


For the six months ended June 30, 2012, the Group incurred expenses related to the provision for baddebts in an amount of US$ 149 thousand, compared to no provision for bad debts for the six monthsended June 30, 2011. This increase related to the acquisition of ZAO ProfTrans prior to the acquisitionby the Group, and represents doubtful trade receivables for providing transportation services.

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Other income

Other income decreased by US$ 372 thousand, or 91.6%, from US$ 406 thousand for the six monthsended June 30, 2011 to US$ 34 thousand for the six months ended June 30, 2012. In June 2011, theGroup sold doubtful receivables of OAO Baikal Pulp and Paper Plant to a third party in the amount ofUS$ 373 thousand. (see “Risk Factors—Risks Relating to the Group’s Financial Condition—The Groupis subject to credit risk.”).

Reversal of impairment on revaluation of railcars

Reversal of impairment on revaluation of railcars decreased by US$ 1,668 thousand, or 28.9%, fromUS$ 5,774 thousand for the six months ended June 30, 2011, to US$ 4,106 thousand for the sixmonths ended June 30, 2012. The decrease in reversal of impairment for the year ended June 30,2012 is primarily due to the stabilization of railcar prices after the significant increase in railcar marketprices in 2010 and the first half of 2011 following the recovery from the global economic crisis and areduction in amounts previously impaired.

Finance income

Finance income increased by US$ 502 thousand, or 464.8%, from US$ 108 thousand for the sixmonths ended June 30, 2011, to US$ 610 thousand for the six months ended June 30, 2012. Theincrease was primarily due to an increase in bank deposits.

Finance costs

Finance costs increased by US$ 16,016 thousand, or 93.6%, from US$ 17,103 thousand for the sixmonths ended June 30, 2011, to US$ 33,119 thousand for the six months ended June 30, 2012. Theincrease primarily resulted from the increase of borrowings. In August 2011, the Group signed anamendment agreement with EBRD and IFC for an additional US$120 million facility increasing the totalavailable borrowing under the EBRD/IFC Facility to US$420 million. In October 2011, the Group signeda syndicated loan agreement with VTB Capital plc and Raiffeisen Bank International AG for a total loanfacility of US$156 million from which the Group drew down US$ 43 million. In addition, with theacquisition of OOO Brunswick Trans and ZAO Proftrans, the Group obtained railcars under financeleases which generated additional finance costs during the six months ended June 30, 2012. Pleasesee “—Liquidity and Capital Resources—Capital Resources”.

Net foreign exchange translation losses

Net foreign exchange translation gains increased by US$ 12,626 thousand, or 94.5%, from a gain ofUS$ 13,361 thousand for the six months ended June 30, 2011, to a gain of US$ 25,987 thousand forthe six months ended June 30, 2012. The increase was primarily due to the application of hedgeaccounting with non-derivatives pursuant to IAS 39 which resulted in US$ 36.9 million net foreignexchange translation losses (gross of related tax) being deferred to other comprehensive incomeduring the six months ended June 30, 2012.

Profit before tax

Profit before tax increased by US$ 43,727 thousand, or 186.2%, from a profit of US$ 23,486 thousandfor the six months ended June 30, 2011, to a profit of US$ 67,213 thousand for the six monthsended June 30, 2012. Total net revenue of the Group for the same period increased by US$ 87,967thousand, or 140.7%, however, net expenses of the Group for the same period increased byUS$ 44,240 thousand or 113.3%. The increase in net revenues was primarily due to a foreignexchange translation gain in the amount of US$ 25,987 thousand and the acquisition of 5,916 railcarsfrom July 1, 2011, to June 30, 2012. The increase in net expenses was primarily due to railcardepreciation costs and finance costs. In addition, the application of hedge accounting withnon-derivatives positively impacted profit before tax for the six months ended June 30, 2012.

Income tax expense

The Group includes companies incorporated in Bermuda, Cyprus and Russia with income tax rates of0%, 10% and 20%, respectively. The Group’s income tax expense increased by US$ 8,200 thousand,

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or 104.9%, from an expense of US$ 7,818 thousand for the six months ended June 30, 2011, to anexpense of US$ 16,018 thousand for the six months ended June 30, 2012. The increase in the Group’stax charge was due to the increase in profitability of the Group compared to the same period in 2011.

Net profit for the period

The Group had a net profit of US$ 15,668 thousand for the six months ended June 30, 2011 and a netprofit of US$ 51,195 thousand for the six months ended June 30, 2012. The increase in the Group’sprofitability was due primarily to the factors discussed above.

For the years ended December 31, 2011 and 2010

The following discussion is based on, and should be read in conjunction with, the Group’s AuditedFinancial Statements, included in this Prospectus beginning on page F-2.

The following table sets forth each of the Group’s consolidated income statement line items for theyears ended December 31, 2011 and 2010:

For the year endedDecember 31,

2011 2010

(in US$ thousands)

Operating lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,083 85,674Finance lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,360 6,638Transportation income – operator’s services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,467 —Railcar depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66,393) (30,886)Depot repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,846) (1,812)Railcar insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (214) (193)Other railcar expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (698) (382)Transportation services subcontracted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,899) —Other transportation services expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (617) —Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,583) (1,785)Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,477) (6,037)Share based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,052) (1,338)Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,540) (2,268)Property tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,592) (8,823)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,018 247Reversal of impairment on revaluation of railcars . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,169 36,959Gain on acquisition of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,421 —Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 89Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,086) (23,850)Net foreign exchange translation losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61,482) (3,771)

Profit/(loss) before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,623) 48,462Income tax (expense)/credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 826 (8,390)

Net profit/(loss) for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,797) 40,072

Revenue

The following table sets forth the breakdown of the Group’s total revenue for the years endedDecember 31, 2011 and 2010:


2011 2010

(in US$ thousands)

Full service operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,298 8,068Triple-net operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,785 77,606

Operating lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,083 85,674Finance lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,360 6,638Transportation income – operator’s services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,467 —

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,910 92,312

70

Total revenue increased by US$ 91,598 thousand, or 99.2%, from US$ 92,312 thousand for the yearended December 31, 2010 to US$ 183,910 thousand for the year ended December 31, 2011. Thisincrease was primarily due to the increase in the size of the Group’s railcar fleet from 12,601 railcarsas of December 31, 2010 to 21,759 railcars as of December 31, 2011 all of which were successfullyleased to its clients or used in the Group’s transportation operations. In particular, revenue from fullservice operating leases grew from US$ 8,068 thousand to US$ 62,298 thousand, revenue fromtriple-net operating leases grew by 24.7% from US$ 77,606 thousand to US$ 96,785 thousand and theaggregate operating lease income grew by 85.7% from US$ 85,674 thousand to US$ 159,083thousand. Transportation operation income for the year ended December 31, 2011 was US$ 19,467thousand resulting from the Group’s acquisition of ZAO ProfTrans. These increases were partiallyoffset by a decrease in finance lease income by 19.3% from US$ 6,638 thousand to US$ 5,360thousand due to the earlier termination of a finance lease contract consisting of a total number of 550railcars in November 2011, the re-execution of one finance lease contract in the form of operatinglease contract in November 2011 consisting of a total number of 250 railcars and partial repayment ofexisting finance leases by the Group’s clients. No new finance lease contracts were signed startingfrom 2010 in accordance with the Group’s strategy to stop offering this product to its clients.

Net expenses

The following table sets forth a breakdown of the Group’s net expenses for the years endedDecember 31, 2011 and 2010:


2011 2010

(in US$ thousands)

Railcar depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66,393) (30,886)Depot repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,846) (1,812)Railcar insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (214) (193)Other railcar expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (698) (382)Transportation services subcontracted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,899) —Other transportation services expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (617) —Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,583) (1,785)Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,477) (6,037)Share based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,052) (1,338)Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,540) (2,268)Property tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,592) (8,823)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,018 247Reversal of impairment on revaluation of railcars . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,169 36,959Gain on acquisition of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,421 —Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 338 89Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (41,086) (23,850)Net foreign exchange translation losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (61,482) (3,771)

Total net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (203,533) (43,850)

The Group’s total net expenses increased by US$ 159,683 thousand from US$ 43,850 thousand forthe year ended December 31, 2010 to US$ 203,533 thousand for the year ended December 31, 2011,primarily due to railcar depreciation, net foreign exchange translation losses, finance costs incurred in2011 and expenses related to transportation services as a result of ProfTrans acquisition in August2011.


Railcar depreciation increased by US$ 35,507 thousand, or 115%, from US$ 30,886 thousand for theyear ended December 31, 2010 to US$ 66,393 thousand for the year ended December 31, 2011. Theincrease was due to the acquisition of 9,958 new railcars during the year ended December 31, 2011and the increase in the carrying value of railcars due to revaluation, amounting to US$ 182,857thousand, which resulted in an increase in related depreciation charges.

71

Depot repairs

Depot repairs increased by US$ 1,034 thousand, or 57.1%, from US$ 1,812 thousand for the yearended December 31, 2010 to US$ 2,846 thousand for the year ended December 31, 2011. Theincrease was due to the increase in the number of railcars leased to the Group’s clients under full-service operating lease contracts from 1,240 as at December 31, 2010, to 20,689 as at December 31,2011, an increase in depot repair prices and the acquisition of 1,000 used railcars from NTS in July2011.

Railcar insurance

Railcar insurance increased by US$ 21 thousand, or 10.9%, from US$ 193 thousand for the yearended December 31, 2010 to US$ 214 thousand for the year ended December 31, 2011. The increasewas due to an increase in the number of railcars insured but was substantially offset by a reduction ininsurance premiums.


Other railcar expenses increased by US$ 316 thousand, or 82.7%, from US$ 382 thousand for the yearended December 31, 2010 to US$ 698 thousand for the year ended December 31, 2011. This increaseis mainly due to cleaning services expenses which were incurred with the acquisition of 1,000 railcarsfrom NTS in July 2011.


Transportation services subcontracted was US$ 9,899 thousand for the year ended December 31,2011 and nil for the year ended December 31, 2010. These expenses relate to fees paid by ZAOProfTrans, acquired by the Group in August 2011, to third party providers of railcars that ZAOProfTrans contracted to render transportation services in the instance of a shortage of ProfTrans’ ownfleet.


During 2011, other expenses relating to transportation services amounted to US$ 617 thousand. Theseexpenses mainly represent Russian Railways rail tariffs for idle time.

Professional fees

Professional fees increased by US$ 1,798 thousand, or 100.7%, from US$ 1,785 thousand for the yearended December 31, 2010 to US$ 3,583 thousand for the year ended December 31, 2011. Theincrease was due to an increase in the use of services of external consultants (including tax and legalconsultants and appraisers) in connection with the Group’s railcar acquisition and M&A projects.

Staff costs

Staff costs increased by US$ 3,440 thousand, or 57.0%, from US$ 6,037 thousand for the year endedDecember 31, 2010 to US$ 9,477 thousand for the year ended December 31, 2011. This increase wasdue to increase of the staff by 130% from 46 as at December 31, 2010 to 106 as at December 31,2011 including 38 from ZAO ProfTrans at that date and salary indexation from January 1, 2011.

Share based compensation

Share based compensation increased by US$ 1,714 thousand, or 128.1%, from US$ 1,338 thousandfor the year ended December 31, 2010 to US$ 3,052 thousand for the year ended December 31, 2011.This increase was due to the fact that the December 31, 2010 expense includes the final tranche of themanagement incentive plan implemented in 2007 and fully vested on that date, whereas theDecember 31, 2011 expense relates to the benefit arising under the exit bonus agreement in the formof a cash-settled, share-based compensation that was fair valued as at that date to US$ 3,052thousand.

72


Other operating expenses increased by US$ 3,272 thousand, or 144.3%, from US$ 2,268 thousand forthe year ended December 31, 2010 to US$ 5,540 thousand for the year ended December 31, 2011.The increase was due to an increase in leasehold repairs, rental expenses due to office spaceextension, and traveling expenses related to the Group’s railcar acquisition projects.

Property tax

Property tax increased by US$ 4,769 thousand, or 54.1%, from US$ 8,823 thousand for the yearended December 31, 2010 to US$ 13,592 thousand for the year ended December 31, 2011. Theincrease was due to the increase in the Group’s railcar fleet from 12,601 railcars as at December 31,2010 to 21,759 railcars as at December 31, 2011.

Other income

Other income increased by US$ 1,771 thousand from US$ 247 thousand for the year endedDecember 31, 2010 to US$ 2,018 thousand for the year ended December 31, 2011. The increase wasdue to the early termination of a finance lease contract in November 2011 with 550 railcars resulting ina gain of US$ 1,602 thousand.

Reversal of impairment on revaluation of railcars

The Group recognized a reversal of impairment of US$ 2,169 for the year ended December 31, 2011and a reversal of impairment of US$ 36,959 for the year ended December 31, 2010. The decrease inreversal of impairment for the year ended December 31, 2011 is due to of the stabilization of railcarprices after the significant increase in railcar market prices in 2010 and beginning of 2011 followingrecovery from the global economic crisis.

Gain on acquisition of subsidiary

For the year ended December 31, 2011, the gain on acquisition of subsidiaries was US$10,421 thousand in comparison to nil for the year ended December 31, 2010. This increase resultsprimarily from the gain on the difference between the price paid by the Group for the railcar fleet ofZAO ProfTrans and the fair market value of those railcars on the date of acquisition.

Finance income

Finance income increased by US$ 249 thousand from US$ 89 thousand for the year endedDecember 31, 2010 to US$ 338 thousand for the year ended December 31, 2011. The increase wasdue to an increase in interest income on bank deposits.

Finance costs

Finance costs increased by US$ 17,236 thousand, or 72.3%, from US$ 23,850 thousand for the yearended December 31, 2010 to US$ 41,086 thousand for the year ended December 31, 2011. Theincrease primarily resulted from the increase in borrowings. In August 2011 the Group signed anamendment agreement with EBRD and IFC for an additional US$120 million facility increasing the totalavailable borrowings under the EBRD/IFC Facility to US$ 420 million. In March 2011 the Groupborrowed under a US$ 60 million mezzanine facility with MRIF Luxembourg Restructuring S.a.r.l. asoriginal lender, an affiliate of one of the Parent’s shareholder. In October 2011, the Group signed anacquisition finance facility with VTB Capital plc and Raiffeisen Bank International AG for a total loanfacility of US$156 million (the “VTB/RBI Acquisition Facility”) under which the Group drew down US$43 million. In addition, with acquisition of OOO Brunswick Trans and ZAO ProfTrans, the Groupobtained railcars under finance leases in the amount of US$ 150 million which generated additionalfinance costs in 2011. See “—Liquidity and Capital Resources—Capital Resources”.


Net foreign exchange translation losses increased by US$ 57,711 thousand, from a loss ofUS$ 3,771 thousand for the year ended December 31, 2010 to a loss of US$ 61,482 thousand for the

73

year ended December 31, 2011. The increase was primarily due to the depreciation of the Roubleagainst the US dollar over the relevant periods and to an increase in US$-denominated borrowings.The Group recognizes foreign exchange translation losses if the Rouble depreciates against US dollarand it recognizes foreign exchange translation gains if the Rouble appreciates against US dollar.Starting from the second quarter of 2012 the Group has applied hedge accounting with non-derivativesto mitigate the exposure to foreign currency risk.

Profit/(loss) before tax

The Group had a profit before tax of US$ 48,462 thousand for the year ended December 31, 2010 anda loss before tax of US$ 19,623 thousand for the year ended December 31, 2011. The decline in theGroup’s profitability was primarily due to an increase in foreign exchange translation losses and anincrease in finance costs.

Income tax (expense)/credit

The Group’s income tax expense decreased by US$ 9,216 thousand, from an expense ofUS$ 8,390 thousand for the year ended December 31, 2010 to a credit of US$ 826 thousand for theyear ended December 31, 2011. The decrease in tax charge was due to the decline in the Group’sprofitability between 2010 and 2011.

Net profit/(loss) for the year

The Group had a net loss of US$ 18,797 thousand for the year ended December 31, 2011 comparedto a net profit of US$ 40,072 thousand for the year ended December 31, 2010. The decline in theGroup’s profitability was due primarily to the factors discussed above.

For the years ended December 31, 2010 and 2009

The following discussion is based on, and should be read in conjunction with, the Group’s AuditedFinancial Statements, included in this Prospectus beginning on page F-2.

The following table sets forth each of the Group’s consolidated income statement line items for theyears ended December 31, 2010 and 2009:


2010 2009

(in US$ thousands)

Operating lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,674 75,184Finance lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,638 9,624Railcar depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,886) (25,866)Depot repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,812) (1,181)Railcar insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (193) (212)Other railcar expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (382) (102)Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,785) (1,594)Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,037) (4,896)Share based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,338) (2,348)Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,268) (1,783)Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (425)Property tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,823) (7,725)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 66Reversal of impairment/(impairment loss) on revaluation of railcars . . . . . . . . . . . . . . 36,959 (30,785)Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 119Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,850) (22,684)Net foreign exchange translation losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,771) (9,733)

Profit/(loss) before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,462 (24,341)Income tax (expense)/credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,390) 8,510

Net profit/(loss) for the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,072 (15,831)

74

Revenue

The following table sets forth the breakdown of the Group’s total revenue for the years endedDecember 31, 2010 and 2009:

For the yearended

December 31,

2010 2009

(in US$ thousands)

Full service operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,068 6,249Triple-net operating leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,606 68,935Operating lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,674 75,184Finance lease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,638 9,624

Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,312 84,808

Total revenue increased by US$ 7,504 thousand, or 8.8%, from US$ 84,808 thousand for the yearended December 31, 2009, to US$ 92,312 thousand for the year ended December 31, 2010. Thisincrease was primarily due to the increase in the size of the Group’s railcar fleet from 10,703 railcarsas of December 31, 2009 to 12,601 railcars as of December 31, 2010, all of which were successfullyleased to its clients. In particular, revenue from full service operating leases grew by 29.1% fromUS$ 6,249 thousand to US$ 8,068 thousand, revenue from triple-net operating leases grew by 12.6%from US$ 68,935 thousand to US$ 77,606 thousand and the aggregate operating lease income grewby 14.0% from US$ 75,184 thousand to US$ 85,674 thousand. These increases were partially offset bya decrease in finance lease income by 31.0% from US$ 9,624 thousand to US$ 6,638 thousand due topartial repayment of existing finance leases by the Group’s clients and the re-execution of financelease contracts in the form of operating lease contracts in 2009. No new finance lease contracts weresigned starting from 2010 in accordance with the Group’s strategy to stop offering this product to itsclients.

Net expenses

The following table sets forth a breakdown of the Group’s net expenses for the years endedDecember 31, 2010 and 2009:


2010 2009

(in US$ thousands)

Railcar depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (30,886) (25,866)Depot repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,812) (1,181)Railcar insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (193) (212)Other railcar expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (382) (102)Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,785) (1,594)Staff costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,037) (4,896)Share based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,338) (2,348)Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,268) (1,783)Property tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,823) (7,725)Provision for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (425)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 247 66Reversal of impairment/(impairment loss) on revaluation of railcars . . . . . . . . . . . . 36,959 (30,785)Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 119Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,850) (22,684)Net foreign exchange translation losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,771) (9,733)

Total net expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (43,850) (109,149)

The Group’s total net expenses decreased by US$ 65,299 thousand, or 59.8%, from US$ 109,149thousand for the year ended December 31, 2009, to US$ 43,850 thousand for the year endedDecember 31, 2010, primarily due to reversal of impairment loss on revaluation of railcars recognizedin 2009.

75


Railcar depreciation increased by US$ 5,020 thousand, or 19.4%, from US$ 25,866 thousand for theyear ended December 31, 2009 to US$ 30,886 thousand for the year ended December 31, 2010. Theincrease was due to the acquisition of 1,898 new railcars during the year ended December 31, 2010,and the increase in the carrying value of railcars due to revaluation which resulted in an increase inrelated depreciation charge.

Depot repairs

Depot repairs increased by US$ 631 thousand, or 53.4%, from US$ 1,181 thousand for the year endedDecember 31, 2009, to US$ 1,812 thousand for the year ended December 31, 2010. The increase wasdue to the increase in the number of railcars leased to the Group’s clients under full-service operatinglease contracts from 1,050 as at December 31, 2009, to 1,240 as at December 31, 2010, and anincrease in depot repair prices.

Railcar insurance

Railcar insurance decreased by US$ 19 thousand, or 9.0%, from US$ 212 thousand for the year endedDecember 31, 2009, to US$ 193 thousand for the year ended December 31, 2010. The decrease wasdue to more favorable insurance tariffs that the Group was able to obtain.


Other railcar expenses increased by US$ 280 thousand, or 274.5%, from US$ 102 thousand for theyear ended December 31, 2009, to US$ 382 thousand for the year ended December 31, 2010. TheGroup generally seeks to minimize idle periods for its railcars by agreeing delivery dates with its clientswhich coincide with the delivery date of the new railcars to the Group by its suppliers. However, in thebeginning of 2010, the Group incurred parking costs related to the acquisition of 600 railcars by theGroup that due to the recent economic downturn were leased by its clients over a period of 1 to3 months after their delivery from the plant.

Professional fees

Professional fees increased by US$ 191 thousand, or 12.0%, from US$ 1,594 thousand for the yearended December 31, 2009, to US$ 1,785 thousand for the year ended December 31, 2010. Theincrease was due to an increase in the use of services of external consultants (including tax and legalconsultants and appraisers) in connection with the Group’s financing projects.

Staff costs

Staff costs increased by US$ 1,141 thousand, or 23.3%, from US$ 4,896 thousand for the year endedDecember 31, 2009, to US$ 6,037 thousand for the year ended December 31, 2010. During theeconomic downturn starting in the end of 2008 the Group in 2009 had no significant increase inpersonnel and no significant salary adjustments. In 2010, with the beginning of the recovery of themarket the Group made salary indexation since January 1, 2010.

Share-based compensation

Share-based compensation decreased by US$ 1,010 thousand, or 43.0%, from US$ 2,348 thousandfor the year ended December 31, 2009 to US$ 1,338 thousand for the year ended December 31, 2010.The decrease is due to the allocation of the 2007 management incentive plan in tranches between theyears 2007 and 2010. The 2009 tranche includes US$1,109 thousand of 2009 plus US$ 1,137thousand from 2010, whereas the 2010 tranche includes only the remaining part of 2010 in the amountof US$ 1,137.


Other operating expenses increased by US$ 485 thousand, or 27.2%, from US$ 1,783 thousand forthe year ended December 31, 2009, to US$ 2,268 thousand for the year ended December 31, 2010.The increase was due to the increase in communication costs and traveling expenses related to theGroup’s railcar acquisition projects.

76

Property tax

Property tax increased by US$ 1,098 thousand, or 14.2%, from US$ 7,725 thousand for the yearended December 31, 2009, to US$ 8,823 thousand for the year ended December 31, 2010. Theincrease was due to the increase in the Group’s railcar fleet from 10,703 railcars as at December 31,2009, to 12,601 railcars as at December 31, 2010.


Provision for bad debts decreased by US$ 425 thousand, or 100.0%, from US$ 425 thousand for theyear ended December 31, 2009, to nil for the year ended December 31, 2010. The provision related tooverdue lease receivables from OAO Baikal Pulp and Paper Plant which was fully recognized in theyear ended December 31, 2009. See “Risk Factors—Risks Relating to the Group’s FinancialCondition—The Group is subject to credit risk.”

Other income

Other income increased by US$ 181 thousand from US$ 66 thousand for the year endedDecember 31, 2009, to US$ 247 thousand for the year ended December 31, 2010. The increase wasdue to the release of the provision for expenses related to the potential restructuring of the Groupwhich was recognized before 2008 and was no longer required in 2010.

Reversal of impairment/impairment loss on revaluation of railcars

The Group recognized an impairment loss of US$ 30,785 thousand for the year ended December 31,2009, during the global economic downturn when the railcar market prices significantly dropped and areversal of impairment of US$ 36,959 thousand for the year ended December 31, 2010 as the railcarmarket started to recover and market prices for railcars increased.

Finance income

Finance income decreased by US$ 30 thousand, or 25.2%, from US$ 119 thousand for the year endedDecember 31, 2009, to US$ 89 thousand for the year ended December 31, 2010. The decrease wasprimarily due to a decrease in interest rates on the Group’s bank deposits.

Finance costs

Finance costs increased by US$ 1,166 thousand, or 5.1%, from US$ 22,684 thousand for the yearended December 31, 2009, to US$ 23,850 thousand for the year ended December 31, 2010. Theincrease was primarily due to new loans obtained from EBRD and IFC during 2010. See “—Liquidityand Capital Resources—Capital Resources”.


Net foreign exchange translation losses decreased by US$ 5,962 thousand, or 61.3%, from a loss ofUS$ 9,733 thousand for the year ended December 31, 2009, to a loss of US$ 3,771 thousand for theyear ended December 31, 2010. The decrease was primarily due to the strengthening of the Roubleagainst the US dollar over the relevant periods. The Group recognizes foreign exchange translationlosses if the Rouble depreciates against the US dollar and it recognizes foreign exchange translationgains if the Rouble appreciates against US dollar as the Group’s presentation currency is US dollarand its functional currency is Rouble.

Profit/(loss) before tax

The Group had a loss before tax of US$ 24,341 thousand for the year ended December 31, 2009, anda profit before tax of US$ 48,462 thousand for the year ended December 31, 2010. The improvementin the Group’s profitability was primarily due to the reversal of impairment on revaluation of railcars andlower foreign exchange translation losses.

77

Income tax (expense)/credit

The Group’s tax charge increased by US$ 16,900 thousand, or 198.6%, from a credit ofUS$ 8,510 thousand for the year ended December 31, 2009, to a charge of US$ 8,390 thousand forthe year ended December 31, 2010. The increase in tax charge was due to the improvement in theGroup’s profitability between 2009 and 2010.

Net profit/(loss) for the year

The Group had a net profit of US$ 40,072 thousand for the year ended December 31, 2010, comparedto a net loss of US$ 15,831 thousand for the year ended December 31, 2009. The improvement in theGroup’s profitability was due primarily to the factors discussed above.

Liquidity and Capital Resources

General

The business of railcar operating leasing is capital-intensive. In the periods under review, the Group’sliquidity needs arose primarily from the need to incur substantial expenditures for, among other things,expansion and maintenance of its fleet of rolling stock, non-organic growth through acquisitions andgeneral working capital requirements. The Group has been able to meet its liquidity and capitalexpenditure needs through cash generated from operating activities, available cash balances, andlong-term borrowing. Cash generated from operation activities and long-term borrowings are theprimary sources of cash used to fund daily operations (see “—Liquidity and Capital Resources—Capital resources”).

The Group believes that it has sufficient working capital for the next twelve months and that theproceeds of the Notes will enable it to repay the EBRD/IFC Facility and expand its business if themarket continues to improve and appropriate opportunities arise. In the longer term, the Group plans tofund its liquidity and any discretionary capital expenditure and acquisition needs from cash generatedfrom operations and borrowed funds, including bond issuances, supplemented if required by additionalequity offerings. See also “Risk Factors—Risks Relating to the Group’s Business and Industry—Expansion of the Group’s business may place a strain on its financial condition and organizationalresources”.

Capital expenditures

The Group’s capital expenditures have principally been made to fund the acquisition of rolling stock,including the acquisition of control in entities holding the rolling stock. Capital expenditures on railcarmaintenance are currently negligible due to the young age for most of the Group’s fleet. These areexpected to grow in line with the age of the Group’s railcars.

The Group’s capital expenditure for purchases of rolling stock, including prepayments for rolling stock,and acquisitions of subsidiaries for the six months ended June 30, 2012 and 2011, wereUS$ 49,694 thousand and US$ 248,241 thousand, respectively. The total amount of capitalexpenditure and M&A for the year ended December 31, 2011 of US$ 683,031 thousand, whichincludes US$ 510,287 thousand as cash consideration and the remainder represented by (i) the VTBfinance lease agreements entered into in relation to the acquisition of OOO Brunswick Trans and(ii) the non-cash consideration paid in the form of Company’s shares and finance lease obligationsassumed in connection with the acquisition of ZAO ProfTrans. For the year ended December 31, 2010,capital expenditures equaled US$ 91,089, and for the year ended December 31, 2009, capitalexpenditures equaled US$ 37,982 thousand.

78

Cash flows

The following table sets forth the principal components of the Group’s consolidated statement of cashflows for the six months ended June 30, 2012 and 2011, the twelve months ended June 30, 2012 andthe years ended December 31, 2011, 2010 and 2009:



2012 2011 2011 2010 2009

(in US$ thousands)

Net cash from operating activities . . . . . . . . . . . . . 132,092 51,031 166,070 87,881 76,904Net cash used in investing activities . . . . . . . . . . . (32,947) (275,665) (518,373) (72,800) (38,939)Net cash (used in)/from financing activities . . . . . . (62,420) 178,159 299,255 65,136 (39,516)Net increase/(decrease) in cash and cash

equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,725 (46,475) (53,048) 80,217 (1,551)Cash and cash equivalents at beginning of the

period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,847 104,500 104,500 24,343 25,325Exchange gains/(losses) on cash and cash

equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (841) (460) (605) (60) 569Cash and cash equivalents at end of period(1) . . . 86,731 57,565 50,847 104,500 24,343

(1) At June 30, 2012 there is an amount of US$ 17.5 million (June 30, 2011: US$ 15.95 million; 2011: US$ 15.95 million; 2010:US$ 7.95 million, 2009: US$ 5.95 million) that relates to restricted cash which is not available for general use by the Groupand has therefore been excluded from cash and cash equivalents.

Net cash from operating activities

Net cash from operating activities increased by US$ 81,061 thousand, or 158.8%, fromUS$ 51,031 thousand for the six months ended June 30, 2011, to US$ 132,092 thousand for thesix months ended June 30, 2012. This increase was primarily due to the increase of operating leaseincome resulting from the increase of the size of the Group’s railcar fleet during the six months endedJune 30, 2012, from 16,318 railcars to 22,734 railcars which, excluding 500 prepaid but undeliveredrailcars as of June 30, 2012, and 1,481 railcars used in the Group’s freight forwarding services, weresuccessfully leased to its clients.

Net cash from operating activities increased by US$ 78,189 thousand, or 89%, fromUS$ 87,881 thousand for the year ended December 31, 2010, to US$ 166,070 thousand for the yearended December 31, 2011. This increase was primarily due to the increase in the size of the Group’srailcar fleet in 2011 from 12,601 railcars to 21,759 railcars all of which were successfully leased to itsclients or used in the Group’s freight forwarding services.

Net cash from operating activities increased by US$ 10,977 thousand, or 14.3%, fromUS$ 76,904 thousand for the year ended December 31, 2009, to US$ 87,881 thousand for the yearended December 31, 2010. This increase was primarily due to the increase in the size of the Group’srailcar fleet in 2010 from 10,703 railcars to 12,601 railcars all of which were successfully leased to itsclients.

Net cash used in investing activities

Net cash used in investing activities decreased by US$ 242,718 thousand, or 88.0%, fromUS$ 275,665 thousand for the six months ended June 30, 2011 to US$ 32,947 thousand for thesix months ended June 30, 2012. This decrease was primarily due to the decline in railcar purchases,including prepayments, by US$ 198,547 thousand from US$ 248,241 thousand for the six monthsended June 30, 2011 to US$ 49,694 thousand for the six months ended June 30, 2012.

Net cash used in investing activities increased by US$ 445,573 thousand, or 612%, fromUS$ 72,800 thousand for the year ended December 31, 2010 to US$ 518,373 thousand for the yearended December 31, 2011. This increase was primarily due to the increase in the purchase of railcars,including prepayments for railcars, and the acquisition of ZAO ProfTrans, by US$ 419,198 thousandfrom US$ 91,089 thousand for the year ended December 31, 2010 to US$ 510,287 thousand(excluding borrowings under finance lease and other non-cash consideration) for the year endedDecember 31, 2011, reflecting the acquisition of new rolling stock by the Group.

79

Net cash used in investing activities increased by US$ 33,861 thousand, or 87.0%, fromUS$ 38,939 thousand for the year ended December 31, 2009, to US$ 72,800 thousand for the yearended December 31, 2010. This increase was primarily due to the increase in the purchase of railcars,including prepayments for railcars, by US$ 53,106 thousand from US$ 37,982 thousand for the yearended December 31, 2009, to US$ 91,089 thousand for the year ended December 31, 2010, reflectingthe acquisition of new rolling stock by the Group.

Net cash from/(used in) financing activities

Net cash from/(used in) financing activities decreased by US$ 240,579 thousand, or 135.0%, fromUS$ 178,159 thousand from financing activities for the six months ended June 30, 2011, toUS$ (62,420) thousand used in financing activities for the six months ended June 30, 2012. Thisdecrease in net cash from financing activities was primarily due to the repayment of bank borrowings,by US$ 241,649 thousand from US$ 35,325 thousand for the six months ended June 30, 2011 toUS$ 276,974 thousand for the six months ended June 30, 2012, reflecting the repayment of theremaining outstanding amounts under the loan entered into between Brunswick Rail Holding Limited asthe borrower and a group of international banks as the lenders, including Societe Generale and BNPParibas (the “SG/IFC Facility”), in the principal amount of up to US$ 435 million due August 20, 2012,as well as the repayment of the VTB/RBI Acquisition Facility.

Net cash from financing activities increased by US$ 234,119 thousand, or 359.4%, from net cash fromfinancing activities of US$ 65,136 thousand for the year ended December 31, 2010, to net cash fromfinancing activities of US$ 299,255 thousand for the year ended December 31, 2011. This increasewas primarily due to borrowings obtained under a bridge loan facility of US$43 million, drawdown of theEBRD/IFC Facility of US$420 million and drawdown of mezzanine loan in US$ 60 million in 2011.

Net cash from/(used in) financing activities increased by US$ 104,652 thousand, or 264.8%, from netcash used in financing activities of US$ 39,516 thousand for the year ended December 31, 2009, to netcash from financing activities of US$ 65,136 thousand for the year ended December 31, 2010. Thisincrease was primarily due to the increase in proceeds received from the issue of shares byUS$ 107,500 thousand from US$ 45,000 thousand for the year ended December 31, 2009, toUS$ 152,500 thousand for the year ended December 31, 2010, and the increase in proceeds receivedfrom bank borrowings by US$ 107,315 thousand from nil for the year ended December 31, 2009, toUS$ 107,315 thousand for the year ended December 31, 2010, reflecting the loan from EBRD and thebridge loan from Alfa-Bank, which was partially offset by the increase of repayments of bank borrowingsby US$ 62,699 thousand from US$ 63,283 thousand for the year ended December 31, 2009, toUS$ 125,982 thousand for the year ended December 31, 2010, reflecting the partial repayment of theSG/IFC Facility as well as the repayment of the bridge loan received from Alfa-Bank.

Capital resources

The Group’s financial indebtedness consisted of bank borrowings, financial leases and loans fromrelated parties (the Mezzanine Facility) in an aggregate principal amount of US$ 743,699 thousand asat June 30, 2012, representing a decrease of US$ 15,326 thousand or 2.0% when compared toUS$ 759,025 thousand as at December 31, 2011. The Group had financial indebtedness in anaggregate principal amount of US$ 272,935 thousand, as at December 31, 2010, andUS$ 298,924 thousand as at December 31, 2009. These borrowings have been secured, inter alia, bypledges of rolling stock and shares in certain Group companies, assignments of certain contractualrights under lease and supply contracts and guarantees granted by Group members.

As at June 30, 2012, 28.4% of the Group’s borrowings had fixed interest rates, and the remaining71.6% had floating interest rates.

The following table sets forth the maturity profile of the Group’s borrowings as of June 30, 2012.

As of June 30, 2012

(in US$ thousands)Maturity of borrowings(1)

Less than 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101,918Between 2 and 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 214,966Between 4 and 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,066Over 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,475

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 545,425

(1) Excludes financial leases.

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The following table sets forth the maturity profile of the Group’s finance leases as of June 30, 2012.

As of June 30, 2012

(in US$ thousands)

Maturity of finance leases . . . . . . . . . . . . . . . . . . . . . . .Not later than 1 year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,092Later than 1 year and not later than 5 years . . . . . . . . . . 118,446Later than 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,480

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,018

The following is a summary of the main terms of the Group’s material outstanding loans and creditfacilities.

Lender Borrower

TotalAmount(in US$)

Nominal AnnualInterest Rate

Carryingamount

as ofJune 30,

2012(in US$)

Amountavailable as ofJune 30, 2012

(in US$) Maturity

Syndicate of internationalbanks led by EBRD andIFC(1) . . . . . . . . . . . . . . . . .

OOOBrunswick

WagonLeasing

420 million 3-month US$ LIBORplus

6% per annum for A Loan(4.25% per annum

from July 7, 2011 forEBRD facility, fromAugust 17, 2011 for

IFC facility)

3-month US$ LIBOR plus4.5% per annum forB Loan (3.25% perannum from July 7,

2011 for EBRDfacility, from

August 17, 2011 forIFC facility)

289.2 million Fully drawndown

A Loan – June 30,2018

B Loan –June 30, 2015

MRIF Luxembourg HoldingsS.A.R.L. and MRIFBermuda Investments 4Limited(2) . . . . . . . . . . . . . . the Parent 60 million 15% 69.3 million

Fully drawndown October 7, 2020

IFC(3) . . . . . . . . . . . . . . . . . . . (i) OOOBrunswick

RailLeasing;

and(ii) OOO

BrunswickRail Service

250 million Prior to the issuanceof the Notes,

3-month US$ LIBOR+ 5% per annum forboth the A Loan and

B Loan

After the issuance ofthe Notes, 3-monthUS$ LIBOR plus thegreater of (i) 6% perannum and (ii) the

Notes’ impliedspread to the US$mid-swaps for theremaining average

loan life of the ALoan and B Loan at

the time of anyinterest payment

243.3 million Fully drawndown

May 23, 2017

VTB Leasing financeleases . . . . . . . . . . . . . . . .

OOOBrunswick

Trans

9%(4) 117.0 million October 31,2014(5)

Other finance leases . . . . . . 10.2 million 2015 through 2020

Triton Rail Leasing BV (theshareholder) . . . . . . . . . . . the Parent

14.7million

3-month US$ LIBOR+ 3% per annum 14.7 million

Fully drawndown March 15, 2015

(1) See “Description of Certain Indebtedness”.(2) See “Description of Certain Indebtedness”.(3) See “Description of Certain Indebtedness”.(4) Implied interest rate determined in accordance with finance lease repayment schedule.(5) In 2014, US$ 108 million is expected to be outstanding under the finance lease agreement, which can be extended for

another two to five years upon the agreement of both parties.

81

Working capital

The table below sets forth the components of the Group’s working capital for the periods indicated:

As of June 30, As of December 31,

2012 2011 2010 2009

(in US$ thousands)

Current assetsCash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . 104,231 66,797 112,450 30,293Advances to customs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 194 1,575 2,166Advances paid for rail tariffs . . . . . . . . . . . . . . . . . . . . . . . . 2,181 1,332 — —Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . 4,880 3,596 4,395 1,989Finance lease receivables . . . . . . . . . . . . . . . . . . . . . . . . . . 2,460 8,082 12,290 11,930Income tax prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . 556 — — 22

Current liabilitiesTrade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . (16,177) (12,887) (11,966) (5,937)Current income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . (100) (152) (17) —VAT payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,811) (5,438) (3,715) (2,333)Taxes payable other than income . . . . . . . . . . . . . . . . . . . . (3,886) (4,686) (2,426) (1,888)Provisions for other liabilities and charges . . . . . . . . . . . . . — — (420) (254)

Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,383 56,838 112,166 35,988

Working capital increased by US$ 28,545 thousand from US$ 56,838 thousand as of December 31,2011, to US$ 85,383 thousand as of June 30, 2012. The increase was due to an increase of cash andcash equivalents of US$ 37,434 thousand primarily relating to the increase of operating lease incomeresulting from the increase of the size of the Group’s railcar fleet partially offset by an increase in tradeand other payables and an increase in VAT payables.

Working capital decreased by US$ 55,328 thousand, from US$ 112,166 thousand as of December 31,2010, to US$ 56,838 thousand as of December 31, 2011. This decrease was primarily due to adecrease in cash and cash equivalents, resulting primarily from the investments the Group made inrailcars during this period.

Working capital increased by US$ 76,178 thousand, from US$ 35,988 thousand as of December 31,2009, to US$ 112,166 thousand as of December 31, 2010. This increase was primarily due to theincrease in cash and cash equivalents, resulting primarily from the increased borrowings of the Group.

Off-balance sheet arrangements

As at June 30, 2012, the Group had no material off-balance sheet arrangements except pledges andguarantees described in “Description of Certain Indebtedness”.

Contractual obligations and commercial commitments

As at June 30, 2012, no member of the Group had any material obligation as a guarantor or surety ofthe obligation of any person, not being a member of the Group, which are not reflected on the balancesheet.

As at June 30, 2012, the Group was not aware of any contingent tax, litigation or other liabilities, whichcould have a material effect on the result of operations or financial position of the Group and whichhave not been accrued or disclosed in the Group’s Financial Statements.

Quantitative and qualitative disclosures about market and other risks

The Group’s activities expose it to market risk, including foreign exchange risk and interest rate risk,credit risk and liquidity risk.

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Market risk

Foreign exchange risk

Foreign exchange risk is the risk of a negative impact on the value or earnings of the Group caused byfluctuations in foreign exchange rates. The Group is exposed to foreign exchange risk arising fromfluctuation in the exchange rates between the Rouble and the US dollar. The foreign exchange lossesfor the years ended December 31, 2011, 2010 and 2009, were US$ 61,482 thousand, US$3,771 thousand and US$ 9,733 thousand, respectively. The foreign exchange gains for the six monthsended June 30, 2012, were US$ 25,987 thousand and the foreign exchange gains for the six monthsended June 30, 2011, were US$ 13,361 thousand.

At December 31, 2011, if the Rouble had strengthened/weakened by a 10% for the year endedDecember 31, 2011, 10% for the year ended December 31, 2010, and 10% for the year endedDecember 31, 2009, relative to the US dollar with all other variables held constant, loss after tax for therespective year would have been US$ 63,035 thousand higher/lower for the year ended December 31,2011, US$ 27,294 thousand higher/lower post-tax profit for the year ended December 31, 2010, andUS$ 29,892 thousand higher/lower post-tax loss for the year ended December 31, 2009, mainly as aresult of foreign exchange differences on translation of US dollar-denominated borrowings.

The sensitivity of the loss to the exchange rates is comparable between the three years.

Management’s policy in respect of the currency exposure is:

• to allow only a limited part of the lease contracts to be denominated in Roubles. Currently, theterms and conditions of two of the Group’s syndicated loan facilities cap Rouble-denominatedleases at 25%; and

• not to hedge the translation exposure as described above caused by the revaluation effectson the railcar fleet.

Interest rate risk

The Group earns almost all of its income through the lease payments made on the leased fleet ofrailcars. All lease levels, expressed as a daily lease rate payable per railcar, are agreed at the starteither as a fixed rate throughout the contract term or, in some cases, with periodical pre-definedincreases or indexation options based on the market lease rates at the time of signing. Effectively thismeans that the revenue stream of the Group is largely fixed over the term of the current lease portfolio.In addition to the equity capital, the portfolio is financed with debt facilities. On two of such debtfacilities the Group pays a floating interest rate expressed as a margin over three-months US$ Libor.

As a consequence, the Group is exposed to an increase in interest rates as the cost for the financingwould increase, whereas the revenues on the lease portfolio would remain unchanged.

The Group manages this interest rate exposure using the interest rate swaps through which it convertsthe floating interest payments on the financing to a fixed rate interest. By doing so, it can protect itselfagainst fluctuations in the interest cost on the debt caused by changes in the market interest rates.

The hedging of interest rate risk is described in the Group’s policy and is also a part of the loandocumentation agreed with the financing banks. The policy states that a minimum 60% and amaximum of 100% of the debt facility at any time must be hedged. As a consequence, the effect on theprofit for the year and on the equity of a change in the interest rates on US dollar denominatedborrowings, with all other variables held constant, is not considered to be material.

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The table below summarizes the Group’s exposure to interest rate risk. The table presents theaggregated amounts of the Group’s financial assets and liabilities at carrying amounts, categorized bythe earlier of contractual interest re-pricing or maturity dates. The amounts disclosed in the table arethe contractual undiscounted cash flows.

Less than1 year

2 to 5years

Over 5years Total

(in US$ thousands)

December 31, 2011Total financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,506 12,322 5,879 98,707Total financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (608,958) (148,917) (74,249) (832,124)

Net interest sensitivity gap at December 31, 2011 . . . . . . (733,417)

December 31, 2010Total financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132,711 43,555 15,787 192,053Total financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (300,702) — — (300,702)


December 31, 2009Total financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,810 53,787 22,901 127,498Total financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (324,929) — — (324,929)


Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reduce theamount of future cash inflows from the Group assets, whether in the form of deposits with banks andfinancial institutions or in the form of lease contracts with clients.

For short term deposits and cash on current account, credit risk is managed by using only reputablecounterparties with independent credit ratings. The Group keeps the majority of its accounts withUnicreditbank and Societe Generale.

The Group has established a comprehensive policy which describes the process by which new leaseclients shall be accepted (the “Credit Policy”).

A cornerstone in the Credit Policy is the performance of a revaluation of all new clients andtransactions taking into account the financial strength of the lessee, the quality of the leased equipmentand transaction structure.

There are several criteria which are used to control customer credit risk, including:

• minimum lessee criteria which categorize clients / lessees between A and B categories;

• equipment classification between liquid, semi-liquid and illiquid based on which maximumportfolio exposure on each class is monitored and controlled; and

• portfolio concentration limits, including single lessee exposure (not more than 20% except inthe case of one client for which the limit is 30%) and single industry exposure (not more than35%, except for the transportation industry to which the exposure can be 60%).

These limits have been set by the Credit Committee of the Group acting on behalf of the Board ofDirectors of the Group. The Credit Committee consists of members appointed by the Board ofDirectors, including Chairman of the Committee.

The Group’s CFO is responsible for updating the policy and seeking approval of the policy by theBoard of Directors. The Board of Directors has delegated the implementation of the policy to the CFOand the approval of exceptions to the policy to the Credit Committee.

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Depending on the level of transaction and the exposure on a single client, the transaction may beapproved only by top management or may, in case the aggregate exposure to the lessee exceedsUS$ 10 million, require the approval of the Chairman of the Credit Committee who has the right to vetothe transaction.

For credit quality of financial assets refer to Note 15(b) of the Group’s Audited Financial Statements.

The fair market value of the equipment pledged as collateral under finance lease receivables (1,070railcars as of June 30, 2012 and December 31, 2011, 1,870 railcars in 2010 and 1,870 railcars in 2009)is also higher than the finance lease receivables’ carrying amount. Based on an independent valuationreport produced for the lenders, the fair value (excluding VAT) of the equipment pledged as collateralunder finance lease receivables as of June 30, 2012 was US$ 66,380 thousand, as of December 31,2011 was US$ 64,573 thousand, as of December 31, 2010 was US$ 104,001 thousand and as ofDecember 31, 2009 was US$ 69,179 thousand which exceeded the finance lease receivables’ carryingamount as at that dates by US$ 44,047 thousand, US$ 48,764 thousand and US$ 1,553 thousand,respectively.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to settle all liabilities as they fall due. TheGroup’s liquidity position is carefully monitored and managed by the treasury function. The Group hasestablished budgeting and cash flow planning procedures to ensure it has adequate cash available tomeet its payment obligations as they fall due.

The maturity profile of the Group’s borrowings and of the Group’s finance leases as at June 30, 2012are presented in “Liquidity and Capital Resources—Capital Resources”. In May 2012, the Grouprefinanced the SG/IFC Facility and the VTB/RBI Acquisition Facility, extending the maturity of amajority of the Group’s financial liabilities. The table below shows the maturity profile of the Group’sfinancial liabilities as at December 31, 2011, 2010, and 2009. The amounts disclosed in the table arethe contractual undiscounted cash flows. Balances due within 12 months equal their carrying amountsas the impact of discounting is not significant.

Less than 1 year 2 - 3 years 4 - 5 years Over 5 years

(in US$ thousands)

At December 31, 2011Borrowings (ex. finance lease liabilities) . . . . . . . . . 240,677 167,016 89,038 78,195Mezzanine loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — 66,941Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . 16,600 148,917 — 7,308Trade and other payables . . . . . . . . . . . . . . . . . . . . . 12,887 — — —Consideration payable on business combination . . 27,070 — — —Derivative financial instruments . . . . . . . . . . . . . . . . 4,546 — — —

301,780 315,933 89,038 152,444

At December 31, 2010Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,932 199,912 16,004 16,327Trade and other payables . . . . . . . . . . . . . . . . . . . . . 11,966 — — —Derivative financial instruments . . . . . . . . . . . . . . . . 8,382 3,766 — —

72,280 203,678 16,004 16,327

At December 31, 2009Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,325 272,517 — —Trade and other payables . . . . . . . . . . . . . . . . . . . . . 5,937 — — —Derivative financial instruments . . . . . . . . . . . . . . . . 9,722 7,629 — —

45,984 280,146 — —

Prudent liquidity risk management implies maintaining sufficient cash and the availability of funds tomeet these repayments. This is primarily managed through certain financial covenants specificallyagreed with the funding banks. The Parent is required to comply with the covenants described below interms of the Consolidated Tangible Net Worth value and the Gearing Ratio (as defined in the relevantloan agreements).

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The most important of these are as follows:

• Debt service coverage ratio not to fall below 1.2 in any quarter or on an annual basis;

• maintenance of a reserve account with a minimum balance equal at the Parent level to US$10 million at the level of OOO Brunswick Wagon Leasing for the EBRD/IFC Facility from thelast day of the commitment period and no less than US$ 2 million before;

• consolidated tangible net worth should not be less than US$ 125 million, plus 50% of theAdditional Equity (as defined in the loan agreements); and

• the Group does not maintain a gearing ratio of more than 3.5 to 1 at all times.

In addition it is important that the Group’s portfolio of railcars is focused on the most liquid types ofrailcars in order to make a remarketing or sale as fast and efficient as possible.

Capital risk management

The Group manages its capital to ensure that it will be able to continue as a going concern whilemaximizing the return to the equity holder through the optimization of the debt and equity balance.

The gearing ratio as defined by the management as at June 30, 2012 and December 31, 2011, 2010and 2009 was as follows:

Six months ended June 30, Year ended December 31,

2012 2011 2010 2009

(in US$ thousands)

Total borrowings . . . . . . . . . . . . . . . . . . . . . . . . 674,443 693,972 272,935 298,924Unamortized borrowing costs . . . . . . . . . . . . . 16,851 12,722 11,240 3,918

Gross borrowings . . . . . . . . . . . . . . . . . . . . . . . 691,294 706,694 284,175 302,842Less: Cash and cash equivalents . . . . . . . . . . (104,231) (66,797) (112,450) (30,293)

Total net borrowings . . . . . . . . . . . . . . . . . . . . 587,063 639,897 171,725 272,549

Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 663,714 664,611 491,870 188,641

Gearing ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 0.88 0.96 0.35 1.44

The Group monitors its capital adequacy on the basis of the gearing ratio being the consolidated totalnet borrowings of the Parent to Equity where Equity means the residual interest in the assets of theParent after deducting all liabilities (as determined in accordance with IFRS) ignoring non-cashunrealized gains or losses attributable to foreign exchange exposures (including related taxes (if any))and excluding any amount attributable to any hedging arrangement being marked to market inaccordance with IFRS.

The increase in the gearing ratio during 2011, measured at the consolidated level, resulted primarilyfrom the increase of borrowings, as a result of (a) full utilization of the EBRD-IFC facility, (b) the VTBCapital plc and Raiffeisen Bank International AG loan facilities and (c) finance lease provided by VTBLeasing and finance lease liabilities acquired under acquisition of ZAO ProfTrans.

Significant Accounting Policies, Critical Accounting Estimates and Judgments

The Group believes its most significant accounting policies and its critical accounting estimates andjudgments are those described below.

Significant Accounting Policies

A detailed description of the main accounting policies used in preparing the Group’s FinancialStatements is set out in Note 2 to the Group’s Audited Financial Statements and to the Group’sUnaudited Interim Financial Statements.

Critical Accounting Estimates and Judgments

Critical accounting estimates and judgments are those that require the application of management’smost challenging, subjective or complex judgments, often as a result of the need to make estimatesabout the effect of matters that are inherently uncertain and may change in subsequent periods.Critical accounting policies involve judgments and uncertainties that are sufficiently sensitive to resultin materially different results under different assumptions and conditions.

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A detailed description of certain of the critical accounting estimates and judgments used in preparingthe Group’s Financial Statements is set out in Note 7 to the Group’s Audited Financial Statements.

Recent Accounting Pronouncements

Recent accounting pronouncements are described in Note 2 to the Group’s Unaudited InterimFinancial Statements and Note 3 to the Group’s Audited Financial Statements.

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INDUSTRY

Macroeconomic overview

The Russian Federation is the largest country in the world by territory and is characterized bysignificant distances both between population centers and between suppliers of raw materials and theirintermediate or end customers. With 17,098,242 square kilometers covering more than one ninth of theEarth’s land area, Russia extends across the whole of northern Asia and 40 percent of Europe,spanning 9 time zones.

Prior to the recent global economic slowdown, the period between 2000 and 2008 was characterizedby economic growth in Russia. Favorable commodity market conditions had facilitated theimprovement of Russia’s trade balance, allowing the Government of the Russian Federation to build upbudget surpluses and foreign currency reserves, which enabled increased public investment ininfrastructure and accumulation of foreign exchange reserves. Growing incomes resulted in strongdemand for housing and consumer goods, which significantly facilitated overall production growthacross all segments.

Starting from the second half of 2008, the Russian economy was adversely affected by the globaleconomic downturn. Since foreign currency reserves were accumulated by the CBR during thepreceding period of consequent growth, significant stimulus packages were put in place by theGovernment, lessening the impact of the global economic downturn on the Russian economy, which,according to the MED, returned to 0.1 percent monthly GDP growth in June 2009 (free of seasonalfactors) and continued to grow thereafter. Depreciation of the Rouble during the downturn alsosubstantially improved the cost competitiveness of Russia’s export-focused industries.

Improvements in the Russian macroeconomic environment have also resulted in a significant accelerationin investment growth, demonstrated by increase in foreign direct investments (“FDI”). FDI into Russiasteepened from US$ 30 billion in 2006 to US$ 75 billion in 2008, decreasing to US$ 36 billion in 2009 as aresult of the global economic downturn, and further increased to US$ 43 billion in 2010 and US$ 53 billion in2011, according to the EIU. In addition, there was significant growth in the total volume of gross investmentin fixed assets in Russia as well as the size of the Russian construction industry, both being importantdrivers of demand for rail freight transportation services. According to the EIU, annual gross investment infixed assets in Russia improved from US$ 183 billion in 2006 to US$ 370 billion in 2008, dropped toUS$ 269 billion in 2009 and increased to US$ 395 billion in 2011.

Russia has historically witnessed high levels of correlation between GDP growth, industrial productiongrowth and the growth in rail freight turnover. According to the EIU, the economic growth is likely tocontinue in Russia in the medium-term, with GDP expected to rise from US$ 1,936 billion in 2012 toUS$ 2,073 billion in 2013.

The following table sets forth actual and forecasted GDP, gross fixed investment, foreign directinvestment, construction expenditure, rail freight turnover and industrial production in Russia between2005 and 2013:

Year ended December 31,

2005 2006 2007 2008 2009 2010 2011 2012F 2013F

(US$ billion)Russian GDP(1) . . . . . . . . . . . . . . . . . . . . . 764 990 1,300 1,661 1,223 1,487 1,858 1,936 2,073Gross fixed investment(1) . . . . . . . . . . . . . 136 183 273 370 269 324 395 448 494Foreign direct investment in Russia(1) . . . 13 30 55 75 36 43 53 50 59Construction expenditures(2) . . . . . . . . . . 62 87 129 182 126 144 172 N/A N/A

(ton-kilometers, billion)Rail freight turnover(2) . . . . . . . . . . . . . . . . 1,858 1,951 2,090 2,116 1,865 2,011 2,127 N/A N/A

(% to previous year)Industrial production(2) . . . . . . . . . . . . . . . 105.1 106.3 106.8 100.6 90.7 108.2 104.7 103.6(3) 103.7(3)

(% growth)Russian real GDP growth(1) . . . . . . . . . . . 6.4% 8.2% 8.5% 5.3% -7.8% 4.3% 4.3% 3.8% 3.9%Gross fixed investment (1) . . . . . . . . . . . . . 25% 35% 49% 36% -27% 20% 22% 13% 10%Foreign direct investment in Russia(1) . . . -17% 130% 85% 36% -51% 19% 22% -5% 18%Construction expenditures(2) . . . . . . . . . . 36% 40% 49% 41% -31% 15% 19% N/A N/A

Source:

(1) EIU, nominal terms if not stated otherwise(2) Rosstat, CBR(3) MED

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Russian rail freight transportation industry overview

Brief overview

The Russian rail network is the key mode of transportation in the country, being the world’s first largestin terms of average transportation distance, second largest in terms of freight rolling stock, and thirdlargest in terms of freight turnover.

Averagetransportation

distance(2010)

(km)Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,668The United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,334Canada(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,077China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 759Kazakhstan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 803

(1) Data as of 2011

Source: Association of American Railroads, China Statistical Yearbook 2011, US International Trade Commission, Groupanalysis

Freight RollingStock(2010)

(’000 railcars)The United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,363Russia(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,119China(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 594India(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187

(1) Data as of June 30, 2012(2) Data as of 2009(3) Data as of 2008

Source: Association of American Railroads, US International Trade Commission, Group analysis, INFOLine data

Freight turnover(2010)

(bn tons)China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,733The United States of America . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,469Russia(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,127India . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300

(1) Data as of 2011

Source: Association of American Railroads, China Statistical Yearbook 2011, US International Trade Commission, Groupanalysis

Rail is the dominant mode of the freight transportation in Russia, accounting for approximately 85% ofthe country’s overall freight turnover in 2011, excluding pipelines, according to Rosstat, which issignificantly higher compared to the United States (48%, according to the U.S. Department ofTransportation, as of 2008), China (20% according to National Bureau of Statistics of China, in 2010)and Europe (18% according to Eurostat, average for 27 countries of European Union, as of 2008).

In an economy that relies heavily on the trading of commodities and raw materials, a railway networkand rolling stock are essential elements of the infrastructure driving its growth with significantlimitations of other means of transportation. Given the bulk and heavy nature of the commoditiestransported as well as the long distances involved, the extreme meteorological conditions, the lack ofsuitable waterways, which freeze during winter, and the cost to expand the current limited roadnetwork, there are no viable alternatives to rail transportation.

• Significant volumes of bulk commodities transported. Rail freight turnover in Russia, theworld’s leading producer of mineral resources, has always been largely comprised of

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commodities, as road network and air transportation are economically inefficient for longdistance transportation of such cargoes. According to Rosstat, commodities such as coal, oiland petroleum products, steel, iron ore, construction materials and fertilizers constituted over80% of the freight volume transported by rail in 2011. Commodities are expected to continueto dominate freight volumes. Moreover, while the majority of crude oil is transported bypipelines, rail is the main mode of transport for oil products mainly due to their high sensitivityto blending. Due to the anticipated increase of refining capacity in Russia in the next five toten years (as announced by major oil companies in Russia, such as Lukoil, Rosneft, AllianceOil, TNK-BP, etc.), the share of oil and oil products in rail freight turnover is expected to growin the near term. The table below illustrates rail transportation volume in Russia by types ofcargo.

Rail transportation volume, million ton Share in total rail transportation volume, %

2007 2008 2009 2010 2011 2007 2008 2009 2010 2011

Coke and coal . . . . . . . . . . . . 299 309 286 299 309 22% 24% 26% 25% 25%Oil and oil products . . . . . . . . 233 232 228 253 250 17% 18% 21% 21% 20%Construction cargoes . . . . . . . 201 197 128 143 158 15% 15% 12% 12% 13%Iron and manganese ore . . . . 110 102 95 102 111 8% 8% 9% 8% 9%Ferrous metals . . . . . . . . . . . . 83 79 65 73 74 6% 6% 6% 6% 6%Chemical and mineral

fertilizers . . . . . . . . . . . . . . . 45 42 39 46 47 3% 3% 4% 4% 4%Timber cargoes . . . . . . . . . . . 66 55 41 42 41 5% 4% 4% 3% 3%Cement . . . . . . . . . . . . . . . . . . 41 36 29 33 35 3% 3% 3% 3% 3%Other cargoes . . . . . . . . . . . . 267 251 198 216 217 20% 19% 18% 18% 17%

Total . . . . . . . . . . . . . . . . . . . . 1,344 1,304 1,109 1,206 1,242 100% 100% 100% 100% 100%

Source: Rosstat

• Long distances and extreme climate conditions. Russia is the world’s largest country byterritory with an area of over 17 million square kilometers, covering 9 time zones, according toRosstat. Russia is also one of the coldest countries in the world judged by its annual averagetemperature, with temperatures varying by as much as 60°C between winter and summerextremes, according to the Russian Federal Service for Hydrometeorology and EnvironmentalMonitoring. Rail is the most suitable form of transportation under these diverse weatherconditions.

• Lack of suitable waterways. Russia’s geography and climate limit the capacity of inlandshipping. The largest suitable waterways are directed either from North to South or fromSouth to North, while the majority of the export commodities are transported in an East toWest direction. Due to the severe climate, navigation along the Northern sea border of Russiain the Arctic Ocean may only be possible for up to four months of the year, depending on theregion, and often requires the use of costly ice-breakers in other periods.

• Limited road network. Although road transportation is less relevant in the context of bulkcargoes transportation in Russia, it is nevertheless important for overall cargo turnover.Russia had 982,000 km of roads as of 2009, according to CIA World Factbook, of which only776,000 km are paved. Even though Russia is currently ranked the 8th in the world in terms ofroad length, road density in Russia (5.7 km of road per 100 km2 of land area) is significantlylower, compared to world average (52.9 km per 100 km2) and compared to developedcountries and other BRIC countries, according to World Bank data.

The Russian railcar fleet is the second largest globally with about 1,119 thousand freight railcars as atJune 30, 2012, according to INFOLine data, following the United States with a fleet of approximately1,363 thousand railcars according to Association of American Railroads in 2010. However, averagetransportation volume per one railcar in Russia tends to be greater than that in the USA, which isattributable to a relatively high empty run as a result of fragmented nature of fleet in the USA (pleasesee “—Rail sector Reform” for more details on efficiency of rail transportation in Russia).

Rail freight transportation market

The development of the Russian freight transportation industry has primarily been driven by economicgrowth, demonstrating a high degree of correlation with industrial production and GDP. In 1990, before

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the collapse of the Soviet Union, annual freight turnover in the Russian Soviet Federative SocialistRepublic (“RSFSR”) reached its historical peak of 2,523 billion ton-km (according to Rosstat). Theindustry experienced a continued decline over the following decade as rail transportation volumescontracted. In 2002, the railway sector started recovering at the pace of overall economy growth, andbetween 2002 and 2008 freight turnover experienced compound annual growth rate ofapproximately 6%, outpacing the growth in turnover of other modes of transportation (according toRosstat). However, annual turnover levels are still lower than the volumes transported during theSoviet period (notwithstanding historical highs of modern Russia of 2,127 billion ton-km in 2011). It isexpected that total rail freight turnover will increase by 4.2% in 2012 and by 15.8% in 2015 comparedto 2011, according to MED (social and economic development forecast for 2013-2015 as of September2012).


2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

(ton-kilometers, billion)Rail freight

turnover(1) . . . . . . . . 1,434 1,510 1,669 1,802 1,858 1,951 2,090 2,116 1,865 2,011 2,127(ton, million)

Rail freight volume . . . 1,058 1,169 1,169 1,221 1,273 1,312 1,345 1,304 1,109 1,206 1,242(% growth)

Rail freight turnovergrowth . . . . . . . . . . . 4.4% 5.3% 10.5% 8.0% 3.1% 5.0% 7.1% 1.2% -11.9% 7.8% 5.7%

Rail freight volumegrowth . . . . . . . . . . . 1.1% 2.5% 7.8% 4.4% 4.3% 3.1% 2.5% -3.0% -15.0% 8.7% 3.0%

Industrial productiongrowth . . . . . . . . . . . 2.9% 3.1% 8.9% 8.0% 5.1% 6.3% 6.8% 0.6% -9.3% 8.2% 4.7%

Notes:

(1) Exclusive of empty runs relating to railcars owned by private operators, locomotives and cranes

Source: Rosstat

The modern Russian rail freight transportation market was primarily shaped by a rail sector reform (the“Reform”), which started in 2001, is still ongoing and is expected to increase the overall marketefficiency and profitability in the long term. While Russian Railways retains a monopoly over theprovision of rail infrastructure and is by far the major player in the locomotive traction services market,the new regulatory framework provides private operators with a legal right to access the rail system ona non-discriminatory basis alongside Russian Railways and its subsidiaries. Private operators havebenefited from the Reform, enjoying unregulated pricing as well as being able to differentiatethemselves by way of the quality of services provided. Despite the fact that private operators owned77% of railcar fleet in Russia as of June 30, 2012, according to INFOLine data, Russian Railways,together with its subsidiaries, Freight Two and OAO “TransContainer” (“TransContainer”), remains theleading player in many cargo segments of the Russian freight rail market. In addition, the regulatedtariffs charged by Russian Railways for access to its infrastructure and for locomotive traction continueto have a major impact on pricing in certain segments. Further stages of the Reform are expected toreduce the role of regulated tariffs and increase competition in the freight rail market. For a moredetailed discussion of the Reform, see “—Rail sector reform” below.

Key players of rail freight transportation market

Rail freight transportation market players are generally divided into 3 groups: state-owned companies(mainly Russian Railways and its subsidiaries), private operators and captive companies.

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In 2011, total transportation volume amounted to 1,242 million tons of cargo, out of which 284 milliontons were transported by Freight One and 72 million tons were transported by IndependentTransportation Company (NTK). A significant number of operators and railcar owners have a largelyregional focus or concentrate on limited types of freight. Key private market participants includeNeftetransservice, Globaltrans, Transoil and Rail Garant as well as a number of captive freight railcaroperators, such as NTK, Gazpromtrans, SUEK, LUKOIL-Trans, Uralkali, Sibur-trans and Eurochemwhich are focused primarily on transportation of the cargoes of their parent companies. Freightvolumes transported by key players of the Russian rail freight transportation market in 2011 arepresented in the table below.

OwnershipFreight volume,

million tons (2011)

Freight One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . United Cargo Logistics Holding 284NTK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Captive 61Neftetransservice . . . . . . . . . . . . . . . . . . . . . . . . . . . Private 72Globaltrans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private 70Transoil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private 53RG-Trans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Captive 41Rail Garant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private 33Sovfracht-Sovmortrans . . . . . . . . . . . . . . . . . . . . . . . Private 31Gazpromtrans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Captive 29Transgarant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private 26

Source: INFOLine,

As of June 30, 2012, there were approximately 2,000 private owners in Russia, according to RussianRailways data. However, there is a potential for consolidation in the industry, which could lead to thecreation of large operators. Large operators of railcars possess competitive advantages over smallplayers that allow them to attract some of the largest Russian rail transportation customers.

Russian Railways, its subsidiaries and private operators have historically been focused on acquisitionof railcars, including through financial leasing. However, major private operators have recently shiftedtheir preference to short-term operating leasing contracts as they provide for higher fleet flexibility andallow for prompt fleet reduction to match the decrease in transportation volumes. Thus, total leased-infleet of Globaltrans increased from 3,354 railcars in 2008 to 5,157 railcars as of June 30, 2012,according to Globaltrans data. On the other hand, operators owned by large Russian industrial groupsneed to secure fleet for a longer period of time to ensure uninterrupted transportation of the cargoes,supplied by the parent companies. As such, captive operators tend to own or lease fleet under long-term operating lease contracts.

A larger fleet provides operators with the flexibility to supply rolling stock on short notice and allows forthe provision of a “one-stop shop” service to key customers that have production facilities, suppliersand cargo destinations in multiple locations. Large operators can also achieve additional efficiencygains through logistical optimizations (e.g., by reducing empty run costs), thus increasing profitability.However, the industry is anticipated to remain relatively fragmented, with the top 10 Russian privatefreight rail operators accounting for approximately 51% of the whole private fleet, and the top 20 suchoperators accounting for approximately 60% as of June 30, 2012, according to INFOLine data.

Rail sector reform

The key recent developments of the Russian rail freight sector and its further growth prospects havebeen and are expected to be driven by the structural Reform of the rail transportation industry inRussia by the Russian Government. During the 1990s Russia experienced a significant investmentdeficit in the rail sector. Solid economic growth, following the 1998 crisis, also had a significant impacton the rail transportation industry and revealed high demand for transportation services as well as foradditional capital investments. Trying to improve the situation, the Government of the RussianFederation approved the Rail Reform Program in 2001 with the primary aim, among others, ofsatisfying the growing demand of the Russian economy for transportation services by increasing theefficiency of the existing rail infrastructure and attracting additional investments to the sector, includingprivate funds to support modernization of the ageing railcar fleet, locomotives and rail infrastructure.

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The first stage of the Reform resulted in the separation of the regulatory and business functions of theRussian railway system which, up to 2003, were carried out by the Russian Ministry for RailwayTransport. As a result, Russian Railways was established in 2003 as a Joint Stock Company, wholly-owned by the Russian Federation, and inherited all the business functions of the Russian Ministry forRailway Transport, whereas regulatory function remained with the Federal Tariff Service (“FST”) andthe Ministry of Transport of Russian Federation (“Mintrans”). Russian Railways became the soleowner of rail infrastructure, including railways, railway stations as well as locomotives and the majorityof the fleet. Private ownership of railcars existed at earlier stages of the Reform. According toExpert RA, there were approximately 161,000 private railcars in 2001, owned by large industrialcompanies. However, those companies did not have access to the national railway network and,therefore, cannot be considered as first private market participants. First private operators emergedwith introduction of Tariff 10-01 in July 2003, when they obtained legal right to access the railwaysystem alongside Russian Railways and its subsidiaries.

The second stage of the Reform was aimed at restructuring of Russian Railways by creating a numberof fully-owned subsidiaries engaged in long-distance and suburban passenger transportation services,freight transportation, repairs and maintenance as well as non-core businesses.

As a result of the second stage of the Reform, the operating subsidiaries of Russian Railways,TransContainer, Freight One and Freight Two were established in 2006, 2007 and 2010, respectively,providing freight transportation services on a competitive basis. Russian Railways has graduallytransferred its fleet to these companies over the past three years. Out of approximately 435,000railcars, 190,603 railcars were transferred to Freight One and 151,300 railcars, to Freight Two. Apartfrom freight transportation subsidiaries, OAO Federal Passenger Company engaged in long-distancepassenger transportation was established in 2010. Russian Railways continued to own and operate therail system and infrastructure as well as retained monopoly over locomotive traction.

Adoption of Tariff 10-01 in 2003 initiated rail tariff liberalization. Railcar charges were separated frominfrastructure and locomotive charges in the rail tariff structure providing economic stimuli for privaterailcar ownership. Even though the tariff liberalization was aimed at creating market-regulated prices,transportation prices for major types of cargoes still continue to correlate with Russian Railways tariff,while cross subsidizing of freight and passenger transportation is still in place.

Market liberalization of the maintenance market commenced in 2008 with the sale of 17 depots toprivate owners. Thereafter, three railcar repair companies (“VRKs”), owning in the aggregate112 depots, were established by Russian Railways in 2011. In line with the Reform program, VRKs areexpected to be privatized in 2012. According to the Group’s estimates there is excess repair andmaintenance capacity in the Western part of Russia, whereas the Eastern part experiences someshortage in maintenance facilities. This is primarily due to the fact that the current locations ofmaintenance facilities were determined in the Soviet times when cargo flows to the Eastern directionwere less intensive.

Another considerable milestone in the liberalization process would be the privatization of RussianRailways subsidiaries involved in freight transportation, long distance and suburban passengertransportation services, repair facilities and non-core businesses and the liberalization of locomotives.TransContainer conducted a private placement in 2008 and an initial public offering in 2010 as a part ofthe Reform. In October 2011, Russian Railways sold 75% minus 2 shares in Freight One to UnitedCargo Logistics Holdings. The full liberalization of locomotive traction is yet to be completed and will bemostly driven by the need for significant investments into the locomotive fleet that can be partiallyfunded by private capital. Moreover, a universal empty-run tariff is expected to be established, aimed ateliminating cross-subsidization among state-controlled transportation companies. Such moves wouldbe expected to improve the competitive landscape of the sector as government support for RussianRailways subsidiaries would be significantly reduced.

At present, liberalization of the locomotive market remains the key area of uncertainty with no decisionhaving been made by the Russian Government in respect of the timing and terms of liberalization.Whereas railcar liberalization is substantially complete, it is believed that the Reform led to increasedinefficiency in railcar fleet utilization. The ownership of fleet has become more fragmented with eachoperator focused on transporting cargoes of its clients and having its own route scheme, which is notnecessarily optimal for the railway system. This (coupled with growing transportation volumes) leads to

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increased empty run and longer idle time of the railcars, which, in turn, leads to growing demand forrailcars. On the contrary, when the fleet was under control of the Russian Ministry for RailwayTransport, it was possible to optimize routes within the system and reallocate fleet when needed.Moreover, while the number of railcars increased significantly in recent years, the number oflocomotives remained relatively flat: it increased by only 941 locomotives from 19,571 in 2003 to20,512 in 2011, according to Russian Railways. Inadequate growth of locomotives as well as limitedrailroad network capacity further leads to the reduction of overall system efficiency.

The key impact of liberalization on the leasing market has been increasing demand for leasing servicesas a result of new active private players involved in railway freight transportation as well as fleetrenewal and build-up undertaken by private companies and Russian Railways and its subsidiaries.Additionally, the potential liberalization of the locomotive sector will create a new, attractive and sizableopportunity for operating leasing companies. Liberalization will allow private operators to acquiremaintenance facilities either to establish a competitive advantage in integrated management ofoperations or to lease maintenance capacity out to other players.

Pricing mechanism in the railcar transportation sector

Generally, rail freight transport service tariffs include use of the infrastructure together with alocomotive traction tariff and a railcar charge. The infrastructure and locomotive traction tariff is set bythe FST for all market participants and is usually charged by Russian Railways as a limitation ontransportation fees which it charges to its customers. As a result of the Reform, private rail freightoperators may determine the railcar element of their prices, independent of the overall service tariff.Accordingly, the overall price of freight rail services for end users continues to be influenced, to anextent, by the regulatory environment.

In August 2012 FST approved a rail freight transport service tariffs indexation of 7% for 2013. Tariffindexation for 2014-2019 is currently not expected to exceed inflation rates.

The rail transportation tariff depends on a number of factors, including weight of cargo, distancetraveled, destination (i.e., whether the freight is being transported to or from abroad through landborder crossings or within Russia, including to or from sea ports) and cargo class. Below are someexamples of the types of cargoes falling into each tariff class.

• Class 1 cargoes include basic industrial and construction materials (e.g., mineral and cokingcoal, mineral and construction materials, cement, wood, bricks, iron and manganese ores,coke);

• Class 2 cargoes include cast iron, crude oil, oil products, fertilizers, grain, etc.;

• Class 3 cargoes include rolled steel, non-ferrous metals, scrap metal, construction materialsfor industrial production, metal construction products, lubricants and oils, automobiles and softgoods.

While Class 1 cargo attracts the lowest tariff and Class 3 cargo attracts the highest tariff, the marketshare of private operators is higher in Class 2 and Class 3 categories of freight than in Class 1 freight,due to higher usually margins borne by operators, according to Russian Railways. Although cargoclass is a factor in determining tariffs, it is not always a key driver of profitability. The ability to optimizeempty runs is one of the most important factors contributing to profitability for private freight railoperators.

Rail tariff(1) (US$ per ton)

1,000km

2,000km

3,000km

4,000km

5,000km

Class 1 (iron ore) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.18 20.28 24.40 28.63 31.86Class 2 (cast iron) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.05 48.31 67.24 90.35 112.14Class 3 (rolled steel) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.01 63.68 86.87 114.38 141.90

Notes:

(1) Rail tariff is provided for different transportation distances and includes 50% empty run, US$/RUB exchange rate of 32/8169is applied (as per CBR as of June 30, 2012)

Source: Tariff 10-01 as of June 30, 2012

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Prices charged by private operators are not regulated. However, since Russian Railways (and itssubsidiaries), in addition to its role as provider of infrastructure services at regulated tariffs, remains thelargest provider of freight rail transportation and related services, the regulated freight railcar tariffscharged by Russian Railways often serve as an effective benchmark for the unregulated pricescharged by privately owned freight rail transportation services providers.

Russian railcar market

Current fleet structure

There are five common types of railcars used to transport a wide spectrum of cargoes: gondolas, tankcars, hoppers, boxcars and flatcars. A gondola is an open-top type rolling stock designed to carry loosebulk materials, such as coal, niter, pellets, ferrous metals, hematite, scrap, limestone and woodchips.Gondolas are one of the most wide-spread and highly demanded types of railcars due to their use for avariety of cargoes, applicable for the energy, steel, construction, timber and agricultural sectors. A tankcar is a type of railcar designed to transport liquid and gaseous commodities, such as fuel oil, benzene,benzol, diesel fuel, gasoil, toluene, gasoline, crude oil, ammonia, etc. A hopper car is a type of railcarused to transport loose bulk cargoes, including grain, fertilizers, cement and other dry cargoes.Hoppers are most commonly used in agriculture and construction industries. A boxcar is a railcar thatis enclosed and generally used to carry general freight. Boxcars with covered tops are mostly used byfood-manufacturing and industrial companies to transport paper, sugar, polychloroprene rubber, tile,gabbro, non-ferrous metals and flour. A flatcar is constructed with an open deck to carry timber andlumber, flat steel or spare parts, as well as for transporting containers and other large or outsizecargoes.

Since its introduction in 2001, the Reform has considerably reshaped the competitive landscape,allowing private operators to expand their fleet and increase their market share. The share of privatefleet in the structure of total fleet has been constantly growing from 28% in 2004 to 36% in 2007, 49%in 2010, according to Russian Railways, and 77% as of June 30, 2012, according to INFOLine data.

There are approximately 1,119 thousand railcars in the rail system of Russia as of June 30, 2012,according to INFOLine data with a high average age of 16 years, as of March 31, 2012, according toINFOLine data. The railcar fleet of Russian Railways and its subsidiaries is significantly oldercompared to private operators and requires significant write-offs each year. As a result, the totalnumber of railcars owned by Russian Railways and its subsidiaries has remained flat despiteconsiderable new railcar purchases. In the past ten years private operators invested heavily in newrolling stock purchases, which resulted in their fleets growing at approximately 13% per annum during2006-2010, according to Russian Railways. The following table sets out a breakdown (as at March 31,2012) of the Russian rolling stock fleet by type of railcar and type of operator:

TypeRussianRailways

Per centof railcar

typePrivate

operators

Per centof totalrailcartype

Totalfleet

Totalper cent

Gondola cars (open top) . . . . . . . . . . . . 7,263 1.4% 494,957 98.6% 502,220 100%Tank cars . . . . . . . . . . . . . . . . . . . . . . . . . 459 0.2% 269,700 99.8% 270,159 100%Flatcars . . . . . . . . . . . . . . . . . . . . . . . . . . 16,684 30.4% 38,132 69.6% 54,816 100%Boxcar (covered top) . . . . . . . . . . . . . . . 9,926 14.3% 59,651 85.7% 69,577 100%Grain hopper . . . . . . . . . . . . . . . . . . . . . . 514 1.4% 36,939 98.6% 37,453 100%Mineral hopper . . . . . . . . . . . . . . . . . . . . 18 0.1% 31,929 99.9% 31,947 100%Cement hopper . . . . . . . . . . . . . . . . . . . . 10 0.0% 25,027 100% 25,037 100%Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,410 23.8% 97,245 76.2% 127,655 100%

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,284 1,053,580 1,118,864 100%

Source: INFOLine data (as of March 31, 2012)

Apart from above-mentioned types of operators, operating leasing companies are also activeparticipants in the market. The largest privately owned companies (including captive operators) interms of railcar fleet in ownership are Freight One, Globaltrans, Neftetransservice, Rusagrotrans andRail Garant, collectively possessing 30% of total railcar fleet in Russia as of June 30, 2012. Thefollowing table sets out the largest fleet owners in Russia (excluding finance lease companies) and

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their railcar fleet (calculated as owned plus leased-in minus leased-out railcar fleet) as of June 30,2012.

Ownedrailcarfleet

Shareof

totalfleet

Railcar fleetunder

management

Shareof

totalfleet

Freight One (Universal Cargo Logistics subsidiary) . . . . . . . . . . . . . 193 17% 171 15%Freight Two (Russian Railways subsidiary) . . . . . . . . . . . . . . . . . . . . 168 15% 66 6%Russian Railways . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 6% 65 6%Globaltrans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 5% 51 5%Neftetransservice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 3% 55 5%Novotrans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 2% 27 2%Rail Garant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 2% 26 3%TransContainer (Russian Railways subsidiary) . . . . . . . . . . . . . . . . . 25 2% 25 2%Spetsenergotrans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2% 8 1%Rusagrotrans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 2% 30 3%

Source: INFOLine data (as of June 30, 2012)

Railcar demand dynamics

The demand for new railcars is fairly volatile and is mainly driven by rail transportation dynamics,efficiency of rail transportation, railcar utilization as well as the size of the available fleet. Fleetavailability is primarily dependent on the supply of new railcars (limited by production capacity) and theretirement of old railcars, growth in transportation volumes, new railcar technology and a decline innetwork efficiency.

Supply of new railcars and retirement of old railcars

The collapse of the Soviet Union and the subsequent economic disintegration caused a dramaticdecrease of rail freight turnover by approximately 50%, and new railcar production virtually ceased. Adrop in railcar demand caused a drastic reduction in the production of railcars between 1992 and 2002,according to INFOLine. The 2000s witnessed the beginning of the recovery of production levels, andby 2008 annual production reached 43,000 railcars, similar to the level of production achieved duringthe Soviet period. During the global economic downturn of 2008-2009, freight rail turnover declined by12%, causing a subsequent decrease in demand for new railcars and a fall in production by almost50%. The quick response of production to the crisis is a result of the short time between the orderingand delivery of approximately 60 days. Production of railcars in Russia exceeded pre-crisis level by theend of 2010, driven by overall rail transportation sector recovery. Ongoing freight volume growth,projected by the MED, is expected to lead to an increase in the required fleet. Historical production offreight railcars in the Soviet Union (1980-1990) and CIS (from 1991) is set out in the table below.

Railcar production, thousand railcars

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995

66 67 67 67 66 64 67 69 60 59 52 38 25 24 16 12

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

9 6 4 3 3 7 11 27 36 37 34 41 73 47 96 114

Source: INFOLine data (1980-2007), Industrial Cargoes (2008-2011); Group analysis

Significant underproduction in 1992-2002 led to a considerable production gap of approximately520,000 railcars (equivalent to approximately half of the Russian railcar fleet as at June 30, 2012,according to INFOLine data). This underproduction resulted in a significant imbalance in the fleet agestructure: railcars in Russia tend to be either more than 16 to 19 years old (and, therefore, close totheir average operational lifespan of 26 years) or younger than six to eight years. The Group estimatesby 2022 that approximately 35% or 380,000 railcars of the current Russian railcar fleet will need to beretired and replaced requiring a US$ 30 billion investment.

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Historical lack of investment in fleet renovation as well as above-mentioned production gap resulted ina high average fleet age of 16 years in Russia as of March 31, 2012, according to INFOLine data.According to INFOLine data, the majority of old fleet is owned by Russian Railways and its subsidiarieswith average fleet age of 28 years as of March 31, 2012, while average private fleet age was 15 yearsas of March 31, 2012.

Privatecompanies

RussianRailways

Total fleet inRussia

Technicallife, yearsType

Averageage, years

Averageage,

years

Numberof

railcars

Averageage,

years

Gondola cars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.7 28.1 502,220 11.9 22Tank cars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.4 28.0 270,159 16.4 32Flatcars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.7 28.2 54,816 27.2 32Boxcar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19.2 28.9 69,577 20.6 32Grain hopper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.0 27.0 37,453 22.0 30Mineral hopper . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.3 24.9 31,947 13.3 26Cement hopper . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.7 26.0 25,037 12.7 26Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.1 27.7 127,655 19.4 22-40Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14.8 28.0 1,118,864 15.6 26


At present, the age of approximately 22% of railcars in Russia exceeds the respective railcars’technical life. If the current fleet continues to operate and no write-offs take place, another 23% of thecurrent fleet will be beyond its technical life in the next 10 years. This further highlights a significantpotential fleet retirement expected in the near term. The table below sets out current share of railcarsbeyond technical life as well as expected share within 5 and 10 years.

TypeTechnical life,

yearsAs ofnow

In5 years

In10 years

Gondola cars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 27.1% 11.0% 1.7%Tank cars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 13.5% 8.3% 10.6%Flatcars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 18.2% 19.5% 20.0%Boxcar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 9.4% 18.5% 24.0%Grain hopper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 8.2% 45.5% 23.9%Mineral hopper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 11.2% 20.9% 9.6%Cement hopper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 6.5% 24.3% 12.2%Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 51.5% 29.2% 2.7%Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 21.6% 14.5% 8.4%


Apart from modernization of freight rolling stock, the Strategy of railway transport development until2030 also anticipates development of locomotive and passenger railcar fleet as well as infrastructuredevelopment, which is the major part of modernization program. The strategy forecasts an increase infreight turnover to 2,677 billion ton-km in 2015 and 3,050-3,300 billion ton-km in 2030, which issupportive for further railcar demand growth.

Growth in transportation volumes

As has been described in “Industry—Russian rail freight transportation industry overview—Rail freighttransportation market”, the recent development of the Russian freight transportation industry hasprimarily been driven by economic growth, demonstrating a high degree of correlation with industrialproduction and GDP. For instance, in 2002, the railway sector started recovering at the pace of overalleconomy growth, and between 2002 and 2008 freight turnover experienced a CAGR of approximately6%, outpacing the growth in turnover of other modes of transportation, according to Rosstat. As aresult, railcar production levels started to recover and by 2008 the annual production already reached73 thousand railcars and in 2011 reached the all-time high of 114 thousand railcars.

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During the global economic downturn of 2008-2009, freight rail turnover declined by 15% causing asubsequent decrease in demand for railcars. At the peak of the crisis, the Group believes up to 200 to300 thousand existing railcars were sitting idle which led to a substantial decline in demand for newrailcars, and a fall in production by almost 50%. Strong recovery of the Russian economy, commoditiesdemand and rail transportation volumes post-crisis led to an increased demand for railcars and again ashortage of new railcars despite peak production.

Given the high correlation between economic growth and rail freight turnover, the Group expects thesector to continue to grow in line with the Russian economy. Additionally, the Group estimates that withincreased rail freight turnover, approximately 280,000 railcars will need to be added to meet demand,which would require an investment of approximately US$ 20 billion at current market prices.

New railcar technology

Russian railcars are based on an 18-100 bogie design, which features an axle load of 23.5 tons. This isreliable, but outdated compared to the US market, where bogies with axle loads of more than 30 tonsare available. Russian new generation railcars are based on next generation bogies with axle loads of25 tons (which is the maximum axle load that the Russian rail system infrastructure can supportwithout major investments), and are equipped with a body of increased capacity in order to utilize theincreased load. New generation railcars provide for lower maintenance costs and slower wearing out ofwheel sets due to better dynamic characteristics.

There are several new generation bogie designs, two developed by U.S. engineering companies,Amsted Rail and Webtech, and one developed domestically by Uralvagonzavod. All three designs arebeing tested and are expected to reach the market in 2012. A number of railcar models weredeveloped for these new designs.

The following railcar manufacturers are expected to produce next generation railcars: UVZ (based ontheir in-house design), Promtraktor-Wagon, Kryukovsky Wagon Plant (based on Amsted Rail) andTikhvin Wagon Plant (based on Webtech). Other producers are currently working on licenceagreements and bogie designs with the leading global suppliers of railcar technology.

The Group pioneered investment into new generation railcars by purchasing a pilot lot of 70 newgeneration gondola railcars from Promtraktor Wagon Plant, which were delivered to the Group in thefourth quarter of 2011.

As more railcar capacity becomes available, railcar manufacturers will seek to differentiate themselvesby technological innovations and the accelerated introduction of new generation railcars into themarket.

Decline in network efficiency

While rail system liberalization is a positive development for the Russian economy, it is believed to leadto decreased efficiency in railcar fleet utilization because:

• Fleet ownership has become more fragmented with each operator focused onfreightforwarding and route structure. This, coupled with growing transportation volumes, has led toincreased empty runs and longer idle time of railcars, leading, in turn, to growing demand forrailcars. By contrast, when the Russian fleet was under control of the Ministry of Railways, itwas possible to optimize routes within the system and reallocate fleet when needed moreefficiently.

• While the number of railcars increased significantly in recent years, the number oflocomotives has remained relatively flat. Inadequate number of locomotives has led to areduction of overall system efficiency.

• The increase in the number of railcars in recent years without the corresponding investment ininfrastructure has led to increased traffic jams and lower average speeds of trains, reducingrailcar turnover. This was especially evident on certain popular destinations and key ports,where loading/off-loading facilities and adjacent rail infrastructure were not able to handleincreased volumes of cargo and number of railcars, which had too long waiting times.

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To illustrate the impact of growing system inefficiency on railcar demand, an increase in cargotransportation time to some destinations from 10 to 11 days means a 10% increase in a railcar usagetime and, assuming 100% fleet utilization and stable transportation volumes, a 10% increase inrequired fleet in the system. In the Russian market context, this is the equivalent to an additional100 thousand railcars and is comparable to the total annual production of railcars in the CIS.

The Group believes that based on the current market environment and structural changes in theindustry composition, there are no fundamental reasons to believe that the current low efficiency of theRussian railcar fleet will be significantly improved in the near term, which will further support thedemand for railcars.

Railcar supply dynamics

During the Soviet era, Russia and Ukraine were the main producers of railcars in the USSR. With thecollapse of the Soviet Union, Russia and Ukraine remained both key suppliers and key purchasers ofrailcars in CIS countries. While part of the production in Ukraine was absorbed internally,approximately 90% of railcars produced were exported to Russia, according to the Group’s estimates.The structure of the supply has changed in recent years. While in 2006 approximately 65% of railcarsproduced in CIS were manufactured by Russian producers and 34% were produced by Ukraine, in2011 the share of Russian manufacturers decreased to 55% whereas the share of Ukrainian plantsincreased to 43%, according to Industrial Cargoes; Group analysis.

Total railcar production capacity is defined by the lowest capacity of the two major components:(i) casting and (ii) manufacturing and assembly. Manufacturing and assembly is a relatively flexible andless capital-intensive business, which is based on readily available and proven technology, allowingrailcar maintenance and general metal works companies to enter this market easily when there is ademand and create additional assembly capacity. Casting production, on the other hand, is a muchmore technically challenging, capital-intensive and harder to expand business given the size of castingrequired for railcars, which is believed to be the largest in the world. Building a new casting productionfacility may take up to five years, reducing the overall flexibility of the casting market.

Following the recent increase in railcar demand, it is the casting component of the railcar productionthat has become a key limiting factor for growth of production volumes of railcars and still remains akey bottleneck. Castings are produced both by railcar manufacturers and independent suppliers inRussia and Ukraine. A significant part of the castings produced is used in railcar repairs, which furtherreduces available castings capacity for new railcars. The majority of rail casting producers areconcentrated near the largest railcar manufacturers: for example, Kremenchug Steel Works supplycasting kits to Kriukov Car Building Works, Stakhanov Wagon Works and Dneprovagonmash. Thetable below sets forth production volume of the key manufacturers of castings in 2008-2010.

Casting production, tons

Country 2008 2009 2010 2011

Kremenchug Steel Works . . . . . . . . . . . . . . . . . . . . . Ukraine 106,564 50,009 103,686 114,917Azov Electric Steel . . . . . . . . . . . . . . . . . . . . . . . . . . . Ukraine 34,357 19,422 48,725 79,602Uralvagonzavod . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Russia 57,969 26,841 49,953 56,257Promtractor-Promlit . . . . . . . . . . . . . . . . . . . . . . . . . . Russia 54,980 28,251 27,935 46,080Bezhitsky Steel Works . . . . . . . . . . . . . . . . . . . . . . . . Russia 29,571 28,842 29,968 31,617Altaivagon . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Russia 0 2,400 20,369 18,143

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283,441 155,765 280,636 346,616

Source: Industrial Cargoes; Group analysis

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Russian Uralvagonzavod remains the largest railcar manufacturer in the CIS, producing almost 50%more than its nearest competitors, followed by two Ukrainian companies: Azovmash and Kriukov CarBuilding Works. Eight major railcar manufacturers together assemble approximately 80% of totalrailcars. 80-90% of railcars produced in Ukraine are exported (mainly to Russia).

Production volume, railcars

Country 2006 2007 2008 2009 2010 2011

Uralvagonzavod . . . . . . . . . . . . . . . . . Russia 16,186 17,931 19,661 9,205 19,528 25,385Azovmash . . . . . . . . . . . . . . . . . . . . . Ukraine 8,462 9,972 9,306 5,533 12,318 16,429Kriukov Car Building Works . . . . . . . Ukraine 4,349 7,648 6,407 3,384 9,083 10,652Car Building Company of

Mordovia . . . . . . . . . . . . . . . . . . . . . Russia 4,214 5,728 5,148 5,181 8,573 5,823Dneprovagonmash . . . . . . . . . . . . . . Ukraine 2,616 3,239 3,205 904 4,637 6,986Stakhanov Wagon Works . . . . . . . . . Ukraine 2,181 5,411 5,510 1,544 7,334 6,710Altaiwagon . . . . . . . . . . . . . . . . . . . . . Russia 6,410 6,755 6,021 3,809 8,118 6,377Promtractor-Wagon . . . . . . . . . . . . . . Russia 0 1,102 1,117 1,967 1,608 5,047Constructional Ironworks Engels . . . Russia 1,070 1,565 1,943 1,004 2,647 4,960Bryansk Car Building Plant . . . . . . . . Russia 1,950 2,102 2,395 428 2,347 2,994Other . . . . . . . . . . . . . . . . . . . . . . . . . 4,466 10,047 12,407 5,122 14,536 22,930

Total . . . . . . . . . . . . . . . . . . . . . . . . . . 51,904 71,500 73,120 38,081 90,729 114,293


Prior to the crisis the major railcar manufacturers announced their intentions to significantly increaseinstalled capacity, however most of them have been postponed or cancelled. However, only the Tikhvinplant was launched in early 2012. It has an expected production capacity of 13,000 railcars per year(not likely to be achieved earlier than 2013-14) and 27,000 casting kits per year (gradual ramp-up withtarget production levels achieved by 2016). Currently the plant operates for manufacturing andassembly, while the casting production is expected to start only by 2015.

