OJSC AK TRANSNEFT Issue Price of the 2013 Notes

230 Pages·2008·1.61 MB·English

U.S.$600,000,000 7.70 per cent. Loan Participation Notes due 2013
and
U.S.$1,050,000,000 8.70 per cent. Loan Participation Notes due 2018
each issued by, but with limited recourse to,
TransCapitalInvest Limited
for the sole purpose of financing a corresponding loan to
OJSC AK TRANSNEFT
Issue Price of the 2013 Notes: 100 per cent.
Issue Price of the 2018 Notes: 100 per cent.
TransCapitalInvest Limited, a company organised and existing as a limited liability company under the laws of Ireland (‘‘TCI Limited’’ or
the ‘‘Issuer’’) is issuing an aggregate principal amount of U.S.$600,000,000 7.70 per cent. Loan Participation Notes due 2013 (the ‘‘2013
Notes’’) and an aggregate principal amount of U.S.$1,050,000,000 8.70 per cent. Loan Participation Notes due 2018 (the ‘‘2018 Notes’’, and
together with the 2013 Notes, the ‘‘Notes’’) for the sole purpose of financing a U.S.$600,000,000 loan (the ‘‘2013 Loan’’) and a
U.S.$1,050,000,000 loan (the ‘‘2018 Loan’’, and together with the 2013 Loan, the ‘‘Loans’’) to OJSC AK Transneft (‘‘Transneft’’ or the
‘‘Borrower’’) pursuant to a loan agreement dated 6 August 2008 (the ‘‘2013 Loan Agreement’’) and to a loan agreement dated 6 August
2008 (the ‘‘2018 Loan Agreement’’, and together with the 2013 Loan Agreement, the ‘‘Loan Agreements’’), in each case, between TCI
Limited and the Borrower. Interest on the 2013 Notes will be payable semi-annually in arrear on 7 February and 7 August in each year,
commencing on 7 February 2009, as described under ‘‘Terms and Conditions of the 2013 Notes—5. Interest’’. Interest on the 2018 Notes
will be payable semi-annually in arrear on 7 February and 7 August in each year, commencing on 7 February 2009, as described under
‘‘Terms and Conditions of the 2018 Notes—5. Interest’’. The 2013 Loan will bear interest at a rate of 7.70 per cent. per annum. The 2018
Loanwillbearinterestatarateof8.70percent.perannum.
Subject to the provisions of the trust deeds relating to each of the 2013 Notes and the 2018 Notes (the ‘‘Trust Deeds’’) to be dated on or
about 7 August 2008 between TCI Limited and Citicorp Trustee Company Limited (the ‘‘Trustee’’), TCI Limited will charge as security for
its payment obligations in respect of the relevant series of Notes and under each Trust Deed (i) its rights to all payments of principal,
interest and additional amounts (if any) under the relevant Loan Agreement, (ii) its rights to receive all sums that may be or may become
payable under any claim, award or judgment relating to the relevant Loan Agreement and (iii) amounts deposited in an account of TCI
Limited pursuant to the relevant Loan Agreement, in each case to the Trustee, as trustee for the benefit of the holders of the 2013 Notes
and the 2018 Notes, respectively (together and separately, as the context may require, the ‘‘Noteholders’’). Furthermore, under the terms of
the Trust Deeds, TCI Limited will assign all of its rights under the relevant Loan Agreement, except for any Reserved Rights (as defined in
theTrustDeeds)andrightssubjecttotherelevantcharge,totheTrusteeforthebenefitoftheNoteholders.
The Notes are limited recourse obligations of TCI Limited. In each case where amounts of principal, interest and additional amounts (if
any) are stated to be payable in respect of the Notes, the obligation of TCI Limited to make such payment will constitute an obligation
onlytoaccounttotheNoteholders,oneachdateuponwhichsuchamountsofprincipal, interest andadditionalamounts(ifany)areduein
respect of the Notes, for an amount equivalent to all principal, interest and additional amounts (if any) actually received by or for the
account of TCI Limited pursuant to the relevant Loan Agreement, excluding amounts paid in respect of Reserved Rights (as defined in the
relevant Trust Deed). TCI Limited will have no other financial obligation under the relevant Notes. Noteholders will be deemed to have
accepted and agreed that they will be relying solely and exclusively on the credit and financial standing of Transneft in respect of the financial
servicingoftheNotes.
Except as set forth herein under ‘‘Taxation’’, payments in respect of the Notes (and the Loans) will be made without any deduction or
withholdingonaccountoftaxes. AssetforthmorefullyineachLoanAgreement,Transneft mayprepay eachLoanatitsprincipalamount,
inwholebutnotin part, together withaccrued interest, if(i)Transneft orTCILimitedisrequired todeduct orwithhold certaintaxes from
payments they make in respect of such Loan or the corresponding Notes, respectively, or (ii) it becomes illegal for the Notes or such Loan
to remain outstanding. Upon such occurrence, TCI Limited will, subject to the receipt of the relevant funds from Transneft, prepay the
principalamountofalltheNotesoutstanding,togetherwithaccruedinterest.
Except as otherwise expressly provided in this Prospectus and in the Trust Deeds, no proprietary or other direct interest in TCI Limited’s
rights under or in respect of the Loan Agreements, or in any rights that TCI Limited may receive by way of assignment in respect of the
Loans, exists for the benefit of the Noteholders. Subject to the terms of the relevant Trust Deed, no Noteholder will be entitled to enforce
anyprovisionsoftheLoanAgreementsorhavedirectrecoursetotheBorrower.
ANINVESTMENTINTHENOTESINVOLVESAHIGHDEGREEOFRISK.SEE‘‘RISKFACTORS’’ONPAGE14.
The Notes and the Loans have not been, and will not be, registered under the U.S. Securities Act of 1933, as amended (the ‘‘Securities
Act’’), and, subject to certain exceptions, may not be offered and sold within the United States or to, or for the account or benefit of, U.S.
persons (as defined in Regulation S under the Securities Act (‘‘Regulation S’’)). The