Technical and regulatory requirements applicable to railcars were developed during the Soviet periodand are currently the same across all CIS countries. Therefore, Russian or CIS railcar manufacturersare able to supply railcars to any company, operating within the Russian railway network. On the otherhand, any other railcar, produced outside the CIS, is required to go through a lengthy and complicatedcertification process, which is strictly controlled by Russian Railways, as the only body having theauthority to certify a railcar in Russia.

Railcar price dynamics

Railcar price dynamics are cyclical and linked to macroeconomic environment and the demand forrailcars. For the past few years the market prices have exhibited a rapid growth on the back of risingcommodity prices, increasing transportation volumes and limitations of production capacities. Thecurrent prices for selected types of railcars reached historical highs in 2011 due to undersupply, and, in2012, prices have since stabilized and declined somewhat due to market saturation.

2007 2008 2009 2010 2011

(average price, US$ per railcar, excl. VAT)

Boxcar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,508 113,997 47,666 63,371 86,429Flatcar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,959 89,765 56,840 73,937 90,600Gondola . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,765 78,579 40,803 55,227 74,789Hopper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,939 77,624 45,832 57,832 78,805Tank car . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,318 85,612 46,235 64,488 78,002Including:Oil tank car . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,915 83,180 44,301 62,524 76,470Gas tank car . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,116 118,906 61,578 79,163 95,851


Maintenance cycle and resource extension economics

Railcar conditions and schedule of maintenance operations are controlled by The Federal Agency forRailway Transport. It is prohibited to operate a railcar on Russian Railways network if the railcar is not

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in operational condition, or not maintained according to schedule. Key types of maintenance operationsconducted during the lifecycle of a railcar include:

• depot repair;

• capital repair; and

• wheelset replacement.

There are c. 140 railcar depots in Russia, around 90% of which are owned by Russian Railwaysthrough three Wagon Repair Companies (VRK-1,2,3), legally separated from RZD in June 2011.Eleven rail depots were privatized in 2008 through the auctions and are now privately owned. A typicalrepair depot has a capacity of 3,000 railcar repairs per year.

Depot repair. Depot repair is a maintenance operation conducted at the railcar depot on a regularbasis. The schedule of depot repairs mainly depends on the railcar type. For example, the first depotrepair on a gondola is required to be conducted three years after its production, and then each year,except for the year following the capital repair. There is an alternative option of scheduling, which isbased on railcar mileage. In this case, the first depot repair is scheduled after the first threeconsecutive years from production of a railcar, and each successive year after 110,000 or 160,000kilometers (depends on bogie type). This option is feasible for railcars with lower averagetransportation distance, which reduces repair frequency by a factor of approximately 1.5. Cost of depotrepairs depends on depot location, replaced components and actual operations done and, according toBR’s estimates, on average reaches approximately US$2.5 thousand per railcar.

Capital repair. Capital repair is a maintenance operation, which includes thorough diagnostics ofrailcars and its components, repair of railcar body and replacement of bogie components. It usuallyoccurs in the middle of the technical life of a railcar. According to BR’s estimates, average cost ofcapital repair is currently around US$3.5 thousand per railcar (excluding cost of wheelsetreplacement), while actual costs depend on a number of factors, similar to those of depot repair.

Cost of capital repair is highly dependent on the type and size of wear incurred by a railcar. While thesame wear made to a bogie of different types of railcars entails similar expenses, as the majority ofrailcars use the same type of bogie, similar body wear may cause various consequences with a widerange of possible costs involved.

Wheelset replacement. Wheelset replacement is an operation of replacing old wheelsets with newones. There is no specific schedule for wheelset replacement, but rather a wheelset condition criterionis used to schedule the replacement. According to the Company, wheelsets are replaced once inseven years on average. According to the Company’s estimates, average wheelset replacementcurrently costs around US$8 thousand.

Railcar operating leasing market

Railcar operating leasing appeared in Russia in 2004 with the Group being the pioneer of the industry,introducing an innovative business model. Share of fleet under operating leasing in Russia has beenconstantly growing and is estimated at 15% in 2011, up from 7% as of 2009, according to theINFOLine data. The penetration of operating leasing is still very low compared to more developedcountries (56% in the North America, according to Umler as of January 2011) and is expected tosignificantly increase over the coming years as Russian industrial companies become more focused onefficient balance sheet management and investments in core activities.

Operating leasing penetration in Russia and the UnitedStates

Russia United States

2009 2010 2011 2011

Russian Railways (Russia) / Railroads (USA) . . . . . . . 57% 49% 26% 25%Freight owners and freight forwarders . . . . . . . . . . . . . 36% 44% 59% 19%Operating lessors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7% 7% 15% 56%(1)

(1) Cars owned by TTX Company are included with operating lessors

Source: Company analysis

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The market for railcar operating leasing consists of two major groups of players: pure operatinglessors, primarily focused on operating leasing business, and operators that provide operating leasingin addition to their core transportation services. Generally, operating leasing is being provided to acertain extent by transportation operators such as Freight One and Globaltrans, who lease out excessfleet, but mostly by specialized operating lessors such as the Group. While both operators andoperating lease companies own the fleet that they lease out, operators tend to focus on providingshort-term (less than twelve months) lease contracts to other operators or affiliated companies,whereas operating leasing companies focus on multi-year lease contracts to both freight owners andtransportation companies. This significant difference is a result of operators leasing out surplus fleet ona short-term basis to maximize utilization and, in the long term, with the aim of maintaining the flexibilityof using the fleet, if required. Moreover, operators tend to lease out older and lower quality fleet,retaining the younger higher quality fleet for their core business.

For freight owners and transportation companies, railcar operating leasing is a key alternative to theownership of a fleet. Two types of companies generally prefer to own a fleet: (i) companies whoconsider ownership of fleet as a strategic advantage (especially in an undersupplied market); and(ii) companies who are less concerned about balance sheet efficiency and/or need to acquirespecialized equipment, for which only a limited secondary market exists and for which, consequently, alessor may not be inclined to assume the residual value risk.

Companies who prefer the ownership of railcars use either their own funds, bank loans or financialleasing as a way to finance the acquisition of the fleet. Financial leasing services are provided byfinancial institutions while operating leasing services are typically provided by specialist companies,such as the Group, that have professional industry expertise in managing railcar fleets and providingrelated services.

The growing shift from railcar ownership to operating leasing is driven by a number of key factors,including:

• increased focus of freight owners on investments in core business and limiting investments innon-core assets, such as railcars, especially in periods of liquidity constraints;

• proliferation of asset-light business models targeted on higher return on capital, especiallyamong transportation companies;

• more attractive economics of railcar operating leasing for freight owners and transportationcompanies given ability of lessors to efficiently leverage their balance sheets and providecompetitive lease terms;

• inability of customers to efficiently manage their fleets and desire to outsource maintenanceand fleet management to professionals; and

• greater operational flexibility compared to railcar ownership allowing for immediate access torolling stock when needed and resizing its fleet and adjusting to changing transportationlogistics and market conditions.

The penetration of railcar operating leasing is still low compared with developed countries (56% in theUS, which is the best proxy for the Russian market given market structure) and it is expected that it willsignificantly increase over the coming years as Russian corporations become more focused onefficient balance sheet management and investment in core activities. Management expectspenetration of railcar operating leasing to double in the next ten years.

Once operating leasing becomes more established and the market matures, railcar operating lessorsare expected to become more focused on additional value-added services.

In addition to growing demand drivers, the development of operating leasing is also supported by anumber of drivers on the supply side, including:

• increased offering of bundled services providing a full spectrum of railcar related services toclients;

• leaner and more effective organization of operating lessors providing cost advantage; and

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• professional procurement skills and relationships with railcar manufacturers resulting inincreasing purchasing power of operating lessors and production capacity allocations in favorof lessors.

All of the above allows railcar operating lessors to be highly competitive and provide a realeconomically sensible alternative to the ownership of railcars.

Lease rates dynamics

As customers typically compare the economics of leasing a railcar versus owning it, there is a directcorrelation between rental rates, also known as daily rates, and the cost of a new railcar. In anenvironment where railcar prices are high, the average daily operating lease rate tends to increase. Bycontrast, when railcar prices decrease, daily operating lease rates tend to decrease as well.Historically, this relationship resulted in a relatively stable cash yield.

At the early stages of the rail market reform, the rail transportation tariff set by Russian Railways wasthe key driver for daily operating lease rates. The regulated tariff included three components:infrastructure fee, traction services fee, and railcar fee, of which only the railcar component wasliberalized. This allowed private investors to enter the market and start providing private railcars, whichover time led to decoupling of rail transportation tariff and railcar daily rates.

The daily rate is set as a result of negotiation and there are no official quotation mechanisms.Generally, the client receives a commercial offer, which contains the daily rate, lease period,maintenance conditions and, in some cases, the cost of transporting railcars to it. Spot rates areavailable in the periodical Industrial Cargoes and can be used as a reference. According to theCompany’s experience, the daily rate generally does not depend on the duration of the contract, butrather on the specification and quality of the leased fleet.

In the past several years lease rates have demonstrated a high level of correlation with railcar prices.In the environment when railcar prices are high, the average daily operating lease rate tends toincrease. On the contrary, when railcar prices decrease, operating lease rates tend to decrease aswell.

Year ended December 31,Six months ended

June 30,

2008 2009 2010 2011 2012

(average daily operating lease rate(1), US$ per railcar)

Boxcar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.7 21.0 32.2 43.1 50.1Flatcar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.2 18.6 19.0 36.4 42.2Gondola . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.2 20.5 30.1 44.6 47.0Hopper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.0 16.9 23.9 30.5 37.2Tank car . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.2 24.9 29.2 41.1 46.5

(1) Average daily operating lease rate is calculated as simple average of monthly averages for daily operating lease rates fordifferent types of railcars


Competitive environment

The Group is the largest specialized company providing railcar operating leasing in Russia accountingfor approximately 12% of the total Russian fleet of railcars used in operating leasing as of June 30,2012, according to INFOLine. Management believes that there are currently only two other sizeableplayers in the market with primary focus on railcar operating leases.

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The table below sets out top operating leasing providers in Russia with railcar fleet size underoperating leasing as of June 30, 2012:

Ownership Core businessRailcars leased out underoperating leasing (‘000)

Freight One . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Operator 21.2Brunswick Rail . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Operating leasing 19.7OTEKO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Operating leasing 14.1TFC Eurotrans . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Operator 7.4Globaltrans(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Operator 12.0Rail 1520 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Operating leasing 4.8RRR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Operating leasing 5.2RusTransCom . . . . . . . . . . . . . . . . . . . . . . . . . . . Private Operator 2.1

(1) Globaltrans fleet also includes TransLeaseService and Metalloinvesttrans

Source: INFOLine data, Group data

Other key operating lease providers

OTEKO. OTEKO is a leading rail leasing company focused on the operating leasing of oil tank cars.The company was founded in 2002 as a result of the merger of OAO “Russkiy Mir” and “SFAT”—thelatter being a leader in oil and oil product rail transportation market at the time. The company currentlyalso offers freight forwarding, railcar maintenance and logistical services. The company’s railcarstransport around 18 million tons of oil, liquefied natural gas and oil products every year. According toINFOLine data, it had approximately 14.1 thousand railcars out in operating leasing as of June 30,2012.

RRR (3R). RRR refocused its activity on railcar operating leasing in 2007, and in 2008 acquired thefleet of ZMK Leasing which resulted in RRR’s total fleet size of 5.2 thousand railcars, according toINFOLine data. RRR’s railcar fleet is composed of oil tanks (25%), boxcars (18%), platform (9%),hopper cars (31%), gondolas (17%).

RAIL1520. Rail1520 is a recently-created specialist railcar operating leasing company. It is a part ofJV, created by Mitsui and ICT Group, one of the largest industrial groups in Russia, which also ownsTikhvin Car Building Plant. Mitsui and ICT Group recently announced plans to invest up to US$ 100million in the railcar operating leasing JV. According to RAIL1520 data, the company currently owns adiversified fleet of approx. 4.8 thousand railcars. The company is partnering with Tikhvin plant and isthe first example on the Russian market of a leasing company affiliated with a railcar manufacturer (abusiness model also used by some of the US railcar manufacturers). A few other manufacturers inRussia and Ukraine are considering entry into the operating leasing market, but these plans are yet tomaterialize.

Operators with operating leasing services

Freight One. Freight One was established in 2007 with the purpose of operating the freight rolling stockof Russian Railways. Russian Railways currently owns 25% plus 2 shares in Freight One with theremainder owned by NTK. Freight One has representative offices in 14 regions of Russia as well as inthe Ukraine and Azerbaijan, employing over 3,800 people. Freight One provides freight forwardingservices all over Russia as well as in the CIS. As of June 30, 2012, Freight One operated about 17% ofall Russian freight rolling stock, which amounted to 193.0 thousand units and is planning to graduallyincrease the size of its fleet over the next five years, according to INFOLine data. In 2011, Freight Oneshipped 284 million tons of freight (approximately 23% of total Russian rail freight volume, according toRosstat. Freight One has set up a leasing subsidiary called PGK-Leasing (or Freight One-Leasing) in2008. Freight One-Leasing operated fleet of 21.2 thousand railcars as of June 30, 2012, according toINFOLine data.

Globaltrans. Globaltrans is the second-largest private railcar operator in Russia which owned a fleet of57.5 thousand railcars as of June 30, 2012, according to Globaltrans data. This mainly consists ofgondolas (64%) and tank cars (35%) and also includes 57 locomotives. Globaltrans also providesoperating lease services and leased out about 12.0 thousand railcars under operating lease as of

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June 30, 2012, according to Globaltrans data. In May 2012 Globaltrans acquired 100% ofMetalloinvesttrans, the captive freight rail transportation operator of Metalloinvest, a leading global ironore and HBI producer based in Russia.

RusTransCom. RusTransCom is a private operating company, providing freight forwarding services foragricultural companies and specializing on transportation of grain cargoes. RusTransCom had a totalfleet of 28.1 thousand railcars, of which 2.1 thousand railcars were under operating lease contracts asof June 30, 2012, according to INFOLine.

SG-trans. SG-trans is a state-owned operator, specializing on rail transportation of liquefied natural gasand light oil products. The company operates on domestic market as well as exports cargoes to theCIS. As at June 30, 2012, out of a total of 14.9 thousand railcars owned by SG-Trans, 5.4 thousandrailcars were leased out, according to INFOLine data. On September 27, 2012 a competitive processto select a purchaser for 100% of common shares in SG-trans was completed. The highest price forthe stake was put forward by AFK Sistema. The closing of the transaction is subject to furthergovernment approvals.

Key drivers of competition in the railcar operating leasing market

Availability of fleet. In order to stay competitive and conduct business with large industrial customers, itis essential to secure access to a sizeable fleet. Contracts with such customers typically cover thesupply of thousands of railcars. Given the difficulties associated with access to production capacity andsecuring a stable flow of new railcars without established relationships with railcar manufacturers,building a substantial fleet would require both time and considerable capital investment.

Relationships with customers and market reputation. Customers typically remain loyal to their originaloperating lessor, particularly in markets with tight supply, given the high switching costs, for exampleloss of revenues from the disruption of logistics, which are potentially significant and difficult to controland predict. Given the potentially high transaction costs associated with switching between suppliersand the consequent disruptions to operations, customers are typically extremely careful when selectinga lessor for railcars. A strong and consistent reputation is therefore crucial for winning new business. Inaddition, customers seek to deal with lessors who can meet all their railcar needs in terms of differenttypes of cars and number of cars. This gives a significant advantage for larger operating lessors.

Expertise. Profound knowledge of the railcar market is vital for a market participant to be able to predictdemand, learn how to manage maintenance and the risk associated with managing a large pool ofcapital intensive assets. Experience in risk-based pricing and residual value setting is also a significantcontributor to competitive advantage.

Access to financing. Low-cost financing is critical for operating lessors due to high capital requirementsof their business model. In order to ensure efficient terms of bank financing, market players need tohave in place a number of complex processes (e.g., complex modeling and forecasting tools, reportingprocesses, IFRS accounts) to develop an efficient funding structure as well as satisfactory credithistory. Favorable financing conditions would normally require the borrower to have a strong assetbase, limited customer concentration (by customer and railcar type) and steady cash flows.

Purchasing efficiency. An important factor in a lessor’s ability to operate profitably is the relationshipbetween the purchase price of railcars and the operating lease rates which can be achieved fromcustomers. The ability to purchase railcars at attractive prices is the result of market knowledge, wellestablished relationships and the ability to place large purchase orders with the manufacturers.

Price. According to the Group’s estimates, operating lease rates have insignificant impact on thepotential clients’ choice of counterparty. While it might be a factor in short-term leasing contracts,potential clients, aimed to execute a long-term leasing contract, are more concerned about lessor’sreputation and its ability to supply the required number of railcars on time.

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BUSINESS

Overview

The Group is the largest privately owned operating lessor of freight railcars in Russia by number ofrailcars as at June 30, 2012, according to INFOLine data. The Group believes that it is one of very fewoperating lessors of railcars in Russia that offer multi-year operating leases, which results in apredictable revenue base, a consistently high railcar utilization rate, close to 100% since 2006, stabilityof the Group’s financial profile and reduced exposure to market volatility, as demonstrated by thefinancial performance of the Group throughout its existence, including during the global financialdownturn of 2008-2009. Since September 2011, the Group has offered freight forwardingtransportation services to its clients, through its fully-owned transportation subsidiary, ZAO ProfTrans.

The Group’s fleet represented 2.0% of the total freight railcar fleet in Russia as of June 30, 2012, and12% of the Russian operating lease market, as of June 30, 2012, according to INFOLine data. TheGroup owned 22,734 railcars as of June 30, 2012, and 22,005 railcars as of the date of theProspectus, due to the expiration and termination of finance leases relating to 729 railcars. Its railcarfleet consists of a variety of railcars configured to transport various dry bulk products, as well as liquidsand other commodities, and has an average age of 4.8 years, compared to the market average ofapproximately 16 years and a technical useful life of 22 to 40 years, according to INFOLine data. TheGroup believes that the quality, versatility and relative low average age of its railcars make its fleeteasily marketable, result in low maintenance costs and have allowed it to maintain a consistently highutilization rate.

The Group leases its railcars under operating lease contracts to a selected number of leading Russianindustrial and transportation companies operating in a variety of sectors, including coal, chemicals, oiland gas, transportation and ferrous metals. As of June 30, 2012, the Group had 30 leasing clients. TheGroup believes that this diversity of end-markets amongst its clients limits its exposure to a particularsector. The Group primarily offers multi-year operating leases, with terms ranging between one andseven years, with the majority of the contracts signed having terms of two to three years. As ofJune 30, 2012, the average length of outstanding contracts was 2.9 years. Since 2009, the Group hassuccessfully renewed over 81% of its operating leases in terms of the number of railcars with the sameclient.

The Group owns an array of railcars that enables it to cater to its clients’ diverse and high-volumetransportation needs. Its fleet primarily consists of general purpose and semi-specialized types ofrailcars, allowing it to redeploy its railcars for different uses at competitive market rates. The Group’sfleet comprises (a) primarily gondolas, which are used for the transportation of coal, ore, crushed stoneand other bulk freight, (b) mineral hoppers, which are mainly used for the carriage of fertilizers and(c) tank cars which are used to carry liquids, such as oil and petroleum products. Gondolas, mineralhoppers and tank cars represent 70%, 15% and 10% of the Group’s total fleet as of June 30, 2012,respectively. The Group’s fleet also includes box cars and platform cars, which represent 2% and 3%of the Group’s fleet as of June 30, 2012, respectively.

In 2011, the Group’s net revenue was US$ 183.9 million, Adjusted EBITDA was US$ 139.6 million, andAdjusted EBITDA margin was 75.9%. For the six months ended June 30, 2012, the Group’s netrevenue was US$ 150.5 million, Adjusted EBITDA was US$ 124.3 million, and Adjusted EBITDAmargin was 82.2%. For the twelve months ended June 30, 2012, the Group’s net revenue was US$271.9 million, Adjusted EBITDA was US$ 214.4 million, and Adjusted EBITDA margin was 78.7%. Asat June 30, 2012, total assets of the Group were US$ 1.55 billion and net debt was US$ 570 million,and, as at December 31, 2011, total assets of the Group were US$ 1.52 billion and net debt wasUS$ 628 million. The Group has also received a long-term corporate credit rating of BB- from Standardand Poor’s and a long-term corporate credit rating of Ba3 from Moody’s.

Key Strengths

The Group believes its key strengths include:

Robust business model with proven resilience

The Group has achieved a strong market position in Russia by focusing on its core competency ofrailcar operating leasing. This allows the Group to minimize overhead and also to avoid competitionwith its clients in the transportation business. The Group has consistently proven its ability to achieve

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high utilization rates due to the quality of its fleet, strong relationships with its client base as well as itshigh standards of client service. The Group’s average utilization rate, excluding railcars used in theGroup’s freight forwarding services, for the twelve months ended June 30, 2012 was 100%. TheGroup’s utilization rate has consistently remained above 98%.

The Group mainly operates on the basis of multi-year contracts, rather than on a spot basis which theGroup believes may, in the short term, generate higher current operating lease rates but is morevolatile by nature. The Group’s railcars are leased out with contract length ranging between 1 and 7years with the majority of the contracts signed having terms of two to three years. As a result of theGroup’s focus on multi-year contracts, the Group has a highly predictable and stable revenue stream,including in periods of economic downturn which negatively affected freight rail transportation inRussia. For example, during the 2008-2009 global economic downturn, the Group’s average dailyoperating lease rates decreased by only 17% versus the decrease in spot daily rates of 75% to 80%,according to Industrial Cargoes and Group analysis, and the Group’s Adjusted EBITDA in 2009increased by 9.7% in comparison to 2008. The Group also successfully tested the enforceability of itscontracts, during this period, by obtaining court rulings against several defaulting clients andrepossessing railcars held under non-performing contracts. Notwithstanding this, the Group remainedcommitted to the provision of high quality service to its clients and overall client retention. In severalcases, clients contacted the Group to ask for lease rate reductions and, in most cases, the Groupagreed to provide temporary lease rate reductions for 2009 and 2010 with an option to increase thelease rates once the market begins to recover. Successful negotiations with the Group’s clients duringthe downturn built long-term trust and strengthened its relationships as well as protected the Group’seconomic interests. Each re-negotiated lease contract had a higher net present value than the originallease contract. As a result, even at the nadir of the crisis, the Group’s end of quarter utilization ratesremained at or above 98.6%.

Strong market position in a fast growing railcar operating leasing market

The Group believes that it is well positioned to capitalize on the attractive growth opportunities offeredin the Russian railcar operating leasing market. Currently, it is one of the largest private railcar fleetowners in Russia and the market leader among railcar operating leasing companies which pursueoperating leasing as their core business (as opposed to transportation companies providing railcaroperating leasing as a secondary line of activities), according to INFOLine data. Having pioneered theoperating leasing of railcars in the Russian market and signed the first ever Russian railcar operatingleasing contract in 2004, the Group has developed a unique experience in the market and establishedlong-term relationships with some of Russia’s leading industrial groups.

The Group believes that the Russian railcar operating leasing market is still in relatively early stages ofdevelopment and has strong growth potential due to a favorable macroeconomic outlook, the Russiangovernment’s efforts to liberalize the railway industry, the continued penetration of operating leases inRussia and the potential for consolidation in the railcar industry. Please see “Industry—Russian railfreight transportation industry overview—Rail freight transportation market” for more information on railfreight growth.

Railcar operating leasing is a proven and successful business model internationally, prevalent indeveloped markets such as the U.S., where operating leasing accounted for more than 55% of allrailcar ownership according to Group analysis. The penetration of operating leases in the Russianrailcar market is expected to continue to increase as the railcar market, and associated infrastructure,develops. The Group expects the overall operating lease market to grow from 15% of total rolling stockfleet in 2012, to 30% in 2022, growing at a CAGR of 9.0%, double the overall railcar market growthrate. Moreover, the Group believes that the Russian railcar market has potential for consolidation, asthere were over 2,000 private fleet owners in Russia as of June 30, 2012, with top ten owners’ share ofthe total fleet being approximately 50%, according to INFOLine data. With its strong capital structureand market leading expertise, the Group is well positioned to reinforce its leadership in the Russianrailcar operating lease market.

High quality asset base

The Group’s fleet has an average age of only approximately 4.8 years. This compares to the averageage of the total Russian fleet of approximately 16 years and an average technical useful life of a railcar

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of 22 to 40 years, according to INFOLine data. The young average age of the Group’s fleet allows theGroup to keep its maintenance costs low and its fleet operational for longer periods. Since itsestablishment, the Group has concentrated on building a fleet of railcars that can satisfy broad demandin the Russian market. Since 2005, it has invested US$ 1,377 million in the acquisition of railcars,which it believes makes it one of the largest purchasers of railcars in Russia during such period. Mostof the Group’s railcars are general purpose gondolas and can, therefore, be easily redeployed givenmultiple uses for different end markets. As at June 30, 2012, the total fair market value of the Group’sfleet was US$ 1,392 million as per the report of independent appraiser Neo Centre Consulting Group.

Strong track-record of financial performance

The Group achieved a net revenue CAGR of 50% per year between 2005 and 2011. For the yearended December 31, 2011, and for the six months ended June 30, 2012, the Group had net revenuesof US$ 183.9 million and US$ 150.5 million (June 30, 2011: US$ 62.5 million), respectively.

The Group has also achieved solid profitability, generating an Adjusted EBITDA margin of 75.9% forthe year ended December 31, 2011 (82.2% for the six months ended June 30, 2012), compared to anAdjusted EBITDA margin of 77.3% for the year ended December 31, 2010, and an Adjusted EBITDAmargin of 79.0% for the year ended December 31, 2009. For the year ended December 31, 2011, theGroup generated an Adjusted EBITDA of US$ 139.6 million (US$ 124.3 million for the six monthsended June 30, 2012) representing a 95.7% increase compared to the Group’s Adjusted EBITDA forthe year ended December 31, 2010. This strong growth and margin profile is a function of the Group’smarket leading position, strong asset base and commitment to maintaining a lean and efficient costbase.

In addition, the Group’s cash generation profile demonstrates its financial strength and liquidity. For theyear ended December 31, 2011, the Group’s cash conversion rate, expressed as operating cash flowsas a percentage of Adjusted EBITDA, stood at 119.1% (106.2% for the six months ended June 30,2012), compared to a cash conversion rate of 123.1% for the year ended December 31, 2010, and114.7% for the year ended December 31, 2009.

The Group has also received a long-term corporate credit rating of BB- from S&P and a long-termcorporate credit rating of Ba3 from Moody’s, further highlighting its solid financial position.

Strong financial discipline and proven experience in international financial markets

The Group maintains a strong and cost-effective capital structure based on the cash flows it receivesfrom its multi-year operating lease contracts. Once railcars are acquired, they are able to support theGroup’s debt position through the revenue streams they generate. Since the Group’s inception, itsoperating cash flows have either been re-invested or used to repay any outstanding loans. In addition,the Group also has significant experience in the international debt markets that has allowed it to borrowat favorable rates. In 2007-2008, the Group secured debt funding from a group of international banksled by Société Générale and BNP Paribas in the aggregate amount of US$ 435 million, which theGroup repaid in June 2012. In 2010, the Group secured debt funding in the aggregate amount of US$300 million, which, in 2011, was subsequently increased to US$ 420 million, under the EBRD/IFCFacility and also raised US$ 112.5 million in equity through a private placement of securities. Inaddition, under the Mezannine Facility, one of the Parent’s shareholders also provided aUS$ 60 million 10-year loan convertible into equity under certain conditions. In October 2011, theGroup entered into the VTB/RBI Acquisition Facility with VTB Capital plc and Raiffeisen BankInternational AG, two of the underwriters of this Offering, for the aggregate amount of up to US$156 million, of which the Group drew down US$ 43 million and has since repaid in June 2012. At thatsame time, the Group also entered into a US$133 million ten-year finance lease facility with VTBLeasing. In May 2012, the Group obtained the US$ 250 million five-year fully-amortized loan from IFCand the group of commercial banks.

During its history, the Group has also attracted high quality equity investors such as IFC, Sumitomo,Macquarie Renaissance Infrastructure Fund (MRIF), UFG Asset Management and VTB Capital plc.

Defendable market position with high barriers to new entrants

The Group operates one of the largest privately owned fleet of railcars in Russia, according toINFOLine data. As of June 30, 2012, the Group’s fleet consisted of 22,734 railcars, 19,683 were leased

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under operating leases, 1,070 were leased under finance leases, 1,481 were used in transportationoperations and 500 were prepaid but undelivered. Because of its well developed asset base, strongclient base focused on the leading Russian industrial and transportation companies, and significantin-house research capabilities, the Group believes that its market position in the supply of railcars inRussia is sustainable.

The primary entry barrier into the operating lease market is ownership of a substantially large railcarasset base. Existing market players that already own a significant number of railcars, and as a resultcould more easily enter the operating lease market, generally do not focus on operating leasing as acore business segment and therefore assign a relatively small proportion of their assets and resourcesto it. In addition, companies that have large transportation operations generally incur higher operationcosts, including higher overhead costs, than the Group does, making any operating lease operationsthey may offer less profitable.

In addition to the Group’s asset base, the Group has developed stable, long-term relationships with itsclients which solidifies its position in the Russian operating lease market. The Group currently has 30operating and finance lease clients. Moreover, the Group’s weighted average client retention rate from2009 to 30 June, 2012, was 81%, in terms of number of railcars, and the Group believes that existingclients will exhibit significant demand for more railcars in the short-term. The Group believes that itslong-term relationships with its clients as well as its scale, allowing the delivery of a high-volume ofrailcars to the clients, make the Group’s position in the Russian operating lease market stable.Furthermore, it believes that its clients would face large hurdles, including logistical issues and tariffs, ifthe Group’s clients changed to a competitor.

The Group’s market position is also strengthened by its strong relationship with key railcar suppliers,which has historically allowed it to secure access to railcar supply, in spite of the general shortage ofrolling stock supply. Sixteen suppliers have been certified by the Group’s internal risk controlprocedures, giving access to a complete range of manufactured railcars required for its operations.Due to the Group’s constant presence in the railcar acquisition market and strong relationships withmanufacturers, the Group has a proven track record of being able to procure railcars even in situationswhen the market is in short supply.

The Group utilizes its in-house market research capabilities to help it monitor fleet usage by its clientsand pro-actively manages its fleet, so as to forecast supply/demand dynamic for railcars in order toexploit market opportunities.

Significant knowledge of the Russian operating leasing, railcar and transportation markets

Since its founding in 2004, the Group has developed significant knowledge and know-how in theRussian operating leasing, railcar, and transportation markets. The Group has developed proprietarymarket research capabilities, highly regarded by market players and industry consultants. Theseresearch capabilities allow the Group to monitor railcar usage by its clients in real-time and proactivelymanage its fleet, as well as to forecast railcar supply and demand dynamics to optimize the use of itsfleet. Through its research, the Group is able to gain significant insight into key trends anddevelopments in the industry and allow the Group to take advantage of the opportunities available to it.In addition, through its acquisition of ZAO ProfTrans, the Group has obtained a foothold in the freightforwarding market, through which the Group is able to observe many of the market dynamicsconfronting its clients as an industry participant, which further assists the Group in optimizing itsoperating lease fleet.

Sophisticated risk management

The Group has developed, and operates, a sophisticated risk management process to minimize itsexposure to obsolescence of the asset base (residual value risk), counterparty risk and end marketconcentration. The process applies to all lease transactions, allowing the Group to assess theacceptability of each new leasing transaction and to monitor the lease portfolio from a risk perspective.Furthermore, the Group’s management has experience in monitoring the maintenance of the Group’sleased railcars.

In addition, information technology that the Group uses allows it to track the exact railcar location inreal time and is integrated with the database of Russian Railways, mitigating the risk of any loss of therailcar fleet.

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Experienced management team and continued shareholder support

The Group has an experienced and highly-qualified team of senior management. The key members ofthe Group’s management team each have a minimum of ten years of relevant experience in the railwayand/or financial services sectors. Their knowledge combines an in-depth understanding of the Russianrail market with extensive international experience. The Group’s management is supported by a skilledgroup of employees that is characterized by a high degree of university-level education andqualification. Please see “Directors and Senior Management”. The Group’s management team hasproven its ability in both managing the significant growth of the business, both organically and throughM&A, (50% net revenue CAGR between 2005 and 2011) and managed the business successfullythrough the economic downturn in 2008 and 2009, with an Adjusted EBITDA growth in the year endedDecember 31, 2009 of 9.7%.

The Group enjoys a strong and transparent working relationship with its shareholders who haveconsistently supported the Group’s long-term growth strategy. The Group’s shareholders haveapproved multiple share capital increases, including a US$ 50 million rights offering in 2009 and aUS$ 172.5 million equity and mezzanine financing private placement in December 2010, and haveforgone dividends, allowing the Group to continue expanding its fleet.

Strategy

The Group’s vision is to become one of the largest and most profitable railcar operating leasingcompanies in Russia by making ongoing value-creating investments in the size and quality of its fleet,expanding into new markets and other rail related asset classes and procuring in-house maintenancecapabilities. Over the next five years, the Group will seek to continue leveraging its industry expertiseand client base, focus on quality of services, maintaining its strong financial position and theexperience and dedication of its management team to continue delivering strong growth, highoperating margins and stable operating cash flows to its investors.

Continue the Group’s focus on its core competency of railcar operating leasing

The Group will continue to focus on its core competency of freight railcar operating leasing, offering iton a multi-year contractual basis to its clients, a resilient business model, which provides it with asteady revenue stream and good earnings visibility. Operating lease rates under the Group’s multi-yearcontracts are based on the spot operating lease rates as at the time of signing the relevant contractand are either fixed through the lease term or have a Company’s option for periodical upward revision.Accordingly, the Group’s average contracted operating lease rates may lag behind the current spotoperating lease rates in a growing market but provide the Group protection and stability during marketdownturns. The Group believes that the long-term cash flow stability secured through long-termcontracts is more than adequate compensation for slightly lower short-term revenue in a growingmarket. Coupled with its low operating costs, the Group believes such a strategy will allow to maintainits profitability going forward.

The Group envisages that full-service leases will become the dominant type of operating leasing itoffers starting from 2013 due to the increasing demand from the clients for these services. Given thatthe maintenance costs offered by the Group under the full-service leases are easily predictable, theGroup does not envisage any major difficulties in switching the majority of its railcar portfolio to full-service leases.

The Group’s focus on railcar operating leasing and the young age of its fleet allows it to maintain a lowcost base, high margins and high operating cash generation. The Group’s business operations can beeffectively managed by a small team of professionals, focused on business development, railcartechnology and financial management. The Group believes that the continued focus on its corestrength of railcar operating leasing under multi-year contracts will allow it to maintain its profitabilityand strengthen its market position.

Maintain solid capital structure and prudent financial policies

The cost, tenor and flexibility of the Group’s capital structure is a key factor contributing to the Group’sability to grow the business in a profitable and predictable way and deliver a consistently high quality

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service to its clients. The Group’s business model is focused on stability of cash flows and allows theGroup to safely maintain optimal leverage while still having a solid credit rating from leading ratingagencies. The Group has continuously focused on managing its borrowing costs and, historically, it hasbeen successful in accessing the international debt markets and achieving favorable pricing and tenor.The Group’s key lenders are leading international and Russian financial institutions, which the Groupbelieves is indicative of their support of the Group’s strategy.

The Group’s prudent financial policies are subject to periodic review and approval by the Board ofDirectors. The Group aims to maintain a run-rate total indebtedness to Adjusted EBITDA ratio of up to4.0x, which should allow the Group to have a solid capital structure and deliver competitive returns toits shareholders.

This Offering will further diversify the sources of the Group’s financing and increase efficiency of itscapital structure.

Maintain high quality client portfolio

The Group will continue to focus on serving high quality clients to minimize its credit exposure. Since2004, the Group has built a high quality client portfolio currently comprising 30 clients, most of whichare leading Russian industrial and transportation corporations. The Group will continue to offer a highquality service to its clients, which has resulted in overall retention rates of more than 81% over thepast three years, and will selectively expand its client base.

The Group’s management designed and implemented a robust credit risk policy, ensuring that baddebts and losses are minimized. By screening all prospective operating lease contracts the Group isable to closely control its exposure to each industry, client and railcar type. The Group’s close attentionto credit risk management was rewarded during the 2008-2009 global economic downturn, when thegroup managed to successfully protect its contracts and cash flows: in 2009, the Group’s averageoperating lease rate fell by just 17%, versus a decrease in the spot daily rate of 75% to 80%, accordingto Industrial Cargoes and Group analysis, whilst the Group’s revenue and Adjusted EBITDA continuedto grow in 2009 as a result of railcar purchases completed during 2008 and new customer contracts.The total write-offs since the Company’s founding was only US$184,630.

With the acquisition of ZAO ProfTrans in August 2011, the Group purchased its rail-based freighttransportation business, which in the near term could be used as a platform for reaching new industriesand further promoting operating leases of specialized railcars to new clients. Small transportationoperations also allow the Group to better understand the underlying market and current market trendsto improve its client service and explore upcoming opportunities.

The rail freight transportation business will remain opportunistic and small in size compared to the corebusiness of providing freight railcar operating leasing services under long-term contracts, and theGroup will limit the number of railcars involved in freight forwarding.

Further strengthen the Group’s leadership position by opportunistically increasing the size ofthe Group’s fleet

The Group’s railcar fleet equaled approximately 2.0% of the entire Russian freight railcar fleet, as atJune 30, 2012 and 12% of the Russian operating lease market, according to INFOLine data. TheGroup believes that its railcar fleet size firmly establishes it as a top-tier participant in the Russianrailcar transportation market and that continued fleet growth will further strengthen its position. TheGroup believes that demand for its services will continue to increase, driven by both general increasedneed for transportation as the Russian economy continues to grow, the increasing age of the totalRussian railcar fleet and consequent replacement demand, and also as the result of a continuedincrease of the operating lease as a means to secure access to transportation capacity. Increasing thesize of the Group’s fleet will allow the Group to generate significant economies of scale and strengthenits relationships and market position with key clients, as it can serve more of its clients’ high volumetransportation needs.

The Group plans to pursue fleet growth only where favorable and profitable market opportunities existcoupled with favorable access to funding. The Group currently targets a fleet size of up to 40,000

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railcars, approximately 3% to 4% of the railcar market in Russia, and approximately 20% to 25% of theoperating lease market in Russia in the medium term. Achieving this level of growth is dependent uponmany factors, including the availability of financing, the external market conditions, the rate of returnexpected from the purchase, the type and amount of railcars available, and the credit quality of therailcar supplier. Moreover, any additional financing required for fleet growth must fit within theparameters set by its Board of Directors from time to time in terms of the level of financial risk theGroup is willing to assume. The Group intends to grow its railcar fleet organically but may also explorestrategic acquisitions of railcar companies, joint ventures and sale/leaseback transactions.

The Group’s fleet expansion is expected to focus on next generation railcars and specialized railcars,which provides better returns on investment, though it constantly monitors its fleet requirements andmakes purchase decisions based on a comprehensive assessment of the projected demand for itsservices, expected supply and demand for railcars as well as railcars prices and their anticipateddynamics, and targets return on capital. The Group has established firm relationships with leadingRussian and Ukrainian railcar manufacturers as well as leading international technology andcomponent suppliers, and benefits from these relationships by its ability to gain access to railcars inperiods of short supply.

The Group’s management team has proven its ability to prudently invest in fleet expansion as isdemonstrated by the Group’s strong financial track record and history of railcar growth. The Group isconfident that it can continue to expand its railcar asset base, if and when it is desirable to do so. TheGroup believes that its existing management platform and expertise can support additional assetswithout significant increases to its infrastructure or expense base due to the scalable nature of itsoperations.

Selectively invest in next generation railcars

The Group is actively pioneering the transition of the Russian railcar fleet to the next generationrailcars. In addition to increasing the size of its fleet through purchases of standard railcars, the Groupwill selectively seek to invest in next generation railcars. For example, in July 2011, it purchased a pilotlot of 70 next generation gondola railcars from Promtraktor Wagon Plant. The railcars have aninnovative bogie system developed by Amsted Rail, a leading international railcar technology supplier,which allows a considerable increase of the railcar’s load per axel, body space and carrying capacity.The Group believes that it will benefit from such technology through an increase in haul capacity and areduction of maintenance costs which will allow for significantly better railcar economics for the Group.The next generation railcars are subject to testing and mandatory certification by Russian Railwayswithin the next year, after which the Group expects to purchase more new generation railcars.

Expand opportunistically into new markets and new asset classes

The Group may consider expanding its geographical presence into new markets, including Ukraine andKazakhstan. Both Ukraine and Kazakhstan have similar markets to Russia in terms of technicalrequirements, infrastructure and supply/demand imbalance. At the same time, these markets do notpose any barriers in terms of culture and language. According to Group analysis, as at June 30, 2012,Ukraine’s fleet size is estimated to be approximately 180,000 railcars (approximately 16% of theRussian railcar fleet), and Kazakhstan’s market is estimated to be approximately 110,000 railcars(approximately 10% of the Russian railcar fleet).

The Group believes that its business model would provide for a successful entrance into thesemarkets. Moreover, a presence in Ukraine would also allow the Group to get closer to local railcarmanufacturers and strengthen its relationship with them.

The Group’s long-term strategy is focused on the railcar business, but the Company will also consideropportunities to expand into new asset classes, including locomotives, which is currently monopolizedby Russian Railways. The Russian locomotive segment is expected to be liberalized in the next stageof Russian railway reform, which will also make locomotive leasing possible. According to RussianRailways, as at December 31, 2010, the current Russian fleet comprised approximately 20,000locomotives, with all new locomotive production contracted by the Russian Railways for the next threeyears. The Group believes that its successful operating leasing model could be employed in thelocomotive segment, provided that locomotives become available for private operators as currentlyenvisaged by the Russian railway reform.

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Develop fully integrated maintenance and repair capabilities

The Group believes that the maintenance of its railcars will become more and more important for theGroup as the size of its fleet grows and the majority of the Group’s portfolio is represented by full-service operating leases. Two major drivers of the Group’s increased exposure to maintenance risksare increased fleet size and increased average age of the fleet. The number of the Group’s railcarsabove three years old will increase, and as such, the number of required depot repairs will grow fasterthan its fleet size. Over the period of the next ten years, most of the Group’s railcars will also require acapital repair and one or two wheelset replacements. Incorporating in-house repair facilities to theGroup’s value chain will allow the Group to control time, cost and quality of maintenance operations,improving profitability even in case of a repair capacity shortage. However, the Group does not intendto add maintenance as a separate line of business and revenue stream. To this end, the Group mayconsider acquiring rail depot facilities, potentially through a joint venture, or participating in potentialprivatization of one of Russian Railways captive repair and maintenance companies (VRKs).

History and Development

Railway reform in Russia, which began in 2003, has opened the market to private investors andcreated attractive investment opportunities. The Group was established in 2004 after its foundingshareholders, Messrs. Martin Andersson and Gerald de Geer, both founders of the Brunswick Group, aprominent brokerage house, which subsequently became Brunswick UBS Warburg, undertook anextensive feasibility study on the attractiveness of the rail transportation market in Russia. The Group’soriginal strategy was to introduce to Russia the operating leasing of railcars, a proven business modelthat had rapidly developed in markets such as the US and Western Europe and that was not at thetime present in the Russian market. The Group was originally incorporated as a privately ownedholding company in Bermuda under the trading name, Brunswick Leasing Limited, which was laterchanged to Brunswick Rail Limited in the course of the Group’s re-branding in 2010.

The Group has achieved its position as one of the leading providers of railcar operating leasing inRussia by rapidly increasing its asset base and providing best-in-class services to its clients. ByDecember 2004, the year of the Group’s incorporation, the Group owned 610 railcars, by December2005, the number of railcars in its fleet reached 3,038. In December 2006 and 2007, the Group held3,529 and 7,265 railcars, respectively. By 2008, the Group had acquired 10,403 railcars, and by theend of 2010, its fleet reached 13,601 railcars.

2011 was a transformational year for the Group which marked a significant milestone in the Company’sdevelopment. During that year, the Group increased its fleet by 73% from 12,601 as at December 31,2010 to 21,759 as at December 31, 2011. The Group acquired 9,958 railcars, 4,445 of which wereacquired through organic growth, including 70 next generation railcars, and 5,513 of which were theresult of the successful execution of three fleet acquisitions, including the acquisition of 742 railcarsfrom CentroCredit Bank, the acquisition of 1,000 railcars from OOO Promtransinvest, and theacquisition of OOO Brunswick Trans holding a fleet of 2,124 railcars under finance leases with VTBLeasing, and one business acquisition, including the acquisition of ZAO ProfTrans holding a fleet of1,647 railcars. As a result, Adjusted EBITDA more than tripled from US$ 71 million for the year endedDecember 31, 2010 to US$ 214 million for the twelve months ended June 30, 2012. As atJune 30, 2012, the Group had acquired a total of 22,734 railcars and as at the date of this Prospectusits railcar fleet consists of 22,005 railcars due to the expiration and termination of finance leasesrelating to 729 railcars.

Throughout its history, the Group has demonstrated its capability in structuring efficient financingsolutions, both debt and equity-related, allowing it to meet its growth targets. Since its founding, theGroup has raised in total US$380 million of equity and US$1.3 billion of debt capital in 14 capitalraising and refinancing transactions on competitive terms. Strong financial performance of the Group,its solid business model and financial position were recognized by rating agencies, resulting in a BB-long-term corporate rating from S&P and a Ba3 long-term corporate rating from Moody’s in 2011.

Recent Acquisitions

Acquisition of 742 railcars from CentroCredit

In March 2011, the Group completed the acquisition of fleet of 742 railcars from CentroCredit Bank. AllCentro Credit railcars stayed with original lessees with the exception of 153 mineral hoppers that wereremarketed.

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Acquisition of 1,000 railcars from OOO Promtransinvest

In July 2011, the Group completed the acquisition of 1,000 refurbished railcars from OOOPromtransinvest. The acquired railcars were subsequently leased to two established Group customerson the basis of 3-year full-service operating leases. The useful life of the railcars is 5.5 years with apossible extension for an additional 3 years.

Acquisition of ZAO ProfTrans

In August 2011, the Group completed the acquisition of 100% of shares in ZAO ProfTrans, a medium-sized Russian transportation company with a fleet of 1,647 railcars owned or held on the basis ofoperating and finance leases. In addition to railcar operating leases, ZAO ProfTrans also offers rail-based freight forwarding services.

Acquisition of OOO Brunswick Trans

In October 2011, the Group acquired a 100% participation interest in OOO Brunswick Trans, a newly-established company that holds 2,124 railcars under finance lease provided by VTB Leasing, from theshareholders of OOO RG-Trans and also established a relationship with VTB Leasing, with whom theGroup entered into a 10 year finance lease facility.

Group Structure

The chart below shows the simplified Group structure as at the date of this Prospectus.

Brunswick RailLimited(2)

Brunswick RailGroup Limited

Brunswick RailGroup (Cyprus)

Limited

Brunswick Rail(Cyprus) Limited

OOOBrunswick RailManagement

(1) Issuer(2) Guarantor

OOOBrunswick Rail

Leasing(2)

OOOBrunswick Rail

Service(2)

OOOBrunswick

Wagon Leasing(2)

OOOBrunswick

Wagon Service

OOOTransmash

Active

ZAOProfTrans

OOOBrunswick

Trans(Ekaterinburg)(2)

Brunswick RailFinance Limited

(Ireland)(1)

MeconennEnterprises

Limited

OOOProfExpo

Trans

OOOTransActive

Brunswick RailFin Limited

Brunswick Wagon Fin

Limited

Brunswick Wagon (Cyprus)

Limited

TobikocoLimited

0.1%

100%1% 99%

100% 100% 50%

Brunswick Wagon Service

(Cyprus) Limited

Brunswick RRR(Cyprus) Limited

Brunswick RailTrans (Cyprus)

Limited

Brunswick RailFinance Public

CompanyLimited

Brunswick RailHolding Limited

Brunswick WagonHolding Limited

Brunswick Wagon ServiceHolding Limited

100% 100% 100%

100%100%100%100%100%100%

99% 1% 99%

99% 1%

1% 1% 98.9997% 0.0003% 1% 99%

100% 100% 100%

100%99.9%

99%

1%

100%

Operations

The Group is the largest privately owned provider of operating leases of freight railcars to corporateclients in Russia in terms of the number of railcars as at June 30, 2012, according to INFOLine data.The Group leases out railcars, that it either owns or holds on finance lease, under multi-year contracts.Since August 2011, the Group has been offering a limited amount of transportation services but theeconomic impact of this service is not a significant part of the Group’s business.

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Railcar Fleet

Over the past six years, the Group’s fleet has grown rapidly to 22,734 railcars, as of June 30, 2012and, as at the date of this Prospectus, its railcar fleet consists of 22,005 resulting from the expirationand termination of finance leases relating to 729 railcars. The following table shows the growth of theGroup’s fleet since 2005:

As at December 31, As at June 30,

2005 2006 2007 2008 2009 2010 2011 2012

Fleet size . . . . . . . . . . . . . . . 3,060 3,700 7,385 10,403 10,703 12,601 21,759 22,734

There are five main types of general purpose and semi-specialized railcars in the Group’s portfolio:

• Gondola—The gondola is an open-top high-sided railcar designed for carrying loose bulkmaterials (coal, ore, crushed stones, etc.). A gondola may be equipped with dump doors inthe floor and hinged end walls or a solid body;

• Hopper—The hopper car is a closed-top railcar used to transport loose bulk commoditiessuch as mineral fertilizers, cement, grain, etc. A hopper’s dumper body is shaped like a funneland has gates at the bottom to empty cargo by the force of gravity, making for quick andeffective unloading;

• Platforms—The universal platform is a railcar designed to transport timber, wheeled andtrack-type vehicles, boxed cargoes, metal structures and long cargoes;

• Boxcars—The box car is designed to transport various types of products (including foods)that require protection against precipitation; and

• Tank cars—The tank car is designed to carry liquids, including oil and petroleum products,chemically active and aggressive liquid substances (acids, alkalis and other compoundsubstances), liquefied gas (propane-butane, oxygen) and others.

The following table lists the number, the percentage of the Group’s fleet and average age of each typeof railcar that the Group owns or holds on finance lease, as of June 30, 2012:

Type of RailcarNumber in

Fleet % of Fleet Average Age (years)

Gondola 16,049 70% 5.0Hopper 3,391 15% 5.2Platform 667 3% 7.2Box car 380 2% 3.4Tank car 2,247 10% 1.8

Total 22,734 100% 4.8

The young age of the Group’s fleet is one of its key strengths. The average age of the Group’s railcarsis 4.8 years compared to the market average of approximately 16 years and a useful technical life of22 to 40 years, according to INFOLine data. This gives the Group one of the youngest fleets in theRussian market.

Railcar Suppliers

The Group has established firm relationships with well-known railcar manufacturers in Russia andUkraine. The Group works directly with manufacturers avoiding the use of independent trade housesand unrelated intermediaries that are not able to provide adequate post sale guarantees and technicalsupport. The benefits of these relationships are the ability to gain access to railcars in periods of shortsupply and, in addition, to achieve more favorable pricing terms than the prevailing market prices.

The Group is one of the largest purchasers of new railcars in Russia and has well established contactswith the main suppliers for the Russian railcar market. As a part of the Group’s risk managementprocedures (please see “—Risk Management” below) the management pre-approves each supplier,and it currently has approved the following 16 suppliers as suppliers of railcars and components:Azovmash (Ukraine), Altaivagonzavod (Russia), Bryanskiy Mashinostroitelny Zavod (Russia),

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DneproVagonMash (Ukraine), Kryukovsky Wagon Plant (Ukraine), Novokuznetsky Wagon Plant(Russia), Stakhanovsky Wagon Plant (Ukraine), Uralvagonzavod (Russia), VKM/Ruzkhimmash(Russia), ZMK Plant (Russia), Abakanwagonmash (Russia), Kaliningradskiy Wagon Plant (Russia),Promtraktor Wagon Plant / Kanashsky Repair Plant (Russia), Transmash (Russia), Transmash(Ukraine) and Mogilevskiy Wagon Plant (Belarus). The manufacturers that the Group sources railcarsfrom have a total production capacity of approximately 110,000 railcars per annum and produced anaverage of approximately 99,000 railcars in 2011, according to Industrial Cargoes and Group analysis.Eight of these suppliers have supplied railcars to the Group in the past. No single supplier hasaccounted for more than 36% of the Group’s railcars.

The following table shows the average price the Group has paid per railcar since January 1, 2005:


2005 2006 2007 2008 2009 2010 2011

(in US$ thousands)

Average price paid per railcar . . . . . . . . . . 41 43 44 68 40 42 69

In order to secure production capacity, the Group is usually required to make an advanced payment forpart of the price for the railcars which the Group sources from its suppliers. The prepayment rangesfrom 50% to 100% of the price of a railcar.

The typical delivery time for a new railcar ranges from 60 to 90 days from the date of the relevantsupply contract.

Generally, all of the Group’s railcars have already been placed on a lease contract at the time theGroup takes delivery.

Operating Lease Contracts

Operating leasing is the Group’s key product. In these contracts, which have a length of one to sevenyears, the leased asset remains on the balance sheet of the Group whilst the utilization risk istransferred to the lessee and the Company retains the title and exposure to the residual value at theend of the lease. Given these characteristics, the product has proven popular with clients who wish topreserve their debt capacity and equity capital while guaranteeing the availability of a non-core assetessential for their transportation needs.

The Group offers two types of operating lease contract: triple-net and full-service.

• Triple-net leases: under these contracts, the clients accept full responsibility for depot repair,while the Group is responsible for capital repair and wheel-set replacement. Triple-netcontracts currently account for the majority of the Group’s operating leasing contracts.

• Full-service leases: full-service leases are common in more mature operating lease marketssuch as the U.S. In a full-service lease, the lessor assumes depot repair risk in addition to theresidual value risk. Under these contracts, the Group accepts responsibility for railcarmaintenance that is included in the lease rate.

In the past, the Group has also used finance leases opportunistically as a way to gain exposure tocertain of the Group’s clients. Financial leasing has allowed the Group to attract new clients and offerleases on railcars which it deemed as illiquid and where it was not willing to assume the residual valuerisk. The Group does not consider finance leases to be a key product, and it is not part of the Group’slong term strategy, therefore the Group’s finance lease services will end as current finance leasecontracts expire. This is anticipated to occur between 2012 and 2019.

The following table provides for the number of railcars according to the type of lease as at June 30,2012 and as at December 31, 2011, 2010, and 2009:

As atJune 30,

As atDecember 31,

2012 2011 2010 2009

Operating LeaseTriple-net . . . . . . . . . . . . . . . . . . . . . . . . 9,907 9,802 9,441 7,733Full-service . . . . . . . . . . . . . . . . . . . . . . 9,776 9,406 1,290 1,100

Finance Lease . . . . . . . . . . . . . . . . . . . . . . . 1,070 1,070 1,870 1,870

Total leased railcars . . . . . . . . . . . . . . . . . . 20,753 20,278 12,601 10,703

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In operating leases, which typically have a contract term of two to three years, the leased assetremains on the Group’s balance sheet whilst the utilization risk is transferred to the lessee, and theGroup retains exposure to the residual value at the end of the lease; substantially all of its operatinglease contracts have daily lease rates indexed to US$.

The Group’s operating leases provide clients with:

• the ability to lock in a significant portion of transportation costs over an extensive period,thereby avoiding volatility from the short term lease market;

• flexible management of railcar fleet needed for transporting their cargo;

• ability to secure availability of transportation capacity whilst preserving capital for investmentin core activities; and

• access to one of the newest railcar fleets in the Russian market.

As the market continues to mature, the Group expects that the demand for full-service leases willcontinue to increase, and it envisages that full-service leases will become the dominant type ofoperating leasing starting from 2013. With the expertise and experience that the Group has built overthe past eight years, it anticipates being able to predict the additional maintenance costs therebyassumed. Currently, the Group does not expect any significant difficulties in switching the majority of itsrailcar portfolio to full-service leases.

For new contracts, the Group expects to continue to offer contract lengths ranging between one andseven years maturity going forward, but with a strong focus on terms ranging between three and fiveyears. As at June 30, 2012, the Group’s average contract length was 2.9 years.

Remarketing and Extension of Lease Contracts

Where possible, the Group seeks to have its current clients extend their operating lease contracts atmarket rates as they mature. The Group’s lessees must provide the Group with 60 days notice toextend their lease contracts, in order to provide the Group’s management with enough time to examinealternative deployment of the railcar, if needed. If a lessee fails to provide the Group with such notice,the operating lease will automatically expire at the end of the term, and the lessee will be required toreturn the railcar pursuant to the lease terms. The Group’s operating leases contain detailed provisionsregarding the required condition of the railcar and its components upon redelivery at the end of theoperating lease term. In the case of returning a railcar to the Group, the client is obliged to compensatethe Group up to 50% of the rail tariff for delivering the railcar from its current location to the Group,which creates substantial switching costs for the Group’s clients—an additional incentive for them torenew their leases.

The following table shows the number of railcars supplied under renegotiated operating leases and thepercentage of clients retained for the six months ended June 30, 2012 and the year endedDecember 31, 2011, 2010, 2009:


Year endedDecember 31,

2012 2011 2010 2009

Number of railcars renegotiated . . . . . . . . . . . . . 1,658 1,790 1,679 1,879Percentage of clients retained . . . . . . . . . . . . . . . 89.3% 70.4% 85.1% 76.1%

The quality of the Group’s fleet of railcars as well as its portfolio of long term operational leases haveenabled the Group to maintain high utilization rates close to 100% (excluding railcars used in theGroup’s freight forwarding services).

The following table shows the average utilization rates of the Group’s cars as a percentage of theaggregate fleet size for the first two quarters of 2012 and each quarter of 2011, 2010, and 2009:

Q1 Q2 Q3 Q4

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 100% — —2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.0% 99.8% 99.9% 100.0%2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.1% 100% 100% 99.5%2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.6% 98.6% 99.0% 100%

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In general, variation of the Group’s utilization rate results from the transportation of railcars from itssuppliers to the Group’s clients, rather than as a result of idle usage during remarketing phases.

Leaseback Contracts

A leaseback is an acquisition of used railcars from the existing owner-operator and subsequentprovision of railcars to the seller on an operating lease basis (triple-net or full-service). This means offinancing can provide the client with immediate cash flow as well as capital structure benefits. In thenear future, the Group believes that there will be further opportunities to actively develop sale andleaseback products. Transportation operators and freight owners are likely to be more willing tooutsource railcar fleet and focus financial resources on their core businesses and, at the same time, tobe assured of the availability of railcars when needed.

Transportation Services

As a result of its acquisition of ZAO ProfTrans in August 2011, the Group also offers rail-based freighttransportation services. The Group’s rail-based transportation services primarily involve transportingcontainers owned by the Group on its railcars to third parties. Transportation contracts are typicallysigned for one year with an automatic renewal and 15 days cancellation notice period. The Group doesnot consider railcar freight transportation services as a part of the its main strategy, and the Group’sinvolvement is primarily motivated to increase the Group’s knowledge of the market. As of June 30,2012, 1,481 of the Group’s railcars were used in transportation operations for the shipment of ironscrap and other freights.

Legacy Business

In the past, the Group had also offered finance leases opportunistically as a way to gain exposure tocertain clients, perceived to be strategically important for further growth. Under a finance lease, thelessee takes the risk on residual value and acquires the title of the railcar for a nominal amount at theend of the lease under a purchase agreement. Terms of the purchase agreement are agreed at thebeginning of the lease. The length of finance lease contracts is generally five to ten years and theequipment is normally fully amortized during this period.

Financial leasing has allowed the Group to attract new clients and offer leases on railcars which itdeemed as illiquid and where it was not willing to assume the residual value risk. The Group has notoffered finance leases since 2007, and it is not part of the Group’s long-term strategy; therefore theGroup’s finance lease services will end as its current finance lease contracts expire.

Pricing

The Group’s pricing policy is primarily determined by the prevailing prices in the spot market. Operatinglease rate and the price of a new railcar have over several years displayed a strong correlation witheach other. In 2004, for example, the price of a gondola was approximately US$ 35,000 and the dailyoperating lease rate was approximately $18. As gondola prices increased during the 2005-2008 period,reaching above US$ 100,000, daily operating lease rates also almost tripled, settling at approximatelyUS$ 55 per day. During the market downturn in 2008-2009, gondola prices retreated back toapproximately US$ 30,000 and daily operating lease rates fell to just under US$ 20. Then, in early2010, as the markets started to recover, both gondola prices and daily operating lease rates increased.In the second quarter of 2012, new gondolas cost approximately US$ 72,100 and the daily marketoperating lease rate was approximately US$ 39. See “Industry.” In negotiating the operating leaserates the Group adjusts the market price of railcars based upon a number of factors, including the typeof operating lease contract entered into and the length of the contract.

The following table provides the average daily railcar operating lease rate for the first three quarters of2012 and each quarter of 2011, 2010, and 2009.

Q1 Q2 Q3 Q4

(in US$)

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 37 37 —2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 29 32 352010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 24 25 252009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 25 24 24

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Under the Group’s operating lease contracts, the operating lease rate is expressed as the amount ofpayment for possession and use of one railcar per day. During the term of a contract, the daily ratecould be indexed upwards, depending on the spot market performance but may not be below the dailyrate set at signing of the contract. In most contracts, the operating lease rate is quoted in US dollarsand payable in Roubles at the exchange rate published by the CBR on the day of payment.

The Group’s operating lease contracts typically assume 30-day prepayment and significant penaltiesfor late payments.

Client Base

The Group’s client base consists of two major groups of customers:

• Freight owners. Leading Russian industrial companies operating in the mining, steel, ore, coaland chemicals sectors. These clients may or may not have in-house transportation divisionsand often own some railcar fleet. They increasingly use operating leasing services, both short-and long-term, provided by the Group as well as other companies, including rail operators, asa source of railcars as well as a way to manage peak volumes; and

• Rail transportation companies (freight forwarders). There are approximately 2,000 railoperators in the Russian rail infrastructure industry, ranging from companies managing only afew hundred cars to the largest railcar owners, such as Freight One and Globaltrans. Railtransportation companies are often willing to pay higher lease rates for railcars during marketupturns, and are less stable than industrial clients during downturns.

The Group currently serves 30 leasing clients involved in the manufacturing and transportation ofcommodities, including iron ore, chemical and mineral fertilizers, coal and steel products, timber, pulp,paper and oil and other petrochemical products. The largest contributors of these sectors are thetransportation, coal and coke and chemicals sectors which collectively accounted for 83.3% of theGroup’s railcars as of June 30, 2012. As of June 30, 2012, SUEK, the largest single client of theGroup, accounted for approximately 15% of the Group’s operating lease revenue, and the top tenclients together accounted for approximately 80.8% of the Group’s operating lease revenue.

The following table shows the number of railcars leased by the Group’s and the percentage of theGroup’s leased fleet by industry, as at June 30, 2012:

IndustryNumber of

railcars % of Fleet

Chemicals & Mineral Fertilizer 2,349 11.3%Coal & coke 7,068 34.1%Construction material 166 0.8%Ferrous Metals 2,456 11.8%Oil, gas & petrochemicals 760 3.7%Timber, pulp & paper 465 2.2%Transportation 7,489 36.1%

Total 20,753 100.0%

The following table shows the Group’s top ten clients as a percentage of revenue, for the six monthsended June 30, 2012; their industry, the number of railcars leased to them and the average remainingcontract length:

Client Industry Client sinceNumber of

railcars leased

Average remainingcontract length

(years)

OAO SUEK Coal and coke November 2007 3,354 1.4Zarechnaya Coal and coke November 2011 2,124 6.3OOO UralChem-Trans Chemicals and

mineral fertilizers April 2008 1,849 4.6OOO ZapSib-Transservice Transportation March 2010 1,786 1.9EUROSIB Group Transportation August 2005 1,470 0.9UKAS-Holding Coal and coke February 2011 1,470 2.9OOO TransGarant Transportation January 2005 1,050 1.8Sovfrakht-Sovmortrans

Group Transportation March 2011 1,000 6.0OOO Spetsenergotrans Transportation April 2010 919 1.6

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Sales and Marketing

The Group’s core commercial strategy is to concentrate on large, well-established clients with strongcredit profiles. The Group’s client portfolio therefore consists of selected corporations that meet theGroup’s credit requirements, please see “—Risk Management”. The Group believes that there arebenefits to this strategy:

• large corporations are generally more stable and typically display a better counterparty riskprofile. At the same time they also require larger fleets and expect suppliers to be able tomeet their demands;

• because it is able to meet a large portion of the Group’s clients’ railcar needs, the Group isable to build stronger relationships with its clients; and

• because it focuses on a selected group of clients, the Group can keep overhead costs low asonly a limited sales force is required to establish and maintain relationships with its clients.

The Group’s business development department is responsible for developing and maintainingrelationships with the senior operations staff of the Group’s clients, negotiating lease contracts andcoordinating with their operating level staff. This close customer communication allows the Group tonegotiate lease contracts that satisfy both the Group’s financial return requirements and the Group’sclients’ operating needs and ensures that the Group is aware of its clients’ potential equipmentshortages and that they are aware of the availability of the Group’s railcars.

Maintenance and Repair

Currently, most of the Group’s clients undertake railcar maintenance pursuant to the triple-netoperating lease contracts. The Group undertakes maintenance under full-service operating leasecontracts and such maintenance is conducted by three railcar repair companies, VRK-1, VRK-2 andVRK-3, all of which are Russian Railway subsidiaries. Under the Group’s agreements with VRK-1,VRK-2 and VRK-3, the Group can purchase repair services from their depots at fixed prices. Thecontract term is until the end of 2012, and the contracts are expected to be renewed annually.

The Group believes that the maintenance of its railcars will become more and more important for it asthe size of its fleet grows and the majority of its portfolio is represented by full-service operating leases.Two major drivers of the Group’s increased exposure to maintenance risks are increased fleet size andincreased average age of the fleet. Own maintenance will allow the Group to control time, cost andquality of maintenance operations even in case of a repair capacity deficit. The Group’s fleet agestructure will change over time. The number of the Group’s railcars above three years old will increase,and as such, the number of required depot repairs will grow faster than the Group’s fleet size. Over theperiod of the next 10 years most of the Group’s railcars will also require a capital repair and one ortwo wheelset replacements. To this end, the Group may consider acquiring rail depot facilities,potentially through a joint venture.

Risk Management

Counterparty risk

Counterparty risk relates to a potential loss resulting from a counterparty not meeting its obligationsunder lease or supply contract. The Group uses prepayments with its customers, therefore the leasecontract counterparty risk is mainly related to the opportunity cost and economic loss resulting from thetime lag before the railcar would be remarketed. The supply contract counterparty risk mainly relates tothe loss of prepayments for railcars and equipment, as well as warranty claims and the correspondingeconomic loss. So far all of Group’s supply contracts have been fulfilled and the correspondingwarranties received.

In order to manage and limit its exposure to the counterparty risk, the Group has developed an internalpolicy approved by the Board of Directors and applied to all lease transactions (the “Credit Policy”).The Credit Policy contains guidance on how to assess the acceptability of each new leasingtransaction, how to monitor the lease portfolio from a risk perspective and a conceptual framework tomanage the risk associated with the railcar fleet mix. The Credit Policy sets a series of checks andthresholds to maintain concentration limits for specific types of railcar and also provides a specificprocess to manage exceptions.

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The Credit Policy provides that each lessee must, at inception of a potential transaction, meet anumber of quantitative and qualitative criteria and that each transaction must be assessed not only onthe basis of the client’s credit profile but also in relation to the type of equipment to be leased and thetransaction’s overall profitability and structure.

The Credit Policy also covers counterparty risk related to its suppliers, including various policies ofmanaging risks related to down payments for railcars and manufacturers’ warranties. The Group alsoassesses supplier default risk by analyzing its financial position and results prior to purchase dealconclusion. Further the financial statements of current Group suppliers are requested and analyzed onquarterly basis.

To control supplier default risk the Group ensures that the amount of advance payments made tosuppliers does not at any time exceed certain pre-determined amount. In addition, the Groupoccasionally uses bank guarantees and letter of credit instruments in order to further minimize theexposure to any suppliers’ risks. Sale and purchase contracts with suppliers also ensure the supplierwarranty for the production defects, late delivery of railcars, and the respective potential loss of leaserevenues.

The Credit Policy also seeks to balance the overall risk profile of the operating leasing portfolio throughthe inclusion of a variety of concentration limits, including:

• Individual lessee limit;

• Industry sector limit; and

• Railcar type limit.

Given the Group’s focus on gondolas and hoppers there is, and will likely remain, a relatively largeexposure to the coal and coke, chemical and mineral fertilizer and transportation industries.

The Company’s chief executive officer is responsible for updating the policy and seeking approval ofthe policy by the Board of Directors. The Board of Directors has delegated the implementation of thepolicy to the chief financial officer and the approval of exceptions to the policy to the Credit Committee.

Credit application, assessment and approval

The Group uses a standard application form for internal transaction approval which includes anassessment of the potential client’s credit quality, the nature of the equipment to be leased and thestructure of the transaction, including any deviations from the Group’s standard contract terms and ananalysis of the expected transaction profitability. The preparatory work also includes a detailed reviewby the internal legal team.

Transactions that result in an aggregate client exposure of up to US$10 million must be approved by allthe executive members of the Credit Committee while transactions in excess of this amount must beadditionally approved by members of the Credit Committee appointed by the Board.

For each level of assigned risk, the Group has established a set time period after which its customersmust be reviewed to reassess any developments in their performance. Customers who received thelowest of the acceptable scores are reviewed quarterly; those with the best score are reviewed everytwelve months. For clients showing negative developments, the Group may take remedial action,including, but not limited to, requesting meetings with management to discuss and understand thebackground to the developments and any corrective actions taken, not entering into any newtransactions and monitoring the maintenance status of the railcars more closely in order to ensure thatthe equipment is properly maintained. During the 2008-2009 global economic downturn, managementshortened the review cycles and also initiated special follow-up procedures, sometimes on a dailybasis, to assure that any developing problems were detected early.

Portfolio risk allocation and diversification

The Credit Policy sets out a number of concentration limits for various categories, to ensure that theCompany maintains a high level of diversity both in terms of its client base and industrial sector whereits railcars are employed.

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An assessment of each concentration limit is made before entering into a new lease contract based onthe prevailing market value of the railcars covered by the contracts as compared to the value of theentire fleet. The market value of the fleet is assessed on a quarterly basis by an independent appraisalcompany. To continually maintain the set level of diversification, the portfolio ratios are monitored on amonthly basis. The Group believes that despite the relatively large exposure to certain industries theapplication of these concentration limits has allowed it to form a diversified portfolio, striking a balancebetween client credit risk, portfolio asset quality, overall risk profile and profitability.

Residual value risk management

The Group has a dedicated sub-division for analysing market developments in order to gain understandingon how demand for certain railcar types might develop. This information influences the Company’sprocurement strategy to ensure the development of a railcar portfolio that meets market demand.

Procurement risk

In the recent past the railcar manufacturing industry went through a period of operating at100% capacity utilization and as a consequence the inability to satisfy market demand for railcars.Manufacturers’ utilization ratio dropped significantly in 2009 following a short-term decline in marketactivity and railcar demand, but it quickly returned to 100% utilization levels, once the economicrecovery started in late 2009.

The Group has established firm relationships with well-known and successful railcar manufacturersand their captive trade houses. The Group avoids the use of independent trade houses and unrelatedintermediaries that are not able to provide adequate post-sale guarantees and technical support. Thebenefits of these relationships is the ability to gain access to railcars in periods of short supply and inaddition achieve more favorable pricing terms than the market.

The Company pays close attention to the quality of railcars provided by suppliers and the majority of itscontracts assumes a manufacturer’s warranty that also covers potential loss of lease revenues for theGroup in case of production defects.

Insurance

Under the Group’s lease contracts as well as certain of its loan agreements, the Group is obligated toinsure its railcars against property damage and, in case of the loan agreements, also to arrange forthird party insurance. The Group’s current insurance policies include:

• Property damage insurance with a limited indemnity of US$ 25 million covering such risks asphysical loss and damage of cars, including collision and derailment. The Group believes thatits risk to property damage is low because its railcar assets are widely distributed throughoutthe country;

• Liability insurance covering the risk of damages and injuries to persons, including the lessee’semployees (total limit US$ 10 million).

The Group generally maintains the types of insurance customarily available to businesses in the sameindustry in Russia.

Competitive Environment

The market for railcar operating leasing consists of the following major groups of players: pureoperating lessors focused predominantly on operating leasing business, financing lessors focusedpredominantly on financing leasing business, operators that provide operating leasing in addition totheir core transportation services and railcar manufacturers that also provide leasing as an alternativeoption to selling railcars. Transportation operators focus on providing short-term (under 12 months)contracts to other operators or affiliated companies whereas operating leasing companies focus onmulti-year contracts, to both freight owners and transportation companies. This significant difference isa result of operators leasing out surplus fleet on a short term basis to maximize utilization and in thelong term aiming to maintain the flexibility to use the fleet if required. As a result, transportationoperators do not develop the same long term relationships with clients as operating lessors do. In

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addition, operators tend to lease out older and lower quality fleet retaining the younger higher qualityfleet for their own use. While financing lessors do contribute and participate in the overall railcar supplymarket, the Group does not consider financing lessors as its competitors as they essentially providesecured loan financing for the acquisition of railcars.

The Group is one of the leading private companies in the Russian railcar operating leasing market,accounting for approximately 2.0% of the total Russian fleet of railcars used in operating leasing as atJune 30, 2012 and 12% of the Russian operating lease market, as of June 30, 2012, according toINFOLine data. For those companies that focus on operating leasing as a core business, the Groupconsiders its primary competitors to be Rail 1520, ZAO OTEKO and RRR. For those companies thatoffer transportation services in addition to providing operating leasing, the Group considers its primarycompetitors to be Freight One and Globaltrans.

For more information regarding the Group’s competitive environment, please see “Industry—Competitive environment”.

IT System

The Group’s operations are supported by an advanced information technology infrastructure whichfacilitates key business functions and processes, including: business planning, Russian and IFRSaccounting, proprietary railcar tracking systems, treasury, purchasing, contract administration,budgeting, personnel, front office systems, and critical business support and administration, includingelectronic system for contracts approval.

The Group’s proprietary railcar tracking system connected with the railcar data base of RussianRailways allows the Group to track the location, starting point, destination, cargo and the client for eachof its railcars. This data is available to the Group on demand from Russian Railways for a subscriptionfee allowing it to identify the location of its railcars real time. The Group uses this tracking system totrack its railcars at least on a monthly basis.

A separate back-up system has been established outside the Moscow facilities to ensure data safetyand IT infrastructure efficiency in case of emergency. The system synchronizes with the Moscow officeIT system on a regular basis, and if needed, can be transformed into an autonomous IT systemcontaining all corporate data and ensuring critical functionality. In addition to this, the Group conducts aweekly data and server back-up to a separate external storage device. Presently, virtual technology isbeing implemented to lower the dependence of the system from physical equipment used, and toimprove its fail-safety.

Employees

As at June 30, 2012, the Group employed 104 people. The entire workforce is employed by theGroup’s Russian, and Cypriot subsidiaries. The Group’s employees are predominately located inRussia with three employees based in Cyprus. The majority of the Group’s employees have extensiveexperience either in the rail businesses or in the financial services sectors and have significantexperience in managing risk associated with credit exposure as well as with the composition of railcarportfolios. None of the Group’s employees are a party to any collective bargaining agreements nor arethey members of any trade unions.

The following is a table of the number of employees according to department as at June 30, 2012:

Department Number of Employees

Executive Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Business Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Finance and Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Technical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Legal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Marketing & Corporate Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19IT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

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The Group did not have any significant reduction in the number of employees during the economicdownturn.

The Group does not use temporary employees for its business.

The Group has a share based compensation program for certain executives of the Group. For moreinformation on the program, please see “Directors and Senior Management—Share-BasedCompensation”.

At present, the Group makes mandatory pension contributions for its employees as stipulated byRussian law. Currently, the Group does not maintain any voluntary pension fund or pension programsand has no agreements with its employees to provide pension or retirement benefits.

Environmental

By the nature of its business, the Group is not exposed to any environmental liabilities, nor does itexpect to be exposed to any in the future. According to Russian law regulating leases and the RussianCivil Code, lessors do not bear any environmental liabilities deriving from the utilization of leasedassets by lessee unless a hidden defect can be demonstrated, for which the supplier of the railcar willultimately be liable. Although protected by the law, the Group is, nevertheless, insured against potentialenvironmental liabilities. The Group also employs certain prudential measures to reduce itsenvironmental impact. Currently, it is not involved in any environmental approvals, nor does the Grouphave any environmental claims asserted against it.

Real Property

The Group currently leases two offices in Russia and one in Cyprus. It does not own any material realproperty.

Intellectual Property

The Group does not hold any material intellectual property rights.

Litigation and Other Proceedings

In 2005-2010, the Group was involved in a number of disputes with the Russian tax authorities. Pleasesee “—Disputes with the Russian Tax Authorities” below.

Disputes with the Russian Tax Authorities

From 2005 to 2010, the Group was involved in a number of disputes with the Russian tax authoritiesrelating to VAT refunds.

Two of the Group’s Russian operating subsidiaries, OOO Brunswick Rail Leasing and OOO BrunswickRail Service, had 15 disputes with the Russian tax authorities with respect to VAT refunds and othertax related matters. All these matters relate to tax claims arising from tax assessments for the fiscalyears of 2004, 2005, 2006, 2007, and 2008. With respect to VAT refunds, the Group’s approach hasconsistently been to claim its entitlement to VAT refunds pursuant to Article 176 of the Tax Code, and ithas actively sought to enforce its rights by seeking the protection or assistance of the courts. All caseswere successfully litigated, and in 2009, OOO Brunswick Rail Leasing received the last of a series ofcash refunds from the Russian tax authorities for a total amount of US$ 1.2 million. In 2010, OOOBrunswick Rail Service and OOO Brunswick Wagon Leasing were successful in receiving a series ofcash refunds from the Russian tax authorities for a total amount of US$ 17.9 million andUS$ 13.9 million, respectively. During 2011 and six month ended June 30, 2012 the Group receivedVAT refunds of US$ 44.4 million.

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REGULATION OF RAILWAY TRANSPORTATION AND LEASING BUSINESS IN RUSSIA

Set forth below is a summary of material information concerning regulation of railway transportation inRussia and the Group’s business. This description does not purport to be a complete description of alllaws and regulations applicable to the Group’s business and should not be read as such.

Applicable Legislation

The regulation of railway transportation in Russia is primarily based on the following laws andregulations:

• Federal Law “On Railway Transport in the Russian Federation” No. 17-FZ dated January 10,2003, as amended (the “Railway Transport Law”):

The Railway Transport Law establishes the legal framework for the functioning of railwaytransport, in particular:

(i) principles and aims of the state regulation of railway transport;

(ii) regulatory requirements applicable to organizations engaged in the rail business and torailway transport facilities;

(iii) safety requirements; and

(iv) other issues.

• Federal Law “Charter of Railway Transport of Russian Federation” No. 18-FZ datedJanuary 10, 2003, as amended (the “Railway Transport Charter”):

The Railway Transport Charter regulates all types of relations between shippers, passengers,consignors, consignees, owners of railway transport infrastructure and other users andproviders of railway transport services, including the principal terms and conditions fortransportation services, liability issues and procedures for dispute resolution.

• Federal Law “On Natural Monopolies” No 147-FZ dated August 17, 1995, as amended (the“Natural Monopolies Law”):

The Natural Monopolies Law determines the federal policy with respect to natural monopoliesin the Russian Federation and aims at achieving a balance of interests of consumers andnatural monopolies. In accordance with the Natural Monopolies Law, the core servicesprovided by Russian Railways are classified as belonging to the natural monopoly sector andthe prices (tariffs) charged by Russian Railways for such services are regulated by the state.

• Federal Law “On Technical Regulation” No. 184-FZ dated December 27, 2002, as amended(the “Technical Regulation Law”):

The Technical Regulation Law determines the rules relating to the developments, enactment,application and enforcement of obligatory technical requirements and the development ofvoluntary standards relating to manufacturing processes, operations, storage, transportation,selling and utilization. Please see “—Certification of Rolling Stock and Equipment” for thediscussion of the applicable provisions of the Technical Regulation Law.

• Government Regulation “On the Programme of Structural Reform of Railway Transport”No. 384 dated 18 May 2001, as amended (the “Programme”):

Please see “—Structural Reform of Railway Transportation in the Russian Federation—Restructuring of the railways system in the Russian Federation” for the discussion of theProgramme.

• Government Decree “On the Development Strategy for Railway Transportation in the RussianFederation up to 2030” No. 877-R dated June 17, 2008 (the “2030 Development Strategy”)

The 2030 Development Strategy provides a roadmap for implementing the remainder of theRussian rail transportation market reform, lists priorities for modernization, improvement andexpansion of the rail transportation industry in Russia, and sets goals for meeting publictransportation needs and facilitating regional social and economic development.

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• Government Regulation “On State Regulation and Control of Tariffs, Fees and Duties inRelation to Works (Services) Provided by Natural Monopolies Entities in the Area of RailwayTransportation” No. 643 dated 5 August 2009 (the “Regulation on Natural MonopoliesTariff”):

The Regulation on Natural Monopolies Tariff determines: (a) the aims, principles and methodsof the state regulation of tariffs charged for the services provided by Russian Railways as anatural monopoly; (b) the rules for the determination of tariffs; and (c) the rules of control overtheir determination and application.

• FST decree “On Approval of the Method for Calculating the Economically Justified Expensesand Normative Profit that are Considered when Determining the Economically Justified Indexto the Current Level of Tariffs, Fees and Duties for the Freight Railway Transportation”No. 198-t/1 dated August 31, 2010 (the “Decree 198-t/1”);

The Decree 198-t/1 provides guidelines for indexation of the tariffs imposed in accordancewith the Regulation on Natural Monopolies Tariff.

• Federal Energy Commission Regulation “On Approval of the Price List No. 10-01 “Tariffs forFreight Transportation and Infrastructure Services Provided by Russian Railways” No. 47-t/5dated June 17, 2003, as amended (the “Tariff 10-01”):

Please see “— The Pricing Policy” for the discussion of the main provisions of theTariff 10-01.

• Ministry of Railway Transport Instruction “On Work Performance for the Establishment ofCertification System” No. 166u dated November 12, 1996, as amended (the “RailwayTransport Certification Rules”), which approves Rules of Certification of the FederalRailway Transport of the Russian Federation; Main Provisions (P SSFZT 01-96).

Please see “—Certification of Rolling Stock and Equipment” for the discussion of the mainprovisions of the Railway Transport Certification Rules.

• Government Regulation “On Approval of the Rules for Rendering the Services on CommonRailway Carrier Infrastructure” No. 703 dated November 20, 2003 (the “Rules for Access toInfrastructure”):

The Rules for Access to Infrastructure provide legal grounds for the use of the railwayinfrastructure by railway operators.

• Mintrans Order “On Approval of Rules for Freight Transportation in the Trains Composed ofLocomotives and Railcars Owned or otherwise possessed by Consignors, Consignees orOther Legal Entities or Individuals Which are not Railway Carriers Themselves” No. 150 datedOctober 22, 2007 (the “Rules for Freight Transportation”):

The Rules for Freight Transportation regulate the procedure and terms of cargo railwaytransportation by trains formed of locomotives and railcars which are not owned by the railwaycarrier.

There are a number of other orders and decrees issued by the Mintrans, the Federal Agency forRailway Transport, Russian Railways and the former Ministry of Railways of Russia which providedetailed regulation of the Russian rail industry.

The regulation of leasing operations is primarily based on the following three legal acts:

• The Civil Code of the Russian Federation (Part 1 adopted by Federal Law No. 51-FZ datedNovember 30, 1994; Part 2 adopted by Federal Law No. 14-FZ dated January 26, 1996; Part3 adopted by Federal Law No. 146-FZ dated November 26, 2001; and Part 4 adopted byFederal Law N 230-FZ dated December 18, 2006), as amended (the “Civil Code”):

The Civil Code is the prime source of civil law in the Russian Federation, regulatingproprietary and certain non-proprietary relations between parties of any type and, in particular,establishing: (i) the rules for obtaining and transferring ownership of movable and immovableproperty; (ii) the basic rules for concluding, amending, performing and terminating contracts;and (iii) the material terms and conditions of the most common commercial contracts(including, but not limited to, lease contracts, supply contracts, service agreements, and loanand credit agreements).

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• Tax Code:

The Tax Code establishes, inter alia, specific rules for taxation of the leasing business inRussia. Please see “—Tax Considerations”.

• Federal Law “On Financial Leasing” No. 164-FZ dated October 29, 1998, as amended (the“Law on Leasing”):

The Law on Leasing regulates both operating and finance lease in Russia. Please see“—Rolling Stock Leasing” for the discussion of the main provisions of the Law on Leasing.

Various aspects of the leasing industry are also regulated by orders and regulations adopted mostly bythe Government of the Russian Federation, such as the Regulation on Approving the Procedure forProviding State Guarantees for Financial Leasing Activities, pursuant to which the state may guaranteethe performance by a leasing company of its obligations towards a credit institution.

International Agreements

Russia is party to international agreements governing railway transportation. In particular, Russia is aparty to the Agreement on International Railway Cargo Communication dated November 1, 1951(“CMGS”), which provides for a direct method of railway communication for the transportation ofcargoes among the railways of 23 countries of Europe and Asia. Its chief purpose is establishing thesame terms of transportation and a single set of transportation documents for all member states. InFebruary 1993, Russia joined the Tariff Agreement of CIS Railway Administrations dated February 17,1993, as amended (the “Tariff Agreement”), which sets out a general procedure to adopt annuallymaximum freight tariff levels for the international transit through the CIS territory. The Tariff Agreementregulates relations between CIS railway administrations. Only railcars directly owned by RussianRailways are subject to the Tariff Agreement. In July 2009, Russia joined the Convention ConcerningInternational Carriage by Rail dated May 9, 1980, as amended, which aims at establishing a system ofuniform law applicable to the carriage of passengers, baggage and freight in direct international trafficbetween member states. Russia has also acceded to the UNIDROIT Convention on InternationalFinancial Leasing dated May 28, 1988 which sets out main terms of a financial leasing transaction andregulates the rights and duties of the parties to such transaction. This Convention applies in caseswhere the lessor and the lessee have their places of business in different states and (i) both of thesestates are member states, or (ii) the law of a member state is the governing law for both the leasecontract and the supply agreement on the basis of which the leased equipment is purchased by thelessor.

The Regulatory Bodies

The Principal Regulatory Bodies

At the federal level, regulatory powers over the Russian railway industry are primarily divided betweenthe following ministries:

• the Mintrans, which is responsible for the development of governmental policy and legal andregulatory standards in the transportation sector of the Russian economy;

• the Ministry of Economic Development, which: (i) develops and implements strategicprograms of social and economic development; (ii) adopts the legislation on the indicators ofeconomic efficiency for state-owned open joint-stock companies, including Russian Railways;and (iii) opines on draft legal acts which regulate the business community or its relationshipswith the Russian Federation or which affect the country’s macroeconomics; and

• the Ministry of Finance, inter alia, which determines the taxation policy.

Regulation of the rail industry is also performed by a number of federal agencies and services, whichare responsible for management of state property, and provision of state services, oversight ofcompliance with regulations and various other regulatory functions. These federal services andagencies include the following:

• the Federal Agency for Railway Transport, which implements state policy, provides stateservices and manages state property in the Russian railway transportation sector, maintainsthe registers of rolling stock and makes decisions on suspension of freight transportation oncertain routes;

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• the Federal Transport Supervision Service, which carries out licensing of certain activities inthe railway sector and governmental supervision of railway transport;

• the FST, which determines and implements state regulation of tariffs and regulates the pricingof natural monopolies in the Russian Federation; and

• the Federal Antimonopoly Service (the “FAS”), which monitors and supervises compliancewith the Russian competition legislation.

The federal services and agencies listed above are directly involved in regulating and supervising theRussian railway industry. There are certain other government bodies which have authority over variousspecific issues relating to the Russian railway industry and otherwise relating to the Group’s business,including emergency procedures, taxation and others.

At the level of the CIS, the Commonwealth Railway Transportation Council coordinates railwaytransport activity and provides recommendations with respect to pricing rates and technical policywithin the territory of the CIS countries.

Russian Railways also performs certain regulatory functions in the Russian railway industry: it issuesapprovals for the use of locomotives on particular routs, prohibits the transportation of certain cargo incertain types of railcars and determines the procedure for submitting and agreeing freight carriageapplications.

Structural Reform of Railway Transportation in the Russian Federation

Restructuring of the railways system in the Russian Federation

The Russian railway system has been undergoing a reform aimed at improving the stability, safety andquality of railway transportation services, liberalizing the railway sector to enhance its competitiveenvironment attractiveness for private investments, increasing the efficiency of the infrastructure andmeeting growing demand for railway transportation services (the “Reform”). The Reform commencedin 2001 with the enactment of the Programme.

The Programme envisaged that the Reform would comprise three stages as summarized below. Whilethe Programme contemplated completion of the third stage by 2010, the implementation of the thirdstage is currently on-going.

First stage: preparation for the Reform (2001-2003)

During the first stage of the Reform, a legal and regulatory framework was developed and adopted, theregulatory and business functions of the Russian railway system were separated, external controlmechanisms were created, and non-core facilities, including housing, social and public utilityenterprises were separated and spun-off. In October 2003, Russian Railways was created, and thebusiness functions previously carried out by the Ministry for Railway Transport were transferred to it.

Second stage: corporate build-up and encouragement of competition (2003-2005)

Between 2003 and 2005, the Russian railway industry continued to undergo liberalization of variousrailway transportation market segments and related sectors. The Rules for Access to Infrastructureestablished a legal framework for non-discriminatory access to the railway infrastructure, while in thefreight transportation market segment, the Russian government’s adoption of a new tariff pursuant tothe Tariff 10-01 resulted in a significant increase in the number of railcars owned by private operators.By the end of 2005, private operators’ freight railcar fleet comprised roughly one third of the total fleet(although the objective stated by the Programme was 50% or more).

Russian Railways has also focused its efforts on improving efficiency and financial transparency. Tothis end, Russian Railways began to spin off some of its business lines into independently-operatedsubsidiaries. As a result of these initiatives, 27 subsidiaries were established to operate variousbusinesses of Russian Railways, including container transportation, freight transportation, freightrailcars renovation, capital construction, repairs and maintenance and the others. This processcontinued into the third stage of the Reform Programme.

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Although implementation of some of the measures envisaged by the Programme as a part of this stageof the Reform are still underway, on November 10, 2005, the Government approved the results of thesecond stage and thus the transition to the third stage was officially completed.

Third stage: formation and development of a competitive market (2006-2010)

The final stage of the Reform as outlined in the Programme, envisages further development ofcompetition in passenger and freight transportation, including an increase in the percentage of freightcars owned by private operators to 60% or more of the total fleet, issuance of licenses for provision oflong-distance and suburban passenger transportation services and liberalization of the locomotivesegment. Furthermore, the Programme provides for a partial sale of the shares of subsidiaries ofRussian Railways which provide freight and passenger railcar services as well as operate repairfacilities and other non-core businesses. In the course of this stage, Russian Railways has continuedthe process of creating a competitive environment in passenger and freight railway transportation,encouraging private investment into modernization of rail assets (including rolling stock, locomotivesand infrastructure), separating its business activities into independently-operated subsidiaries andselling shares in these subsidiaries to private investors.

In particular, the third stage of the Reform involves divestment of repair depots owned by the RussianRailways. Its implementation started in the first half of 2008 with the adoption of the Directive of theRussian Government No 348-r dated 20 March 2008 (the “Directive 348-r”), and is currently ongoing.Pursuant to the Directive 348-r, the privatization of repair depots is carried out through assets salesrather than stock sales. The depots are auctioned, with a mandatory condition of each auction beingthe obligation of the eventual acquirer not to change the designated use of the depots for a minimum offive years. Normally, each auction involves the sale of several depots situated in relative proximity toeach other.

2030 Development Strategy

On June 17, 2008, when the Russian government approved the 2030 Development Strategy. The 2030Development Strategy provides a roadmap for implementing the remainder of the Reform through2030, and for modernizing, improving and expanding the rail transportation industry in Russia, in orderto further the country’s social and economic development, to extend the Russian government’scapacity for the protection of its national sovereignty and national security, to meet the transportationneeds of its citizens, and to permit the acceleration of regional social and economic development.

The 2030 Development Strategy comprises the following two stages:

Railway sector modernization (2008-2015)

This is the stage of fundamental modernization of existing infrastructure objects, fleet and technology,as well as construction of new railway lines.

Dynamic extension of railway system (2016-2030)

This is the stage for the development of infrastructure and upgrade of technology in line withinternational standards and increasing global competitiveness of the Russian railway transport.

Target Structure of the Freight Rail Transportation Market by 2015

The goals of the Reform were reiterated most recently on April 13, 2011, when the GovernmentCommittee for Transport and Communications approved the detailed Plan for the Implementation ofthe Target Structure of the Freight Rail Transportation Market by 2015 (the “Target Structure”). TheTarget Structure envisages the institution of a pilot programme for the development of a privatelocomotive operators’ market. Initially, private operators are expected to provide locomotive tractionservices on a certain limited number of routes. Russian Railways currently expect the privateoperators’ fleet to constitute up to 5% to 10% of the Russian locomotive fleet upon completion of thepilot programme. Based on the results of the pilot programme, Russian Railways may considerbroadening the offering of locomotive traction services by private operators on all of the Russian railsystem. The Target Structure also provides for further fine tuning of the tariff setting methodology anda reform of the structure of railway infrastructure development funding.

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Certification of Rolling Stock and Equipment

The Railway Transport Law requires the certification or declaration of compliance of, inter alia, rollingstock, its components, rail equipment and elements of infrastructure, in order to confirm theircompliance with safety requirements, including health and labor safety, fire safety, sanitary,epidemiological and environmental protection rules. Confirmation of compliance with the applicablestandards is generally governed by the Technical Regulation Law. Pursuant to the TechnicalRegulation Law, such confirmation is exercised either through certification or declaration ofcompliance, depending on the type of product. The Railway Transport Certification Rules provide forcertain certification rules pertaining specifically to the rail industry, although these Rules are largelyoutdated in light of the recent amendments to the Technical Regulation Law. The list of the rolling stockand equipment which are required to be either certified or declared compliant is determined by theGovernment Regulation “On Approving the Unified Nomenclature of Products Subject to MandatoryCertification and the Unified Nomenclature of Products Subject to Declaration of Compliance” No. 982dated December 1, 2009. During the term of a certificate, the rolling stock must be inspected at leastonce a year to ensure the compliance of certified rolling stock with the applicable requirements.Findings of the inspection control are documented in an official act of inspection. If there is a breach ofcertification rules or legal requirements, the certificate will be suspended until the certificate holdercures the problem. If the problem is not cured in due course, the certificate may be revoked. Use ofuncertified rolling stock and equipment is prohibited under Russian law and such utilization, ifdiscovered, may result in an administrative fine and/or the forfeiture of such uncertified products.

Rolling Stock Leasing

Leasing activities are regulated by the Civil Code, the Law on Leasing and the Tax Code. The CivilCode provides for some basic requirements to lease contracts, their terms and conditions and theirtermination and sets out rules pertaining to certain rights of the lessor and the lessee and allocation ofvarious responsibilities and risks between them. The Law on Leasing has a similar scope and for alarge part reiterates the provisions of the Civil Code, although it establishes a number of additionalconditions that the lease contracts shall provide for, and, notably, stipulates that in case of a repeatednon-payment by the lessee, the lessor shall have the right to present payment demands against thelessee’s bank account for a withdrawal to be made without the consent of the lessee, despite thegeneral requirement of the Russian law that such withdrawals can only be made if the account holderhas instructed the bank accordingly. Neither the Civil Code nor the Law on Leasing distinguishesbetween financial and operating lease. Importantly, both provide that the condition requiring the lessorto purchase the equipment which is going to be leased out is compulsory in a lease contract;accordingly, a lease contract for an equipment which is already owned by the lessor will not bedeemed a lease contract for the purposes of the Law on Leasing, and will be governed by the generalprovisions of the Civil Code applicable to all lease contracts.

The Civil Code is expected to undergo major changes in the near future. The draft law introducing therelevant amendments passed the first reading in April 2012. Although this draft does not introduce anychanges to the regulation of leasing activities, it is expected to be substantially amended for thesecond reading, so it is impossible to predict at this stage what changes will be made exactly and towhat extent they will concern the Group and its business.

The Tax Code establishes specific rules for taxation of the leasing business in Russia.

There are currently no specific corporate, financial or licensing requirements to the companiesengaged in the leasing business, as well as no restrictions on the ownership of such companies.Leases of rolling stock and the commercial terms and conditions of such leases are not subject to anyspecific state regulation, save for the general legislative provisions outlined above.

The Pricing Policy

The regulated railway tariffs generally apply only to the services provided by Russian Railways andaffect the Group’s business since: (a) such tariffs can have an effect on the commercial attractivenessof railway transportation for the Group’s clients, (b) the Group pays these Russian Railways’ chargesfor the transportation of new railcars from its suppliers, and (c) the Group uses the services of RussianRailways in its capacity as a provider of transportation services.

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According to the Programme, the main aim of the tariff policy for the Russian railway industry is tostimulate development of competition in the railway services sector and to ensure non-discriminatoryaccess to the railway infrastructure. Tariffs should ensure a reasonable profit margin and coverexpected investments in infrastructure maintenance and modernization. Tariffs are indexed annuallybut occasionally may be subject to supplemental indexation at the discretion of FST or the Mintrans (incase of international transit), or as a response to a request from the Mintrans, a state authority or amarket participant.

Generally, the tariffs which apply to the transportation-related services provided by Russian Railwaysare established by the FST, except for international transit tariffs which are set according to inter-governmental and interagency agreements, and vary depending on the countries involved. These areimplemented in Russia by acts adopted by the Mintrans. The freight tariff applicable in the Russianrailway sector is divided into two main parts: (i) a general infrastructure and locomotive charge; and(ii) a railcar charge.

While the infrastructure and locomotive component of the tariff is set by the FST for all marketparticipants, including Russian Railways and private operators, the railcar component established bythe FST applies only to Russian Railways. Accordingly, private operators such as the Group are free toset their own rates of railcar charges. In reality, however, for certain cargoes, private operators use theRussian Railways railcar tariffs set by FST as a benchmark.

The tariffs for carriage of freight, locomotive and infrastructure services rendered by Russian Railwaysare contained in the Tariff 10-01. The Tariff 10-01 differentiates three classes of freight tariffs with thelowest tariff applicable to Class 1 and the highest applicable to Class 3. The tariffs charged by RussianRailways primarily depend on the distance, freight class and type of destination. (Please see“—Industry—Russian rail freight transportation industry overview”.)

The Russian government periodically approves certain parameters for economic growth, including anannual adjustment of tariff for the services of natural monopolies such as Russian Railways. TheRegulation on Natural Monopolies Tariff provides a general framework for regulation, determinationand indexation of tariffs in the Russian railway sector. In accordance with the approved parameters,the FST has adopted the Decree 198-t/1 and a similar act for passenger transportation, and performsan annual (and, from time to time, supplemental) indexation of railway tariffs.

In the summer of 2012, Russia ratified the Protocol on Accession to the WTO dated 16 December2011 and became its plenipotentiary member. As a result of the accession to the WTO, Russia mustunify its freight transportation tariffs. The export or import transportation tariffs must become equal tothe domestic freight transportation tariffs.

In July 2011, as part of establishing a unified economic zone with Belarus and Kazakhstan, Russiaratified an agreement with Belarus and Kazakhstan setting out rules regulating tariffs for the railtransportation services in these countries. These rules regulate matters such as the compensation ofeconomically justifiable expenses, development of infrastructure and tariff transparency. Theagreement provides for the unification of tariffs between these countries by 1 January 2013, acrossexport, import and domestic freight tariffs. Under these rules, from 1 January 2013, rail transportationorganizations must be entitled, based on economic feasibility, to change the tariffs for railtransportation services within certain limits determined by the relevant state authority. In addition,starting from 1 January 2015, each Russia, Belarus and Kazakhstan must provide access to its railwayinfrastructure to the transportation companies of each other contracting party.

Antimonopoly Restrictions

Federal Law “On Protection of Competition” No. 135-FZ dated July 26, 2006, as amended (the“Competition Law”), provides for mandatory pre-approval by the FAS of the following transactions:

• acquisition by a person (or its group) of more than 25% of the voting shares of a joint stockcompany (1/3 participation interest in a limited liability company) and the subsequent increaseof such shareholdings to a level representing more than 50% and more than 75% of thevoting shares (1/2 and 2/3 participation interest in a limited liability company);

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• acquisition or leasing by a person (or its group) of the core production assets (with certainexceptions) and/or intangible assets of an entity if the balance sheet value of such assetsexceeds 20% of the total balance sheet value of the core production and/or intangible assetsof the seller or lessor; or

• obtaining (directly or indirectly) rights to determine the conditions of business activity of anentity or to exercise the powers of its executive body by a person (or its group);

in each case, if any of the following thresholds are met:

• the aggregate asset value of the acquirer (or its group) together with the target (or its group)exceeds RUB 7 billion and the total asset value of the target (or its group) exceeds RUB 250million;

• the total annual revenues of the acquirer (or its group) and the target (or its group) for thepreceding calendar year exceed RUB 10 billion and the total asset value of the target (or itsgroup) exceeds RUB 250 million; or

• the acquirer, and/or the target, and/or any entity within the acquirer’s group or the target’sgroup are included in the register of entities having a market share in excess of 35% on aparticular market or having a dominant position on a particular market maintained by the FAS(the “Register”).

Furthermore, the Competition Law provides for mandatory pre-approval by the FAS of the followingactions:

• mergers and consolidations of entities, if any of the following thresholds are met:

• the aggregate asset value of such entities (or of the groups of persons to which theybelong) exceeds RUB 7 billion;

• the total annual revenues of such entities (or of the groups of persons to which theybelong) for the preceding calendar year exceed RUB 10 billion; or

• one or more of these entities is included in the Register; or

• formation of an entity, if its charter capital is paid by the shares (or participation interest) and/or the assets of another entity (save for monetary funds) or the newly founded entity acquiresthe rights in respect of such shares (or participation interest) and/or assets as specified in theCompetition Law, provided that any of:

• the aggregate asset value of the founders (or group of persons to which they belong) andthe entities (or groups of persons to which they belong), shares (or participation interest)and/or assets of which are contributed to the charter capital of the newly founded entityexceeds RUB 7 billion;

• the total annual revenues of the founders (or group of persons to which they belong) andthe entities (or groups of persons to which they belong), the shares (or participationinterest) and/or assets of which are contributed to the charter capital of the newlyfounded entity for the preceding calendar year exceed RUB 10 billion; or

• the entity, the shares (or participation interest) and/or assets of which are contributed tothe charter capital of the newly founded entity is included in the Register.

The Competition Law stipulates certain carve-outs from this rule providing for post-transactionalnotification to the FAS instead of FAS pre-approval. The Competition Law provides for a mandatorypost-transactional notification (within 45 days of the closing of the transaction) to the FAS in connectionwith the transactions specified above, if the aggregate asset value or total annual revenues of theacquirer (or its group) and the target (or its group) for the preceding calendar year exceeds RUB400 million and the total asset value of the target (or its group) exceeds RUB 60 million, or withmergers and consolidations of entities if the aggregate asset value or the total annual revenues of suchentities exceed RUB 400 million.

Intra-group transfers are generally notifiable, however, there are certain exceptions to the CompetitionLaw in this respect. Different thresholds apply to transactions with financial entities as targets.

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The Competition Law expressly provides for its extraterritorial application to transactions which aremade outside of Russia but lead, or may lead, to the restriction of competition in Russia and whichrelate to assets located on the territory of Russia, to the shares (or participation interests) in Russiancompanies or rights in relation to such companies, shares in or rights in relation to foreign targetcompanies which had sales to Russia of at least RUB 1 billion for the year preceding the year in whichthe transaction is consummated.

Under the Competition Law, if an acquirer has acted in violation of the merger control rules and, forexample, acquired shares without obtaining the prior approval of the FAS, the transaction may beinvalidated by a court order initiated by the FAS, provided that such transaction has led or may lead tothe restriction of competition, for example, by means of strengthening of a dominant position in therelevant market.

More generally, Russian legislation provides for civil, administrative and criminal liability for theviolation of antimonopoly legislation.

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DIRECTORS AND SENIOR MANAGEMENT

The following section contains summary of certain provisions of the Parent’s By-Laws and of certainprovisions of Bermuda law in effect as at the date of this Prospectus.

Pursuant to the Bermuda Companies Act 1981, the Parent has adopted a governance structureconsisting of the general meeting of shareholders and the Board of Directors, which includes an AuditCommittee, a Credit Committee, a Governance and Positions Committee, a Compensation Committeeand a Strategy Committee. The members of the Board of Directors are elected by the general meetingof shareholders. The directors appoint one member to serve as the Chairman of the Board of Directors.The Board of Directors is supported by a team of executive managers (the “Executive ManagementTeam”), which manages the day-to-day operations of the Group and is employed by Brunswick RailGroup Management and OOO Brunswick Rail Management, wholly-owned direct and indirectsubsidiaries of the Parent, respectively. For a description of the directors and management of theIssuer and the Guarantors, see “Description of the Issuer and the Guarantors.”

Board of Directors of the Parent

The Board of Directors of the Parent is comprised of nine members. Members of the Board of Directorsare elected annually by a general meeting of shareholders. A person elected as a member of theBoard of Directors may be re-elected an unlimited number of times.

The Parent’s Bye-Laws grant wide powers to the Board of Directors to manage and represent theParent and perform all necessary and required acts in furtherance of the objects of the Parent. TheBoard must meet at least four times each year to monitor progress in the business and, whenevernecessary, to discuss and decide on any changes to the Parent’s strategy and other matters within itsauthority. The Board also appoints members to serve on the five board committees: the AuditCommittee, which oversees the quarterly, semi-annual and annual audited accounts; theCompensation Committee, which oversees executive management compensation issues; the CreditCommittee, which oversees decisions on new and existing counterpart exposures; the Governanceand Positions Committee, which oversees all corporate governance matters, and the StrategyCommittee, which communicates with management on ongoing projects between the meetings of theBoard of Directors. The quorum for all meetings of the Board is at least two of the members of theBoard of Directors, present or duly represented at such meeting. In case of a deadlock, the Chairmanof the Board of Directors has the deciding vote. Decisions of the Board of Directors are recorded in theminutes of the meetings of the Board of Directors. The Board of Directors may also pass a resolutionwithout the occurrence of a meeting upon unanimous written approval.

All of the Group’s directors have significant experience in the financial services industry and/or in thebroader Russian market. The business address for each of our directors is Wessex House, 2nd floor,45 Reid Street, Hamilton HM 12, Bermuda.

The names, position titles, years of birth, dates of first appointment of each member of the Parent’sBoard of Directors and their respective nominating shareholders as of the date hereof are set out in thetable below:

NameYear of

birth PositionYear

Appointed

Martin Andersson . . . . . . . . . 1966 Member of the Board of Directors 2005Charles Brown . . . . . . . . . . . . 1966 Member of the Board of Directors 2010Andrey Burlinov . . . . . . . . . . . 1972 Member of the Board of Directors 2011Gerard De Geer . . . . . . . . . . 1947 Member of the Board of Directors 2006Vladimir Lelekov . . . . . . . . . . 1967 Member of the Board of Directors

(and Chief Executive Officer)2012

Anders Lidefelt . . . . . . . . . . . 1959 Deputy Chairman of the Board of Directors 2012Kazuo Omori . . . . . . . . . . . . . 1948 Member of the Board of Directors 2009Paul Ostling . . . . . . . . . . . . . . 1948 Chairman of the Board of Directors 2012Damian Secen . . . . . . . . . . . . 1972 Member of the Board of Directors 2012

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Set out below is certain biographical information regarding the members of the Board of Directors,including any relevant education and experience and certain current employment commitments andbusiness interests outside of their role with the Group.

Martin Andersson

Mr. Andersson has been on the Board of Directors since 2005. He graduated from the StockholmSchool of Economics in 1989 and HEC Paris in 1990. He began his career working as a consultant atBooz Allen Hamilton in their mergers & acquisitions department. From 1992 – 1993, he served as anadvisor to the Privatization Committee at the Government of the Russian Federation. In August 1993,Mr. Andersson became one of the co-founders of Brunswick Group and was appointed CEO ofBrunswick Brokerage in November 1993. He subsequently became Chairman of Brunswick UBSWarburg in 1999. He also chaired the Boards of Directors of Brunswick Capital Limited from 2002 –2007 and Brunswick Rail Leasing from 2005 – 2007. Mr. Andersson is currently also a member of theboard of directors of SUEK and Cabo Delgado Investments Ltd.

Charles Brown

Mr. Brown joined the Board of Directors in 2010. He graduated from Cambridge University with a B.A.and M.A. in Architecture and Law in 1988. He is the founder and chairman of Asiarails Limited, a HongKong based transportation advisory and investment company. Prior to setting up Asiarails Limited in1993, Mr. Brown worked in Spain for Alcazar Immobiliaria from 1988 to 1991, and after returning toHong Kong in 1992, he founded and later sold General Waste Co. Ltd. from 1992 to 1995, awaste-to-energy technology company. Mr. Brown is a member of the board of directors of GenagroLtd., a farmlang operating and development company and is the chairman of the Peace andDevelopment Foundation, the official partner in Hong Kong of the UN Development Program in China.

Andrey Burlinov

Mr. Burlinov joined the Board of Directors in 2011. He graduated from the Illinois Institute ofTechnology with a Bachelors in Science in 1994 and from Erasmus University with an M.A. in BusinessAdministration in 1996. Mr. Burlinov has held various investment banking positions at Donaldson,Lufkin & Jenrette in New York from 1997 to 2000, at Credit Suisse First Boston in New York from 2000to 2003, and at Troika Dialog in Moscow from 2004 to 2010. Mr. Burlinov joined the VTB Group in 2010as a senior vice president of the VTB Bank and as a managing director of VTB Capital plc. Mr. Burlinovis currently responsible for the natural resources and transportation and infrastructure sectors at VTBCapital plc.

Gerard De Geer

Mr. De Geer has been on the Board of Directors since 2006. He graduated from the Stockholm Schoolof Economics with a B.Sc. in Economics. During the 1970s and 1980s, he chaired a number of banks,financial groups and companies, including Skandinaviska Enskilda Banken, Stockholm, HambrosBank, London, Skandinaviska Enskilda Limited (Enskilda Securities) London and SkandinaviskaEnskilda Banken (SEB) Stockholm. Mr. De Geer worked as a consultant at MOM Consulting SA,Switzerland, offering consulting in Eastern Europe and, in particular, Russia. He was appointed as apersonal advisor to Anatoly Chubais, the first Deputy Prime Minister, during the initial stages of themass privatization program in Russia. Mr. De Geer was a founding partner and chairman of BrunswickGroup from 1993 to 2007, with investments predominantly in emerging markets, including financialservices, information technology, oil and publishing. In 2005, Mr. De Geer became the director andowner of Sarastro Group of Companies which has investments in Europe, China, Thailand and Russia.He has been a member of the Advisory Board of Sveafastigheter, a Swedish property fund, since2006.

Vladimir Lelekov

Mr. Lelekov joined the Board of Directors in 2012 and has been the chief executive officer of BRL since2006. Mr. Lelekov occupied the positions of General Director of the managing company CommercialTransport Systems, Deputy General Director of ICT Group, one of Russia’s largest industrial &financial holdings, and Chairman of the Board of Directors at Titran, a freight car plant in Tikhvin, both

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part of ICT Group. Vladimir was in charge of Titran which manufactured bogies and wheelsets forelectric trains, special and passenger railcars. He also managed a production site reconstructionproject to install casting capacity and build a manufacturing facility to produce up to 12,500 newgeneration freight railcars a year. Before that, Vladimir held various positions at the MDM industrial andfinancial groups. These included the positions of Deputy General Director for Economics and Financeat MDM Industrial Group; where he was responsible for financing, restructuring and setting up financialmanagement and control of acquired industrial assets, Deputy Chairman of the Management Board ofMDM Bank where he handled lending, risk management, international business and strategic M&Atransactions in non-banking sectors. Previously, Vladimir was Director for Corporate Finance at IMAGInvestment Management & Advisory Group AG (Switzerland), Director for Corporate Finance atSovlink Corporation (United States), and Deputy Director of the Oil & Gas Team at the Russian ProjectFinancing Bank, Russia’s first banking project of the European Bank for Reconstruction andDevelopment. Vladimir is a graduate of the Moscow Institute of Physics and Technology with a major inapplied mathematics and physics.

Anders Lidefelt

Mr. Lidefelt joined the Group in 2005 as Managing Partner and joined the Board of Directors in 2012. Hegraduated from the Stockholm School of Economics in 1983 with a B.Sc. in Business Administration andEconomics. From 2004 to 2005, Mr. Lidefelt held the position of finance director at Vattenfall AB, one ofEurope’s five largest electric utilities. From 1999 to 2003, Mr. Lidefelt was the CEO of a major leasingorganization (including both operational and finance leasing portfolios) associated with ABB StructuredFinance AB, the largest bank/independent finance company in the region, where he headed the businessactivities in charge of a US$ 3 billion lease portfolio and an organization of 70 people in Sweden, Norwayand Finland. In addition to this, from 1987 to 1999, Mr. Lidefelt has held several management positionswithin ABB Financial Services including managing the project finance related insurance business andpart of group management team at Sirius International Insurance Corp., head of capital markets at ABBin Zurich in charge of all medium and long term funding operations of the ABB Group and in charge of theproprietary fixed income trading at ABB Treasury Center in Stockholm. Mr. Lidefelt serves as Chairmanof the Board at Svea Ekonomi AB.

Kazuo Omori

Mr. Omori joined the Board of Directors in 2009. He graduated in March 1971 from the School ofMarine Engineering at Osaka University. Mr Omori is the Executive Vice President of SumitomoCorporation. He joined Sumitomo in 1971 and has held a variety of positions within several areas ofthe corporation, including the Transportation & Construction Division, Ship & Marine Project Division,Ship, Aerospace & Transportation Systems Division, and Transportation & Construction SystemsBusiness Unit.

Paul J. Ostling

Mr. Ostling joined the Board of Directors in 2012. He holds a Law Degree from the Fordham UniversitySchool of Law and a B.S. in Mathematics and Philosophy from Fordham University. Mr. Ostling iscurrently a member of the Board of Directors of Uralkali. He is also the Chairman of the Board of theBusiness Council for International Understanding, as well as the Chairman of the Finance Committeeand a member of the Board of the Boy Scouts of America, TransAtlantic Council. He is the DeputyChairman of the Board of the global environmental services organization, Cool nrg, and is a member ofthe Supervisory Board of Innolume GmbH. From 2010 to 2011 Mr. Ostling was a Board member ofKungur Oilfield Equipment and Services, where he also served as CEO and General Director from2007 to 2009. From 2007 to 2011 he was a member of the Board of Directors of PromSvyazBank.From 2008 to 2010 was a member of the Board of Directors of UralChem. From 1977 to 2007, he heldvarious senior management positions at Ernst & Young, including Global Chief Operating Officer (2003– 2007); Global Executive Partner (1994 – 2003); and Vice Chair and National Director for HumanResources (1985 – 1994). Mr. Ostling is a member of the New York State Bar and certain other federaljurisdictions. Mr. Ostling is a certified financial advisor under SEC and LSE Regulations.

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Damian Secen

Mr. Secen joined the Board in 2012. He is the Co-Chairman of Macquarie Renaissance InfrastructureFund (MRIF), a leading private infrastructure investment fund in Russia and the CIS. MRIF’s firstinvestment was in Brunswick Rail. Since that time, MRIF has made three further investments in energyand telecommunications infrastructure in Russia. Mr. Secen brings over 15 years’ experience investingin and advising on major infrastructure and transportation projects. He has been with MacquarieGroup, a leading global adviser, investor and manager of infrastructure assets, for over 10 years, andis Head of Macquarie Group, Russia and the CIS. Other roles include: Branch Representative ofMacquarie Capital CIS Holdings Pty. Ltd (Russia Branch), a wholly-owned subsidiary of MacquarieGroup Limited, Member of the Expert Group for the Developing Banking, Securities and InvestmentSectors of the Russian Economy, and Fellow of the Australian Institute of Public Infrastructure.Mr. Secen is admitted to practice as a Barrister and Solicitor of the High Court of Australia and theSupreme Courts of Victoria and Western Australia. He has a Bachelor of Commerce and a Bachelor ofLaws (Honours).

Executive Management Team

The Executive Management Team consists of six individuals with extensive experience in the railwayand financial services sectors. The business address for each of the Group’s executive managers isPaveletskaya Square, 2/2, 12th Floor, Moscow, 115054, Russian Federation. The ExecutiveManagement Team is employed by OOO Brunswick Rail Management, a wholly-owned indirectsubsidiary of the Parent, which is the management company for all the Guarantors, except for theParent (which does not have any employees) and OOO Brunswick Trans (see “Description of theIssuer and the Guarantors”).

The following persons comprise the Executive Management Team:

NameYear of

birth PositionYear

Appointed Service term

Vladimir Lelekov . . . . . . 1967 Chief Executive Officer 2006 unlimitedNicolas Pascault . . . . . . 1963 Managing Director/Chief Financial Officer 2004 unlimitedSergey Bogdanov . . . . . 1978 Managing Director/Chief Operating

Officer2006 unlimited

Vladimir Khoroshilov . . . 1956 Managing Director/Chief BusinessDevelopment Officer

2010 unlimited

Victor Koshkin . . . . . . . . 1972 Managing Director/M&A and EquityTransactions

2010 unlimited

Elena Naumova . . . . . . . 1975 Managing Director/General Counsel 2006 unlimited

None of the abovementioned members of the Executive Management Team have any familyrelationship with any other member of the Board of Directors or the Group or any significantshareholders.

Set out below is certain biographical information regarding the members of the Executive ManagementTeam, including any relevant education and experience and certain current employment commitmentsand business interests outside of their role with the Group.

Vladimir Lelekov

See “—Board of Directors of the Parent”.

Nicolas Pascault

Nicolas Pascault joined the Group in June 2004 with extensive experience in industry, audit andcorporate finance services. Prior to joining, he was the chief financial officer for Danone Group inRussia from 1998 to 2004, one of the most competitive multinational companies in the food industryworldwide with Russia accounting 11 per cent. of Danone’s sales and the group’s biggest markets.Prior to this, he worked for eight years at Ernst & Young in Moscow, St. Petersburg and Paris in theAudit and Corporate Finance Departments as a Senior Manager. Nicolas graduated from the Institutd’Etudes Politiques of Paris and has a Master of Finance from the University Paris II. He alsoparticipated in the Business Case Study Program at the Harvard Business School.

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Sergey Bogdanov

Sergey Bogdanov joined the Group in August 2006. Since November 2010 he is responsible for theefficient functioning of the Company as a whole and directly manages the implementation of a numberof Brunswick Rail’s key projects. From 2006 until 2010, he worked at the Group as Director forBusiness Development. In this position, he was responsible for structuring new company business andhe supervised the Group’s marketing, commercial and technical operations. In 2005-2006, he occupiedthe position of Director for Business Planning and Finance at Commercial Transportation Systems, apart of ICT Group, where he worked on the Tikhvin Freight Railcar Plant project. In the period from2000 till 2005 he worked as an auditor, then as a business consultant in the companies ArthurAndersen and Ernst&Young and conducted a number of assignments for Russian Railways. In 1999,he was awarded a Bachelor’s degree and, in 2001—a Master’s degree in Economics from the M.V.Lomonosov Moscow State University. In 2005 he was certified in the programs CMA/CFM.

Vladimir Khoroshilov

Vladimir Khoroshilov joined the Group in November 2010. He is responsible for the management of theCompany’s commercial and technical activities, and he is developing Brunswick Rail’s new businesslines. Before joining the Company, Vladimir worked as Director of Transport and Logistics at FosAgroholding. He started his career as a programmer in the Moscow Institute of Electromechanics andProgramming in 1978. He graduated from M.V. Lomonosov Moscow State University with a degree inMathematics in 1978.

Victor Koshkin

Prior to joining the Group in 2010, Mr. Koshkin was chief financial officer of CJSC Integrated EnergyTechnologies, an electrical equipment holding company, where he oversaw capital raising, strategy,financial reporting and M&A; he also served on the Board of Directors of OJSC Samara Transformer,its portfolio company. From 2005 to 2007 Mr. Koshkin was Deputy Head of business development atSUAL and in 2003-2005 was adviser to shareholders of MDM Group. Mr. Koshkin completed a numberof transactions, including the strategic merger of SUAL with RUSAL and aluminium assets of Glencoreand the merger of pipe producing assets of MDM Group with those of Sinara Group to create TMKSteel, the world’s second largest pipe producer for the oil and gas industry. In 1998-2001 Mr. Koshkinwas Associate in the Media and Telecom Investment Banking Group at JP Morgan in New York. Priorto JP Morgan, from 1996 to 1998, Mr. Koshkin worked as a banker in the Transportation InvestmentBanking Group at Lehman Brothers in New York. Mr. Koshkin started his career in 1995 in theInvestment Banking Division of Janney Montgomery Scott in Philadelphia. He holds a BA degree ineconomics from Wabash College and an MBA degree from Harvard Business School.

Elena Naumova

Elena Naumova joined the Group in January 2006. Prior to joining she was the lawyer of RaiffeisenLeasing in 2005-2006 and as the Head of Legal department of Interrosleasing from 2002 to 2005. In2001-2002 Elena occupied position of the Assistant to Vice President at YUKOS—the largest privateowned oil company in Russia at that time. In the period from 1996 to 2001 Elena worked as anattorney and was a member of the Saint-Petersburg Bar Association. Elena graduated from the Saint-Petersburg law school in 1996.

Compensation

The Group

Members of the Group’s Board of Directors and Executive Management Team were awarded anaggregate of approximately US$ 4,094,306 million for services provided during 2011, consisting ofsalaries, bonuses and directors’ fees.

Share-Based Compensation

In 2007, the Parent signed a management incentive plan award agreement (the “MIP Agreements”)with each of the three key managers of the Group, including Mr. Vladimir Lelekov, Mr. Anders Lidefeltand Mr. Nicolas Pascault. In accordance with the MIP Agreements, the Parent would award in total

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7,967,044 new ordinary shares of the Parent (the “Award Shares”) to these three key managers infour annual tranches starting no later than December 31, 2007. The purchase price per Award Sharepayable by the key managers is US$ 0.0001 per share, which is the nominal value of each share. OnDecember 31, 2010, as the fourth and final tranche became due, the management incentive planbecame fully vested, and the key management members were entitled to the shares initially allocatedto them. As of June 30, 2012, all Award Shares were issued and outstanding. In September 2012, theBoard of Directors adopted a new management bonus plan. The terms of the plan have not yet beenfinalized.

The Group does not have any pension, retirement or similar benefit plans available to the members ofits Board of Directors and Executive Management Team.

Please see “Major Shareholders” for the disclosure of the shareholding in the Parent of the members ofthe Group’s Board of Directors and Executive Management Team.

Committees of the Board of Directors

The Board of Directors has five committees: the Audit Committee, the Compensation Committee, theCredit Committee, the Governance and Positions Committee and the Strategy Committee.

Audit Committee

The Audit Committee consists of three members. It deals with all material questions concerningauditing and accounting policy matters of the Group. The Chairman of the Board of Directorsnominates members to the Audit Committee, subject to the approval of the Board of Directors. Noemployee of the Parent or its subsidiaries may serve on the Audit Committee at any time.

The members of the Audit Committee are as follows:

Name Position Start Date

Mr. Anders Lidefelt . . . . . . . . . . . . . . . . . . . . . Member of the Audit Committee 2012Mr. Paul Ostling . . . . . . . . . . . . . . . . . . . . . . . . Chairman of the Audit Committee 2012Mr. Damian Secen . . . . . . . . . . . . . . . . . . . . . . Member of the Audit Committee 2012

Compensation Committee

The Compensation Committee consists of three members. It deals with contracts for any employeeearning over US$ 500,000 per annum, and with contracts for the CEO and CFO of the Group. Thecommittee is responsible for the alteration of these contracts, any increases in salary, any bonusesawarded and the allotment of shares or options received by such employees. The Chairman of theBoard of Directors nominates members to the Compensation Committee, subject to the approval of theBoard of Directors. No employee of the Parent or its subsidiaries may serve on the CompensationCommittee at any time.

The members of the Compensation Committee are as follows:


Mr. Martin Andersson . . . . . . . . . . . . . . . . . . . Member of the Compensation Committee 2005Mr. Paul Ostling . . . . . . . . . . . . . . . . . . . . . . . . Chairman of the Compensation Committee 2012Mr. Damian Secen . . . . . . . . . . . . . . . . . . . . . . Member of the Compensation Committee 2012

Credit Committee

The Credit Committee consists of two members. It reviews and oversees decisions on new andexisting counterpart exposures. See “Business—Risk Management.”

The members of the Credit Committee are as follows:


Mr. Andrey Burlinov . . . . . . . . . . . . . . . . . . . . . Chairman of the Credit Committee 2011Mr. Damian Secen . . . . . . . . . . . . . . . . . . . . . . Member of the Credit Committee 2012

Governance and Positions Committee

The Governance and Positions Committee consists of two members. It oversees all corporategovernance matters of the Group.

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The members of the Governance and Positions Committee are as follows:


Mr. Gerard De Geer . . . . . . . . . . . . . . . . . . . . . Member of the Governance and PositionsCommittee

2012

Mr. Anders Lidefelt . . . . . . . . . . . . . . . . . . . . . . Chairman of the Governance and PositionsCommittee

2012

Strategy Committee

The Strategy Committee consists of four members. It communicates with the Group’s management onongoing projects between the meetings of the Board of Directors.

The members of the Strategy Committee are as follows:


Mr. Martin Andersson . . . . . . . . . . . . . . . . . . . . Member of the Strategy Committee 2011Mr. Gerard De Geer . . . . . . . . . . . . . . . . . . . . . Member of the Strategy Committee 2011Mr. Vladimir Lelekov . . . . . . . . . . . . . . . . . . . . . Chairman of the Strategy Committee 2012Mr. Damian Secen . . . . . . . . . . . . . . . . . . . . . . Member of the Strategy Committee 2012

Statement Regarding Compliance with Corporate Governance Requirements

The Parent is in full compliance with the corporate governance requirements of Bermuda. Corporategovernance requirements in Bermuda are not as developed as in Western European countries or theUnited States and, in general, do not offer the same level of protection to investors. The Parent doesnot currently observe the corporate governance recommendations set out in the UK CorporateGovernance Code.

Conflicts

As of the date of this Prospectus, there are no potential conflicts of interest between any duties of themembers of the Board of Directors and members of the Executive Management Committee and theirprivate interests and/or other duties.

Statement Regarding Litigation

As of the date of this Prospectus, none of the directors nor the senior managers of the Issuer andGuarantors have in the previous five years:

• have any convictions in relation to fraudulent offences;

• have held any executive function of senior manager, or been a member of the administrativemanagement or supervisory body, of any company, during the period or immediatelypreceding the period of any, bankruptcy, receivership or liquidation of such company; or

• have been subject to any official sanction by any statutory or regulatory authority (includingany designated professional body), nor has he/she ever been disqualified by a court fromacting as a member of any administrative, examinership, management or supervisory body ofa company or from acting in relation to the management of any company.

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MAJOR SHAREHOLDERS

The Issuer is a direct wholly-owned subsidiary of the Parent.

OOO Brunswick Rail Leasing is an indirect wholly-owned subsidiary of the Parent, which owns throughits subsidiaries Brunswick Rail (Cyprus) Ltd. and Brunswick Rail Holding Ltd. 100.0% of interest inOOO Brunswick Rail Leasing.

OOO Brunswick Wagon Leasing is an indirect wholly-owned subsidiary of the Parent, which ownsdirectly and through its subsidiaries Brunswick Wagon Holding Ltd., Brunswick Wagon (Cyprus) Ltd.and Tobikoco Ltd. 100.0% of interest in OOO Brunswick Wagon Leasing.

OOO Brunswick Trans is an indirect wholly-owned subsidiary of the Parent, which owns through itssubsidiaries Meconnen Enterprises Ltd. and Brunswick RRR (Cyprus) Ltd. 100.0% of interest in OOOBrunswick Trans.

OOO Brunswick Rail Service is an indirect wholly-owned subsidiary of the Parent, which owns throughits subsidiaries OOO Brunswick Rail Leasing and Brunswick Rail Holding Ltd. 100.0% of interest inOOO Brunswick Rail Service.

The following table sets forth information with respect to the beneficial ownership of the Parent as ofthe date of this Prospectus. As of the date of this Prospectus, the Parent had an issued share capital ofUS$ 204,620,587, divided into 204,619,789 issued and outstanding ordinary shares with nominal valueof US$ 1 each and 7,967,044 issued and outstanding ordinary shares with nominal value of US$0.0001 each. The ordinary shares with a nominal value of US$ 0.0001 each were issued for thepurpose of a management share incentive scheme established in 2007. None of the Group’s majorshareholders has different voting rights.

The authorized share capital of the Parent as of the date of this Prospectus was US$ 500,000,000,divided into 499,999,203 ordinary shares with nominal value of US$ 1.00 each and 7,970,000 ordinaryshares of nominal value US$ 0.0001 each.

Major Shareholders of the Parent

The following table sets forth the principal shareholders of the Parent as of the date hereof appearingon its register of shareholders with an interest of not less than 5 per cent. of its total share capital aswell as the total shareholdings of management in the Parent:

Shareholder

Number ofBrunswick Rail Limited

Issued Shares

Percent ofBrunswick Rail Limited

Issued Shares

Troon Management Services Limited(1) . . . . . . . . . . . . . . . . 34,729,614 16.34%International Finance Corporation(2) . . . . . . . . . . . . . . . . . . . 28,907,328 13.60%MRIF Bermuda Investments 2 Limited(3) . . . . . . . . . . . . . . . 22,549,912 10.61%Triton Rail Leasing B.V.(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,036,087 9.42%Sarastro Group Limited(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,866,823 8.87%Lokomotiv Moscow Limited(6) . . . . . . . . . . . . . . . . . . . . . . . . 15,318,715 7.21%Andre Hoffmann(9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,597,322 6.40%Wilcom Management Limited(8) . . . . . . . . . . . . . . . . . . . . . . . 12,254,914 5.76%Russian Rail Investments Limited(7) . . . . . . . . . . . . . . . . . . . 10,640,637 5.01%Management(10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,576,931 2.78%

(1) Troon Management Services Limited is a company organized and existing under the laws of British Virgin Islands underregistration number 479667 with its registered office at Bison Court, P.O. Box 3460, Road Town, Tortola, British VirginIslands. It is controlled by trustees of a trust of which Mr. Martin Andersson is a primary beneficiary.

(2) International Finance Corporation is a member of the World Bank Group with over 182 member companies.(3) MRIF Bermuda Investments 2 Limited is a company organized and existing under the laws of Bermuda under registration

number 44768 with its registered office at Penboss Building, 50 Parliament Street, Hamilton HM 12, Bermuda. It is controlledby Macquarie Renaissance Infrastructure Fund (MRIF), whose investors include Vnesheconombank, the Russian StateBank for Development and Foreign Economic Affairs, as cornerstone investor, and Eurasian Development Bank.

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(4) Triton Rail Leasing B.V. is a company organized and existing under the laws of the Netherlands under registration numberBV 1319349 with its registered office at Strawinskylaan 907, 1077xx Amsterdam, the Netherlands. It is controlled bySumitomo Corporation, a publicly traded company on the Tokyo Stock Exchange.

(5) Sarastro Group Limited is a company organized and existing under the laws of British Virgin Islands under registrationnumber 1418652 with its registered office at Bison Court, P.O. Box 3460, Road Town, Tortola, British Virgin Islands. It iscontrolled by Mr. Gerard De Geer, one of the founders of the Group and a member of the Board of Directors.

(6) Lokomotiv Moscow Limited is a company organized and existing under the laws of Guernsey, Channel Islands, underregistration number 52756 with its registered office at 4th Floor, West Wing, Trafelar Court, Admiral Park, St Peter Port,Guernsey, Channel Islands. It is controlled by VTB Capital plc, a Russian investment bank and one of the Joint LeadManagers and Bookrunners in the Offering.

(7) Russian Rail Investments Limited is a company organized and existing under the laws of Bermuda under registrationnumber 44767 with its registered office at Penboss Building, 50 Parliament Street, Hamilton HM 12, Bermuda. It is controlledby Macquarie Renaissance Infrastructure Fund (MRIF), whose investors include Vnesheconombank, the Russian StateBank for Development and Foreign Economic Affairs, as cornerstone investor, and Eurasian Development Bank.

(8) Wilcom Management Limited is a company organized and existing under the laws of Cyprus under registration number256904 with its registered office at Karapatakis Bldg., 1 Naousis Street, Larnaca 6018, Cyprus. It is controlled by UFGPrivate Equity Fund II LP, A Cayman Islands Limited Partnership.

(9) Shares held directly and indirectly, through affiliated entities. Andre Hoffmann was a member of the Board of Directors from30 March 2006 to 22 September 2010.

(10) Under the share incentive scheme (see “Directors and Senior Management—Share-Based Compensation”).

2010 Private Placement

In November and December 2010, the shareholders of the Parent approved private placement ofshares to existing and new shareholders for a maximum amount of 75,316,954 newly issued ordinaryshares of nominal value US$ 1 each (the “2010 Private Placement”). As a result of the 2010 PrivatePlacement, 75,316,954 shares in the Parent were placed to a number of international and Russianinvestors. Major participants of the 2010 Private Placement were VTB Capital plc, UFG AssetManagement, Macquarie Renaissance Infrastructure Fund (MRIF) and International FinanceCorporation, an existing shareholder of the Parent. The proceeds were used to increase the railcarfleet of the Group. Goldman Sachs International, one of the Joint Lead Managers and Bookrunners inthe Offering, acted as an exclusive placement agent for the 2010 Private Placement.

Shareholders’ Agreement

On August 16, 2005 (as further amended on July 19, 2006 and on December 20, 2010), theshareholders of the Parent entered into arrangements governing their shareholdings in the Parent(including the restrictions on transfer of their shares), the management of the Parent, and certain othermatters (the “Shareholders’ Agreement”). Any person acquiring shares in the Parent from an existingshareholder (except in case the entire issued share capital of the Parent is being transferred) orthrough an issue of new equity (except in case shares are issued to a wholly-owned subsidiary of theParent) shall enter into a deed of adherence to the Shareholders’ Agreement.

The parties to the Shareholders’ Agreement have agreed, inter alia, to the following materialprovisions:

Share Issues

Existing shareholders have pre-emption right upon any new issue of shares or any rights to subscribefor or convert securities into shares, except in case of (i) the shareholders entitled to exercise amajority of the votes at a meeting of the shareholders (the “Majority Shareholders”) approving to thecontrary; (ii) such shares or rights only being issued to employees, directors or subsidiaries of theParent, provided that following such issue their aggregate holding of such shares or rights does notexceed 15% of the total share capital of the Parent on a fully diluted basis; or (iii) debt-to-equityconversion as stipulated by the mezzanine facility agreement between the Parent and MRIFLuxembourg Restructure S.a.r.l., as original lender (see “—Mezzanine Facility Agreement”).

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Restrictions on Transfers

Pre-emption rights of the shareholders also apply to disposal of shares by an existing shareholder,except if approved to the contrary by the Majority Shareholders, and subject to a number of otherexemptions, such as inter-company transfers; transfers to affiliates, board-approved transfers of under2% of all issued shares to another existing shareholder, transfers pursuant to tag-along or drag-alongprovisions, etc. (each of the persons a transfer to whom is not subject to pre-emption rights is a“Permitted Transferee”).

Mandatory Transfer

A shareholder who suffers a change of control, has a winding-up or administration petition presented inrelation to it, enters into a composition or arrangement with its creditors, is unable to pay its debts, orundergoes certain other events similar in nature is required to offer all of its shares for purchase toother shareholders. The price at which the shares are to be sold in such case is determined pursuantto the Shareholders’ Agreement.

Tag-Along and Drag-Along Rights

If a shareholder (the “Selling Shareholder”) intends to transfer some or all of its shares to a person,who, following such transfer, would own 20% or more of the entire share capital of the Parent (the“Prospective Buyer”), the other shareholders (the “Remaining Shareholders”) shall be entitled to sellto the Prospective Buyer the same percentage of their respective shareholdings as the SellingShareholder intends to sell (the “Relevant Percentage”). The Prospective Buyer is required to make abinding offer to all Remaining Shareholders to purchase the Relevant Percentage of shares from eachof them, supported by a bank guarantee if any of the Remaining Shareholders so requires. Thecompletion of a transaction between the Prospective Buyer and each of the Remaining Shareholderswho choose to enforce this tag-along right, or their failure to accept the Prospective Buyer’s offer withina specified period of time, is a precondition for the Selling Shareholder being able to sell the RelevantPercentage of its shares.

If a person, other than an existing shareholder of the Parent or a Permitted Transferee of suchshareholder, makes an offer to purchase all of the issued shares of the Parent on equal terms, and theMajority Shareholders accept this offer, the shares of any non-accepting shareholder may betransferred to the offeror without the consent of such shareholder.

Exit

The shareholders have agreed to take all reasonably necessary action required to achieve an “Exit” byDecember 31, 2012, and the Parent has agreed to take such action as may reasonably be required bythe Board of Directors to achieve an Exit, whereby an Exit shall mean the either of: (a) a sale of morethan 50% of the Parent’s share capital; (b) a sale of the whole or a substantial part of the business ofthe Group; (c) a public offering of the Parent’s shares on an internationally recognized stock exchange;(d) winding up of the Group; (e) an amalgamation or merger of the Parent with another entity resultingin the shareholders of the Parent holding 50% or less in such amalgamated entity; or (f) any othertransaction or series of related transactions having a comparable effect to matters (a) through(e) above.

Duration and Termination

The Shareholders’ Agreement shall continue to be in force for so long as two or more parties continueto hold shares in the Parent. It may be terminated by an approval of the shareholders entitled toexercise over 85% of the votes exercisable at a meeting of the shareholders or by an approval of theMajority Shareholders on the occurrence of an Exit.

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TRANSACTIONS WITH RELATED PARTIES

There is no single ultimate controlling party which exercises control over the affairs of the Group.

Transactions with related parties are as follows:

Key management compensation

Please see, “Directors and Senior Management—Compensation” and Note 29 to the Group’s AuditedFinancial Statements and Note 23 to the Group’s Unaudited Interim Financial Statements.

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DESCRIPTION OF THE ISSUER AND THE GUARANTORS

Issuer

Brunswick Rail Finance Limited was incorporated in Ireland on October 2, 2012, with registerednumber 518323 as a private company with limited liability under the Companies Acts 1963 – 2012 ofIreland (the “Companies Acts”). The registered office of the Issuer is 31 Fitzwilliam Square, Dublin 2,Ireland and its telephone number is + 353 1 905 8020.

Share capital and ownership

The authorized share capital of the Issuer is EUR 100 divided into 100 ordinary shares of par valueEUR 1.00 each (the “Shares”). The Issuer has issued one Share, which is fully paid and is held byBrunswick Rail Limited.

The Issuer is a wholly-owned subsidiary of Brunswick Rail Limited.

Pursuant to the Articles of Association of the Issuer, the Board is responsible for the management ofthe Issuer. Under Irish law, for as long as the Issuer is solvent the Board is required to act in the bestinterests of the Issuer.

The relationship between the Issuer and Brunswick Rail Limited, the sole shareholder of the Issuer, isgoverned by the memorandum and articles of association of the Issuer and Irish law, including theCompanies Acts and regulations made thereunder.

Cafico Corporate Services Limited (the “Corporate Services Provider”), an Irish company, acts as thecorporate services provider for the Issuer. The office of the Corporate Services Provider serves as thegeneral business office of the Issuer. Through the office and pursuant to the terms of the corporateservices agreement entered into on 24 October 2012 between the Issuer and the Corporate ServicesProvider (the “Corporate Services Agreement”), the Corporate Services Provider performs variousmanagement functions on behalf of the Issuer, including the provision of certain clerical, reporting,accounting, administrative and other services until termination of the Corporate Services Agreement. Inconsideration of the foregoing, the Corporate Services Provider receives various fees and othercharges payable by the Issuer at rates agreed upon from time to time plus expenses. The terms of theCorporate Services Agreement provide that either party may terminate the Corporate ServicesAgreement upon the occurrence of certain stated events, including any material breach by the otherparty of its obligations under the Corporate Services Agreement which is either incapable of remedy orwhich is not cured within 30 days from the date on which it was notified of such breach. In addition,either party may terminate the Corporate Services Agreement at any time by giving at least 90 dayswritten notice to the other party. The Corporate Services Agreement contains provisions for theappointment of a replacement corporate services provider if necessary.

The Corporate Services Provider’s principal office is 31 Fitzwilliam Square, Dublin 2, Ireland.

Principal Activities

The principal objects of the Issuer are set forth in clause 2 of its memorandum of association (ascurrently in effect) and permit the Issuer, inter alia, to lend money and give credit, secured orunsecured, to issue debentures and otherwise to borrow or raise money and to grant security over itsproperty for the performance of its obligations or the payment of money.

The Issuer is organized as a special purpose company. The Issuer was established to raise capital bythe issue of debt securities and to use amounts equal to the proceeds of each such issuance toadvance loans to Group companies.

Since its incorporation, the Issuer has not engaged in any material activities other than those incidentalto its registration as a private company under the Companies Acts and those related to the issue of theNotes. The Issuer has no employees.

Directors and Company Secretary

The Issuer’s Articles of Association provide that the Board of Directors of the Issuer will consist of atleast two Directors.

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The Directors of the Issuer and their business addresses are as follows:

Rodney O’Rourke, 31 Fitzwilliam Square, Dublin 2, Ireland.

Yolanda Kelly, 31 Fitzwilliam Square, Dublin 2, Ireland.

The Company Secretary is Cafico Secretaries Limited.

The Directors do not hold any direct, indirect, beneficial or economic interest in any of the Shares. Thedirectorships of Rodney O’Rourke and Yolanda Kelly are provided as part of the Corporate ServicesProvider’s overall corporate administration services provided to the Issuer pursuant to the CorporateServices Agreement. There are no current or potential conflicts of interest between the private interestsand/or other duties of any member of the Issuer’s Board of Directors and the duties of the members ofthe Issuer’s Board of Directors to the Issuer.

Save for the issues of Notes described above and their related arrangements, the Issuer has noborrowings or indebtedness in the nature of borrowings (including loan capital issued or created butunissued), term loans, liabilities under acceptances or acceptance credits, mortgages, charges orguarantees or other contingent liabilities.

Financial Statements

Since its date of incorporation, the Issuer has not commenced operations and no financial statementsof the Issuer have been prepared as of the date of this Prospectus. The financial year of the Issuerends on December 31 in each year. The Issuer will not prepare interim financial statements.

Each year, a copy of the audited profit and loss account and balance sheet of the Issuer together witha report of the directors and the auditors thereon is required to be filed in the Irish CompaniesRegistration Office within 28 days of the annual return date of the Issuer and is available for inspection.The profit and loss account and balance sheet can be obtained free of charge from the registeredoffice of the Issuer.

Guarantors

The Parent

Incorporation and Status

The Parent was founded on November 3, 2003 as an exempted company with limited liability under thelaws of Bermuda.

The registered office of the Parent is Wessex House, 2nd Floor, 45 Reid Street Hamilton HM12 Bermuda, and its telephone number is +441 296 0541. The Parent is registered in Bermuda undernumber 34383.

Purpose

The Parent’s purpose, as set out in its memorandum of association, is to engage in any business, orbusinesses, or in any acts or activities, which are not prohibited under any law for the time being inforce in the Islands of Bermuda. In particular, according to its memorandum of association, the Parentmay take or otherwise acquire and hold securities in any other corporate entity having objectsaltogether or in part similar to those of the Parent or carrying on any business capable of beingconducted so as to benefit the Parent.

Share Capital

The Parent’s authorized share capital is US$ 500,000,000. The Parent’s issued share capital iscomprised of 204,619,789 registered ordinary shares each with a nominal value of US$ 1.00 and7,967,044 registered ordinary shares each with a nominal value of US$ 0.0001, all of which have beenfully paid.

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Organizational Structure

The Parent is the main holding company of the Group. See “Business—Group Structure”.

Business

The Parent is a holding company.

Directors and management

For the directors of the Parent, see “Directors and Senior Management—Board of Directors”. TheParent does not have any employees.

Dividends

The Parent’s dividends are approved by its directors. No dividends have been distributed by the Parentfor the years 2009, 2010 and 2011 and for the six months ended June 30, 2012.

Auditors

ZAO PricewaterhouseCoopers Audit is the auditor of the Parent.

OOO Brunswick Rail Leasing


OOO Brunswick Rail Leasing was founded on March 26, 2004 as a limited liability company under thelaws of the Russian Federation.

The registered office of OOO Brunswick Rail Leasing is Paveletskaya square 2, bld. 2, 12th floor,Moscow, Russia, 115054, and its telephone number is + 7 (495) 783 67 00. OOO Brunswick RailLeasing is registered in the Russian Federation under main state registration number 1045006456901.

Purpose

OOO Brunswick Rail Leasing’s purpose, as set out in its charter, is the leasing of rolling stock andrelated equipment, maintenance and operation of rolling stock and related equipment, and otherancillary businesses.

Share Capital

OOO Brunswick Rail Leasing’s share capital is RUB 885,783,900 divided into two participationinterests with a nominal value of RUB 876,926,061 and RUB 8,857,839, owned by Brunswick Rail(Cyprus) Limited and Brunswick Rail Holding Limited, respectively. Both participation interests havebeen fully paid.

One hundred percent (100%) of participation interests in OOO Brunswick Rail Leasing are pledgedunder two pledge agreements both dated May 25, 2012 to secure the IFC Loan. Please see“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidityand Capital Resources—Capital resources” and “Description of Certain Indebtedness—IFC Loan”.


OOO Brunswick Rail Leasing is a 100%-owned subsidiary of the Parent. OOO Brunswick Rail Leasinghas no branches or representative offices.

Business

OOO Brunswick Rail Leasing is a rolling stock leasing company. See “Business—Operations” for afurther description of OOO Brunswick Rail Leasing’s activities.

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Directors and Management

OOO Brunswick Rail Leasing is managed by its CEO. The functions of the CEO are carried out byOOO Brunswick Rail Management, a management company with its registered address at2 Pavaletskaya square, bld. 2, 12th floor, Moscow 115054, Russian Federation, which is a 100%-owned subsidiary of the Parent. The CEO and sole manager of OOO Brunswick Rail Management isVladimir Lelekov, CEO of the Group. Mr. Lelekov’s business address is 2 Paveletskaya square, bld. 2,12th floor, Moscow 115054, Russian Federation. OOO Brunswick Rail Leasing does not have a boardof directors.

There are no current or potential conflicts of interest between Mr. Lelekov’s duties to OOO BrunswickRail Leasing and his private interests or other duties.

Dividends

OOO Brunswick Rail Leasing’s dividends are approved by the general meeting of its participants. Nodividends have been distributed by OOO Brunswick Rail Leasing for the years 2009, 2010 and 2011and for the six months ended June 30, 2012.

Auditors

ZAO PricewaterhouseCoopers Audit is the statutory auditor of OOO Brunswick Rail Leasing.

OOO Brunswick Rail Service


OOO Brunswick Rail Service was founded on March 26, 2004, as a limited liability company under thelaws of the Russian Federation.

The registered office of OOO Brunswick Rail Service is Paveletskaya square 2, bld. 2, 12th floor,Moscow, Russia, 115054, and its telephone number is + 7 (495) 783 67 00. OOO Brunswick RailService is registered in the Russian Federation under main state registration number 1047796200693.

Purpose

OOO Brunswick Rail Service’s purpose, as set out in its charter, is the purchasing and leasing of rollingstock and related equipment, the maintenance and operation of rolling stock and related equipment,and other ancillary businesses.

Share Capital

OOO Brunswick Rail Service’s share capital is RUB 551,359,900 divided into two participation interestswith a nominal value of RUB 545,846,301 and RUB 5,513,599, owned by OOO Brunswick Rail Leasingand Brunswick Rail Holding Limited, respectively. Both participation interests have been fully paid.

One hundred percent (100%) of participation interests in OOO Brunswick Rail Service are pledgedunder two pledge agreements both dated May 25, 2012, to secure the IFC Loan. See “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Liquidity and CapitalResources—Capital resources” and “Description of Certain Indebtedness—IFC Loan”.


OOO Brunswick Rail Service is a 100%-owned subsidiary of the Parent. OOO Brunswick Rail Servicehas no branches or representative offices.

Business

OOO Brunswick Rail Service is a rolling stock leasing company. See “Business—Operations” for afurther description of OOO Brunswick Rail Service’s activities.


OOO Brunswick Rail Service is managed by its CEO. The functions of the CEO are carried out byOOO Brunswick Rail Management, a management company with its registered address at 2

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Pavaletskaya square, bld. 2, 12th floor, Moscow 115054, Russian Federation, which is a 100%-ownedsubsidiary of the Group. The CEO and sole manager of OOO Brunswick Rail Management is VladimirLelekov, CEO of the Group. Mr. Lelekov’s business address is 2 Paveletskaya square, bld. 2, 12th

floor, Moscow 115054, Russian Federation. OOO Brunswick Rail Service does not have a board ofdirectors.

There are no current or potential conflicts of interest between Mr. Lelekov’s duties to OOO BrunswickRail Service and his private interests or other duties.

Dividends

OOO Brunswick Rail Service’s dividends are approved by the general meeting of its participants. Nodividends have been distributed by OOO Brunswick Rail Service for the years 2009, 2010 and 2011and for the six months ended June 30, 2012.

Auditors

ZAO PricewaterhouseCoopers Audit is the statutory auditor of OOO Brunswick Rail Service.

OOO Brunswick Trans


OOO Brunswick Trans was founded on July 15, 2011, as a limited liability company under the laws ofthe Russian Federation.

The registered office of OOO Brunswick Trans is 36 Mamina-Sibiryaka Street, Ekaterinburg, Sverdlovregion Russia, 620027, and its telephone number is + 7 (343) 311 08 18. OOO Brunswick Trans isregistered in the Russian Federation under the main state registration number 1116672016988.

Purpose

OOO Brunswick Trans’ purpose, as set out in its charter, is the leasing of rolling stock and relatedequipment, railway transportation, and other ancillary businesses.

Share Capital

OOO Brunswick Trans’ share capital is RUB 10,000,000, wholly-owned by Meconnen Enterprises Ltd.


OOO Brunswick Trans is a 100%-owned subsidiary of the Parent. OOO Brunswick Trans has nobranches or representative offices.

Business

OOO Brunswick Trans is a rolling stock leasing company. See “Business—Operations” for a furtherdescription of OOO Brunswick Trans’ activities

Management

OOO Brunswick Trans is managed by its CEO and board of directors. Mr. Andrey Khasanov is theCEO of OOO Brunswick Trans. The following individuals are members of the board of directors ofOOO Brunswick Trans: Mr. Vladimir Khoroshilov (Chairman), Mr. Sergey Bogdanov and Ms. ElenaNaumova.

There are no current or potential conflicts of interest between the members of the board of directors ofOOO Brunswick Trans and OOO Brunswick Trans in its official capacity and its private interests orother duties.

Dividends

OOO Brunswick Trans’ dividends are approved by the general meeting of its participants. No dividendshave been distributed by OOO Brunswick Trans for the years 2009, 2010 and 2011, and for the sixmonths ended June 30, 2012.

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Auditors

ZAO PricewaterhouseCoopers Audit is the statutory auditor of OOO Brunswick Trans.

OOO Brunswick Wagon Leasing


OOO Brunswick Wagon Leasing was founded on January 12, 2010, as a limited liability companyunder the laws of the Russian Federation.

The registered office of OOO Brunswick Wagon Leasing is Paveletskaya square 2, bld. 2, 12th floor,Moscow, Russia, 115054, and its telephone number is + 7 (495) 783 67 00. OOO Brunswick WagonLeasing is registered in the Russian Federation under main state registration number 1107746005102.

Purpose

OOO Brunswick Wagon Leasing’s purpose, as set out in its charter, is the purchasing and leasing ofrolling stock and related equipment, the maintenance and operation of rolling stock and relatedequipment, and other ancillary businesses.

Share Capital

OOO Brunswick Wagon Leasing’s share capital is RUB 3,244,214,440 divided into three participationinterests with a nominal value of RUB 3,211,762,395.60, RUB 32,442,044.40 and RUB 10,000, ownedby Brunswick Wagon (Cyprus) Limited, the Parent and Tobikoco Ltd., respectively. All threeparticipation interests have been fully paid.

Ninety nine and nine thousand nine hundred and ninety seven thousandths (99,9997%) of participationinterests in OOO Brunswick Wagon Leasing are pledged under two pledge agreements both datedJuly 23, 2010 to secure the EBRD/IFC Loan. See “Management’s Discussion and Analysis of FinancialCondition and Results of Operations—Liquidity and Capital Resources—Capital resources”.


OOO Brunswick Wagon Leasing is a 100%-owned subsidiary of the Parent. OOO Brunswick WagonLeasing has no branches or representative offices.

Business

OOO Brunswick Wagon Leasing is a rolling stock leasing company. See “Business—Operations” for afurther description of OOO Brunswick Wagon Leasing’s activities


OOO Brunswick Wagon Leasing is managed by its CEO. The functions of the CEO are carried out byOOO Brunswick Rail Management, a management company with its registered address at2 Pavaletskaya square, bld. 2, 12th floor, Moscow 115054, Russian Federation, which is a100%-owned subsidiary of the Group. The CEO and sole manager of OOO Brunswick RailManagement is Vladimir Lelekov, CEO of the Group. Mr. Lelekov’s business address is 2 Paveletskayasquare, bld. 2, 12th floor, Moscow 115054, Russian Federation. OOO Brunswick Wagon Leasing doesnot have a board of directors.

There are no current or potential conflicts of interest between Mr. Lelekov’s duties to OOO BrunswickWagon Leasing and his private interests or other duties.

Dividends

OOO Brunswick Wagon Leasing’s dividends are approved by the general meeting of its participants.No dividends have been distributed by OOO Brunswick Wagon Leasing for the years 2009, 2010 and2011 and for the six months ended June 30, 2012.

Auditors

ZAO PricewaterhouseCoopers Audit is the statutory auditor of OOO Brunswick Wagon Leasing.

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DESCRIPTION OF CERTAIN INDEBTEDNESS

EBRD/IFC Facility

In June 2010, OOO Brunswick Wagon Leasing (“BWL”) entered into a loan agreement with the EBRD,and, in November 2010, OOO Brunswick Wagon Leasing entered into a loan agreement with theInternational Finance Corporation. As amended, the EBRD/IFC Facility consists of the following loans:

• A loan facility (“EBRD A Loan”) not to exceed US$ 160,000,000;

• A loan facility (“EBRD B Loan”) not to exceed US$ 130,000,000;

• A loan facility (“IFC 2010 A Loan”) not to exceed US$ 50,000,000; and

• A loan facility (“IFC 2010 B Loan”) not to exceed US$ 80,000,000.

As of June 30, 2012, US$ 122.5 million was outstanding under the EBRD A Loan, US$ 85.8 millionwas outstanding under the EBRD B Loan, US$ 36.6 million was outstanding under the IFC 2010 ALoan, and US$ 52.4 million was outstanding under the IFC 2010 B Loan. The Group intends to use theproceeds of the Notes to repay the entirety of the outstanding amounts under the EBRD/IFC Facility.

Interest

Interest on the EBRD A Loan and the IFC 2010 A Loan is equal to the US dollar three-month LondonInterbank Offer Rate (“LIBOR”) plus 4.25% per annum. Interest on the EBRC B Loan and the IFC 2010B Loan is equal to the US dollar three-month LIBOR plus 3.25% per annum.

Scheduled Amortization and Prepayments

Repayment of borrowings under the EBRD/IFC Facility is amortized quarterly through June 30, 2018.BWL is required to prepay all or a portion of the facility upon certain events, including: (i) on an interestpayment date, BWL is required to prepay an amount equal to 50% of the aggregate amount of cashavailable (excluding, among other things, that amount of cash which would result in the debt servicecoverage ratio under the agreement being equal to 1); (ii) after receipt of a VAT refund, BRL is requiredto prepay within ten days an amount equal to such refund except in certain cases where the refund isapplied to purchase additional railcars; and (iii) a change of control of BWL or the additional obligors, inwhich case EBRD or IFC, as the case may be, may declare the entire outstanding amount of therespective facility due and payable.

BWL may also elect to prepay the EBRD/IFC Facility upon certain changes in tax law and mayotherwise elect to prepay the EBRD/IFC Facility, subject to certain customary prepayment fees.

Covenants

The EBRD/IFC Facility contains certain financial and other affirmative and negative covenants that theGroup believes is usual and customary for a senior secured credit agreement. The financial covenantsin the EBRD/IFC Facility include,:

• maintenance of the Group’s debt service coverage ratio of not less than 1.2;

• maintenance of a lease delinquency ratio of not less than 15%;

• maintenance of a ratio of tangible assets to total assets of at least 30%;

• maintenance of an on-lease ratio of not less than 85%;

• maintenance of a loan-to-railcar value ratio of not more than 75%;

• maintenance of an average remaining lease tenor of not less than 18 months; and

• maintenance of a rouble lease ratio of not more than 25%.

Other affirmative covenants include, among other things, the maintenance of a specified lease tenor forcertain leases and compliance with the hedging policy set forth in the EBRD/IFC facility agreements.

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The negative covenants in the EBRD/IFC Facility include, among other things, limitations on theGroup’s ability to:

• declare dividends and make other distributions (including payment of management fees);

• make certain capital expenditures;

• incur additional indebtedness;

• grant liens, except for liens associated with permitted financings;

• enter into derivative transactions, except for certain hedging arrangements or certain othertransactions entered into in the ordinary course of business;

• enter into affiliate transactions not at an arm’s-length basis, except for managementarrangements and inter-group loan agreements;

• make loans or investments, except, among other things, with respect to the purchase orleasing railcars; and

• sell certain assets or permit any merger or other business combination;

Events of Default

The events of default under the EBRD/IFC Facility include, without limitation, nonpayment,misrepresentations, breach of covenants, nationalization, bankruptcy, ineligibility for financing, certainjudgments, the occurrence of an event likely to have a material adverse effect and cross-defaults.

Security

The EBRD/IFC Facility is secured by the following assets of the Group:

• the Pledge of all railcars owned by BWL;

• the Pledge of 100% of participation interests in BWL and OOO Brunswick Rail Managementand of 100% of shares in Brunswick Wagon (Cyprus) Limited, Brunswick Wagon Leasing FinLimited, Brunswick Rail Group Limited and Brunswick Wagon Holding Limited;

• the pledge by BWL of rights under railcar supply and lease agreements;

• charges over bank accounts maintained by BWL, Brunswick Wagon Holding Limited,Brunswick Wagon (Cyprus) Limited and Brunswick Wagon Fin Limited;

• withdrawal agreements authorizing initiation of automatic withdrawals from the bank accountsmaintained by BWL; and

• the conditional assignment (effective upon the occurrence of an event of default) of rightsunder the intercompany loan agreements entered into by the Parent, Brunswick WagonHolding Limited, Brunswick Wagon (Cyprus) Limited and Brunswick Wagon Fin Limited.

EBRD/IFC Guarantee, Subordination and Administration Agreement

Pursuant to a guarantee, subordination and administration agreement dated July 23, 2010, betweenEBRD and BWL (and amended on April 6, 2011, with IFC) and certain additional guarantors of theGroup (the “EBRD GSA”), each of the Parent, Brunswick Wagon Holding Limited, Brunswick WagonFin Limited, Brunswick Wagon (Cyprus) Limited, Brunswick Rail Group Limited, Brunswick Rail Group(Cyprus) Limited, and OOO Brunswick Rail Management agreed to guarantee payment andperformance of other obligations under the EBRD/IFC Facility. The EBRD GSA requires, after aqualified bond issuance, that any material company, which is any member of the Brunswick restrictedgroup which represents more than 10% of total assets or EBITDA of the restricted group, become aguarantor under the IFC Loan and that all guarantors under the IFC Loan represent at least 75% of thetotal assets or EBITDA of the Brunswick restricted group.

In addition, the Parent, Brunswick Wagon Holding Limited, Brunswick Wagon Fin Limited, BrunswickWagon (Cyprus) Limited and OOO Brunswick Wagon Leasing that certain intra-Group loans betweensuch entities would be subordinated to the EBRD/IFC Facility.

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The EBRD GSA also contains certain customary provisions governing the rights and obligations of thesecurity agent with respect to security under the EBRD/IFC Facility.

IFC Loan

In May 2012, OOO Brunswick Rail Leasing (“BRL”) and OOO Brunswick Rail Service (“BRS”) enteredinto a loan agreement with the IFC (the “IFC Loan”). The IFC Loan consists of the following loans:

• a loan facility (“IFC 2012 A Loan”) not to exceed US$ 70,000,000, with two separate tranchesfor BRL and one tranche for BRS; and

• a loan facility (“IFC 2012 B Loan”) not to exceed US$ 180,000,000, with two separatetranches for BRL and one tranche for BRS.

As of June 30, 2012, US$ 70 million was outstanding under the IFC 2012 A Loan, and US$ 180 millionwas outstanding under the IFC 2012 B Loan.

Borrowings under the IFC Loan were used, in part, to repay the Group’s borrowings from certaininternational banks led by Société Générale and BNP Paribas under a US$ 435 million facility, and therepayment of up to a US$ 156 million bridge loan received from VTB Capital plc and Raiffeisen BankInternational AG, of which US$ 43 million was drawn down by the Group.

Interest

Prior to a qualified bond issuance, which includes the issuance of the Notes, interest on the IFC Loanis equal to the US dollar three-month LIBOR plus 5.00% per annum. Following a qualified bondissuance, interest on the IFC Loan is equal to the US dollar three-month LIBOR plus the greater of(i) 6.00% per annum and (ii) the qualified bond’s implied spread to the US$ mid-swap rate for theremaining average loan life of the IFC Loan.

Scheduled Amortization and Prepayments

Repayment of borrowings under the IFC Loan is amortized quarterly through May 23, 2017. BRL andBRS are required to prepay all or a portion of the facility upon certain events, including: (i) after receiptof a VAT refund, BRL and BRS are required to prepay within 10 days an amount equal to such refundexcept in certain cases where the refund is applied to purchase additional railcars; (ii) a change ofcontrol of BWL or the additional obligors, in which case IFC may declare the entire outstanding amountof the respective facility due and payable; (iii) upon any bond redemption, BRL and BRS must prepaythe IFC Loan pro-rata to the bond redemption; and (iv) upon any sale of certain assets (includingrailcars) and prior to a qualified bond issuance, BRL and BRS must prepay any amount not applied tothe purchase of additional railcars; after a qualified bond issuance, upon any sale of certain assets,BRL and BRS must prepay any amount not applied to the purchase of additional railcars pro rata toprepayment of the qualified bond

BRL and BRS may also elect to prepay the IFC Loan upon certain changes in tax law and mayotherwise elect to prepay the IFC Loan, subject to certain customary prepayment fees.

Covenants

The IFC Loan contains certain financial and other affirmative and negative covenants that the Groupbelieves is usual and customary for a senior secured credit agreement. The financial covenants in theIFC Loan include:

• maintenance of the Group’s debt service coverage ratio of not less than 1.2;

• maintenance of a lease delinquency ratio of not less than 15%;

• maintenance of a ratio of tangible net assets to total assets of at least 25%;

• maintenance of an on-lease ratio of not less than 85%;

• maintenance of a loan-to-railcar value ratio of not more than 75%;

• maintenance of an average remaining lease tenor of not less than 12 months; and

• maintenance of a rouble lease ratio of not more than 25%;

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• maintenance of a gearing ratio (net borrowings over adjusted share capital) of less than 3.5 to1 prior to a qualified bond issuance and less than 2.5 to 1 after a qualified bond issuance; and

• maintenance of total debt to EBITDA prior to a qualified bond issuance of less than 4 to 1 andafter a qualified bond issuance less than 3.5 to 1.

Other affirmative covenants include, among other things, maintenance of a specified lease tenor forcertain leases and compliance with the hedging policy set forth in the IFC Loan agreement.

The negative covenants in the IFC Loan include, among other things, limitations on the Group’s abilityto:

• declare dividends and make other distributions (including payment of management fees);

• make certain capital expenditures;

• incur additional indebtedness;

• grant liens, except for liens associated with permitted financings and, after a qualified bondissuance, to the extent the IFC Loan is equally and ratably secured with additional financialdebt;

• enter into derivative transactions, except for certain hedging arrangements or certain othertransactions entered into in the ordinary course of business;

• enter into affiliate transactions not at an arm’s-length basis, except for managementarrangements and inter-group loan agreements;

• make loans or investments, except, among other things, with respect to the purchase orleasing railcars; and

• sell certain assets or permit any merger or other business combination;

Events of Default

The events of default under the IFC Loan include, without limitation, nonpayment, misrepresentations,breach of covenants, nationalization, bankruptcy, certain judgments, the occurrence of an event likelyto have a material adverse effect and certain cross-defaults.

Security

The IFC Loan is secured by the following assets of the Group:

• the pledge of all railcars owned by BRS on and after the date of the agreement (and in caseof the issuance of the Notes, all railcars owned by the Group (excluding unrestrictedsubsidiaries));

• the pledge of all railcars owned by BRL on and after the date of the agreement (and in case ofthe issuance of the Notes, all railcars owned by the Group (excluding unrestrictedsubsidiaries));

• the pledge by BRL of rights under railcar supply and lease agreements;

• the pledge by BRS of rights under railcar supply and lease agreements;

• the pledge by BRL of all of its participation interests in BRS (constituting 99% of the sharecapital of BRS);

• the pledge by Brunswick Rail Holding Limited of all of its participation interests in BRS(constituting 1% of the share capital of BRS);

• the pledge by Brunswick Rail (Cyprus) Limited of all of its participation interests in BRS(constituting 99% of the share capital of BRS);

• the pledge by Brunswick Rail Holding Limited of all of its participation interests in BRL(constituting 1% of the share capital of BRL);

• the pledge by Brunswick Rail Limited of all of its participation interest in Brunswick RailHolding Limited (constituting 100% of the share capital of Brunswick Rail Holding Limited)

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• the pledge by BRS of its rights under certain hedging arrangements;

• the pledge by BRL of its rights under certain hedging arrangements;

• charges over certain bank accounts maintained by BRL and BRS;

• the assignment by Brunswick Rail Fin Limited of its rights under any present or future intra-group lending agreements between BRL or BRS, on the one hand, and Brunswick Rail FinLimited, on the other; and

• the assignment by each of BRL or BRS of any of their rights under any present or futurepermitted loans by BRL or BRS, including any loans between BRL or BRS, any subordinatedloans to Brunswick Rail Fin Limited, any loans to another member of the Group to paymanagement operational expenses, or any loans of distributable profits to BRL or BRS, as thecase may be, or to any guarantor under the IFC Loan.

Release of Security—Qualified Bond Issuance

Following the closing of a qualified bond issuance, which refers to the issuance of notes by a memberof the Group for the purposes of refinancing the EBRD/IFC Facility and is expected to include theissuance of the Notes, subject to certain conditions set forth below, the security granted under the IFCLoan will be released.

The release of security upon a qualified bond issuance is subject to certain conditions, including, butnot limited to:

• the terms of the notes being issued pursuant to the qualified bond issuance and any otherterms of the qualified bond issuance being acceptable to IFC;

• the proceeds of the qualified bond issuance being sufficient to repay the EBRD/IFC Facility;

• the earliest scheduled redemption or repayment date (including any put option under thenotes issued pursuant to the qualified bond issuance) in respect of all or any part of theprincipal outstanding under the notes issued pursuant to the qualified bond issuance being atleast four months after the final maturity date of the IFC Loan (May 23, 2017);

• each of the Parent and material subsidiary of the Group entering into a guarantee,subordination and administration agreement dated May 23, 2012, between IFC and BRS andBRL, and certain additional guarantors of the Group (the “IFC GSA”) and becoming aguarantor under the IFC Loan as of the date of closing of the qualified bond issuance;

• the guarantor parties to the guarantee, subordination and administration agreementconstituting 75% of the total assets and EBITDA of the Brunswick restricted group;

• any other guarantor of notes issued pursuant to a qualified bond issuance also guaranteeingthe IFC Loan;

• the Parent having a credit rating of at least BB- (stable outlook) with S&P and Ba3 (stableoutlook) with Moody’s;

• following the qualified bond issuance, other than certain specified liens, no lien existing orbeing required to be created over any of the Group or its assets; and

• the IFC Loan ranking at least pari passu with notes issued pursuant to a qualified bondissuance.

IFC Guarantee, Subordination and Administration Agreement

Pursuant to the IFC GSA, each of the Parent, Brunswick Rail Holding Limited, Brunswick Rail FinLimited, Brunswick Rail (Cyprus) Limited, BRS and BRL agreed to guarantee payment andperformance of other obligations under the IFC Loan. The IFC GSA requires, after a qualified bondissuance, that any material company, which is any member of the Brunswick restricted group whichrepresents more than 10% of total assets or EBITDA of the restricted group, become a guarantorunder the IFC Loan and that all guarantors under the IFC Loan represent at least 75% of the totalassets or EBITDA of the Brunswick restricted group.

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In addition, the Parent, Brunswick Rail Holding Limited, Brunswick Rail Fin Limited, Brunswick Rail(Cyprus) Limited, BRS and BRL agreed that certain intra-Group loans between such entities would besubordinated to the IFC Loan, including any intra-Group loan to repay the IFC 2010 A Facility and theIFC 2010 B Facility, and any intra-Group loan between Brunswick Rail Fin Limited and the Parent andBrunswick Rail (Cyprus) Limited and the Parent.

The IFC GSA also contains certain customary provisions governing the rights and obligations of thesecurity agent with respect to security under the IFC Loan.

Mezzanine Facility Agreement

On October 7, 2010, the Parent entered into a mezzanine facility agreement (the “MezzanineAgreement”) with MRIF Luxembourg Restructure S.a.r.l. as original lender (the “Mezzanine Lender”),an affiliate of MRIF Bermuda Investments 2 Limited (a shareholder in the Group), which was furtheramended and restated on December 2, 2010. Pursuant to the terms of the Mezzanine Agreement, theMezzanine Lender agreed to make available to the Parent a mezzanine term loan facility in anaggregate amount of US$ 60 million. The ten-year loan, which carries an interest rate of 15% perannum (paid at the option of the borrower, with any unpaid portion irrevocably added to the face valueof the loan), is repayable through a bullet payment on October 7, 2020 and is convertible into equity(the “debt-to-equity conversion”) in the event that (i) a public offering of ordinary shares of the Parenton an internationally recognized stock exchange occurs, with gross proceeds of the primary offering ofat least US$ 200,000,000 and gross proceeds from secondary sales of at least the amount ofmezzanine loan outstanding at the time (in which case the Mezzanine Lender shall have a pre-emptionright to sell in such public offering the shares it has received as a result of the debt-to-equityconversion); or (ii) a sale by a shareholder of the Parent of some or all of its shares results in anyperson other than certain affiliates of the Mezzanine Lender acquiring over 35% of the ordinary sharesin the Parent (in which case the Mezzanine Lender shall have a tag-along right in respect of the sharesit has received as a result of the debt-to-equity conversion); or (iii) none of the events described initems (i) or (ii) above has occurred on or before the fifth anniversary of the date of the MezzanineAgreement. The debt-to-equity conversion is exercised at a price that is (a) the lower of 95% of thepublic offering share price or US$ 3,00 per share in case of item (i) above; or (b) the lower of 95% ofthe sale price or US$ 3,00 per share in case of item (ii) above; or (c) the higher of a price determinedas a result of an independent evaluation and US$ 3,00 per share in case of item (iii) above. TheMezzanine Facility has been fully drawn down by the Parent as of March 31, 2011, and since originaldrawdown the rights and obligations have been subsequently transferred by MRIF LuxembourgRestructure S.a.r.l to its MRIF-affiliated entities, MRIF Luxembourg Holdings S.a.r.l. and MRIFBermuda Investments 4 Limited. The Mezzanine Facility will be fully subordinated to the Notes.

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TERMS AND CONDITIONS OF THE NOTES

The U.S.$600,000,000 6.5 per cent. guaranteed notes due 2017 of Brunswick Rail Finance Limited(the Issuer) (the Notes, which expression includes any further Notes issued pursuant to Condition 15and forming a single series therewith) are guaranteed unconditionally and irrevocably, on a joint andseveral basis, by Brunswick Rail Limited (the Parent) and OOO Brunswick Rail Leasing, OOOBrunswick Rail Service, OOO Brunswick Trans and OOO Brunswick Wagon Leasing (together with theParent, each an Initial Guarantor and, together, the Initial Guarantors). The Notes were authorisedby a meeting of the board of directors of the Issuer held on 25 October 2012. The Guarantees (asdefined below) of the Notes were authorised by a resolution of the board of directors of each InitialGuarantor passed between 11 October 2012 and 15 October 2012.

The Notes are constituted by a trust deed dated 1 November 2012 (the Trust Deed) between theIssuer and Citibank, N.A., London Branch (the Trustee, which expression shall include all persons forthe time being who are the trustee or trustees under the Trust Deed) as trustee for the Holders (asdefined below) of the Notes. Each of the Initial Guarantors have entered into a separate deed ofguarantee with the Trustee, dated on or about the date of the Trust Deed (each an Initial Deed ofGuarantee and together the Initial Deeds of Guarantee). The Initial Deeds of Guarantee, togetherwith any further deeds of guarantee in substantially the same form as the Initial Deeds of Guaranteeentered into by any Successor Guarantor and/or any additional Guarantors are referred to herein asthe Deeds of Guarantee).

These terms and conditions (the Conditions) include summaries of, and are subject to, the detailedprovisions of the Trust Deed and the Deeds of Guarantee. The Issuer and the Guarantors haveentered into an agency agreement dated 1 November 2012 (the Agency Agreement) with theTrustee, Citibank, N.A., London Branch, as principal paying agent (the Principal Paying Agent and,together with any other paying agents appointed under the Agency Agreement, the Paying Agents)and the Registrar and Transfer Agents named therein. The Registrar, Paying Agents and TransferAgents are together referred to herein as the Agents.

Copies of the Trust Deed, the Deeds of Guarantee and the Agency Agreement are available forinspection during normal business hours at the specified office of the Trustee, being at the date hereof13th Floor, Citigroup Centre, Canada Square, Canary Wharf, London E14 5LB, United Kingdom, and atthe specified offices of the Agents. The Noteholders (as defined below) are entitled to the benefit of,are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and the Deeds ofGuarantee and are deemed to have notice of those provisions of the Agency Agreement applicable tothem.

Capitalised terms used but not defined in these Conditions shall have the respective meanings given tothem in the Trust Deed and the Deeds of Guarantee.

1. FORM AND DENOMINATION

The Notes are issued in fully registered form, serially numbered and without interest coupons attached,in minimum denominations of U.S.$200,000 or integral multiples of U.S.$1,000 in excess thereof (eachan Authorised Denomination). The Notes may be transferred only in amounts not less than anAuthorised Denomination.

The Notes are initially issued in global, fully registered form, and will only be exchangeable for Notes indefinitive, fully registered form (Definitive Notes) in the limited circumstances set forth in the AgencyAgreement.

2. GUARANTEES AND STATUS

Guarantees

2.1 The Guarantors have, or will have, each separately, pursuant to the Deeds of Guarantee,unconditionally and irrevocably, on a joint and several basis, guaranteed the payment when due of allsums expressed to be payable by, and all other obligations of, the Issuer under the Trust Deed and theNotes (each a Guarantee and together the Guarantees).

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2.2 Each Guarantor will undertake in the related Deed of Guarantee that so long as any of the Notesremains outstanding (as defined in the Trust Deed) it will not take any action for the liquidation orwinding-up of the Issuer.

Status

2.3 The Notes constitute direct, unsubordinated and (subject to Condition 4.6) unsecured obligations ofthe Issuer and shall at all times rank pari passu and rateably without any preference amongthemselves. Each Guarantee constitutes direct, unsubordinated and (subject to Condition 4.6)unsecured obligations of the relevant Guarantor. Each of the Issuer and the Guarantors shall ensurethat at all times the claims of the Noteholders against them under the Notes and the Guarantees,respectively, rank in right of payment at least pari passu with the claims of all their other present andfuture unsecured and unsubordinated creditors, save those whose claims are preferred by anymandatory operation of law.

3. REGISTER, TITLE AND TRANSFERS

Register

3.1 The Registrar shall maintain a Register in respect of the Notes (the Register) outside the UnitedKingdom at the specified office for the time being of the Registrar in accordance with the provisions ofthe Agency Agreement and shall record in the Register the names and addresses of the holders of theNotes, particulars of the Notes and all transfers and redemptions thereof. In these Conditions, theHolder of a Note means the person in whose name such Note is for the time being registered in theRegister (or, in the case of a joint holding, the first named thereof) and Noteholder shall be construedaccordingly.

Title

3.2 Title to the Notes will pass by and upon registration in the Register. The Holder of each Note shall(except as otherwise required by a court of competent jurisdiction or applicable law) be treated as theabsolute owner of such Note for all purposes (whether or not it is overdue and regardless of any noticeof ownership, trust or any other interest therein, any writing on the Definitive Note relating thereto(other than the endorsed form of transfer) or any notice of any previous loss or theft of such DefinitiveNote) and no person shall be liable for so treating such Holder.

Transfers

3.3 Subject to Conditions 3.6 and 3.7 below, a Note may be transferred in whole or in part in anAuthorised Denomination upon surrender of the relevant Definitive Note representing that Note,together with the form of transfer (including any certification as to compliance with restrictions ontransfer included in such form of transfer endorsed thereon) (the Transfer Form), duly completed andexecuted, at the specified office of a Transfer Agent or of the Registrar, together with such evidence assuch Agent or the Registrar may reasonably require to prove the title of the transferor and the authorityof the persons who have executed the Transfer Form. Where not all the Notes represented by thesurrendered Definitive Note are the subject of the transfer, a new Definitive Note in respect of thebalance not transferred will be delivered by the Registrar to the transferor in accordance with Condition3.4. Neither the part transferred nor the balance not transferred may be less than U.S.$200,000.

Registration and delivery of Definitive Notes

3.4 Within five Business Days of the surrender of a Definitive Note in accordance with Condition 3.3above, the Registrar shall register the transfer in question and deliver a new Definitive Note to eachrelevant Holder at the specified office of the Registrar or (at the request of the relevant Noteholder) atthe specified office of a Transfer Agent or (at the request and risk of such relevant Holder) send it byuninsured first class mail (airmail if overseas) to the address specified for the purpose by such relevantHolder.

No Charge

3.5 The registration of the transfer of a Note shall be effected without charge to the Holder ortransferee thereof, but against such indemnity from the Holder or transferee thereof as the Registrarmay require in respect of any tax or other duty of whatsoever nature which may be levied or imposed inconnection with such transfer.

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Closed periods

3.6 Noteholders may not require the transfer of a Note to be registered during the period of 15 daysending on the due date for any payment of principal, interest or Step-Up Interest (if any) in respect ofsuch Note.

Regulations concerning Transfer and Registration

3.7 All transfers of Notes and entries on the Register are subject to the detailed regulations concerningthe transfer and registration of Notes set out in the First Schedule to the Agency Agreement. Theregulations may be changed by the Issuer with the prior written approval of the Trustee and theRegistrar. A copy of the current regulations will be sent by the Registrar free of charge to any personwho so requests and will be available at the specified office of the Registrar.

4. COVENANTS

Limitation on Indebtedness

4.1 (a) The Issuer, the Parent and the Guarantors will not, and the Parent will not permit any of itsRestricted Subsidiaries to, Incur, directly or indirectly, any Indebtedness; provided, however,that the Parent, the Issuer, the Guarantors and each Restricted Subsidiary will be entitled toIncur Indebtedness if:

(i) after giving effect to such Incurrence and the application of the proceeds thereof, on a proforma basis, no Default or Event of Default would occur or be continuing; and

(ii) on the date of such Incurrence and after giving effect thereto and the application of theproceeds thereof, on a pro forma basis the Consolidated Leverage Ratio does not exceed4 to 1; and

(iii) on the date of such Incurrence and after giving effect thereto and the application of theproceeds thereof, on a pro forma basis the Consolidated Coverage Ratio is 2 to 1 orhigher.

(b) Notwithstanding the foregoing Condition 4.1(a), the Issuer, the Parent, Guarantors and anyRestricted Subsidiaries will be entitled to Incur Permitted Indebtedness.

(c) Notwithstanding the foregoing, no Guarantor or any Restricted Subsidiary will Incur anyIndebtedness pursuant to Condition 4.1 if the proceeds thereof are used, directly or indirectly,to Refinance any Subordinated Obligations of any Guarantor or any Restricted Subsidiaryunless such Indebtedness shall be subordinated to the Notes or the applicable Guarantee to atleast the same extent as such Subordinated Obligations.

(d) For purposes of determining compliance with this Condition 4.1:

(i) in the event that an item of Indebtedness (or any portion thereof) meets the criteria ofmore than one of the types of Indebtedness described in Conditions 4.1(a) or 4.1(b), theParent, in its sole discretion, will classify such item of Indebtedness (or any portionthereof) at the time of Incurrence and will only be required to include the amount and typeof such Indebtedness in one of the above sub-Conditions;

(ii) the Parent will be entitled to divide and classify an item of Indebtedness in more than oneof the types of Indebtedness described in Conditions 4.1(a) or 4.1(b) and may change theclassification of an item of Indebtedness (or any portion thereof) to any other type ofIndebtedness described in Conditions 4.1(a) or 4.1(b) at any time. The outstandingprincipal amount of any particular Indebtedness shall be counted only once and anyobligations arising under any guarantees, Lien, letters of credit or similar instrumentsupporting such Indebtedness shall not be double counted; and

(iii) any entity that is allowed to Incur Indebtedness under Condition 4.1(a) or Condition 4.1(b)(and the definition of Permitted Indebtedness) may provide a guarantee of any otherentity’s Incurrence of such Indebtedness, provided that such other entity Incurs suchIndebtedness pursuant to Condition 4.1(a) or Condition 4.1(b) (and the same paragraphof the definition of Permitted Indebtedness) under which the guaranteeing entity providesits guarantee of such Indebtedness.

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(e) For purposes of determining compliance with any U.S. dollar denominated restriction on theIncurrence of Indebtedness where the Indebtedness Incurred is denominated in a differentcurrency, the amount of such Indebtedness will be the U.S. Dollar Equivalent determined on thedate of the Incurrence of such Indebtedness; provided, however, that if any such Indebtednessdenominated in a different currency is subject to a Currency Agreement with respect to U.S.dollars covering all principal, premium, if any, and interest payable on such Indebtedness, theamount of such Indebtedness expressed in U.S. dollars will be as provided in such CurrencyAgreement. The principal amount of any Refinancing Indebtedness Incurred in the same currencyas the Indebtedness being Refinanced will be the U.S. Dollar Equivalent, as appropriate, of theIndebtedness Refinanced, except to the extent that (A) such U.S. Dollar Equivalent wasdetermined based on a Currency Agreement, in which case the Refinancing Indebtedness will bedetermined in accordance with the preceding sentence, and (B) the principal amount of theRefinancing Indebtedness exceeds the principal amount of the Indebtedness being Refinanced, inwhich case the U.S. Dollar Equivalent of such excess, as appropriate, will be determined on thedate such Refinancing Indebtedness is Incurred. Notwithstanding any other provision of thisCondition 4.1, the maximum amount that the Parent or a Restricted Subsidiary may Incur pursuantto this Condition 4.1 shall not be deemed to be exceeded, with respect to outstandingIndebtedness, due solely as a result of fluctuations in the exchange rates of currencies.

Limitation on Restricted Payments

4.2 (a) The Issuer and the Guarantors will not, and the Parent will not permit any of its RestrictedSubsidiaries, directly or indirectly, to, make a Restricted Payment if at the time such RestrictedPayment is made:

(i) a Default or Event of Default shall have occurred and be continuing (or would resulttherefrom);

(ii) the Parent is not entitled to Incur an additional U.S.$1.00 of Indebtedness pursuant toCondition 4.1(a) after giving effect on a pro forma basis to such Restricted Payment; or

(iii) the aggregate amount of such Restricted Payment and all other Restricted Paymentssince the Issue Date would exceed the sum of (counting each amount or event in onlyone category below):

(A) 50 per cent. of the consolidated net profit of the Parent and its consolidatedRestricted Subsidiaries (determined in accordance with IFRS) accrued during theperiod (treated as one accounting period) from the first day of the semi-annualfinancial period in which the Issue Date occurs to the end of the most recent semi-annual financial period ending prior to the date of such Restricted Payment for whichfinancial statements are available (or, in the case of a consolidated net loss of theParent and its Restricted Subsidiaries (determined in accordance with IFRS), minus100 per cent. of such consolidated net loss); plus

(B) 100 per cent. of the aggregate Net Cash Proceeds and the Fair Market Value ofproperty (other than cash) received by the Parent from the issuance or sale of itsCapital Stock (other than Disqualified Stock), or warrants, options or rights topurchase shares of its Capital Stock (other than Disqualified Stock) but solely uponthe exercise of such options, warrants or rights, in each case, subsequent to theIssue Date (other than an issuance or sale to a Subsidiary of the Parent and otherthan an issuance or sale to an employee stock ownership plan or to a trustestablished by the Parent or any of its Subsidiaries for the benefit of theiremployees) and 100 per cent. of any cash capital contribution received by the Parentfrom its shareholders subsequent to the Issue Date; plus

(C) the amount by which Indebtedness of the Parent or any Restricted Subsidiary isreduced on the Parent’s balance sheet upon the conversion or exchangesubsequent to the Issue Date of any Indebtedness of the Parent convertible orexchangeable for Capital Stock (other than Disqualified Stock) of the Parent (less theamount of any cash, or the Fair Market Value of any other property, distributed bythe Parent upon such conversion or exchange); provided, however, that (i) subject tosub-Condition (ii) of this Condition 4.2(a)(iii)(C), the foregoing amount shall notexceed the Net Cash Proceeds received by the Parent or any Restricted Subsidiary

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from the sale of such Indebtedness (excluding Net Cash Proceeds from sales to aSubsidiary of the Parent or to an employee stock ownership plan or a trustestablished by the Parent or any of its Subsidiaries for the benefit of theiremployees); and (ii) the foregoing amount, as limited by sub-Condition (i) of thisCondition 4.2(a)(iii)(C), shall be increased by the aggregate Net Cash Proceeds, ifany, received by the Parent or a Restricted Subsidiary upon such conversion orexchange (excluding any such Net Proceeds comprising funds borrowed from theParent or any Restricted Subsidiary until and to the extent such borrowing is repaid);plus

(D) 50 per cent. of any cash dividends received by the Parent or a Restricted Subsidiaryafter the Issue Date from an Unrestricted Subsidiary, to the extent that suchdividends were not otherwise included in the consolidated net profit (or loss) of theParent and its consolidated Restricted Subsidiaries (determined in accordance withIFRS) for such period.

(b) Sub-Condition 4.2(a) shall not prohibit:

(i) any Restricted Payment made out of the Net Cash Proceeds of the substantiallyconcurrent sale of, or made by exchange for, Capital Stock of the Parent (other thanDisqualified Stock and other than Capital Stock issued or sold to a Subsidiary of theParent or an employee stock ownership plan or to a trust established by the Parent orany of its Subsidiaries for the benefit of their employees) or a substantially concurrentcash capital contribution received by the Parent from its shareholders; provided,however, that (A) such Restricted Payment shall be excluded in the calculation of theamount of Restricted Payments and (B) the Net Cash Proceeds from such sale or suchcash capital contribution (to the extent so used for such Restricted Payment) shall beexcluded from the calculation of amounts under sub-Condition (iii)(B) of Condition 4.2(a);

(ii) so long as no Default or Event of Default has occurred and is continuing, any purchase,repurchase, redemption, defeasance or other acquisition or retirement for value ofSubordinated Obligations of the Issuer or a Guarantor made by exchange for, or out ofthe proceeds of the substantially concurrent Incurrence of, Refinancing Indebtedness ofsuch Person in respect of such Subordinated Obligations; provided, however, that suchpurchase, repurchase, redemption, defeasance or other acquisition or retirement forvalue shall be excluded in the calculation of the amount of Restricted Payments;

(iii) dividends paid by the Parent within 60 days after the date of declaration thereof if at suchdate of declaration such dividend would have complied with this covenant; provided,however, that such payment (without duplication of the relevant dividend) shall beincluded in the calculation of the amount of Restricted Payments;

(iv) so long as no Default or Event of Default has occurred and is continuing, the purchase,redemption or other acquisition of Capital Stock of the Parent or any of its Subsidiariesfrom employees, former employees, directors or former directors of the Parent or any ofits Subsidiaries or any Affiliate of the Parent (or permitted transferees of such employees,former employees, directors or former directors), pursuant to the terms of the agreements(including employment agreements) or plans (or amendments thereto) approved by theBoard of Directors under which such individuals purchase or sell or are granted theoption to purchase or sell, shares of such Capital Stock; provided, however, that theaggregate amount of such Restricted Payments shall not exceed U.S.$5,000,000 in theaggregate; provided further, however, that such Restricted Payments shall be included inthe calculation of the amount of Restricted Payments;

(v) repurchases of Capital Stock deemed to occur upon exercise of stock options or warrantsif such Capital Stock represents a portion of the exercise price of such options; provided,however, that such Restricted Payments shall be excluded from the calculation of theamount of Restricted Payments;

(vi) cash payments in lieu of the issuance of fractional shares in connection with stockdividends, splits or combinations, the exercise of warrants, options or other securitiesconvertible into or exchangeable for Capital Stock of the Parent; provided, however, thatany such cash payment shall not be for the purpose of evading the limitation of

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this Condition 4.2 (as determined in good faith by the Board of Directors); providedfurther, however, that such payments shall be excluded from the calculation of theamount of Restricted Payments;

(vii) in the event of a Change of Control, and if no Default or Event of Default shall haveoccurred and be continuing, the payment, purchase, redemption, defeasance or otheracquisition or retirement of Subordinated Obligations of any Guarantor, in each case, at apurchase price not greater than 101 per cent. of the principal amount of suchSubordinated Obligations, plus any accrued and unpaid interest thereon; provided,however, that prior to such payment, purchase, redemption, defeasance or otheracquisition or retirement, the Issuer (or a third party to the extent permitted by theConditions) has issued a Change of Control Put Event Notice with respect to the Notesas a result of such Change of Control and has repurchased all Notes validly tendered andnot withdrawn in connection with such Change of Control; provided further, however, thatsuch payments, purchases, redemptions, defeasances or other acquisitions orretirements shall be included in the calculation of the amount of Restricted Payments;

(viii) the purchase, repurchase, redemption, legal defeasance, acquisition or retirement forvalue of any intercompany Indebtedness, the Incurrence of which was permitted underCondition 4.1(b) and paragraph (m) of Permitted Indebtedness, provided, however, thatno Default or Event of Default has occurred and is continuing or would otherwise resulttherefrom; provided further, however, that such payments shall be excluded in thecalculation of the amount of Restricted Payment;

(ix) payments or distributions to dissenting shareholders pursuant to applicable law inconnection with or contemplation of a merger, consolidation or transfer of assets thatcomplies with the provisions of the Notes relating to mergers, consolidations or transfersof substantially all of any Guarantor’s assets;

(x) payments that are permitted pursuant to Condition 4.5;

(xi) the payment of dividends on the Parent’s ordinary shares of up to 6 per cent. per annumof the net proceeds received by the Parent from any public offering of ordinary shares, orcertificates representing shares of, the Parent; and

(xii) Restricted Payments in an amount which, when taken together with all RestrictedPayments made pursuant to this sub-Condition (xii), does not exceed U.S.$15,000,000;provided, however, that (A) at the time of each such Restricted Payment, no Default orEvent of Default shall have occurred and be continuing (or result therefrom) and (B) suchpayments shall be included in the calculation of the amount of Restricted Payments.

Limitation on Restrictions on Distributions from Restricted Subsidiaries

4.3 (a) The Issuer and the Guarantors will not, and the Parent will not permit any of its RestrictedSubsidiaries to, create or Incur or otherwise cause or permit to exist or become effective anyencumbrance or consensual restriction on the ability of any Restricted Subsidiary to (A) paydividends or make any other distributions on its Capital Stock to the Parent or a RestrictedSubsidiary or pay any Indebtedness owed to the Issuer, a Guarantor or a RestrictedSubsidiary, (B) make any loans or advances to the Issuer, a Guarantor or a RestrictedSubsidiary or (C) transfer any of its property or assets to the Issuer, a Guarantor or anotherRestricted Subsidiary, except as specified in Condition 4.3(b).

(b) Condition 4.3(a) shall not apply to any of the following:

(i) any encumbrance or restriction pursuant to an agreement in effect at or entered into onthe Issue Date, a Credit Facility or the Notes and Guarantees;

(ii) encumbrances or restrictions imposed by applicable law, rule, order, approval orregulation or by governmental licence, concession or permit;

(iii) encumbrances and restrictions contained in any agreement or other instrument of anyPerson acquired by the Parent or any Restricted Subsidiary in effect at the time of suchacquisition or with respect to any Unrestricted Subsidiary at the time it is designated or

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deemed to become a Restricted Subsidiary (but not created in contemplation thereof)which encumbrance or restriction is not applicable to any Person, or the properties orassets of any Person, other than the Person, or the property or assets of the Person, soacquired;

(iv) any encumbrance or restriction pursuant to an agreement with respect to IndebtednessIncurred in reliance on Condition 4.1(b) and paragraph (a) of Permitted Indebtedness;

(v) a restriction on the transfer of property arising or agreed to in the ordinary course ofbusiness (i) that restrict in a customary manner the subletting, assignment or transfer ofany property or asset that is subject to a lease or license or, (ii) by virtue of any Lien on,or agreement to transfer, option or similar right with respect to any property or assets of,either the Parent or any Restricted Subsidiary or (iii) arising or agreed to in the ordinarycourse of business, not relating to any Indebtedness, and that do not, individually or inthe aggregate, detract from the value of property or assets of the Parent or anyRestricted Subsidiary thereof in any manner material to the Parent or any RestrictedSubsidiary thereof;

(vi) customary limitations on the distribution or disposition of assets or property of aRestricted Subsidiary pursuant to joint venture agreements entered into in the ordinarycourse of business and in good faith; provided that such encumbrance or restriction isapplicable only to such Restricted Subsidiary and provided that:

(A) the encumbrance or restriction is not materially more disadvantageous to theNoteholders than is customary in comparable agreements (as determined in goodfaith by the Parent); and

(B) the Parent determines in good faith that any such encumbrance or restriction will notmaterially affect the ability of the Parent or any Guarantor to make any anticipatedprincipal or interest payments on the Notes and any other Indebtedness for borrowedmoney that is an obligation of the Parent or a Guarantor;

(vii) contractual requirements of a Securitisation Entity in connection with a QualifiedSecuritisation Transaction; provided that such sale restrictions apply only to suchSecuritisation Entity;

(viii) encumbrances or restrictions contained in contracts for sale of Capital Stock or assetspermitted by Condition 4.4 with respect to the assets or Capital Stock to be sold pursuantto such contract or in customary merger or acquisition agreements (or any option to enterinto such contracts) for the purchase or acquisition of Capital Stock assets or any of theParent’s Subsidiaries by another Person;

(ix) Liens securing Indebtedness that is permitted to be incurred and secured under theseConditions;

(x) customary encumbrances or restrictions in connection with Purchase MoneyIndebtedness for property acquired in the ordinary course of business and Capital LeaseObligation that impose restrictions on the property purchased or leased;

(xi) encumbrances or restrictions on cash or other deposits or net worth imposed bycustomers and suppliers under contracts entered into in the ordinary course of business;and

(xii) any encumbrance or restriction of the type referred to in Condition 4.3(a) imposed by anyamendments, modifications, restatements, renewals, increases, supplements,refundings, replacements or refinancings of the contracts, instruments or obligationsreferred to in any of Condition 4.3(b)(i) to (xi); provided that such amendments,modifications, restatements, renewals, increases, supplements, refundings, replacementsor refinancings are, in the good faith judgment of the Board of Directors of the Parent, nomore restrictive in any material respect with respect to such encumbrance and otherrestrictions taken as a whole than those prior to such amendment, modification,restatement, renewal, increase, supplement, refunding, replacement or refinancing.

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Limitation on Sales of Assets and Subsidiary Stock

4.4 (a) The Issuer and the Guarantors will not, and the Parent will not permit any of its RestrictedSubsidiaries to, directly or indirectly, consummate any Asset Disposition unless:

(i) the Parent, Guarantor or such Restricted Subsidiary receives consideration at the time ofsuch Asset Disposition at least equal to the Fair Market Value (including as to the valueof all non-cash consideration) of the Capital Stock and assets subject to such AssetDisposition;

(ii) at least 75 per cent. of the consideration thereof received by the Parent, Guarantor orsuch Restricted Subsidiary is in the form of (A) cash or (B) Cash Equivalents (as definedbelow); and

(iii) an amount equal to 100 per cent. of the Net Available Cash from such Asset Dispositionis applied by the Issuer, the relevant Guarantor or such Restricted Subsidiary, as thecase may be:

(A) to the extent the Parent elects (or is required by the terms of any Indebtedness), toprepay, repay, redeem or purchase Senior Indebtedness of the Parent or anyRestricted Subsidiary (in each case other than Indebtedness owed to the Parent oran Affiliate of the Parent) within 180 days from the later of the date of such AssetDisposition or the receipt of such Net Available Cash;

(B) to the extent the Parent elects (or is required by the terms of any Indebtedness), toprepay, repay, redeem or purchase Indebtedness of any Restricted Subsidiary that isnot a Guarantor (in each case other than Indebtedness owed to the Parent or anAffiliate of the Parent) within 180 days from the later of the date of such AssetDisposition or the receipt of such Net Available Cash;

(C) to the extent the Parent elects, to invest in the Related Business;

(D) to the extent the Parent elects, to invest in Temporary Cash Investments within180 days from the date of such Asset Disposition or the receipt of such Net AvailableCash; and

(E) to the extent the Parent elects, any combination of the foregoing,

provided, however, that in connection with any prepayment, repayment or purchase ofIndebtedness pursuant to sub-Condition (iii)(A) or (B) above, the Parent or such RestrictedSubsidiary shall permanently retire such Indebtedness and shall cause the related loancommitment (if any) to be permanently reduced in an amount equal to the principal amount soprepaid, repaid or purchased and provided further that if the use of Net Available Cash isapplied under sub-Condition (iii)(D) above, such Net Available Cash must be applied pursuantto sub-Condition (iii)(A) or (iii)(B) within 365 days from the date of such Asset Disposition or thereceipt of such Net Available Cash.

The Issuer, the Guarantors and any Restricted Subsidiary will be deemed to have compliedwith the provision described in sub-Conditions (iii)(A) through (iii)(E) if and to the extent that,within 180 days after the Asset Disposition, such Issuer, Guarantor or Restricted Subsidiaryhas entered into and not abandoned or rejected a binding agreement of any of sub-Conditions(iii)(A) through (iii)(E), and that such agreement is completed within 180 days after the end ofthe initial 180-day period.

(b) Any Net Available Cash from Asset Dispositions that is not applied or invested as provided inCondition 4.4(a) within 365 days after receipt thereof will be deemed to constitute ExcessProceeds and:

(i) when the aggregate amount of Excess Proceeds exceeds U.S.$35,000,000, the Issuerwill be required to make an offer (Asset Disposition Offer) to all Holders of Notes topurchase the maximum principal amount of Notes that may be purchased out of theExcess Proceeds (equal to U.S.$200,000 and any integral multiple of U.S.$1,000 inexcess thereof and provided that any unpurchased portion of any Note surrendered is ina principal amount of at least U.S.$200,000), at an offer price in cash in an amount equalto 100 per cent. of the principal amount of the Notes plus accrued and unpaid interest,Step-Up Interest (if any) and any additional amounts payable pursuant to Condition 8.1,

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to the date of purchase. If there is any Indebtedness outstanding that ranks pari passuwith the Notes and contains similar provisions to this Condition 4.4 requiring the Parent tomake an offer to purchase such Indebtedness following as Asset Disposition, the Parent(x) may make an offer to purchase such Indebtedness on similar terms (but at a price notexceeding 100 per cent. of the relevant principal amount) as, or on terms that are nobetter than the terms of, the Asset Disposition Offer and, (y) to the extent that theaggregate principal amount of Notes validly tendered and not withdrawn (the TenderedNotes) together with the amount of such pari passu Indebtedness validly tendered andnot withdrawn (the Aggregate Tendered Amount) exceeds the Excess Proceeds, theproportion of the Excess Proceeds to be applied to the purchase of the Tendered Notesshall be the amount which bears the same proportion to the Excess Proceeds as theaggregate principal amount of the Tendered Notes bears to the Aggregate TenderedAmount, and any reference below to Excess Proceeds shall be taken to mean suchproportional amount.

(ii) If the aggregate principal amount of Notes surrendered by Holders thereof exceeds theamount of Excess Proceeds, the Notes (equal to U.S.$200,000 and any integral multipleof U.S.$1,000 in excess thereof and provided that any unpurchased portion of any Notesurrendered is in a principal amount of at least U.S.$200,000) shall be purchased on apro rata basis. Upon completion of such Asset Disposition Offer, the amount of ExcessProceeds shall be reduced by the aggregate amount of such Asset Disposition Offer.

The Parent will determine the relevant procedures in respect of any Asset Disposition Offer,provided that such procedures are in compliance with the rules of any stock exchange onwhich the Notes are listed. Notice of the Asset Disposition Offer will be given in accordancewith the Trust Deed. The Asset Disposition Offer will remain open for a period of 20 BusinessDays following its commencement, except to the extent that a longer period is required byapplicable law (the Asset Disposition Offer Period). No later than five Business Days afterthe termination of the Asset Disposition Offer Period (the Asset Disposition Purchase Date),the Parent will purchase and pay for the principal amount of Notes required to be purchasedpursuant to this Condition 4.4 (the Asset Disposition Offer Amount).

Any Note tendered and not accepted for purchase will be promptly mailed or delivered by theIssuer to the Holder thereof. The Issuer will publicly announce the results of the AssetDisposition Offer on the Asset Disposition Purchase Date.

The Issuer will comply, to the extent applicable, with any securities laws or regulations inconnection with the repurchase of Notes pursuant to the Trust Deed. To the extent that theprovisions of any securities laws or regulations conflict with provisions of this Condition, theIssuer will comply with the applicable securities laws and regulations and will not be deemed tohave breached its obligations under the Trust Deed by virtue of any conflict.

To the extent that all or any portion of the Excess Proceeds remains after completion of anAsset Disposition Offer, the Parent or such Restricted Subsidiary may use any remainingExcess Proceeds for any corporate purposes permitted by the covenants contained in theseConditions.

(c) For the purposes of this Condition 4.4, the following are deemed to be Cash Equivalents:

(i) the assumption or discharge of (a) Senior Indebtedness of the Parent (other thanobligations in respect of Disqualified Stock of the Parent) or any Restricted Subsidiary(other than obligations in respect of Disqualified Stock or Preferred Stock of a Guarantor)and the release of the Parent or such Restricted Subsidiary from all liability on suchIndebtedness in connection with such Asset Disposition or (b) Senior Indebtedness of aRestricted Subsidiary that is no longer a Restricted Subsidiary as a result of such AssetDisposition, if the Parent and each other Restricted Subsidiary is released from anyobligation under such Indebtedness as a result of such Asset Disposition;

(ii) securities received by the Parent or any Restricted Subsidiary from the transferee thatare converted within 180 days by the Parent or such Restricted Subsidiary into cash, tothe extent of the cash received in that conversion; and

(iii) Temporary Cash Investments.

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Limitation on Affiliate Transactions

4.5 (a) The Issuer and the Guarantors will not, and the Parent will not permit any of its RestrictedSubsidiaries to, enter into or permit to exist any transaction or a series of related transactions(including the purchase, sale, lease or exchange of any property, employee compensationarrangements or the rendering of any service) with, or for the benefit of, any Affiliate of theIssuer, the Guarantors or such Restricted Subsidiary (an Affiliate Transaction) unless:

(i) the terms of the Affiliate Transaction are no less favourable to the Parent, the relevantGuarantor, or such Restricted Subsidiary than those that could be obtained at the time ofthe Affiliate Transaction in arm’s length dealings with a Person who is not an Affiliate;

(ii) if such Affiliate Transaction involves an amount in excess of U.S.$10,000,000, the termsof the Affiliate Transaction are set forth in writing and a majority of the Board of Directorsof the Parent disinterested with respect to such Affiliate Transaction (or, in the event thatthere is only one disinterested director, by the resolution of such disinterested director or,in the event that there are no disinterested directors, by unanimous resolution of theentire Board of Directors) have determined in good faith that the criteria set forth insub-Condition (i) above are satisfied and have approved the relevant Affiliate Transactionas evidenced by a resolution of the Board of Directors.

(b) The provisions of Condition 4.5(a) above will not prohibit:

(i) any transaction or series of related transactions in an aggregate amount not exceedingU.S.$2,500,000 in any 12 month period;

(ii) any issuance of securities, or other advances, payments, awards or grants in cash,securities or otherwise pursuant to, or the funding of, employment arrangements,insurance plans, deferred compensation plans, retirement and savings plans, stockoptions and stock ownership plans that are customary and are approved by the Board ofDirectors in good faith and deemed the services theretofore or thereafter to be performedfor such compensation or payments to be fair consideration therefor;

(iii) loans or advances or guarantees of third party loans (but not any forgiveness of suchloans or advances or guarantees) to employees, directors and officers in the ordinarycourse of business in accordance with the past practices of the Parent or its RestrictedSubsidiaries, but in any event not to exceed U.S.$1,000,000 in the aggregate outstandingat any one time;

(iv) transactions between or among all or any of the Parent, any Restricted Subsidiaries, andany joint venture, which if involving a joint venture would constitute an AffiliateTransaction solely because the Parent or a Restricted Subsidiary owns an equity interestin or otherwise controls such joint venture;

(v) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Parent;

(vi) any agreement as in effect on the Issue Date, or any renewals, extensions oramendments of any such agreement (so long as such renewals, extensions oramendments, taken as a whole, are not less favourable in any material respect to theParent or the Restricted Subsidiaries) and the transactions evidenced thereby;

(vii) transactions effected as part of a Qualified Securitisation Transaction;

(viii) the agreements and arrangements for the payment of fees and expenses owed by theParent, the Issuer, the Guarantors or a Restricted Subsidiary to an Affiliate for servicesrendered or goods sold in an aggregate amount not exceeding U.S.$1,000,000 in any12 month period;

(ix) agreements and arrangements existing on the Issue Date and any amendment,extension, renewal, refinancing, modification or supplement thereof, provided thatfollowing such amendment, extension, renewal, refinancing, modification or supplement,the terms of any such agreement or arrangement so amended, modified or supplementedare not materially more disadvantageous to the Noteholders and to the Parent, theIssuer, the Guarantors and the Restricted Subsidiaries, as applicable, than the originalagreement or arrangement as in effect on the Issue Date and provided, further, that suchamendment or modification is (A) on a basis substantially similar to that which would be

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conducted in an arm’s length transaction with third parties who are not Affiliates and(B) in the case of any transaction having a Fair Market Value of greater thanU.S.$10,000,000, approved by the Parent’s Board of Directors (including a majority of thedisinterested directors or, in the event that there is only one disinterested director, by theresolution of such disinterested director or, in the event that there are no disinteresteddirectors, by unanimous resolution of the entire Board of Directors); and

(x) transactions with customers, clients, suppliers or purchasers or sellers of goods orservices consistent with past practice, in each case, in the ordinary course of businessand otherwise in compliance with these Conditions, which are fair to the Parent, theIssuer, the Guarantors or the relevant Restricted Subsidiary in the reasonabledetermination of the Board of Directors or the senior management of the Parent, theIssuer, the relevant Guarantor or the relevant Restricted Subsidiary, as the case may be,in each case, that are disinterested with respect to such Affiliate Transaction or are onterms no less favourable than those that could reasonably have been obtained at suchtime from an unaffiliated party.

Limitation on Liens

4.6 The Parent, the Issuer and the Guarantors will not, directly or indirectly, create, Incur or permit orsuffer to exist any Lien of any nature whatsoever on any of its properties or assets (including CapitalStock of the Issuer, a Guarantor or a Restricted Subsidiary), whether owned at the Issue Date orthereafter acquired, or on any income, revenue or profits therefrom, securing any Indebtedness, otherthan Permitted Liens, without at the same time or prior thereto effectively providing that the Issuer’sobligations under the Notes or the relevant Guarantor’s obligation under the Guarantee, as the casemay be, shall be secured (i) if such Indebtedness is Senior Indebtedness, equally and rateably with theIndebtedness secured by such Lien or (ii) if such Indebtedness is a Subordinated Obligation, senior inpriority to the Lien securing such obligations, in each case, for so long as such obligations are sosecured.

Limitation on Lines of Business

4.7 The Parent, the Issuer and the Guarantors will not, and the Parent will not permit any RestrictedSubsidiaries to, engage in any business other than a Related Business, except to such extent as wouldnot be material to the Parent, the Issuer, the Guarantors and the Restricted Subsidiaries taken as awhole.

Merger and Consolidation

4.8 (a) The Issuer will not consolidate with or merge with or into, or convey, transfer or lease, in onetransaction or a series of transactions, directly or indirectly, all or substantially all its assets to,any Person, unless:

(i) either (A) the Issuer will be the continuing corporation or (B) the resulting, surviving ortransferee Person, if not the Issuer (the Successor Issuer), shall be a Person which isorganised and existing under the laws of an Issuer Approved Jurisdiction and theSuccessor Issuer (if not the Issuer) shall expressly assume, by executing a supplementaltrust deed and any other relevant documents, in each case, in a form satisfactory to theTrustee, all the obligations of the Issuer under this Notes;

(ii) immediately after giving pro forma effect to such transaction (and treating anyIndebtedness which becomes an obligation of the Successor Issuer or any Subsidiary asa result of such transaction as having been Incurred by such Successor Issuer or suchSubsidiary at the time of such transaction), no Default or Event of Default shall haveoccurred and be continuing;

(iii) immediately after giving pro forma effect to such transaction (A) the Parent would be ableto Incur an additional U.S.$1.00 of Indebtedness pursuant to Condition 4.1(a) or (B) theConsolidated Coverage Ratio is no less and the Consolidated Leverage Ratio is nogreater than the ratios in effect immediately prior to such transaction;

(iv) the Issuer shall have delivered to the Trustee an Officers’ Certificate and an Opinion ofCounsel, each stating that such consolidation, merger or transfer complies with theseConditions; and

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(v) the Issuer shall have delivered to the Trustee an Opinion of Counsel to the effect that theNoteholders will not recognise income, gain or loss for Irish income tax purposes as aresult of such transaction and will be subject to Irish income tax on the same amounts, inthe same manner and at the same times as would have been the case if such transactionhad not occurred,

provided, however, that Condition 4.8(a)(iii) and Condition 4.4 will not apply to (I) (A) thedisposition of the Issuer in its entirety to a Restricted Subsidiary, whether through a merger,consolidation or sale of Capital Stock or (B) the sale of all or substantially all the assets of theIssuer to a Restricted Subsidiary or (II) the Issuer engaging in a transaction with an Affiliate ofthe Parent solely for the purpose and with the sole effect of reincorporating the Issuer inanother jurisdiction that is an Issuer Approved Jurisdiction.

The Successor Issuer will be the successor to the Issuer and shall succeed to, and besubstituted for, and may exercise every right and power of, the Issuer under the Notes, and thepredecessor company (except in the case of a lease of all or substantially all of its assets, inwhich case the predecessor company shall not be released from such obligations) shall bereleased from the obligation to pay the principal of and interest and Step-Up Interest, if any, onthe Notes.

(b) The Parent will not, and will not permit any Guarantor to, consolidate with or merge with or into,or convey, transfer or lease, in one transaction or a series of transactions, all or substantially allof its assets to any Person unless:

(i) the resulting, surviving or transferee Person (if not the Parent or such Guarantor, theSuccessor Guarantor) shall be a Person which is organised and existing under aGuarantor Approved Jurisdiction, and such Person (if not the Parent or anotherGuarantor) shall expressly assume, by executing a deed of guarantee in substantially thesame form as the relevant Deed of Guarantee, in a form satisfactory to the Trustee, allthe obligations of such Guarantor, if any, under its Guarantee;

(ii) immediately after giving effect to such transaction or transactions on a pro forma basis(and treating any Indebtedness which becomes an obligation of the resulting, surviving ortransferee Person as a result of such transaction as having been issued by such Personat the time of such transaction), no Default or Event of Default shall have occurred andbe continuing;

(iii) immediately after giving pro forma effect to such transaction (A) the Successor Guarantorwould be able to Incur an additional U.S.$1.00 of Indebtedness pursuant to Condition4.1(a) or (B) the Consolidated Coverage Ratio is no less and the Consolidated LeverageRatio is no greater than the ratios in effect immediately prior to such transaction; and

(iv) the Parent delivers to the Trustee an Officers’ Certificate and an Opinion of Counsel,each stating that such consolidation, merger or transfer complies with these Conditions,

provided, however, that this Condition 4.8(b) will not apply to (I) (A) the disposition of aGuarantor that is not the Parent in its entirety to another Guarantor, whether through a merger,consolidation or sale of Capital Stock, (B) the sale of all or substantially all the assets of aGuarantor that is not the Parent to another Guarantor or (C) the disposition of all or a portion ofthe Capital Stock of a Guarantor that is not the Parent which ceases to be a Subsidiary, eachof which is permitted, if in connection therewith the Parent provides an Officers’ Certificate tothe Trustee to the effect that the Parent will comply with its obligations under Condition 4.4 and4.13 (treating the date of such disposition as a Guarantor Testing Date and making thecalculations required in such Condition 4.13 on a pro forma basis for such disposition) inrespect of such sale or disposition, (II) a Restricted Subsidiary consolidating with, merging intoor transferring all or part of its properties and assets to a Guarantor (so long as no CapitalStock of the Parent or a Guarantor is distributed to any Person other than the Parent oranother Guarantor), (III) a merger between or among any Guarantors or (IV) the Parentengaging in a transaction with an Affiliate of the Parent solely for the purpose and with the soleeffect of reincorporating the Parent in another jurisdiction that is a Guarantor ApprovedJurisdiction.

(c) For purposes of this Condition 4.8, the sale, lease, conveyance, assignment, transfer or otherdisposition of all or substantially all of the properties and assets of one or more Subsidiaries ofa Guarantor, which properties and assets, if held by such Guarantor instead of such

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Subsidiaries, would constitute all or substantially all of the properties and assets of suchGuarantor on a consolidated basis, shall be deemed to be the transfer of all or substantially allof the properties and assets of such Guarantor.

(d) The Successor Guarantor will be the successor to such Guarantor and shall succeed to, andbe substituted for, and may exercise every right and power of the relevant Guarantor, as thecase may be, under its Guarantee and the Notes, but the predecessor company in the case of:

(i) a sale, transfer, assignment, conveyance or other disposition (unless such sale, transfer,assignment, conveyance or other disposition is of all the assets of the predecessorcompany as an entirety or virtually as an entirety); or

(ii) a lease,

shall not be released from any obligation to pay the principal of, premium, if any, and interestand Step-Up Interest, if any, on the Notes.

Reports

4.9 (a) As long as any Notes are outstanding, the Parent will publish and furnish to the Noteholdersand the Trustee:

(i) within 120 days after the end of each financial year, annual reports containing thefollowing information: (A) audited consolidated balance sheets of the Parent as of the endof the two most recent financial years and audited consolidated income statements andstatements of cash flow of the Parent for the two most recent financial years, in eachcase prepared in accordance with IFRS, and including complete footnotes to suchfinancial statements and the report of the independent auditors on the financialstatements and (B) an operating and financial review of the audited financial statements,including a discussion of the results of operations, financial condition, and liquidity andcapital resources, and a discussion of material commitments and contingencies andcritical accounting policies;

(ii) within 90 days after the end of each semi-annual period of each financial year of theParent thereafter a report containing an unaudited consolidated balance sheet as of theend of such period and unaudited statements of income and cash flow for the periodending on the unaudited balance sheet date, and the comparable prior year periods, ineach case prepared in accordance with IFRS, and including condensed footnotes to suchinterim condensed consolidated financial information (unaudited) together with a reviewreport thereon conducted in accordance with International Standards on ReviewEngagements No. 2410 (or such replacement standard in force at such time);

(iii) within 60 days after the end of the first and the third quarter of each financial year of theParent thereafter reports containing an unaudited consolidated balance sheet as of theend of such period and unaudited statements of income and cash flow for the periodending on the unaudited balance sheet date, and the comparable prior year periods, ineach case prepared in accordance with IFRS and including condensed footnotedisclosure to such interim condensed consolidated financial information (unaudited);

(iv) promptly after the occurrence of a material acquisition, disposition, restructuring orchange in auditors or any other material event, a report containing a description of suchevent; and

(v) an Officers’ Certificate of the Parent, quarterly, with respect to compliance with theConditions and specifying any Unrestricted Subsidiaries or Restricted Subsidiaries, if any,in accordance with the definition thereof.

(b) If any of the Parent’s Subsidiaries are Unrestricted Subsidiaries and, in the aggregate, suchUnrestricted Subsidiaries’ total assets or Net Income represent not less than ten per cent. ofthe Parent’s Consolidated Total Assets and consolidated net profit (or loss) of the Parent andits consolidated Restricted Subsidiaries (determined in accordance with IFRS) as at the date ofthe balance sheet included in a report required by the preceding paragraph, then the annualfinancial information required in such report will include a supplemental review of the financialcondition and results of operations of the Parent and its Restricted Subsidiaries (separate fromthe financial condition and results of operations of the Unrestricted Subsidiaries of the Parent)based on the financial information regarding the Adjusted EBITDA, equipment, total assets andliabilities of the Parent and its Restricted Subsidiaries on a consolidated basis.

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(c) The Parent shall also (i) post copies of such reports in compliance with the guidelinespublished by the Stock Exchange or any agency or service customarily used by entities withdebt securities listed on such Stock Exchange for the dissemination of information and (ii) postsuch reports on the website of the Parent or the Issuer. All reports referred to in this section willbe available for inspection at the respective offices of the Principal Paying Agent. AnyNoteholder may request that a copy of any such report be mailed to such Noteholder, at theexpense of the Issuer, by written request to the Principal Paying Agent.

(d) In addition, so long as any of the Notes are restricted securities (as defined in Rule 144 underthe Securities Act) and during any period during which the Parent is not subject to the reportingrequirements of the Exchange Act or exempt therefrom pursuant to Rule 12g3-2(b), the Parentwill furnish to any Holder or beneficial owner of Notes initially offered and sold in the UnitedStates to Qualified Institutional Buyers pursuant to Rule 144A under the Securities Act, and toprospective purchasers in the United States designated by such Holder or beneficial owners,upon request, the information required to be delivered pursuant to Rule 144A(d)(4) under theSecurities Act.

Payment of Taxes and Other Claims

4.10 So long as any amount remains outstanding under the Notes, the Parent shall, and shall cause itsRestricted Subsidiaries to, pay or discharge or cause to be paid or discharged, before the same shallbecome overdue and without incurring penalties, (a) all taxes, assessments and governmental chargeslevied or imposed upon, or upon the income, profits or assets of the Parent or any RestrictedSubsidiaries (which, in the context of any entity incorporated in the Russian Federation, shall mean theearlier of either a ruling of the tax inspection based on an act of audit (reshenie, vynesennoye po aktuproverki) or a request to pay taxes (trebovanie ob uplate naloga)) and (b) all lawful claims for labour,materials and supplies which, if unpaid, might by law become a Lien (other than a Permitted Lien) uponthe property of the Parent or any Restricted Subsidiaries; provided, however, that none of the Parentnor any Restricted Subsidiaries shall be required to pay or discharge or cause to be paid or dischargedany such tax, assessment or charge (which, in the context of any entity incorporated in the RussianFederation, shall mean the earlier of either a ruling of the tax inspection based on an act of audit(reshenie, vynesennoye po aktu proverki) or a request to pay taxes (trebovanie ob uplate naloga)) orany such claim (i) whose amount, applicability or validity is being contested in good faith by appropriateproceedings or (ii) whose amount, together with all such other unpaid or undischarged taxes,assessments, charges and claims, does not in the aggregate exceed U.S.$10,000,000.

Maintenance of Authorisations

4.11 (a) Each of the Parent, the Issuer (with respect to itself only) and each Guarantor shall obtain ormake, and procure the continuance or maintenance of, all registrations, recordings, filings,consents, licences, approvals and authorisations, which may at any time be required to beobtained or made in Russia, Bermuda, Ireland or any other relevant jurisdiction for thepurposes of the execution, delivery or performance of the Notes, the Deeds of Guaranteesand the Trust Deed and for the validity and enforceability thereof; and

(b) Each of the Parent, the Issuer and each Guarantor shall and the Parent shall procure thateach of its Restricted Subsidiaries shall, take all necessary action to obtain and do or cause tobe done all things necessary, in the opinion of the Parent, the Issuer or the relevantGuarantor, to ensure the continuance of its corporate existence and its business.

Maintenance of Property

4.12 The Parent shall, and shall cause the Issuer, the Guarantors and each of its RestrictedSubsidiaries to, cause all property that is material in the conduct of its or their business to bemaintained and kept in good condition, repair and working order and supplied with all necessaryequipment and shall cause to be made all necessary repairs, renewals, replacements andimprovements thereof, all as, in the judgment of the Parent, the Issuer or the relevant Guarantor orRestricted Subsidiary, may be reasonably necessary so that the business carried on in connectiontherewith may be properly conducted at all times; provided, however, that nothing in this Condition 4.12will prevent the Parent, the Issuer, or any Restricted Subsidiaries from discontinuing or reducing theoperation or maintenance of any such property if such discontinuance or reduction is determined bythe Parent, the Issuer or any such Guarantor or Restricted Subsidiary having managerial responsibilityfor such property to be desirable in the conduct of its business or the business of the Parent, the Issueror any such Guarantor or Restricted Subsidiary.

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Additional Guarantors

4.13 (a) The Parent shall ensure that on each date which is 60 days after the publication of the annualor semi-annual financial statements referred to in Condition 4.9 (each a Guarantor TestingDate):

(i) aggregate total assets of the Guarantors (calculated in accordance with IFRS or underGAAP local to each such Guarantor where IFRS financials are not available in respect ofsuch Guarantor), comprises 75 per cent. or more of the Consolidated Total Assets ineach case with reference to the last available annual or semi-annual balance sheet of theGuarantors and of the Group immediately preceding the Guarantor Testing Date; and

(ii) Adjusted EBITDA of the Guarantors (calculated based on information derived from IFRSfinancial statements or under GAAP local to each such Guarantor where IFRS financialstatements are not available in respect of such Guarantor), comprises 75 per cent. ormore of Adjusted EBITDA in each case for the last annual or semi-annual periodimmediately preceding the Guarantor Testing Date.

(b) In the event that any of the tests in Condition 4.13(a) is not satisfied on any Guarantor TestingDate, the Parent will cause additional Subsidiaries to execute and deliver to the Trustee adeed of guarantee in the same form as the Deeds of Guarantee, pursuant to which each suchSubsidiary will unconditionally and irrevocably, on a joint and several basis with each otherGuarantor, guarantee the payment of all moneys payable, and all other obligations of theIssuer, under the Trust Deed and the Notes and will become vested with all the duties andobligations of a Guarantor as if originally named a Guarantor under a Deed of Guarantee, assoon as practicable (but in any event no later than 90 days), such that, following suchGuarantor Testing Date, if such additional Subsidiaries had been included as Guarantors priorto or as of such date, each of the tests in Condition 4.13(a) would have been satisfied.

(c) In the event that both of the tests in Condition 4.13(a) are satisfied on any Guarantor TestingDate, the Parent may elect that any Guarantor (other than a Guarantor that is a MaterialSubsidiary) may be unconditionally released and discharged from its obligations under theDeed of Guarantee; provided that after giving effect to such release and discharge, both ofthe tests in Condition 4.13(a) would have been satisfied on that Guarantor Testing Date.

(d) In the event that on any Guarantor Testing Date, a Subsidiary of the Parent is determined tobe a Material Subsidiary, the Parent will, within 90 days of such Guarantor Testing Date,cause such Material Subsidiary to become a Guarantor and execute and deliver to theTrustee a deed of guarantee in the same form as the Deeds of Guarantee, pursuant to whichsuch Material Subsidiary will unconditionally and irrevocably, on a joint and several basis witheach other Guarantor, guarantee the payment of all moneys payable, and all other obligationsof the Issuer, under the Trust Deed and the Notes and will become vested with all the dutiesand obligations of a Guarantor as if originally named a Guarantor under a Deed of Guarantee.

(e) Notwithstanding the foregoing, the Parent shall not be obligated to cause any such RestrictedSubsidiary to guarantee the Notes to the extent that the Parent has delivered to the Trusteean Officers’ Certificate certifying that it has determined in good faith that such Guaranteewould reasonably be expected to give rise to or result in (a) any violation of applicable law,rule, regulation or order or (b) any liability for the officers, directors or shareholders of suchRestricted Subsidiary, in each case that cannot be avoided or otherwise prevented throughmeasures reasonably available to the Parent or such Restricted Subsidiary.

(f) Notwithstanding the foregoing, the Parent may elect at any time that any additional Subsidiaryshall become a Guarantor, and upon any such election, the Parent will cause such Subsidiaryto become a Guarantor and execute and deliver to the Trustee a deed of guarantee in thesame forms as the Deeds of Guarantee, pursuant to which such Subsidiary willunconditionally and irrevocably, on a joint and several basis with each other Guarantor,guarantee the payment of all monies payable, and all other obligations of the Issuer, underthe Trust Deed and the Notes and will become vested with all the duties and obligations of aGuarantor as if originally named a Guarantor under a Deed of Guarantee;

(g) The Issuer and/or the Parent will give notice to the Trustee in accordance with Condition 16hereof forthwith upon any Guarantor ceasing to be a Guarantor or any additional Subsidiarybecoming a Guarantor and, so long as the Notes are listed on the London Stock Exchangeand/or any other stock exchange on which the Notes may be listed or quoted from time to

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time, shall comply with applicable rules of the London Stock Exchange and/or such otherexchange (including preparation of a supplemental prospectus) in relation to any Guarantorceasing to be a Guarantor or any of the Restricted Subsidiaries becoming Guarantors.

(h) The Issuer shall also procure that the following opinions are delivered to the Trustee (at theexpense of the Parent (or the Issuer provided it has received funds from the Parent)) on thedate of the execution of each such deed of guarantee upon which the Trustee is entitled torely without liability to any person for so doing:

(i) an opinion of counsel or tax advisors of recognised standing reasonably acceptable tothe Trustee, in substantially the same form and substance as the tax opinions deliveredin respect of the Guarantors on the Issue Date; and

(ii) an opinion of counsel of recognised standing reasonably acceptable to the Trustee, inform and substance satisfactory to the Trustee, stating that all legal conditions precedentin relation to such substitution or addition have been complied with and that such Deed ofGuarantee, constitutes legal, valid and binding obligations of the respective additionalGuarantor, enforceable in accordance with its terms, subject to customary exceptions,qualifications and limitations.

(i) For the avoidance of doubt, any breach of, or failure to procure under, Condition 4.13 shall beremedied as set out pursuant to Condition 6.4 and shall not otherwise be deemed to be abreach of the Notes or otherwise cause an Event of Default (save to the extent there is asubsequent breach, default or failure to pay pursuant to Condition 6.4). Condition 6.4 shall notapply to Condition 4.13(f).

Claims Pari Passu

4.14 Each of the Issuer and each Guarantor shall ensure at all times the claims of the Noteholdersagainst it under the Notes and the Guarantees, as applicable, shall rank at least pari passu with claimsof all other present and future unsecured creditors (other than claims preferred under any bankruptcy,insolvency, liquidation or similar laws).

Limitation on Layering

4.15 The Issuer and the Guarantors will not incur Indebtedness if such Indebtedness is subordinate orjunior in ranking in any respect to any Senior Indebtedness, unless such Indebtedness ranks equallywith the Notes and the Guarantees or is subordinated to the Notes and the Guarantees. No suchIndebtedness will be considered to be senior by virtue of being secured on a first or junior prioritybasis.

Limitation on Sale or Issuance of Voting Stock of Restricted Subsidiaries

4.16 The Issuer and the Guarantors will not, and the Parent will not permit its Restricted Subsidiariesto,

(a) sell, lease, transfer or otherwise dispose of any Voting Stock of any Restricted Subsidiary to anyPerson (other than to the Parent or, directly or indirectly to a Wholly Owned Subsidiary), and

(b) issue any Voting Stock of any Restricted Subsidiary (other than, if necessary, shares of its VotingStock constituting directors’ or other legally required qualifying shares) to any Person (other thanto the Parent or a Wholly Owned Subsidiary),

unless

(i)

(A) immediately after giving effect to such issuance, sale or other disposition, either theParent or its Wholly Owned Subsidiaries own (x) more than 50 per cent. of theoutstanding Voting Stock of such Restricted Subsidiary or (y) none of the outstandingVoting Stock of such Restricted Subsidiary; and

(B) such sale, lease, transfer, issuance or other disposition complies with the restrictionscontained in Condition 4.4;

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(ii)

(A) such issuance, sale or other disposition is made pursuant to the creation of a jointventure engaged in the Related Business; and

(B) such sale, lease, transfer, issuance or other disposition complies with the restrictionscontained in Condition 4.4

(iii) such issuance, sale or other disposition is required by law or applicable regulation; or

(iv) in case of the issuance of Voting Stock of a Restricted Subsidiary to a Restricted Subsidiarywhich is not a Wholly Owned Subsidiary, such Restricted Subsidiary acquires at the sametime not less than its proportionate share in such issuance of Voting Stock.

5. INTEREST AND STEP-UP INTEREST

Interest

5.1 The Notes bear interest from and including the Issue Date at the rate of 6.5 per cent. per annum,payable semi-annually in arrear on 1 May and 1 November in each year (each an Interest PaymentDate).

Each Note will cease to bear interest from the due date for redemption unless, upon due presentation,payment of principal is improperly withheld or refused. In such event it shall continue to bear interest atsuch rate (both before and after judgment) until whichever is the earlier of (a) the day on which allsums due in respect of such Note up to that day are received by or on behalf of the relevant Holder,and (b) the day which is seven days after the Trustee or the Principal Paying Agent has notifiedNoteholders of receipt of all sums due in respect of all the Notes up to that seventh day (except to theextent that there is failure in the subsequent payment to the relevant Holders under these Conditions).

If interest is required to be calculated for a period of less than a complete Interest Period (as definedbelow), the relevant day–count fraction will be determined on the basis of a 360-day year consisting of12 months of 30 days each and, in the case of an incomplete month, the number of days elapsed.

In these Conditions, the period beginning on and including the Issue Date and ending on but excludingthe first Interest Payment Date and each successive period beginning on and including an InterestPayment Date and ending on but excluding the next succeeding Interest Payment Date is called anInterest Period.

Interest in respect of any Note shall be calculated per U.S.$1,000 in principal amount of the Notes (theCalculation Amount). The amount of interest payable per Calculation Amount for any period shall beequal to the product of 6.5 per cent., the Calculation Amount and the day-count fraction for the relevantperiod, rounding the resulting figure to the nearest cent (half a cent being rounded upwards).

Step-Up Interest

5.2 The Notes bear additional interest for each period from and including any Step-Up Date to butexcluding any Step-Down Date (such period, the Step-Up Period) at the rate of 1.25 per cent. perannum, payable semi-annually in arrear on each Interest Payment Date (the Step-Up Interest).

Each Note will cease to bear Step-Up Interest from the earlier of (a) the Step-Down Date and (b) thedue date for redemption unless, upon due presentation, payment of principal is improperly withheld orrefused. In such event it shall continue to bear Step-Up Interest at such rate (both before and afterjudgment) until whichever is the earlier of (i) the day on which all sums due in respect of such Note upto that day are received by or on behalf of the relevant Holder, and (ii) the day which is seven daysafter the Trustee or the Principal Paying Agent has notified Noteholders of receipt of all sums due inrespect of all the Notes up to that seventh day (except to the extent that there is failure in thesubsequent payment to the relevant Holders under these Conditions).

If Step-Up Interest is required to be calculated for a period of less than a complete Interest Period, therelevant day–count fraction will be determined on the basis of a 360-day year consisting of 12 monthsof 30 days each and, in the case of an incomplete month, the number of days elapsed.

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Step-Up Interest in respect of any Note shall be calculated per U.S.$1,000 in principal amount of theNotes (the Calculation Amount). The amount of Step-Up Interest payable per Calculation Amount forany period shall be equal to the product of 1.25 per cent., the Calculation Amount and the day-countfraction for the relevant period, rounding the resulting figure to the nearest cent (half a cent beingrounded upwards).

6. REDEMPTION AND PURCHASE

Final redemption

6.1 Unless previously redeemed, or repurchased and cancelled, the Notes will be redeemed at theirprincipal amount on 1 November 2017 (the Maturity Date). The Notes may not be redeemed at theoption of the Issuer or any Guarantor other than in accordance with this Condition 6.

Redemption for tax reasons

6.2 The Notes may be redeemed at the option of the Issuer in whole, but not in part, at any time, ongiving not less than 30 nor more than 60 days’ notice to the Noteholders in accordance with Condition16 (which notice shall be irrevocable) at the principal amount thereof, together with interest andStep-Up Interest, if any, accrued to the date fixed for redemption, if the Issuer or a Guarantor satisfiesthe Trustee immediately prior to the giving of such notice that (i) it has or will become obliged to payadditional amounts as provided or referred to in Condition 8.1 as a result of any change in, oramendment to, the laws, treaties or regulations of any Relevant Jurisdiction, or any change in thepublished application or official interpretation of such laws or regulations, which change or amendmentbecomes effective on or after 26 October 2012 and (ii) such obligation cannot be avoided by the Issueror such Guarantor taking reasonable measures available to it; provided that no such notice ofredemption shall be given earlier than 90 days prior to the earliest date on which the Issuer or suchGuarantor would be obliged to pay such additional amounts were a payment in respect of the Notesthen due. Prior to the publication of any notice of redemption pursuant to this Condition, the Issuer orthe relevant Guarantor shall deliver to the Trustee (x) a certificate signed by an authorised attorney ofthe Issuer or two directors or an authorised attorney of the relevant Guarantor stating that theobligation referred to in (i) above cannot be avoided by the Issuer or such Guarantor taking reasonablemeasures available to it and the Trustee shall be entitled to accept such certificate as sufficientevidence of the satisfaction of the conditions precedent set out in (ii) above, in which event it shall beconclusive and binding on the Noteholders and (y) an opinion of independent legal advisers ofrecognised standing to the effect that the Issuer or the relevant Guarantor has or will become obligedto pay such additional amounts as a result of such change or amendment. All Notes in respect of whichany such notice of redemption is given under and in accordance with this Condition shall be redeemedon the date specified in such notice in accordance with this Condition.

Redemption upon a change of control

6.3 (a) Upon the occurrence of any Change of Control, the Holder of a Note will have the option (theChange of Control Put Option) to require the Issuer to redeem all or any part (equal toU.S.$200,000 and any integral multiple of U.S.$1,000 in excess thereof and provided thatany unpurchased portion of any Note surrendered is in a principal amount of at leastU.S.$200,000) of such Note on the Change of Control Put Settlement Date (as definedbelow) at 101 per cent. of its principal amount together with accrued and unpaid interest andStep-Up Interest (if any) to the Change of Control Put Settlement Date (as defined below)(subject to the right of Holders of record on the relevant Record Date to receive interest andStep-Up Interest due on the relevant Interest Payment Date).

(b) Promptly, and in any event within 30 calendar days, upon the Issuer becoming aware that aChange of Control has occurred, the Issuer shall give notice (a Change of Control Put EventNotice) to the Trustee and the Noteholders in accordance with Condition 16, specifying thedetails relating to the occurrence of the Change of Control and the procedure for exercising theChange of Control Put Option.

(c) In order to exercise the Change of Control Put Option, the Holder of a Note must deliver nolater than 30 days after the Change of Control Put Event Notice is given (the Change ofControl Put Period), to the specified office of the Principal Paying Agent, evidencesatisfactory to the Principal Paying Agent of such Holder’s entitlement to such Note and a duly

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completed put option notice (a Change of Control Put Option Notice) specifying the principalamount of the Notes in respect of which the Change of Control Put Option is exercised, in theform obtainable from the Principal Paying Agent. The Principal Paying Agent will provide suchNoteholder with a non-transferable receipt. On the Business Day following the end of theChange of Control Put Period, the Principal Paying Agent shall notify in writing the Issuer of theexercise of the Change of Control Put Option specifying the aggregate principal amount of theNotes to be redeemed in accordance with the Change of Control Put Option. Provided that theNotes that are the subject of any such Change of Control Put Option Notice have beendelivered to the Principal Paying Agent prior to the expiry of the Change of Control Put Period,then the Issuer shall redeem all such Notes on the date falling 30 calendar days after theexpiration of the Change of Control Put Period (the Change of Control Put Settlement Date).No Change of Control Put Option Notice, once delivered in accordance with this Condition 6.3,may be withdrawn.

(d) The Issuer will not be required to issue a Change of Control Put Event Notice following aChange of Control if (i) a third party makes an offer in substantially similar terms to theprovisions of this Condition 6.3 in the manner, at the times and otherwise in compliance withthe requirements set forth in this Condition 6.3 and purchases all Notes validly tendered andnot withdrawn thereunder or (ii) a notice of redemption has been given pursuant to the TrustDeed as described in Condition 6.5, unless and until there is a default in payment of theapplicable redemption price.

(e) The Issuer will comply, to the extent applicable, with the requirements of Section 14(e) of theExchange Act and any other securities laws or regulations in connection with the repurchase ofNotes as a result of a Change of Control. To the extent that the provisions of any securitieslaws or regulations conflict with the provisions of this Condition, the Issuer will comply with theapplicable securities laws and regulations and shall not be deemed to have breached theobligations contained in this Condition 6.3(e) by virtue of its compliance with such securitieslaws or regulations.

Redemption Upon Additional Guarantee Event

6.4 (a) Upon the occurrence of an Additional Guarantee Event, the Holder of a Note will have theoption (the Additional Guarantee Event Put Option) to require the Issuer to redeem all orany part (equal to U.S.$200,000 and any integral multiple of U.S.$1,000 in excess thereof andprovided that any unpurchased portion of any Note surrendered is in a principal amount of atleast U.S.$200,000) of such Note on the Additional Guarantee Event Put Settlement Date (asdefined below) at 101 per cent. of its principal amount together with accrued and unpaidinterest and Step-Up Interest (if any) to the Additional Guarantee Event Put Settlement Date(as defined below) (subject to the right of Holders of record on the relevant Record Date toreceive interest and Step-Up Interest, if any, due on the relevant Interest Payment Date).

(b) Promptly, and in any event within 30 calendar days, upon the Issuer becoming aware that anAdditional Guarantee Event has occurred, the Issuer shall give notice (a AdditionalGuarantee Event Put Option Notice) to the Trustee and the Noteholders in accordance withCondition 16, specifying the details relating to the occurrence of the Additional GuaranteeEvent and the procedure for exercising the Additional Guarantee Event Put Option.

(c) In order to exercise the Additional Guarantee Event Put Option, the Holder of a Note mustdeliver no later than 30 days after the Additional Guarantee Put Event Notice is given (theAdditional Guarantee Event Put Period), to the specified office of the Principal Paying Agent,evidence satisfactory to the Principal Paying Agent of such Holder’s entitlement to such Noteand a duly completed put option notice (a Additional Guarantee Event Put Option Notice)specifying the principal amount of the Notes in respect of which the Additional GuaranteeEvent Put Option is exercised, in the form obtainable from the Principal Paying Agent. ThePrincipal Paying Agent will provide such Noteholder with a non-transferable receipt. On theBusiness Day following the end of the Additional Guarantee Event Put Period, the PrincipalPaying Agent shall notify in writing the Issuer of the exercise of the Additional Guarantee EventPut Option specifying the aggregate principal amount of the Notes to be redeemed inaccordance with the Additional Guarantee Event Put Option. Provided that the Notes that arethe subject of any such Additional Guarantee Event Put Option Notice have been delivered tothe Principal Paying Agent prior to the expiry of the Additional Guarantee Event Put Period,then the Issuer shall redeem all such Notes on the date falling 30 calendar days after the

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expiration of the Additional Guarantee Event Put Period (the Additional Guarantee Event PutSettlement Date). No Additional Guarantee Event Put Option Notice, once delivered inaccordance with this Condition 6.4, may be withdrawn.

(d) The Issuer will not be required to issue an Additional Guarantee Event Notice following anAdditional Guarantee Event if a notice of redemption has been given pursuant to the TrustDeed as described in Condition 6.5, unless and until there is a default in payment of theapplicable redemption price.

Optional Redemption at Make Whole

6.5 (a) The Issuer may at its option, having given not less than 30 nor more than 60 days’ notice to theNoteholders in accordance with Condition 16 (which notice shall be irrevocable), redeem theNotes in whole but not in part at the price which shall be the following:

(i) their principal amount; plus

(ii) the Make Whole Premium; plus

(iii) interest and Step-Up Interest (if any) accrued to but excluding the date of redemption.

(b) Make Whole Premium means the greater of (i) 1 per cent. of the aggregate principal amountof Notes outstanding at the date the call is exercised and payment therefor is to be made (theCall Date) or (ii) the excess, if any (as determined in good faith in writing to the Issuer and theTrustee by a reputable financial institution operating in the United States Treasury Securitiesmarket in New York selected at its own expenses by the Issuer and approved in writing by theTrustee (the Financial Adviser) (and rounded, if necessary, to the third decimal place (0.0005being rounded upwards)), of (A) the value at the Call Date of (1) the aggregate principalamount of the Notes outstanding at such date plus (2) all required interest payments that wouldotherwise be due to be paid on the Notes during the period between the Call Date and theMaturity Date, excluding accrued but unpaid interest at the Call Date plus (3) if the Call Dateoccurs during a Step-Up Period, the amount of Step-Up Interest which would be payableduring the period between the Call Date and the Maturity Date excluding accrued but unpaidStep-Up Interest, in the case of (1), (2) and (3) above, calculated using a discount rate equal to50 basis points above the Treasury Rate over (B) the outstanding aggregate principal amountof the Notes at the Call Date.

(c) Treasury Rate means a rate equal to the yield, as published by the most recent FederalReserve Statistical Release H.15(519), on actively traded United States Treasury Securitieswith a maturity comparable to the remaining life of the Notes, as selected by the FinancialAdviser. If there is no such publication of this yield during the week preceding the calculationdate, the Treasury Rate will be calculated by reference to quotations from selected primaryUnited States Treasury Securities dealers in New York selected by the Financial Adviser. TheTreasury Rate will be calculated on the third day (other than a Saturday or Sunday) on whichbanks and foreign exchange markets are open for business generally in New York precedingthe Call Date.

(d) Notices of redemption will specify the date fixed for redemption and the applicable redemptionprice. No such notice of redemption may be given by the Issuer unless it shall have deliveredto the Trustee an Officers’ Certificate (upon which the Trustee may rely absolutely withoutfurther enquiry and without liability to any person) that it will have the funds, without condition,required to redeem the Notes at the redemption price plus accrued interest and Step-UpInterest (if any) on the date specified for redemption. Upon the expiry of any notice ofredemption delivered in accordance with this Condition 6.5, the Issuer shall be bound toredeem the Notes in accordance with this Condition 6.5.

Purchase

6.6 The Issuer, each Guarantor and any of their respective Subsidiaries may at any time purchaseNotes in the open market or otherwise at any price.

Cancellation

6.7 All Notes redeemed or purchased pursuant to this Condition 6 shall be cancelled forthwith and maynot be held or resold. Any Notes so cancelled may not be reissued.

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7. PAYMENTS

Principal and other amounts

7.1 Payment of principal, interest and Step-Up Interest (if any) in respect of the Notes will be made tothe persons shown in the Register at the close of business on the Record Date (as defined below).Payments of all amounts other than as provided in this Condition 7.1 will be made as provided in theseConditions.

Payments

7.2 Each payment in respect of the Notes pursuant to Condition 7.1 will be made by transfer to a U.S.dollar account maintained by or on behalf of the payee with a bank in New York City. Paymentinstructions (for value on the due date or, if that is not a business day (as defined below), for value thefirst following day which is a business day) will be initiated on the business day preceding the due datefor payment (for value the next business day).

Payments subject to fiscal laws

7.3 All payments in respect of the Notes are subject in all cases to (i) any applicable fiscal or other lawsand regulations in the place of payment, but without prejudice to the provisions of Condition 8 and(ii) any withholding or deduction of the kind described in Condition 8.2. No commissions or expensesshall be charged to the Noteholders in respect of such payments.

Payments on business days

7.4 If the due date for any payment of principal, interest or Step-Up Interest under this Condition 7 isnot a business day, the Holder of a Note shall not be entitled to payment of the amount due until thenext following business day and shall not be entitled to any further interest, Step-Up Interest or otherpayment in respect of any such delay. In this Condition 7 only, business day means any day on whichbanks are open for business in the place of the specified office of the relevant Paying Agent and, in thecase of payment by transfer to a U.S. Dollar account as referred to above, on which dealings in foreigncurrencies may be carried on both in New York City and in such other place.

Record date

7.5 Record Date means the seventh business day, in the place of the specified office of the Registrar,before the due date for the relevant payment.

Agents

7.6 The initial Agents and their initial specified offices are listed below. The Issuer reserves the right tovary or terminate the appointment of all or any of the Agents at any time (with the written approval ofthe Trustee) and appoint additional or other payment or transfer agents, provided that the Issuer will atall times maintain (i) a Registrar and a Principal Paying Agent, (ii) a Paying Agent and a Transfer Agenthaving specified offices in at least one major European city approved by the Trustee and (iii) a PayingAgent with a specified office in a European Union member state that will not be obliged to withhold ordeduct tax pursuant to any law implementing European Council Directive 2003/48/EC or any otherDirective implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000.Notice of any such change will be provided to Noteholders as described in Condition 16.

8. TAXATION

8.1 Subject to Condition 8.2 below, all payments of principal, interest and Step-Up Interest (if any) inrespect of the Notes by or on behalf of the Issuer or under the Guarantees by the Guarantors shall bemade free and clear of, and without withholding or deduction for, or on account for, any present orfuture taxes, duties, assessments or governmental charges of whatsoever nature imposed, levied,collected, withheld or assessed by or within Bermuda or the Russian Federation or Ireland or anypolitical subdivision or any authority thereof or therein having power to tax, unless such withholding ordeduction is required by law. In that event, the Issuer or (as the case may be) the relevant Guarantorshall increase the relevant payment so as to result in the receipt by the Noteholders of such amounts

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as would have been received by them if no such withholding or deduction had been required, exceptthat no such additional amounts shall be payable in respect of any Note:

(a) held by or on behalf of a Holder which is (i) liable to such taxes, duties, assessments orgovernmental charges in respect of such Note or the Guarantees by reason of its (or its beneficialowners) having some connection with Bermuda or (as the case may be) the Russian Federation orIreland other than the mere holding of such Note or the benefit of the Guarantees or (ii) able toavoid such deduction or withholding by satisfying any statutory requirements or by making adeclaration of non-residence or other claim to the relevant taxing authority; or

(b) where (in the case of a payment of principal, interest or Step-Up Interest (if any) on redemption)the relevant Definitive Note is surrendered for payment more than 30 days after the Relevant Dateexcept to the extent that the relevant Holder would have been entitled to such additional amountsif it had surrendered the relevant Definitive Note on the last day of such period of 30 days; or

(c) where such withholding or deduction is imposed on a payment to an individual and is required tobe made pursuant to any law implementing European Council Directive 2003/48/EC or any otherDirective implementing the conclusions of the ECOFIN Council meeting of 26-27 November 2000or any law implementing or complying with, or introduced to conform to, such Directive;

(d) by or on behalf of a Noteholder who would have been able to avoid such withholding or deductionby arranging to receive the relevant payment through another Paying Agent in a member state ofthe European Union; or

(e) to a Noteholder in respect of taxes, duties, assessments or governmental charges that areimposed or withheld by reason of the failure of the Noteholder to comply with a request of, or onbehalf of, the Issuer addressed to the Noteholder to provide information concerning the nationality,residence or identity of such Noteholder or to make any declaration or similar claim or satisfy anyinformation or reporting requirement, which is required or imposed by a statute, treaty, regulation,protocol or administrative practice as a precondition to exemption from all or part of such taxes,duties, assessments or governmental charges.

8.2 All payments in respect of the Notes will be made subject to any withholding or deduction requiredpursuant to Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through1474 of the Code, any regulations or agreements thereunder, official interpretations thereof, or any lawimplementing an intergovernmental approach thereto. Neither the Issuer nor the Guarantors will haveany obligation to pay additional amounts or otherwise indemnify an investor for any such withholdingdeducted or withheld by the Issuer, the paying agent or any other party.

8.3 In these Conditions, Relevant Date means whichever is the later of (a) the date on which thepayment in question first becomes due and (b) if the full amount payable has not been received in NewYork City by or for the account of the Principal Paying Agent or the Trustee on or prior to such duedate, the date on which (the full amount having been so received) notice to that effect has been givento the Noteholders by the Issuer in accordance with Condition 16.

8.4 Any reference in these Conditions to principal, interest or Step-Up Interest shall be deemed toinclude any additional amounts in respect of principal, interest or Step-Up Interest (as the case maybe) which may be payable under Condition 8 or any undertaking given in addition to or in substitutionfor it under the Trust Deed.

8.5 If the Issuer or any Guarantor becomes subject at any time to any taxing jurisdiction other than (orin addition to) Bermuda or the Russian Federation or Ireland, respectively, references in theseConditions to Bermuda or the Russian Federation or Ireland shall be construed as references toBermuda or (as the case may be) the Russian Federation or Ireland and/or such other jurisdiction.

9. EVENTS OF DEFAULT

The Trustee at its discretion may, and if so requested in writing by the Holders of not less than 25 percent. of the principal amount of the Notes then outstanding or if so directed by an ExtraordinaryResolution (as defined in the Trust Deed) shall (subject in each case to its being indemnified and/orsecured and/or pre-funded to its satisfaction), give notice to the Issuer that the Notes are immediatelydue and repayable at their principal amount together with accrued interest and Step-Up Interest (if any)if any of the following events occurs and is continuing (each an Event of Default):(a) the Issuer, or where applicable, any of the Guarantors, fails to pay the principal of or any interest

or Step-Up Interest on any of the Notes when due (whether at its stated maturity, on optionalredemption, on required purchase, on declaration of acceleration or otherwise) and such failurecontinues for a period of 7 calendar days in the case of interest and Step-Up Interest; or

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(b) the Issuer or any of the Guarantors, as the case may be, defaults in the performance orobservance of any of their respective other obligations under the Notes (other than a failure toprocure an additional Guarantor pursuant to Condition 4.13), the Trust Deed or in a Deed ofGuarantee, as the case may be, and except where such default is not in the opinion of the Trusteecapable of remedy, such default in the opinion of the Trustee remains unremedied for 30 calendardays after written notice thereof, addressed to the Issuer or the relevant Guarantor, as the casemay be, has been delivered by or on behalf of the Trustee to the Issuer or such Guarantor, as thecase may be; or

(c) a default under any Indebtedness of the Issuer, any Guarantor or any Restricted Subsidiary, if thatdefault (i) is caused by a failure to pay principal of, or interest or premium, if any, on suchIndebtedness within any originally applicable grace period; or (ii) results in the acceleration of suchIndebtedness prior to its stated maturity; provided that the amount of Indebtedness referred to insub-paragraph (i) and/or sub-paragraph (ii) above individually or in the aggregate exceedsU.S.$10,000,000 (or its U.S. Dollar Equivalent); or

(d) the amount of unsatisfied judgments, decrees or orders of courts or dispute resolution bodies ofcompetent jurisdiction that are not subject to further appeal for the payment of money against theIssuer, any Guarantor or any Restricted Subsidiary in the aggregate at any given moment of timeexceeds U.S.$10,000,000, or its U.S. Dollar Equivalent and there shall have been a period of 30consecutive days during which a stay of enforcement of such judgement, decree or order, byreason of an appeal or otherwise, shall not be in effect; or

(e) the Issuer, any Guarantor or any Restricted Subsidiary is unable or admits inability to pay its debtsas they fall due, generally suspends making payments on any of its debts or, by reason of actualor anticipated financial difficulties, commences negotiations with its creditors generally with a viewto a general rescheduling any of its Indebtedness; and/or a moratorium is declared in respect ofany Indebtedness of any of the Issuer, any Guarantor or any Restricted Subsidiary; or

(f) the occurrence of any of the following events: (i) the Issuer, any Guarantor or any RestrictedSubsidiary ceases to have corporate existence or is seeking or consenting to (or an order is madeor an effective resolution is passed for) the introduction of proceedings for its winding up,liquidation, examinership, or dissolution or the appointment of a liquidator, examiner, or liquidationcommission (likvidatsionnaya komissiya) or a similar officer of the Issuer, any Guarantor or anyRestricted Subsidiary, as the case may be, or a petition in relation to the Issuer, any Guarantor orany Restricted Subsidiary for winding up, liquidation, examinership or dissolution (otherwise ineach case than for the purposes of or pursuant to an amalgamation, reorganisation orrestructuring whilst solvent); (ii) the presentation or filing of a petition in respect of any of theIssuer, any Guarantor or any Restricted Subsidiary in any court of competent jurisdiction,arbitration court or before any competent agency alleging, or for, the bankruptcy, insolvency,examinership, dissolution, liquidation (or any analogous proceedings) of any of the Issuer, anyGuarantor or any Restricted Subsidiary and such petition, if not initiated by the Issuer, anyGuarantor or any Restricted Subsidiary, is not discharged within 14 days; (iii) the institution ofbankruptcy, examinership, insolvency, voluntary or judicial liquidation, composition with creditors,reprieve from payment, controlled management, fraudulent conveyance, general settlement withcreditors, reorganisation or similar laws affecting the rights of creditors generally which, in the caseof any entity in the Russian Federation and without limitation, shall include the institution ofsupervision (nablyudeniye), financial rehabilitation (finansovoye ozdorovleniye), externalmanagement (vneshneye upravleniye), bankruptcy management (konkursnoye proizvodstvo) overthe relevant entity in the Russian Federation, and such bankruptcy, examinership, insolvency orsimilar reorganisation procedure, if not initiated by the Issuer, any Guarantor or any RestrictedSubsidiary, is not discharged within 14 days; (iv) the entry by the Issuer, any Guarantor or anyRestricted Subsidiary into, or the agreeing by the Issuer, any Guarantor or any RestrictedSubsidiary to enter into any amicable settlement which, in the case of any entity in the RussianFederation and without limitation, shall include amicable settlement (mirovoye soglasheniye) withits creditors, as such terms are defined in the Federal Law of the Russian Federation No. 127-FZ“On Insolvency (Bankruptcy)” dated 26 October 2002 (as amended or replaced from time to time);(v) any judicial liquidation in respect of the Issuer, any Guarantor or any Restricted Subsidiary; or

(g) the Notes, the Trust Deed or any Guarantee is held in any judicial proceeding to be unenforceableor invalid or ceases to be in full force and effect (other than in accordance with, the terms of suchdocument) or the Issuer or any Guarantor denies, disaffirms, repudiates (or purports to repudiate)its obligations under the Notes, the Trust Deed or its Guarantee; or

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(h) any expropriation, attachment, sequestration, execution, Lien or distress is levied against orbecomes enforceable and is enforced against, or an encumbrancer takes possession of or sells,the whole or any part of, the property, undertaking, revenues or assets of the Parent or any of itsRestricted Subsidiaries in an amount, which individually or together with any prior expropriation,attachment, sequestration, execution, Lien or distress which remain in effect without having beenlifted or which have been enforced, is equal to or greater than US.$20,000,000 (or its U.S. DollarEquivalent);

(i) any governmental authorization necessary for the performance of the obligations of the Issuer or aGuarantor under the Notes or Guarantee, as the case may be, ceases to be in full force and effect(and such cessation continues for more than 30 Business Days); or

(j) any action, condition or thing (including the obtaining or effecting of any necessary consent,approval, authorisation, exemption, filing, licence, order, recording or registration) at any timerequired to be taken, fulfilled or done in order (i) to enable the Issuer or a Guarantor lawfully toenter into, exercise their respective rights and perform and comply with its obligations under theNotes, the Guarantees and the Trust Deed, (ii) to ensure that such obligations are legally bindingand enforceable and (iii) to make the Notes, the Guarantees and the Trust Deed admissible inevidence in arbitration proceedings or the courts of the United Kingdom is not taken, fulfilled ordone; or

(k) it is or will become unlawful for the Issuer or any Guarantor to perform or comply with any one ormore of its obligations under any of the Notes, the Guarantees or the Trust Deed; or

(l) any step is taken by or under state authority with a view to the seizure, compulsory acquisition,expropriation, condemnation, or nationalisation of all or a part (the book value of which beingequal to or greater than 15 per cent. of the book value of the Group) of the undertaking, assetsand revenues of the Issuer, any Guarantor or any Restricted Subsidiary or the Issuer, anyGuarantor or any Restricted Subsidiary is prevented by any such person from exercising normalcontrol over all or any substantial part of its undertaking, assets and revenues; or

(m) any event occurs which under the laws of any relevant jurisdiction has an analogous effect to anyof the events referred to in any of the foregoing paragraphs.

10. PRESCRIPTION

Claims for the payment of principal, interest and Step-Up Interest (if any) in respect of any Note shallbe prescribed unless made within 10 years (for claims for the payment of principal) or five years (forclaims for the payment of interest or Step-Up Interest (if any)) of the appropriate Relevant Date.

11. REPLACEMENT OF DEFINITIVE NOTES

If any Note is lost, stolen, mutilated, defaced or destroyed, it may be replaced at the specified office ofthe Registrar, subject to all applicable laws and stock exchange requirements, upon payment by theclaimant of the expenses incurred in connection with such replacement and on such terms as toevidence, security, indemnity and otherwise as the Registrar may reasonably require. Mutilated ordefaced Notes must be surrendered before replacements will be issued.

12. MEETINGS OF NOTEHOLDERS, MODIFICATION AND WAIVER

Meetings of Noteholders

12.1 The Trust Deed contains provisions for convening meetings of Noteholders to consider mattersaffecting their interests, including the sanctioning by Extraordinary Resolution of a modification of anyof these Conditions or any provisions of the Trust Deed. Such meetings shall be held in accordancewith the provisions set out in the Trust Deed. Such a meeting shall be convened by the Trustee uponthe request in writing of Noteholders holding not less than 10 per cent. of the aggregate principalamount of the Notes for the time being outstanding. The quorum at any meeting convened to vote onan Extraordinary Resolution will be two or more persons holding or representing a clear majority inprincipal amount of the Notes for the time being outstanding, or at any adjourned meeting one or morepersons being or representing Noteholders whatever the principal amount of the Notes held orrepresented, unless the business of such meeting includes consideration of proposals, inter alia, (i) tomodify the maturity of the Notes or the dates on which interest or Step-Up Interest (if any) is payable in

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respect of the Notes, (ii) to reduce or cancel the principal amount of, or interest or Step-Up Interest (ifany) payable on, the Notes, (iii) to alter the method of calculating the amount of any payment in respectof the Notes, (iv) to change the currency of payment under the Notes, (v) to modify the provisions inSchedule 3 of the Trust Deed concerning the quorum required at any meeting of Noteholders or themajority required to pass an Extraordinary Resolution, (vi) to modify or cancel the Guarantees, or(vii) to sanction the exchange or substitution for the Notes of, or the conversion of the Notes into,shares, bonds or other obligations or securities of the Issuer, the Guarantors or any other entity, inwhich case the necessary quorum will be two or more persons holding or representing not less than75 per cent., or at any adjourned meeting not less than 25 per cent. of the aggregate principal amountof the Notes for the time being outstanding. Any Extraordinary Resolution duly passed at any suchmeeting shall be binding on Noteholders (whether or not they were present at the meeting at whichsuch resolution was passed). A written resolution signed by or on behalf of the Holders of not less than90 per cent of the aggregate principal amount of Notes outstanding who are for the time being entitledto receive notice of a meeting in accordance with the Trust Deed will take effect as if it were a dulypassed Extraordinary Resolution.

Modification and Waiver

12.2 The Trustee may agree with the Issuer and the Guarantors, without the consent of theNoteholders, to (i) any modification of any of the provisions of the Trust Deed, the Deeds of Guarantee,the Agency Agreement or the Notes which is, in the opinion of the Trustee, of a formal, minor ortechnical nature or is made to correct a manifest error, and (ii) any other modification (except asmentioned in the Trust Deed), and any waiver or authorisation of any breach or proposed breach ofany of the provisions of the Notes or the Trust Deed or the Deeds of Guarantee, which is in the opinionof the Trustee not materially prejudicial to the interests of the Noteholders. Any such modification,authorisation or waiver shall be binding on the Noteholders and, if the Trustee so requires, shall benotified to the Noteholders as soon as practicable.

Entitlement of the Trustee

12.3 In connection with the exercise of its functions (including but not limited to those referred to in thisCondition) the Trustee shall have regard to the interests of the Noteholders as a class and shall nothave regard to the consequences of such exercise for individual Noteholders and the Trustee shall notbe entitled to require, nor shall any Noteholder be entitled to claim, from the Issuer, the Guarantors, theTrustee or any other Person, any indemnification or payment in respect of any tax consequences ofany such exercise upon individual Noteholders.

13. ENFORCEMENT

At any time after the Notes become due and payable, the Trustee may, at its discretion (but subject toCondition 20) and without further notice, institute such proceedings against the Issuer and/or anyGuarantor as it may think fit to enforce the terms of the Trust Deed, the Notes and/or the Deeds ofGuarantee (whether by arbitration pursuant to the Trust Deed or the Deeds of Guarantee or bylitigation), but it need not take any such steps, actions or proceedings and nor shall the Trustee bebound to take, or omit to take any step or action (including instituting such proceedings) unless (a) itshall have been so directed by an Extraordinary Resolution or so requested in writing by Noteholdersholding at least 25 per cent. in principal amount of the Notes outstanding and (b) it shall have beenindemnified and/or secured and/or prefunded to its satisfaction. No Noteholder may proceed directlyagainst the Issuer or any Guarantor unless the Trustee, having become bound so to proceed, fails todo so within a reasonable time and such failure is continuing.

14. INDEMNIFICATION AND REMOVAL OF THE TRUSTEE

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief fromresponsibility. The Trustee is entitled to enter into business transactions with the Issuer, eachGuarantor and any entity related to the Issuer or each Guarantor without accounting for any profit. TheTrustee may rely without liability to Noteholders on any certificate or report prepared by auditors,accountants or any other expert pursuant to the Trust Deed, whether or not addressed to the Trusteeand whether or not the auditors’, accountants’ or expert’s liability in respect thereof is limited by amonetary cap or otherwise. The Trust Deed provides that the Noteholders shall together have the

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power, exercisable by Extraordinary Resolution, to remove the Trustee (or any successor trustee oradditional trustees) provided that the removal of the Trustee or any other trustee shall not becomeeffective unless there remains a Trustee in office after such removal.

15. FURTHER ISSUES

The Issuer may from time to time, without the consent of the Noteholders, create and issue furthersecurities having the same terms and conditions as the Notes in all respects (or in all respects exceptfor the first payment of interest) and so that such further issue shall be consolidated and form a singleseries with the outstanding Notes. References in these Conditions to the Notes include (unless thecontext requires otherwise) any other securities issued pursuant to this Condition and forming a singleseries with the Notes. Any such other securities shall be constituted by a deed supplemental to theTrust Deed and will benefit from guarantees substantially in the form of the Deeds of Guarantee givenin respect of these Notes. The Trust Deed contains provisions for convening a single meeting of theNoteholders for the holders of securities of other series where the Trustee so decides.

16. NOTICES

Notices to the Noteholders shall be valid if sent to them by first class mail (airmail if overseas) at theirrespective addresses on the Register or by any means designated from time to time by any clearingsystem on which trades in Notes settle. Any such notice shall be deemed to have been given on thefourth day after the date of mailing. In addition, so long as the Notes are listed on the Stock Exchangeand the rules or guidelines of that exchange so require, notices will be published in a leadingnewspaper having general circulation in London (which is expected to be the Financial Times) or, if inthe opinion of the Trustee such publication shall not be practicable, in any English languagenewspaper of general circulation in Europe. Any such notice shall be deemed to have been given onthe date of such publication or, if published more than once or on different dates, on the first date onwhich publication is made.

17. CURRENCY INDEMNITY

If any sum due from the Issuer in respect of the Notes or a Guarantor in respect of its Guarantee orany order or judgment given or made in relation thereto has to be converted from the currency (thefirst currency) in which the same is payable under these Conditions or such order or judgment intoanother currency (the second currency) for the purpose of (a) making or filing a claim or proof againstthe Issuer or any Guarantor, (b) obtaining an order or judgment in any court or other tribunal or(c) enforcing any order or judgment given or made in relation to the Notes or a Guarantee, the Issuer,failing whom the Guarantors jointly and severally, shall indemnify each recipient, on the writtendemand of such recipient addressed to the Issuer and the Guarantors and delivered to the Issuer andthe Guarantors or to the specified office of the Registrar, against any loss suffered as a result of anydiscrepancy between (i) the rate of exchange used for such purpose to convert the sum in questionfrom the first currency into the second currency and (ii) the rate or rates of exchange at which suchrecipient may in the ordinary course of business purchase the first currency with the second currencyupon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim orproof.

This indemnity constitutes a separate and independent obligation of the Issuer or, as the case may be,the Guarantors and shall give rise to a separate and independent cause of action, will applyirrespective of any indulgence granted by any Noteholder or any other person and will continue in fullforce and effect despite any judgment, order, claim or proof for a liquidated amount in respect of anysum due under the Trust Deed, the Deeds of Guarantee and/or the Notes or any other judgment ororder.

18. CONTRACTS (RIGHTS OF THIRD PARTIES) ACT 1999

No person shall have any right to enforce any term or condition of the Notes under the Contracts(Rights of Third Parties) Act 1999 except and to the extent, if any, that the Notes expressly provide forsuch Act to apply to any of their terms.

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19. GOVERNING LAW, JURISDICTION AND ARBITRATION

19.1 The Trust Deed, the Notes, the Deeds of Guarantee and these Conditions and anynon-contractual obligations arising out of or in connection therewith shall be governed by andinterpreted in accordance with English law.

19.2 (a) Any dispute, claim or difference of whatever nature arising out of or in connection with theTrust Deed, the Notes, the Deeds of Guarantee and these Conditions (including a disputeregarding the existence, validity or termination of the Trust Deed, the Notes, the Deeds ofGuarantee or these Conditions or a dispute relating to non-contractual obligations arising outof or in connection with the Trust Deed, the Notes, the Deeds of Guarantee and theseConditions) (a Dispute) shall be referred to and finally resolved by arbitration under the rulesof the LCIA (formerly known as the London Court of International Arbitration) (the Rules),which Rules are deemed incorporated by reference into these Conditions, as amendedherein;

(b) The arbitral tribunal shall consist of three arbitrators. The claimant(s), irrespective of number,shall nominate jointly one arbitrator. The respondent(s), irrespective of number, shallnominate jointly the second arbitrator. Failing such nomination within 15 days of receivingnotice of the nomination of an arbitrator by the other side, the second arbitrator shall beappointed by the LCIA as soon as possible. The third arbitrator, who shall serve as Chairman,shall be nominated by agreement of the two party-nominated arbitrators. Failing suchagreement within 15 days of the confirmation of the appointment of the second arbitrator, thethird arbitrator shall be appointed by the LCIA as soon as possible. For the avoidance ofdoubt, the parties to this Agreement agree for the purpose of Article 8.1 of the Rules, that theclaimant(s), irrespective of number, and the respondent(s), irrespective of number, shallconstitute two separate sides for the formation of the arbitral tribunal;

(c) In the event that the claimant(s) or the respondent(s) fail to nominate an arbitrator inaccordance with the Rules, such arbitrator shall be nominated by the LCIA as soon aspossible, preferably within 15 days of such failure. In the event that the respondent(s) or boththe claimant(s) and the respondent(s) fail to nominate an arbitrator in accordance with theRules, all 3 arbitrators shall be nominated and appointed by the LCIA as soon as possible,preferably within 15 days of such failure, and such arbitrators shall then designate oneamongst them as Chairman;

(d) The seat of arbitration shall be London, England and the language of the arbitration shall beEnglish;

(e) If more than one arbitration is commenced under the Trust Deed, the Notes, the Deeds ofGuarantee or these Conditions and any party contends that two or more such arbitrations areso closely connected that it is expedient for them to be resolved in one set of proceedings, thearbitral tribunal appointed in the first filed of such proceedings (the First Tribunal) shall havethe power to determine, provided no date for the hearing on the merits of the Dispute in anysuch arbitrations has been fixed, that the proceedings shall be consolidated;

(f) The tribunal in such consolidated proceedings shall be selected as follows: (i) the parties tothe consolidated proceedings shall agree on the composition of the tribunal; and (ii) failingsuch agreement within 30 days of consolidation being ordered by the First Tribunal, the LCIAshall appoint all members of the tribunal within 30 days of a written request by any of theparties to the consolidated proceedings;

(g) For the avoidance of doubt, the parties to the Trust Deed, the Notes, the Deeds of Guaranteeand these Conditions are intended by the parties to this Agreement to have the right under theContracts (Rights of Third Parties) Act 1999 to enforce the terms of Condition 19.2(e); and

(h) The parties hereby exclude the jurisdiction of the courts under Sections 45 and 69 of theArbitration Act 1996.

19.3 The Issuer and each Guarantor undertakes irrevocably to appoint Law Debenture CorporateServices Limited as agent to accept service of process and any other documents in proceedings inEngland or in any legal action or proceedings arising out of or in connection with these Conditions andthe Notes (the Process Agent), provided that:

(a) service upon the Process Agent shall be deemed valid service upon the Issuer and eachGuarantor whether or not the process is forwarded to or received by the Issuer or any suchGuarantor;

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(b) the Issuer and each Guarantor shall inform the Trustee, in writing, of any change in the address ofthe Process Agent within 28 days of such change;

(c) if the Process Agent ceases to be able to act as a process agent or to have an address inEngland, the Issuer and each Guarantor irrevocably agrees to appoint a new process agent inEngland acceptable to the Trustee and to deliver to the trustee within 14 days a copy of a writtenacceptance of appointment by the new process agent; and

(d) nothing in these Conditions shall affect the right to serve process in any other manner permitted bylaw.

19.4 To the extent that the Issuer or any Guarantor may now or hereafter be entitled, in any jurisdictionin which any legal action or proceeding may at any time be commenced pursuant to or in accordancewith these Conditions, to claim for itself or any of its undertaking, properties, assets or revenuespresent or future any immunity (sovereign or otherwise) from suit, jurisdiction of any court, attachmentprior to judgment, attachment in aid of execution of a judgment, execution of a judgment or award orfrom set-off, banker’s lien, counterclaim or any other legal process or remedy with respect to itsobligations under these Conditions and/or to the extent that in any such jurisdiction there may beattributed to the Issuer or any Guarantor any such immunity (whether or not claimed), the Issuer andeach Guarantor hereby irrevocably agrees not to claim, and hereby waive, any such immunity.

19.5 The Issuer and each Guarantor irrevocably and generally consents in respect of any proceedingsanywhere to the giving of any relief or the issue and service on it of any process in connection withthose proceedings including, without limitation, the making, enforcement or execution against anyassets whatsoever (irrespective of their use or intended use) of any order or judgment which may bemade or given in those proceedings

20. NON-PETITION

None of the Noteholders or the other creditors (nor any other person acting on behalf of any of them)shall be entitled at any time to institute against the Issuer, or join in any institution against the Issuer ofany bankruptcy, administration, moratorium, reorganisation, controlled management, arrangement,insolvency, examinership, winding-up or liquidation proceedings or similar insolvency proceedingsunder any applicable bankruptcy or similar law in connection with any obligation of the Issuer relatingto the Notes or otherwise owed to the creditors, save for lodging a claim in the liquidation of the Issuerwhich is initiated by another party or taking proceedings to obtain a declaration or judgment as to theobligations of the Issuer.

No Noteholder shall have any recourse against any director or officer of the Issuer in respect of anyobligations, covenants or agreement entered into or made by the Issuer in respect of the Notes, otherthan in the case of fraud.

21. DEFINITIONS

In these Conditions the following terms have the meaning given to them in this Condition 21.

Additional Guarantee Event shall occur at any time if the Parent does not comply with its obligationsunder Condition 4.13(b) or Condition 4.13(d) within the period prescribed in such Conditions;

Adjusted EBITDA for any period means the sum of the consolidated net profit (or loss) of the Parentand its consolidated Restricted Subsidiaries determined in accordance with IFRS adjusted as follows:

(a) plus or minus any income tax expense or credit, as applicable, of the Parent and its consolidatedRestricted Subsidiaries;

(b) plus Consolidated Interest Cost;

(c) minus Consolidated Interest Income;

(d) plus depreciation and amortisation expense of the Parent and its consolidated RestrictedSubsidiaries;

(e) plus all other non-cash charges of the Parent and its consolidated Restricted Subsidiaries(excluding any such non-cash charge to the extent that it represents an accrual of or reserve forcash expenditures in any future period unless such change is subsequently reversed) less, to theextent increasing consolidated net profit (or loss) of the Parent and its consolidated RestrictedSubsidiaries (determined in accordance with IFRS), all non-cash items of income of the Parent

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and its consolidated Restricted Subsidiaries (other than accruals of revenue by the Parent and itsconsolidated Restricted Subsidiaries in the ordinary course of business and other non-cash itemsto the extent they will result in the receipt of cash payments in any future period); and

(f) taking no account of any exceptional or non-recurring items;

in each case for such period. Notwithstanding the foregoing, the provision for taxes based on theincome or profits of, and the depreciation and amortisation and non-cash charges of, a RestrictedSubsidiary shall be added to the consolidated net profit (or loss) (determined in accordance with IFRS)of the Parent and its consolidated Restricted Subsidiaries to compute Adjusted EBITDA only to theextent (and in the same proportion, including by reason of minority interests) that the net profit (or loss)of such Restricted Subsidiary was included in calculating (in accordance with IFRS) the consolidatednet profit (or loss) of the Parent and its consolidated Restricted Subsidiaries;

Affiliate of any specified Person means (i) any other Person, directly or indirectly, controlling orcontrolled by or under direct or indirect common control with such specified Person or (ii) any otherPerson who is a director or officer (a) of such specified Person, (b) of any Subsidiary of such specifiedPerson or (c) of any Person described in (i) above. For the purposes of this definition, control whenused with respect to any Person means the power to direct the management and policies of suchPerson, directly or indirectly, whether through the ownership of voting securities, by contract orotherwise; and the terms controlling and controlled have meanings correlative to the foregoing;

Annual Reporting Date means the date on which the Parent publishes a report setting out theinformation required pursuant to Condition 4.9(a)(i);

Asset Disposition means any sale, lease, transfer or other disposition (or series of related sales,leases, transfers or dispositions) by the Parent, the Issuer, any Guarantor or any Restricted Subsidiary,including any disposition by means of a merger, consolidation or similar transaction (each referred tofor the purposes of this definition as a disposition), of:

(a) any Capital Stock of a Restricted Subsidiary (other than directors’ qualifying shares or sharesrequired by applicable law to be held by a Person other than the Parent or a RestrictedSubsidiary);

(b) all or substantially all the assets of any division or line of business of the Parent, any Guarantor orany Restricted Subsidiary; or

(c) any other assets of the Parent, any Guarantor or any Restricted Subsidiary outside of the ordinarycourse of business of the Parent, such Guarantor or such Restricted Subsidiary,

other than, in the case of paragraphs (a), (b) and (c) above,

(i) any disposal of assets in part or full exchange for other assets usable or involved in theRelated Business of equal or greater Fair Market Value, including, without limitation, shares,participations or ownership interests in persons involved in the Related Business;

(ii) any sale or disposal of accounts receivable, equipment and related assets (including, contractrights) of the type specified in the definition of “Qualified Securitisation Transaction” to aSecuritisation Entity for the Fair Market Value thereof;

(iii) transfer of ownership rights by a third-party lessor of assets in the possession of the Groupunder finance leases and the re-transfer, as the case may be, of possession of such assetsby the Group to a third-party lessor;

(iv) any sale and leaseback transaction permitted by these Conditions;

(v) the sale or discount of accounts receivable arising in the ordinary course of business inconnection with the compromise or collection thereof;

(vi) a disposition by a Restricted Subsidiary to the Parent or by the Parent or a RestrictedSubsidiary to a Restricted Subsidiary;

(vii) for the purposes of Condition 4.4 only, (i) a disposition that constitutes a Restricted Payment(or would constitute a Restricted Payment but for the exclusions from the definition thereof)and that is not prohibited by Condition 4.2 and (ii) a disposition of all or substantially all of theassets of a Guarantor in accordance with Condition 4.8;

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(viii) a disposition of assets in a single transaction or a series of related transactions with a FairMarket Value of less than U.S.$5,000,000 in any 12 month period to any Person that is not aRestricted Subsidiary;

(ix) a disposition of cash or Temporary Cash Investments; and

(x) the creation of a Lien (but not the sale or other disposition of the property subject to suchPermitted Lien).

(xi) the licensing or sublicensing of rights to intellectual property or other intangibles in theordinary course of business;

(xii) any disposition constituting or resulting from the enforcement of a Lien Incurred or permittedto subsist in compliance with Condition 4.6;

(xiii) the sale, lease or other disposition of obsolete, worn out, negligible, surplus or outdatedequipment or machinery or inventory in the ordinary course of a Related Business;

(xiv)any sale, lease, transfer or other disposition of an investment in a joint venture to the extentrequired by, or made pursuant to, customary buy/sell terms between the joint venture partiesset forth in joint venture arrangements;

(xv) sales or other dispositions of assets or property received by the Parent or any RestrictedSubsidiary upon the foreclosure on a Lien granted in favour of the Parent or any RestrictedSubsidiary or any other transfer of title with respect to any ordinary course securedinvestment in default;

(xvi) the surrender or waiver of contract rights or the settlement, release, or surrender of contract,tort or other claims, in the ordinary course of the business; and

(xvii) any disposition of Capital Stock, Indebtedness or other securities of an UnrestrictedSubsidiary.

Authorised Signatories means, in relation to any entity, any Person who is duly authorised (in suchmanner as may be acceptable to the Trustee) and in respect of whom the Trustee has received acertificate signed by a director or another Authorised Signatory of such entity setting out the name andsignature of such Person and confirming such Person’s authority to act;

Average Life means, as of the date of determination, with respect to any Indebtedness, the quotientobtained by dividing (a) the sum of the products of the numbers of years from the date of determinationto the dates of each successive scheduled principal payment of, or redemption or similar payment withrespect to, such Indebtedness multiplied by the amount of such payment by (b) the sum of all suchpayments;

Board of Directors means the Board of Directors of the Parent or any committee thereof dulyauthorised to act on behalf of such Board;

Business Day means, other than for the purposes of Condition 7, a day on which, if on that day apayment is to be made hereunder, commercial banks generally are open for business in Bermuda,Moscow, New York City and in the city where the Specified Office (as defined in the AgencyAgreement) of the Principal Paying Agent is located;

Capital Lease Obligation means an obligation that is required to be classified and accounted for as acapital lease for financial reporting purposes in accordance with IFRS, and the amount of Indebtednessrepresented by such obligation shall be the capitalised amount of such obligation determined inaccordance with IFRS, provided that in no event shall an operating lease be considered a CapitalLease Obligation solely by virtue of a change in IFRS after the Issue Date; and the Stated Maturitythereof shall be the date of the last payment of rent or any other amount due under such lease prior tothe first date upon which such lease may be terminated by the lessee without payment of a penalty.For purposes of Condition 4.6, a Capital Lease Obligation will be deemed to be secured by a Lien onthe property being leased;

Capital Stock of any Person means any and all shares, interests (including partnership interests),rights to purchase, warrants, options, participations or other equivalents of or interests in (howeverdesignated) equity of such Person, including any Preferred Stock, but excluding any debt securitiesconvertible into such equity;

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A Change of Control shall occur at any time if any of the following shall occur:

(a) prior to an initial public offering of Capital Stock of the Parent, either (1) the Permitted Holders’joint beneficial ownership of issued and outstanding Voting Stock of the Parent drops below50 per cent. of the issued and outstanding Voting Stock of the Parent or (2) the Permitted Holderstogether lose or any person or persons acting together and/or in concert other than the PermittedHolders directly or indirectly acquires the right to appoint a majority of the Board of Directors of theParent; or

(b) any person or persons acting together and/or in concert directly or indirectly acquires thebeneficial ownership of Capital Stock in the Parent carrying more than 35 per cent. of the issuedand outstanding Voting Stock of the Parent; provided that the Permitted Holder’s joint beneficialownership of issued and outstanding Voting Stock of the Parent is in the aggregate a lesserpercentage of the total voting power of the Voting Stock of the Parent than such other person orpersons and the Permitted Holders do not have the right or ability to elect or designate for electiona majority of the Board of Directors of the Parent;

Consolidated Coverage Ratio means as of any date of determination the ratio of (x) the aggregateamount of Adjusted EBITDA for the period of the most recent two consecutive financial quarters endingprior to the date of such determination for which financial statements are available, as determined ingood faith by a responsible financial or accounting officer of the Parent, whose determination will beconclusive to (y) Consolidated Interest Cost for such two financial quarters; provided, however, that:

(a) if the Parent or any Restricted Subsidiary has Incurred any Indebtedness since the beginning ofsuch period that remains outstanding or if the transaction giving rise to the need to calculate theConsolidated Coverage Ratio is or includes an Incurrence of Indebtedness, or both, AdjustedEBITDA and Consolidated Interest Cost for such period shall be calculated after giving effect on apro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first dayof such period and the discharge of any other Indebtedness repaid, repurchased, defeased orotherwise discharged with the proceeds of such new Indebtedness as if such discharge hadoccurred on the first day of such period;

(b) if the Parent or any Restricted Subsidiary has repaid, repurchased, defeased or otherwisedischarged any Indebtedness since the beginning of such period or if any Indebtedness is to berepaid, repurchased, defeased or otherwise discharged (in each case other than IndebtednessIncurred under any revolving credit facility unless such Indebtedness has been permanently repaidand has not been replaced) on the date of the transaction giving rise to the need to calculate theConsolidated Coverage Ratio, Adjusted EBITDA and Consolidated Interest Cost for such periodshall be calculated on a pro forma basis as if such discharge had occurred on the first day of suchperiod and as if the Parent or such Restricted Subsidiary has not earned the interest incomeactually earned during such period in respect of cash or Temporary Cash Investments used torepay, repurchase, defease or otherwise discharge such Indebtedness;

(c) if since the beginning of such period the Parent or any Restricted Subsidiary shall have made anyAsset Disposition, the Adjusted EBITDA for such period shall be reduced by an amount equal tothe Adjusted EBITDA (if positive) directly attributable to the assets which are the subject of suchAsset Disposition for such period, or increased by an amount equal to the Adjusted EBITDA (ifnegative), directly attributable thereto for such period and Consolidated Interest Cost for suchperiod shall be reduced by an amount equal to the Consolidated Interest Cost directly attributableto any Indebtedness of the Parent or any Restricted Subsidiary repaid, repurchased, defeased orotherwise discharged with respect to the Parent and its continuing Restricted Subsidiaries inconnection with such Asset Disposition for such period (or, if the Capital Stock of any RestrictedSubsidiary is sold, the Consolidated Interest Cost for such period directly attributable to theIndebtedness of such Restricted Subsidiary to the extent the Parent and its continuing RestrictedSubsidiaries are no longer liable for such Indebtedness after such sale);

(d) if since the beginning of such period the Parent or any Restricted Subsidiary (by merger orotherwise) shall have made an investment in any Restricted Subsidiary (or any person whichbecomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assetsoccurring in connection with a transaction requiring a calculation to be made hereunder, whichconstitutes all or substantially all of an operating unit of a business, Adjusted EBITDA andConsolidated Interest Cost for such period shall be calculated after giving pro forma effect thereto(including the Incurrence of any Indebtedness) as if such investment or acquisition occurred on thefirst day of such period;

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(e) if since the beginning of such period the Parent or any Restricted Subsidiary shall have enteredinto agreements for the leasing to customers of its railcars or related assets, or the Parent or anyRestricted Subsidiary (by merger or otherwise) shall have made an investment in any RestrictedSubsidiary (or any person which becomes a Restricted Subsidiary) which is party to agreementsfor the leasing to customers of its railcars or related assets, including any leasing or investmentoccurring in connection with a transaction requiring a calculation to be made hereunder, AdjustedEBITDA for such period shall be calculated after giving pro forma effect thereto (including theIncurrence of any Indebtedness in the acquisition by the Parent or the Restricted Subsidiary ofsuch railcars or in the investment of the Parent of the Restricted Subsidiary, if such Incurrenceoccurred since the beginning of such period) as if such leasing to customers of the railcars orrelated assets had occurred on the first day of such period; provided that (i) the competentmanagement body of the Parent or such Restricted Subsidiary, as the case may be, has(A) provided to the Trustee a copy of such agreements and certified in a certificate to the Trusteethe calculation of the Adjusted EBITDA corresponding to such leasing payments and certified thatthe scheduled leasing payments for railcars or related assets provided for in the agreements, werethe leases to have commenced on the first day of such period, would have generated suchAdjusted EBITDA during such period (the Contracted Railcar Compliance Certificate) and (B) ifthe agreements relate to the leasing of railcars which have not previously been the subject of aContracted Railcar Compliance Certificate, specified the Step-Up Determination Date for suchrailcars and (ii) this paragraph (e) shall not apply on a date of determination of the ConsolidatedCoverage Ratio which is also a Step-Up Determination Date with respect to such railcars inrespect of which the date of determination is a Step-Up Determination Date; and

(f) if since the beginning of such period any Person (that subsequently became a RestrictedSubsidiary or was merged with or into the Parent or any Restricted Subsidiary since the beginningof such period) shall have made any Asset Disposition or acquisition of assets that would haverequired an adjustment pursuant to clause (c) or (d) above if made by the Parent or a RestrictedSubsidiary during such period, Adjusted EBITDA and Consolidated Interest Cost for such periodshall be calculated after giving pro forma effect thereto as if such Asset Disposition or acquisitionoccurred on the first day of such period.

For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, theamount of income or earnings relating thereto and the amount of Consolidated Interest Costassociated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall bedetermined in good faith by a responsible financial or accounting Officer of the Parent. If anyIndebtedness bears a floating rate of interest and is being given pro forma effect, the interest of suchIndebtedness shall be calculated as if the rate in effect on the date of determination had been theapplicable rate for the entire period (taking into account any Interest Rate Agreement applicable tosuch Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months);

Consolidated Indebtedness means at any date of determination (and without duplication) allconsolidated Indebtedness of the Parent and its consolidated Restricted Subsidiaries as calculated inaccordance with the then most recently published consolidated financial statements of the Parentprepared in accordance with IFRS;

Consolidated Interest Cost means, for any period, all finance costs incurred by the Parent and itsconsolidated Restricted Subsidiaries as calculated in accordance with the then most recently publishedconsolidated financial statements of the Group prepared in accordance with IFRS;

Consolidated Interest Income means, for any period, all finance income received by the Parent andits consolidated Restricted Subsidiaries as calculated in accordance with the then most recentlypublished consolidated financial statements of the Group prepared in accordance with IFRS;

Consolidated Leverage Ratio as of any date of determination, means the ratio of (x) the aggregateamount of Consolidated Indebtedness outstanding on such date to (y) two times the aggregate amountof Adjusted EBITDA for the period of the most recent two consecutive financial quarters ending prior tothe date of such determination for which financial statements are available, as determined in good faithby a responsible financial or accounting Officer of the Parent, whose determination will be conclusive(in the absence of manifest error); provided, however, that:

(a) if the Parent or any Restricted Subsidiary has Incurred any Indebtedness since the beginning ofsuch period that remains outstanding or if the transaction giving rise to the need to calculate the

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Consolidated Leverage Ratio is an Incurrence of Indebtedness, or both, Adjusted EBITDA for suchperiod shall be calculated after giving effect on a pro forma basis to such Indebtedness and theuse of proceeds therefrom as if such Indebtedness had been Incurred on the first day of suchperiod;

(b) if the Parent or any Restricted Subsidiary has repaid, repurchased, defeased or otherwisedischarged any Indebtedness since the beginning of such period or if any Indebtedness is to berepaid, repurchased, defeased or otherwise discharged (in each case other than IndebtednessIncurred under any revolving credit facility unless such Indebtedness has been permanently repaidand has not been replaced) on the date of the transaction giving rise to the need to calculate theConsolidated Leverage Ratio, the Consolidated Leverage Ratio shall be calculated on a pro formabasis as if such discharge had occurred on the first day of such period and as if the Parent or suchRestricted Subsidiary had not earned the interest income actually earned during such period inrespect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwisedischarge such Indebtedness;

(c) if since the beginning of such period the Parent or any Restricted Subsidiary shall have made anyAsset Disposition:

(i) Indebtedness at the end of such period will be reduced by an amount equal to theIndebtedness discharged, defeased or retired with the Net Available Cash of such AssetDisposition; and

(ii) Adjusted EBITDA for such period shall be reduced by an amount equal to Adjusted EBITDA(if positive) directly attributable to the assets which are the subject of such Asset Dispositionfor such period, or increased by an amount equal to Adjusted EBITDA (if negative), directlyattributable thereto for such period;

(d) if since the beginning of such period the Parent or any Restricted Subsidiary (by merger orotherwise) shall have made an investment in any Restricted Subsidiary (or any Person whichbecomes a Restricted Subsidiary) or an acquisition of assets, including any acquisition of assetsoccurring in connection with a transaction requiring a calculation to be made hereunder, whichconstitutes all or substantially all of an operating unit of a business, Adjusted EBITDA for suchperiod shall be calculated after giving pro forma effect thereto (including the Incurrence of anyIndebtedness) as if such investment or acquisition had occurred on the first day of such period;

(e) if since the beginning of such period the Parent or any Restricted Subsidiary shall have enteredinto agreements for the leasing to customers of its railcars or related assets, or the Parent or anyRestricted Subsidiary (by merger or otherwise) shall have made an investment in any RestrictedSubsidiary (or any person which becomes a Restricted Subsidiary) which is party to agreementsfor the leasing to customers of its railcars or related assets, including any leasing or investmentoccurring in connection with a transaction requiring a calculation to be made hereunder, AdjustedEBITDA for such period shall be calculated after giving pro forma effect thereto (including theIncurrence of any Indebtedness in the acquisition by the Parent or the Restricted Subsidiary ofsuch railcars or in the investment of the Parent of the Restricted Subsidiary, if such Incurrenceoccurred since the beginning of such period) as if such leasing to customers of the railcars orrelated assets had occurred on the first day of such period; provided that (i) the competentmanagement body of the Parent or such Restricted Subsidiary, as the case may be, has(A) provided to the Trustee a Contracted Railcar Compliance Certificate and (B) if the agreementsrelate to the leasing of railcars or related assets which have not previously been the subject of aContracted Railcar Compliance Certificate, specified the Step-Up Determination Date for suchrailcars and (ii) this paragraph (e) shall not apply on a date of determination of the ConsolidatedLeverage Ratio which is also a Step-Up Determination Date with respect to such railcars inrespect of which the date of determination is a Step-Up Determination Date; and

(f) if since the beginning of such period any Person (that subsequently became a RestrictedSubsidiary or was merged with or into the Parent or any Restricted Subsidiary since the beginningof such period) shall have made any Asset Disposition or acquisition of assets that would haverequired an adjustment pursuant to paragraph (c) or (d) above if made by the Parent or aRestricted Subsidiary during such period, the Consolidated Leverage Ratio shall be calculatedafter giving pro forma effect thereto as if such Asset Disposition or acquisition had occurred on thefirst day of such period.

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For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets andthe amount of income or earnings relating thereto, the pro forma calculations shall be determined ingood faith by a responsible financial or accounting officer of the Parent, whose determination will beconclusive (in the absence of manifest error);

Consolidated Total Assets means at any date of determination the total assets of the Parent and itsconsolidated Restricted Subsidiaries as shown in the most recently available balance sheet of theParent prepared in accordance with IFRS;

Credit Facility means one or more debt facilities, commercial paper facilities, or other Indebtedness, ineach case, with banks or other institutional lenders or investors providing for (i) term loans,(ii) revolving credit loans, (iii) receivables financings (including through the sale of receivables to suchlenders or to special purpose entities formed to borrow from such lenders against such receivables),bank guarantees or letters of credit or (iv) other Indebtedness, in the case of (i), (ii), (iii) or (iv), asamended, restated, modified, renewed, refunded, replaced (whether upon or after termination orotherwise) or Refinanced in whole or in part from time to time with the same or different banks or otherinstitutional lenders or investors;

Currency Agreement means any foreign exchange contract, currency swap agreement or othersimilar agreement with respect to currency values;

Default means an event which, with the lapse of time and/or the issue, making or giving of any noticeor both, would constitute an Event of Default;

Disqualified Stock means, with respect to any Person, any Capital Stock which by its terms (or by theterms of any security into which it is convertible or for which it is exchangeable at the option of theholder) or upon the happening of any event:

(a) matures or is mandatorily redeemable (other than redeemable only for Capital Stock of suchPerson which is not itself Disqualified Stock) pursuant to a sinking fund obligation or otherwise;

(b) is convertible or exchangeable at the option of the holder for Indebtedness or Disqualified Stock;or

(c) is mandatorily redeemable or must be purchased upon the occurrence of certain events orotherwise, in whole or in part;

in each case on or prior to the first anniversary of the Stated Maturity of the Notes; provided,however, that any Capital Stock that would not constitute Disqualified Stock but for provisionsthereof giving holders thereof the right to require such Person to purchase or redeem such CapitalStock upon the occurrence of an Asset Disposition or Change of Control occurring prior to the firstanniversary of the Stated Maturity of the Notes shall not constitute Disqualified Stock if:

(i) the Asset Disposition or Change of Control provisions applicable to such Capital Stock are notmore favourable to the holders of such Capital Stock than the terms applicable to the Notesand described under Condition 4.4 and Condition 6.3; and

(ii) any such requirement only becomes operative after compliance with such terms applicable tothe Notes, including the purchase of any Notes tendered pursuant thereto.

The amount of any Disqualified Stock that does not have a fixed redemption, repayment or repurchaseprice will be calculated in accordance with the terms of such Disqualified Stock as if such DisqualifiedStock were redeemed, repaid or repurchased on any date on which the amount of such DisqualifiedStock is to be determined pursuant to these Conditions; provided, however, that if such DisqualifiedStock could not be required to be redeemed, repaid or repurchased at the time of such determination,the redemption, repayment or repurchase price will be the book value of such Disqualified Stock asreflected in the most recent financial statements of such Person;

Exchange Act means the U.S. Securities Exchange Act of 1934, as amended;

Fair Market Value means, with respect to any asset or property, the price which could be negotiated inan arm’s length, free market transaction, for cash, between a willing seller and a willing and able buyer,neither of whom is under undue pressure or compulsion to complete the transaction. Fair Market Value

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will, in relation to any transaction or series of related transactions with an aggregate value in excess ofU.S.$10,000,000, other than of any asset with a public trading market, be determined in good faith by amajority of the competent management board of the Parent or the relevant Restricted Subsidiarydisinterested with respect to such transaction (or, in the event that there is only one disinteresteddirector, by the resolution of such disinterested director or, in the event that there are no disinteresteddirectors, by unanimous resolution of the competent management board of the Parent or the relevantRestricted Subsidiary, whose determination will be conclusive (evidenced by a resolution of the Boardof Directors set forth in an Officers’ Certificate delivered to the Trustee);

FATCA means Sections 1471 to 1474 of the United States Internal Revenue Code of 1986, anyregulations or agreements thereunder, official interpretations thereof, or any law implementing anintergovernmental approach thereto;

Group means the Parent and its consolidated Restricted Subsidiaries taken as a whole;

guarantee means any financial obligation, contingent or otherwise, of any Person directly or indirectlyguaranteeing any Indebtedness or other obligation of any other Person and any obligation, direct orindirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds forthe purchase or payment of) such Indebtedness or other obligation of such other Person (whetherarising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets,goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise)or (b) entered into for purposes of assuring in any other manner the obligee of such Indebtedness orother obligation of the payment thereof or to protect such obligee against loss in respect thereof (inwhole or in part); provided, however, that the term guarantee will not include endorsements forcollection or deposit in the ordinary course of business. The term guarantee used as a verb has acorresponding meaning;

Guarantor means each of the Initial Guarantors, any Successor Guarantor and any other Subsidiary ofthe Parent which becomes a Guarantor pursuant to Condition 4.13(b) or Condition 4.13(d) (individuallyor in the aggregate as the context may require), in each case, until such time as the relevant Guarantoris unconditionally and irrevocably released and discharged from its obligations under the Deed ofGuarantee pursuant to Condition 4.13(c);

Guarantor Approved Jurisdiction means the Russian Federation, any state which is a member ofthe European Union as at the Issue Date, any European Economic Area member state (whosesovereign debt securities carry an investment grade rating), Bermuda, the British Virgin Islands, theUnited States, any state thereof or the District of Columbia, Switzerland and Canada;

Hedging Obligations of any Person means the obligations of such Person pursuant to any InterestRate Agreement or Currency Agreement;

IFRS means International Financial Reporting Standards (IFRSs and IFRIC interpretation), consistentlyapplied and which are in effect from time to time;

Incur means issue, assume, guarantee, incur or otherwise become liable for; provided, however, thatany Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary(whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by suchPerson at the time it becomes a Restricted Subsidiary. The term Incurrence when used as a nounshall have a correlative meaning. Solely for purposes of determining compliance with Condition 4.1:

(a) the accrual of interest;

(b) amortisation of debt discount or the accretion of principal with respect to a non interest bearing orother discount security;

(c) the payment of regularly scheduled interest in the form of additional Indebtedness of the sameinstrument or the payment of regularly scheduled dividends on Capital Stock in the form ofadditional Capital Stock of the same class and with the same terms;

(d) the obligation to pay a premium in respect of Indebtedness arising in connection with the issuanceof a notice of redemption or the making of a mandatory offer to purchase such Indebtedness;

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(e) unrealised losses or charges in respect of Hedging Obligations; and

(f) a guarantee otherwise permitted by this Agreement to be Incurred by Parent or a Subsidiary ofParent of Indebtedness Incurred in compliance with the terms of this Agreement by Parent or suchSubsidiary, as applicable;

will not be deemed to be the Incurrence of Indebtedness;

Indebtedness means, with respect to any Person on any date of determination (without duplication):

(a) the principal in respect of (A) indebtedness of such Person for money borrowed or raised and(B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for thepayment of which such Person is responsible or liable, including, in each case, any premium onsuch indebtedness to the extent such premium has become due and payable;

(b) all Capital Lease Obligations of such Person;

(c) all obligations of such Person issued or assumed as the deferred purchase price of property, allconditional sale obligations of such Person and all obligations of such Person under any titleretention agreement (but excluding any accounts payable or other liability to trade creditors arisingin the ordinary course of business);

(d) all obligations of such Person for the reimbursement of any obligor on any letter of credit,performance bonds or surety bonds, bankers’ acceptance or similar credit transaction (other thanobligations with respect to letters of credit securing obligations (other than obligations described inparagraphs (a), (b) and (c)) entered into in the ordinary course of business of such Person to theextent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawingis reimbursed no later than the tenth Business Day following receipt of a demand forreimbursement);

(e) the amount of all obligations of such Person with respect to the redemption, repayment or otherrepurchase of any Disqualified Stock of such Person (but excluding, in each case, any accrueddividends);

(f) all obligations of the type referred to in paragraphs (a) to (e) of other Persons and all dividends ofother Persons for the payment of which, in either case, such Person is responsible or liable,directly or indirectly, as obligor, guarantor or otherwise, including by means of any guarantee;

(g) all obligations of the type referred to in paragraphs (a) to (f) of other Persons secured by any Lienon any property or asset of such Person (whether or not such obligation is assumed by suchPerson), the amount of such obligation being deemed to be the lesser of (i) the Fair Market Valueof such property or assets and (ii) the amount of the obligation so secured; and

(h) to the extent not otherwise included in this definition, that part of the net obligations in respect ofany Hedging Obligations of such Person (and, when calculating the value thereof, only the netmarked to market value shall be taken into account) that are determined in good faith by aresponsible financial or accounting officer of Parent to constitute indebtedness pursuant toAccounting Standards.

Notwithstanding the foregoing, in connection with the purchase by the Parent or any RestrictedSubsidiary of any business, the term Indebtedness will exclude post closing payment adjustments towhich the seller may become entitled to the extent such payment is determined by a final closingbalance sheet or such payment depends on the performance of such business after the closing;provided, however, that, at the time of closing, the amount of any such payment is not determinableand, to the extent such payment thereafter becomes fixed and determined, the amount is paid within90 days thereafter.

The amount of Indebtedness of any Person at any date shall be the outstanding balance at such dateof all unconditional obligations as described above; provided, however, that (i) in the case ofIndebtedness sold at a discount, the amount of such Indebtedness at any time will be the accretedvalue thereof at such time and (ii) that Indebtedness shall not include obligations of any Persons(x) arising from the honouring by a bank or other financial institution of a check, draft or similarinstrument inadvertently drawn against insufficient funds in the ordinary course of business; providedthat such obligations are extinguished within two Business Days of their incurrence unless covered byan overdraft line, (y) resulting from the endorsement of negotiable instruments for collection in theordinary course of business and consistent with past business practices and (z) under stand-by lettersof credit or guarantees to the extent collateralised by cash or Cash Equivalents;

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Interest Rate Agreement means any interest rate swap agreement, interest rate cap agreement orother financial agreement or arrangement with respect to exposure to interest rates;

Issue Date means 1 November 2012;

Issuer Approved Jurisdiction means any member country of the European Economic Area (whosesovereign debt securities carry an investment grade rating), Bermuda, the United States, any statethereof or the District of Columbia, Switzerland and Canada;

Lien means any mortgage, pledge, encumbrance, easement, restriction, covenant, right-of-way,servitude, lien, charge or other security interest or adverse claim of any kind (including, withoutlimitation, anything analogous to any of the foregoing under the laws of any jurisdiction and anyconditional sale or other title retention agreement or lease in the nature thereof);

Material Subsidiary means at any relevant time a direct or indirect Restricted Subsidiary of theParent:

(a) whose total consolidated assets represent not less than 10 per cent. of Consolidated Total Assets,or whose consolidated Adjusted EBITDA represent not less than 10 per cent. of Adjusted EBITDA(determined by reference to the most recent publicly available annual or interim financialstatements of the Parent and its consolidated Restricted Subsidiaries, prepared in accordancewith IFRS); or

(b) to which is transferred all or substantially all the assets and undertakings of a Subsidiary of theParent which immediately prior to such transfer is a Material Subsidiary;

provided that for the purpose of calculating the ratios set out in paragraph (a) above, the assets andAdjusted EBITDA of any Restricted Subsidiary shall be taken into account only (i) to the extent suchassets and Adjusted EBITDA are not eliminated in the preparation of the relevant consolidatedfinancial statements of the Parent and its consolidated Restricted Subsidiaries in accordance with IFRSand (ii) in the same amounts as such assets and Adjusted EBITDA are included in the relevantconsolidated financial statements of the Parent and its consolidated Restricted Subsidiaries;

Net Available Cash from an Asset Disposition means cash payments received therefrom (includingany cash payments received by way of deferred payment of principal pursuant to a note or instalmentreceivable or otherwise and proceeds from the sale or other disposition of any securities received asconsideration, but only as and when received, but excluding any other consideration received in theform of assumption by the acquiring Person of Indebtedness or other obligations relating to suchproperties or assets or received in any other non-cash form), in each case net of:

(a) all legal, title and recording tax expenses, commissions and other fees and expenses incurred,and all federal, state, provincial, foreign and local taxes paid or required to be accrued as a liabilityunder IFRS, as a consequence of such Asset Disposition;

(b) all payments made on any Indebtedness which is secured by any assets subject to such AssetDisposition, in accordance with the terms of any Lien upon or other security agreement of any kindwith respect to such assets, or which must by its terms, or in order to obtain a necessary consentto such Asset Disposition, or by applicable law, be repaid out of the proceeds from such AssetDisposition;

(c) all distributions and other payments required to be made to minority interest holders in RestrictedSubsidiaries as a result of such Asset Disposition;

(d) the deduction of appropriate amounts provided by the seller as a reserve, in accordance withIFRS, against any liabilities associated with the property or other assets disposed in such AssetDisposition and retained by the Parent or any Restricted Subsidiary after such Asset Disposition;and

(e) any portion of the purchase price from an Asset Disposition placed in escrow, whether as areserve for adjustment of the purchase price, for satisfaction of indemnities in respect of suchAsset Disposition or otherwise in connection with that Asset Disposition; provided, however, thatupon the termination of that escrow, Net Available Cash will be increased by any portion of fundsin the escrow that are released to the Parent or any Restricted Subsidiary;

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Net Cash Proceeds with respect to any issuance or sale of Capital Stock or Indebtedness, means thecash proceeds of such issuance or sale net of attorneys’ fees, accountants’ fees, underwriters’ orplacement agents’ fees, discounts or commissions and brokerage, consultant and other fees actuallyincurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof;

Net Income means net income (loss) determined in accordance with IFRS;

Non-Recourse Debt means Indebtedness:

(a) as to which neither the Parent nor any Restricted Subsidiary (a) provides any guarantee or creditsupport of any kind (including any undertaking, guarantee, indemnity, agreement or instrumentthat would constitute Indebtedness) or (b) is directly or indirectly liable (as a guarantor orotherwise);

(b) no default with respect to which (including any rights that the holders thereof may have to takeenforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time orboth) any holder of any other Indebtedness of the Parent or any Restricted Subsidiary to declare adefault under such other Indebtedness or cause the payment thereof to be accelerated or payableprior to its stated maturity; and

(c) the explicit terms of which provide that there is no recourse against any of the assets of the Parentor any of its Restricted Subsidiaries;

Officers’ Certificate means, in the case of the Parent, a certificate signed on behalf of the Parent bytwo Authorised Signatories of the Parent at least one of whom shall be the principal executive officer,principal accounting officer or principal financial officer of the Parent or, in the case of any Guarantor, acertificate signed by two officers of the Guarantor, both of whom shall be a member of suchGuarantor’s management board;

Opinion of Counsel means a written opinion from international legal counsel of recognised standingwhich is acceptable to the Trustee;

Permitted Holders means any and all of (i) the beneficial owners of the Voting Stock of the Parent asof the Issue Date and (ii) the legal representatives of any such beneficial owner and the trustees ofbona fide trusts of which any such beneficial owners are the only beneficiaries;

Permitted Indebtedness means any or all of the following Indebtedness:

(a) Indebtedness of the Parent and the Restricted Subsidiaries pursuant to Credit Facilities; providedthat the aggregate principal amount at any time outstanding does not exceed U.S.$25,000,000;

(b) Indebtedness outstanding at the Issue Date;

(c) Indebtedness represented by the Notes and the Guarantees;

(d) Indebtedness Incurred pursuant to Hedging Obligations Incurred; providing that such HedgingObligations are entered into in the ordinary course of business and not for speculative purposes;

(e) Indebtedness (including Capitalized Lease Obligations) Incurred by the Issuer, Parent, anyGuarantor or any of the Restricted Subsidiaries to finance the purchase, lease, improvement ormodification of any railcars or other assets related to railcars and necessary for the operationthereof and whether through the direct purchase of such railcars or assets or the Capital Stock ofany Person whose principal assets are railcars or such related assets (outright or through aCapitalized Lease Obligation) (any such purchase a Railcar Acquisition), provided that:

(i) the amount of such Indebtedness to be Incurred does not exceed 10 per cent. ofConsolidated Total Assets at any time;

(ii) such Indebtedness is Incurred no earlier than 120 days before the date of such RailcarAcquisition; and

(iii) no later than the last day of the second financial quarter following any such incurrence ofIndebtedness under Condition 4.1(b) and this paragraph (e), the Parent must be able to incuran additional U.S.$1.00 of Indebtedness pursuant to 4.1(a). In the event that the Parent failsto meet this requirement, no Indebtedness may be incurred pursuant to Condition 4.1(b) andthis paragraph (e) until such time as the Parent can incur an additional U.S.$1 ofIndebtedness pursuant to Condition 4.1(a);

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(f) Refinancing Indebtedness Incurred in respect of Indebtedness Incurred pursuant to Condition4.1(a) or pursuant to paragraphs (b), (c), (e), (f), (o) or (p) of this definition;

(g) Indebtedness of either the Parent or any Restricted Subsidiary consisting of guarantees ofIndebtedness of either the Parent or any Restricted Subsidiary Incurred under Condition 4.1(a) orany other paragraph of this definition;

(h) Indebtedness in respect of workers’ compensation claims or claims arising under similarlegislation, or pursuant to self-insurance obligations and not in connection with the borrowing ofmoney or the obtaining of advances or credit;

(i) Indebtedness arising from the honouring by a bank or other financial institution of a check, draft orsimilar instrument drawn against insufficient funds, overdrafts or cash pooling arrangements in theordinary course of business; provided, however, that any such Indebtedness that arises isextinguished within six Business Days of Incurrence;

(j) guarantees by the Parent or any Restricted Subsidiary of Indebtedness Incurred by or in relation tojoint ventures which are not Restricted Subsidiaries, which may not exceed U.S.$10,000,000 inthe aggregate at any one time outstanding;

(k) contingent liabilities arising with respect to customary indemnification obligations in favour ofpurchasers in connection with dispositions permitted under Conditions 4.4 and 4.8;

(l) Non-Recourse Debt (except for Standard Securitisation Undertakings) of a Securitisation Entity ina Qualified Securitisation Transaction;

(m) intercompany Indebtedness owed to, and held by, the Parent or a Restricted Subsidiary in respectof the Parent or a Restricted Subsidiary; provided, however, that (A) any subsequent issuance ortransfer of any Capital Stock which results in any such Restricted Subsidiary ceasing to be aRestricted Subsidiary or any subsequent disposition, pledge or transfer of such intercompanyIndebtedness (other than to the Parent or a Restricted Subsidiary) shall be deemed, in each case,to constitute the Incurrence of such Indebtedness by the relevant obligor in respect of suchIndebtedness and (B) if a Guarantor is the obligor in respect of such Indebtedness, suchIndebtedness is unsecured;

(n) obligations in respect of performance, bid and surety bonds, completion guarantees, letters ofcredit, veksels or similar obligations provided by the Parent or any Restricted Subsidiary in theordinary course of business, provided that, upon demand being made under such obligations,such obligations are reimbursed or the Indebtedness thereunder repaid within 30 days followingsuch payment or disbursement in respect of such demand;

(o) Indebtedness of the Parent or a Restricted Subsidiary Incurred and outstanding on or prior to thedate on which such Restricted Subsidiary was acquired by the Parent or another RestrictedSubsidiary by way of merger, consolidation or other business combination (other thanIndebtedness Incurred in connection with, or to provide all or any portion of the funds or creditsupport utilised to consummate, the transaction or series of related transactions pursuant to whichsuch Restricted Subsidiary became a Subsidiary or was acquired by the Parent); provided,however, that on the date of such acquisition and after giving pro forma effect thereto (A) theParent would have been entitled to Incur at least U.S.$1.00 of additional Indebtedness pursuant toCondition 4.1(a) or (B) the Consolidated Coverage Ratio is greater and the Consolidated LeverageRatio is less after giving effect to the acquisition;

(p) in addition to the items referred to in paragraphs (a) to (o), Indebtedness of the Parent and itsRestricted Subsidiaries Incurred in an aggregate outstanding principal amount which, when takentogether with the principal amount of all other Indebtedness Incurred pursuant to this paragraph(p) and then outstanding, will not exceed U.S.$30,000,000 at any time outstanding.

Permitted Liens means:

(a) Liens existing on the Issue Date and extensions, refinancings, renewals and replacements of anysuch Liens so long as the principal amount of Indebtedness or other obligations secured thereby isnot increased (other than by an amount necessary to pay any fees and expenses, includingpremiums, related to such extensions, refinancing, renewals or replacements) and so long as suchLiens are not extended to any other property of the Parent or any of its Restricted Subsidiaries;

(b) Liens created pursuant to paragraphs (a), (b) or (c) of the definition of “Permitted Indebtedness”;

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(c) Liens under worker’s compensation laws, unemployment insurance laws or similar legislation, orto secure public or statutory obligations, surety bonds, customs duties, bid bonds and the like, orfor the payment of rent, in each case incurred in the ordinary course of business and not securingIndebtedness;

(d) Liens imposed by law, such as carriers’, vendors’, warehousemen’s and mechanics’ liens, in eachcase for sums not yet due or being contested in good faith and by appropriate proceedings;

(e) Liens for ad valorem, income or property Taxes or assessments and similar charges which eitherare not delinquent or are being contested in good faith by appropriate proceedings for which theParent has set aside in its books of account reserves to the extent required by IFRS, asconsistently applied;

(f) Liens securing reimbursement obligations with respect to letters of credit that encumberdocuments and other property relating to such letters of credit and the proceeds thereof;

(g) with respect to any Person, survey exceptions, encumbrances, easement or reservations of, orrights of others, licences, rights of way, sewers, electrical lines, telegraph or telephone lines andother similar purposes, or zone or other restrictions as to the use of real property or Liensincidental to the conduct of the business of such Person or to the ownership of its properties whichdo not act in the aggregate materially adversely effect the value of the property or materially impairtheir use in the operation of the business of such Person;

(h) (i) licenses or leases or subleases, including Capital Leases Obligations, as licensor, lessor orsublessor of any of its property in the ordinary course of business and (ii) with respect to anyleasehold interest where either the Parent or any Restricted Subsidiary is a lessee, tenant,subtenant or other occupant, mortgages, obligations, liens and other encumbrances incurred,created, assumed or permitted to exist and arising by, through or under a landlord or sublandlordof such leased real property encumbering such landlord’s or sublandlord’s interest in such leasedreal property;

(i) any bankers’ Liens in respect of deposit accounts, statutory landlords’ Liens and deposits tosecure bids, contracts, leases, and other similar obligations (provided such Liens do not secureobligations constituting Indebtedness and are incurred in the ordinary course of business), anynetting or set-off arrangement entered into by any member of the Group in the normal course of itsbanking arrangements for the purpose of netting debit and credit balances and judgment Liens notgiving rise to a Default or an Event of Default so long as such Lien is adequately bonded and anyappropriate legal proceedings that may have been duly initiated for the review of such judgmenthave not been finally terminated or the period within which such proceedings may be initiated hasnot expired;

(j) Liens over properties and assets incurred in the ordinary course of business not securingIndebtedness and not in the aggregate materially detracting from the value of such assets orproperties or their use in the operation of the business of the Parent and its RestrictedSubsidiaries;

(k) Liens securing Indebtedness permitted to be Incurred under Condition 4.1 to finance or refinancethe construction, purchase or lease of, or repairs, improvements or additions to, property of suchPerson; provided, however, that the Lien may not extend to any other property (other thanproperty related to the property being financed) owned by such Person or any of its Subsidiaries atthe time the Lien is incurred, and the Indebtedness (other than any interest thereon) secured bythe Lien may not be incurred more than 180 days after the later of the refinancing, acquisition,lease, completion of construction, repair, improvement, addition or commencement of fulloperation of the property subject to the Lien;

(l) Liens on property at the time such Person or any of its Subsidiaries acquires the property,including any acquisition by means of a merger or consolidation with or into the Parent or aRestricted Subsidiary; provided, however, that such Liens are not created, Incurred or assumed inconnection with, or in contemplation of, such acquisition and provided further, that the Liens maynot extend to any other property owned by such Person or any of its Restricted Subsidiaries (otherthan assets and property affixed or appurtenant thereto);

(m) Liens securing Indebtedness or other obligations of either the Parent or a Restricted Subsidiary infavour of either the Parent or a Restricted Subsidiary;

(n) Liens securing Hedging Obligations so long as such Hedging Obligations are permitted to beIncurred under these Conditions and the related Indebtedness is, and is permitted to be in

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accordance with these Conditions, secured by a Lien on the same property securing such HedgingObligation and such Hedging Obligations are entered into in the ordinary course of business andare not speculative;

(o) any pledge of the Capital Stock of an Unrestricted Subsidiary to secure Indebtedness of suchUnrestricted Subsidiary;

(p) any title transfer or retention of title arrangement entered into by any member of the Group in theordinary course of its trading activities on the counterparty’s standard or usual terms;

(q) Liens on receivables, equipment and related assets (including contract rights) thereto inconnection with a Qualified Securitisation Transaction;

(r) Liens to secure a Refinancing Indebtedness that was secured by a Lien permitted thereunder andthat was Incurred in accordance with these Conditions; provided that such Liens do not extend toor cover any property or assets of either the Parent or any Restricted Subsidiary other than assetsor property securing the Indebtedness so refinanced;

(s) deposits made by and escrow or similar arrangements to secure obligations or liabilities arisingfrom agreements providing for indemnification, adjustment of purchase price, earn-out or othersimilar obligations, in each case Incurred or assumed in connection with the disposition of anyassets (to the extent such disposition of assets is permitted hereby);

(t) Liens on property or Capital Stock of another Person at the time such other Person becomes aRestricted Subsidiary; provided, however, that such Liens are not created, Incurred or assumed inconnection with, or in contemplation of, such Person becoming a Restricted Subsidiary andprovided further that the Liens may not extend to any other property owned by the Parent or aRestricted Subsidiary (other than assets and property affixed or appurtenant thereto);

(u) any extension, renewal of or substitution for any Lien permitted by any of the precedingparagraphs, provided, however, that such extension, renewal or replacement shall be no morerestrictive in any material respect than the original Lien; with respect to Liens incurred pursuant tothis paragraph (u) the principal amount secured has not increased (other than any increaserepresenting costs, fees, expenses or commission associated with such extension, renewal orsubstitution) and the Liens have not been extended to any additional property or assets (otherthan proceeds of the property or assets in question); and

(v) any Liens (other than those contemplated above in paragraphs (a) to (u)) where the aggregatevalue of the assets or revenues subject to such Liens at any one time outstanding do not exceed5 per cent. of Consolidated Total Assets;

Person means any individual, company, corporation, firm, partnership, joint venture, association,organisation, state or agency of a state or other entity, whether or not having separate legalpersonality;

Preferred Stock, as applied to the Capital Stock of any Person, means Capital Stock of any class orclasses (however designated) which is preferred as to the payment of dividends or distributions, or asto the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such Person,over Capital Stock of any other class of such Person;

Purchase Money Indebtedness means Indebtedness (including Capital Lease Obligations)(i) consisting of the deferred purchase price of property, conditional sale obligations, obligations underany title retention agreement, other purchase money obligations and obligations in respect of industrialrevenue bonds or similar Indebtedness, in each case where the maturity of such Indebtedness doesnot exceed the anticipated useful life of the asset being financed, and (ii) Incurred to finance theacquisition by the Parent or a Restricted Subsidiary of such asset, including construction, additions andimprovements, in the ordinary course of business (including the cost of design, development,construction, acquisition, transportation, installation, improvement and migration of assets); provided,however, that (A) any Lien arising in connection with any such Indebtedness shall be limited to thespecific asset being financed or, in the case of real property or fixtures, including additions andimprovements, the real property on which such asset is attached, (B) such Indebtedness is Incurredwithin 180 days after such acquisition of such assets and (C) the aggregate principal amount ofPurchase Money Indebtedness at one time outstanding shall not exceed (x) the Fair Market Value ofthe acquired or constructed asset or improvement so financed or (y) in the case of an uncompleted

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constructed asset, the amount of the asset to be constructed, as determined on the date the contractfor construction of such asset was entered into by the Parent or the relevant Restricted Subsidiary(including, in each case, any reasonable related fees and expenses incurred in connection with suchacquisition, construction or development);

Qualified Securitisation Transaction means any transaction or series of transactions that may beentered into by the Parent or any Restricted Subsidiary pursuant to which the Parent or any of itsSubsidiaries may sell, convey or otherwise transfer to (i) a Securitisation Entity (in the case of atransfer by the Parent or any of its Restricted Subsidiaries); and (ii) any other Person (in the case of atransfer by a Securitisation Entity), or may grant a security interest in any accounts receivable orequipment (whether now existing or arising or acquired in the future) of the Parent or any of itsRestricted Subsidiaries, and any assets related thereto including, without limitation, all collateralsecuring such accounts receivable and equipment, all contracts and contract rights and all guaranteesor other obligations in respect of such accounts receivable and equipment, proceeds of such accountsreceivable and equipment and other assets (including contract rights) which are customarily transferredor in respect of which security interests are customarily granted in connection with asset securitisationtransactions involving accounts receivable and equipment;

Quarterly Reporting Date means the date on which the Parent publishes a report setting out theinformation required pursuant to Condition 4.9(a)(iii);

Refinance means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay,purchase, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for,such Indebtedness. Refinances, Refinanced and Refinancing shall have correlative meanings;

Refinancing Indebtedness means Indebtedness that Refinances any Indebtedness of the Parent orany Restricted Subsidiary existing on the Issue Date or Incurred in compliance with these Conditions,including Indebtedness that Refinances Refinancing Indebtedness; provided, however, that:

(a) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of theIndebtedness being Refinanced or earlier provided that the Stated Maturity is later than the StatedMaturity of the Notes;

(b) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness isIncurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced orearlier provided that the Average Life is later than the Average Life of the Notes;

(c) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with originalissue discount, an aggregate issue price) that is equal to or less than the aggregate principalamount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding(plus all accrued interest and fees and expenses, including any premium and defeasance costs)under the Indebtedness being Refinanced; and

(d) if the Indebtedness being Refinanced is subordinated in right of payment to the Notes and theGuarantees, such Refinancing Indebtedness is subordinated in right of payment to the Notes andthe Guarantees at least to the same extent as the Indebtedness being Refinanced;

provided further, however, that Refinancing Indebtedness shall not include Indebtedness of the Parentor a Guarantor that Refinances Indebtedness of an Unrestricted Subsidiary;

Related Business means any business of the type in which the Parent or any of its RestrictedSubsidiaries was engaged on the Issue Date and any business reasonably similar, ancillary orcomplementary or related to such business or a reasonable extension, development or expansion ofsuch business;

Relevant Jurisdiction means:

(a) in the case of payment by the Issuer, Ireland or any political subdivision or any authority thereof ortherein having power to tax;

(b) in the case of payments by the Guarantors, Bermuda and the Russian Federation or any politicalsubdivision or any authority thereof or therein having power to tax; or

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(c) in any case except in relation to Condition 6.2, any other jurisdiction or any political subdivision orany authority thereof or therein having power to tax to which the Issuer or any Guarantor becomessubject in respect of payments made by it of principal, interest or Step-Up Interest on the Notes;

Restricted Payment with respect to any Person, means:

(a) the declaration or payment of any dividends or any other distributions of any sort in respect of itsCapital Stock (including any payment in connection with any merger or consolidation involvingsuch Person) or similar payment to the direct or indirect holders of its Capital Stock (other than(i) dividends or distributions payable solely in the form of its Capital Stock (other than DisqualifiedStock) or in options, warrants or other rights to acquire shares of such Capital Stock (other thanDisqualified Stock), (ii) dividends or distributions payable solely to the Parent or a RestrictedSubsidiary and (iii) pro rata dividends or other distributions made by a Subsidiary that is not aWholly Owned Subsidiary to minority stockholders (or owners of an equivalent interest in the caseof a Subsidiary that is an entity other than a corporation) or such dividends or distributions on abasis that results in the Parent or a Restricted Subsidiary receiving dividends or other distributionsof greater value than would result on a pro rata basis);

(b) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value ofany Capital Stock of the Parent held by any Person (other than by a Restricted Subsidiary) or ofany Capital Stock of a Restricted Subsidiary held by any Affiliate of the Parent (other than by aRestricted Subsidiary), including in connection with any merger or consolidation and including theexercise of any option, warrant or other rights to acquire any Capital Stock or to exchange anyCapital Stock (other than into Capital Stock of the Parent that is not Disqualified Stock); or

(c) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value,prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of anySubordinated Obligations of any Guarantor (other than (A) from the Parent or a RestrictedSubsidiary or (B) the purchase, repurchase, redemption, defeasance or other acquisition orretirement of Subordinated Obligations purchased in anticipation of satisfying a sinking fundobligation, principal instalment or final maturity, in each case due within one year of the date ofsuch purchase, repurchase, redemption, defeasance or other acquisition or retirement);

Restricted Subsidiary means any Subsidiary that is not an Unrestricted Subsidiary, including at alltimes the Issuer and each Guarantor;

Securities Act means the U.S. Securities Act of 1933, as amended;

Securitisation Entity means a Wholly Owned Subsidiary (or another Person to which the Parent orany Subsidiary of the Parent transfers accounts receivable or equipment and related assets) whichengages in no activities other than in connection with the financing of accounts receivable orequipment and which is designated by the Board of Directors of the Parent as a Securitisation Entity(a) no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which (i) isguaranteed by the Parent or any Restricted Subsidiary (excluding guarantees of obligations (other thanthe principal of, and interest on, Indebtedness) pursuant to Standard Securitisation Undertakings);(ii) is recourse to or obligates the Parent or any Restricted Subsidiary in any way other than pursuant toStandard Securitisation Undertakings; or (iii) subjects any property or asset of the Parent or anyRestricted Subsidiary, directly or indirectly, contingently or otherwise, to the satisfaction thereof, otherthan pursuant to Standard Securitisation Undertakings; (b) with which neither the Parent nor anyRestricted Subsidiary has any material contract, agreement, arrangement or understanding other thanon terms no less favourable to the Parent or such Restricted Subsidiary than those that might beobtained at the time from Persons that are not Affiliates, other than fees payable in the ordinary courseof business in connection with servicing receivables of such entity; and (c) to which neither the Parentnor any Restricted Subsidiary has any obligations to maintain or preserve such entity’s financialcondition or cause such entity to achieve certain levels of operating results;

Semi-annual Reporting Date means the date on which the Parent publishes a report setting out theinformation required pursuant to Condition 4.9(a)(ii);

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Senior Indebtedness means, with respect to any Person:

(a) Indebtedness of such Person, whether outstanding on the Issue Date or thereafter Incurred; and

(b) all other obligations of such Person (including interest accruing on or after the filing of any petitionin bankruptcy or for reorganisation relating to such Person whether or not post filing interest isallowed in such proceeding) in respect of Indebtedness described in clause (a) above,

unless, in the case of paragraphs (a) and (b), in the instrument creating or evidencing the same orpursuant to which the same is outstanding, it is provided that such Indebtedness or otherobligations are subordinate in right of payment to the Notes or the Guarantees of such Person, asthe case may be; provided, however, that Senior Indebtedness shall not include:

(i)any obligation of such Person to the Parent or any Subsidiary of the Parent;

(ii) any liability for federal, state, local or other taxes owed or owing by such Person;

(iii) accounts payable or other liability to trade creditors arising in the ordinary course of business;

(iv) any Indebtedness or other obligation of such Person which is subordinate or junior in anyrespect to any other Indebtedness or other obligation of such Person; or

(v) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation ofthese Conditions;

Standard Securitisation Undertaking means representations, warranties, covenants and indemnitiesentered into by the Parent or any Restricted Subsidiary which are reasonably customary insecuritisations of railcars and railcar leases;

Stated Maturity means, with respect to any security, the date specified in such security as the fixeddate on which the final payment of principal of such security is due and payable, including pursuant toany mandatory redemption provision (but excluding any provision providing for the repurchase of suchsecurity at the option of the holder thereof upon the happening of any contingency unless suchcontingency has occurred);

Step-Down Date means, the earlier of the Quarterly Reporting Date, the Semi-Annual Reporting Dateor the Annual Reporting Date on which the Parent is able to incur an additional U.S.$1.00 ofIndebtedness under Condition 4.1(a); provided that such date occurs no earlier than the last day of thefinancial quarter following the financial quarter in which the Step-Up Date falls;

Step-Up Determination Date means, with respect to the leasing of railcars or related assets in respectof which a Contracted Railcar Compliance Certificate has been delivered to the Trustee, the earlier ofthe Quarterly Reporting Date, the Semi-Annual Reporting Date or the Annual Reporting Date whichfalls no earlier than the last day of the second financial quarter following the delivery of suchContracted Railcar Compliance Certificate;

Step-Up Date means any Step-Up Determination Date in respect of which, as at such date, the Parentis unable to Incur an additional U.S.$1.00 of Indebtedness under Condition 4.1(a);

Stock Exchange means the London Stock Exchange plc;

Subordinated Obligation means, with respect to a Person, any Indebtedness of such Person(whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right ofpayment to the Notes or a Guarantee of such Person, as the case may be, pursuant to a writtenagreement to that effect;

Subsidiary of any specified Person means any corporation, partnership, joint venture, association orother business or entity, whether now existing or hereafter organised or acquired, (a) in the case of acorporation, of which more than 50 per cent. of the total voting power of the Voting Stock is held bysuch first-named person and/or any of its Subsidiaries and such first-named person or any of itsSubsidiaries has the power to direct the management, policies and affairs thereof; or (b) in the case ofa partnership, joint venture, association, or other business or entity, with respect to which such first-named person or any of its Subsidiaries has the power to direct or cause the direction of themanagement and policies of such entity by contract or otherwise if (in each case) in accordance withIFRS, as consistently applied, such entity would be consolidated with the first-named person forfinancial statement purposes;

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Taxes means any taxes, duties, assessments or government charges of whatever nature (includinginterest or penalties thereon) which are now or at any time hereafter imposed, assessed, charged,levied, collected, demanded, withheld or claimed by a Relevant Jurisdiction or any tax authority thereofor therein and the term Taxation shall be construed accordingly;

Temporary Cash Investments means any of the following:

(a) any investment in direct obligations of a member of the European Union (whose sovereign debtsecurities carry an investment grade rating), the Russian Federation, the United States or anyagency thereof or obligations guaranteed by a member of the European Union (whose sovereigndebt securities carry an investment grade rating), the Russian Federation, or the United States orany agency thereof;

(b) investments in demand and time deposit accounts, certificates of deposit and money marketdeposits with a maturity of one year or less from the date of acquisition thereof issued by a bank ortrust company which is organised under the laws of the Russian Federation, a member of theEuropean Union or the United States or any state thereof, and which bank or trust company hascapital, surplus and undivided profits aggregating in excess of U.S.$500,000,000 (or the foreigncurrency equivalent thereof) and has outstanding debt which is rated “BBB-” or “Baa3” (or suchsimilar equivalent rating) or higher by at least one nationally recognised statistical ratingorganisation;

(c) repurchase obligations with a term of not more than seven days for underlying securities of thetypes described in paragraph (a) entered into with a bank meeting the qualifications described inparagraph (b);

(d) investments in commercial paper with a maturity of one year or less from the date of acquisition,issued by a corporation (other than an Affiliate of the Parent) organised and in existence under thelaws of a member of the European Union, the United States or the Russian Federation with arating at the time as of which any investment therein is made of “P1” (or higher) according toMoody’s Investors Service, Inc. or “A1” (or higher) according to Standard & Poor’s Ratings Group;

(e) investments in securities with maturities of six months or less from the date of acquisition issued orfully guaranteed by any state, commonwealth or territory of a member of the European Union, theUnited States, or the Russian Federation or by any political subdivision or taxing authority thereof,and rated at least “BBB-” by Standard & Poor’s Ratings Group or “Baa3” by Moody’s InvestorsService, Inc.; and

(f) investments in money market funds that invest at least 95 per cent. of their assets in securities ofthe types described in paragraphs (a) to (e);

Unrestricted Subsidiary means:

(a) any Subsidiary of the Parent that at the time of determination shall be designated an UnrestrictedSubsidiary by the Board of Directors in the manner provided below; and

(b) any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors of the Parent may designate any Subsidiary of the Parent (including anynewly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary only if:

(i) such Subsidiary or any of its Subsidiaries does not own any Capital Stock or Indebtedness ofor have any investment in, or own or hold any Lien on any property of, the Parent or any otherSubsidiary of the Parent or any Restricted Subsidiary that, in each case, is not a Subsidiary ofthe Subsidiary to be so designated;

(ii) all the Indebtedness of such Subsidiary and its Subsidiaries shall, at the date of designation,and will at all times thereafter, consist of Non-Recourse Debt;

(iii) such Subsidiary, either alone or in the aggregate with all other Unrestricted Subsidiaries, doesnot operate, directly or indirectly, all or substantially all of the business of the Parent and itsSubsidiaries;

(iv) such Subsidiary is a Person with respect to which neither the Parent nor any of its RestrictedSubsidiaries has any direct or indirect obligation (i) to subscribe for additional Capital Stock ofsuch Person; or (ii) to maintain or preserve such Person’s financial condition or to cause suchPerson to achieve any specified levels of operating results;

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(v) on the date such Subsidiary is designated an Unrestricted Subsidiary, such Subsidiary is nota party to any agreement, contract, arrangement or understanding with the Parent or anyRestricted Subsidiary unless such agreement complies with Condition 4.5; and

(vi) the designation would not cause a Default or Event of Default.

Any designation of a Subsidiary of the Parent as an Unrestricted Subsidiary will be evidenced to theTrustee by filing with the Trustee a certified copy of a resolution of the Board of Directors of the Parentgiving effect to such designation and an Officers’ Certificate certifying that such designation compliedwith the preceding conditions, as determined by the Parent. If, at any time, any Unrestricted Subsidiarywould fail to meet the preceding requirements as an Unrestricted Subsidiary, it will thereafter cease tobe an Unrestricted Subsidiary for purposes of these Conditions and any Indebtedness of suchSubsidiary will be deemed to be Incurred by a Restricted Subsidiary as of such date and, if suchIndebtedness is not permitted to be Incurred as of such date under Condition 4.1, the Parent will be inDefault or Event of Default under Condition 4.1.

For the avoidance of doubt, the term Unrestricted Subsidiary does not include the Issuer or anyGuarantor;

U.S. Dollar Equivalent means with respect to any monetary amount in a currency other than U.S.dollars, at any time for determination thereof, the amount of U.S. dollars obtained by converting suchforeign currency involved in such computation into U.S. dollars at the spot rate for the purchase of U.S.dollars with the applicable foreign currency as published in The Wall Street Journal in the “ExchangeRates” column under the heading “Currency Trading” on the date two Business Days prior to suchdetermination;

Voting Stock of a Person means all classes of Capital Stock of such Person then outstanding andnormally entitled (without regard to the occurrence of any contingency) to vote in the election of theboard of directors, managers or trustees (or Persons performing similar functions) thereof;

Wholly Owned Subsidiary means a Restricted Subsidiary all the Capital Stock of which (other thandirectors’ qualifying shares or shares of Restricted Subsidiaries required to be owned by third partiesunder applicable law) is owned by the Parent or one or more other Wholly Owned Subsidiaries.

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SUMMARY OF PROVISIONS OF THE NOTES WHILE IN GLOBAL FORM

The Global Notes

All Notes will be in fully registered form, without interest coupons attached. The Notes offered and soldto non U.S. Persons (as defined in Regulation S) outside the United States in reliance on Regulation S(the “Regulation S Notes”) will be evidenced on issue by, and represented by beneficial interests inthe Regulation S Global Note (the “Regulation S Global Notes”). The Regulation S Global Note willbe in fully registered form, without interest coupons attached, and will be deposited on or about theclosing date of the Offering with a common depositary for Euroclear Bank and Clearstream,Luxembourg, and registered in the name of Citvic Nominees Limited, as nominee for such commondepositary in respect of interests held through Euroclear or Clearstream, Luxembourg. Beneficialinterests in the Regulation S Global Note may at all times be held only through Euroclear orClearstream, Luxembourg. By acquisition of a beneficial interest in the Regulation S Global Note, thepurchaser thereof will be deemed to represent, among other things, that it is not a U.S. Person, andthat, if it determines to transfer such beneficial interest prior to the expiration of the 40-day distributioncompliance period (as such term is defined in Rule 902 of Regulation S), it will transfer such interestonly to a person whom the seller reasonably believes (a) to be a non-U.S. person in an offshoretransaction in accordance with Rule 903 or Rule 904 of Regulation S or (b) to be a person who takesdelivery in the form of an interest in a Rule 144A Global Note (if applicable). See “Transfer Restrictions,Clearing and Settlement”.

The Notes offered and sold in reliance on Rule 144A (the “Rule 144A Notes”) will be evidenced onissue by, and represented by beneficial interests in a Rule 144A Global Note (the “Rule 144A GlobalNote” and, together with the Regulation S Global Note, the “Global Notes”). The Rule 144A GlobalNote will be in fully registered form, without interest coupons attached, and will be deposited on orabout the closing date of the Offering with a custodian for, and registered in the name of Cede & Co.,as nominee for, DTC. By acquisition of a beneficial interest in the Rule 144A Global Note, thepurchaser thereof will be deemed to represent, among other things, that the purchaser is a QIB andthat, if in the future it determines to transfer such beneficial interest, it will transfer such interest inaccordance with the procedures and restrictions contained in the Trust Deed. Beneficial interests in theRule 144A Global Note may be held only through DTC.

Each Regulation S Global Note will have a CUSIP number, an ISIN and a common code and eachRule 144A Global Note will have a CUSIP number, an ISIN and a common code.

Amendments to Conditions

The Global Notes contain provisions which apply to the Notes in respect of which the Global Notes areissued, some of which modify the effect of the “Terms and Conditions of the Notes” containedelsewhere in this Prospectus. Terms defined in the “Terms and Conditions of the Notes” section of thisProspectus have the same meanings as in the paragraphs below. The following is a summary of thoseprovisions.

Meetings

The registered holder of each Global Note will be treated as being two persons for the purposes of anyquorum requirements of, or the right to demand a poll at, any meeting of Noteholders, and in any suchmeeting as having one vote in respect of each Note for which the Global Notes may be exchanged.

Cancellation

Cancellation of any Note evidenced by a Global Note required by the Terms and Conditions of theNotes to be cancelled will be effected by reduction in the principle amount of the appropriate GlobalNote.

Payment

Payments of principal and interest in respect of the Global Note shall be made to the person whoappears at the relevant time on the register of Noteholders as holder of the Global Note againstpresentation and (if no further payment falls to be made on it) surrender thereof to or to the order of the

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Principal Paying Agent (or to or to the order of such other Paying Agent as shall have been notified tothe Noteholders for this purpose) which shall endorse such payment or cause such payment to beendorsed on the relevant schedule thereto (such endorsement being prima facie evidence that thepayment in question has been made). Each payment will be made to, or to the order of, the personwhose name is entered on the Register at the close of business on the Clearing System Business Dayimmediately prior to the date for payment, where “Clearing System Business Day” means Monday toFriday inclusive except December 25th and January 1st. No person shall however be entitled toreceive any payment on a Global Note falling due after the Exchange Date (as defined below) unlessthe exchange of the relevant Global Note for Definitive Notes is improperly withheld or refused by or onbehalf of the Issuer.

Transfers

Transfer of interests in the Notes which are represented by a Global Note shall be made in accordancewith the rules and procedures of Euroclear, Clearstream, Luxembourg or DTC, as the case may be.

Notices

So long as any of the Notes are represented by a Global Note and such Global Note is held on behalfof DTC, Euroclear or Clearstream, Luxembourg, or any alternative clearing system, notices toNoteholders may be given by delivery of the relevant notice to DTC, Euroclear or Clearstream,Luxembourg, or any alternative clearing system, for communication by it to entitled accountholders insubstitution for notification as required by the “Terms and Conditions of the Notes” and such noticesshall be deemed to have been given on the second day after the day on which they were so delivered.For so long as the Notes are listed, the Issuer will also publish notices in accordance with the rules andregulations of the relevant stock exchange.

Whilst any Notes held by Noteholder are represented by a Global Note, notices to be given by suchNoteholder may be given by such Noteholder to the Principal Paying Agent through the relevantclearing system in such a manner as the Principal Paying Agent and the relevant clearing system mayapprove for this purpose.

Prescription

Claims in respect of principal, interest and other amounts payable in respect of the Notes will becomevoid unless they are presented for payment within a period of 10 years (in the case of principal) andfive years (in the case of interest or any other amounts) from the due date for payment in respectthereof.

Trustee’s Powers

In considering the interests of Noteholders in circumstances where the Global Notes are being held onbehalf of DTC, Euroclear or Clearstream, Luxembourg or any alternative clearing system, the Trusteemay, to the extent it considers it appropriate to do so in the circumstances, (a) have regard to suchinformation provided to it by or on behalf of the relevant clearing system or its operator as to theidentity of its accountholders (either individually or by way of category) with entitlements in respect ofGlobal Notes; and (b) consider such interests as if such accountholders were the holders of suchGlobal Notes.

Exchange of Interests in Global Notes for Definitive Notes

Exchange of interests in Notes represented by the Rule 144A Global Note, in whole but not in part, forRule 144A Notes represented by individual Notes in definitive form (the “Rule 144A Definitive Notes”)will not be permitted unless DTC or a successor depositary notifies the Issuer that it is no longer willingor able to discharge properly its responsibilities as depositary with respect to the Rule 144A GlobalNote or ceases to be a “clearing agency” registered under the Exchange Act, or is at any time nolonger eligible to act as such, and the Issuer is unable to locate a qualified successor within 90 days ofreceiving notice of such ineligibility or cessation on the part of such depositary Exchange of interests inNotes represented by the Regulation S Global Note, in whole but not in part, for Regulation S Notesrepresented by the Regulation S Global Note, in whole but not in part, for Regulation S Notesrepresented by individual Notes in definitive form (the “Regulation S Definitive Notes” and, together

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with the Rule 144A Definitive Notes, the “Definitive Notes”) will not be permitted unless Euroclear orClearstream, Luxembourg, is closed for business for a continuous period of 14 days (other than byreason of legal holidays), or announces an intention permanently to cease business or does in fact doso. Exchange of interests in a Global Note, in whole or in part, for a Definitive Note may be made on orafter the Exchange Date by the surrender by the holder of the Global Note to the Registrar or theTransfer Agent. “Exchange Date” means a day falling not later than 90 days after that on which thenotice requiring exchange is given and on which banks are open for business in the city in which thespecified office of the Registrar or Transfer Agent is located. The Registrar will not register theexchange of interest in a Global Note for a Definitive Note during the period of 15 calendar days endingon the due date for any payment or principal or interest in respect of the Notes.

Legends

The holder of a Definitive Note may transfer the Notes evidenced thereby in whole or in part in theapplicable minimum denomination by surrendering it at the specified office of the Registrar or anyTransfer Agent, together with the completed form of transfer thereon. Upon the transfer, exchange orreplacement of a Rule 144A Definitive Note bearing the legend referred to under “Transfer Restrictions,Clearing and Settlement” or upon specific request for removal of the legend on a Rule 144A DefinitiveNote, the Issuer will deliver only Rule 144A Definitive Notes that bear such legend, or will refuse toremove such legend, as the case may be, unless there is delivered to the Registrar a fully completed,signed certificate substantially to the effect that the transfer is being made in compliance with theprovisions of Regulation S.

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TRANSFER RESTRICTIONS, CLEARING AND SETTLEMENT

The following information relates to the transfer of the Notes. Terms defined in the section of thisProspectus entitled “Terms and Conditions of the Notes” have the same meanings in the paragraphsbelow.

Transfer Restrictions

Rule 144A Notes

Each purchaser of Rule 144A Notes, by accepting delivery of this Prospectus, will be deemed to haverepresented, agreed and acknowledged that:

1. It is (a) a QIB, (b) acquiring such Notes for its own account, or for the account of one or more QIBsand (c) aware, and each beneficial owner of such Notes has been advised, that the sale of such Notesto it is being made in reliance on Rule 144A.

2. It (a) is not a broker-dealer that owns and invests on a discretionary basis less than US$ 25 millionin securities of unaffiliated issuers; (b) is not a participant-directed employee plan, such as a 401(k)plan, as referred to in paragraph (a)(1)(i)(D) or (a)(1)(i)(E) of Rule 144A, or a trust fund referred to inparagraph (a)(1)(i)(F) of Rule 144A that holds the assets of such a plan; (c) is acquiring the Notes forits own account or for the account of a QIB; (d) was not formed for the purpose of investing in theIssuer; (e) will hold and transfer at least US$ 200,000 in principal amount of the Notes at any time;(f) will provide notice of the transfer restrictions described in this “Transfer Restrictions” to anysubsequent transferees; (g) acknowledges that the Issuer may receive a list of participants’ holdingpositions in the Notes from one or more book-entry depositories.

3. It understands that the Issuer has the power to compel any owner of Rule 144A Notes that is aU.S. person and is not a QIB to sell its interest in the Rule 144A Notes, or may sell such interest onbehalf of such owner. The Issuer has the right to refuse to honor the transfer of a Rule 144A Note to aU.S. person who is not a QIB.

4. The Notes and the Guarantees have not been and will not be registered under the Securities Actand may not be offered, sold, pledged or otherwise transferred except (a) pursuant to a registrationstatement that has been declared effective under the Securities Act; (b) in reliance on Rule 144A to aperson that it and any person acting on its behalf reasonably believe is a QIB purchasing for its ownaccount or for the account of one or more QIBs; (c) to a non U.S. person (as defined in Regulation S)in an offshore transaction in accordance with Rule 903 or Rule 904 of Regulation S; (d) pursuant to anyother available exemption from the registration requirements of the Securities Act, in each case inaccordance with any applicable securities laws of any State of the United States.

5. The Notes offered and sold hereby in the manner set forth in paragraph (1) are “restricted securities”within the meaning of Rule 144(a)(3) under the Securities Act, are being offered and sold in atransaction not involving any public offering in the United States within the meaning of the SecuritiesAct and no representation is made as to the availability of the exemption provided by Rule 144 for theresale of the Notes;

6. The purchaser of the Notes will be deemed to represent, warrant and agree that (1) either (i) it is notand for so long as it holds a Note (or any interest therein) will not be (a) an “employee benefit plan” asdefined in Section 3(3) of ERISA that is subject to Title I of ERISA, (b) a “plan” as defined in andsubject to the Section 4975 of Code, (c) an entity whose underlying assets include, or are deemed toinclude, the assets of any such employee benefit plan subject to Title I of ERISA or other plan subjectto Section 4975 of the Code, or (d) a governmental or other employee benefit plan which is subject toany U.S. federal, state or local law or non U.S. law, that is substantially similar to the provisions ofSection 406 of ERISA or Section 4975 of the Code (each of the foregoing, a “Plan”) or (ii) its purchaseand holding of the Notes (or any interest therein) will not constitute or result in a non-exempt prohibitedtransaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of such agovernmental or other employee benefit plan, any such substantially similar U.S. federal, state or locallaw or non U.S law) and (2) it will not sell or otherwise transfer the Notes to any Plan otherwise than toa purchaser or transferee that is deemed to represent and agree with respect to its purchase and

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holding of such Notes to the same effect as the purchaser’s representation and agreement set forth inthis sentence. Any purported purchase of a Note (or an interest therein) that does not comply with theforegoing shall be null and void ab initio.

7. The Rule 144A Notes, unless the Issuer determines otherwise in compliance with applicable law, willbear a legend substantially to the following effect:

THIS NOTE AND THE GUARANTEE IN RESPECT HEREOF HAS NOT BEEN AND WILL NOT BEREGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) OR WITHANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OFTHE UNITED STATES, AND THIS NOTE MAY NOT BE OFFERED, SOLD, PLEDGED OROTHERWISE TRANSFERRED EXCEPT (1) IN ACCORDANCE WITH RULE 144A UNDER THESECURITIES ACT (“RULE 144A”) TO A PERSON THAT THE HOLDER AND ANY PERSON ACTINGON ITS BEHALF REASONABLY BELIEVE IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THEMEANING OF RULE 144A (A “QIB”) THAT IS ACQUIRING THIS NOTE FOR ITS OWN ACCOUNTOR FOR THE ACCOUNT OF ONE OR MORE QIBS, (2) TO A NON U.S. PERSON (AS DEFINED INREGULATION S) IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE904 OF REGULATION S UNDER THE SECURITIES ACT, OR (3) PURSUANT TO AN EXEMPTIONFROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER,IF AVAILABLE, IN EACH CASE IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OFANY STATE OF THE UNITED STATES. NO REPRESENTATION CAN BE MADE AS TO THEAVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144 UNDER THE SECURITIES ACTFOR RESALES OF THE NOTES.

EACH BENEFICIAL OWNER HEREOF REPRESENTS AND WARRANTS THAT FOR SO LONG ASIT HOLDS THIS NOTE OR ANY INTEREST HEREIN (1) EITHER (i) IT IS NOT AND FOR SO LONGAS IT HOLDS NOTES WILL NOT BE (AND IS NOT ACQUIRING THE NOTES DIRECTLY ORINDIRECTLY WITH THE ASSETS OF A PERSON WHO IS OR WHILE NOTES ARE HELD WILL BE)AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE UNITED STATES EMPLOYEE RETIREMENTINCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), A PLAN SUBJECT TO SECTION 4975OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ANENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY SUCHEMPLOYEE BENEFIT PLAN’S OR PLAN’S INVESTMENT IN THAT ENTITY (EACH OF THEFOREGOING, A “PLAN”) OR A GOVERNMENTAL OR OTHER EMPLOYEE BENEFIT PLAN, THATIS SUBJECT TO ANY U.S. FEDERAL, STATE OR LOCAL LAW OR NON-U.S. LAW THAT ISSUBSTANTIALLY SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975OF THE CODE (AN “ALTERNATIVE PLAN”); OR (ii) ITS PURCHASE AND HOLDING OF THENOTES WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDERSECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF ANALTERNATIVE PLAN, ANY SUCH SUBSTANTIALLY SIMILAR U.S. FEDERAL, STATE OR LOCALLAW, OR NON-U.S. LAW) AND (2) IT WILL NOT SELL OR OTHERWISE TRANSFER SUCH NOTESOTHERWISE THAN TO A PURCHASER OR TRANSFEREE THAT IS DEEMED TO REPRESENTAND AGREE WITH RESPECT TO ITS PURCHASE AND HOLDING OF SUCH NOTES TO THESAME EFFECT AS THE PURCHASER’S REPRESENTATION AND AGREEMENT SET FORTH INTHIS SENTENCE. ANY PURPORTED PURCHASE OF THIS NOTE (OR ANY INTEREST HEREIN)THAT DOES NOT COMPLY WITH THE FOREGOING SHALL BE NULL AND VOID AB INITIO.

8. It understands that the Issuer, the Guarantors, the Registrar, the Joint Lead Managers and theirrespective affiliates, and others will rely upon the truth and accuracy of the foregoingacknowledgements, representations and agreements. If it is acquiring any Notes for the account of oneor more QIBs, it represents that it has sole investment discretion with respect to each of thoseaccounts and that it has full power to make the foregoing acknowledgements, representations andagreements on behalf of each account.

9. It understands that the Rule 144A Notes will be evidenced by the Rule 144A Global Note. Beforeany interest in the Rule 144A Global Notes may be offered, sold, pledged or otherwise transferred to aperson who takes delivery in the form of an interest in the Regulation S Global Note, it will be requiredto provide the Transfer Agent with a written certification (in the form provided in the AgencyAgreement) as to compliance with applicable securities laws.

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Prospective purchasers are hereby notified that sellers of the Notes may be relying on theexemption from the provisions of Section 5 of the Securities Act provided by Rule 144A.

Regulation S Notes

Each purchaser of Notes outside the United States pursuant to Regulation S and each subsequentpurchaser of such Notes by accepting delivery of this Prospectus and the Notes, will be deemed tohave represented, agreed and acknowledged that:

1. It is, or at the time Notes are purchased will be, the beneficial owner of such Notes and is a nonU.S. Person (as defined in Regulation S) and is purchasing the Notes in an offshore transactionpursuant to Regulation S.

2. It understands that the Notes and the Guarantees have not been and will not be registered under theSecurities Act and that the Issuer has not been and will not be registered under the InvestmentCompany Act and that it will not offer, sell, pledge or otherwise transfer such Notes except (a) inaccordance with Rule 144A to a person that it and any person acting on its behalf reasonably believesis a QIB purchasing for its own account or the account of one or more QIBs or (b) to a non U.S. person(as defined in Regulation S) in an offshore transaction in accordance with Rule 903 or Rule 904 ofRegulation S, in each case in accordance with any applicable securities laws of any State of the UnitedStates.

3. The purchaser of the Notes will be deemed to represent, warrant and agree that (1) either (i) it is notand for so long as it holds a Note (or any interest therein) will not be (a) an “employee benefit plan” asdefined in Section 3(3) of ERISA that is subject to Title I of ERISA, (b) a “plan” as defined in andsubject to the Section 4975 of Code, (c) an entity whose underlying assets include, or are deemed toinclude the assets of any such employee benefit plan subject to Title I of ERISA or other plan subject toSection 4975 of the Code, or (d) a governmental or other employee benefit plan which is subject to anyU.S. federal, state or local law or non U.S. law, that is substantially similar to the provisions ofSection 406 of ERISA or Section 4975 of the Code (each of the foregoing, a “Plan”) or (ii) its purchaseand holding of the Notes (or any interest therein) will not constitute or result in a non-exempt prohibitedtransaction under Section 406 of ERISA or Section 4975 of the Code (or, in the case of such agovernmental or other employee benefit plan, any such substantially similar U.S. federal, state or locallaw or non U.S law) and (2) it will not sell or otherwise transfer the Notes otherwise than to a purchaseror transferee that is deemed to represent and agree with respect to its purchase and holding of suchNotes to the same effect as the purchaser’s representation and agreement set forth in this sentence.Any purported purchase of a Note (or an interest therein) that does not comply with the foregoing shallbe null and void ab initio.

4. It acknowledges that for the period until and including the 40th day after the commencement of theOffering, it will not make an offer or sale of Regulation S Notes to, or for the account or benefit of, aU.S. Person within the meaning of Regulation S.

5. It understands that such Notes, unless otherwise determined by the Issuer in accordance withapplicable law, will bear a legend substantially to the following effect:

THIS NOTE AND THE GUARANTEE IN RESPECT HEREOF HAS NOT BEEN AND WILL NOT BEREGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE “SECURITIES ACT”) OR WITHANY SECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTION OFTHE UNITED STATES AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISETRANSFERRED WITHIN THE UNITED STATES EXCEPT PURSUANT TO AN AVAILABLEEXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ALLAPPLICABLE STATE SECURITIES LAWS.

EACH BENEFICIAL OWNER HEREOF REPRESENTS AND WARRANTS THAT FOR SO LONG ASIT HOLDS THIS NOTE OR ANY INTEREST HEREIN (1) EITHER (i) IT IS NOT AND FOR SO LONGAS IT HOLDS NOTES WILL NOT BE (AND IS NOT ACQUIRING THE NOTES DIRECTLY ORINDIRECTLY WITH THE ASSETS OF A PERSON WHO IS OR WHILE NOTES ARE HELD WILL BE)AN EMPLOYEE BENEFIT PLAN SUBJECT TO THE UNITED STATES EMPLOYEE RETIREMENTINCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), A PLAN SUBJECT TO SECTION 4975OF THE UNITED STATES INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”), ANENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY SUCH

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EMPLOYEE BENEFIT PLAN’S OR PLAN’S INVESTMENT IN THAT ENTITY (EACH OF THEFOREGOING, A “PLAN”) OR A GOVERNMENTAL OR OTHER EMPLOYEE BENEFIT PLAN, THATIS SUBJECT TO ANY U.S. FEDERAL, STATE OR LOCAL LAW OR NON-U.S. LAW THAT ISSUBSTANTIALLY SIMILAR TO THE PROVISIONS OF SECTION 406 OF ERISA OR SECTION 4975OF THE CODE (AN “ALTERNATIVE PLAN”); OR (ii) ITS PURCHASE AND HOLDING OF THENOTES WILL NOT RESULT IN A NON-EXEMPT PROHIBITED TRANSACTION UNDERSECTION 406 OF ERISA OR SECTION 4975 OF THE CODE (OR, IN THE CASE OF ANALTERNATIVE PLAN, ANY SUCH SUBSTANTIALLY SIMILAR U.S. FEDERAL, STATE OR LOCALLAW, OR NON-U.S. LAW) AND (2) IT WILL NOT SELL OR OTHERWISE TRANSFER SUCH NOTESOTHERWISE THAN TO A PURCHASER OR TRANSFEREE THAT IS DEEMED TO REPRESENTAND AGREE WITH RESPECT TO ITS PURCHASE AND HOLDING OF SUCH NOTES TO THESAME EFFECT AS THE PURCHASER’S REPRESENTATION AND AGREEMENT SET FORTH INTHIS SENTENCE. ANY PURPORTED PURCHASE OF THIS NOTE (OR ANY INTEREST HEREIN)THAT DOES NOT COMPLY WITH THE FOREGOING SHALL BE NULL AND VOID AB INITIO.

6. It understands that the Issuer, the Guarantors, the Registrar, the Joint Lead Managers and theirrespective affiliates, and others will rely upon the truth and accuracy of the foregoingacknowledgements, representations and agreements.

7. It understands that the Notes offered in reliance on Regulation S will be represented by theRegulation S Global Note. Before any interest in the Regulation S Global Note may be offered, sold,pledged or otherwise transferred to a person who takes delivery in the form of an interest in the Rule144A Global Note, it will be required to provide the Transfer Agent with a written certification (in theform provided in the Agency Agreement) as to compliance with applicable securities laws.

Book-Entry Procedures for the Global Notes

Custodial and depository links are to be established between DTC, Euroclear and Clearstream,Luxembourg to facilitate the initial issue of the Notes and cross market transfers of the Notesassociated with secondary market trading. See “—Book-Entry Ownership” and “—Settlement andTransfer of Notes”. Investors may hold their interests in the Global Notes directly through DTC,Euroclear or Clearstream, Luxembourg if they are accountholders (“Direct Participants”) or indirectly(“Indirect Participants” and together with Direct Participants, “Participants”) through organizationswhich are accountholders therein.

Euroclear and Clearstream, Luxembourg

Euroclear and Clearstream, Luxembourg, each hold securities for their customers and facilitate theclearance and settlement of securities transactions through electronic book-entry transfer betweentheir respective accountholders. Indirect access to Euroclear and Clearstream, Luxembourg, isavailable to other institutions which clear through or maintain a custodial relationship with anaccountholder of either system. Euroclear and Clearstream, Luxembourg, provide various servicesincluding safekeeping, administration, clearance and settlement of internationally traded securities andsecurities lending and borrowing. Euroclear and Clearstream, Luxembourg, also deal with domesticsecurities markets in several countries through established depository and custodial relationships.Euroclear and Clearstream, Luxembourg, have established an electronic bridge between their twosystems across which their respective customers may settle trades with each other. Their customersare worldwide financial institutions including underwriters, securities brokers and dealers, banks, trustcompanies and clearing corporations.

DTC

DTC has advised the Issuer as follows: DTC is a limited purpose trust company organized under thelaws of the State of New York, a “banking organization” under the laws of the State of New York, amember of the U.S. Federal Reserve System, a “clearing corporation” within the meaning of theNew York Uniform Commercial code and a “clearing agency” registered pursuant to the provisions ofSection 17A of the Exchange Act. DTC was created to hold securities for its Participants and facilitatethe clearance and settlement of securities transactions between Participants through electroniccomputerized book-entry changes in accounts of its Participants, thereby eliminating the need forphysical movement of certificates.

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Participants include securities brokers and dealers, banks, trust companies, clearing corporations andcertain other organizations. Indirect access to DTC is available to others, such as banks, securitiesbrokers, dealers and trust companies, that clear through or maintain a custodial relationship with aDTC Direct Participant, either directly or indirectly.

Investors may hold their interests in the Rule 144A Global Note directly through DTC if they are DirectParticipants in the DTC system, or as Indirect Participants through organizations which are DirectParticipants in such system.

DTC has advised the Issuer that it will take any action permitted to be taken by a holder of Notes onlyat the direction of one or more Direct Participants and only in respect of such portion of the aggregateprincipal amount of the Rule 144A Global Note as to which such Participant or Participants has or havegiven such direction. However, in the circumstances described under “Summary of Provisions of theNotes while in Global Form—Exchange of the Global Notes for Definitive Notes”, DTC will surrenderthe Rule 144A Global Note for exchange for Rule 144A Definitive Notes (which will bear the legendapplicable to transfers pursuant to Rule 144A).

Book-Entry Ownership

Euroclear and Clearstream, Luxembourg

The Regulation S Global Note representing the Regulation S Notes will have an ISIN, a Common Codeand a CUSIP number and will be registered in the name of a nominee for, and deposited with acommon depositary on behalf of, Euroclear and Clearstream, Luxembourg.

The address of Euroclear is 1 Boulevard du Roi Albert 11, B-1210 Brussels, Belgium, and the addressof Clearstream, Luxembourg is 42 Avenue J.F. Kennedy, L-2967, Luxembourg.

DTC

The Rule 144A Global Note representing the Rule 144A Notes will have an ISIN, a Common Code anda CUSIP number and will be deposited with a custodian (the “Custodian”) for, and registered in thename of Cede & Co. as nominee of, DTC. The Custodian and DTC will electronically record theprincipal amount of the Notes held within the DTC System. The address of DTC is 55 Water Street,New York, New York 10041, United States of America.

Relationship of Participants with Clearing Systems

Each of the persons shown in the records of DTC, Euroclear, Clearstream, Luxembourg as the holderof a Note evidenced by a Global Note must look solely to DTC, Euroclear or Clearstream, Luxembourg(as the case may be) for his share of each payment made by the Issuer to the holder of such GlobalNote and in relation to all other rights arising under such Global Note, subject to and in accordancewith the respective rules and procedures of DTC, Euroclear or Clearstream, Luxembourg (as the casemay be). The Issuer expects that, upon receipt of any payment in respect of Notes evidenced by aGlobal Note, the common depositary by whom such Note is held, or nominee in whose name it isregistered, will immediately credit the relevant Participants’ or accountholders’ accounts in the relevantclearing system with payments in amounts proportionate to their respective beneficial interests in theprincipal amount of the relevant Global Note as shown on the records of the relevant commondepositary or its nominee. The Issuer also expects that payments by Direct Participants in any clearingsystem to owners of beneficial interests in any Global Note held through such Direct Participants in anyclearing system will be governed by standing instructions and customary practices. Save as aforesaid,such persons shall have no claim directly against the Issuer in respect of payments due on the Notesfor so long as the Notes are evidenced by such Global Note, and the obligations of the Issuer will bedischarged by payment to the registered holder, as the case may be, of such Global Note in respect ofeach amount so paid. None of the Issuer, the Guarantors, the Trustee, the Joint Lead Managers or anyAgent will have any responsibility or liability for any aspect of the records relating to or payments madeon account of ownership interests in any Global Note or for maintaining, supervising or reviewing anyrecords relating to such ownership interests.

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Settlement and Transfer of Notes

So long as DTC or its nominee or Euroclear, Clearstream, Luxembourg, or the nominee of theircommon depositary is the registered holder of a Global Note, DTC, Euroclear, Clearstream,Luxembourg, or such nominee, as the case may be, will be considered the sole owner or holder of theNotes represented by such Global Note for all purposes under the Agency Agreement and the Notes.Payments of principal, premium (if any), interest and additional amounts (if any) in respect of GlobalNotes will be made to DTC, Euroclear, Clearstream, Luxembourg, or such nominee, as the case maybe, as the registered holder thereof. None of the Issuer, the Guarantors, the Trustee, any Agent or theJoint Lead Managers or any affiliate of any of them or any person by whom any of them is controlledfor the purposes of the Securities Act will have any responsibility or liability for any aspect of therecords relating to or payments made on account of beneficial ownership interests in Global Notes orfor maintaining, supervising or reviewing any records relating to such beneficial ownership interests.

Distributions of principal, premium (if any) and interest with respect to book-entry interests in the Notesheld through Euroclear or Clearstream, Luxembourg will be credited, to the extent received byEuroclear or Clearstream, Luxembourg, from the Principal Paying Agent, to the cash accounts ofEuroclear or Clearstream, Luxembourg, customers in accordance with the relevant system’s rules andprocedures.

Holders of book-entry interests in the Notes through DTC will receive, to the extent received by DTCfrom the Principal Paying Agent, all distributions of principal, premium (if any) and interest with respectto book entry interests in the Notes from the Principal Paying Agent through DTC. Distribution in theUnited States will be subject to relevant United States tax laws and regulations.

Payments on the Notes will be paid to the holder shown on the Register on the close of business thebusiness day before the due date for such payment so long as the Notes are represented by a GlobalNote, and on the close of business the business day before the due date for such payment if the Notesare in the form of Definitive Notes (the “Record Date”).

Subject to the rules and procedures of each applicable clearing system, purchases of Notes held withina clearing system must be made by or through Direct Participants, which will receive a credit for suchNotes on the clearing system’s records. The ownership interest of each actual purchaser of each suchNote (the “Beneficial Owner”) will in turn be recorded on the Direct and Indirect Participants’ records.

Beneficial Owners will not receive written confirmation from any clearing system of their purchase, butBeneficial Owners are expected to receive written confirmations providing details of the transaction, aswell as periodic statements of their holdings, from the Direct or Indirect Participant through which suchBeneficial Owner entered into the transaction.

Transfers of ownership interests in Notes held within the clearing system will be effected by entriesmade on the books of Participants acting on behalf of Beneficial Owners. Beneficial Owners will notreceive certificates representing their ownership interests in such Notes, unless and until interests inany Global Note held within a clearing system are exchanged for Definitive Notes.

No clearing system has knowledge of the actual Beneficial Owners of the Notes held within suchclearing system, and its records will reflect only the identity of the Direct Participants to whoseaccounts such Notes are credited, which may or may not be the Beneficial Owners. The Participantswill remain responsible for keeping account of their holdings on behalf of their customers. Conveyanceof notices and other communications by the clearing systems to Direct Participants, by DirectParticipants to Indirect Participants, and by Direct Participants and Indirect Participants to BeneficialOwners will be governed by arrangements among them, subject to any statutory or regulatoryrequirements as may be in effect from time to time.

The laws of some jurisdictions require that certain persons take physical delivery of securities indefinitive form. Consequently, the ability to transfer interests in a Global Note to such persons may belimited. Because DTC, Euroclear and Clearstream, Luxembourg, can only act on behalf of indirectparticipants, the ability of a person having an interest in a Global Note to pledge such interest topersons or entities which do not participate in the relevant clearing system, or otherwise take actions inrespect of such interest, may be affected by the lack of a physical certificate in respect of such interest.

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The holdings of book-entry interests in the Notes through DTC, Euroclear and Clearstream,Luxembourg, will be reflected in the book-entry accounts of each such institution. As necessary, theRegistrar will adjust the amounts of Notes on the Register for the accounts of (i) Citvic NomineesLimited and (ii) Cede & Co. to reflect the amounts of Notes held through Euroclear, Clearstream,Luxembourg, and DTC, respectively. Beneficial ownership in the Notes will be held through financialinstitutions as direct and indirect participants in DTC, Euroclear and Clearstream, Luxembourg.

Beneficial interests in the Regulation S Global Note and the Rule 144A Global Note will be inuncertificated book-entry form.

DTC actions with respect to the Notes

The Issuer will direct DTC to take the following steps in connection with the Notes:

• to cause (i) each physical DTC delivery order ticket delivered by DTC to purchasers to containthe 20-character security descriptors and (ii) each DTC delivery order ticket delivered by DTCto purchasers in electronic form to contain the “GRLS” indicators and the related user manualfor participants, which will contain a description of relevant restrictions;

• to send, on or prior to the closing date of this Offering, an “Important Notice” to all DTCparticipants in connection with this Offering of the Notes. the Issuer may instruct DTC fromtime to time (but not more frequently than every six months) to reissue the “Important Notice”;

• to include in all “confirms” of trades of the Notes in DTC, CUSIP numbers with a “fixed field”attached to the CUSIP number that has the “GRLS” markers; and

• to deliver to the Issuer from time to time a list of all DTC participants holding an interest in theNotes.

Euroclear actions with respect to the Notes

The Issuer will instruct Euroclear Bank S.A./N.V., as operator of the Euroclear, to take the followingsteps in connection with the Notes:

• to reference “144A” as part of the security name in the Euroclear securities database;

• in each daily securities balances report and daily transactions report to Euroclear participantsholding positions in the Notes, to include “144A” in the securities name for the Notes; and

• to deliver to the Issuer from time to time, upon its request, a list of all Euroclear participantsholding an interest in the Notes.

Clearstream, Luxembourg, actions with respect to the Notes

The Issuer will instruct Clearstream, Luxembourg, to take the following steps in connection with theNotes:

• to reference “144A” as part of the security name in the Clearstream, Luxembourg, securitiesdatabase;

• in each daily portfolio report and daily settlement report to Clearstream, Luxembourg,participants holding positions in the Notes, to include “144A” in the securities name for theNotes; and

• to deliver to the Issuer from time to time, upon its request, a list of all Clearstream,Luxembourg, participants holding an interest in the Notes.

Bloomberg Screens, etc.

The Issuer will from time to time request all third-party vendors to include appropriate legendsregarding Rule 144A restrictions on the Notes on screens maintained by such vendors. Without limitingthe foregoing, the Joint Lead Managers will request that Bloomberg, L.P. include the following on eachBloomberg screen containing information about the securities as applicable:

• the bottom of the “Security Display” page describing the Notes should state: “Iss’d under144A” and “GRLS”;

• the “Security Display” page should have a flashing red indicator stating “Additional Note Pg”;

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• such indicator for the Notes should link to an “Additional Security Information” page, whichshould state that the Notes “are being offered in reliance on the exception from registrationunder Rule 144A of the Securities Act of 1933, as amended (the “Securities Act”) to personsthat are “qualified institutional buyers” as defined in Rule 144A under the Securities Act; and

• the “Disclaimer” pages for the Notes should state that the securities “have not been and willnot be registered under the Securities Act of 1933, as amended”.

CUSIP

Each “CUSIP” obtained for a Rule 144A Global Note will have an attached “fixed field” that contains“GRLS” and “144A” indicators.

Trading between Euroclear and Clearstream, Luxembourg, Accountholders

Secondary market sales of book-entry interests in the Notes held through Euroclear or Clearstream,Luxembourg, to purchasers of book-entry interests in the Notes through Euroclear or Clearstream,Luxembourg, will be conducted in accordance with the normal rules and operating procedures ofEuroclear and Clearstream, Luxembourg, and will be settled using the procedures applicable toconventional Eurobonds.

Trading between DTC Participants

Secondary market sales of book-entry interests in the Notes between DTC participants will occur in theordinary way in accordance with DTC rules and will be settled using the procedures applicable toUnited States corporate debt obligations in DTC’s Same Day Funds Settlement System.

Trading between DTC Seller and Euroclear or Clearstream, Luxembourg, Purchaser

When book-entry interests in Notes are to be transferred from the account of a DTC participant holdinga beneficial interest in a Rule 144A Global Note to the account of a Euroclear or Clearstream,Luxembourg accountholder wishing to purchase a beneficial interest in the Regulation S Global Note(subject to such certification procedures as are provided in the Agency Agreement), the DTCparticipant will deliver instructions for delivery to the relevant Euroclear or Clearstream, Luxembourgaccountholder to DTC by 12:00 noon, New York time, on the settlement date. Separate paymentarrangements are required to be made between the DTC participant and the relevant Euroclear orClearstream, Luxembourg accountholder, as the case may be. On the settlement date, the custodianwill instruct the Registrar to (i) decrease the amount of Notes registered in the name of Cede & Co. andevidenced by such Rule 144A Global Note and (ii) increase the amount of Notes registered in thename of Citvic Nominees Limited and evidenced by such Regulation S Global Note. Book-entryinterests will be delivered free of payment to Euroclear or Clearstream, Luxembourg, as the ease maybe, for credit to the relevant accountholder on the first business day following the settlement date. Seeabove concerning the Record Date for payments of interest.

Trading between Euroclear or Clearstream, Luxembourg, Seller and DTC Purchaser

When book-entry interests in Notes are to be transferred from the account of a Euroclear orClearstream, Luxembourg, accountholder holding a beneficial interest in a Regulation S Global Note tothe account of a DTC participant wishing to purchase a beneficial interest in a Rule 144A Global Note(subject to such certification procedures as are provided in the Agency Agreement), the Euroclear orClearstream, Luxembourg, accountholder must send to Euroclear or Clearstream, Luxembourg,delivery free of payment instructions by 7:45 p.m., Brussels or Luxembourg time, one business dayprior to the settlement date. Euroclear or Clearstream, Luxembourg, as the case may be, will in turntransmit appropriate instructions to the common depositary for Euroclear and Clearstream,Luxembourg, and the Registrar to arrange delivery to the DTC participant on the settlement date.Separate payment arrangements are required to be made between the DTC participant and therelevant Euroclear or Clearstream, Luxembourg, accountholder, as the case may be. On thesettlement date, the common depositary for Euroclear and Clearstream, Luxembourg, will (i) transmitappropriate instructions to the custodian who will in turn deliver such book-entry interests in the Notesfree of payment to the relevant account of the DTC participant and (ii) instruct the Registrar to(a) decrease the amount of Notes registered in the name of Citvic Nominees Limited and evidenced by

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such Regulation S Global Note and (b) increase the amount of Notes registered in the name of theCede & Co. and evidenced by such Rule 144A Global Note. See above concerning the Record Datefor payments of interest.

Although the foregoing sets out the procedures of DTC, Euroclear and Clearstream, Luxembourg, inorder to facilitate the transfers of interests in the Notes among the participants of DTC, Euroclear andClearstream, Luxembourg, none of DTC, Euroclear or Clearstream, Luxembourg, is under anyobligation to perform or continue to perform such procedures, and such procedures may bediscontinued at any time. None of the Issuer, the Guarantors, the Trustee, any Agent, the Joint LeadManagers or any affiliate of any of them or any person by whom any of them is controlled for thepurposes of the Securities Act, will have any responsibility for the performance by DTC, Euroclear orClearstream, Luxembourg, or their respective direct or indirect participants or accountholders of theirrespective obligations under the rules and procedures governing their operations or for the sufficiencyfor any purpose of the arrangements described above.

Pre-issue Trades Settlement

It is expected that delivery of the Notes will be made against payment therefor on the Closing Date,which could be more than three business days following the date of pricing. Under Rule 15c6-1 underthe Exchange Act, trades in the United States secondary market generally are required to settle withinthree business days (T+3), unless the parties to any such trade expressly agree otherwise.

Accordingly, purchasers who wish to trade the Notes in the United States on the date of pricing or thenext succeeding business days until three days prior to the Closing Date will be required, by virtue ofthe fact the Notes initially will settle beyond T+3, to specify an alternate settlement cycle at the time ofany such trade to prevent a failed settlement. Settlement procedures in other countries will vary.

Purchasers of the Notes may be affected by such local settlement practices, and purchasers of theNotes between the relevant date of pricing and the Closing Date should consult their own advisers.

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TAX CONSIDERATIONS

The following is a general description of certain tax considerations relating to the Notes based onadvice received. It does not purport to be a complete analysis of all tax considerations relating to theNotes. Prospective purchasers of the Notes should consult their tax advisors as to the consequencesof a purchase of the Notes, including but not limited to the consequences of receipt of interest and ofsale or redemption of the Notes. This summary is based upon the law in effect on the date of thisdocument and is subject to any change in law that may take effect after such date.

The following is a general description of certain tax considerations relating to the Notes and does notpurport to be a complete analysis of all tax considerations relating to the Notes. Prospectivepurchasers of the Notes should consult their tax advisors as to the consequences of a purchase,ownership and disposition of any the Notes in light of their particular circumstances, including, but notlimited to, the consequences of receipt of interest and of sale or redemption of the Notes. Thissummary is based upon the laws as in effect on the date of this document and is subject to any changein law that may take effect after such date.

Russian Taxation

General

The following is a general summary of certain Russian tax considerations relevant to the acquisition,ownership and disposition of the Notes as well as taxation of payments under the Guarantees.

This summary is based on the laws of the Russian Federation as in effect on the date of thisProspectus (these laws are subject to changes which could occur frequently, at short notice and mayhave retroactive effect). The summary does not seek to address the applicability of, procedures inrelation to, taxes levied by regions, municipalities or other non-federal level authorities of Russia or taximplications arising for the Noteholders applying special tax regimes available under Russian taxlegislation. Similarly this summary does not seek to address the availability of double tax treaty relief toor the eligibility of double tax treaty relief of any Noteholder in respect of income payable to thatNoteholder, or practical difficulties involved in obtaining such double tax treaty relief.

The analysis set out herein does not include any comments on tax implications which could arise forthe Noteholders in connection with entering into REPO or stock lending transactions with the Notes orinto term deals, derivatives or any similar types of transactions with the Notes.

Prospective investors should consult their own tax advisors regarding the tax consequences ofinvesting in the Notes in their own particular circumstances. No representation with respect to theRussian tax consequences pertinent to any particular Noteholder is made hereby.

Many aspects of Russian tax laws and regulations are subject to significant uncertainty and lack ofinterpretive guidance resulting in different interpretations and inconsistent application thereof by thevarious authorities in practice. Further, the substantive provisions of Russian tax laws and regulationsapplicable to financial instruments may be subject to more rapid and unpredictable changes (possiblywith the retroactive effect) and inconsistent interpretations as compared to jurisdictions with moredeveloped capital markets and tax systems. The interpretation and application of such provisions will,in practice, rest substantially with local tax inspectorates and such interpretations may often beinconsistent and/or may often change.

In practice, interpretation and application of tax laws and regulations by different tax inspectorates inRussia and their representatives may be inconsistent or contradictory, and may result in the impositionof conditions, requirements or restrictions that are not explicitly stated by the law. Similarly, in theabsence of binding precedent, court rulings on tax or other related matters taken by different courtsrelating to the same or similar circumstances may also be inconsistent or contradictory.

For the purposes of this summary, a “Resident Noteholder” means:

• a Noteholder who is an individual and satisfies the criteria for being a Russian tax resident. A“Russian tax resident” is an individual who is present in the Russian Federation in aggregatefor 183 calendar days or more in any period comprised of 12 consecutive months;

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• a Russian legal entity or an organization, that purchases, holds and disposes the Notes;

• a legal entity or an organization, in each case organized under a non-Russian law, thatpurchases, holds and disposes the Notes through its permanent establishment in Russia.

For the purposes of this summary, a “Non-Resident Noteholder” means:

• a legal entity or an organization in each case not organized under Russian law whichacquires, holds and disposes the Notes otherwise than through a permanent establishment inRussia (the “Non-Resident Noteholder—Legal Entity”); or

• a Noteholder who is an individual and does not satisfy the criteria for being a Russian taxresident as defined above (the (“Non-Resident Noteholder—Individual”).

For the purposes of this summary, the definitions of “Resident Noteholder” and “Non-ResidentNoteholder” in respect of individuals are taken at face value based on the wording of Russian tax lawas currently written. In practice, however, the application of the above formal residency definition maydiffer based on the position of the Russian tax authorities. The law is currently worded in a way thatimplies the potential for a split year residency for individuals. However, both the Russian Ministry ofFinance and the Russian tax authorities have expressed the view that an individual should be eithertax resident or non-resident in the Russian Federation for the full calendar year and consequently evenwhere the travel pattern dictates a differing tax residency status for a part of the tax year, theapplication of the residency tax rate may in practice be disallowed.

Tax residency rules and the Russian Federation’s rights with regard to taxation may be affected by theapplicable double tax treaty. The Russian tax treatment of payments under the Guarantees made bythe Guarantors to the Issuer (or to the Trustee, as the case may be) may affect the Noteholders. See“—Taxation of Payments under the Guarantees” below.

Taxation of the Notes

Resident Noteholders

Resident Noteholders will be subject to all applicable Russian taxes in respect of income derived bythem in connection with the acquisition, ownership and/or disposition of the Notes.

Resident Noteholders should consult their own tax advisors with respect to the effect that theacquisition, holding and disposition of the Notes may have on their tax position.

Non-Resident Noteholders

A Non-Resident Noteholder should not be subject to any Russian taxes in respect of payments ofinterest and repayments of principal on the Notes received from the Issuer. A Non-Resident Noteholderalso generally should not be subject to any Russian taxes in respect of any gains or other incomerealized on redemption, sale or other disposition of the Notes outside Russia, provided that theproceeds from such redemption, sale or other disposition of the Notes are not received from a sourcewithin the Russian Federation. However, in the absence of a clear definition of what constitutes incomefrom sources within Russia in case of sale of securities, there is a risk that the income from dispositionof the Notes may be considered as received from Russian sources for Non-Resident Noteholders—Individuals.

Taxation of Non-Resident Noteholders—Legal Entities

Acquisition of the Notes

The acquisition of the Notes by Non-Resident Noteholder—Legal Entities should not constitute ataxable event under Russian tax law. Consequently, the acquisition of the Notes should not trigger anyRussian tax implications for the Non-Resident Noteholder—Legal Entities.

Disposition of the Notes

In the event that proceeds from a redemption, sale or other disposition of the Notes are received froma source within the Russian Federation, a Non-Resident Noteholder—Legal Entities should not be

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subject to any Russian withholding tax on any gain on sale or other disposition of the Notes, althoughthere is some residual uncertainty regarding the tax treatment of the portion of the sales or disposalproceeds, if any, attributable to accrued interest on the relevant Notes. The risk of withholding tax wassubstantially mitigated by the recent changes to the Russian Tax Code (i.e. Law 97-FZ).

Non-Resident Noteholders—Legal Entities should consult their own tax advisors with respect to the taxconsequences of the sale or other disposition of the Notes and of the receipt of proceeds from asource within the Russian Federation.

Taxation of a Non-Resident Noteholders—Individuals

Acquisition of the Notes

The acquisition of the Notes by Non-Resident Noteholders—Individuals, may constitute a taxable eventfor Russian personal income tax purposes pursuant to provisions of the Russian Tax Code relating tothe material benefit (deemed income) received by individuals as a result of acquisition of securities (incase the Notes are initially issued at par, these provisions are likely to be relevant for the acquisitionsof the Notes in the secondary market only). In particular, if the acquisition price of the Notes is belowthe lower margin of the fair market value of the Notes calculated under a specific procedure for thedetermination of market prices of securities for tax purposes, the difference may become subject to theRussian personal income tax at the rate of 30 percent (or such other tax rate as may be effective at thetime of acquisition), arguably subject to reduction or elimination under the applicable double tax treaty.

Under the Russian tax legislation, taxation of income derived by Non-Resident Noteholders—Individuals will depend on whether this income is qualified as received from Russian or non-Russiansources. Since the Russian Tax Code does not contain any provisions in relation to how the relatedmaterial benefit should be sourced, in practice the Russian tax authorities may infer that such incomeshould be considered as Russian source income, if the Notes are purchased “in Russia”. In theabsence of any additional guidance as to what should be considered as a purchase of securities “inRussia”, the Russian tax authorities may apply various criteria to determine the source of the relatedmaterial benefit, including looking at the place of conclusion of the acquisition transaction, the locationof the Issuer, or other similar criteria. There is no assurance therefore that as a result any materialbenefit received by the Non-Resident Noteholders—Individuals in connection with the acquisition of theNotes will not become taxed in Russia.

Disposition of the Notes

Subject to any available tax treaty relief, if the receipt of proceeds from the disposition of the Notes bya Non-Resident Noteholder—Individual, is classified as income from a source within the RussianFederation for Russian personal income tax purposes and, as such, will be subject to Russian personalincome tax at the rate of 30 percent (or such other tax rate as may be effective at the time of payment)on the gross amount.

Since the Russian Tax Code does not contain any additional guidance as to when the sales or disposalproceeds should be deemed to be received from Russian sources, in practice the Russian taxauthorities may assert that such income should be considered as Russian source income if the Notesare sold or disposed “in Russia”. In absence of any additional guidance as to what should beconsidered as a sale or other disposal of securities “in Russia”, the Russian tax authorities may applyvarious criteria in order to determine the source of the sale or other disposal, including looking at theplace of conclusion of the transaction, the location of the purchaser, or other similar criteria. There isno assurance therefore that as a result sales or disposal proceeds received by the Non-ResidentNoteholders—Individual will not become taxed in Russia.

The tax will apply to the gross amount of sales or disposal proceeds received upon the disposition ofthe Notes decreased by the amount of any available duly documented cost deductions (including theoriginal acquisition costs and other documented expenses related to the acquisition, holding and saleor other disposal of the Notes) provided that such documentation is duly executed and is provided tothe person obliged to calculate and withhold the tax in a timely manner. There is a risk that, if thedocumentation supporting the cost deductions is deemed insufficient by the Russian tax authorities orthe person remitting the respective income to a Non-Resident Noteholder—Individual (where such

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person is considered as the tax agent obliged to calculate and withhold Russian personal tax and remitit to the Russian budget), the deduction will be disallowed and Russian personal income tax will applyto the gross amount of sales or disposal proceeds.

In certain circumstances if the sale and/or disposal proceeds are paid to a Non-Resident Noteholder—Individual by a licensed broker or an asset manager that is a Russian legal entity or organization or anyother person located in Russia (including a foreign company with a permanent establishment or anyregistered presence in Russia or an individual entrepreneur located in Russia), carrying out operationsfor the benefit of the Non-Resident Noteholder—Individual under an asset management agreement, abrokerage service agreement, an agency agreement, a commission agreement or a commercialmandate agreement, the applicable Russian personal income tax at the rate of 30 percent (or suchother tax rate as may be in force at the time of payment) will be withheld at source by that personconsidered as the tax agent.

If the Notes are sold by a Non-Resident Noteholder—Individual to legal entities, organizations (otherthan licensed brokers, asset managers or other legal entities mentioned in preceding paragraph) orindividuals, generally no Russian personal income tax should be withheld at source by these persons.The Non-Resident Noteholder—Individual will be required to file a personal income tax returnindividually, report on the amount of income realized to the Russian tax authorities and apply for adeduction in the amount of acquisition and other expenses relating to the purchase, holding and sale orother disposal of the Notes confirmed by the supporting documentation. The applicable personalincome tax would then have to be paid by the Non-Resident Noteholder—Individual on the basis of thefiled personal income tax return.

Under certain circumstances, gains received and losses incurred by a Non-Resident Noteholder—Individual as a result of the sale or other disposal of the Notes and other securities of the samecategory occurring within the same tax year may be aggregated for the Russian personal income taxpurposes, which would affect the total amount of income of a Non-Resident Noteholder—Individualsubject to taxation in Russia.

There is also a risk that any gain derived by a Non-Resident Noteholder—Individual from the sale orother disposal of the Notes may be affected by changes in the exchange rate between the currency ofthe acquisition of the Notes, the currency of the sale or other disposal of the Notes and rubles.

Non-Resident Noteholders—Individuals should consult their own tax advisors with respect to taxconsequences of the purchase of the Notes, sale or other disposition of the Notes, including the receiptof sales proceeds from a source within Russia further to their disposition.

Tax Treaty Relief

The Russian Federation has concluded double tax treaties with a number of countries and honorssome double tax treaties concluded by the former Union of Soviet Socialist Republics. These doubletax treaties may contain provisions allowing to reduce or eliminate Russian withholding tax due withrespect to income receivable by Non-Resident Noteholders from Russian sources (including incomefrom the disposition of the Notes). In order to obtain the benefits available under the applicable doubletax treaties, Non-Resident Noteholders must comply with the certification, information, and reportingrequirements which are in force in the Russian Federation (relating, in particular, to the confirmation ofthe entitlement and eligibility to treaty benefits).

Under the Russian domestic legislation, in order to enjoy benefits of the applicable double tax treaty, aNon-Resident Noteholder—Individual will have to provide the Russian tax authorities with a taxresidency certificate, issued by the competent authorities in his/her country of residence for taxpurposes and a confirmation from the relevant foreign tax authorities of income received and the taxpayment made outside the Russian Federation on income with respect to which double tax treatybenefits are claimed. Such requirements may be imposed even if they directly contradict provisions ofthe respective double tax treaty. Technically, these requirements mean that a Non-ResidentNoteholder—Individual would not be able to rely on the applicable double tax treaty until he or shepays the tax in relation to this income in the jurisdiction of his/her tax residency. Individuals in practicewould not be able to obtain the advance treaty relief in relation to income derived by them from

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Russian sources, as it is very unlikely that the supporting documentation for the treaty relief can beprovided to the Russian tax authorities and, consequently, approval from the latter can be obtainedbefore the receipt of income by a Non-Resident Noteholder—Individual occurs.

Non-Resident Noteholders should consult their own tax advisors regarding possible tax treaty reliefand procedures required to be fulfilled for obtaining such relief with respect to any Russian taxesimposed in respect of proceeds received in connection with the acquisition, holding and disposition ofthe Notes.

Refund of Tax Withheld

If Russian withholding tax applicable to income derived from Russian sources by a Non-ResidentNoteholder—Legal Entity was withheld at source, despite the release from Russian withholding taxenvisaged by the Russian tax law, a claim for a refund of the Russian income tax that was excessivelywithheld at source can be filed by this Non-Resident Noteholder—Legal Entity with the Russian taxauthorities within three years from the end of the tax period in which the tax was withheld.

If Russian personal income tax applicable to income derived from Russian sources by a Non-ResidentNoteholder—Individual for whom double tax treaty relief is available was withheld at source despite theright of this Non-Resident Noteholder—Individual to rely on benefits of the applicable double tax treatyallowing not to pay the tax in Russia or allowing to pay the tax at the reduced rate in relation to thisincome, a claim for a refund of Russian personal tax which was excessively withheld at source may befiled with the Russian tax authorities within one year following the year in which the tax was withheld.

Although the Russian Tax Code arguably contains the exhaustive list of documents and informationwhich have to be provided by the foreign person to the Russian tax authorities for the tax refundpurpose, the Russian tax authorities may, in practice, require a wide variety of documentationconfirming the right of a Non-Resident Noteholder to obtain tax relief available under the applicabledouble tax treaty. Such documentation may not be explicitly required by the Tax Code and may to alarge extent depend on the position of local representatives of the tax inspectors. In practice, the taxauthorities may be more willing to take a more formalistic approach in relation to the approval of the taxrefund.

Obtaining a refund of Russian taxes that were excessively withheld at source is likely to be a timeconsuming process and no assurance can be given that such a refund will be granted to aNon-Resident Noteholder in practice.

Non-Resident Noteholders should consult their own tax advisors regarding procedures required to befulfilled in order to obtain the refund of Russian income taxes which were excessively withheld atsource.

Taxation of Payments under the Guarantees

Russian tax legislation in respect of withholding tax on guarantee payments to non-residents isunclear. Non-Resident Noteholders should consult their own tax advisors with respect to the taxconsequences of the receipt of any payments under the Guarantees, including applicability of anyavailable double tax treaty relief.

In general, no withholding tax obligations should arise upon making payments under Guarantees bythe Russian Guarantors to Non-Resident Noteholders—Legal Entities by virtue of the exemptionenvisaged by Law 97-FZ.

Law 97-FZ provides that Russian companies which make payments in favor of foreign legal entitiesupon the execution of the guarantee or suretyship should be fully released from the obligation towithhold tax from such payments provided that the following conditions are all met:

(1) payments under a guarantee or suretyship relate to the “issued bonds” placed by a foreign entityin order to fund a debt to a Russian entity, where “issued bonds” are defined as bonds or otherdebt obligations (a) listed and/or admitted to trading on one of the specified foreign exchangesand/or (b) that have been registered in foreign depository/clearing organizations;

The lists of qualifying foreign exchanges and foreign depositary/clearing organizations should beadopted by the Federal Service for Financial Markets and agreed upon by the Russian Ministry of

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Finance. Before the adoption of the above mentioned lists, any foreign exchanges or foreigndepositary/clearing organizations could qualify for the purposes of the test mentioned above. Itremains unclear whether borrowers will be exempted from the obligation to act as tax agents afterthe lists of foreign stock exchanges and foreign depository/clearing organizations areapproved—if, for example, bonds are admitted for trading on a foreign exchange before the list ofexchanges is approved, and this foreign exchange is not subsequently included in the list. It isexpected that the Note rights to which are registered in such depository/clearing systems asEuroclear, Clearstream, Luxembourg and DTC and/or which are listed and/or admitted for tradingon the London Stock Exchange should qualify for the “issued bonds”. However, there can be noassurance that these depository/clearing systems and exchange will be included into the list of theFederal Financial Markets Service.

The connection between the payments and the issued bonds should be evident and supportedwith documents, which are set forth in Law 97-FZ.

(2) there is a double tax treaty between Russia and the jurisdiction of tax residence of incomerecipient (i.e. the respective Noteholder) which can be confirmed by a tax residency certificate.

The release from the obligation to withhold tax from interest and other payments described hereinwill apply to income paid on issued bonds (such as the Notes) that are placed before 1 January2014.

It should be noted that there can be no assurance that the Russian withholding tax would not beimposed on the payments made under the Guarantees to the Non-Resident Noteholders—LegalEntities not residing for tax purposes in countries which have concluded a double tax treaty withRussia. In such case there is a risk that Russian withholding tax would be imposed on the full amountof the Guarantee payment, including the principal amount of the Notes. Since the above could only berelevant in case of payments made in favor of the Non-Resident Noteholders—Legal Entities residingfor tax purposes in countries which does not have a double tax treaty with Russia, reduction orelimination of 20 per cent. Russian withholding tax on the basis of the double tax treaties under suchcircumstances should not be possible.

Importantly, Law 97-FZ does not provide an exemption to the foreign interest income recipients fromRussian withholding tax, although currently there is no requirement in the Russian tax legislation forforeign income recipients which are the legal entities to self-assess and pay the tax to the Russian taxauthorities. The Russian Ministry of Finance has acknowledged in an information letter published on itswebsite that the release from the obligation to act as a tax agent means, in effect, that tax at sourcewithin Russia should not arise in connection with Eurobonds, since there is neither a mechanism norobligation for a non-resident to independently calculate and pay such tax. There can be no assurancethat such rules will not be introduced in the future or that the Russian tax authorities would not makeattempts to collect the tax from the foreign income recipients including the Non-ResidentNoteholders—Legal Entities and/or the Trustee.

Payments under the Guarantees, as the case may be, to a Non-Resident Noteholder—Individual, maybe subject to Russian tax as such income may be treated as a Russian source income. In this case,depending on how these payments would be effected, either the full amount of payments, or a part ofsuch payments covering the interest on the Notes, could be subject to personal income tax at the rateof 30 percent, which may be withheld at the source or payable on a self-assessed basis. The tax maybe reduced or eliminated pursuant to the provisions of any applicable double tax treaty.

The treaty relief and refund procedures should generally be similar to the tax relief and refundprocedures described above with respect to proceeds from disposal of the Notes.

Pursuant to the Trust Deed payments under the Guarantees that relate to interest and principal on theNotes will be paid to the Trustee.

If payments under the Guarantees become subject to the Russian withholding tax (as a result of whichthe Russian Guarantors would have to reduce payments made under the Guarantees by the amount oftax withheld), the Russian Guarantors will be obliged (subject to certain conditions) to increasepayments under the Guarantees as may be necessary so that the net payments received by theTrustee acting on behalf of the Noteholders will be equal to the amounts it would have received in theabsence of such withholding.

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It is currently unclear whether the provisions obliging the Russian Guarantors to gross up paymentsunder the Guarantees will be enforceable under the Russian laws. There is a risk that gross up forwithholding tax will not take place and that the payments made by the Guarantors under theGuarantees will be reduced by the amount of the Russian income tax withheld by the Guarantors at therate of 20 percent (in the case of Non-Resident Noteholders—Legal Entities) or at a rate of 30 percent.(in the case of Non-Resident Noteholders—Individuals), or such other rate as may be in force at thetime of payment.

VAT on Payments under the Guarantee

Any payments under the Guarantees made by the Guarantors should not be subject to Russian VAT.

Irish Taxation

The following is a summary of the principal Irish tax consequences for individuals and companies ofownership of the Notes based on the laws and practice of the Irish Revenue Commissioners currentlyin force in Ireland and may be subject to change. It deals with Noteholders who beneficially own theirNotes as an investment. Particular rules not discussed below may apply to certain classes of taxpayersholding Notes, such as dealers in securities, trusts, etc. The summary does not constitute tax or legaladvice and the comments below are of a general nature only. Prospective investors in the Notesshould consult their professional advisers on the tax implications of the purchase, holding, redemptionor sale of the Notes and the receipt of interest thereon under the laws of their country of residence,citizenship or domicile.

Withholding Tax

In general, tax at the standard rate of income tax (currently 20 percent) is required to be withheld frompayments of Irish source interest which should include interest payable on the Notes. The Issuer willnot be obliged to make a withholding or deduction for or on account of Irish income tax from a paymentof interest on a Note where:

(a) the Notes are Quoted Eurobonds, i.e. securities which are issued by a company (such as theIssuer), which are listed on a recognized stock exchange (such as the Irish, London orLuxembourg Stock Exchanges) and which carry a right to interest; and

(b) the person by or through whom the payment is made is not in Ireland, or if such person is inIreland, either:

(i) the Notes are held in a clearing system recognized by the Irish Revenue Commissioners;(DTC, Euroclear and Clearstream, Luxembourg, are, amongst others, so recognized); or

(ii) the Noteholder is not resident in Ireland and has made a declaration to a relevant person(such as a paying agent located in Ireland) in the prescribed form; and

(c) one of the following conditions is satisfied:

(i) the Noteholder is resident for tax purposes in Ireland; or

(ii) the Noteholder is a pension fund, government body or other person (other than a persondescribed in paragraph (c)(iv) below), who is resident in a Relevant Territory (as definedbelow) and who, under the laws of that territory is exempted from tax that generallyapplies to profits, income or gains in that territory; or

(iii) the Noteholder is subject, without any reduction computed by reference to the amount ofsuch interest or other distribution, to a tax in a Relevant Territory which generally appliesto profits, income or gains received in that territory, by persons, from sources outside thatterritory; or

(iv) the Noteholder is not a company which, directly or indirectly, controls the Issuer, iscontrolled by the Issuer, or is controlled by a third company which also directly orindirectly controls the Issuer, and neither the Noteholder, nor any person connected withthe Noteholder, is a person or persons:

i. from whom the Issuer has acquired assets;

ii. to whom the Issuer has made loans or advances; or

iii. with whom the Issuer has entered into a Swap Agreement,

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where the aggregate value of such assets, loans, advances or Swap Agreementsrepresents not less than 75 per cent. of the assets of the Issuer, or

(v) the Issuer is not aware at the time of the issue of any Notes that any Noteholder of thoseNotes is (i) a person of the type described in (c)(iv) above AND (ii) is not subject, withoutany reduction computed by reference to the amount of such interest or other distribution,to a tax in a Relevant Territory which generally applies to profits, income or gainsreceived in that territory, by persons, from sources outside that territory,

where for these purposes, the term

“Relevant Territory” means a member state of the European Union (other than Ireland) ora country with which Ireland has signed a double tax treaty; and

“Swap Agreement” means any agreement, arrangement or understanding that—

(i) provides for the exchange, on a fixed or contingent basis, of one or morepayments based on the value, rate or amount of one or more interest rates, currencies,commodities, securities, instruments of indebtedness, indices, quantitative measures, orother financial or economic interests or property of any kind, or any interest therein orbased on the value thereof, and

(ii) transfers to a person who is a party to the agreement, arrangement orundertaking, or to a person connected with that person, in whole or in part, the financialrisk associated with a future change in any such value, rate or amount without alsoconveying a current or future direct or indirect ownership interest in the asset (includingany enterprise or investment pool) or liability that incorporates the financial risk sotransferred.

Thus, so long as the Notes continue to be quoted on the London Stock Exchange, are held in aclearing system recognized by the Irish Revenue Commissioners (DTC, Euroclear and Clearstream,Luxembourg, are, amongst others, so recognized), and one of the conditions set out in paragraph(c) above is met, interest on the Notes can be paid by any Paying Agent acting on behalf of the Issuerfree of any withholding or deduction for or on account of Irish income tax. If the Notes continue to bequoted but cease to be held in a recognized clearing system, interest on the Notes may be paid withoutany withholding or deduction for or on account of Irish income tax provided such payment is madethrough a Paying Agent outside Ireland, and one of the conditions set out in paragraph (c) above ismet.

Encashment Tax

Irish tax will be required to be withheld at the standard rate of income tax (currently 20 per cent.) frominterest on any Note, where such interest is collected or realized by a bank or encashment agent inIreland on behalf of any Noteholder. There is an exemption from encashment tax where the beneficialowner of the interest is not resident in Ireland and has made a declaration to this effect in theprescribed form to the encashment agent or bank.

Income Tax, PRSI and Universal Social Charge

Notwithstanding that a Noteholder may receive interest on the Notes free of withholding tax, theNoteholder may still be liable to pay Irish tax with respect to such interest. Noteholders resident orordinarily resident in Ireland who are individuals may be liable to pay Irish income tax, social insurance(PRSI) contributions and the universal social charge in respect of interest they receive on the Notes.

Interest paid on the Notes may have an Irish source and therefore may be within the charge to Irishincome tax. In the case of Noteholders who are non-resident individuals such Noteholders may also beliable to pay the universal social charge in respect of interest they receive on the Notes.

Ireland operates a self-assessment system in respect of tax and any person, including a person who isneither resident nor ordinarily resident in Ireland, with Irish source income comes within its scope.

There are a number of exemptions from Irish income tax available to certain non-residents. Firstly,interest payments made by the Issuer are exempt from income tax so long as the Issuer is a qualifyingcompany for the purposes of Section 110 of the TCA, the recipient is not resident in Ireland and is

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resident in a Relevant Territory and, the interest is paid out of the assets of the Issuer. Secondly,interest payments made by the Issuer in the ordinary course of its business are exempt from incometax provided the recipient is not resident in Ireland and is a company which is either resident in aRelevant Territory which imposes a tax that generally applies to interest receivable in that RelevantTerritory by companies from sources outside that Relevant Territory or, in respect of the interest isexempted from the charge to Irish income tax under the terms of a double tax agreement which iseither in force or which is not yet in force but which will come into force once all ratification procedureshave been completed. Thirdly, interest paid by the Issuer free of withholding tax under the quotedEurobond exemption is exempt from income tax, where the recipient is a person not resident in Irelandand resident in a Relevant Territory. Finance Act 2012 extends the foregoing exemption to companieswhich are under the control, whether directly or indirectly, of person(s) who by virtue of the law of aRelevant Territory are resident for the purpose of tax in a Relevant Territory and are not under thecontrol of person(s) who are not so resident, and to 75% subsidiary companies of a company orcompanies the principal class of shares in which is substantially and regularly traded on a recognizedstock exchange. For these purposes, residence is determined under the terms of the relevant doubletaxation agreement or in any other case, the law of the country in which the recipient claims to beresident. Interest falling within the above exemptions is also exempt from the universal social charge.

Notwithstanding these exemptions from income tax, a corporate recipient that carries on a trade inIreland through a branch or agency in respect of which the Notes are held or attributed, may have aliability to Irish corporation tax on the interest.

Relief from Irish income tax may also be available under the specific provisions of a double tax treatybetween Ireland and the country of residence of the recipient.

Interest on the Notes which does not fall within the above exemptions is within the charge to incometax, and, in the case of Noteholders who are individuals, is subject to the universal social charge. In thepast the Irish Revenue Commissioners have not pursued liability to tax in respect of persons who arenot regarded as being resident in Ireland except where such persons have a taxable presence of somesort in Ireland or seek to claim any relief or repayment in respect of Irish tax. However, there can be noassurance that the Irish Revenue Commissioners will apply this treatment in the case of anyNoteholder.

Capital Gains Tax

A Noteholder will not be subject to Irish tax on capital gains on a disposal of Notes unless such holderis either resident or ordinarily resident in Ireland or carries on a trade or business in Ireland through abranch or agency in respect of which the Notes were used or held.

Capital Acquisitions Tax

A gift or inheritance comprising of Notes will be within the charge to capital acquisitions tax (whichsubject to available exemptions and reliefs, will be levied at 30 percent if either (i) the disponer or thedonee/successor in relation to the gift or inheritance is resident or ordinarily resident in Ireland (or, incertain circumstances, if the disponer is domiciled in Ireland irrespective of his residence or that of thedonee/successor) on the relevant date or (ii) if the Notes are regarded as property situate in Ireland(i.e. if the Notes are physically located in Ireland or if the register of the Notes is maintained inIreland)).

Stamp Duty

No stamp duty or similar tax is imposed in Ireland (on the basis of an exemption provided for inSection 85(2)(c) of the Irish Stamp Duties Consolidation Act, 1999 so long as the Issuer is a qualifyingcompany for the purposes of Section 110 of the TCA and the proceeds of the Notes are used in thecourse of the Issuer’s business), on the issue, transfer or redemption of the Notes.

EU Directive on Taxation of Savings Income

Ireland has implemented the EC Council Directive 2003/48/EC on the taxation of savings income intonational law. Accordingly, any Irish paying agent making an interest payment on behalf of the Issuer toan individual or certain residual entities resident in another Member State of the European Union or

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certain associated and dependent territories of a Member State will have to provide details of thepayment and certain details relating to the Noteholder (including the Noteholder’s name and address)to the Irish Revenue Commissioners who in turn are obliged to provide such information to thecompetent authorities of the state or territory of residence of the individual or residual entity concerned.The Issuer shall be entitled to require Noteholders to provide any information regarding their tax status,identity or residency in order to satisfy the disclosure requirements in Directive 2003/48/EC andNoteholders will be deemed by their subscription for Notes to have authorized the automatic disclosureof such information by the Issuer or any other person to the relevant tax authorities.

Bermuda Taxation

At the date hereof, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capitaltransfer tax, estate duty or inheritance tax payable by the Issuer or its members, other than membersordinarily resident in Bermuda. Further, no such tax is imposed by withholding or otherwise on anypayment to be made to or made by the Issuer.

An assurance has been received from the Minister of Finance of Bermuda under the ExemptedUndertakings Tax Protection Act 1966 to the effect that, in the event of there being enacted inBermuda any legislation imposing tax computed on profits or income, or computed on any capitalassets, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, such tax shall notuntil March 31, 2035, be applicable to the Issuer or to any of its operations or to the shares, debenturesor other obligations of the Issuer except in so far as such tax applies to persons ordinarily resident inBermuda and holding such shares, debentures or other obligations of the Issuer or to any land leasedor let to the Issuer.

United Kingdom Taxation

The following summary is a general description of certain UK tax considerations relating to the Notesand does not purport to be a complete analysis of all tax considerations relating to the Notes. It relatesonly to the position of investors who are the absolute beneficial owners of the Notes and does notnecessarily apply to certain classes of person (such as brokers, dealers or traders in securities) orwhere the income is deemed for tax purposes to be the income of any other person. Furthermore, thediscussion below is generally based upon the provisions of UK tax law and published practice of HMRevenue & Customs (“HMRC”) as of the date of this Prospectus, and such provisions may berepealed, revoked or modified, possibly with retroactive effect so as to result in UK tax consequencesdifferent from those discussed below. A Holder who is subject to tax in any other jurisdiction or who isin any doubt as to his tax position should seek his own professional advice.

Withholding Tax

Payments of interest on the Notes may be made without withholding on account of UK tax, on thebasis that the interest is not UK source interest.

Stamp Duty and Stamp Duty Reserve Tax

It is expected that no UK stamp duty or stamp duty reserve tax will be payable on issue of the Notes ora transfer of the Notes.

Provision of Information

Any Paying Agent or other person paying interest to, or receiving interest on behalf of, another personwho is an individual (whether resident in the UK or elsewhere), may be required to provide informationin relation to the payment and the payee or person entitled to the interest to HMRC. HMRC maycommunicate information to the tax authorities of other jurisdictions. Interest for these purposes mayinclude, in certain circumstances, payments of amounts due on redemption of Notes if the Notesconstitute “deeply discounted securities” (as defined in section 430 of the Income Tax (Trading andOther Income) Act 2005). In this regard, HMRC published guidance for the year 2012/2013 indicatingthat HMRC will not exercise its power to obtain financial information in relation to such payments in thatyear. See also page 227 below for a description of the obligations to provide reports of or withhold taxfrom payments of savings income under Council Directive 2003/48/EC.

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United States Taxation

General

The following discussion summarizes certain U.S. federal income tax consequences relevant to theacquisition, ownership, disposition and retirement of the Notes by a U.S. Noteholder (as definedbelow), and does not purport to be a complete analysis of all potential tax considerations. Thisdiscussion only applies to Notes that are held as capital assets and that are purchased in the initialoffering at the initial offering price, by U.S. Noteholders. This discussion does not describe all of theU.S. federal income tax consequences that may be relevant to U.S. Noteholders in light of theirparticular circumstances or to U.S. Noteholders subject to special treatment under U.S. federal incometax law, such as financial institutions; tax-exempt organizations; insurance companies; real estateinvestment trusts; regulated investment companies; entities treated as partnerships for U.S. federalincome tax purposes; traders or dealers in securities; persons holding Notes as part of a straddle,hedge, conversion transaction or other integrated transaction; persons liable for the alternativeminimum tax; or certain former citizens or residents of the United States. This summary also does notaddress tax consequences to U.S. Noteholders whose “functional currency” is not the U.S. dollar.Persons considering the purchase of Notes are urged to consult their tax advisors with regard to theapplication of the U.S. federal income tax laws to their particular situations as well as any taxconsequences arising under the laws of any state, local or foreign taxing jurisdiction. Furthermore, thisdiscussion does not describe the effect of U.S. federal estate and gift tax laws or the effect of anyapplicable foreign, state or local law.

This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), Treasuryregulations promulgated thereunder (the “Treasury Regulations”), administrative pronouncementsand judicial decisions, each as available and in effect on the date hereof. All of the foregoing aresubject to change (possibly with retroactive effect) or differing interpretations which could affect the taxconsequences described herein. The Issuer has not and will not seek any rulings or opinions from theInternal Revenue Service (the “IRS”) with respect to the matters discussed below. There can be noassurance that the IRS will not take a different position concerning the tax consequences of theacquisition, ownership or disposition of the Notes or that any such position would not be sustained.

TO ENSURE COMPLIANCE WITH U.S. TREASURY DEPARTMENT CIRCULAR 230,NOTEHOLDERS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF UNITED STATESFEDERAL TAX ISSUES IN THIS OFFERING MEMORANDUM IS NOT INTENDED OR WRITTEN TOBE RELIED UPON, AND CANNOT BE RELIED UPON, BY NOTEHOLDERS FOR THE PURPOSE OFAVOIDING PENALTIES THAT MAY BE IMPOSED ON NOTEHOLDERS UNDER THE INTERNALREVENUE CODE; (B) SUCH DISCUSSION IS INCLUDED HEREIN BY THE ISSUER INCONNECTION WITH THE PROMOTION OR MARKETING (WITHIN THE MEANING OFCIRCULAR 230) BY THE ISSUER OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN;AND (C) NOTEHOLDERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULARCIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

For purposes of this summary, a “U.S. Noteholder” is a beneficial owner of Notes, who is for U.S.federal income tax purposes:

• a citizen or individual resident of the United States;

• a corporation or other entity subject to tax as a corporation for U.S. federal income taxpurposes created or organized in or under the laws of the United States or any state thereof(including the District of Columbia);

• an estate the income of which is subject to U.S. federal income taxation regardless of itssource; or

• a trust (1) that has a valid election in effect to be treated as a U.S. person for U.S. federalincome tax purposes, or (2) (a) the administration of which a U.S. court can exercise primarysupervision over and (b) all of the substantial decisions of which one or more U.S. personshave the authority to control.

If a partnership (or other entity or arrangement treated as a partnership for U.S. federal income taxpurposes) holds Notes, the tax treatment of a partner will depend on the status of the partner and theactivities of the partnership. A U.S. Noteholder that is a partnership and partners in such partnershipshould consult their own tax advisors as to the tax consequences to them of acquiring, owning,disposing and retirement of Notes.

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Interest and Original Issue Discount

The Treasury Regulations provide special rules for debt instruments that provide for certain alternativepayment schedules that apply upon the occurrence of contingencies. Under these rules, if a singlepayment schedule for a debt instrument is significantly more likely than not to occur as of the issuedate, holders account for interest and original issue discount (“OID”), if any, based on that paymentschedule. Based on our assessment of the likelihood of Step-Up Interest payments being made, weintend to take the position that, for purposes of these rules, it is significantly more likely than not thatwe will not be required to make any Step-Up Interest payments, and the remainder of this discussionassumes this treatment.

The Notes may be issued with OID for U.S. federal income tax purposes. The amount of OID on aNote, if any, will equal the excess of the Note’s “stated redemption price at maturity” over its “issueprice” unless such excess is de minimis (i.e., less than one-quarter of one percent of the statedredemption price at maturity multiplied by the number of complete years to maturity). The “issue price”of a Note will equal the first price at which a substantial amount of Notes are sold for money, excludingsales to underwriters, placement agents or wholesalers. The “stated redemption price at maturity” willequal the Note’s face amount.

Each U.S. Noteholder, regardless of such U.S. Noteholder’s accounting method, generally mustinclude in ordinary income (in addition to including stated interest as ordinary interest income inaccordance with such U.S. Noteholder’s regular method of accounting) a portion of any OID for eachday during each taxable year in which a note is held, determined by using a constant yield-to-maturitymethod that reflects compounding of interest. The amount of such inclusions will generally increaseover time. This means that such U.S. Noteholder will be required to include amounts in income withouta corresponding receipt of cash attributable to such income.

In the event that step-up interest payments are made in accordance with Condition 5.2, then solely forpurposes of determining the amount and inclusion of OID, a Note will be treated as retired and thenreissued for an amount equal to its adjusted issue price (i.e., its issue price, increased by theaggregate amount of OID that has accrued on the Note, and decreased by any payments previouslymade of amounts included in the stated redemption price at maturity of the Note) on that date, and theamount of OID accruing under the Notes will be recalculated at that time.

Withholding and Payment of Additional Amounts

If any non-U.S. taxes are withheld with respect to interest payments on the Notes, a U.S. Noteholderwould be required to include in ordinary taxable income any additional amounts (as described underCondition 8) paid and any tax withheld from the interest payment, notwithstanding that such withheldtax is not in fact received by the U.S. Noteholder. A U.S. Noteholder may be eligible, subject to anumber of limitations, for a deduction or U.S. foreign tax credit with respect to any non-U.S. taxwithheld. Interest on the Notes will generally be treated as foreign source income for U.S. federalincome tax purposes, and for purposes of certain limitations imposed on the United States foreign taxcredit, generally will be considered passive income. Non-U.S. taxes withheld or imposed in respect ofthe Notes other than on a payment of interest or OID may not be creditable or may be creditable only ifthe U.S. Noteholder has foreign source income of the appropriate type. The rules relating to U.S.foreign tax credits or deductions and the timing thereof are extremely complex and U.S. Noteholdersshould consult their own tax advisors with regard to the availability of a U.S. foreign tax credit ordeduction and the application of the U.S. foreign tax credit limitations to their particular situations.

Sale, Exchange, Retirement or Other Disposition

Upon the sale, exchange, retirement or other disposition of a Note, a U.S. Noteholder generally willrecognize capital gain or loss equal to the difference between the amount realized on the sale,exchange, retirement or other disposition (other than accrued but unpaid interest which will be taxableas ordinary income to the extent not yet included in income by the U.S. Noteholder) and the U.S.Noteholder’s adjusted tax basis in such Note. A U.S. Noteholder’s adjusted tax basis in a Notegenerally should equal the cost of the Note to such U.S. Noteholder, increased by any accrued OIDpreviously included in income and decreased by the amount of any payment other than stated interestpreviously made on the Note.

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Any capital gain or loss recognized on the disposition of a Note will generally be long-term capital gainor loss if the U.S. Noteholder has held the Note for more than one year. Long-term capital gain of anon-corporate U.S. Noteholder is generally subject to reduced rates of taxation. The deductibility ofcapital losses is subject to limitations.

In most circumstances, gain or loss realized by a U.S. Noteholder on the sale, exchange, retirement orother disposition of a Note generally will be treated as U.S. source income or loss, as the case may be,for U.S. foreign tax credit limitation purposes.

Contingent Payment Debt Instruments

It is possible that the alternative payment schedule rules described above do not apply to the Notes, inwhich case the Notes would be governed by provisions of the Treasury Regulations relating to“contingent payment debt instruments.” Under these regulations, the timing and amount of incomeinclusions and the character of income recognized may be different from the consequences discussedabove. U.S. Noteholders should consult their tax advisors about the application of the contingentpayment debt instrument regulations to the Notes.

Possible Effect of Substitution of the Issuer

Provided that certain conditions are satisfied, another entity may be substituted, without the consent ofthe Noteholders, as the principal obligor in respect of the Notes. Depending on the circumstances,such substitution could be treated as a deemed taxable exchange to a U.S. Noteholder of the Notes fornewly issued notes. U.S. Noteholders should consult their tax advisors regarding the consequences tothem of such a substitution.

It is possible that the Issuer, Guarantors or financial institutions through which payments on the Notesare made may be required to withhold U.S. tax at a rate of 30% on a portion of payments made after31 December 2016 pursuant to the passthru payment provisions of recently enacted legislation(“FATCA”) or a similar law implementing an intergovernmental approach to FATCA. This withholdingtax may be triggered in the event that the terms of the Notes are materially modified after 1 January2013, and the Issuer, Guarantor or other paying agent is considered to be a “foreign financialinstitution” (FFI) (as defined in FATCA) and certain other factors are present. While the IRS has issuedproposed regulations that address some aspects of FATCA, such proposed regulations do not addressthe scope of the withholding tax described above, and thus the possible application of FATCA tointerest, principal or other amounts paid with respect to the Notes is not clear. If an amount in respectof U.S. withholding tax were to be deducted or withheld from interest, principal or other payments onthe Notes, neither the Issuer nor the Guarantor nor any paying agent nor any other person would berequired to pay additional amounts as a result of the deduction or withholding of such tax. As a result,investors could receive less interest or principal than expected. U.S. Noteholders should consult theirtax advisers on how these rules may apply to payments they receive under the Notes.

EU Savings Directive

Under EC Council Directive 2003/48/EC on the taxation of savings income (the “Directive”), memberstates are required to provide to the tax authorities of other member states details of payments ofinterest or other similar income paid by a person within its jurisdiction to an individual (or certain othertypes of person) established in that other member state. However, Luxembourg and Austria areinstead required to operate a withholding system for a transitional period in relation to such paymentsmade by paying agents established in those countries unless, during such period, they elect to dootherwise. The transitional period will end after agreement on exchange of information is reachedbetween the European Union and certain non-European Union states. A number of non-EU countriesand territories have agreed to adopt similar measures.

The European Commission has proposed certain amendments to the Directive which may, ifimplemented, amend or broaden the scope of the requirements described above.

The attention of Noteholders is drawn to Condition 7.6 of the Terms and Conditions of the Notes.

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CERTAIN ERISA CONSIDERATIONS

ERISA imposes certain requirements on “employee benefit plans” (as defined in Section 3(3) ofERISA) subject to Title I of ERISA, including entities such as collective investment funds and separateaccounts whose underlying assets include the assets of such plans (collectively, “ERISA Plans”) andon those persons who are fiduciaries with respect to ERISA Plans. Investments by ERISA Plans aresubject to ERISA’s general fiduciary requirements, including the requirement of investment prudenceand diversification and the requirement that an ERISA Plan’s investments be made in accordance withthe documents governing the ERISA Plan. The prudence of a particular investment must bedetermined by the responsible fiduciary of an ERISA Plan by taking into account the ERISA Plan’sparticular circumstances and all of the facts and circumstances of the investment including, but notlimited to, the matters discussed under “Risk Factors” and the fact that in the future there may be nomarket in which such fiduciary will be able to sell or otherwise dispose of the Notes.

Section 406 of ERISA and Section 4975 of the Code, prohibit certain transactions involving the assetsof an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject toSection 4975 of the Code, such as individual retirement accounts (together with ERISA Plans,“Plans”)) and certain persons (referred to as “parties in interest” or “disqualified persons”) havingcertain relationships to such Plans, unless a statutory or administrative exemption is applicable to thetransaction. A party in interest or disqualified person who engages in a prohibited transaction may besubject to excise taxes and other penalties and liabilities under ERISA and Section 4975 of the Code.

Regulations promulgated by the United States Department of Labor at 29 C.F.R. Section 2510.3-101,as modified by Section 3(42) of ERISA (the “Plan Asset Regulation”), describe what constitutes theassets of a Plan with respect to the Plan’s investment in an entity for purposes of certain provisions ofERISA and Section 4975 of the Code, including the fiduciary responsibility and prohibited transactionprovisions of Title I of ERISA and Section 4975 of the Code. Under the Plan Asset Regulation, thepurchase with assets of a Plan of equity interests in the Issuer could, in certain circumstances, causethe assets of the Issuer to be deemed assets of the investing Plan which, in turn, would subject theIssuer and its assets to the fiduciary responsibility provisions of ERISA and the prohibited transactionprovisions of ERISA and Section 4975 of the Code. The Plan Asset Regulation defines an equityinterest as “any interest in an entity other than an instrument that is treated as indebtedness underapplicable local law and which has no substantial equity features.” Although there is no guidance underERISA on how this definition applies generally, and in particular, to a security issued by a specialpurpose entity such as the Issuer, because the Notes (a) are expected to be treated as indebtednessunder local law, and (b) should not be deemed to have any “substantial equity features,” purchases ofthe Notes should not be treated as equity investments and, therefore, the assets of the Issuer shouldnot be deemed to be assets of the investing Plans. These conclusions are based, in part, upon thetraditional debt features of the Notes, including the reasonable expectation of purchasers of the Notesthat the Notes will be repaid when due, as well as the absence of conversion rights, warrants and othertypical equity features. It should be noted, however, that the debt treatment of the Notes for ERISApurposes could change subsequent to their issuance (i.e., they could be treated as equity) if, forinstance, the Issuer incurs significant losses.

Whether or not the underlying assets of the Issuer are deemed to include “plan assets,” as describedabove, prohibited transactions within the meaning of Section 406 of ERISA or Section 4975 of theCode may arise if any Notes are acquired by a Plan with respect to which the Issuer, the Guarantors,the Joint Lead Managers, the Trustee or any of their respective affiliates are a party in interest or adisqualified person. Certain exemptions from the prohibited transaction provisions of Section 406 ofERISA and Section 4975 of the Code may be applicable, however, depending in part on the type ofPlan fiduciary making the decision to acquire Notes and the circumstances under which such decisionis made. There can be no assurance that any exemption will be available with respect to any particulartransaction involving the Notes, or that, if an exemption is available, it will cover all aspects of anyparticular transaction. By its purchase of any Notes (or any interest in a Note), the purchaser (whetherin the case of the initial purchase or in the case of a subsequent transfer) thereof will be deemed tohave represented and agreed that (1) either (i) it is not and for so long as it holds a Note (or anyinterest in a Note) will not be (and is not acquiring the Notes directly or indirectly with the assets of aperson who is or while the Notes are held will be) a Plan, an entity whose underlying assets include, orare deemed to include, the assets of any such Plan (each of the foregoing a “Benefit Plan Investor”),or a governmental or other employee benefit plan which is subject to any U.S. federal, state or local

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law, or non-U.S. law, that is substantially similar to the provisions of Section 406 of ERISA orSection 4975 of the Code, or (ii) its purchase and holding of the Notes (or any interest therein) will notconstitute or result in a non-exempt prohibited transaction under Section 406 of ERISA or Section 4975of the Code (or, in the case of such a governmental or other employee benefit plan, any suchsubstantially similar U.S. federal, State or local law, or non-U.S. law); and (2) it will not sell or otherwisetransfer such Notes otherwise than to a purchaser or transferee that is deemed to represent and agreewith respect to its purchase and holding of such Notes to the same effect as the purchaser’srepresentation and agreement set forth in this sentence. Any purported purchase of a Note (or aninterest therein) that does not comply with the foregoing shall be null and void ab initio.

The foregoing discussion is general in nature and not intended to be all inclusive. Any Plan fiduciarywho proposes to cause a Plan to purchase any Notes (or any interests therein) should consult with itscounsel regarding the applicability of the fiduciary responsibility and prohibited transaction provisions ofERISA and Section 4975 of the Code to such an investment, and to confirm that such investment willnot constitute or result in a prohibited transaction or any other violation of an applicable requirement ofERISA.

The sale of Notes (or any interests therein) to a Plan is in no respect a representation by the Joint LeadManagers that such an investment meets all relevant requirements with respect to investments byPlans generally or any particular Plan, or that such an investment is appropriate for Plans generally orany particular Plan.

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SUBSCRIPTION AND SALE

Goldman Sachs International, Raiffeisen Bank International AG, UBS Limited and VTB Capital plc(together, the “Joint Lead Managers”) have, pursuant to a Subscription Agreement dated on26 October, 2012, severally and not jointly nor jointly and severally agreed with the Issuer and theGuarantors, subject to the satisfaction of certain conditions, to subscribe for the Notes at 100 per cent.of their principal amount in the following amounts:

Joint Lead Manager PrincipalAmount of

Notes (US$)

Goldman Sachs International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000,000Raiffeisen Bank International AG . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000,000UBS Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000,000VTB Capital plc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000,000

The Issuer (failing whom the Parent) has agreed to pay to the Joint Lead Managers a combinedmanagement, underwriting and selling commission (which shall be an agreed percentage of theaggregate principal amount of the notes) in consideration of their obligations undertaken in theSubscription Agreement. In addition, the Issuer (failing whom the Parent) has agreed to reimburse theJoint Lead Managers for certain of their expenses in connection with the issue of the Notes. TheSubscription Agreement entitles the Joint Lead Managers to terminate it in certain circumstances priorto payment being made to the Issuer. The Issuer and the Guarantors have in the SubscriptionAgreement agreed to indemnify the Joint Lead Managers against certain liabilities incurred inconnection with the issue of the Notes, including liabilities under the Securities Act.

The Joint Lead Managers and their respective affiliates may have performed various financial advisory,investment banking and commercial banking services for, and may arrange loans and other non publicmarket financing for, and enter into derivative transactions with, the Parent and its affiliates (includingits shareholders, the Issuer and the Guarantors) and for which they may receive customary fees andexpenses. The Group has entered into finance lease agreements with OAO VTB Leasing, an affiliate ofVTB Capital plc. Each of the Joint Lead Managers and their respective affiliates may, from time to time,engage in further transactions with, and perform services for, the Issuer and the Group in the ordinarycourse of their respective businesses.

One or more investors, with a long term relationship with the Group, has expressed an interest inparticipating in the Issuer’s debut bond offering, subject to the final terms of the Offering and thecompletion of their internal approval procedures. The Issuer can provide no assurance, however, as towhether, or the extent to which, one or more of these investors will ultimately participate.

No Securities Commission Approval

The Notes have not been approved or disapproved by the US Securities and ExchangeCommission, any state securities commission in the United States or any other US regulatoryauthority, nor have any of the foregoing authorities passed upon or endorsed the merits of theoffering of the Notes or the accuracy or adequacy of this Prospectus. Any representation to thecontrary is a criminal offence in the United States.

United States

The Notes and Guarantees have not been and will not be registered under the Securities Act and maynot be offered or sold within the United States or to, or for the account or benefit of, U.S personsexcept in accordance with Regulation S or pursuant to an exemption from, or in a transaction notsubject to, the registration requirements of the Securities Act. Each Joint Lead Manager has severallyand not jointly represented in the Subscription Agreement that it has not offered and sold the Notesand Guarantees and agrees that it will not offer and sell the Notes or guarantees (i) as part of theirdistribution at any time and (ii) otherwise until 40 days after the later of the commencement of theoffering and the closing Date (the “distribution compliance period”) except in accordance with

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Rule 903 or 904 of Regulation S or Rule 144A as set forth below. Accordingly, each Joint LeadManager has represented that neither it, its affiliates nor any persons acting on its or their behalf haveengaged or will engage in any directed selling efforts with respect to the Notes and Guarantees and ithas complied and will comply with the offering restrictions of Regulation S. Terms used in thisparagraph have the meanings given to them by the Regulations.

Each Joint Lead Manager has agreed in the Subscription Agreement that, at or prior to confirmation ofsale of Notes and Guarantees (other than a sale pursuant to Rule 144A), it will have sent to eachdistributor, dealer or person receiving a selling concession, fee or other remuneration that purchasesNotes and Guarantees from it during the distribution compliance period a confirmation or notice tosubstantially the following effect:

“The Notes and Guarantees covered hereby have not been registered under the U.S. Securities Act of1933, as amended (the “Securities Act”), and may not be offered and sold within the United States orto, or for the account or benefit of, U.S. persons (i) as part of their distribution at any time or(ii) otherwise until 40 days after the later of the commencement of the offering and the closing date,except in either case in accordance with Regulation S under the Securities Act. Terms used abovehave the meaning given to them by Regulation S under the Securities Act.”

Each Joint Lead Manager has also severally and not jointly nor jointly and severally represented andagreed in the Subscription Agreement that neither it nor any of its affiliates (as defined in Rule 501(b)of Regulation D under the Securities Act (“Regulation D”)), nor any person acting on its or their behalfhas engaged or will engage in any form of general solicitation or general advertising (within themeaning of Regulation D) in connection with any offer and sale of the Notes and Guarantees in theUnited States. Each Joint Lead Manager severally and not jointly nor jointly and severally has furtherrepresented that it has not entered and agreed that it will not enter into any contractual arrangementwith any distributor (as that term is defined in Regulation S) with respect to the distribution or deliveryof the Notes and Guarantees, except with its affiliates or with the prior written consent of the Issuer andthe Parent.

The Subscription Agreement provides that the Joint Lead Managers may directly or through theirrespective U.S. broker-dealer affiliates arrange for the offer and resale of Notes and Guarantees in theUnited States only to qualified institutional buyers in accordance with Rule 144A.

United Kingdom

Each of the Joint Lead Managers has severally and not jointly nor jointly and severally represented andagreed in the Subscription Agreement that:

(a) it has only communicated or caused to be communicated and will only communicate or cause tobe communicated any invitation or inducement to engage in investment activity (within themeaning of section 21 of the FSMA) received by it in connection with the issue or sale of anyNotes in circumstances in which section 21(1) of the FSMA does not apply to the Issuer or anyGuarantor; and

2.2 it has complied and will comply with all applicable provisions of the FSMA with respect to anythingdone by it in relation to the Notes in, from or otherwise involving the United Kingdom.

Russian Federation

Each Joint Lead Manager has severally and not jointly nor jointly and severally acknowledged in theSubscription Agreement that (i) no Russian prospectus has been produced and registered or isintended to be produced and registered with respect to the Notes and the Notes have not been and arenot intended to be registered in the Russian Federation; and (ii) the Notes are not admitted to placingand public circulation in the Russian Federation (in terms of the applicable Russian securities laws).Consequently, each of the Joint Lead Managers has severally and not jointly nor jointly and severallyrepresented, warranted and agreed in the Subscription Agreement that it and its affiliates have notoffered or sold or otherwise transferred, and will not offer or sell or otherwise transfer as part of theirinitial distribution or at any time thereafter, any Notes to or for the benefit of any persons (includinglegal entities) resident, incorporated, established or having their usual residence in the RussianFederation, or to any person located within the territory of the Russian Federation unless and to theextent otherwise permitted under Russian law.

231

Ireland

Each of the Joint Lead Managers has, severally and not jointly nor jointly and severally acknowledgedin the Subscription Agreement that:

• it will not underwrite the issue of, or place the Notes, otherwise than in conformity with theprovisions of the European Communities (Markets in Financial Instruments) Regulations 2007(Nos. 1 to 3) as amended, including, without limitation, Regulations 7 and 152 thereof or anycodes of conduct used in connection therewith and the provisions of the InvestorCompensation Act 1998;

• it will not underwrite the issue of, or place, any Notes, otherwise than in conformity with theprovisions of the Companies Acts 1963 – 2012, the Central Bank Acts 1942 – 2011 and anycodes of conduct rules made under Section 117(1) of the Central Bank Act 1989;

• it will not underwrite the issue of, or place, or do anything in Ireland in respect of any Notesotherwise than in conformity with the provisions of the Prospectus (Directive 2003/71/EC)Regulations 2005, as amended, and any rules issued under Section 51 of the InvestmentFunds, Companies and Miscellaneous Provisions Act 2005, by the Central Bank of Ireland;and

• it will not underwrite the issue of, place or otherwise act in Ireland in respect of any Notes,otherwise than in conformity with the provisions of the Market Abuse (Directive 2003/6/EC)Regulations 2005, as amended, and any rules issued under Section 34 of the InvestmentFunds, Companies and Miscellaneous Provisions Act 2005 by the Central Bank of Ireland.

Bermuda

Each of the Joint Lead Managers has severally and not jointly nor jointly and severally acknowledgedin the Subscription Agreement that securities may be offered or sold in Bermuda only in compliancewith the provisions of the Investment Business Act 2003, the Exchange Control Act 1972 and relatedregulations of Bermuda which regulate the sale of securities in Bermuda. In addition, specificpermission is required from the BMA, pursuant to the provisions of the Exchange Control Act 1972 andrelated regulations. The BMA, the Minister of Finance of Bermuda and the Registrar of Companiesaccept no responsibility for the financial soundness of any proposal or for the correctness of any of thestatements made or opinions expressed in this Prospectus or in any prospectus supplement.

232

LEGAL MATTERS

Certain legal matters in relation to the Offering will be passed upon for the Issuer and the Guarantorswith respect to the laws of England and the United States by Skadden, Arps, Slate, Meagher & Flom(U.K.) LLP, with respect to the laws of the Russian Federation by Skadden, Arps, Slate,Meagher & Flom LLP, with respect to the laws of Bermuda by Appleby (Bermuda) Limited and withrespect to the laws of Ireland by Arthur Cox. Certain legal matters in relation to the Offering will bepassed upon for the Joint Lead Managers and the Joint Bookrunners with respect to the laws ofEngland, the United States and the Russian Federation by Freshfields Bruckhaus Deringer LLP.Certain legal matters in relation to the Offering will be passed upon for the Trustee with respect to thelaws of England by Linklaters LLP.

233

INDEPENDENT AUDITORS

The Group’s Audited Financial Statements have been audited by ZAO PricewaterhouseCoopers Audit,independent auditors, as stated in their audit report appearing herein (the “Independent Auditor’sReport”). ZAO PricewaterhouseCoopers Audit has registered offices at White Square Office Center,10 Butyrsky Val, Moscow Russia 125047, Russian Federation. ZAO PricewaterhouseCoopers Audit isa member of the Audit Chamber of Russia (Auditorskaya Palata Rossii).

The Group’s Unaudited Interim Financial Statements have been reviewed by ZAOPricewaterhouseCoopers Audit in accordance with professional standards for review of suchinformation. Their report dated September 27, 2012 appearing at page F-62 (the “IndependentAuditor’s Review Report”) states that they conducted their review in accordance with InternationalStandard on Review Engagements 2410 “Review of interim financial information performed by theindependent auditor of the entity” and that they do not express an audit opinion on this information.Accordingly, the degree of reliance on their review report should be restricted in light of the limitednature of the review procedures applied.

For the purposes of Prospectus Rules paragraph 5.5.4(R)(2)(f) ZAO PricewaterhouseCoopers Audit isresponsible for the Independent Auditor’s Report as part of this Prospectus and declares that it hastaken all reasonable care to ensure that the information contained in the Independent Auditor’s Reportis, to the best of ZAO PricewaterhouseCoopers Audit knowledge, in accordance with the facts andcontains no omission likely to affect its import. This declaration is included in the Prospectus incompliance with item 1.2 of Annex IX to the Commission Regulation (EC) No 809/2004(“PD Regulation”).

For the purpose of compliance with Annex IX item 13.1 in Appendix 3 to the Prospectus Rules, ZAOPricewaterhouseCoopers Audit has given and not withdrawn its written consent to the inclusion of theIndependent Auditor’s Report, in the form and context in which it is included and has authorized thecontent of the Independent Auditor’s Report.

The written consent described above is different from a consent filed with the US Securities andExchange Commission under Section 7 of the Securities Act, which is applicable only to transactionsinvolving securities registered under the Securities Act. As the Notes have not and will not beregistered under the Securities Act, ZAO PricewaterhouseCoopers Audit has not filed a consent underSection 7 of the Securities Act.

234

GENERAL INFORMATION

1 The Notes have been accepted for clearance through Euroclear, Clearstream, Luxembourg, andDTC. The common code of the Regulation S Notes is 085039326 and the ISIN is XS0850393264.The common code of the Rule 144A Notes is 085043188, the CUSIP number is 117381AA1 andthe ISIN is US117381AA17.

2 So long as any of the Notes are outstanding and the Notes are “restricted securities” within themeaning of Rule 144(a)(3) under the Securities Act, the Issuer will promptly furnish, for the benefitof the holders from time to time of Notes, upon request, to holders of Notes and prospectivepurchasers designated by any such holders, information required to be disclosed by subsection(d)(4) of Rule 144A (or any successor provision).

3 So long as any of the Notes are outstanding and any of the Guarantees is a “restricted security”within the meaning of Rule 144(a)(3) under the Securities Act, the respective Guarantor willpromptly furnish, for the benefit of holders from time to time of the relevant Notes, upon request, toholders of Notes and prospective purchasers designated by any such holders, informationrequired to be disclosed by subsection (d)(4) of Rule 144A (or any successor provision).

4 It is expected that the listing of the Notes on the Official List of the UK Listing Authority and theadmission of the Notes to trading on the Regulated Market of the London Stock Exchange forlisted securities will take place on or about 1 November 2012, subject to the issuance of the GlobalNotes. Transactions will normally be effected for delivery on the third business day after thetransaction.

5 For so long as any of the Notes are listed on the London Stock Exchange and admitted to tradingon the Regulated Market for listed securities of the London Stock Exchange, copies of thefollowing documents may be inspected at and are available free of charge in physical form at theregistered office of the Issuer, the Guarantors and the specified office of the Principal PayingAgent in London during normal business hours on any weekday (Saturdays, Sundays and publicholidays excepted):

• the certificate of incorporation of the Issuer and articles of association of the Issuer;

• a copy of the charter or, as the case may be, articles of incorporation of each of theGuarantors (together with an English translation thereof, if applicable; any investor receivingan English translation acknowledges that such translation is provided solely for the benefit ofthe investor and that in the instance of any dispute, the original document will prevail. TheGroup affirms that any English translation provided will be direct and accurate in all materialrespects);

• the Agency Agreement;

• the Trust Deed, including the forms of the Global Notes;

• the Guarantees;

• the Prospectus;

• the Group’s Audited Financial Statements;

• the Group’s Unaudited Interim Financial Statements;

• the authorizations listed below.

6 The issuance of the Notes have been authorized by a decision of the Board of Directors ofBrunswick Rail Finance Limited, dated October 25, 2012, and the Guarantees have beenauthorized by a decision of the Board of Directors of Brunswick Rail Limited, dated October 11,2012, a decision of the meeting of the participants of OOO Brunswick Rail Service, datedOctober 15, 2012, a decision of the meeting of the participants of OOO Brunswick Rail Leasing,dated October 15, 2012, a decision of the meeting of the participants of OOO Brunswick WagonLeasing, dated October 15, 2012, a decision of the sole participant of OOO Brunswick Trans,dated October 15, 2012.

7 No consents, approvals, authorizations or orders of any regulatory authorities are required by theIssuer or any of the Guarantors under the laws of the United Kingdom, Ireland, the RussianFederation or Bermuda for issuing the Notes or the giving of the Guarantees.

235

8 Since October 2, 2012, the date of incorporation of the Issuer, there has been no material adversechange in the prospects of the Issuer.

9 Since October 2, 2012, the date of incorporation of the Issuer, there has been no significantchange in the financial or trading position of the Issuer.

10 There has been no material adverse change in the prospects of either the Guarantors or theGroup since December 31, 2011, such date being the date of the last audited financial statementsof the Group.

11 There has been no significant change in the financial or trading position of either the Guarantors orthe Group since June 30, 2012, such date being the date of the latest unaudited interim financialstatements of the Group.

12 There have been no governmental, legal or arbitration proceedings (including any suchproceedings which are pending or threatened of which the Issuer or the Guarantors are aware),during a period covering at least the previous 12 months, which may have, or have had in therecent past, significant effects on each of the Issuer’s, the Guarantors’, or the Group’s financialposition or profitability.

13 The Issuer does not intend to provide post-issuance transaction information regarding the Notes orthe Guarantees.

14 The total fees and expenses in relation to the admission to trading of the Notes are expected to beapproximately U.S.$ 15.9 million.

15 The language of the Prospectus is English. Certain legislative references and technical terms havebeen cited in their original language in order that the correct technical meaning may be ascribed tothem under applicable law.

16 Any reference to websites in this Prospectus is for information purposes only and such websitesshall not form part of this document.

236

GLOSSARY OF TECHNICAL TERMS

The following technical terms are used in this Prospectus:

• “bogie” is a chassis or framework carrying wheels, attached to a railcar wagon;

• “carrier” means a company or organization which assumes an obligation to move goodsfrom one point to another on the railway network;

• “empty run” means movement of rolling stock without cargo for the whole or a substantialpart of the journey;

• “flat car” means a type of rolling stock with a flat top and is primarily used to carrycontainers;

• “finance lease” means a lease agreement where ownership of the asset is transferred to thelessee at the end of the lease term;

• “full-service contract” is a lease agreement where the lessor assumes depot repair risk inaddition to the residual value risk;

• “gondola (open top) car” means a type of rolling stock with an open top and low sides usedfor transporting a wide variety of cargoes;

• “hopper car” means a type of rolling stock equipped to carry dry cargoes such as grain andcement and has several sub-categories;

• “locomotive” means a self-propelled vehicle for traction, that is used for hauling cars alongtracks;

• “operating lease” is a lease agreement where the lessor transfers only the right to use theproperty to the lessee. At the end of the lease period, the lessee returns the property to thelessor;

• “platform car” is a railway car without permanent raised sides or covering;

• “rail tank car” means a type of rolling stock used for transporting liquids, such as oil productsand oil;

• “tons” means metric tons (equivalent to 1,000 kilograms); and

• “triple-net contract” is a lease agreement where the lessee accepts full responsibility fordepot repair, while the lessor is responsible for capital repair and wheel-set replacement.

237

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INDEX TO FINANCIAL STATEMENTS

Pages

Audited consolidated financial statements of the Group as of and for the years endedDecember 31, 2011, 2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-2

Unaudited interim condensed consolidated financial information of the Group as of and for thesix months ended June 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-61

F-1

REPORT AND AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE GROUP AS OFAND FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009

Contents Pages

Independent Auditor’s Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-3

Consolidated Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6

Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9

Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10

F-2

ZAO PricewaterhouseCoopers Audit, White Square Office Center, 10 Butyrsky Val, Moscow, Russia, 125047 Telephone+7 (495) 967 6000, Fax +7 (495) 967 6001, www.pwc.ru

Independent Auditor’s Report

To the Shareholders and Board of Directors of Brunswick Rail Limited.

We have audited the accompanying consolidated financial statements of Brunswick Rail Limited and itssubsidiaries (the “Group”), which comprise the consolidated balance sheets, as at 31 December 2011,2010 and 2009 and the consolidated income statements, statements of comprehensive income,changes in equity and cash flows for the years then ended, and notes comprising a summary ofsignificant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financialstatements in accordance with International Financial Reporting Standards, and for such internalcontrol as management determines is necessary to enable the preparation of consolidated financialstatements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on ouraudit. We conducted our audit in accordance with International Standards on Auditing. Thosestandards require that we comply with ethical requirements and plan and perform the audit to obtainreasonable assurance about whether the consolidated financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe consolidated financial statements. The procedures selected depend on the auditor’s judgment,including the assessment of the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the entity’s preparation and fair presentation of the consolidated financial statements inorder to design audit procedures that are appropriate in the circumstances, but not for the purpose ofexpressing an opinion on the effectiveness of the entity’s internal control. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the consolidatedfinancial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the financialposition of the Group as at 31 December 2011, 2010 and 2009, and its financial performance and itscash flows for the years then ended in accordance with International Financial Reporting Standards.

ZAO PricewaterhouseCoopers Audit12 October 2012Moscow, Russia

F-3

Brunswick Rail Limited and its subsidiary companies

Consolidated income statement

Note2011US$

2010US$

2009US$

Operating lease income 159.083.125 85.673.965 75.183.808Finance lease income 5.360.130 6.638.001 9.624.037Transportation income – operator’s services 19.466.868 — —

Revenue 183.910.123 92.311.966 84.807.845

Railcar depreciation 16 (66.393.396) (30.886.460) (25.866.376)Property tax 11 (13.592.108) (8.823.219) (7.725.341)Depot repairs (2.846.412) (1.811.578) (1.181.309)Railcar insurance (214.316) (193.129) (212.075)Other railcar expenses (697.741) (382.207) (102.439)Other transportation services expenses (617.302) — —Transportation services subcontracted (9.899.278) — —Professional fees 8 (3.583.173) (1.785.264) (1.594.404)Staff costs 9 (9.476.636) (6.036.682) (4.896.534)Share based compensation 10 (3.052.272) (1.337.518) (2.348.073)Other operating expenses 8 (5.539.992) (2.268.182) (1.782.554)Provision for bad debts — — (425.460)Other income 17 2.018.197 246.761 65.828Reversal of impairment/(impairment loss) on

revaluation of railcars 16 2.169.209 36.958.877 (30.784.737)Gain on acquisition of subsidiary 14 10.420.849 — —Finance income 12 337.777 88.535 118.669Finance costs 12 (41.085.765) (23.849.909) (22.683.643)Net foreign exchange translation losses (61.480.483) (3.770.321) (9.730.548)

(Loss)/profit before Income tax (19.622.719) 48.461.670 (24.341.151)

Income tax credit/(expense) 13 825.914 (8.390.021) 8.510.459

Net (loss)/profit for the year (18.796.805) 40.071.649 (15.830.692)

Attributable to:Owners of the parent (18.621.243) 40.071.649 (15.830.692)Non-controlling interest (175.562) — —

(18.796.805) 40.071.649 (15.830.692)

The notes on pages F-10 to F-60 are an integral part of these consolidated financial statements.

F-4


Consolidated statement of comprehensive income

Note2011US$

2010US$

2009US$

Net (loss)/profit for the year (18.796.805) 40.071.649 (15.830.692)

Other comprehensive income:Cash flow hedge:– Fair value losses on hedging reserve 22 (941.306) (6.503.006) (3.436.533)– Transfers to income statement 22 8.515.997 10.046.664 9.952.326Currency translation differences (37.864.588) 2.078.681 (5.336.344)Gains/ (losses) on revaluation of railcars 182.856.730 150.158.531 (58.304.376)

Other comprehensive income/(loss) for the year,net of tax 152.566.833 155.780.870 (57.124.927)

Total comprehensive income/ (loss) for the year 133.770.028 195.852.519 (72.955.619)

Attributable to:Owners of the parent 134.111.033 195.852.519 (72.955.619)Non-controlling interest (341.005) — —

133.770.028 195.852.519 (72.955.619)

Items in the statement above are disclosed net of tax. The income tax relating to each component ofother comprehensive income is disclosed in Note 13.


F-5


Consolidated balance sheet

Note2011US$

2010US$

2009US$

AssetsNon-current assetsEquipment 16 1.382.595.100 613.855.514 338.151.917Intangible assets 1.134 36.312 1.374Finance leases receivables 17 12.444.668 42.946.962 55.695.755Deferred income tax asset 19 992.817 4.823.267 18.195.971Prepayment for acquisition of railcars 16 19.608.463 31.372.905 26.516.689

1.415.642.182 693.034.960 438.561.706

Current assetsVAT recoverable 16 20.771.792 2.042.788 19.456.845Advances to customs 193.969 1.574.962 2.166.191Advances paid for rail tariffs 1.332.327 — —Trade and other receivables 18 3.595.902 4.394.723 1.988.746Finance leases receivables 17 8.082.008 12.290.274 11.930.230Income tax prepayment — — 22.169Cash and cash equivalents 20 66.796.636 112.450.226 30.293.423

100.772.634 132.752.973 65.857.604

Total assets 1.516.414.816 825.787.933 504.419.310

Equity and liabilitiesCapital and reservesShare capital 21 211.320.587 211.320.587 151.312.559Share premium 21 150.330.446 150.612.860 97.865.678Treasury shares 21 — — (300.239)Other reserves 22 265.848.276 125.122.039 (31.796.245)Accumulated losses (11.390.014) (4.774.810) (44.846.459)

616.109.295 482.280.676 172.235.294

Non-controlling interest 1.026.648 — —

Total equity 617.135.943 482.280.676 172.235.294

Non-current liabilitiesBorrowings 23 455.125.872 224.148.313 270.076.926Mezzanine loan 24 64.432.635 — —Derivative financial instruments 25 — 11.956.422 15.500.080Deferred income tax liabilities 19 85.635.557 40.072.077 7.348.325

605.194.064 276.176.812 292.925.331

Current liabilitiesTrade and other payables 26 12.886.633 11.965.562 5.937.148Current income tax liabilities 152.216 16.861 —VAT payable 5.438.069 3.715.160 2.332.608Taxes payable other than income tax 4.686.322 2.425.900 1.888.457Borrowings 23 239.466.016 48.786.709 28.846.647Derivative financial instruments 25 4.386.002 — —Consideration payable on business combination 14 27.069.551 — —Provisions for other liabilities and charges — 420.253 253.825

294.084.809 67.330.445 39.258.685

Total liabilities 899.278.873 343.507.257 332.184.016

Total equity and liabilities 1.516.414.816 825.787.933 504.419.310

On 11 October 2012, the Board of Directors of Brunswick Rail Limited authorized these consolidatedfinancial statements for issue.

Paul Ostling, Director Damian Secen, Director


F-6


Consolidated statement of changes in equity

Attributable to owners of the parent

Note

Sharecapital/share

premium/treasuryshares

(Accumulatedlosses)/

Retainedearnings

Otherreserves/

(Accumulatedlosses) Total

Noncontrolling

interestTotalEquity

US$ US$ US$ US$ US$ US$Balance at 1 January 2009 204.177.839 (39.260.041) 33.327.292 198.245.090 — 198.245.090

Comprehensive income:Loss for the year — (15.830.692) — (15.830.692) — (15.830.692)Other comprehensive income:Currency translation differences 22 — — (5.336.344) (5.336.344) — (5.336.344)Cash flow hedge:– Fair value losses in year 22 — — (3.436.533) (3.436.533) — (3.436.533)– Transfer to income statement 22 — — 9.952.326 9.952.326 — 9.952.326Losses on revaluation of railcars

net of tax 16 — — (58.304.376) (58.304.376) — (58.304.376)Conversion of leases 17 — 10.244.274 (10.244.274) — — —

Total other comprehensiveincome/ (expense) — 10.244.274 (67.369.201) (57.124.927) — (57.124.927)

Total comprehensive expense — (5.586.418) (67.369.201) (72.955.619) — (72.955.619)

Transactions with ownersShare-based payment 10 — — 2.245.664 2.245.664 — 2.245.664Transfer of shares to employees 10,21 159 — — 159 — 159Purchase of treasury shares 10,21 (300.000) — — (300.000) — (300.000)Issue of share capital 21 45.000.000 — — 45.000.000 — 45.000.000

Total contribution from anddistribution to owners of theCompany 44.700.159 — 2.245.664 46.945.823 — 46.945.823

Balance at 31 December 2009 /01 January 2010 248.877.998 (44.846.459) (31.796.245) 172.235.294 — 172.235.294

Comprehensive income:Profit for the year — 40.071.649 — 40.071.649 — 40.071.649Other comprehensive income:Currency translation differences 22 — — 2.078.681 2.078.681 — 2.078.681Cash flow hedge:– Fair value losses in year 22 — — (6.503.006) (6.503.006) — (6.503.006)– Transfer to income statement 22 — — 10.046.664 10.046.664 — 10.046.664Railcar revaluation gains net of

taxes 16 — — 150.158.531 150.158.531 — 150.158.531

Total other comprehensiveincome — — 155.780.870 155.780.870 — 155.780.870

Total comprehensive income — 40.071.649 155.780.870 195.852.519 — 195.852.519

Transactions with ownersShare-based payment 10 — — 1.137.414 1.137.414 — 1.137.414Transfer of shares to employees 10,21 239 — — 239 — 239Transfer of treasury shares 10,21 300.000 — — 300.000 — 300.000Buy back and cancellation of

shares 21 (35.551.004) — — (35.551.004) — (35.551.004)Issue of share capital 21 152.500.000 — — 152.500.000 — 152.500.000Equity raising fees 21 (4.193.786) — — (4.193.786) — (4.193.786)

Total contribution from anddistribution to owners of theCompany 113.055.449 — 1.137.414 114.192.863 — 114.192.863

Balance at 31 December 2010/01 January 2011 361.933.447 (4.774.810) 125.122.039 482.280.676 — 482.280.676


F-7


Consolidated statement of changes in equity (continued)Attributable to owners of the parent

Note

Sharecapital/share

premium/treasurysharesUS$

Accumulatedlosses/

Retainedearnings

US$

Otherreserves/

AccumulatedlossesUS$

TotalUS$

Noncontrolling

interestUS$

TotalEquityUS$

Balance at 31 December 2010/01 January 2011 361.933.447 (4.774.810)125.122.039 482.280.676 — 482.280.676

Comprehensive income:Loss for the year — (18.621.243) — (18.621.243) (175.562) (18.796.805)Other comprehensive income:Currency translation differences 22 — — (37.712.461) (37.712.461) (152.127) (37.864.588)Cash flow hedge:– Fair value losses in year 22 — — (941.306) (941.306) — (941.306)– Transfer to income statement 22 — — 8.515.997 8.515.997 — 8.515.997Railcar revaluation gains net of

tax 16 — — 182.870.046 182.870.046 (13.316)182.856.730

Total other comprehensiveincome — — 152.732.276 152.732.276 (165.443)152.566.833

Total comprehensive(expense)/ income — (18.621.243)152.732.276 134.111.033 (341.005)133.770.028

Transactions with ownersTransfer of share based

compensation reserve toretained earnings uponvesting — 12.006.039 (12.006.039) — — —

Equity raising fees (1) 21 (282.414) — — (282.414) — (282.414)

Total contribution from anddistribution to owners ofthe Company (282.414) 12.006.039 (12.006.039) (282.414) — (282.414)

Non-controlling interest arisingon business combination — — — — 1.367.653 1.367.653

Balance at 31 December 2011 361.651.033 (11.390.014)265.848.276 616.109.295 1.026.648 617.135.943

(1) The equity raising fees as reflected above relate to the settlement of prior year services that were invoiced and paid in thecurrent year.


F-8


Consolidated statement of cash flows

2011 2010 2009Note US$ US$ US$

Cash flows from operating activities(Loss)/ profit before tax (19.622.719) 48.461.670 (24.341.151)Adjustments for:

Depreciation of equipment 16 66.529.946 31.006.989 25.941.381Amortisation charge of intangible assets 36.492 7.367 87Provision for impairment of receivables — — 425.460Profit on disposal of assets (1.604.235) (25.633) —Gain from sale of doubtful debt (372.571) — —Interest income accrued 12 (337.777) (88.535) (118.669)Interest expense and other borrowing costs accrued 12 31.778.071 13.803.245 12.731.317Fair value gain on interest rate swap 12 8.515.997 10.046.664 9.952.326(Reversal of impairment)/impairment loss on revaluation of

railcars (2.169.209) (36.958.877) 30.784.737Gain on acquisition of subsidiary (10.420.849) — —Non-operating net foreign exchange translation losses 61.480.483 3.770.321 9.730.548Share-based compensation 10 3.052.272 1.337.518 2.348.073

136.865.901 71.360.729 67.454.109Changes in working capital:

Trade and other receivables 3.747.193 (1.156.155) 518.549Finance leases receivable 14.056.554 12.746.752 7.527.155Trade and other payables (2.892.927) 1.929.852 (1.402.209)Taxes payable other than income tax 2.391.451 551.861 (557.960)VAT received 13.248.113 2.915.503 3.512.643

Cash generated from operations 167.416.285 88.348.542 77.052.287Income tax paid (1.346.835) (468.003) (147.917)

Net cash from operating activities 166.069.450 87.880.539 76.904.370

Cash flows from investing activitiesAcquisition of subsidiaries (net of cash acquired) (52.946.380) — —Purchase of equipment including prepayments for equipment (457.341.102) (91.088.743) (37.982.363)Purchase of intangible assets — (42.210) —Proceeds from disposal of assets 16.612.175 54.292 —VAT received from VAT authorities 22.167.483 31.865.722 1.209.780Advances to customs/VAT paid on railcars (46.865.549) (13.589.516) (2.166.191)

Net cash used in investing activities (518.373.373) (72.800.455) (38.938.774)

Cash flows from financing activitiesShare buy back — (34.839.984) —Issue of shares 21 — 152.500.000 45.000.000Cash receipts from transfer of shares to employees 21 — 239 159Purchase of treasury shares 10,21 — — (300.000)Equity raising transaction costs (4.394.913) (792.308) —Proceeds from bank borrowings 465.684.833 107.315.167 —Repayments of bank borrowings (115.554.099) (125.981.597) (63.282.527)Transaction costs paid on borrowings (7.830.417) (9.240.110) —Transfers to restricted cash balances (8.000.000) (2.000.000) —Interest and commitment fees paid on borrowings (18.305.819) (11.870.262) (11.156.526)Interest received 12 337.777 88.535 118.669Amounts paid on derivative financial instruments (8.518.431) (10.044.107) (9.895.590)Finance leases liabilities – principal repayments (4.163.463) — —

Net cash from/(used in) financing activities 299.255.468 65.135.573 (39.515.815)

Net (decrease)/increase in cash and cash equivalents (53.048.455) 80.215.657 (1.550.219)Cash and cash equivalents at beginning of year 104.500.226 24.343.423 25.325.185Exchange (losses)/gains on cash and cash equivalents (605.135) (58.854) 568.457

Cash and cash equivalents at end of year (1) 20 50.846.636 104.500.226 24.343.423

(1) At 31 December 2011 an amount of US$15,95 million (2010: US$7,95 million, 2009: US$5,95 million) relates to restrictedcash which is not available for general use by the Group and has therefore been excluded from cash and cash equivalentsabove (Note 20).


F-9


Notes to the financial statements

1 General information

Introduction

These consolidated financial statements have been prepared in accordance with InternationalFinancial Reporting Standards for the years ended 31 December 2011, 2010 and 2009 for BrunswickRail Limited (the “Company”) and its subsidiaries (the “Group”).

Country of incorporation

The Company is incorporated in Bermuda as a private limited liability company in accordance with theprovisions of the section 14 of the Companies Act 1981. Its registered office is at Wessex House, 2ndFloor, 45 Reid Street, Hamilton HM 12 Bermuda.

Principal activities

The Group’s principal activity is to engage in the purchase, sale, financing and leasing of railcars in the“1520 gauge territory” (the railway territory of Russian Federation and CIS), and all ancillary activitiesthereto, itself or through its subsidiaries. Following the acquisition of ZAO ProfTrans group (Note 14),the Group is now engaged in the shipment of iron scrap and other freights within Russian Federationterritory using both own and leased railcars as well as railcars provided by third party carriers.

These consolidated financial statements were authorized for issue by the Company’s Board ofDirectors on 11 October 2012.

2 Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statementsare set out below. These policies have been consistently applied to all years presented in theseconsolidated financial statements unless otherwise stated.

Basis of preparation

The consolidated financial statements of the Group have been prepared in accordance withInternational Financial Reporting Standards (IFRS) as issued by the International AccountingStandards Board (IASB). They have been prepared on a going-concern basis under the historical costconvention as modified by the revaluation of equipment and derivatives.

The preparation of financial statements in conformity with IFRS requires the use of certain criticalaccounting estimates and requires management to exercise its judgement in the process of applyingthe Group’s accounting policies. The areas involving a higher degree of judgement or complexity, orareas where assumptions and estimates are significant to the consolidated financial statements aredisclosed in Note 7.

Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chiefoperating decision-maker. The chief operating decision-maker, who is responsible for allocatingresources and assessing performance of the operating segments, is the Company’s Board of Directors(“the Board”).

The Board which supervises the General Director and the executive management team who areresponsible for the day-to-day operations and the Group performance, monitors the progress in thebusiness and approves all major strategic transactions such as larger purchases of fleets, potentialacquisitions of other companies and establishment of new business lines.

Consolidation

(a) Subsidiaries

Subsidiaries are all entities (including special purpose entities) over which the Group has thepower to govern the financial and operating policies generally accompanying a shareholding ofmore than one half of the voting rights. The existence and effect of potential voting rights that are

F-10


2 Summary of significant accounting policies (continued)

Consolidation (continued)

(a) Subsidiaries (continued)

currently exercisable or convertible are considered when assessing whether the Group controlsanother entity. Subsidiaries are fully consolidated from the date on which control is transferred tothe Group. They are de-consolidated from the date that control ceases.

The purchase method of accounting is used to account for the acquisition of subsidiaries by theGroup. The cost of an acquisition is measured as the fair value of the assets given, equityinstruments issued and liabilities incurred or assumed at the date of exchange. Costs directlyattributable to the acquisition are immediately expensed in the income statement. Identifiableassets acquired and liabilities and contingent liabilities assumed in a business combination aremeasured initially at their fair values at the acquisition date, irrespective of the extent of anynon-controlling interest. The excess of the cost of acquisition over the fair value of the Group’sshare of the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition isless than the fair value of the net assets of the subsidiary acquired, the difference is recognizeddirectly in the consolidated income statement.

Inter-company transactions, balances and unrealized gains on transactions between groupcompanies are eliminated. Unrealized losses are also eliminated but considered an impairmentindicator of the asset transferred. Accounting policies of subsidiaries have been changed wherenecessary to ensure consistency with the policies adopted by the Group.

(b) Transactions with non-controlling interests

The Group applies a policy of treating transactions with non-controlling interests as transactionswith equity owners of the Group. For purchases from non-controlling interests, the differencebetween any consideration paid and the relevant share acquired of the carrying value of netassets of the subsidiary is recorded in equity. Gains and losses on disposals to non-controllinginterest are also recorded in equity.

Revenue recognition

Revenue comprises the fair value of the consideration received or receivable for the sale of services inthe ordinary course of the Group’s activities, net of value added tax, returns, rebates and discounts andafter eliminating sales within the Group.

The Group recognises revenue when the amount of revenue can be reliably measured, it is probablethat future economic benefits will flow to the entity and specific criteria have been met for each of theGroup’s activities as described below. Revenues earned by the Group are recognized on the followingbases:

(a) Operating lease income

Operating lease income arises from two types of lease contracts; triple-net and full service leasecontracts. Under the triple-net lease, the lessee accepts full responsibility for depot repairswhereas under the full-service lease contract, the Group is responsible for depot repairs. Underboth types of leases, income is recognized over the term of the lease on a straight-line basis.

(b) Finance lease income

Lease income under finance leases is recognized over the term of the lease using the netinvestment method which reflects a constant periodic rate of return.

(c) Revenue from railway transportation services

Net revenue generated from freight rail transportation is defined as “transportation income –operator’s services”. Revenue is presented net of “OAO Russian Railways” tariffs as the Grouphas a contractual relationship with the client and sets the selling and payment terms of thetransaction excluding the OAO “Russian Railways” tariff. Net revenue is recognized in accordanceto the stage of completion of the journey.

F-11



Revenue recognition (continued)

(d) Interest income

Interest income is recognized on a time proportion basis using the effective interest method. Whena receivable is impaired, the Group reduces the carrying amount to its recoverable amount, beingthe estimated future cash flow discounted at the original effective interest rate of the instrument,and continues unwinding the discount as interest income.

(e) Other income

All other fees, commissions and other income items are generally recorded on an accrual basis byreference to completion of the specific transaction assessed on the basis of the actual serviceprovided as a proportion of the total services to be provided.

Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using thecurrency of the primary economic environment in which the entity operates (“the functionalcurrency”) which is the Russian Rouble. The consolidated financial statements are presented inUS Dollars which is the Group’s presentation currency as this is the currency considered mostappropriate by the Group’s investors.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange ratesprevailing at the dates of the transactions or valuation where items are remeasured. Foreignexchange gains and losses resulting from the settlement of such transactions and from thetranslation at year-end exchange rates of monetary assets and liabilities denominated in foreigncurrencies are recognized in the income statement, except when deferred in equity as qualifyingcash flow hedges.

(c) Group companies

The results and financial position of all the Group entities (none of which has the currency of ahyperinflationary economy) that have a functional currency different from the presentationcurrency are translated into the presentation currency as follows:

(i) assets and liabilities for each balance sheet presented are translated at the closing rate at thedate of that balance sheet;

(ii) share capital and reserves are translated at historic exchange rates;

(iii) income and expenses for each income statement are translated at average exchange rates(unless this average is not a reasonable approximation of the cumulative effect of the ratesprevailing on the transaction dates, in which case income and expenses are translated at thedates of the transactions); and

(iv) all resulting exchange differences are recognized as a separate component of equity.

The closing rates used are the exchange rates established by the Central Bank of the RussianFederation, effective at each balance sheet date. For income and expenses the transactions arebeing recalculated into US Dollars, using the average monthly rate of exchange (as it is believedto represent a reasonable approximation of the prevailing rates at the dates of the transactions).The exchange rates effective at 31 December 2011, 31 December 2010 and 31 December 2009were 32.20, 30.48 and 30.24 respectively.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated asassets and liabilities of the foreign entity and translated at the closing rate.

F-12



Current and deferred income tax

The tax expense for the period comprises current and deferred tax. Tax is recognized in the incomestatement, except to the extent that it relates to items recognized in other comprehensive income ordirectly in equity. In this case, the tax is also recognized in other comprehensive income or directly inequity, respectively.

The current income tax is calculated in the basis of the tax laws enacted or substantively enacted atthe balance sheet date in the countries where the Company and its subsidiaries operate and generatetaxable income. Management periodically evaluates positions taken in tax returns with respect tosituations in which applicable tax regulation is subject to interpretation. If applicable tax regulation issubject to interpretation, it establishes provisions where appropriate on the basis of amounts expectedto be paid to the tax authorities.

Deferred income tax is recognized using the liability method, on temporary differences arising betweenthe tax bases of assets and liabilities and their carrying amounts in the consolidated financialstatements. However, the deferred income tax is not accounted for if it arises from initial recognition ofan asset or liability in a transaction other than a business combination that, at the time of thetransaction, affects neither accounting nor taxable profit or loss. Deferred income tax is determinedusing tax rates and laws that have been enacted or substantially enacted by the balance sheet dateand are expected to apply when the related deferred income tax asset is realized or the deferredincome tax liability is settled. Deferred income tax assets are recognized to the extent that it isprobable that future taxable profits will be available against which the temporary differences can beutilized.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offsetcurrent tax assets against current tax liabilities and when the deferred income tax assets and liabilitiesrelate to income taxes levied by the same taxation authority on the Company’s subsidiaries wherethere is an intention to settle the balances on a net basis.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries,except where the timing of the reversal of the temporary difference is controlled by the Group and it isprobable that the temporary difference will not reverse in the foreseeable future.

Employee benefits

(a) Bonus plan

The Group recognises a liability and an expense for bonuses. The Group recognises a provisionwhen contractually obliged or where there is a past practice that has created a constructiveobligation.

(b) Share-based compensation

The Group applied a share-based compensation plan for management in 2007 (Note 10). The fairvalue of the employee services received in exchange for the grant of the award shares isrecognized as an expense. The Group recognized the fair value of the services received by theemployees by reference to the fair value of the shares at the grant date. The total amount to beexpensed over the vesting period is determined by reference to the fair value of the award sharesgranted, excluding the impact of any non-market vesting conditions (for example, profitability andsales growth targets). Non-market vesting conditions are included in assumptions about thenumber of award shares that are expected to vest. At each balance sheet date, the entity revisesits estimates of the number of award shares that are expected to vest. It recognises the impact ofthe revision to original estimates, if any, in the income statement, with a corresponding adjustmentto equity.

F-13



Employee benefits (continued)

(c) Cash-settled share-based compensation

The Group set up an exit bonus plan for the key management members in 2009 (Note 10). Thebonus plan falls under the provisions of IFRS 2 “Share-based payment” and the definition of cash-settled share-based payment transactions.

An option pricing model is used to value the benefit for the employees based on the fact that, eventhough this is a cash-settled share based payment, it can only be measured based on a shareprice valuation model. The liability is measured initially and re-measured at the end of eachreporting period until settled, at the fair value of the right, by applying this option pricing model.The expense is recognized in each reporting period based on the option value calculated at theend of each reporting period allocated on a time apportioned basis over the expected serviceperiod of the key management members.

Equipment

Equipment comprises mostly railcars and wheelsets which are stated at fair value, based on periodicvaluations by an external independent valuer, less accumulated depreciation. Any accumulateddepreciation at the date of revaluation is eliminated against the gross carrying amount of the asset, andthe net amount is restated to the revalued amount of the asset. Revaluations are carried out withsufficient regularity to ensure that the carrying amount on the balance sheet date does not differmaterially from that which would be determined using fair value of the balance sheet date. Furnitureand fixtures and computer equipment are stated at historical cost less accumulated depreciation andprovision for impairment where required. Historical cost includes expenditure that is directly attributableto the acquisition of equipment. Each part of an item of equipment with a cost that is significant inrelation to the total cost of the item is depreciated separately.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, asappropriate, only when it is probable the future economic benefits associated with the item will flow tothe Group and the cost of the item can he measured reliably. The carrying amount of the replaced partis derecognized. All other repairs and maintenance are charged to the income statement during thefinancial period in which they are incurred.

Increases in the carrying amount arising on revaluation of equipment are recognized in othercomprehensive income and are credited to “other reserves” in shareholders’ equity (Note 22). Theincrease is recognized in the income statement to the extent that it reverses an impairment of the sameasset previously recognized in the income statement. Decreases that offset previous increases of thesame asset are charged against “other reserves” in equity; through other comprehensive income whilstall other decreases are charged to the income statement.

Depreciation for both wheelsets and the remaining cost of railcars is calculated using the straight-linemethod to allocate their cost to their residual values, over their estimated useful lives. The estimateduseful life of wheelsets is 5-10 years and of the remaining part of the railcar is 22-40 years, dependingon the type of railcars. Furniture and fixtures and computer equipment are also depreciated using thestraight-line method.

An assets’ carrying amount is written down immediately to its recoverable amount if the asset’scarrying amount is greater than its estimated recoverable amount.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amountand are recognized in the income statement.

When revalued assets are sold, the amounts included in other reserves are transferred to retainedearnings.

F-14



Equipment (continued)

The annual depreciation rates are as follows:

%

Railcars 2,50 – 4,55Wheelsets 10,00 – 20,00Furniture and fixtures 24,00Computer equipment 32,00 – 63,00

Following revaluation, the Group depreciates its equipment using the remaining useful economic life ofthe asset.

Revisions of the residual value and useful economic life of every asset are made at each reportingdate. In case any of the estimates changes, the new estimate is applied prospectively with the effectshown in the current year and future accounting periods, where necessary.

Prepayments

Prepayments are carried at cost less provision for impairment. A prepayment is classified asnon-current when the goods or services relating to the prepayment are expected to be obtained afterone year, or when the prepayment relates to an asset which will itself be classified as non-current uponinitial recognition the latter being the case for the Group’s prepayments for railcars as these are of along-term nature.

Prepayments for the acquisition of railcars are transferred to the carrying amount of railcars once theGroup has obtained control of the railcars and it is probable that future economic benefits associatedwith the railcars will flow to the Group.

Other prepayments are written off to profit or loss when the goods or services relating to theprepayments are received. If there is an indication that the assets, goods or services relating to aprepayment will not be received, the carrying value of the prepayment is written down accordingly anda corresponding impairment loss is recognized in profit or loss for the year.

Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessorare classified as operating leases. In these situations the Group is considered to be the lessee.Payments made under operating leases (net of any incentives received from the lessor) are charged tothe income statement on a straight-line basis over the period of the lease.

Depot repairs

Depot repairs are performed once every two to three years for new railcars and every year for oldrailcars. The Group recognizes the expenses incurred for the depot repairs in the income statement.

Impairment of non-financial assets

Assets that have an indefinite useful life are not subject to amortisation and are tested annually forimpairment. Assets that are subject to depreciation or amortisation are reviewed for impairmentwhenever events or changes in circumstances indicate that the carrying amount may not berecoverable. An impairment loss is recognized for the amount by which the asset’s carrying amountexceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value lesscosts to sell and value in use. For the purposes of assessing impairment, assets are grouped at thelowest levels for which there are separately identifiable cash flows (cash-generating units).Non-financial assets that suffered impairment are reviewed for possible reversals of the impairment ateach reporting date.

F-15



Leases

A lease is an agreement whereby the lessor conveys to the lessee, in return of a payment or series ofpayments, the right to use an asset for an agreed period of time.

(a) Finance leases

Where the Group is a lessor in a lease which transfers substantially all the risks and rewardsincidental to ownership to the lessee, the assets leased out are presented as a finance leasereceivable and carried at the present value of the future lease payments. Finance leasereceivables are initially recognized at commencement (when the lease term begins) using adiscount rate determined at inception (the earlier of the date of the lease agreement and the dateof commitment by the parties to the principal provisions of the lease).

The difference between the gross receivable and the present value represents unearned financeincome (Note 17). This income is recognized over the term of the lease using the net investmentmethod (before tax), which reflects a constant periodic rate of return. Incremental costs directlyattributable to negotiating and arranging the lease are included in the initial measurement of thefinance lease receivable and reduce the amount of income recognized over the lease term.

Impairment of finance lease receivables is recognized in the income statement when incurred as aresult of one or more events (“loss events”) that occurred after the initial recognition of financelease receivables. Impairment losses are recognized through an allowance account to write downthe receivables’ net carrying amount to the present value of expected cash flows (which excludefuture credit losses that have not been incurred) discounted at the interest rates implicit in thefinance leases. The estimated future cash flows reflect the cash flows that may result fromobtaining and selling the assets subject to the lease.

(b) Operating leases

Leases in which a significant portion of the risks and rewards of ownership are retained by theGroup are classified as operating leases and the assets are included in the balance sheet under‘Equipment’. In these situations the Group is considered to be the lessor.

Conversion of leases

Lease classification is made at the inception of the lease. If at any time the lessee and the lessor agreeto change the provisions of the lease, other than by renewing the lease, in a manner that would haveresulted in a different classification of the lease if the changed terms had been in effect at the inceptionof the lease, the revised agreement is regarded as a new agreement over its term. However, changesin estimates, do not give rise to a new classification of a lease for accounting purposes. Upon a changefrom finance lease to operating lease, the asset is recognized on the balance sheet and the financelease receivable is derecognized. The change in classification of leases does not result in any gain/loss in the income statement unless there is an impairment on those leases.

Depreciation on the equipment subject to a new lease is accounted for under IAS 16 ‘Property, plantand equipment’. When there is a change from an operating lease to a finance lease, the asset isderecognized from equipment and a finance lease receivable is recognized on the balance sheet. Anyrevaluation gains are released to the retained earnings upon derecognition. Any difference arising fromdepreciation recognized on the revalued amount and depreciation recognized on the historic cost isalso released to the income statement upon derecognition.

Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and aresubsequently re-measured at their fair value. The method of recognizing the resulting gain or lossdepends on whether the derivative is designated as a hedging instrument and, if so, the nature of theitem being hedged. The Group designates certain derivatives as hedges of a particular risk associatedwith a recognized liability (cash flow hedge).

F-16



Derivative financial instruments and hedging activities (continued)

The Group documents, at the inception of the transaction, the relationship between hedginginstruments and hedged items, as well as its risk management objectives and strategy for undertakingvarious hedge transactions. The Group also documents its assessment, both at hedge inception andon an on-going basis, of whether the derivatives that are used in hedging transactions are highlyeffective in offsetting changes in fair values or cash flows of hedged items. The Group has opted topresent the full fair value of derivatives as non-current for hedge relationships over twelve months.

The fair values of various derivative instruments used for hedging purposes are disclosed in Note 25.Movements on the hedging reserve in shareholders’ equity are shown in Note 22. The full fair value ofa hedging derivative is classified as a non-current asset or liability when the remaining hedge item ismore than twelve months; it is classified as a current asset or liability when the remaining maturity ofthe hedged item is less than twelve months.

Cash flow hedge

The effective portion of changes in the fair value of derivatives that are designated and qualify as cashflow hedges are recognized in other comprehensive income. The gain or loss relating to the ineffectiveportion is recognized immediately in the income statement within finance costs.

Amounts accumulated in equity are recycled in the income statement in the periods when the hedgeditem affects profit or loss. The gain or loss relating to the effective and ineffective portion of interestrate swap hedging on variable rate borrowings is recognized in the income statement within financecosts.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedgeaccounting, any cumulative gain or loss existing in equity at that time remains in equity and isrecognized when the forecast transaction is ultimately recognized in the income statement. When aforecast transaction is no longer expected to occur, the cumulative gain or loss that was reported inequity is immediately transferred to the income statement within finance costs.

Trade and other receivables

Trade receivables are recognized initially at fair value and subsequently measured at amortized costusing the effective interest method, less provision for impairment. A provision for impairment of tradereceivables is established when there is objective evidence that the Group will not be able to collect allamounts due according to the original terms of receivables. Significant financial difficulties of thedebtor, the probability that the debtor will enter bankruptcy or financial reorganisation, and default ordelinquency in payments (more than 30 days overdue) are considered indicators that the tradereceivable is impaired. The amount of the provision is the difference between the asset’s carryingamount and the present value of estimated future cash flows, discounted at the original effectiveinterest rate. The carrying amount of the asset is reduced through the use of an allowance account,and the amount of the loss is recognized in the income statement. When a trade receivable isuncollectible, it is written off against the allowance account for trade receivables. Subsequentrecoveries of amounts previously written off are credited in the income statement.

VAT

Output value added tax related to sales is payable to the tax authorities on the earlier of (a) collectionof the receivables from customers or (b) delivery of the goods or services to customers. Input VAT isgenerally recoverable against output VAT upon receipt of the VAT invoice. The tax authorities permitthe settlement of VAT on a net basis. VAT related to sales and purchases is recognized in the balancesheet on a gross basis and disclosed separately as an asset and liability. Where a provision has beenmade for impairment of receivables, impairment loss is recorded for the gross amount of the debtor,including VAT.

F-17



Share capital

Ordinary shares are classified as equity.

Where any Group company purchases the Company’s equity share capital (treasury shares), theconsideration paid, including any directly attributable incremental costs (net of income taxes), isdeducted from equity attributable to the Company’s equity holders until the shares are cancelled orreissued. Where such shares are subsequently reissued any consideration received (net of any directlyattributable incremental transaction costs and the related income tax effects) is included in equityattributable to the Company’s equity holders.

A share swap transaction is effected by the exchange of the shares in any Group company with sharesin the Company’s equity share capital. The shares in the Group company are owned by the Companyand the Company is partly owned by external shareholders.

Any excess of the fair value of consideration received over the par value of shares issued is recordedas Share Premium in equity.

Borrowings

Borrowings are recognized initially at fair value, net of transaction costs incurred. Borrowings aresubsequently carried at amortized cost; any difference between the proceeds (net of transaction costs)and the redemption value is recognized in the income statement over the period of the borrowingsusing the effective interest rate method.

The effective interest method is a method of allocating interest income or interest expense over therelevant period, so as to achieve a constant periodic rate of interest (effective interest rate) on thecarrying amount. The effective interest rate is the rate that exactly discounts estimated future cashpayments or receipts (excluding future credit losses) through the expected life of the financialinstrument or a shorter period, if appropriate, to the net carrying amount of the financial instrument.

The effective interest rate discounts cash flows of variable interest instruments to the next interestrepricing date, except for the premium or discount which reflects the credit spread over the floating ratespecified in the instrument, or other variables that are not reset to market rates. Such premiums ordiscounts are amortized over the whole expected life of the instrument. The present value calculationincludes all fees paid or received between parties to the contract that are an integral part of theeffective interest rate.

In relation to the Group’s instruments with variable cash flows, the Group applies the accounting policyof (a) recognizing borrowing costs on an accrual basis and (b) amortizing transaction costs incurred onthe syndicated loan facility on a straight-line basis over the period of the loan.

Fees paid on the establishment of loan facilities are recognized as transaction costs of the loan to theextent that it is probable that some or all of the facility will be drawn down. To the extent there isevidence that it is probable that some or all of the facility will be drawn down, the facility fee isaccounted for as a transaction cost under IAS 39. The facility fee is deferred in full and treated as atransaction cost when draw down occurs. It is not amortized prior to the draw down. To the extent thereis no evidence that it is probable that some or all of the facility will be drawn down, the facility fee iscapitalized as a prepayment for services and amortized over the period of the facility to which it relates.Borrowings are classified as current liabilities unless the Group has an unconditional right to defersettlement of the liability for at least twelve months after the balance sheet date.

Mezzanine loan

The mezzanine loan is a hybrid financial instrument which includes both a non-derivative host contractand embedded derivatives. The embedded derivatives identified in the agreement are (i) a right for theholder of the loan to request a conversion of the outstanding balance of the loan into shares in theCompany and (ii) a prepayment option for the issuer under which the Company can, under certainconditions, elect to prepay the loan.

F-18



Mezzanine loan (continued)

An embedded derivative is a component of a hybrid instrument that causes some or all of the cashflows that otherwise would be required by the contract to be modified according to a specified interestrate, financial instrument price, commodity price, foreign exchange rate, index of prices or rates, creditrating or credit index, or other variable.

The Company has assessed that the embedded derivatives are not closely related to the economiccharacteristics and risks of the host contract and therefore are accounted for separately as derivativesunder the provisions of IAS 39. As a result, the embedded derivatives are fair valued at each reportingdate and changes in the fair value of the derivatives are recognized in the income statement.

The fair value of the host contract is the fair value of the instrument at the inception less the fair valueof the embedded derivatives. The host contract is accounted for at amortized cost using the effectiveinterest method which is a method of calculating the amortized cost of a financial liability and allocatingthe interest expense over the relevant period of the loan.

When calculating the effective interest rate, the Company estimates cash flows considering all thecontractual terms of the financial instrument and the calculation includes all fees paid, transactioncosts, and all other premiums or discounts. Only cash flows that can be estimated reliably are includedin the calculation.

Finance lease payables

Lease of property, plant and equipment where the Group has substantially all the risks and rewards ofownership are classified as finance leases. Finance leases are capitalized at the lease’s inception atthe lower of the fair value of the leased assets and the present value of the minimum lease payments.Each lease payment is allocated between the liability and finance charges so as to achieve a constantrate on the finance balance outstanding. The corresponding rental obligations, net of finance charges,are included in borrowings. The interest element of the finance cost is charged to the income statementover the lease period so as to produce a constant periodic rate of interest on the remaining balance ofthe liability for each period.

Business combinations

Business combinations are accounted for using the acquisition method of accounting. Theconsideration transferred in a business combination is measured at fair value at the date of acquisition.This consideration includes the cash paid plus the fair value at the date of exchange of assets given,liabilities incurred or assumed and equity instruments issued by the Group. The fair value of theconsideration transferred also includes contingent consideration arrangements at fair value. Directlyattributable acquisition-related costs are expensed in the current period and reported within generaland administration expenses.

At the date of acquisition the Group recognises the identifiable assets acquired, the liabilities assumedand any non-controlling interest in the acquired business. The identifiable assets acquired and theliabilities assumed are initially recognized at fair value.

Where the Group does not acquire total ownership of the acquired business, non-controlling interestsare recorded as the proportion of the fair value of the acquired net assets attributable to thenon-controlling interest.

During the measurement period, the provisional amounts are retrospectively adjusted and additionalassets and liabilities may be recognized, to reflect new information obtained about the facts andcircumstances that existed at the acquisition date which would have affected the measurement of theamounts recognized at that date, had they been known. The measurement period does not exceedtwelve months from the date of acquisition.

F-19



Business combinations (continued)

A gain on a bargain purchase occurs where the total of (i) consideration transferred and(ii) non-controlling interest is less than the value of the identifiable assets and liabilities acquired on thedate of acquisition. A bargain purchase represents an economic gain which is recognized immediatelyin the income statement.

Provisions

Provisions are recognized when the Group has a present legal or constructive obligation as a result ofpast events; it is probable that an outflow of resources will be required to settle the obligation; and theamount has been reliably estimated. Provisions are not recognized for future operating losses.

Cash and cash equivalents

Bank balances which are restricted under the financing facilities are excluded from cash and cashequivalents for the purposes of the cash flow statement. The movement in the restricted bank balancesis shown in the cash flow statement as part of financing activities. Cash and cash equivalents includedeposits held at call with banks. Cash and cash equivalents are carried at amortized cost.

Comparatives and prior year adjustments

Material prior period adjustments are made retrospectively in the first set of financial statementsauthorized for issue:

(a) restating the comparative amounts for the prior period presented in which the change occurred; or

(b) if the change occurred before the earliest prior period presented, restating opening balances ofassets, liabilities and equity for the earliest prior period presented.

In terms of comparatives, the Group has amended the presentation of the following items:

(a) VAT recoverable – previously this category was presented under non-current assets. This is nowclassified under current assets since (i) the Group has several cases on-going with the taxauthorities with respect to VAT refunds and its approach has consistently been to claim itsentitlement to VAT refunds within 6 months after the VAT claim and (ii) the tax authoritiesimproved the efficiency of the VAT refund procedure and the Group been successful in receiving aseries of cash refunds from the tax authorities over the last three years.

(b) Deferred tax assets – previously deferred tax assets and liabilities were offset as they related tothe same tax jurisdiction. These are now presented separately and shown on a gross basis asoffsetting of balances is not permitted when these arise in different legal entities. As a result thefollowing adjustments were made in the consolidated financial statements (amounts in US$):

(i) Effect on deferred tax asset:

Year Original amount Adjustment Restated

2009 10.847.646 7.348.325 18.195.9712010 — 4.823.267 4.823.267

(ii) Effect on deferred tax liability:

Year Original amount Adjustment Restated

2009 — (7.348.325) (7.348.325)2010 (35.248.810) (4.823.267) (40.072.077)

F-20



Comparatives and prior year adjustments (continued)

(c) Transactions with non-controlling interests – Up to 31 December 2010, the Group accounted forthe premium paid in 2005 to acquire 10 million ordinary shares (17,55% holding) of Brunswick RailHolding Limited from a non-controlling interest in the subsidiary, as goodwill.

In order to ensure consistency of accounting policies for the treatment of transactions withnon-controlling interests, so that all such transactions are dealt with in equity as transactions withequity owners, management restated its financial statements so that the premium paid for theacquisition of the non-controlling interest of Brunswick Rail Holding Limited over the share of netassets acquired to be recognized in other reserves in equity.

The effect of the restatement is that intangibles and other reserves have decreased byUS$2.673.106 as of 31 December 2009 and 2010.

3 New standards, interpretations and amendments to published standards

Adoption of New or Revised Standards and Interpretations

The following new standards and interpretations became effective for the Group from 1 January 2011:

Amendment to IAS 24, Related Party Disclosures (issued in November 2009 and effective forannual periods beginning on or after 1 January 2011). IAS 24 was revised in 2009 by:(a) simplifying the definition of a related party, clarifying its intended meaning and eliminatinginconsistencies; and by (b) providing a partial exemption from the disclosure requirements forgovernment-related entities.

As a result of the revised standard, the Group now also discloses contractual commitments topurchase and sell goods or services to its related parties.

Improvements to International Financial Reporting Standards (issued in May 2010 and effectivefrom 1 January 2011). The improvements consist of a mixture of substantive changes andclarifications in the following standards and interpretations: IFRS 1 was amended (i) to allow previousGAAP carrying value to be used as deemed cost of an item of property, plant and equipment or anintangible asset if that item was used in operations subject to rate regulation, (ii) to allow an event-driven revaluation to be used as deemed cost of property, plant and equipment even if the revaluationoccurs during a period covered by the first IFRS financial statements and (iii) to require a first-timeadopter to explain changes in accounting policies or in the IFRS 1 exemptions between its first IFRSinterim report and its first IFRS financial statements; IFRS 3 was amended (i) to require measurementat fair value (unless another measurement basis is required by other IFRS standards) ofnon-controlling interests that are not present ownership interest or do not entitle the holder to aproportionate share of net assets in the event of liquidation, (ii) to provide guidance on the acquiree’sshare-based payment arrangements that were not replaced, or were voluntarily replaced as a result ofa business combination and (iii) to clarify that the contingent considerations from businesscombinations that occurred before the effective date of revised IFRS 3 (issued in January 2008) will beaccounted for in accordance with the guidance in the previous version of IFRS 3;

IFRS 7 was amended to clarify certain disclosure requirements, in particular (i) by adding an explicitemphasis on the interaction between qualitative and quantitative disclosures about the nature andextent of financial risks, (ii) by removing the requirement to disclose carrying amount of renegotiatedfinancial assets that would otherwise be past due or impaired, (iii) by replacing the requirement todisclose fair value of collateral by a more general requirement to disclose its financial effect, and (iv) byclarifying that an entity should disclose the amount of foreclosed collateral held at the reporting date,and not the amount obtained during the reporting period; IAS 1 was amended to clarify therequirements for the presentation and content of the statement of changes in equity ; IAS 27 wasamended by clarifying the transition rules for amendments to IAS 21, 28 and 31 made by the revisedIAS 27 (as amended in January 2008); IAS 34 was amended to add additional examples of significantevents and transactions requiring disclosure in a condensed interim financial report, including transfersbetween the levels of fair value hierarchy, changes in classification of financial assets or changes inbusiness or economic environment that affect the fair values of the entity’s financial instruments; andIFRIC 13 was amended to clarify measurement of fair value of award credits.

F-21


3 New standards, interpretations and amendments to published standards (continued)

Adoption of New or Revised Standards and Interpretations (continued)

The above amendments resulted in additional or revised disclosures, but had no material impact onmeasurement or recognition of transactions and balances reported in these consolidated financialstatements.

Other revised standards and interpretations effective for the current period. IFRIC 19“Extinguishing financial liabilities with equity instruments”, amendments to IAS 32 on classification ofrights issues, clarifications in IFRIC 14 “IAS 19 – The limit on a defined benefit asset, minimum fundingrequirements and their interaction” relating to prepayments of minimum funding requirements andamendments to IFRS 1 “First-time adoption of IFRS”, did not have any impact on these consolidatedfinancial statements.

New Accounting Pronouncements

Certain new standards and interpretations have been issued that are mandatory for the annual periodsbeginning on or after 1 January 2012 or later, and which the Group has not early adopted. The Groupwill be considering the implications of these standards and interpretations, the impact on the Groupand the timing of their adoption by the Group.

IFRS 9, Financial Instruments: Classification and Measurement. IFRS 9, issued in November2009, replaces those parts of IAS 39 relating to the classification and measurement of financial assets.IFRS 9 was further amended in October 2010 to address the classification and measurement offinancial liabilities and in December 2011 to (i) change its effective date to annual periods beginning onor after 1 January 2015 and (ii) add transition disclosures. Key features of the standard are as follows:

• Financial assets are required to be classified into two measurement categories: those to bemeasured subsequently at fair value, and those to be measured subsequently at amortized cost.The decision is to be made at initial recognition. The classification depends on the entity’sbusiness model for managing its financial instruments and the contractual cash flowcharacteristics of the instrument.

• An instrument is subsequently measured at amortized cost only if it is a debt instrument and both(i) the objective of the entity’s business model is to hold the asset to collect the contractual cashflows, and (ii) the asset’s contractual cash flows represent payments of principal and interest only(that is, it has only “basic loan features”). All other debt instruments are to be measured at fairvalue through profit or loss.

• All equity instruments are to be measured subsequently at fair value. Equity instruments that areheld for trading will be measured at fair value through profit or loss. For all other equityinvestments, an irrevocable election can be made at initial recognition, to recognize unrealizedand realized fair value gains and losses through other comprehensive income rather than profit orloss. There is to be no recycling of fair value gains and losses to profit or loss. This election maybe made on an instrument-by-instrument basis. Dividends are to be presented in profit or loss, aslong as they represent a return on investment.

• Most of the requirements in IAS 39 for classification and measurement of financial liabilities werecarried forward unchanged to IFRS 9. The key change is that an entity will be required to presentthe effects of changes in own credit risk of financial liabilities designated at fair value through profitor loss in other comprehensive income.

While adoption of IFRS 9 is mandatory from 1 January 2015, earlier adoption is permitted. The Groupis considering the implications of the standard, the impact on the Group and the timing of its adoptionby the Group.

IFRS 10, Consolidated Financial Statements (issued in May 2011 and effective for annualperiods beginning on or after 1 January 2013), replaces all of the guidance on control andconsolidation in IAS 27 “Consolidated and separate financial statements” and SIC-12 “Consolidation –special purpose entities”. IFRS 10 changes the definition of control so that the same criteria are appliedto all entities to determine control. This definition is supported by extensive application guidance. TheGroup is currently assessing the impact of the new standard on its financial statements.

F-22



New Accounting Pronouncements (continued)

IFRS 11, Joint Arrangements, (issued in May 2011 and effective for annual periods beginning onor after 1 January 2013), replaces IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly ControlledEntities – Non-Monetary Contributions by Ventures”. Changes in the definitions have reduced thenumber of types of joint arrangements to two: joint operations and joint ventures. The existing policychoice of proportionate consolidation for jointly controlled entities has been eliminated. Equityaccounting is mandatory for participants in joint ventures. The Group is currently assessing the impactof the new standard on its financial statements.

IFRS 12, Disclosure of Interest in Other Entities, (issued in May 2011 and effective for annualperiods beginning on or after 1 January 2013), applies to entities that have an interest in asubsidiary, a joint arrangement, an associate or an unconsolidated structured entity. It replaces thedisclosure requirements currently found in IAS 28 “Investments in associates”. IFRS 12 requiresentities to disclose information that helps financial statement readers to evaluate the nature, risks andfinancial effects associated with the entity’s interests in subsidiaries, associates, joint arrangementsand unconsolidated structured entities. To meet these objectives, the new standard requiresdisclosures in a number of areas, including significant judgments and assumptions made indetermining whether an entity controls, jointly controls, or significantly influences its interests in otherentities, extended disclosures on share of non-controlling interests in Group activities and cash flows,summarized financial information of subsidiaries with material non-controlling interests, and detaileddisclosures of interests in unconsolidated structured entities. The Group is currently assessing theimpact of the new standard on its financial statements.

IFRS 13, Fair Value Measurement, (issued in May 2011 and effective for annual periodsbeginning on or after 1 January 2013), aims to improve consistency and reduce complexity byproviding a revised definition of fair value, and a single source of fair value measurement anddisclosure requirements for use across IFRS. The Group is currently assessing the impact of the newstandard on its financial statements.

IAS 27, Separate Financial Statements, (revised in May 2011 and effective for annual periodsbeginning on or after 1 January 2013), was changed and its objective is now to prescribe theaccounting and disclosure requirements for investments in subsidiaries, joint ventures and associateswhen an entity prepares separate financial statements. The guidance on control and consolidatedfinancial statements was replaced by IFRS 10, Consolidated Financial Statements. The Group iscurrently assessing the impact of the new standard on its financial statements.

IAS 28, Investments in Associates and Joint Ventures, (revised in May 2011 and effective forannual periods beginning on or after 1 January 2013). The amendment of IAS 28 resulted from theBoard’s project on joint ventures. When discussing that project, the Board decided to incorporate theaccounting for joint ventures using the equity method into IAS 28 because this method is applicable toboth joint ventures and associates. With this exception, other guidance remained unchanged. TheGroup is currently assessing the impact of the new standard on its financial statements.

Disclosures – Transfers of Financial Assets – Amendments to IFRS 7, Financial Instruments:Disclosures (issued in October 2010 and effective for annual periods beginning on or after1 July 2011.). The amendment requires additional disclosures in respect of risk exposures arising fromtransferred financial assets. The amendment includes a requirement to disclose by class of asset thenature, carrying amount and a description of the risks and rewards of financial assets that have beentransferred to another party, yet remain on the entity’s balance sheet. Disclosures are also required toenable a user to understand the amount of any associated liabilities, and the relationship between thefinancial assets and associated liabilities. Where financial assets have been derecognized, but theentity is still exposed to certain risks and rewards associated with the transferred asset, additionaldisclosure is required to enable the effects of those risks to be understood. The Group does not expectthis amendment to have a significant impact on the financial statements.

Amendments to IAS 1, Presentation of Financial Statements (issued in June 2011, effective forannual periods beginning on or after 1 July 2012), changes the disclosure of items presented in

F-23




other comprehensive income. The amendments require entities to separate items presented in othercomprehensive income into two groups, based on whether or not they may be reclassified to profit orloss in the future. The suggested title used by IAS 1 has changed to ‘statement of profit or loss andother comprehensive income’. The Group expects the amended standard to change the presentationof its financial statements, but to have no impact on the measurement of transactions and balances.

Amendments to IAS 19, Employee Benefits (issued in June 2011, effective for periodsbeginning on or after 1 January 2013), makes significant changes to the recognition andmeasurement of defined benefit pension expense and termination benefits, and to the disclosures forall employee benefits. The standard requires recognition of all changes in the net defined benefitliability (asset) when they occur, as follows: (i) service cost and net interest in profit or loss; and(ii) remeasurements in other comprehensive income. The Group is currently assessing the impact ofthe new standard on its financial statements.

Disclosures – Offsetting Financial Assets and Financial Liabilities – Amendments to IFRS 7,Financial Instruments: Disclosures (issued in December 2011 and effective for annual periodsbeginning on or after 1 January 2013). The amendment requires disclosures that will enable users ofan entity’s financial statements to evaluate the effect or potential effect of netting arrangements,including rights of set-off. The amendment will have an impact on disclosures but will have no effect onthe measurement and recognition of financial instruments.

Offsetting Financial Assets and Financial Liabilities – Amendments to IAS 32, FinancialInstruments: Presentation (issued in December 2011 and effective for annual periods beginningon or after 1 January 2014). The amendment added application guidance to IAS 32 to addressinconsistencies identified in applying some of the offsetting criteria. This includes clarifying themeaning of ‘currently has a legally enforceable right of set-off’ and that some gross settlement systemsmay be considered equivalent to net settlement. The Group is considering the implications of theamendment, the impact on the Group and the timing of its adoption by the Group.

Other revised standards and interpretations: The amendments to IFRS 1 “First-time adoption ofIFRS”, relating to severe hyperinflation and eliminating references to fixed dates for certain exceptionsand exemptions, will not have an impact on these financial statements. The amendment to IAS 12“Income taxes”, which introduces a rebuttable presumption that an investment property carried at fairvalue is recovered entirely through sale, will not have an impact on these financial statements. IFRIC20, Stripping Costs in the Production Phase of a Surface Mine, considers when and how to account forthe benefits arising from the stripping activity in the mining industry.

Transition Guidance Amendments to IFRS 10, IFRS 11 and IFRS 12 (issued on 28 June 2012 andeffective for annual periods beginning 1 January 2013). The amendments clarify the transitionguidance in IFRS 10 Consolidated Financial Statements. Entities adopting IFRS 10 should assesscontrol at the first day of the annual period in which IFRS 10 is adopted, and if the consolidationconclusion under IFRS 10 differs from IAS 27 and SIC 12, the immediately preceding comparativeperiod (that is, year 2012 for a calendar year-end entity that adopts IFRS 10 in 2013) is restated,unless impracticable. The amendments also provide additional transition relief in IFRS 10, IFRS 11,Joint Arrangements, and IFRS 12, Disclosure of Interests in Other Entities, by limiting the requirementto provide adjusted comparative information only for the immediately preceding comparative period.Further, the amendments will remove the requirement to present comparative information fordisclosures related to unconsolidated structured entities for periods before IFRS 12 is first applied. TheGroup is currently assessing the impact of the amendments on its financial statements.

Unless otherwise described above, the new standards and interpretations are not expected to affectsignificantly the Group’s consolidated financial statements.

F-24


4 Financial risk management

(a) Financial risk factors

The Group’s activities expose it to certain financial risks:

(i) Market risk (including foreign exchange risk and interest rate risk)

(ii) Credit risk

(iii) Liquidity risk

The Group’s overall risk management programme focuses on the unpredictability of financialmarkets and seeks to minimise potential adverse effects on the Group’s financial performance.The Group uses derivative financial instruments to hedge certain risk exposures.

Risk management is carried out by the Group’s management under policies approved by theBoard.

(i) Market risk

Foreign exchange risk

Foreign exchange risk is the risk of a negative impact on the value or earnings of the Groupcaused by fluctuations in foreign exchange rates. The Group is exposed to foreign exchangerisk arising from fluctuation in the exchange rates between the Russian Rouble (“RUB”) andthe US Dollar (“USD”). The foreign exchange losses debited to the income statement amountto US$61.480.483 (2010: US$3.770.321, 2009: US$9.730.548).

The annual average exchange rates for the years ended 31 December 2011, 31 December2010 and 31 December 2009 were 29,39, 30,38 and 31,72 respectively.

At 31 December 2011, if the RUB had strengthened / weakened by 10% for 2011 (2010: 10%,2009: 10%) relative to the USD with all other variables held constant, post-tax loss for theyear would have been US$63.035.445 higher/lower (2010: US$27.293.502 higher/lower posttax profit, 2009: US$29.892.357 higher/lower post tax loss) mainly as a result of foreignexchange differences on translation of US Dollar-denominated borrowings. The sensitivity ofthe loss to the exchange rates is not comparable between the three years mainly due to thehigher amount of borrowings taken up in 2011 (Note 23).

Management’s policy in respect of the currency exposure is:

• To reduce currency risk by allowing only a limited part of the lease contracts to bedenominated in RUB. Currently the terms and conditions of the two syndicated loanfacilities caps RUB denominated leases at 15% (US$435 million 2007-2012) and 25%(US$420 million 2010-2018) respectively. A large part of this RUB cash flow is used tocover the Group’s RUB-denominated operating expenses. The remaining part of therental income shall be denominated in USD in order to avoid any mismatch between therental income and interest payments.

• Not to hedge the translation exposure as described above caused by the revaluationeffects on the railcar fleet.

Interest rate risk

The Group earns its income primarily through the rentals received on its leased fleet ofrailcars. All rental levels, expressed as a daily rental rate payable per railcar, are agreed atthe start either as a fixed rate throughout the contract term or, in some cases, with periodicalpredefined increases or, in some cases, with a unilateral right for the Group to adjust the rateupwards, sometimes subject to a cap, in the event market rates have increased.

Effectively this means that the revenue stream of the Group is largely fixed over the term ofthe current lease portfolio. Beside equity, the Group’s portfolio is financed with debt facilitieson which the Group pays a floating interest rate expressed as a margin over three-monthUSD LIBOR.

As a consequence, the Group would be exposed to an increase in interest rates as the cost offinancing would increase whereas the revenues on the lease portfolio would remainunchanged.

F-25


4 Financial risk management (continued)

(a) Financial risk factors (continued)

(i) Market risk (continued)

Interest rate risk (continued)

The Group manages its interest rate exposure through the use of interest rate swaps throughwhich it converts the floating interest payments on the financing to a fixed rate interest. Bydoing so, it mitigates the risk of fluctuations in the interest cost on the debt caused bychanges in the market interest rates.

The hedging of interest rate risk is described in Group policy and is also part of the loandocumentation agreed with the financing banks. The policies state that (i) at least 90% of theamortized part and at least 50% of the unamortized part of the drawn part of the debt facility(US$435 million 2007-2012) and (ii) at least 60% of the outstanding loan amount of A/Btranches (US$420 million 2010-2018) shall be hedged at any time. As a consequence, theeffect on the losses for the respective years and on the equity of a change in the interest rateson USD-denominated borrowings, with all other variables held constant, is not considered tobe material.

The table below summarizes the Group’s exposure to interest rate risk. The table presents theaggregated amounts of the Group’s financial assets and liabilities at carrying amounts,categorized by the earlier of contractual interest re-pricing or maturity dates. The amountsdisclosed in the table are the contractual undiscounted cash flows.

Lessthan

1 year

Between2 and 5years

Over5 years Total

US$ US$ US$ US$

31 December 2011Total financial assets 80.506.408 12.322.015 5.879.009 98.707.432Total financial liabilities (608.958.172) (148.916.784) (74.249.271) (832.124.227)

Net interest sensitivity gapat 31 December 2011 (733.416.795)

31 December 2010Total financial assets 132.711.222 43.554.730 15.787.296 192.053.248Total financial liabilities (300.702.194) — — (300.702.194)


31 December 2009Total financial assets 50.809.972 53.787.364 22.900.722 127.498.058Total financial liabilities (324.928.880) — — (324.928.880)


(ii) Credit risk

Credit risk arises when a failure by counterparties to discharge their obligations could reducethe amount of future cash inflows from the Group assets, whether in the form of deposits withbanks and financial institutions or in the form of lease agreements with clients.

For short-term deposits and cash on current account, credit risk is managed by using onlyreputable counterparties with independent credit ratings. The Group holds the majority of itscash reserves with Societe Generale and UniCredit Bank.

The Group has established a comprehensive policy which describes the process by whichnew lease clients shall be accepted. A cornerstone in the policy is the performance of anevaluation of all new clients and transactions taking into account the financial strength of thelessee, the quality of the leased equipment and transaction structure.

F-26




(ii) Credit risk (continued)

There are several criteria which are used to control customer credit risk including:

• minimum lessee criteria which categorize customers/lessees between A and Bcategories,

• equipment classification between liquid, semi-liquid and illiquid based on which maximumportfolio exposure on each class is monitored and controlled (as the Group needs to beable to remarket its railcars in the secondary market, it classifies its railcar fleet in termsof liquidity by looking (i) at the number of railcars and (ii) the number of users of eachrailcar type in the Russian market and based on a number of predetermined thresholds,the Group classifies its railcars accordingly,

• portfolio concentration limits including single lessee exposure (not more than 20% exceptin the case of one client for which the limit is 30%) and single industry exposure (notmore than 35%), except for the transportation industry where the exposure can be 60%.

The limits above have been set by the Credit Committee of the Group acting on behalf of theBoard. The Credit Committee consists of two members of the Board and senior managementof the Group who are empowered to deal and present to the Credit Committee thetransactions for approval.

Depending on the level of transaction and the exposure on a single client, the transaction maybe approved only by top management or may, in case the aggregate exposure to the lesseeexceeds US$10 million, require the approval also of the two members representing the Board.

For the credit qualities of financial assets refer to Note 15(b).

The fair market value of the equipment pledged (1.070 railcars, 2010: 1.870 railcars, 2009:1.870 railcars) as collateral under finance lease receivables is also higher than the financelease receivables’ carrying amount.

Based on independent valuation reports produced for the lenders, the fair value (excludingVAT) of the equipment pledged as collateral under finance lease receivables on 31 December2011 was US$64.573.412 (2010: US$104.001.278, 2009: US$69.179.055) which exceededthe finance lease receivables’ carrying amount as at that date by US$44.046.735 (2010:US$48.764.042, 2009: US$1.553.070).

All of the Group’s financial assets are neither past due nor impaired. As at 31 December2011, 31 December 2010 and 31 December 2009 the Group did not have any credit relatedcommitments.

F-27




(iii) Liquidity risk

The table below shows how the Group’s financial liabilities become due and payable. Theamounts disclosed in the table are the contractual undiscounted cash flows. Balances duewithin 12 months equal their carrying amount as the impact of discounting is not significant.

Less than1 yearUS$

2 to 3yearsUS$

4 to 5yearsUS$

Over 5yearsUS$

At 31 December 2011Borrowings (ex. finance lease liabilities) 240.676.628 167.016.165 89.038.217 78.195.170Mezzanine loan — — — 66.940.781Finance lease liabilities 16.599.728 148.916.784 — 7.308.490Trade and other payables 12.886.633 — — —Consideration payable on business

combination 27.069.551 — — —Derivative financial instruments 4.545.631 — — —

301.778.171 315.932.949 89.038.217 152.444.441

At 31 December 2010Borrowings 51.931.820 199.911.585 16.004.423 16.327.266Trade and other payables 11.965.562 — — —Derivative financial instruments 8.382.278 3.766.015 — —

72.279.660 203.677.600 16.004.423 16.327.266

At 31 December 2009Borrowings 30.324.991 272.516.533 — —Trade and other payables 5.937.148 — — —Derivative financial instruments 9.722.274 7.629.089 — —

45.984.413 280.145.622 — —

Prudent liquidity risk management entails maintaining sufficient cash and the availability offunds to meet these repayments.

(b) Capital risk management

The gearing ratio as defined by the management at 31 December 2011, 2010 and 2009 was asfollows:

2011US$

2010US$

2009US$

Total consolidated borrowings – principal (Note 23) 693.972.036 272.935.022 298.923.573Unamortized borrowing costs 12.721.948 11.240.072 3.917.951

Gross consolidated borrowings 706.693.984 284.175.094 302.841.524Less: Cash and cash equivalents (Note 20) (66.796.636) (112.450.226) (30.293.423)

Consolidated total net borrowings 639.897.348 171.724.868 272.548.101

Equity 664.610.639 491.869.629 188.641.024

Gearing ratio 0,96 0,35 1,44

The Group monitors its capital adequacy on the basis of the gearing ratio being the consolidatedtotal net borrowings of the Group to Equity where Equity means the residual interest in the assetsof the Group after deducting all liabilities (as determined in accordance with IFRS) ignoring noncash unrealized gains or losses attributable to foreign exchange exposures (including relatedtaxes (if any)) and excluding any amount attributable to any hedging arrangement being marked tomarket in accordance with IFRS.

The increase in the gearing ratio during 2011, measured here at the consolidated level, resultedprimarily from the increase of borrowings, as a result of (a) utilizing fully the European Bank forReconstruction and Development (“EBRD”) — International Finance Corporation (“IFC‘) facility

F-28



(b) Capital risk management (continued)

(b) the VTB Capital plc (“VTB”) — Raiffeisen Bank International (“RBI”) A loan facilities and (c) the7-year finance lease provided by VTB Leasing and finance lease liabilities acquired by the Groupunder its ZAO ProfTrans (“PT group”) acquisition (Note 14). The Group’s agreement with the lendingbanks is for the gearing ratio to be less than 3,5 to 1 at all times.

(c) Fair value estimation

The fair value of financial instruments that are not traded in an active market is determined byusing valuation techniques. The Group uses a variety of methods and makes assumptions that arebased on market conditions existing at each balance sheet date. The Group uses mainlyestimated discounted cash flow models to determine the fair value for the financial instrumentswhich are not traded in an active market.

The carrying value less impairment provision of trade receivables and payables are assumed toapproximate their fair values. The fair value of financial liabilities for disclosure purposes isestimated by discounting the future contractual cash flows at the current market interest rate thatis available to the Group for similar financial instruments.

The following table presents the Group’s assets and liabilities that are measured at fair value at31 December 2011, 2010 and 2009:

31 December 2011Level 2

Totalbalance

US$ US$

LiabilitiesDerivative financial instruments used for hedging 4.386.002 4.386.002

Total liabilities 4.386.002 4.386.002


Totalbalance

US$ US$




US$

Totalbalance

US$



Level 2: valuation based on observable inputs other than quoted prices, that are observable for theasset or liability, either directly (for example, as prices) or indirectly (for example, derived fromprices).

5 Seasonality of operations

The operations of the Group are not subject to seasonal fluctuations.

6 Segment information

Based on the reports reviewed by the Board that are used for allocating resources, assessingperformance and making strategic decisions, management has determined that there is one reportablesegment.

The business has been considered from a product perspective. No segmental analysis is prepared ona geographical basis because substantially all business activities are carried out in the Russian

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6 Segment information (continued)

Federation. The non-Russian entities of the Group carry out part of the functions in the treasury, legal,accounting and financial reporting and even though these corporate activities are reflected as aseparate business unit for internal reporting purposes, they would not qualify as operating segmentsbecause they are not business activities from which the Group is able to earn revenues. For thisreason, the amounts relating to these activities would be reported in the reconciliations of the totalreportable segment amounts to the financial statements.

Brunswick Rail’s portfolio includes two types of lease contracts; operating leases, the Company’s mainproduct, and a remaining portion of finance leases, a product no longer offered and where currentcontracts are left to run out their remaining life. These two lease types are considered to be theoperating segments of the Group. After taking into consideration (i) the similar economic characteristicsof the two operating segments, including the nature of the services provided in that both types of leasearrangements confer the right of use of railcars, the class of customers for these services, theregulatory environment and the economic and political conditions associated with each operatingsegment which are common to both segments, (ii) the finance lease portfolio being deemed as anon-strategic activity and reviewed by the Board together with the operating lease portfolio, (iii) allexpenses of the Group being presented to the Board on a consolidated basis and not being allocatedinto operating segments and (iv) the portfolio monitoring reviewed by the Board as a whole withoutallocating it to the two operating segments, it was decided to aggregate the two operating segmentsinto one reportable segment. The operating leasing segment derives its revenue primarily from twotypes of contracts: triple-net and full service lease contracts.

Adjusted EBITDA is a measure used by the Board to assess the performance of the operatingsegments since Adjusted EBITDA is a key performance indicator in terms of how the business isperceived by investors and how much cash it is generating. Adjusted EBITDA is defined as the profit/(loss) before tax of the Group before taking into account finance costs, finance income, foreignexchange gains and losses, depreciation and amortization, impairment gains and losses on revaluationof railcars, share-based compensation and the gain on acquisition of subsidiary.

The information on types of leases provided to the Board for the year ended 31 December 2011,31 December 2010 and 31 December 2009 is as follows:

2011 2010 2009US$ US$ US$

Triple-net operating leases 96.784.838 77.606.192 68.935.211Full service operating leases 62.298.287 8.067.773 6.248.597Transportation services income 19.466.868 — —Finance leases 5.360.130 6.638.001 9.624.037

Total external revenue 183.910.123 92.311.966 84.807.845

Increase in revenues was driven by an increase in the railcar fleet and an increase in daily rental rateson the existing fleet as the Group used its right to renegotiate certain contracts. The transportationservices income arises from ZAO Proftrans group (“PT group”) acquired during the third quarter of2011. No separate information is presented for this segment as no information is currently beingreviewed by the Board of Directors.

Revenues of US$34.093.197 (2010: US$24.460.129, 2009: US$18.585.512) are derived from a singleexternal customer. These revenues are attributable to the operating lease contracts under both full-service and triple-net leases.

The revenue from external parties reported to the Board is measured in a manner consistent with thatin the income statement. The breakdown of the major components of revenue is disclosed above.

F-30


6 Segment information (continued)2011 2010 2009

Leases PT group Total Leases LeasesUS$ US$ US$ US$ US$

Revenues 167.236.385 20.516.354 187.752.739 92.311.966 84.807.845Revenues inter-segmental (3.842.616) — (3.842.616) — —Revenues from external

customers 163.393.769 20.516.354 183.910.123 92.311.966 84.807.845Direct expenses (16.895.645) (14.814.128) (31.709.773) (11.210.133) (9.221.164)Direct expenses inter-

segmental 3.842.616 — 3.842.616 — —Direct expenses – third

parties (13.053.029) (14.814.128) (27.867.157) (11.210.133) (9.221.164)Professional fees (3.483.861) (99.312) (3.583.173) (1.785.264) (1.594.404)Other overheads (13.842.994) (1.000.592) (14.843.586) (8.176.967) (7.029.455)Other income / (expenses) 2.033.933 (15.736) 2.018.197 246.761 65.828

Adjusted EBITDA 135.047.818 4.586.586 139.634.404 71.386.363 67.028.650

Depreciation and amortization (66.566.438) (31.014.357) (25.941.469)Finance income 337.777 88.535 118.669Finance costs (41.085.765) (23.849.909) (22.683.643)Foreign exchange losses (61.480.483) (3.770.321) (9.730.548)Share-based compensation (3.052.272) (1.337.518) (2.348.073)Gain on acquisition of

subsidiary 10.420.849 — —Reversal of impairment /

(impairment loss) onrevaluation of railcars 2.169.209 36.958.877 (30.784.737)

(Loss) / profit beforeincome tax (19.622.719) 48.461.670 (24.341.151)

2011 2010 2009

Leases PT group Total Leases LeasesUS$ US$ US$ US$ US$

Total segment assets 1.411.735.209 32.307.052 1.444.042.261 702.230.639 451.443.753

Total segment assetsinclude:

Equipment – railcarsunder operatingleases 1.350.880.475 30.922.528 1.381.803.003 613.577.710 337.844.234

Finance leasereceivables 20.526.676 — 20.526.676 55.237.236 67.625.985

VAT recoverable 20.719.595 52.197 20.771.792 2.042.788 19.456.845Prepayment for

acquisition ofrailcars 19.608.463 — 19.608.463 31.372.905 26.516.689

Advances paid toRZD tariffs — 1.332.327 1.332.327 — —

The amounts provided to the Board with respect to total assets are measured in a manner consistentwith that of the financial statements.

F-31



Reportable segments’ assets are reconciled to total assets as follows:

2011 2010 2009US$ US$ US$

Segment assets for reportable segments 1.444.042.261 702.230.639 451.443.753

Unallocated:Cash and cash equivalents 66.796.636 112.450.226 30.293.423Other receivables 3.789.871 5.969.685 4.177.106Deferred tax asset 992.817 4.823.267 18.195.971Other tangible assets 792.097 277.804 307.683Intangible assets 1.134 36.312 1.374

Total assets per balance sheet 1.516.414.816 825.787.933 504.419.310

The revenue from external customers is derived only from the business activities carried out in theRussian Federation. No revenue is derived in Bermuda which is the Company’s country of domicile.

Non-current assets (excluding deferred income tax asset) of US$1.414.649.365 (2010:US$688.211.693, 2009: US$420.365.735) are located in the Russian Federation. None of thenon-current assets are located within Bermuda.

The Group’s interest-bearing liabilities are not considered to be segment liabilities but rather aremanaged by the treasury function.

7 Critical accounting estimates and judgements

Estimates and judgements are continually evaluated and are based on historical experience and otherfactors, including expectations of future events that are believed to be reasonable under thecircumstances.

The Group makes estimates and assumptions concerning the future. The resulting accountingestimates will, by definition, seldom equal the related actual results. The estimates and assumptionsthat have a significant risk of causing a material adjustment to the carrying amounts of assets andliabilities within the next financial year are discussed below.

(i) Deferred income tax asset recognition

The recognized deferred income tax asset represents income taxes recoverable throughfuture deductions from taxable profits and is recorded in the balance sheet. Deferred incometax assets are recorded to the extent that realisation of the related tax benefit is probable. Thefuture taxable profits and the amount of tax benefits that are probable in the future are basedon the medium-term business plan prepared by management and extrapolated resultsthereafter. The business plan is based on management expectations that are believed to bereasonable under the circumstances.

(ii) Valuation of railcars

The Group carries its railcar fleet at revalued amounts based on valuations performed by anindependent appraiser on a quarterly basis and at the end of each reporting period. In valuingthese, a market approach has been used, whereby the valuation of railcars was determinedby reference to prices of comparable railcars on the secondary market, as adjusted to reflectany differences in the type, age and condition of railcars held by the Group. Group’sManagement has reviewed the appraiser’s assumptions for adjustments applied andconfirmed that these have been appropriately determined considering the market conditionsand the type, age and condition of the Group’s railcar fleet at the end of each reporting period.If the railcar prices included in the appraiser’s report were 10% higher/lower, with all othervariables held constant, gross revaluation surpluses for the year recorded in equipment wouldhave been US$23 million (2010: US$22 million, 2009: revaluation losses US$10 million)higher/lower.

F-32


8 Professional fees and other operating expenses

2011US$

2010US$

2009US$

Professional feesMerger and Acquisition transaction costs 1.634.866 408.070 —Other professional fees 876.365 573.620 269.690Auditors’ remuneration 715.216 391.406 293.614Legal fees 356.726 412.168 478.116Professional fees and other costs associated with new equity

project — — 300.614Technical study fees for customized railcars — — 252.370

Total professional fees 3.583.173 1.785.264 1.594.404

2011US$

2010US$

2009US$

Other operating expensesLeasehold repairs 1.297.691 — —Rent expense 1.055.164 495.881 465.354Other operating expenses 974.959 341.218 296.347Travelling, accommodation and entertainment 903.321 703.983 446.342Information technology costs 330.533 165.909 165.217Advertising and Marketing 299.404 — —Directors’ fees (Note 29) 268.927 196.629 199.932Communication costs 236.951 236.666 134.270Depreciation of equipment (Note 16) 136.550 120.529 75.005Amortisation of intangible assets 36.492 7.367 87

Total other operating expenses 5.539.992 2.268.182 1.782.554

9 Staff costs

2011US$

2010US$

2009US$

Salaries 6.279.792 4.850.456 4.040.384Bonuses 2.083.632 729.850 560.360Other staff costs 687.987 239.367 127.186Medical insurance costs 425.225 217.009 168.604

Total staff costs 9.476.636 6.036.682 4.896.534

10 Share-based compensation

In 2007 the Company signed a Management Incentive Plan award agreement (“MIP”) with each of thethree key management members of the Group. In accordance with these MIP agreements, theCompany agreed to award in total 7.967.044 new shares of Brunswick Rail Limited (“Award Shares”) tokey management as follows:

(a) 1st tranche – 30% of the total Award Shares: no later than 31 December 2007 (“First Award Date”)

(b) 2nd tranche – 20% of the total Award Shares: no later than 31 December 2008 (“Second AwardDate”)

(c) 3rd tranche – 20% of the total Award Shares: no later than 31 December 2009 (“Third AwardDate”)

(d) 4th tranche – 30% of the total Award Shares: no later than 31 December 2010 (“Fourth AwardDate”)

The purchase price per Award Share payable by the key management members is US$0,0001 pershare, which represents the par value of each share. The Group recognized the fair value of theservices received by these key management members by reference to the fair value of the shares atthe grant date, in accordance with the valuation guidelines approved by the Board.

F-33


10 Share-based compensation (continued)

Based on the provisions and guidelines of IFRS 2, Share-based Payment and IFRIC 11, Group andTreasury Share Transactions, the expense to be recognized in the consolidated income statement forthe years 2008 to 2010 included that year’s tranche as well as a share of all future tranches up to31 December 2010 (as per (b) – (d) above) on a time-apportioned basis. The amount of US$1.137.414for the year 2010 (2009: US$2.245.664) included in the consolidated income statement of 2010 underthe heading “Share-based compensation”, relates to the MIP and was calculated on the assumptionthat the relevant employees will take the full benefit of the MIP by remaining employed by the Group upto 31 December 2010.

On 31 December 2010 the MIP was fully vested and the relevant employees were entitled to theshares initially allocated to them. The share based compensation reserve balance of US$12.006.039was transferred to retained earnings in 2011 (Note 22).

Equity-settled share-based compensation

A new member of key management (the “member”) joined the Company in August 2009. Inaccordance with the employment contract, the member was entitled to a guaranteed bonus ofUS$300.000 payable 12 months after the commencement of employment date. The memberexpressed a willingness to participate in the share offer made by Brunswick Rail Limited to both newand existing shareholders and proposed to offset the aforementioned bonus entitlement againstpayment for the shares. This entitled the member to acquire 170.648 shares at the price of $1,758 pershare. This price was the one offered to other third parties which were interested in participating in theshare offer and was considered to be the fair value per share.

On 25 November 2009, Brunswick Rail Group Limited transferred to Brunswick Rail Limited theamount of US$300.000 being the purchase consideration to acquire the shares.

The shares would be transferred to the member when the bonus became payable which was theearlier of (a) the date on which employment is terminated by the employer or (b) 12 months fromcommencement of employment (being August 2010). As a result, the amount of US$100.000 wasrecognized under the heading “Share-based compensation” in 2009, being the proportionate amountfor four months from commencement of employment to 31 December 2009. The remaining amount ofUS$200.000 was recognized in 2010.

At the vesting date,170.648 shares at a price of US$1,758 were transferred to the member. This wasconsidered by management to be the fair value of the shares, as the price paid by third parties at theshare issue in November 2010 was not materially different from the price at the vesting date.

Cash-settled share-based compensation

In order to reward management for a successful exit of the Group’s business which formed part of theGroup’s strategy, it was proposed by the Board to set up an exit bonus plan for the four keymanagement members of the Group whereby the members would be paid a cash bonus calculated onthe excess of the valuation of the business on exit value and a pre-defined threshold agreed with theBoard in relation to the Base Value and Target Equity Value.

Based on a resolution by the Board in September 2009, the Group subsidiary company Brunswick RailGroup Limited, signed an Exit Bonus Agreement (“EBA”) with the three key management members ofthe Group in October 2010 in which all detailed terms and conditions of the plan were agreed by allparties. The EBA with the fourth management member was signed in May 2011. If no exit occurs on orbefore 31 December 2012, the agreements terminate and no bonus shall be payable if an exit occursafter this date.

In accordance with the EBA agreements, the Company shall pay a 5% cash bonus pool to the threekey management members calculated on the difference between the Total Equity Value (being thevaluation of the business on an exit) and the Base Value of the business (being a predeterminedthreshold agreed with the Board, adjusted for any new share issues or any other action what would

F-34



Cash-settled share-based compensation (continued)

affect the agreed threshold). The bonus pool is capped to a maximum of US$15 million. In accordancewith the EBA agreement of the fourth management member, a cash bonus will be paid calculated as((Total Equity Value less Target Equity Value) / Base Value) * US$5 million. The Base Value andTarget Equity Values are predetermined thresholds agreed with the Board, adjusted for any new shareissues or any other action what would affect the agreed threshold. The bonus is capped to a maximumof US$5 million.

Exit was defined as (i) a Sale (sale of 75% shares of the business to a third party), (ii) a Listing (listingof 20% or more of the shares on a Securities Market) or (iii) an Asset Sale (sale of all railcars to a thirdparty). The Total Equity Value, Target Equity Value and detailed description of the calculation for eachtype of exit is defined in the agreements.

The proposed transaction falls under the provisions of IFRS 2 “Share-based payment” (“IFRS 2”) andthe definition of cash-settled share-based payment transactions. To this effect and taking into accountthe terms and conditions of the EBA and the provisions of IFRS 2, an Option Pricing Model was usedto value the benefit for the employees based on the fact that, even though this is a cash-settled sharebased payment, it can only be measured based on a share price valuation model.

The option pricing model used is the Black-Scholes model which is a recommended valuation model inaccordance with the guidance of IFRS 2. The option pricing model used took into account the followingfactors:

(a) The spot price of the underlying share

(b) The exercise price of the option

(c) The risk-free interest rate over the life of the option

(d) The life of the option

(e) The expected volatility of the option

(f) The probability of exit

(g) The base value of the Group

(h) The bonus pool cap

The option values calculated at the end of each reporting period were then allocated on a time-apportioned basis over the expected service period of the key management members with acommencement date being September 2009 and a cut-off date taken as the 31 December 2012deemed to be the latest possible exit date. The total service period was therefore assumed to be 39months for the three members and 19 months for the fourth member. The cumulative calculation periodfor the years 2009, 2010 and 2011 were 3, 15 and 27 months respectively over the service period.

In accordance with IFRS 2 provisions which states that the liability shall be measured initially andre-measured at the end of each reporting period until settled, at the fair value of the right, by applyingan option pricing model, valuations were performed for the financial years 2009 to 2011. The liabilitiesto be recorded for the years 2009 and 2010 were not considered to be significant at the Group leveland as a result, no expense was recognized in the income statement for these financial years.

The amount calculated for 2011 of US$3.052.272 represents the fair value of the benefit allocated on atime-apportioned basis over the expected service period of the key management members which endson 31 December 2012, deemed to be the latest possible exit date.

F-35



Cash-settled share-based compensation (continued)

The detailed assumptions used or derived by the option pricing model are presented below:

Inputs31 December

201131 December

201031 December

2009

Spot price (US$) 2,81 2,21 1,12Exercise price (US$) 3,16 2,85 2,85Risk-free rate 0,10% 0,43% 0,43%Life of the option (assumed Initial Public Offer 31 December

2012/ 30 June 2012) 1 year 1,5 years 2,5 yearsExpected volatility (average 2-year and 5-year RTS (1)

index annualized monthly returns) 36,90% 39,70% 48,90%Probability of exit 31,00% 23,00% 6,00%

(1) Russian Trading System

The total share-based compensation in the income statement was calculated as follows:

MIP:2011US$

2010US$

2009US$

(a) Fair value of 4th tranche/3rd tranche — 1.137.414 1.108.250(b) Future tranches allocated to 2008/2007 based on a

time-apportioned basis:– Fair value of 3th tranche — — —– Fair value of 4th tranche — — 1.137.414

Total fair value at 31 December — 1.137.414 2.245.664

Bonus entitlement:Bonus entitlement to key management member — 200.000 100.000Cash-settlement on share based payment 3.059.343 — —Foreign exchange difference on the bonus entitlement (7.071) 104 2.409

3.052.272 200.104 102.409

Total share-based compensation 3.052.272 1.337.518 2.348.073

The share-based compensation reserve balance of US$12.006.039 was transferred to retainedearnings in 2011 (Note 22):

2011US$

2010US$

20099US$$

Opening balance 12.006.039 10.868.625 8.622.961Share-based compensation charged in income statement — 1.137.414 2.245.664Transfer of balance to retained earnings upon vesting (12.006.039) — —

Closing balance — 12.006.039 10.868.625

11 Property tax

Equipment under lease agreements are subject to property tax which is calculated as 2,2% on the netbook value of equipment under Russian Accounting Standards. Property tax of US$13.592.108 wascharged to the income statement of 2011 (2010: US$8.823.219, 2009: US$7.725.341). Further to theGroup’s acquisition of Meconenn / OOO Brunswick Trans shares representing an asset acquisition of2.124 railcars on 31 October 2011 the Group benefits from three subsequent years of property taxexemption starting from the year of railcars recognition on the balance sheet of OOO Brunswick Trans.The benefit is granted by the Ekaterinburg local government specifically for railcars in accordance withlaw #35-OZ dated 27 November 2003 (updated on 15 June 2011).

F-36


12 Finance costs and income2011US$

2010US$

2009US$

Finance costsInterest expense – syndicated bank loans (22.547.561) (13.548.575) (12.607.665)Interest expenses – mezzanine loan (6.698.084) — —Finance lease payables (2.532.426) — —Other borrowing costs (175.802) (142.349) (83.099)

(31.953.873) (13.690.924) (12.690.764)Bank charges (615.895) (112.321) (40.553)Fair value gain on interest rate swap – cash flow hedge,

transfer from equity (Note 22) (8.515.997) (10.046.664) (9.952.326)

(41.085.765) (23.849.909) (22.683.643)

Finance incomeInterest income on bank balances 337.777 88.535 118.669

337.777 88.535 118.669

Net finance costs (40.747.988) (23.761.374) (22.564.974)

13 Income tax expense2011US$

2010US$

2009US$

Current tax 1.294.270 466.291 88.860Deferred tax charge/(credit) (Note 19) (2.120.184) 7.914.605 (8.616.242)Special contribution for defence — 9.125 16.923

Income tax (credit)/ expense (825.914) 8.390.021 (8.510.459)

The tax on the Group’s (loss)/profit before tax differs from the theoretical amount that would arise usingthe applicable tax rates as follows:

2011US$

2010US$

2009US$

(Loss)/profit before income tax (19.622.719) 48.461.670 (24.341.151)

Tax calculated at the applicable corporation tax rates (5.524.793) 7.820.414 (8.905.207)Tax effect of expenses not deductible for tax purposes 4.698.879 561.223 384.702Tax effect of allowances and income not subject to tax — (741) (6.877)Special contribution for defence — 9.125 16.923

Tax charge/(credit) (825.914) 8.390.021 (8.510.459)

Tax is calculated in accordance with the fiscal policies of the country of incorporation of each Groupcompany. At the present time, no income, profit or capital gains taxes are levied in Bermuda as theCompany has received an assurance from the Bermuda Government exempting it from all localincome, withholding and capital gains taxes until March 31, 2035. Subsidiaries registered in Russia aresubject to corporation tax at the applicable rates (Note 27).

Non-deductible expenses relate mainly to foreign exchange losses of Cyprus and Bermuda companiesas well as expenses which are non-deductible in accordance with tax legislation of Russian Federation.

Cypriot subsidiaries

Subsidiaries of the Group registered in Cyprus are subject to income tax at the rate of 10%.

From 1 January 2009 onwards, under certain conditions, interest may be exempt from income tax andonly subject to special defence contribution at the rate of 10%; increased to 15% as from 31 August2011. In certain cases dividends received from abroad may be subject to a special defencecontribution at the rate of 15%; increased to 17% as from 31 August 2011, thereafter increased to 20%from 1 January 2012 to 31 December 2013.

F-37


13 Income tax expense (continued)

Cypriot subsidiaries (continued)

Gains on disposal of qualifying titles (including shares, bonds, debentures, rights thereon etc) areexempt from Cypriot income tax.

The tax (charge)/credit relating to components of other comprehensive income is as follows:

Tax effects of components of other comprehensive income

2011 2010

US$ US$ US$ US$ US$ US$

Beforetax

Tax(charge)/

credit

Aftertax

Before tax Tax(charge)/

credit

Aftertax

Rail cars:

Revaluation gain/(loss) 228.570.912 (45.714.182) 182.856.730 187.698.165 (37.539.632) 150.158.533

2009

US$ US$ US$

Beforetax

Tax(charge)/

credit

Aftertax

Rail cars:Revaluation gain/(loss) (72.880.473) 14.576.095 (58.304.378)

14 Business combinations

The PT group acquisition was executed in 3 steps:

(i) An asset acquisition during July-August 2011 whereby OOO Brunswick Wagon Leasing, a Groupsubsidiary, acquired 890 railcars from PT group;

(ii) The Group’s acquisition of 52% of the share capital of ZAO ProfTrans on 9 August 2011;

(iii) The Group’s acquisition of the remaining 48% of the share capital of ZAO ProfTrans on 22 August2011, the date on which control passed to the Group following completion of the transaction.

PT group’s main activity is the shipment of iron scrap and other freights within Russian Federationterritory using both own and leased railcars and railcars provided by third party carriers. The purpose ofthe acquisition, that is in line with the Group’s acquisitive growth strategy, is to prepare for a potentialconsolidation of the Russian railcar market, and to enable the Group to build a transportation platformin order to offer additional services to its clients.

The following table summarises the consideration paid on the asset acquisition, the shares of PTgroup, the fair value of assets acquired, liabilities assumed and the non-controlling interest at theacquisition date:

Consideration paidUS$

Cash 12.568.145Equity instruments issued on business combination – financial liability (note 21) 11.771.326Consideration on business combination – financial liability 11.377.225Cash paid on the asset acquisition 46.874.281Working capital adjustment 3.921.000

Total consideration transferred 86.511.977

F-38


14 Business combinations (continued)

Recognized amounts of identifiable assets acquired and liabilities assumedUS$

Equipment 125.093.224VAT recoverable 1.588.609Advances to RZD 3.745.630Trade and other receivables 2.531.133Cash and cash equivalents 6.496.046Finance lease liabilities (20.504.165)Deferred tax liabilities – net (11.325.731)Trade and other payables (6.832.847)VAT payable (2.284.446)Current income tax and other taxes payable (206.974)

Total identifiable net assets 98.300.479

Non-controlling interest (1.367.653)Gain on acquisition of subsidiary (10.420.849)

Total 86.511.977

The gain on the acquisition of subsidiary stated in the above table arises mainly due to the differencebetween the price paid by the Group for the PT group railcar fleet (1.647 railcars) and the fair marketvalue of those particular railcars on the date of acquisition.

The assumed assets and liabilities include provisional amounts due to the short time period betweenacquisition date and reporting date. During the measurement period, the Group if required shallretrospectively adjust the provisional amounts recognized at the acquisition date to reflect newinformation obtained about facts and circumstances that existed as of the acquisition date and, ifknown, would have affected the measurement of the amounts recognized as of that date. Themeasurement period shall not exceed one year from the acquisition date.

Acquisition-related costs of US$0,6 million have been charged to administrative expenses in theconsolidated income statement for the year ended 31 December 2011.

The equity instruments of US$11,8 million relate to 2.992.808 ordinary shares of Brunswick RailLimited (“BRL”), the initial consideration shares (“ICS”), which were issued to the sellers as part of theconsideration paid for PT group. The fair value of the ICS is the total of (i) US$10,3 million based upona Group valuation of US$750 million agreed with the seller on pre-PT group acquisition basis, with animplied valuation of US$3,4201780 per share and (ii) US$1,5 million representing a 15% premiumpayable by the Group to the sellers who exercised the put option granted to them under the sale andpurchase agreement and, as a result, the Group is obliged to buy back the shares for cash at theoption price of US$3,9332047 per share.

The consideration of US$11,4 million consists of:

(i) US$9,9 million additional consideration in the form of 2.892.609 ordinary shares of Brunswick RailLimited, the additional consideration shares (“ACS”), to be issued to the sellers by 29 February2012 based on the aforementioned agreed valuation at US$750 million. The additionalconsideration is based on a debt adjustment agreed provisionally between the parties on the dateof acquisition which represents the expectations of the parties of the final debt figure assumed bythe Group being lower than the estimated debt assumed as part of the deal and

(ii) US$1,5 million representing a 15% premium payable by the Group to the sellers who exercisedthe put option granted to them under the SPA and as a result the Group is obliged to buy back theshares for cash at the option price of US$3,9332047 per share.

The working capital adjustment represents an adjustment under which the Group will reimburse thesellers for the working capital contributed into the business as at 31 July 2011, based on apredetermined working capital statement agreed between the parties. The amount of US$3,9 million isthe final amount agreed between the Group and the sellers.

F-39


14 Business combinations (continued)

On 20 December 2011 the sellers submitted an irrevocable notice to the Group notifying the Group oftheir intention to exercise their put option to (i) sell all of the ICS back to the Group at the option priceof US$3,9332047 per share and (ii) request the Group to pay the ACS option price in lieu of beingissued the ACS, the ACS option price being the ACS multiplied by the option price of US$3,9332047per share.

As a result the Group has the obligation to pay the amount of US$27 million to the sellers thereafterreferred to as “total consideration”.

Based on the supplemental agreements signed between the Group and the PT group sellers on28 February 2012, amending certain terms of the original sale and purchase agreements, it wasagreed that the Group shall pay to the PT group sellers an amount of US$2 million on 29 February2012, representing the first part of the total consideration. An additional amount US$25 millionrepresenting the second part of the total consideration was agreed to be paid by the Group to the PTgroup sellers 1 September 2012. The second part of the consideration shall carry interest at theCentral Bank of Russia refinancing rate from 1 March 2012 to the date of settlement.

The proceeds of the new US$250 million syndicated loan facility, which will primarily be used torefinance the Group’s existing loan facilities, will partly be used for settlement of the obligations of theGroup under the PT group transaction.

The carrying value of trade and other receivables is net of provision for bad debts of US$0,2 millionwhich is expected to be uncollectible (note 18). The fair value of the non-controlling interest in PTgroup, an unlisted company, was estimated by using the fair market value of its net assets at the dateof acquisition.

The revenue contributed by PT group in the consolidated income statement since 31 August 2011 wasUS$20,5 million. PT group also contributed Adjusted EBITDA of approximately US$4,6 million over thesame period. Had PT group been consolidated from 1 January 2011, the consolidated incomestatement would show revenue of US$48 million and Adjusted EBITDA of US$17,8 million.

15(a) Financial instruments by category

The accounting policies for financial instruments have been applied to the line items below:

Loans andreceivables Total

31 December 2011 US$ US$

Assets as per balance sheetFinance lease receivables 20.526.676 20.526.676Trade and other receivables (excluding prepayments) 3.036.357 3.036.357Cash and cash equivalents 66.796.636 66.796.636

Total 90.359.669 90.359.669

Fair value throughprofit or loss

Other financialliabilities Total

US$ US$ US$

Liabilities as per balance sheetBorrowings (incl. finance lease payables) — 694.591.888 694.591.888Mezzanine loan — 64.432.635 64.432.635Derivative financial instruments (used for hedging

purposes) 4.386.002 — 4.386.002Trade and other payables — 12.886.633 12.886.633

Total 4.386.002 771.911.156 776.297.158

F-40


15(a) Financial instruments by category (continued)Loans andreceivables Total



Total 169.561.798 169.561.798



US$ US$ US$

Liabilities as per balance sheetBorrowings — 272.935.022 272.935.022Derivative financial instruments (used for hedging


Total 11.956.422 284.900.584 296.857.006

Loans andreceivables Total



Total 99.622.819 99.622.819



US$ US$ US$

Liabilities as per balance sheetBorrowings — 298.923.573 298.923.573Derivative financial instruments (used for hedging


Total 15.500.080 304.860.721 320.360.801

15(b) Credit quality of financial assets

The credit quality of financial assets that are neither past due nor impaired can be assessed byreference to external credit ratings (if available) or internal credit ratings according to criteria set bymanagement including among others minimum leases criteria and portfolio concentration limits:

2011US$

2010US$

2009US$

Cash and cash equivalentsCounterparties with external credit rating (Moody’s Long-

Term rating)Société Générale (A1) 28.296.210 77.633.417 29.875.878UniCredit Bank (A2) 27.426.118 18.877.590 10.406ZAO Raiffeisenbank (A1) 4.126.436 209.707 —VTB 24 (Baa1) 3.713.723 — —Uralsib bank (Ba3) 1.801.905 — —Rosbank (Baa2) 1.283.082 187.254 366.013Alfa Bank (Ba1) 2.663 15.498.282 —Other banks (Ba3 – Aa3) 146.499 43.976 41.126

66.796.636 112.450.226 30.293.423

F-41


15(b) Credit quality of financial assets (continued)2011US$

2010US$

2009US$

Finance lease receivablesCounterparties without external credit rating — — —A 7.673.933 16.306.159 35.173.125B 12.852.743 18.727.341 32.452.860Non-rated (NR) — 20.203.736 —

20.526.676 55.237.236 67.625.985

Category A lessees – minimum turnover US$60 million, minimum equity US$25 million, minimumEBIT/interest ratio 1,25, minimum EBITDA/debt ratio 0,25, maximum debt/equity ratio 3,0

Category B lessees – minimum turnover US$15 million, minimum equity US$5 million, minimumEBIT/interest ratio 1,10, minimum EBITDA/ debt ratio 0,15, maximum debt/equity ratio 4,0

Category NR lessees – lessees whose financial position in 2010 was impacted by the financial crisis.There had been no overdue lease payments or default in 2009, 2010 or 2011by these lessees.

F-42


16 Equipment

RailcarsUS$

Furniture,fittings & office

equipmentUS$

TotalUS$

At 1 January 2011Cost or valuation 757.129.038 612.130 757.741.168Accumulated depreciation (143.551.328) (334.326) (143.885.654)

Net book amount 613.577.710 277.804 613.855.514

Year ended 31 December 2011Opening net book amount 613.577.710 277.804 613.855.514Additions 587.219.096 756.794 587.975.890Revaluation surplus 228.570.912 — 228.570.912Acquisition of subsidiaries 125.077.696 15.528 125.093.224Reversal of impairment loss on revaluation of railcars 2.169.209 — 2.169.209Disposals / retirement of assets (8.100.340) (219.380) (8.319.720)Depreciation charge (66.393.396) (136.550) (66.529.946)Depreciation on disposal 1.970.762 136.081 2.106.843Exchange differences on cost (118.923.979) (73.330) (118.997.309)Exchange differences on depreciation 16.635.333 35.150 16.670.483

Closing net book amount 1.381.803.003 792.097 1.382.595.100

At 31 December 2011Cost or valuation 1.638.095.286 1.152.770 1.639.248.056Accumulated depreciation (256.292.283) (360.673) (256.652.956)

Net book amount 1.381.803.003 792.097 1.382.595.100


Net book amount 337.844.234 307.683 338.151.917

Year ended 31 December 2010Opening net book amount 337.844.234 307.683 338.151.917Additions 81.241.094 85.701 81.326.795Revaluation surplus 187.698.165 — 187.698.165Reversal of impairment loss on revaluation of railcars 36.958.877 — 36.958.877Disposals / retirement of assets (45.317) (14.884) (60.201)Depreciation charge (30.886.460) (120.529) (31.006.989)Depreciation on disposal 5.769 14.884 20.653Exchange differences on cost 810.089 (3.911) 806.178Exchange differences on depreciation (48.741) 8.860 (39.881)

Closing net book amount 613.577.710 277.804 613.855.514

At 31 December 2010Cost or valuation 757.129.038 612.130 757.741.168Accumulated depreciation (143.551.328) (334.326) (143.885.654)

Net book amount 613.577.710 277.804 613.855.514

Year ended 31 December 2009Opening net book amount 461.272.476 164.108 461.436.584Additions / conversion of leases 51.174.190 231.363 51.405.553Loss on revaluation of railcars (72.880.473) — (72.880.473)Impairment loss on revaluation of railcars (30.784.737) — (30.784.737)Disposals / conversion of leases (41.974.752) (15.347) (41.990.099)Depreciation charge (25.866.376) (75.005) (25.941.381)Depreciation on disposal 11.207.552 15.347 11.222.899Exchange differences on cost (15.215.842) (7.702) (15.223.544)Exchange differences on depreciation 912.196 (5.081) 907.115

Closing net book amount 337.844.234 307.683 338.151.917

At 31 December 2009Cost or valuation 401.887.249 545.224 402.432.473Accumulated depreciation (64.043.015) (237.541) (64.280.556)

Net book amount 337.844.234 307.683 338.151.917

F-43


16 Equipment (continued)

Equipment includes 20.689 railcars (2010: 10.731, 2009: 8.833) which are held by the Groupsubsidiary companies. Out of the total equipment, 19.208 railcars are leased out under operatingleases and short-term rentals and 1.481 are used for shipment of iron scrap and other freights. Out ofthe 20.689 railcars, 17.058 railcars are pledged as collateral for the Group borrowings (Note 23).

In 2009, due to the negotiation of certain lease contracts during the global economic crisis, two financelease contracts were converted into operating lease contracts and one operating lease contract wasconverted into a finance lease contract.

One railcar under an operating lease was damaged during 2010. The market value of the railcar wascovered by the insurance company and the lessee.

In 2011, further to the PT group acquisition, finance lease agreements with PT group were convertedto operating leases and thereby recorded as equipment in the balance sheet.

Revaluation of railcar fleet

The Group revalued its railcar fleet on 31 December 2011, 31 December 2010 and 31 December 2009to reflect the fair value of its main asset. Valuations were carried out by an independent valuerapproved by the Group’s lenders on the basis of the market value of the equipment being appraised onan arm’s length basis. Prices used by the independent valuer were based on observable pricesobtained from the railcar market adjusted for depreciation based on the life of the rolling stock as at thedate of valuation. The Group considers the recoverable amount as the fair value less cost to sell.

In 2009 an impairment loss was recognized due to the decrease in the market value of railcars causedby the global economic crisis. This impairment was fully allocated to the operating lease segment. Asat 31 December 2011 there was still an amount of US$795.408 of impairment losses left to bereversed.

In accordance with the provisions of IAS 16, “Property, Plant and Equipment”:

(a) The entire fleet of railcars was revalued.

(b) A revaluation exercise was carried out on each of the railcar owned by the subsidiaries as at thereporting date.

(c) Where the carrying amount of a railcar increased as a result of a positive revaluation, therevaluation surplus, net of applicable income tax, was recognized in other comprehensive incomeand accumulated in equity under the heading of revaluation surplus (Note 22). The increase wasrecognized in the income statement to the extent that it reversed a revaluation decrease of thesame asset previously recognized in the income statement.

(d) Where the carrying amount of a railcar decreased as a result of a negative revaluation, arevaluation loss was charged to the income statement. The decrease was recognized in othercomprehensive income to the extent of any credit balance previously recognized in the revaluationsurplus in respect of that asset. The decrease recognized in other comprehensive income reducesthe amount accumulated in equity under the heading of revaluation surplus.

The following table presents the net revaluation gains arising, grossed up with tax:

2011US$

2010US$

2009US$

Revaluation gain/(loss) recognized in equity (see(c) above) 228.570.912 187.698.165 (72.880.473)

Revaluation gain/(loss) recognized in the incomestatement (see (d) above) 2.169.209 36.958.877 (30.784.737)

Total revaluation gains/(losses) 230.740.121 224.657.042 (103.665.210)

F-44


16 Equipment (continued)

Revaluation of railcar fleet (continued)

Revaluation gains on the railcars are recognized in income statement to the extent that they reverse apreviously recognized revaluation loss of the same asset previously recognized in the incomestatement. If equipment was stated on the historical cost basis the amounts would be as follows:

2011US$

2010US$

2009US$

Cost 1.047.933.049 473.004.703 393.006.446Accumulated depreciation (115.019.242) (75.926.445) (49.116.904)Impairment — — (6.045.308)

Net book amount 932.913.807 397.078.258 337.844.234

Prepayment of railcars

The balance of prepayments at 31 December 2011, of US$19.608.463 (2010: US$31.372.905, 2009:US$26.516.689) related to the acquisition of railcars from third party suppliers.

Cash flow statement

Additions included in “cash flow from investing activities” for the amount of US$215.284.710 (2010:US$21.284.535, 2009: US$231.363) relate to direct cash outflow to suppliers for the acquisition ofrailcars and other tangible assets.

VAT recoverable

The VAT recoverable of US$20.771.792 (2010: US$2.042.788, 2009: US$19.456.845) relates mostlyto the purchase of railcars and is receivable from the Russian tax authorities.

17 Finance leases receivables

2011US$

2010US$

2009US$

Non-current receivablesFinance leases – gross receivables 18.201.024 59.342.027 76.688.087Unearned finance income (5.756.356) (16.395.065) (20.992.332)

12.444.668 42.946.962 55.695.755

Current receivablesFinance leases – gross receivables 11.459.507 19.888.868 20.296.613Unearned finance income (2.031.862) (5.826.973) (6.597.573)Lease payments received in advance (1.345.637) (1.771.621) (1.768.810)

8.082.008 12.290.274 11.930.230

Gross receivables from finance leasesNot later than 1 year 11.459.506 19.888.868 20.296.613Later than 1 year but not later than 5 years 12.322.015 43.554.730 53.787.364Later than 5 years 5.879.009 15.787.297 22.900.723

29.660.530 79.230.895 96.984.700Unearned future finance income on finance leases (7.788.217) (22.222.038) (27.589.905)Lease payments received in advance (1.345.637) (1.771.621) (1.768.810)

Net investment in finance leases 20.526.676 55.237.236 67.625.985

The net investment in finance leases may be analysedas follows:

Not later than 1 year 8.082.008 12.290.274 11.930.230Later than 1 year but not later than 5 years 7.464.518 29.467.706 37.026.674Later than 5 years 4.980.150 13.479.256 18.669.081

20.526.676 55.237.236 67.625.985

F-45


17 Finance leases receivables (continued)

During 2009, the Group reclassified certain lease agreements from operating leases to finance leases.

The 2011 finance lease receivables balance is substantially lower than the 2010 balance as during2011 the Group (i) terminated the finance lease agreement with a lessee for 550 railcars where a profitof US$1,6 million was recorded in Other Income as part of this transaction and (ii) following theacquisition of Proftrans group, converted the finance lease agreements with Proftrans for 250 railcarsto operating leases which are now presented as equipment.

These conversions are accounted for as per the relevant accounting policy in Note 2.

As of 31 December 2011 the net investment in finance leases was 1.070 railcars (2010: 1.870 railcars,2009: 1.870 railcars). All railcars which are leased out under finance leases are pledged as collateralfor the Group borrowings (Note 23).

All of the Group’s financial assets are neither past due nor impaired. As at 31 December 2011 theGroup does not have any credit related commitments.

18 Trade and other receivables2011US$

2010US$

2009US$

Operating lease income receivable — 1.218.086 1.613.872Other receivables and prepayments 3.595.902 3.176.637 374.874

3.595.902 4.394.723 1.988.746

The fair value of trade and other receivables which are due within one year approximates their carryingamount at the balance sheet date.

Other than the debtor balance for which a specific provision for impairment of receivables wasrecognized at the amount of US$174.975 (2010: US$557.201, 2009: US$557.201) no other trade andother receivables balance is considered impaired.

The maximum exposure to credit risk at the reporting date is the fair value of each class of receivablementioned above. The Group does not hold any collateral as security.

The movement of the provision for impairment of receivables is as follows:

2011US$

2010US$

2009US$

Opening balance at 1 January 557.201 557.201 131.741Acquisition of subsidiaries 205.685 — —Charge to the income statement for the year (596.760) — 425.460Foreign exchange difference 8.849 — —

Closing balance at 31 December 174.975 557.201 557.201

The Group’s trade and other receivables are primarily denominated in US Dollars. During 2011, theGroup has been successful in achieving the sale of doubtful receivables to a third party. As a result theGroup has generated a gain in the amount of US$0,4 million.

19 Deferred income tax

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset currenttax assets against current tax liabilities and when the deferred taxes relate to the same fiscal authority.The offset amounts are as follows:

2011US$

2010US$

2009US$

Deferred tax assets to be recovered after more than12 months 992.817 4.823.267 18.195.971

Deferred tax liabilities to be incurred after more than12 months (85.635.557) (40.072.077) (7.348.325)

Deferred tax (liability)/asset (84.642.740) (35.248.810) 10.847.646

F-46


19 Deferred income tax (continued)

The gross movement on the Group’s deferred income tax account is as follows:

2011US$

2010US$

2009US$

Beginning of the year (35.248.810) 10.847.646 (12.320.895)Income tax credit/(charge) (Note 13) 2.120.184 (7.914.605) 8.616.242(Revaluation gains)/impairment losses on railcars (Note 16) (45.714.182) (37.539.632) 14.576.095Acquisition of subsidiary (Note 14) (11.325.731) — —Exchange differences 5.525.799 (642.219) (23.796)

Deferred tax (liability)/asset (84.642.740) (35.248.810) 10.847.646

The movement in deferred income tax assets and liabilities during the year, without taking intoconsideration the offsetting of balances within the same tax jurisdiction, is as follows:

IntangibleAssets Equipment

Operatinglease

incomerecognition

Financelease

receivables

FinanceLease

payables

Provisionsand

accruedexpenses

Carriedforward tax

losses TotalUS$ US$ US$ US$ US$ US$ US$ US$

Deferred tax liabilitiesAt 1 January 2009 (50) (32.129.037) (592.560) (3.069.296) — 250.579 15.010.476 (20.529.888)(Charged)/credited to

income statement — (1.199.658) 155.700 (667.764) — 79.140 2.258.882 626.300Revaluation of railcars — 12.457.384 — — — — — 12.457.384Disposal of equipment — 2.487.922 — (2.487.922) — — — —Exchange difference — 528.207 — 212.708 — (3.197) (639.839) 97.879

At 31 December 2009 (50) (17.855.182) (436.860) (6.012.274) — 326.522 16.629.519 (7.348.325)

(Charged)/credited toincome statement 1.223 (2.894.514) 76.965 1.222.924 — (82.548) 1.780.856 104.906

Revaluation of railcars — (32.778.397) — — — — — (32.778.397)Exchange difference 6 (200.395) (272) 41.583 — 15.309 93.508 (50.261)

At 31 December 2010 1.179 (53.728.488) (360.167) (4.747.767) — 259.283 18.503.883 (40.072.077)

(Charged)/credited toincome statement 4.843 (5.714.067) 181.983 1.769.626 44.336 (214.695) 16.016.273 12.088.299

Revaluation of railcars — (53.817.441) — — 1.965.308 — — (51.852.133)Acquisition of subsidiaries — (8.403.413) — — (2.282.899) (639.419) — (11.325.731)Exchange difference (485) 7.085.282 7.862 102.180 169.587 88.345 (1.926.686) 5.526.085

At 31 December 2011 5.537 (114.578.127) (170.322) (2.875.961) (103.668) (506.486) 32.593.470 (85.635.557)

F-47


19 Deferred income tax (continued)

Equipment

Financelease

receivables

Provision andaccruedexpense

Carriedforwardtaxablelosses Total

US$ US$ US$ US$ US$

Deferred tax assets1 January 2009 (2.693.077) — 50.894 11.049.764 8.407.581(Charged)/credited to income

statement 6.645.144 — 82.452 1.262.346 7.989.942Revaluation of railcars 2.237.629 — — — 2.237.629Exchange difference 86.365 — 3.169 (528.715) (439.181)

At 31 December 2009/ 1 January2010 6.276.061 — 136.515 11.783.395 18.195.971

(Charged)/credited to incomestatement 315.316 — 48.314 (983.239) (619.609)

Revaluation of railcars (5.078.742) — — — (5.078.742)Impairment of railcars (7.391.775) — — — (7.391.775)Exchange difference (258.811) — (24) (23.743) (282.578)

At 31 December 2010/ 1 January2011 (6.137.951) — 184.805 10.776.413 4.823.267

(Charged)/credited to incomestatement 989.817 3.286 (184.805) (10.776.413) (9.968.115)

Revaluation of railcars 6.137.951 — — — 6.137.951Exchange difference — (286) — — (286)

At 31 December 2011 989.817 3.000 — — 992.817

Deferred tax assets are recognized for tax losses carried forward to the extent that the realization ofthe related tax benefit through the use of future taxable profits is probable.

20 Cash and cash equivalents2011 2010 2009US$ US$ US$

Cash at bank 52.345.588 26.820.334 30.012.708Short-term bank deposits 14.451.048 85.629.892 280.715

66.796.636 112.450.226 30.293.423

Out of the total cash and cash equivalents at 31 December 2011, US$15,95 million (2010:US$7,95million, 2009: US$5,95 million) was held in subsidiaries which have contractual restrictionsunder the EBRD-IFC and SG-IFC syndicated loan facilities (Note 23).

These are not available for general use by the Group and for the purpose of the cash flow statement,these are excluded from cash and cash equivalents.

F-48


21 Share capital, share premium and treasury shares

Numberof shares

SharecapitalUS$

Sharepremium

US$

TreasurysharesUS$

TotalUS$

At 1 January 2009 129.696.914 125.714.189 78.464.048 (398) 204.177.839Transfer of shares to

employees (1) 1.593.408 — — 159 159Purchase of treasury shares (3) (170.648) — — (300.000) (300.000)Issue of shares (2) 25.598.370 25.598.370 19.401.630 — 45.000.000

At 31 December 2009 156.718.044 151.312.559 97.865.678 (300.239) 248.877.998Transfer of shares to

employees (1) 2.390.113 — — 239 239Transfer of treasury shares (3) 170.648 — — 300.000 300.000Share buyback and

cancellation (2) (18.153.190) (18.153.190) (17.397.814) — (35.551.004)Issue of shares (2) 78.161.218 78.161.218 74.338.782 — 152.500.000Equity raising fees — — (4.193.786) — (4.193.786)

At 31 December 2010 219.286.833 211.320.587 150.612.860 — 361.933.447Equity raising fees — — (282.414) — (282.414)Acquisition of subsidiary (3)

(Note 14) 2.992.808 — — — —

At 31 December 2011 222.279.641 211.320.587 150.330.446 — 361.651.033

(1) Transfer of shares to employees – Management Incentive Plan (“MIP”)

In November 2007 the Company issued 7.967.044 ordinary shares of par value US$0,0001 each inrelation to the share-based compensation (Note 10). These shares were held by Brunswick Rail GroupLimited, a Group subsidiary, as nominee of the Company. In 2010, 2.390.113 shares were transferredto key management members in relation to the MIP (2009: 1.593.408 shares). By 31 December 2010 atotal of 7.967.044 shares (2009: 5.576.930 shares) were transferred to key Group managementmembers in relation to the MIP. On 31 December 2010, the MIP vested fully and the relevantemployees were entitled to the shares initially allocated to them.

(2) Issue of shares

In October 2009, the shareholders of the Company adopted a resolution in writing whereby an offerwas made to existing and new shareholders (the “Share Offer 1”) to subscribe for a maximum issue of28.442.646 Ordinary Shares of par value US$1,00 at the Share Offer price of US$1,758 per share. TheUS$50 million cash call by the Company was approved by the Board to enable the Group to raiseadditional funding for the purchase of railcars to increase its railcar fleet.

Existing shareholders subscribed for 25.598.370 shares by 31 December 2009. As a result, US$45million were received in cash by 31 December 2009. The remaining 2.844.276 shares were subscribedfor by new shareholders and the US$5 million cash proceeds were received in January 2010.

In November and December 2010 the shareholders of the Company adopted resolutions in writingwhereby offers were made to existing and new shareholders (the “Share Offer 2”) to subscribe for amaximum issue of 75.316.954 ordinary shares of par value US$1,00 at the share offer price ofUS$1,9584 (rounded to four decimals) per share. The Share Offer 2 was approved by the Board toenable the Group to raise additional funding for the purchase of railcars to increase its railcar fleet.

As a result of these offers, a total of US$147,5 million in equity proceeds were paid in the Companyduring November and December 2010. A part of the proceeds were used by the Company to financean offer to existing shareholders to sell back shares. A total of 18.153.190 shares were sold back to theCompany at a price of US$1,9584 per share (rounded to four decimals). These shares weresubsequently cancelled.

F-49


21 Share capital, share premium and treasury shares (continued)

(3) Treasury shares

A new member of key management joined the Company in August 2009. In accordance with theemployment contract, the member was entitled to a guaranteed bonus of US$300.000 payable12 months after the commencement of employment date. The member expressed a willingness toparticipate in the share offer made by the Company to both new and existing shareholders andproposed to offset the aforementioned bonus entitlement against payment for the shares. This wouldentitle the member to acquire 170.648 shares at the price of $1,758 per share. This price was the priceoffered to other third parties which were interested in participating in the share offer and wasconsidered to be the fair value per share.

On 25 November 2009, Brunswick Rail Group Limited transferred to the Company an amount ofUS$300.000 representing the purchase consideration to acquire the relevant shares.

The shares were agreed to be transferred to the member when the bonus became payable which wasthe earlier of (a) the date on which employment is terminated by the employer or (b) 12 months fromcommencement of employment (being August 2010). As a result, the amount of US$100.000 wasrecognized under the heading “Share-based compensation” in 2009, being the proportionate amountfor 4 months from commencement of employment to 31 December 2009. The remaining amount ofUS$200.000 was recognized on 31 December 2010.

At the vesting date, 170.648 shares at a price of US$1,758 were transferred to the employee. This wasconsidered to be the fair value of the shares by management, as the price paid by third parties duringthe share issue on 1 November 2010 was not materially different from the price at the vesting date.

(4) Shares issued on acquisition of subsidiary

In August 2011, the Group issued 2.992.808 ordinary shares of Brunswick Rail Limited to the sellers ofthe PT group as part of the purchase consideration for the 48% shareholding (Note 14). The ordinaryshares issued have the same rights as the other shares in issue.

The fair value of the equity instruments is US$11,8 million being (i) US$10,3 million based on anagreed with the seller pre-acquisition valuation of US$3,4201780 per share and (ii) US$1,5 millionrepresenting a 15% premium payable by the Group in the event that the sellers exercise their putoption.

The US$11,8 million has been recorded as part of the consideration for the business combination andnot as part of equity because, in accordance with the terms of the sale and purchase agreements, thePT group sellers were granted a put option to sell the shares back to the Group for cash. This option issolely at the discretion of the PT group sellers and as a result the fair value of shares issued isrecorded as a financial liability.

F-50


22 Other reserves

Revaluationreserve

Hedgingreserve

Translationreserve

Share-basedcompensation

reserveOther

Reserves TotalUS$ US$ US$ US$ US$ US$

Balance at 1 January2009 107.228.573 (16.687.086) (8.409.257) 8.622.961 (57.427.899) 33.327.292

Cash flow hedge:– Fair value losses in the

year — (3.436.533) — — — (3.436.533)– Transfers to income

statement — 9.952.326 — — — 9.952.326Currency translation

differences — — (5.336.344) — — (5.336.344)Share-based payment

(Note 10) — — — 2.245.664 — 2.245.664Losses on revaluation of

railcars net of tax (58.304.376) — — — — (58.304.376)Conversion of leases (1) (10.244.274) — — — — (10.244.274)

Balance at 31 December2009/1 January 2010 38.679.923 (10.171.293) (13.745.601) 10.868.625 (57.427.899) (31.796.245)


year — (6.503.006) — — — (6.503.006)– Transfers to income


differences — — 2.078.681 — — 2.078.681Share-based payment

(Note 10) — — — 1.137.414 — 1.137.414Railcar revaluation gains

net of tax 150.158.531 — — — — 150.158.531

Balance at 31 December2010/1 January 2011 188.838.454 (6.627.635) (11.666.920) 12.006.039 (57.427.899) 125.122.039


year — (941.306) — — — (941.306)–Transfers to income


differences — — (37.712.461) — — (37.712.461)Share-based payment

(Note 10) — — — (12.006.039) — (12.006.039)Railcar revaluation gains

net of tax 182.870.046 — — — — 182.870.046

Balance at 31 December2011 371.708.500 947.056 (49.379.381) — (57.427.899) 265.848.276

(1) Derecognition of operating leases upon conversion to finance leases.

The translation, hedging and share-based compensation reserves are non-distributable.

F-51


23 Borrowings

2011US$

2010US$

2009US$

Non-current borrowingsBank borrowings 325.949.546 224.148.313 270.076.926Finance lease payables 129.176.326 — —

455.125.872 224.148.313 270.076.926

Current borrowingsBank borrowings 236.254.186 48.786.709 28.846.647Finance lease payables 3.211.830 — —

239.466.016 48.786.709 28.846.647

Total borrowings 694.591.888 272.935.022 298.923.573

2011US$

2010US$

2009US$

Maturity of non-current borrowingsBetween 2 and 3 years 161.581.082 195.716.546 270.076.926Between 4 and 5 years 87.107.490 13.329.493 —Over 5 years 77.260.974 15.102.274 —

325.949.546 224.148.313 270.076.926

The bank borrowings relate to the subsidiary companies, Brunswick Rail Holding Limited (“BRH”),Brunswick RRR (Cyprus) Limited (“BRRR”) and sub-subsidiary company OOO Brunswick WagonLeasing (“OOO BWL”).

SG-IFC Loan BRH

In 2007 BRH entered into a syndicated loan facility of US$385.000.000. The maturity date of the loan isAugust 2012. The loan was originally split between an amortizing part of 46% and a bullet part of 54%.The interest rate on the loan is three-month USD LIBOR + 2,25% and is payable on a quarterly basis.In June 2008, BRH agreed an increase of the facility with an additional US$50.000.000 to finance thefuture expansion of its railcar fleet taking the syndicated loan facility amount to a total ofUS$435.000.000. As of 31 December 2011 total borrowings (excluding unamortized borrowing costs)amounted to US$166.299.315 (2010: US$226.859.928, 2009: US$302.841.524). The loan wasrepayable in quarterly installments by August 2012. The loan was actually repaid earlier in June 2012(Note 30).

EBRD-IFC Loan OOO BWL

In July 2010 OOO Brunswick Wagon Leasing (“OOO BWL”) signed a loan agreement with the EBRDfor a loan facility of US$200 million. The loan facility consists of an A Loan of US$100 million and a BLoan of US$100 million which bear interest rates of three-month USD LIBOR + 6% and three-monthUSD LIBOR + 4,5%, respectively. As of 31 December 2010 the Company had drawn down US$57,3million from this facility.

In November 2010, OOO BWL signed a loan agreement with the IFC for a loan facility of US$100million. The loan facility consists of an A Loan of US$50 million and a B Loan of US$50 million whichbear interest rates of three-month USD LIBOR + 6% and three-month USD LIBOR + 4,5%respectively. As of 31 December 2010 there had been no drawdowns against this facility.

In August 2011, OOO BWL signed an amendment agreement with EBRD-IFC for an additionalUS$120 million facility increasing the total loan facilities to US$420 million. In addition the parties alsoagreed reductions in the loan margins to better reflect the current market conditions and as a result theA Loan tranches would bear interest of three-month USD LIBOR + 4,25% and the B Loan trancheswould bear interest of three-month USD LIBOR + 3,25%.

During 2011, OOO BWL drew down the remaining US$262,7 million (31 December 2010: US$57,3million) of the US$300 million EBRD facility and US$120 million of the additional facility thereby utilizingfully the facilities by 31 December 2011.

F-52


23 Borrowings (continued)

EBRD-IFC Loan OOO BWL (continued)

In the year ended 31 December 2011 OOOBWL repaid US$55 million of the EBRD-IFC loans out ofwhich US$32 million related to scheduled payments in accordance with the agreed repaymentschedules and US$23 million related to loan prepayments using VAT refund proceeds.

The OOO BWL borrowings movement is as follows:

2011US$

2010US$

2009US$

At beginning of year 49.149.967 — —Advances 362.684.833 107.315.167 —Interest charged 11.244.723 3.213.731 —Repayment (54.993.486) (50.000.000) —Interest paid (11.244.723) (3.213.731) —Unamortized borrowing costs (695.336) (8.165.200) —

At end of year 356.145.978 49.149.967 —

The 2010 repayment relates to the US$50 million Alfa Bank facility, which was refinanced by theproceeds of the EBRD loan.

The OOO BWL loan facility is secured as follows:

(i) By charge on the leased equipment of OOO BWL. The aggregate value of the leased equipmentwill be the Rouble equivalent of US$115.493.320.

(ii) By charge of the aggregate value of the pledged rights for lease and supply agreements of OOOBWL which will be the Rouble equivalent of US$492.688.965.

(iii) By charge on shares held by Brunswick Wagon Holding Limited in Brunswick Wagon Fin Limitedand Brunswick Wagon (Cyprus) Limited.

(iv) By charge on the participation interest (99%) held by Brunswick Rail Group (Cyprus) in OOOBrunswick Rail Management with a nominal value of RUB 10.799.226.

(v) By charge on the bank accounts of Brunswick Wagon Fin Limited and Brunswick Wagon (Cyprus)Limited held with Societe Generale, London Branch.

(vi) By charge on the participation interest (99%) held by Brunswick Wagon (Cyprus) Limited in OOOBWL with a nominal value of RUB 1.749.344.969.

VTB/RBI Loan BRRR

On 21 October 2011, Brunswick RRR (Cyprus) Limited (“BRRR”), a subsidiary entity, signed asyndicated loan agreement with VTB and RBI for a total loan facility of US$156 million. This VTB/RBIbridge loan, which matures on 31 October 2013, is split between A/B facilities, the A facility being theamount of US$43 million intended to finance a specific transaction.

The B facility of the amount of US$113 million will be utilized on other permitted acquisitions under theterms of the agreements as part of the Group’s growth strategy. On 31 October 2011 BRRR drewdown in full the A facility to finance the acquisition of Meconenn Enterprise Limited (“Meconenn”) /OOO Brunswick Trans (“OOOBT”) shares representing an asset acquisition of 2.124 railcars.

The BRRR loan facility is secured as follows:

(i) Pledge of rights for sub-lease agreement with U-Trans (between OOO BT and VTB Capital PLC)

(ii) Pledge of shares in OOOBT – 50% of the Charter Capital (between Meconenn and VTB CapitalPLC)

(iii) Pledge of shares in BRH Ltd (between BRL and VTB Capital PLC)

(iv) Pledge of shares in BRRR (between BRL – pledgor and VTB Capital PLC)

(v) Pledge of shares in Meconenn (BRL – pledgor and VTB Capital PLC)

(vi) Pledge of shares in Meconenn (BRRR – pledgor and VTB Capital PLC)

F-53


23 Borrowings (continued)

VTB/RBI Loan BRRR (continued)

The exposure of the total Group bank borrowings to interest rate changes and the contractual repricingperiods at the balance sheet dates are as follows:

2011US$

2010US$

2009US$

1 year or less 562.203.732 272.935.022 298.923.573

The carrying amounts and fair values of the total Group bank borrowings are as follows:

Carrying amounts Fair values

2011US$

2010US$

2009US$

2011US$

2010US$

2009US$

Bank borrowings 562.203.732 272.935.022 298.923.573 567.827.441 278.851.971 291.856.767

Finance lease liabilities

31 December2011

31 December2010

31 December2009

US$ US$ US$

Gross liabilities from finance leasesNot later than 1 year 16.599.729 — —Later than 1 year but not later than 5 years 148.916.784 — —Later than 5 years 7.308.490 — —

172.825.003 — —Future finance charges on finance leases (40.436.847) — —

Present value of finance lease liabilities 132.388.156 — —

The present value of finance lease liabilities may beanalysed as follows:

Not later than 1 year 3.211.830 — —Later than 1 year but not later than 5 years 123.642.985 — —Later than 5 years 5.533.341 — —

132.388.156 — —

The fair values of instruments with variable cash flows are based on forecast quarterly discounted cashflows using forward interest rates obtained by the Group’s bankers for each quarterly repayment period.The carrying amounts of the Group’s bank borrowings are denominated in US Dollars.

24 Mezzanine loan

On 7 October 2010, the Company entered into a Mezzanine Facility Agreement. Initially the mezzanineloan agreement was solely entered into with MRIF Luxembourg Investments 2 Sarl. Part of the loanwas then transferred by the lender to its associate, MRIF Bermuda Investments 4 Limited (together“MRIF”) in 2011. MRIF made available a US$60 million mezzanine term loan facility to the Company.The loan bears interest at a rate of 15% per annum and is repayable on 2 December 2020. Based onthe terms of the agreement, MRIF may give notice to implement a debt for equity conversion during theterm of the loan.

On 31 March 2011 the Company drew down in full the US$60 million mezzanine loan facility. TheCompany incurred borrowing costs in obtaining the loan in the amount of US$2.250.973 which havebeen included under the unamortized borrowing costs of the Group and is amortized over the period ofthe loan. The loan facility is accounted for at amortized cost using the effective interest method.

F-54


24 Mezzanine loan (continued)

The mezzanine loan movement is as follows:

2011US$

2010US$

2009US$

At beginning of year — — —Advances 60.000.000 — —Interest charged 6.940.781 — —Unamortized borrowing costs under the effective interest method (2.508.146) — —

At end of year 64.432.635 — —

25 Derivative financial instruments

2011US$

2010US$

2009US$

Interest rate swaps 4.381.731 11.956.422 15.500.080Interest payable on financial instruments 4.271 — —

Total derivative financial instruments 4.386.002 11.956.422 15.500.080

The derivative financial instruments included in current liabilities represent interest rate swaps – cashflow hedges.

The full fair value of a hedging derivative is classified as a non-current asset or liability if the remainingmaturity of the hedged item is more than twelve months and as a current asset or liability if the maturityof the hedged item is less than twelve months from the end of the reporting period.

The notional amount of the outstanding interest rate swap contracts of BRH at 31 December 2011 wasUS$165.600.569 (2010:US$214.293.072, 2009: US$243.936.201).

The fixed interest rate payable on interest rate swaps ranged from 5,38% to 7,28%. The floating ratesare USD three-month LIBOR + 2,25%. Gains and losses recognized in the hedging reserve in thestatement of changes in equity on interest rate swap contracts as of 31 December 2011 amounting toUS$613.268 (2010: US$6.503.006, 2009: US$3.436.533) will continue to be released to the incomestatement until the repayment of the bank borrowings (Note 23). For the year 2011, an amount ofUS$8.511.625 was transferred to the income statement (2010: US$10.046.664, 2009: US$9.952.326).

On 30 December 2011, OOOBWL entered into swap agreements with SG, ING and UniCredit. Thenotional amount of the outstanding interest rate swap contracts at 31 December 2011 wasUS$235.000.000 (2010: US$Nil, 2009: US$Nil).

The fixed interest rate payable on interest rate swaps ranged from 4,07% to 5,20%. The floating ratesare USD three-month LIBOR + 4,25% and 3,25% for A loan and B loan respectively. Gains and lossesrecognized in the hedging reserve in the statement of changes in equity on interest rate swap contractsas of 31 December 2011 amounting to US$328.038 (2010: US$Nil, 2009: US$Nil) will continue to bereleased to the income statement until the repayment of the bank borrowings (Note 23). For the year2011, an amount of US$4.372 was transferred to the income statement (2010: US$ nil, 2009: US$ nil).

The fair value of the derivative financial instruments is determined using the ‘mark-to-market’ valuationfor each swap agreement.

26 Trade and other payables

2011US$

2010US$

2009US$

Advances from customers 5.537.567 3.797.192 4.652.954Accrued expenses for services rendered in relation to equity

raising — 6.212.500 —Other trade payables and accrued expenses 4.289.723 1.955.870 1.284.194Liability arising on cash-settled share based payment

transactions 3.059.343 — —

12.886.633 11.965.562 5.937.148

F-55


26 Trade and other payables (continued)

During the first half of 2011 the Company settled accrued expenses for services relating to equityraising fees that were provided for in the prior year.

The fair value of trade and other payables which are due within one year approximates their carryingamount at the balance sheet date.

27 Contingencies, commitments and operating risks

Compliance with covenants

The Group is required to be in compliance with certain financial and business covenants relating to thesyndicated loan facilities of SG/BNP/IFC, EBRD/IFC and VTB/RBI. Non-compliance with thesecovenants may result in negative consequences for the Group including declaration of default. As at31 December 2011, 31 December 2010 and 31 December 2009 the Group is in compliance with thesecovenants.

Compliance with local regulations

The Group’s Russian subsidiaries should maintain a minimum level of capital required under the localregulation. As at 31 December 2011, 2010 and 2009 all of the Group’s Russian subsidiaries are in anet asset position.

The Russian legislation specifies that capital repairs on railcars should be performed every 4-17 yearsdepending on the type of railcar. The types of railcars owned by the Group have a capital repair term of10-12 years. Since the Group’s fleet is relatively new such repairs have not yet been required. Depotrepairs as indicated in the Russian legislation should be performed for new railcars after 2-3 years andthen every 1-2 years depending on the type of the railcar.

Operating environment of the Russian Federation

The Russian Federation displays certain characteristics of an emerging market. Tax, currency andcustoms legislation is subject to varying interpretations and contributes to the challenges faced by theGroup operating in the Russian Federation.

The international sovereign debt crisis, stock market volatility and other risks could have a negativeeffect on the Russian financial and corporate sectors. Group management determine loan impairmentprovisions by considering the economic situation and outlook at the end of the reporting period, andapply the ‘incurred loss’ model required by the applicable accounting standards. These standardsrequire recognition of impairment losses that arose from past events and prohibit recognition ofimpairment losses that could arise from future events, no matter how likely those future events are.Refer to Note 2 for more information.

The future economic development of the Russian Federation is dependent upon external factors andinternal measures undertaken by the Russian government to sustain growth, and to change theRussian tax, legal and regulatory environment. Group management have aimed to undertake allreasonable measures to support the sustainability and development of the Group’s business in thecurrent business and economic environment.

Tax legislation

Russian tax and customs legislation which was enacted or substantively enacted at the end of thereporting period, is subject to varying interpretations when being applied to the transactions andactivities of the Group. Consequently, tax positions taken by management and the formaldocumentation supporting the tax positions may be successfully challenged by relevant authorities.Russian tax administration is gradually strengthening, including the fact that there is a higher risk ofreview of tax transactions without a clear business purpose or with tax incompliant counterparties.Fiscal periods remain open to review by the authorities in respect of taxes for three calendar yearspreceding the year of review. Under certain circumstances reviews may cover longer periods.

F-56


27 Contingencies, commitments and operating risks (continued)

Tax legislation (continued)

Russian transfer pricing legislation enacted during the current period is effective prospectively to newtransactions from 1 January 2012. It introduces significant reporting and documentation requirements.The transfer pricing legislation that is applicable to transactions on or prior to 31 December 2011, alsoprovides the possibility for tax authorities to make transfer pricing adjustments and to impose additionaltax liabilities in respect of all controllable transactions, provided that the transaction price differs fromthe market price by more than 20%. Controllable transactions include transactions with interdependentparties, as determined under the Russian Tax Code, all cross-border transactions (irrespective ofwhether performed between related or unrelated parties), transactions where the price applied by ataxpayer differs by more than 20% from the price applied in similar transactions by the same taxpayerwithin a short period of time, and barter transactions. Significant difficulties exist in interpreting andapplying transfer pricing legislation in practice.

Any prior existing Russian court decisions may provide guidance, but are not legally binding fordecisions by other, or higher level, Russian courts in the future.

Tax liabilities arising from transactions between companies are determined using actual transactionprices. It is possible, with the evolution of the interpretation of the transfer pricing rules, that suchtransfer prices could be challenged. The impact of any such challenge cannot be reliably estimated;however, it may be significant to the financial position and/or the overall operations of the Group.

The Group includes companies incorporated outside of Russia. The tax liabilities of the Group aredetermined on the assumption that these companies are not subject to Russian profits tax, becausethey do not have a permanent establishment in Russia. This interpretation of relevant legislation maybe challenged but the impact of any such challenge cannot be reliably estimated currently; however, itmay be significant to the financial position and/or the overall operations of the Group.

As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, fromtime to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group. WhileGroup management currently estimates that the tax positions and interpretations that it has taken canreasonably be sustained, there is a possible risk that outflow of resources will be required should suchtax positions and interpretations be challenged by the relevant authorities. The impact of any suchchallenge cannot be reliably estimated; however, it may be significant to the financial position and/orthe overall operations of the Group.

OOO Brunswick Rail Leasing and OOO Brunswick Rail Service have currently several on-going routinecases with the Russian tax authorities with respect to VAT refunds and other tax related matters. Withrespect to VAT refunds, the relevant subsidiaries’ approach has consistently been to claim theirentitlement to VAT refunds pursuant to Article 176 of the Tax Code, and have actively sought toenforce their rights by seeking the protection or assistance of the courts. In 2009, OOO Brunswick RailLeasing was successful in receiving the last of a series of cash refunds from the tax authorities for atotal amount of US$1.2 million. During this period, the management of the Group improved theefficiency of the VAT refund procedure and this resulted in significant VAT amounts refunded to theGroup’s Russian companies. In 2010 OOO Brunswick Rail Service and OOO Brunswick WagonLeasing have been successful in receiving a series of cash refunds from the tax authorities for a totalamount of US$17,9 million and US$13,9 million respectively. In 2011, OOO Brunswick Wagon Leasingreceived cash refunds totalling US$39.1 million.

As at 31 December 2009, 31 December 2010 and 31 December 2011 it was estimated by Groupmanagement that none of the Group’s subsidiaries had possible tax obligations arising from exposureother than remote tax risks.

Environmental matters

The enforcement of environmental regulation in the Russian Federation is evolving and theenforcement posture of government authorities is continually being reconsidered. The Groupperiodically evaluates its obligations under environmental regulations and shareholder agreements.

F-57



Environmental matters (continued)

Once obligations are determined, they are recognized immediately. Potential liabilities, which mightarise as a result of changes in existing regulations, civil litigation or legislation, cannot be estimated butcould be material. In the current enforcement climate under existing legislation, Group managementbelieves that there are no significant liabilities for environmental matters.

28 Operating lease commitments

(a) Operating lease arrangements

The future aggregate minimum rentals receivable under non-cancelable operating leases are asfollows:

2011US$

2010US$

2009US$

Not later than 1 year 38.689.458 29.267.923 24.106.194Later than one year but not later than 5 years 51.533.826 50.036.310 54.506.054Later than 5 years — 10.464.849 10.724.834

90.223.284 89.769.082 89.337.082

The Group leases out all railcars under operating lease arrangements for a period of 1 – 7 years.

The total future aggregate minimum rentals receivable under cancellable operating leases,excluding fines for early termination, are as follows:

2011US$

2010US$

2009US$

Not later than 1 year 216.563.761 68.560.812 45.600.711Later than one year but not later than 5 years 478.940.840 118.760.352 126.661.304Later than 5 years 109.622.076 24.752.023 26.029.732

805.126.677 212.073.187 198.291.747

(b) Rent of premises

The future aggregate minimum lease payments under non-cancellable leases for the rent ofpremises are as follows:

2011US$

2010US$

2009US$

Not later than 1 year 894.663 422.004 414.769Later than one year but not later than 5 years 1.718.963 644.884 1.113.880

2.613.626 1.066.888 1.528.649

F-58


29 Related party transactions




2011US$

2010US$

2009US$

Salaries 3.083.621 2.657.669 2.391.846Share-based payment (Note 10) 3.052.272 1.337.518 —Bonuses 741.758 68.339 2.348.073Directors fees 268.927 196.629 199.932

7.146.578 4.260.155 4.939.851

30 Events after the balance sheet date

Based on the supplemental agreements signed between the Group and the PT group sellers on28 February 2012, the Group paid the sellers the amount of US$ 2 million on 29 February 2012 beingthe first part of the total consideration. The remaining US$ 25 million, being the second part of the totalconsideration, carried interest at the Central Bank of Russia refinancing rate from 1 March 2012. On2 July 2012 the Group settled the remaining balance, purchased back the shares that have beenissued in connection with the acquisition of Proftrans and discharged fully its obligations to the sellers.

The Company offered to purchase 6.700.000 shares from one of its shareholders at a price of US$2,20per share for a total consideration of US$14,7 million. The purchase was financed with a 3-year loanfrom the shareholder. The loan is unsecured and carries an interest rate of 3-month USD LIBOR +300basis points. The loan was disbursed on 28 March 2012 and the share buyback was completed on3 April 2012.

On 23 May 2012 a new syndicated bank loan was signed between OOO Brunswick Rail Leasing, OOOBrunswick Rail Service and the (IFC). The new loan is a US$ 250 million 5-year A/B facility with a costof USD 3-month libor +5% margin arranged by IFC acting as “A” lender and with a group of fivecommercial banks as “B” lenders. The loan is guaranteed by the Company and its subsidiary BRH. InJune 2012 the Group utilized part of the proceeds to repay the 2007 Brunswick Rail Holding Limited(“BRH”) syndicated bank loan from Société Générale / BNP Paribas, which was maturing in August2012, and prepay the US$43 million VTB/RBI syndicated loan with a maturity in October 2013. Theremaining part of the proceeds was used for organic growth and the settlement of the Group’sobligations under the PT group transaction.

Challenging market conditions, particularly for coal producers, have led to requests from some clientsfor temporary lease rate reductions. The Group agreed with five clients temporary cuts to daily leaserates in the range of 5-15% for a short term period of three to four months in exchange for a leaseextension of an equivalent. Based on the amended contracts, the total impact on Group EBITDA forthe year ending 31 December 2012 is less than USD$ 2 million and the reduced EBITDA in 2012 isexpected to be offset by increased EBITDA in later years.

F-59


31 Direct and indirect interests in subsidiaries

For the purposes of the consolidation the following legal entities are the subsidiaries andsub-subsidiaries of the Company and the table represents the ultimate % ownership of the Company ineach entity’s share capital:

Name

Countryof

incorporation Principal activities 2011 2010 2009Brunswick Rail Holding Limited Bermuda Holding of investments 100% 100% 100%Brunswick Rail Group Limited Bermuda Holding of investments 100% 100% 100%Brunswick Wagon Holding Limited (1) Bermuda Holding of Investments 100% 100% 100%Brunswick Wagon (Cyprus) Limited (4) Cyprus Holding of Russian

subsidiaries100% 100% 100%

Brunswick Wagon Fin Limited (4) Cyprus Provision of financing togroup companies

100% 100% 100%

Brunswick Rail Fin Limited (4) Cyprus Provision of financing togroup companies

100% 100% 100%

Brunswick Rail (Cyprus) Limited (4) Cyprus Holding of Russiansubsidiaries

100% 100% 100%

Tobikoco Limited (6) Cyprus Holding of Russiansubsidiaries

100% — —

OOO Brunswick Rail Leasing Russia Leasing of railcars to third parties 100% 100% 100%OOO Brunswick Rail Service Russia Leasing of railcars to third parties 100% 100% 100%OOO Brunswick Wagon Leasing (2) Russia Leasing of railcars to third parties 100% 100% —OOO Wagon Leasing (5) Russia Leasing of railcars to third parties 100% — —Brunswick RRR (Cyprus) Limited (7) Cyprus Holding of Cypriot and Russian

subsidiaries100% — —

Meconenn Enterprises Limited (8) Cyprus Holding of Russiansubsidiaries

100% — —

OOO Brunswick Trans (9) Russia Leasing of railcars to third parties 100% — —Brunswick Rail Trans (Cyprus)

Limited (10)Cyprus Holding of Russian

subsidiaries100% — —

Brunswick Rail Group (Cyprus)Limited (4)

Cyprus Holding of Russian subsidiary 100% 100% 100%

ZAO Proftrans (11) Russia Shipment of iron scrap and otherfreights

100% — —

OOO TransMash Active (11) Russia Leasing of railcars to PT group 100% — —OOO ProfExpo Trans (11) Russia Shipment of iron scrap and other

freights100% — —

OOO TransActive (11) Russia Leasing of railcars to PT group 50% — —Brunswick Rail Finance Public

Company Limited (12)Cyprus Provision of financing to

group companies100% — —

OOO Brunswick Rail Management Russia Provision of managementservices to Group companies

100% 100% 100%

Brunswick Capital (Cyprus) Limited (3) Cyprus Liquidated in 2010 — — 100%

(1) The company was incorporated on 18 November 2009.(2) The company was incorporated on 12 January 2010.(3) The company was liquidated on 21 January 2010.(4) In May 2011 the following Cyprus subsidiaries changed their names:(a) Brunswick Wagon Leasing (Cyprus) Limited to Brunswick Wagon (Cyprus) Limited(b) Brunswick Wagon Leasing Fin Limited to Brunswick Wagon Fin Limited(c) Brunswick Rail Leasing (Cyprus) Limited to Brunswick Rail (Cyprus) Limited(d) Brunswick Rail Leasing Fin Limited to Brunswick Rail Fin Limited(e) Brunswick Leasing Management (Cyprus) Limited to Brunswick Rail Group (Cyprus) Limited(5) The company was incorporated on 14 July 2011(6) The company was acquired on 07 July 2011(7) The company was acquired on 18 April 2011(8) The company was acquired on 31 October 2011(9) The company was incorporated on 31 October 2011(10) The company was acquired on 11 May 2011(11) The company was acquired on 22 August 2011(12) The company was acquired on 27 July 2011

The Independent Auditor’s report is presented on page F-3 of these consolidated financial statements.

F-60

UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION OF THEGROUP AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 2012

Contents Pages

Auditor’s Review Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-62

Interim Condensed Consolidated Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-63

Interim Condensed Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . F-64

Interim Condensed Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-65

Interim Condensed Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . F-66

Interim Condensed Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-67

Notes to the Interim Condensed Consolidated Financial Information . . . . . . . . . . . . . . . . . . . . . . . F-68

F-61

Report on review of interim condensedconsolidated financial information

To the Shareholders and Board of Directors of Brunswick Rail Limited.

Introduction

We have reviewed the accompanying interim condensed consolidated balance sheet of Brunswick RailLimited and its subsidiaries (the “Group”) as of 30 June 2012 and the related interim condensedconsolidated statements of income and comprehensive income for the three and six months periodsthen ended, and the statements of changes in equity and cash flows for the six-month period thenended. Management is responsible for the preparation and presentation of this interim condensedconsolidated financial information in accordance with International Accounting Standard 34, “InterimFinancial Reporting”. Our responsibility is to express a conclusion on this interim condensedconsolidated financial information based on our review.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements 2410,“Review of interim financial information performed by the independent auditor of the entity”. A review ofinterim financial information consists of making inquiries, primarily of persons responsible for financialand accounting matters, and applying analytical and other review procedures. A review is substantiallyless in scope than an audit conducted in accordance with International Standards on Auditing andconsequently does not enable us to obtain assurance that we would become aware of all significantmatters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that theaccompanying interim condensed consolidated financial information is not prepared, in all materialrespects, in accordance with International Accounting Standard 34, “Interim Financial Reporting”.

ZAO PricewaterhouseCoopers Audit27 September 2012Moscow, Russia

F-62

ZAO PricewaterhouseCoopers Audit, White Square Office Center, 10 Butyrsky Val, Moscow, Russia, 125047 Telephone+7 (495) 967 6000, Fax +7 (495) 967 6001, www.pwc.ru


Interim Condensed Consolidated Income Statement for the six months ended 30 June 2012

Note

6 months ended30 June 2012

US$

6 months ended30 June 2011

US$

3 months to30 June 2012

US$

3 months to 30June 2011

US$

Operating lease income 130.318.723 59.534.866 65.527.578 33.727.461Finance lease income 1.101.069 3.007.070 526.753 1.485.281Transportation income –

operator’s services 19.757.227 — 11.387.041 —

Gross revenue 151.177.019 62.541.936 77.441.372 35.212.742Hedging with

non-derivatives effect 9 (667.567) — (667.567) —

Net revenue 150.509.452 62.541.936 76.773.805 35.212.742Railcar depreciation 12 (51.940.035) (25.346.410) (25.969.797) (14.194.461)Property tax (8.318.017) (5.549.039) (4.115.631) (3.014.552)Depot repairs (3.150.449) (922.495) (1.475.873) (307.096)Transportation services

subcontracted (5.192.034) — (4.113.607) —Other transportation

services expenses (1.140.585) — (402.802) —Railcar insurance (101.896) (89.401) (51.354) (52.385)Other railcar expenses (261.935) (271.221) (85.210) (250.349)Professional fees 6 (1.327.337) (1.406.689) (598.191) (971.616)Staff costs (4.940.484) (3.424.560) (2.467.886) (1.743.347)Share based

compensation 7 (1.907.169) (2.711.950) 10.170 (1.163.843)Other operating expenses 6 (2.486.558) (1.881.277) (1.473.477) (1.199.046)Provision for bad debts (148.859) — (148.859) —Other income 34.454 406.331 21.328 405.783Reversal of impairment

on revaluation ofrailcars 12 4.106.194 5.774.192 3.775.140 3.344.027

Recovery of fair valuelosses on embeddedderivatives 19 — — 8.468.963 —

Finance income 8 610.329 108.356 358.098 64.775Finance costs 8 (33.118.646) (17.103.181) (18.151.659) (10.302.084)Net foreign exchange

translation gains/(losses) 25.986.538 13.361.715 (28.962.187) 2.203.575

Profit before income tax 67.212.963 23.486.307 1.390.971 8.032.123Income tax expense 10 (16.018.448) (7.818.402) (456.663) (2.810.621)

Net profit for the period 51.194.515 15.667.905 934.308 5.221.502

Profit attributable to:Owners of the Company 51.191.101 15.667.905 1.100.523 5.221.502Non-controlling interest 3.414 — (166.215) —

51.194.515 15.667.905 934.308 5.221.502

Earnings per share attributable to the ownersof the Company during the period:

US$ per share US$ per share US$ per share US$ per shareBasic earnings per share 11 0.238 0.071 0.0058 0.0241

Diluted earnings pershare 11 0.230 0.073 0.0150 0.0273

The notes on pages F-68 to F-86 are an integral part of the interim condensed consolidated financialinformation.

F-63


Interim Condensed Consolidated Statement of Comprehensive Income for the six monthsended 30 June 2012

Note

6 monthsended

30 June 2012US$

6 monthsended

30 June 2011US$


US$


US$

Net profit for the period 51.194.515 15.667.905 934.308 5.221.502

Other comprehensive income:Cash flow hedge (derivatives):– Fair value losses on hedging reserve 15 (2.348.602) (707.412) (1.646.432) (460.171)– Transfers to income statement 15 4.727.739 4.463.176 2.880.166 2.193.338Cash flow hedge (non-derivatives):– Exchange differences deferred to

equity 9,15 (29.614.948) — (29.614.948) —– Currency translation differences 9,15 88.341 — 88.341 —– Exchange differences recycled to

income statement 9,15 535.681 — 535.681 —Currency translation differences (12.479.928) 43.084.577 (75.416.451) 7.138.999Gains on revaluation of railcars 39.167.205 95.213.208 15.798.693 71.327.259

Other comprehensive income forthe period, net of tax 75.488 142.053.549 (87.374.950) 80.199.425

Total comprehensive income for theperiod 51.270.003 157.721.454 (86.440.642) 85.420.927

Attributable to:Owners of the Company 50.925.448 157.721.454 (86.148.874) 85.420.927Non-controlling interest 344.555 — (291.768) —

Total comprehensive income for theperiod 51.270.003 157.721.454 (86.440.642) 85.420.927

Items in the statement above are disclosed net of tax.


F-64


Interim Condensed Consolidated Balance Sheet as at 30 June 2012

Note30 June 2012

US$31 December 2011

US$AssetsNon-current assetsEquipment 12 1.392.557.360 1.382.595.100Intangible assets 1.074 1.134Finance leases receivables 13 11.693.673 12.444.668Deferred tax asset 297.763 992.817Prepayment for acquisition of railcars 32.425.692 19.608.463

1.436.975.562 1.415.642.182

Current assetsVAT recoverable 26.277 20.771.792Advances to customs 48.553 193.969Advances paid for rail tariffs 2.180.883 1.332.327Trade and other receivables 16 4.880.456 3.595.902Finance leases receivables 13 2.459.783 8.082.008Income tax prepayment 556.051 —Cash and cash equivalents 104.231.420 66.796.636

114.383.423 100.772.634

Total assets 1.551.358.985 1.516.414.816

Equity and liabilitiesCapital and reservesShare capital 14 204.620.587 211.320.587Share premium 14 142.290.446 150.330.446Other reserves 15 265.582.623 265.848.276Retained earnings / (accumulated losses) 39.801.087 (11.390.014)

652.294.743 616.109.295Non-controlling interest 1.371.203 1.026.648

Total equity 653.665.946 617.135.943

Non-current liabilitiesBorrowings 17 566.432.248 455.125.872Mezzanine loan 18 69.255.977 64.432.635Derivative financial instruments 19 2.002.595 —Deferred income tax liabilities 98.028.608 85.635.557

735.719.428 605.194.064

Current liabilitiesTrade and other payables 20 16.177.347 12.886.633Current income tax liabilities 100.347 152.216VAT payable 8.810.739 5.438.069Taxes payable other than income tax 3.886.213 4.686.322Borrowings 17 108.010.782 239.466.016Derivative financial instruments 19 8.323 4.386.002Consideration payable on business combination 24.979.860 27.069.551

161.973.611 294.084.809


Total equity and liabilities 1.551.358.985 1.516.414.816

On 27 September 2012, the Board of Directors of Brunswick Rail Limited authorized the interimcondensed consolidated financial information for issue.

Paul Ostling, Director Damian Secen, Director


F-65


Interim Condensed Consolidated Statement of Changes in Equity for the six months ended30 June 2012

Attributable to the owners of the Company

Note

Sharecapital/share

premium US$

Accumulatedlosses /

Retainedearnings

US$

OtherReserves

US$TotalUS$

Non-controlling

InterestUS$

TotalEquityUS$

Balance at 1 January 2011 361.933.447 (4.774.810)125.122.039 482.280.676 — 482.280.676

Comprehensive income:Profit for the period — 15.667.905 — 15.667.905 — 15.667.905Other comprehensive income,

net of tax:Currency translation differences — — 43.084.577 43.084.577 — 43.084.577Cash flow hedge:– Fair value losses in the period 15 — — (707.412) (707.412) — (707.412)– Transfer to income statement 15 — — 4.463.176 4.463.176 — 4.463.176Railcar revaluation gains net of

tax — — 95.213.208 95.213.208 — 95.213.208

Total other comprehensiveincome, net of tax — — 142.053.549 142.053.549 — 142.053.549

Total comprehensive income — 15.667.905 142.053.549 157.721.454 — 157.721.454Transactions with ownersEquity raising fees (282.412) — — (282.412) — (282.412)

Total contribution from anddistribution to owners ofthe Company (282.412) — — (282.412) — (282.412)

Balance at 30 June 2011 361.651.035 10.893.095 267.175.588 639.719.718 — 639.719.718

Balance at 1 January 2012 361.651.033 (11.390.014)265.848.276 616.109.295 1.026.648 617.135.943Comprehensive income:Profit for the period — 51.191.101 — 51.191.101 3.414 51.194.515Other comprehensive income,

net of tax:Currency translation differences — — (12.623.786) (12.623.786) 143.858 (12.479.928)Cash flow hedge (derivatives):– Fair value losses in the period 15 — — (2.348.602) (2.348.602) — (2.348.602)– Transfer to income statement 15 — — 4.727.739 4.727.739 — 4.727.739Cash flow hedge (non-

derivatives):– Exchange differences

deferred to equity 9,15 (29.614.948) (29.614.948) — (29.614.948)– Currency translation

differences 9,15 88.341 88.341 88.341– Exchange differences

recycled to income statement 9,15 535.681 535.681 — 535.681Railcar revaluation gains net of

tax — — 38.969.922 38.969.922 197.283 39.167.205

Total other comprehensiveincome, net of tax — — (265.653) (265.653) 341.141 75.488

Total comprehensive income — 51.191.101 (265.653) 50.925.448 344.555 51.270.003Transactions with ownersShares buyback 14 (14.740.000) — — (14.740.000) — (14.740.000)

Total contribution from anddistribution to owners ofthe Company (14.740.000) — — (14.740.000) (14.740.000)

Balance at 30 June 2012 346.911.033 39.801.087 265.582.623 652.294.743 1.371.203 653.665.946


F-66


Interim Condensed Consolidated Statement of Cash Flows for the six months ended 30 June2012

Six months ended30 June 2012

US$30 June 2011

US$Cash flows from operating activitiesProfit before tax 67.212.963 23.486.307Adjustments for:

Depreciation of equipment 52.063.128 25.407.711Amortisation charge of intangible assets 40 18.705Gains from sale of doubtful debt — (372.571)Profit on disposal of assets — (2.083)Provision for bad debts 148.859 —Interest income accrued (610.329) (108.356)Interest expense and other borrowing costs accrued 28.064.787 12.640.006Fair value gain on interest rate swap 4.727.739 4.463.176Reversal of impairment on revaluation of railcars (4.106.194) (5.774.192)Hedging with non-derivatives effect 667.567 —Non-operating net foreign exchange translation losses (25.986.538) (13.361.715)Share-based compensation 1.907.169 2.711.950

124.089.191 49.108.938Changes in working capital:

Trade and other receivables (2.671.263) 870.977Finance leases receivable 6.308.056 6.736.104Trade and other payables 3.001.920 (173.215)Taxes payable other than income tax (711.455) 371.219Provisions for other liabilities and charges — (452.146)VAT received/(paid) 5.050.980 (5.378.227)

Cash generated from operations 135.067.429 51.083.650Income tax paid (2.975.201) (52.557)

Net cash from operating activities 132.092.228 51.031.093

Cash flows from investing activitiesPurchase of equipment including prepayments for equipment (49.693.775) (248.240.506)Deferred consideration paid on past business combination (2.000.000) —Proceeds from disposal of assets — 61.575VAT received from VAT authorities 22.243.201 2.186.074Advances to customs / VAT paid on railcars (3.497.213) (29.671.934)

Net cash used in investing activities (32.947.787) (275.664.791)

Cash flows from financing activitiesEquity raising transaction costs (463.978) (4.394.913)Share buy back (14.740.000) —Proceeds from bank borrowings 250.000.000 233.684.833Repayments of bank borrowings (276.973.538) (35.325.101)Proceeds from shareholder loan 14.740.000 —Transaction costs paid on borrowings (7.576.292) (2.744.896)Transfers to restricted cash balances (1.550.000) —Interest and commitment fees paid on borrowings (12.454.150) (8.678.410)Interest received 610.329 108.356Amounts paid on derivative financial instruments (4.747.493) (4.491.129)Finance leases liabilities – principal repayments (9.264.583) —

Net cash (used in)/ from financing activities (62.419.705) 178.158.740

Net increase/(decrease) in cash and cash equivalents 36.724.736 (46.474.958)Cash and cash equivalents at beginning of the period 50.846.636 104.500.226Exchange losses on cash and cash equivalents (839.952) (460.295)

Cash and cash equivalents at end of the period (1) 86.731.420 57.564.973

(1) At 30 June 2012 there is an amount of US$17.5 million (30 June 2011 US$15.95 million) that relates to restricted cash whichis not available for general use by the Group and has therefore been excluded from cash and cash equivalents above.


F-67


Notes to the interim condensed consolidated financial information

1 Introduction

The interim condensed financial information consolidated the financial information of Brunswick RailLimited (the “Company”) and its subsidiaries (the “Group”), for the six months ended 30 June 2012.

This interim condensed consolidated financial information was approved for issue on 27 September2012.

The interim condensed consolidated financial information for the six months ended 30 June 2012 hasnot been audited by the Group’s external independent auditors. The Group’s external independentauditors have conducted a review in accordance with the International Standard on ReviewEngagements 2410 “Review of Interim Financial Information Performed by the Independent Auditor ofthe Entity”.

Country of incorporation

The Company is incorporated in Bermuda as a private limited liability company in accordance with theprovisions of the section 14 of the Companies Act 1981. Its registered office is at Wessex House, 2ndFloor, 45 Reid Street, Hamilton HM 12 Bermuda.

Principal activities

The Group’s principal activity which is unchanged from last year is to engage in purchase, sale,financing and leasing of railcars in the “1520 gauge territory” (the railway territory of RussianFederation and CIS), and all ancillary activities thereto, itself or through its subsidiaries. Following theacquisition of ProfTrans Group (“PT Group”) in 2011, the Group is also engaged in the shipment of ironscrap and other freights within Russian Federation territory using both own and leased railcars as wellas railcars provided by third party carriers.

Basis of preparation

This interim condensed consolidated financial information for the six months ended 30 June 2012 hasbeen prepared in accordance with International Accounting Standard 34, ‘Interim Financial Reporting’as issued by the International Accounting Standards Board. The interim condensed consolidatedfinancial information should be read in conjunction with the Group’s annual audited report andconsolidated financial statements for the year ended 31 December 2011, which have been prepared inaccordance with International Financial Reporting Standards.

2 Accounting policies

The accounting policies adopted are consistent with those of the Group’s annual audited report andconsolidated financial statements for the year ended 31 December 2011 except as described below.

Hedging activities with non-derivative financial liabilities

On initial designation of the non-derivative as the hedging instrument, the Group formally documentsthe relationship between the hedging instrument and the hedged item. This includes the riskmanagement objectives and hedging strategy in undertaking the hedge transaction and the hedgedrisk, together with the methods that will be used to assess the effectiveness of the hedge.

The Group needs to assess effectiveness both prospectively at the inception of the hedge relationshipand retrospectively at each reporting period to assess whether the hedging instrument is expected tobe highly effective in offsetting the changes in the fair value or cash flows of the hedged itemsattributable to the hedged risk and whether actual results are within a range of 80 – 125%.

For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur andshould present an exposure to variations in cash flows that could ultimately affect reported profit orloss. The hedged highly probable forecast revenue transactions denominated in foreign currency areexpected to occur on a quarterly basis during the designated period of the hedge.

F-68


2 Accounting policies (continued)

Hedging activities with non-derivative financial liabilities (continued)

Cash flow hedge

When a non-derivative is designated as the hedging instrument in a hedge of the variability of cashflows attributable to a foreign currency risk associated with a highly probable forecast transaction thatcould affect profit or loss, the effective portion of foreign exchange gains or losses on thenon-derivative that is designated and qualifies as a cash flow hedge are recognized in othercomprehensive income and accumulated in hedging reserve in equity. Any ineffective portion isrecognized immediately in the income statement within foreign exchange gains or losses.

Foreign exchange gains or losses accumulated in equity are recycled in the income statement in theperiods when the hedged item affects profit or loss. The gain or loss recycled is recognized in theincome statement within revenues with a corresponding entry to other comprehensive income.

When a hedging instrument no longer meets the criteria of hedge accounting, or it expires or is sold orthe designation is revoked, hedge accounting is discontinued prospectively. Any cumulative gain orloss existing in equity at that time remains in equity and is recognized when the forecast transaction isultimately recognized in the income statement (as a reclassification from other comprehensiveincome). If the forecast transaction is no longer expected to occur, the balance in equity is reclassifiedto the income statement within revenue.

Adoption of New or Revised Standards and Interpretations

The following new standards and interpretations became effective for the Group from 1 January 2012:

Disclosures – Transfers of Financial Assets – Amendments to IFRS 7 (issued in October 2010 andeffective for annual periods beginning on or after 1 July 2011). The amendment requires additionaldisclosures in respect of risk exposures arising from transferred financial assets.

The amendment includes a requirement to disclose by class of asset the nature, carrying amount anda description of the risks and rewards of financial assets that have been transferred to another party,yet remain on the entity’s balance sheet. Disclosures are also required to enable a user to understandthe amount of any associated liabilities, and the relationship between the financial assets andassociated liabilities. Where financial assets have been derecognized, but the entity is still exposed tocertain risks and rewards associated with the transferred asset, additional disclosure is required toenable the effects of those risks to be understood. The amendment did not have impact on this interimcondensed consolidated financial information.

Recovery of Underlying Assets – Amendments to IAS 12 (issued in December 2010 and effective forannual periods beginning on or after 1 January 2012). The amendment introduced a rebuttablepresumption that an investment property carried at fair value is recovered entirely through sale. Thispresumption is rebutted if the investment property is held within a business model whose objective is toconsume substantially all of the economic benefits embodied in the investment property over time,rather than through sale. SIC-21, Income Taxes – Recovery of Revalued Non-Depreciable Assets,which addresses similar issues involving non-depreciable assets measured using the revaluationmodel in IAS 16, Property, Plant and Equipment, was incorporated into IAS 12 after excluding from itsscope investment properties measured at fair value. The amendment did not have impact on thisinterim condensed consolidated financial information.

Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters – Amendments to IFRS 1(issued in December 2010 and effective for annual periods beginning on or after 1 July 2011). Theamendment regarding severe hyperinflation creates an additional exemption when an entity that hasbeen subject to severe hyperinflation resumes presenting or presents for the first time, financialstatements in accordance with IFRS. The exemption allows an entity to elect to measure certain assetsand liabilities at fair value; and to use that fair value as the deemed cost in the opening IFRS statementof financial position.

The IASB has also amended IFRS 1 to eliminate references to fixed dates for one exception and oneexemption, both dealing with financial assets and liabilities. The first change requires first-time

F-69



Adoption of New or Revised Standards and Interpretations (continued)

adopters to apply the derecognition requirements of IFRS prospectively from the date of transition,rather than from 1 January 2004. The second amendment relates to financial assets or liabilities wherethe fair value is established through valuation techniques at initial recognition and allows the guidanceto be applied prospectively from the date of transition to IFRS rather than from 25 October 2002 or1 January 2004. This means that a first-time adopter may not need to determine the fair value ofcertain financial assets and liabilities at initial recognition for periods prior to the date of transition. IFRS9 has also been amended to reflect these changes. The amendment did not have impact on thisinterim condensed consolidated financial information.

New Accounting Pronouncements

Since the Group published its last annual financial statements, certain new standards andinterpretations have been published that are mandatory for the Group’s accounting periods beginningon or after 1 April 2012 or later and which the Group has not early adopted:

Amendments to IFRS 1 (issued 13 March 2012 and effective for annual periods beginning on or after1 January 2013): This amendment addresses accounting for a government loan with a below-marketrate of interest when transitioning to IFRSs by a first-time adopter. Earlier application is permitted. Theamendment will have no impact on the financial instruments of the Group.

IFRS 9, Financial Instruments: Classification and Measurement. IFRS 9, issued in November2009, replaces those parts of IAS 39 relating to the classification and measurement of financial assets.IFRS 9 was further amended in October 2010 to address the classification and measurement offinancial liabilities and in December 2011 to (i) change its effective date to annual periods beginning onor after 1 January 2015 and (ii) add transition disclosures. Key features of the standard are as follows:

Š Financial assets are required to be classified into two measurement categories: those to bemeasured subsequently at fair value, and those to be measured subsequently at amortized cost. Thedecision is to be made at initial recognition. The classification depends on the entity’s business modelfor managing its financial instruments and the contractual cash flow characteristics of the instrument.

Š An instrument is subsequently measured at amortized cost only if it is a debt instrument andboth (i) the objective of the entity’s business model is to hold the asset to collect the contractual cashflows, and (ii) the asset’s contractual cash flows represent payments of principal and interest only (thatis, it has only “basic loan features”). All other debt instruments are to be measured at fair value throughprofit or loss.

Š All equity instruments are to be measured subsequently at fair value. Equity instruments that areheld for trading will be measured at fair value through profit or loss. For all other equity investments, anirrevocable election can be made at initial recognition, to recognize unrealized and realized fair valuegains and losses through other comprehensive income rather than profit or loss. There is to be norecycling of fair value gains and losses to profit or loss. This election may be made on aninstrument-by-instrument basis. Dividends are to be presented in profit or loss, as long as theyrepresent a return on investment.

Š Most of the requirements in IAS 39 for classification and measurement of financial liabilities werecarried forward unchanged to IFRS 9. The key change is that an entity will be required to present theeffects of changes in own credit risk of financial liabilities designated at fair value through profit or lossin other comprehensive income.

While adoption of IFRS 9 is mandatory from 1 January 2015, earlier adoption is permitted. The Groupis considering the implications of the standard, the impact on the Group and the timing of its adoptionby the Group.

IFRS 10, Consolidated Financial Statements (issued in May 2011 and effective for annualperiods beginning on or after 1 January 2013), replaces all of the guidance on control and

F-70




consolidation in IAS 27 “Consolidated and separate financial statements” and SIC-12 “Consolidation –special purpose entities”. IFRS 10 changes the definition of control so that the same criteria are appliedto all entities to determine control. This definition is supported by extensive application guidance. TheGroup is currently assessing the impact of the new standard on its financial statements.

IFRS 11, Joint Arrangements, (issued in May 2011 and effective for annual periods beginning onor after 1 January 2013), replaces IAS 31 “Interests in Joint Ventures” and SIC-13 “Jointly ControlledEntities – Non-Monetary Contributions by Ventures”. Changes in the definitions have reduced thenumber of types of joint arrangements to two: joint operations and joint ventures. The existing policychoice of proportionate consolidation for jointly controlled entities has been eliminated. Equityaccounting is mandatory for participants in joint ventures. The Group is currently assessing the impactof the new standard on its financial statements.

IFRS 12, Disclosure of Interest in Other Entities, (issued in May 2011 and effective for annualperiods beginning on or after 1 January 2013), applies to entities that have an interest in asubsidiary, a joint arrangement, an associate or an unconsolidated structured entity. IFRS 12 sets outthe required disclosures for entities reporting under the two new standards: IFRS 10, Consolidatedfinancial statements, and IFRS 11, Joint arrangements, and replaces the disclosure requirementscurrently found in IAS 28, Investments in associates. IFRS 12 requires entities to disclose informationthat helps financial statement readers to evaluate the nature, risks and financial effects associated withthe entity’s interests in subsidiaries, associates, joint arrangements and unconsolidated structuredentities.

To meet these objectives, the new standard requires disclosures in a number of areas, includingsignificant judgments and assumptions made in determining whether an entity controls, jointly controls,or significantly influences its interests in other entities, extended disclosures on share of non-controllinginterests in group activities and cash flows, summarised financial information of subsidiaries withmaterial non-controlling interests, and detailed disclosures of interests in unconsolidated structuredentities. The Group is currently assessing the impact of the new standard on its financial statements.

IFRS 13, Fair value measurement, (issued in May 2011 and effective for annual periodsbeginning on or after 1 January 2013), aims to improve consistency and reduce complexity byproviding a revised definition of fair value, and a single source of fair value measurement anddisclosure requirements for use across IFRSs. The Group is currently assessing the impact of thestandard on its financial statements.

IAS 27, Separate Financial Statements, (revised in May 2011 and effective for annual periodsbeginning on or after 1 January 2013), was changed and its objective is now to prescribe theaccounting and disclosure requirements for investments in subsidiaries, joint ventures and associateswhen an entity prepares separate financial statements. The guidance on control and consolidatedfinancial statements was replaced by IFRS 10, Consolidated Financial Statements. The Group iscurrently assessing the impact of the amended standard on its financial statements.

IAS 28, Investments in Associates and Joint Ventures, (revised in May 2011 and effective forannual periods beginning on or after 1 January 2013). The amendment of IAS 28 resulted from theBoard’s project on joint ventures. When discussing that project, the Board decided to incorporate theaccounting for joint ventures using the equity method into IAS 28 because this method is applicable toboth joint ventures and associates. With this exception, other guidance remained unchanged. TheGroup is currently assessing the impact of the amended standard on its financial statements.

Amendments to IAS 1, Presentation of Financial Statements (issued June 2011, effective forannual periods beginning on or after 1 July 2012), changes the disclosure of items presented inother comprehensive income. The amendments require entities to separate items presented in othercomprehensive income into two groups, based on whether or not they may be reclassified to profit orloss in the future. The suggested title used by IAS 1 has changed to ‘statement of profit or loss andother comprehensive income’. The Group expects the amended standard to change presentation of itsfinancial statements, but have no impact on measurement of transactions and balances.

F-71




Amended IAS 19, Employee Benefits (issued in June 2011, effective for periods beginning on orafter 1 January 2013), makes significant changes to the recognition and measurement of definedbenefit pension expense and termination benefits, and to the disclosures for all employee benefits. Thestandard requires recognition of all changes in the net defined benefit liability (asset) when they occur,as follows: (i) service cost and net interest in profit or loss; and (ii) remeasurements in othercomprehensive income. The Group is currently assessing the impact of the amended standard on itsfinancial statements.

IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, (issued in October 2011and effective for annual periods beginning on or after 1 January 2013). The interpretation clarifiesthat benefits from the stripping activity are accounted for in accordance with the principles of IAS 2,Inventories, to the extent that they are realized in the form of inventory produced.

To the extent the benefits represent improved access to ore, the entity should recognize these costs asa ‘stripping activity asset’ within non-current assets, subject to certain criteria being met. The Groupdoes not expect the amendments to have any material effect on its financial statements.

Offsetting Financial Assets and Financial Liabilities – Amendments to IAS 32 (issued inDecember 2011 and effective for annual periods beginning on or after 1 January 2014). Theamendment added application guidance to IAS 32 to address inconsistencies identified in applyingsome of the offsetting criteria. This includes clarifying the meaning of ‘currently has a legallyenforceable right of set-off’ and that some gross settlement systems may be considered equivalent tonet settlement. The Group is considering the implications of the amendment, the impact on the Groupand the timing of its adoption by the Group.

Disclosures – Offsetting Financial Assets and Financial Liabilities – Amendments to IFRS 7(issued in December 2011 and effective for annual periods beginning on or after 1 January2013). The amendment requires disclosures that will enable users of an entity’s financial statements toevaluate the effect or potential effect of netting arrangements, including rights of set-off. Theamendment will have an impact on disclosures but will have no effect on measurement and recognitionof financial instruments.

Amendments to IFRS 1 First-time adoption of International Financial Reporting Standards –Government loans. The amendments, dealing with loans received from governments at a belowmarket rate of interest, give first-time adopters of IFRSs relief from full retrospective application ofIFRSs when accounting for these loans on transition. This will give first-time adopters the same reliefas existing preparers. The Group is currently assessing the impact of the amended standard on itsfinancial statements.

Improvements to International Financial Reporting Standards (issued in May 2012 and effectivefor annual periods beginning 1 January 2013). The improvements consist of changes to fivestandards. IFRS 1 was amended to (i) clarify that an entity that resumes preparing its IFRS financialstatements may either repeatedly apply IFRS 1 or apply all IFRSs retrospectively as if it had neverstopped applying them, and (ii) to add an exemption from applying IAS 23, Borrowing costs,retrospectively by first-time adopters. IAS 1 was amended to clarify that explanatory notes are notrequired to support the third balance sheet presented at the beginning of the preceding period when itis provided because it was materially impacted by a retrospective restatement, changes in accountingpolicies or reclassifications for presentation purposes, while explanatory notes will be required when anentity voluntarily decides to provide additional comparative statements. IAS 16 was amended to clarifythat servicing equipment that is used for more than one period is classified as property, plant andequipment rather than inventory. IAS 32 was amended to clarify that certain tax consequences ofdistributions to owners should be accounted for in the income statement as was always required byIAS 12. IAS 34 was amended to bring its requirements in line with IFRS 8. IAS 34 will requiredisclosure of a measure of total assets and liabilities for an operating segment only if such informationis regularly provided to chief operating decision maker and there has been a material change in thosemeasures since the last annual financial statements.

F-72




Transition Guidance Amendments to IFRS 10, IFRS 11 and IFRS 12 (issued on 28 June 2012 andeffective for annual periods beginning 1 January 2013). The amendments clarify the transitionguidance in IFRS 10 Consolidated Financial Statements. Entities adopting IFRS 10 should assesscontrol at the first day of the annual period in which IFRS 10 is adopted, and if the consolidationconclusion under IFRS 10 differs from IAS 27 and SIC 12, the immediately preceding comparativeperiod (that is, year 2012 for a calendar year-end entity that adopts IFRS 10 in 2013) is restated,unless impracticable. The amendments also provide additional transition relief in IFRS 10, IFRS 11,Joint Arrangements, and IFRS 12, Disclosure of Interests in Other Entities, by limiting the requirementto provide adjusted comparative information only for the immediately preceding comparative period.Further, the amendments will remove the requirement to present comparative information fordisclosures related to unconsolidated structured entities for periods before IFRS 12 is first applied. TheGroup is currently assessing the impact of the amendments on its financial statements.

3 Seasonality of operations

The operations of the Group are not subject to significant seasonal fluctuations.

4 Segment information

The information on types of leases provided to the Board of Directors for the six month ended 30 June2012 and 30 June 2011 is as follows:

Six months ended 3 months to

30 June 2012US$

30 June 2011US$

30 June 2012US$

30 June 2011US$

Full service operating leases 75.254.950 13.717.507 38.321.350 10.382.501Triple-net operating leases 55.063.773 45.817.359 27.206.228 23.344.960Transportation services income 19.757.227 — 11.387.041 —Finance leases 1.101.069 3.007.070 526.753 1.485.281

Total external revenue pre hedging 151.177.019 62.541.936 77.441.372 35.212.742Hedging with non-derivatives effect (667.567) — (667.567) —

Total external revenue post hedging 150.509.452 62.541.936 76.773.805 35.212.742

Increase in revenues was driven by an increase in the railcar fleet and an increase in daily rental rateson the existing fleet as the Group used its right to renegotiate certain contracts. The transportationservices income arises from PT Group acquired during the third quarter of 2011.

Revenues of approximately US$20.180.578 (6 months ended 30 June 2011: US$15.474.154) arederived from a single external customer. These revenues are attributable to operating lease contractsunder both full-service and triple-net leases.

The revenue from external customers is derived only from the business activities carried out in theRussian Federation. No revenue is derived in Bermuda which is the country of domicile.

The revenue from external parties reported to the Board of Directors is measured in a mannerconsistent with that in the income statement. The breakdown of the major components of revenue isdisclosed above.

F-73



Six months ended30 June 2012

Six monthsended

30 June 2011Leases Transportation Total Leases

US$ US$ US$ US$

Revenues 136.383.002 21.292.918 157.675.920 62.541.936Revenues inter-segmental (6.498.901) — (6.498.901) —Revenues from external customers 129.884.101 21.292.918 151.177.019 62.541.936Direct expenses (11.252.900) (13.410.918) (24.663.818) (6.832.156)Direct expenses inter-segmental 6.498.901 — 6.498.901 —Direct expenses – third parties (4.753.999) (13.410.918) (18.164.917) (6.832.156)Professional fees (1.243.226) (84.111) (1.327.337) (1.406.689)Provision for bad debts — (148.859) (148.859) —Other overheads (7.251.785) (52.122) (7.303.907) (5.225.831)Other income 34.013 440 34.453 406.331

Adjusted EBITDA 116.669.104 7.597.348 124.266.452 49.483.591

Depreciation and amortization (52.063.168) (25.426.416)Finance income 610.329 108.356Finance costs (33.118.646) (17.103.181)Foreign exchange gains 25.986.538 13.361.715Share-based compensation (1.907.169) (2.711.950)Reversal of impairment on revaluation of

railcars 4.106.194 5.774.192Hedging with non-derivatives effect (667.567) —

Profit before tax 67.212.963 23.486.307

Three months to30 June 2012

Three monthsto

30 June 2011Leases Transportation Total Leases

US$ US$ US$ US$

Revenues 68.707.482 12.139.465 80.846.947 35.212.742Revenues inter-segmental (3.405.575) — (3.405.575) —Revenues from external customers 65.301.907 12.139.465 77.441.372 35.212.742Direct expenses (5.310.595) (8.339.458) (13.650.053) (3.624.382)Direct expenses inter-segmental 3.405.575 — 3.405.575 —Direct expenses – third parties (1.905.020) (8.339.458) (10.244.478) (3.624.382)Professional fees (548.386) (49.805) (598.191) (971.616)Provision for bad debts — (148.859) (148.859) —Other overheads (3.872.569) (5.026) (3.877.595) (2.905.620)Other income 20.921 406 21.327 405.783

Adjusted EBITDA 58.996.853 3.596.723 62.593.576 28.116.907

Depreciation and amortization (26.033.563) (14.231.234)Finance income 358.098 64.775Finance costs (18.151.659) (10.302.084)Foreign exchange gains (28.962.187) 2.203.575Share-based compensation 10.170 (1.163.843)Reversal of impairment on revaluation of

railcars 3.775.140 3.344.027Fair value loss on embedded derivatives 8.468.963 —Hedging with non-derivatives effect (667.567) —

Profit before tax 1.390.971 8.032.123

F-74



The amounts provided to the Board of Directors with respect to total assets are measured in a mannerconsistent with that of the financial statements.

30 June 2012

LeasesUS$

TransportationUS$

TotalUS$

Total segment assets 1.405.830.784 34.520.855 1.440.351.639

Total segment assets include:Equipment – railcars under operating leases 1.359.251.636 32.313.695 1.391.565.331Finance leases receivables 14.153.456 — 14.153.456VAT recoverable — 26.277 26.277Prepayment for acquisition of railcars 32.425.692 — 32.425.692Advances paid for RZD tariffs — 2.180.883 2.180.883

31 December 2011Leases

US$Transportation

US$TotalUS$

Total segment assets 1.411.735.209 32.307.052 1.444.042.261

Total segment assets include:Equipment 1.350.880.475 30.922.528 1.381.803.003Finance leases receivables 20.526.676 — 20.526.676VAT recoverable 20.719.595 52.197 20.771.792Prepayment for acquisition of railcars 19.608.463 — 19.608.463Advances paid for RZD tariffs — 1.332.327 1.332.327

Reportable segments’ assets are reconciled to total assets as follows:

30 June 2012US$

31 December 2011US$

Segment assets for reportable segments 1.440.351.639 1.444.042.261

Unallocated:Other tangible assets 992.029 792.097Intangible assets 1.074 1.134Deferred tax asset 297.763 992.817Other receivables 5.485.060 3.789.871Cash and cash equivalents 104.231.420 66.796.636

Total assets per balance sheet 1.551.358.985 1.516.414.816

Non-current assets (excluding deferred tax assets) of US$1.436.677.799 (as at 31 December 2011:US$1.414.649.365) are located in the Russian Federation. None of the non-current assets are locatedwithin Bermuda, which is the country of domicile.

The Group’s interest-bearing liabilities are not considered to be segment liabilities but rather aremanaged by the treasury function.

5 Critical accounting estimates and judgements

The preparation of interim condensed consolidated financial information requires management to makejudgements, estimates and assumptions that affect the application of accounting policies and thereported amounts of assets and liabilities, income and expenses. Actual results may differ from theseestimates.

In preparing the interim condensed consolidated financial information, the significant judgements madeby management in applying the Group’s accounting policies and the key sources of estimationuncertainty were the same as those that applied to the annual audited report and consolidated financialstatements for the year ended 31 December 2011.

F-75


6 Professional fees and other operating expenses

Six months ended Three months to30 June 2012

US$30 June 2011

US$30 June 2012

US$30 June 2011

US$

Professional feesConsultancy fees 527.857 49.554 220.589 16.462Auditors’ remuneration 380.701 299.340 228.899 194.680Legal fees 232.474 177.694 50.544 —M&A transactions — 697.158 — 697.158Other professional fees 186.305 182.943 98.159 63.316

Total professional fees 1.327.337 1.406.689 598.191 971.616

30 June 2012US$

30 June 2011US$

30 June 2012US$

30 June 2011US$

Other operating expensesRent expense 582.789 463.270 302.530 255.709Travelling, accommodation and entertainment 520.204 310.824 339.771 175.573Directors’ fees (Note 23) 380.009 99.130 313.657 49.037Depreciation of equipment (Note 12) 123.093 61.300 63.747 27.212Advertising and marketing 120.286 205.585 84.697 168.497IT costs 114.427 92.588 59.652 53.375Communication costs 111.961 109.381 60.035 62.703Leasehold repairs 35.501 207.226 28.387 176.364Amortisation of intangible assets 40 18.705 19 9.560Other operating expenses 498.248 313.268 220.982 221.016

Total other operating expenses 2.486.558 1.881.277 1.473.477 1.199.046

7 Share-based compensation

The total share-based compensation in the interim condensed consolidated income statement wascalculated as follows:


US$30 June 2011

US$30 June 2012

US$30 June 2011

US$

Cash-settlement on share based payment 1.919.667 2.703.141 (10.201) 1.155.034Foreign exchange difference (12.498) 8.809 31 8.809

Total share based compensation 1.907.169 2.711.950 (10.170) 1.163.843

8 Finance costs and income – net

Six months ended Three months to

30 June 2012US$

30 June 2011US$

30 June 2012US$

30 June 2011US$

Finance costsInterest expense – syndicated bank loans (16.227.622) (9.916.107) (9.061.110) (5.657.180)Finance lease payables (7.030.329) — (3.467.628) —Interest expenses – mezzanine loan (4.806.835) (2.322.997) (2.514.911) (2.322.997)Other borrowing costs (229.827) (45.025) (173.845) 207.183

(28.294.613) (12.284.129) (15.217.494) (7.772.994)Bank charges (96.294) (355.876) (53.999) (335.752)Fair value loss on interest rate swap – cash flow hedge,

transfer from equity (Note 15) (4.727.739) (4.463.176) (2.880.166) (2.193.338)

(33.118.646) (17.103.181) (18.151.659) (10.302.084)

Finance incomeInterest income on bank balances 610.329 108.356 358.098 64.775

610.329 108.356 358.098 64.775

Net finance costs (32.508.317) (16.994.825) (17.793.561) (10.237.309)

F-76


9 Hedging with non-derivatives

During the current period the Group adopted the provisions of IAS 39 and applied hedge accountingwith non-derivative financial liabilities to mitigate its exposure to foreign currency risk and the volatilityof the Group’s earnings over the years as a result of substantial foreign exchange gains / (losses)recorded in income statement. The Group’s functional currency is the RUB and it is exposed to aforeign currency risk arising from rental income denominated in USD. The future revenues are hedgedby borrowings denominated in USD.

The effect of applying hedge accounting on both income statement and balance sheet is presentedbelow:

30 June 2012US$

Income statementNet profit for the period – pre hedging with non-derivatives 22.203.589Net foreign exchange (gains)/losses deferred to other comprehensive income 36.906.224Revenue – exchange differences recycled from other comprehensive income (667.567)Tax charge – relevant deferred taxes (7.247.731)

Net effect on profit / (loss) after tax 28.990.926

Net profit for the period – post hedging with non-derivatives 51.194.515

Balance sheetTotal equity – pre hedging with non-derivatives 653.665.946Hedging reserve – exchange differences deferred from income statement 29.079.267Retained earnings – exchange differences deferred to hedging reserve (28.990.926)Translation reserve effect (88.341)

Total effect on equity —

Total equity – post hedging with non-derivatives 653.665.946

10 Income tax

Income tax expense is recognized based on management’s best estimate of the weighted averageannual income tax rate expected for the full financial year.

11 Earnings per share

a. Basic

Basic earnings per share is calculated by dividing the net income attributable to the owners of theCompany by the weighted average number of ordinary shares in issue during the period.

Six months ended Three months to30 June 2012 30 June 2011 30 June 2012 30 June 2011

Profit for the period attributable to theowners of the Company (US$) 51.191.101 15.667.905 1.100.522 5.221.502

Weighted average number of shares inissue 215.326.060 219.286.833 212.586.833 219.286.833

Earnings per share (expressed in US$per share) 0.238 0.071 0.005 0.024

F-77


11 Earnings per share (continued)

b. Diluted

Diluted earnings per share are calculated by adjusting the weighted average number of ordinaryshares outstanding to assume conversion of the dilutive potential ordinary shares in relation toconversion of the mezzanine loan to equity. The mezzanine loan is assumed to have been convertedinto ordinary shares at the beginning of the period and net profit attributable to the owners of theCompany is therefore adjusted to eliminate the interest expense on mezzanine loan and any foreignexchange gains / (losses) attributable to the mezzanine loan.

Six months ended Three months to30 June 2012 30 June 2011 30 June 2012 30 June 2011

US$ US$ US$ US$

Profit for the period attributable to the owners ofthe Company 51.191.101 15.667.905 1.100.522 5.221.502

Interest expense on mezzanine loan (Note 8) 4.806.835 2.322.997 2.514.911 2.322.997Fair value loss on embedded derivatives — — (8.468.963) —Net foreign exchange translation (gains) /

losses 2.627.169 (550.473) 8.605.562 (550.472)

Profit used to determine diluted earnings pershare 58.625.105 17.440.429 3.752.032 6.994.027

Weighted average number of ordinary shares inissue 215.326.060 219.286.833 212.586.833 219.286.833

Adjustments for:Assumed conversion of mezzanine loan

(weighted average) 39.080.152 19.974.300 39.080.152 39.080.152

Weighted average number of shares for dilutedearnings per share 254.406.212 239.261.133 251.666.985 258.366.985

Earnings per share (expressed in US$ pershare) 0.230 0.073 0.015 0.027

F-78


12 Equipment

Rail carsUS$

Furniture,fittings & office

equipmentUS$

TotalUS$

At 1 January 2012Cost or valuation 1.638.095.286 1.152.770 1.639.248.056Accumulated depreciation (256.292.283) (360.673) (256.652.956)

Net book amount 1.381.803.003 792.097 1.382.595.100

Period ended 30 June 2012Opening net book amount 1.381.803.003 792.097 1.382.595.100Additions 34.828.245 305.350 35.133.595Revaluation surplus 48.959.006 — 48.959.006Reversal of impairment loss on revaluation of railcars 4.106.194 — 4.106.194Disposals / retirement of assets — (725) (725)Depreciation charge (51.940.035) (123.093) (52.063.128)Exchange differences on cost (35.919.818) 27.624 (35.892.194)Exchange differences on depreciation 9.728.736 (9.224) 9.719.512


At 30 June 2012Cost or valuation 1.705.246.975 1.460.813 1.706.707.788Accumulated depreciation (313.681.644) (468.784) (314.150.428)

Net book amount 1.391.565.331 992.029 1.392.557.360


Net book amount 613.577.710 277.804 613.855.514

Year ended 31 December 2011Opening net book amount 613.577.710 277.804 613.855.514Additions 587.219.096 756.794 587.975.890Revaluation surplus 228.570.912 — 228.570.912Acquisition of subsidiaries 125.077.696 15.528 125.093.224Reversal of impairment loss on revaluation of railcars 2.169.209 — 2.169.209Disposals / retirement of assets (8.100.340) (219.380) (8.319.720)Depreciation charge (66.393.396) (136.550) (66.529.946)Depreciation on disposal 1.970.762 136.081 2.106.843Exchange differences on cost (118.923.979) (73.330) (118.997.309)Exchange differences on depreciation 16.635.333 35.150 16.670.483


At 31 December 2011Cost or valuation 1.638.095.286 1.152.770 1.639.248.056Accumulated depreciation (256.292.283) (360.673) (256.652.956)

Net book amount 1.381.803.003 792.097 1.382.595.100

During the period ended 30 June 2012 the Group took delivery of 475 railcars. Equipment includes21 164 railcars (31 December 2011: 20 689 railcars) which are held by the subsidiary companies.From the total equipment, 19 683 railcars are leased out under operating leases and short term rentalsand 1 481 are used for shipment of iron scrap and other freights.

Railcar prices have increased compared to 31 December 2011 and as a result the Group recorded arevaluation surplus during the period.

F-79


13 Finance leases receivables

30 June 2012 31 December 2011US$ US$

Non-current receivablesFinance leases – gross receivables 16.622.676 18.201.024Unearned finance income (4.929.003) (5.756.356)

11.693.673 12.444.668

Current receivablesFinance leases – gross receivables 5.592.528 11.459.507Unearned finance income (1.758.146) (2.031.862)Lease payments received in advance (1.374.599) (1.345.637)

2.459.783 8.082.008

30 June 2012 31 December 2011US$ US$

Gross receivables from finance leasesNot later than 1 year 5.592.528 11.459.506Later than 1 year and not later than 5 years 12.159.823 12.322.015Later than 5 years 4.462.853 5.879.009

22.215.204 29.660.530Unearned future finance income on finance leases (6.687.149) (7.788.217)Lease payments received in advance (1.374.599) (1.345.637)

Net investment in finance leases 14.153.456 20.526.676

The net investment in finance leases may be analysed as follows:Not later than 1 year 2.459.782 8.082.008Later than 1 year and not later than 5 years 7.840.125 7.464.518Later than 5 years 3.853.549 4.980.150

14.153.456 20.526.676

As of 30 June 2012 net investment in finance leases was 1 070 railcars (31 December 2011: 1 070railcars).

14 Share capital and share premium

Numberof shares

SharecapitalUS$

Sharepremium

US$TotalUS$

At 1 January 2011 219.286.833 211.320.587 150.612.860 361.933.447Equity raising fees — — (282.414) (282.414)

At 31 December 2011 219.286.833 211.320.587 150.330.446 361.651.033Shares buyback (6.700.000) (6.700.000) (8.040.000) (14.740.000)

At 30 June 2012 212.586.833 204.620.587 142.290.446 346.911.033

On March 15, 2012 the Company signed an agreement with one of its shareholders to buy back6.7 million shares at a price of US$2.20 per share for a total consideration of US$14.74 million. Theagreement constituted a forward contract to buy a fixed number of shares with settlement in cash andtherefore needed to be recognized as a financial liability at the date of the agreement. The buybackwas completed on April 3, 2012.

F-80


15 Other reserves

Revaluationreserve

US$

HedgingReserve /


TranslationReserve /


Share-basedcompensation

ReserveUS$

OtherReserves /


TotalUS$

Balance at 1 January 2011 188.838.454 (6.627.635) (11.666.920) 12.006.039 (57.427.899) 125.122.039Cash flow hedge:– Fair value losses — (707.412) — — — (707.412)– Transfers to income


differences — — 43.084.577 — — 43.084.577Gains on revaluation of

railcars net of tax 95.213.208 — — — — 95.213.208

Balance at 30 June 2011 284.051.662 (2.871.871) 31.417.657 12.006.039 (57.427.899) 267.175.588

Balance at 1 January 2012 371.708.500 947.056 (49.379.381) — (57.427.899) 265.848.276Cash flow hedge

(derivatives):– Fair value losses, — (2.348.602) — — — (2.348.602)– Transfers to income

statement — 4.727.739 — — — 4.727.739Cash flow hedge (non-

derivatives):– Exchange differences

deferred to equity, net oftax — (29.614.948) — — — (29.614.948)

– Currency translationdifferences — — 88.341 88.341

– Exchange differencesrecycled to incomestatement, net of tax — 535.681 — — — 535.681

Currency translationdifferences — — (12.623.786) — — (12.623.786)

Gains on revaluation ofrailcars net of tax 38.969.922 — — — — 38.969.922

Balance at 30 June 2012 410.678.422 (25.753.074) (61.914.826) — (57.427.899) 265.582.623

The translation, hedging and share-based compensation reserves are non-distributable.

16 Trade and other receivables

30 June 2012US$

31 December 2011US$

Transportation income receivables 1.615.024 —Operating lease income receivables 1.240.283 —Other receivables and prepayments 2.025.149 3.595.902

4.880.456 3.595.902

The fair value of trade and other receivables which are due within one year approximates their carryingamount at the balance sheet date.

F-81


17 Borrowings

30 June 2012US$

31 December 2011US$

30 June 2011US$

Non-current borrowingsBorrowings 443.506.840 325.949.546 321.636.443Finance lease payables 122.925.408 129.176.326 —

566.432.248 455.125.872 321.636.443

Current borrowingsBorrowings 101.918.417 236.254.186 89.993.554Finance lease payables 6.092.365 3.211.830 —

108.010.782 239.466.016 89.993.554

Total borrowings 674.443.030 694.591.888 411.629.997

30 June 2012US$

31 December 2011US$

30 June 2011US$

Maturity of non-current borrowings (excludingfinance lease liabilities)

Between 2 and 3 years 214.966.325 161.581.082 226.078.015Between 4 and 5 years 182.066.178 87.107.490 48.529.715Over 5 years 46.474.337 77.260.974 47.028.713

443.506.840 325.949.546 321.636.443

Movement in borrowings (excluding finance lease liabilities) are analysed as follows:

30 June 2012US$

30 June 2011US$

At the beginning of the period 562.773.660 272.935.022Advances 264.740.000 173.684.833Interest charged 12.023.007 7.081.457Repayment (276.973.537) (35.325.101)Interest paid (12.454.150) (7.098.913)Foreign exchange difference (554.309) 25.902Unamortized borrowing costs (4.129.414) 326.797

At the end of the period 545.425.257 411.629.997

The advances for the six months period ended 30 June 2012 relate to (i) a US$14.74 million loan froma related party (Note 23) and (ii) the new US$250 million syndicated loan from IFC.

Finance lease liabilities

30 June 2012US$

31 December 2011US$

Gross liabilities from finance leasesNot later than 1 year 18.964.548 16.599.729Later than 1 year and not later than 5 years 137.388.846 148.916.784Later than 5 years 5.803.711 7.308.490

162.157.105 172.825.003Future finance charges on finance leases (33.139.332) (40.436.847)

Present value of finance lease liabilities 129.017.773 132.388.156

The present value of finance lease liabilities may be analysed asfollows:

Not later than 1 year 6.092.365 3.211.830Later than 1 year and not later than 5 years 118.445.381 123.642.985Later than 5 years 4.480.027 5.533.341

129.017.773 132.388.156

F-82


18 Mezzanine loan

On 31 March 2011 the Group drew down in full the US$60 million mezzanine loan facility and as aresult the liability is recognized on the balance sheet. The Group incurred borrowing costs in obtainingthe loan which have been included under the unamortized borrowing costs of the Group and areamortized over the period of the loan. The loan facility is accounted for at amortized cost using theeffective interest method.

The mezzanine loan movement is as follows:

30 June 2012US$

31 December 2011US$

At the beginning of the period 64.432.635 —Advances — 60.000.000Interest charged 5.044.813 6.940.781Unamortized borrowing costs under the effective interest method (221.471) (2.508.146)

At the end of the period 69.255.977 64.432.635

19 Derivative financial instruments30 June 2012

US$31 December 2011

US$

Non-current derivative financial instrumentsInterest rate swaps 2.002.595 —

Current derivative financial instrumentsInterest rate swaps — 4.381.731Interest payable on financial instruments 8.323 4.271

8.323 4.386.002

Total derivative financial instruments 2.010.918 4.386.002

The notional amount of the outstanding interest rate swap contracts at 30 June 2012 wasUS$317.389.490 (2011: US$400.600.569).

Gains and losses recognized in the hedging reserve in the statement of changes in equity on interestrate swap contracts as of 30 June 2012 amounting to US$2.348.602 (30 June 2011: US$707.412) willbe continuously released to the income statement until the repayment of the bank borrowings (Note17). For the six months period ended 30 June 2012, the amount of US$4.727.739 was transferred tothe income statement (six months ended 30 June 2011: US$4.463.176).

Embedded derivatives

The embedded derivatives relate to certain derivatives identified in the US$60 million mezzanine loanfacility agreement which are (i) a right for the holder of the loan to request a conversion of theoutstanding balance of the loan into shares in Brunswick Rail Limited (BRL) within 5 years from thedate of the agreement and (ii) a prepayment option for the issuer (BRL) under which BRL can, undercertain conditions, elect to prepay the loan.

On the occurrence of a qualifying IPO, or change of control, the Group will need to exchange a variablenumber of shares (as the number of shares is derived by reference to the principal/outstanding amountof the loan) for a variable amount of cash (as the amount payable on conversion is denominated inUSD which is not the company’s functional currency).Therefore, as the fixed for fixed criterion is notmet the conversion option does not meet the definition of an equity instrument, but it is a derivativefinancial liability.

The embedded derivatives are fair valued at each reporting date. The negative fair value of theembedded derivatives calculated as at 31 March 2012 was US$8.468.963 and fair value losses for thisamount have been recognized at that time in the income statement. During the second quarter ending30 June 2012, mainly due to the depreciation of Rouble rate against USD, the fair value of theembedded derivatives reversed for approximately the same amount, and the fair value losses recordedfor the 3 months ended 31 March 2012 have been recovered.

F-83


20 Trade and other payables

30 June 2012US$

31 December 2011US$

Advances from customers 8.152.139 5.537.567Liability arising on cash-settled share based payment transactions 4.979.010 3.059.343Other trade payables and accrued expenses 3.046.198 4.289.723

16.177.347 12.886.633

The fair value of trade and other payables which are due within one year approximates their carryingamount at the balance sheet date.

21 Contingencies, commitments and operating risks

Compliance with covenants

The Group is required to be in compliance with certain financial and business covenants relating to thesyndicated loan facilities of SG/BNP/IFC (refinanced in June 2012), EBRD/IFC, VTB/RBI (refinanced inJune 2012) and IFC. Non-compliance with these covenants may result in negative consequences forthe Group including declaration of default. As at 30 June 2012 and 31 December 2011 the Group is incompliance with these covenants.

Tax legislation

Russian tax and customs legislation which was enacted or substantively enacted at the end of thereporting period, is subject to varying interpretations when being applied to the transactions andactivities of the Group. Consequently, tax positions taken by management and the formaldocumentation supporting the tax positions may be successfully challenged by relevant authorities.Russian tax administration is gradually strengthening, including the fact that there is a higher risk ofreview of tax transactions without a clear business purpose or with tax incompliant counterparties.Fiscal periods remain open to review by the authorities in respect of taxes for three calendar yearspreceding the year of review. Under certain circumstances reviews may cover longer periods.

Russian transfer pricing legislation enacted during the current period is effective prospectively to newtransactions from 1 January 2012. It introduces significant reporting and documentation requirements.The transfer pricing legislation that is applicable to transactions on or prior to 31 December 2011, alsoprovides the possibility for tax authorities to make transfer pricing adjustments and to impose additionaltax liabilities in respect of all controllable transactions, provided that the transaction price differs fromthe market price by more than 20%. Controllable transactions include transactions with interdependentparties, as determined under the Russian Tax Code, all cross-border transactions (irrespective ofwhether performed between related or unrelated parties), transactions where the price applied by ataxpayer differs by more than 20% from the price applied in similar transactions by the same taxpayerwithin a short period of time, and barter transactions. Significant difficulties exist in interpreting andapplying transfer pricing legislation in practice.

Any prior existing court decisions may provide guidance, but are not legally binding for decisions byother, or higher level, courts in the future.

Tax liabilities arising from transactions between companies are determined using actual transactionprices. It is possible, with the evolution of the interpretation of the transfer pricing rules, that suchtransfer prices could be challenged. The impact of any such challenge cannot be reliably estimated;however, it may be significant to the financial position and/or the overall operations of the entity.

The Group includes companies incorporated outside of Russia. The tax liabilities of the Group aredetermined on the assumption that these companies are not subject to Russian profits tax, becausethey do not have a permanent establishment in Russia. This interpretation of relevant legislation maybe challenged but the impact of any such challenge cannot be reliably estimated currently; however, itmay be significant to the financial position and/or the overall operations of the entity.

F-84



Tax legislation (continued)

As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, fromtime to time, interpretations of such uncertain areas that reduce the overall tax rate of the Group. Whilemanagement currently estimates that the tax positions and interpretations that it has taken canprobably be sustained, there is a possible risk that outflow of resources will be required should suchtax positions and interpretations be challenged by the relevant authorities. The impact of any suchchallenge cannot be reliably estimated; however, it may be significant to the financial position and/orthe overall operations of the Group.

As at 30 June 2012 it is estimated that none of the Group’s subsidiaries have possible tax obligationsarising from exposure other than remote tax risks (as at 31 December 2011: none).

22 Operating lease commitments

The future aggregate minimum rentals receivable under non-cancellable operating leases are asfollows:

30 June 2012US$

31 December 2011US$

Not later than 1 year 36.037.106 38.689.458Later than one year and not later than 5 years 48.648.173 51.533.826Later than 5 years — —

84.685.279 90.223.284

The future aggregate minimum rentals receivable under cancellable operating leases are as follows:

30 June 2012US$

31 December 2011US$

Not later than 1 year 221.532.639 216.563.761Later than one year and not later than 5 years 442.113.166 478.940.840Later than 5 years 79.022.582 109.622.076

742.668.387 805.126.677

23 Related party transactions





US$30 June 2011

US$30 June 2012

US$30 June 2011

US$

Share-based payment (Note 7) 1.907.169 2.711.950 (10.170) 1.163.843Salaries 1.796.452 1.445.247 985.048 684.520Directors fees 380.009 99.130 313.657 49.037Bonuses 12.012 49.694 12.012 24.909

4.095.642 4.306.021 1.300.547 1.922.309

Shareholder loan

30 June 2012US$

30 June 2011US$

At the beginning of the period — —Advances (Note 17) 14.740.000 —Interest charged 135.931 —Interest paid (135.931)

At the end of the period 14.740.000 —

F-85


23 Related party transactions (continued)

Shareholder loan (continued)

On March 15, 2012 the Company signed an agreement with one of its shareholders to buy back6.7 million shares at a price of US$2.20 per share for a total consideration of US$14.74 million. On thesame day, the Company signed an agreement for 3 year loan from the shareholder to finance theacquisition of the shares. The loan is unsecured and carries an interest rate of 3 month USD Libor+300 basis points. The loan was disbursed on March 28, 2012 and the buyback of shares wascompleted in early April 2012.

24 Events after the balance sheet date

Challenging market conditions, particularly for coal producers, have triggered requests from clients fortemporary rate reductions. The Company agreed temporary cuts (3 to 4 months) of daily rates of5-15% for five clients in the exchange for lease extension for the same period. Based on the currentcontracts, the total impact on EBITDA 2012 is less than USD 2 million in 2012.

In July 2012, the Group purchased back the shares that had been issued in connection with theGroup’s acquisition of ProfTrans, and as at 2 July 2012 the Group was fully discharged from itsobligations to the sellers of ProfTrans.

F-86

THE ISSUER

Brunswick Rail Finance Limited31 Fitzwilliam Square

Dublin 2Ireland

THE GUARANTORS

Brunswick RailLimited

Wessex House, 2nd

Floor, 45 Reid StreetHamilton HM 12

Bermuda

OOO BrunswickRail Leasing

2 Paveletskaya square,bld. 2, 12th floorMoscow 115054,

Russian Federation

OOO BrunswickRail Service

2 Paveletskaya square,bld. 2, 12th floorMoscow 115054,

Russian Federation

OOO BrunswickTrans

86 BelinskogoStreet, Ekaterinburg

620026, RussianFederation

OOO BrunswickWagon Leasing2 Paveletskayasquare, bld. 2,

12th floorMoscow 115054,

Russian Federation

TRUSTEE

Citibank, N.A., London Branch

PRINCIPAL PAYING AGENT


REGISTRAR

Citigroup Global Markets Deutschland AG

PAYING AGENT AND TRANSFER AGENT


LEGAL ADVISERS TO THE ISSUER AND THE GUARANTORS

as to English and U.S. law as to Irish law as to Russian law

Skadden, Arps, Slate, Meagher &Flom (UK) LLP

40 Bank Street Canary WharfLondon E14 5DSUnited Kingdom

Arthur CoxEarlsfort CentreEarlsfort Terrace

Dublin 2Ireland

Skadden, Arps, Slate, Meagher &Flom LLP

6 Gasheka Street, 11th FloorMoscow 125047

Russian Federation

as to Bermuda law

Appleby (Bermuda) LimitedCanon’s Court

22 Victoria StreetHamilton HM 12

Bermuda

LEGAL ADVISERS TO THE JOINT LEAD MANAGERS AND BOOKRUNNERS

as to English and U.S. law as to Russian law

Freshfields Bruckhaus Deringer LLP65 Fleet Street

London EC4Y 1HSUnited Kingdom

Freshfields Bruckhaus Deringer LLP14/2 Kadashevskaya Embankment

Moscow 119017Russian Federation

LEGAL ADVISERS TO TRUSTEE

as to English law

Linklaters LLPOne Silk Street

London EC2Y 8HQUnited Kingdom

INDEPENDENT AUDITORS TO THE PARENT

ZAO PricewaterhouseCoopers AuditWhite Square Office Center

10 Butyrsky ValMoscow 125047

Russian Federation

IMPORTANT NOTICE

THIS OFFERING IS AVAILABLE ONLY TO INVESTORS WHO ARE EITHER (1) QUALIFIEDINSTITUTIONAL BUYERS ("QIBS"), IN RELIANCE ON AN EXEMPTION FROM THEREGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE"SECURITIES ACT") PROVIDED BY RULE 144A ("RULE 144A") OR (2) NON-U.S. PERSONS ORADDRESSEES OUTSIDE OF THE UNITED STATES IN COMPLIANCE WITH REGULATION S UNDERTHE SECURITIES ACT ("REGULATION S")

IMPORTANT: You must read the following before continuing. The following applies to the preliminaryprospectus following this page (the "Preliminary Prospectus"), and you are therefore advised to read this carefullybefore reading, accessing or making any other use of the Preliminary Prospectus. In accessing the PreliminaryProspectus, you agree to be bound by the following terms and conditions, including any modifications to them anytime you receive any information from the Group as a result of such access.

NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF THE NOTESDESCRIBED HEREIN (THE "NOTES") FOR SALE IN ANY JURISDICTION WHERE IT IS UNLAWFUL TODO SO. THE NOTES HAVE NOT BEEN, AND WILL NOT, BE REGISTERED UNDER THE SECURITIESACT, OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR OTHER JURISDICTIONAND THE SECURITIES MAY NOT BE OFFERED, PLEDGED OR SOLD WITHIN THE UNITED STATES ORTO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDERTHE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOTSUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLESTATE OR LOCAL SECURITIES LAWS AND WHICH DOES NOT REQUIRE THE ISSUER TO REGISTERUNDER THE INVESTMENT COMPANY ACT.

THE FOLLOWING PRELIMINARY PROSPECTUS MAY NOT BE FORWARDED OR DISTRIBUTED TOANY OTHER PERSON AND MAY NOT BE REPRODUCED IN ANY MANNER WHATSOEVER. ANYFORWARDING, DISTRIBUTION OR REPRODUCTION OF THIS DOCUMENT IN WHOLE OR IN PART ISUNAUTHORIZED. FAILURE TO COMPLY WITH THIS DIRECTIVE MAY RESULT IN A VIOLATION OFTHE SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.

Confirmation of your Representation: In order to be eligible to view this Preliminary Prospectus or make aninvestment decision with respect to the Notes, investors must be either (1) QIBs (within the meaning of Rule 144Aunder the Securities Act) or (2) non-U.S. persons (within the meaning of Regulation S under the Securities Act)outside the United States who are not acting for the account or benefit of U.S. persons. This Preliminary Prospectusis being sent at your request and by accepting the e-mail and accessing this Preliminary Prospectus, you shall bedeemed to have represented to the Group that (1) you and any customers you represent are either (a) QIBs or (b) nota U.S. person and/or are not acting for the account or benefit of a U.S. person and that the electronic mail addressthat you gave the Group and to which this e-mail has been delivered is not located in the United States and (2) thatyou consent to delivery of such Preliminary Prospectus by electronic transmission.

You are reminded that this Preliminary Prospectus has been delivered to you on the basis that you are a person intowhose possession this Preliminary Prospectus may be lawfully delivered in accordance with the laws of thejurisdiction in which you are located and you may not, nor are you authorized to, deliver this Preliminary Prospectusto any other person. The materials relating to the offering do not constitute, and may not be used in connection with,an offer or solicitation in any place where offers or solicitations are not permitted by law. If a jurisdiction requiresthat the offering be made by a licensed broker or dealer and the underwriters or any affiliate of the underwriters is alicensed broker or dealer in that jurisdiction, the offering shall be deemed to be made by the underwriters or suchaffiliate on behalf of the issuer in such jurisdiction.

This Preliminary Prospectus is only directed at persons who (i) are outside the United Kingdom or (ii) are investmentprofessionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (FinancialPromotion) Order 2005 (the "Financial Promotion Order") or (iii) are persons falling within Article 49(2)(a) to(e) of the Financial Promotion Order (all such persons together being referred to as "relevant persons"). ThisPreliminary Prospectus must not be acted on or relied on by persons who are not relevant persons. Any investment orinvestment activity to which this Preliminary Prospectus relates is available only to relevant persons and will beengaged in only with relevant persons. Any person who is not a relevant person should not act or rely on thisPreliminary Prospectus.

This Preliminary Prospectus has been sent to you in an electronic form. You are reminded that documentstransmitted via this medium may be altered or changed during the process of electronic transmission andconsequently none of Brunswick Rail Finance Limited, Brunswick Rail Limited, OOO Brunswick Rail Leasing,OOO Brunswick Rail Service, OOO Brunswick Trans and OOO Brunswick Wagon Leasing, and none of GoldmanSachs International, Raiffeisen Bank International AG, UBS Limited or VTB Capital plc (the "Joint LeadManagers" and each a "Joint Lead Manager") nor any person who controls any of them, nor any director, officer,employee nor agent of any of them or affiliate of any such person accepts any liability or responsibility whatsoeverin respect of any difference between the Preliminary Prospectus distributed to you in electronic format and the hardcopy version available to you on request from any of the Joint Lead Managers.

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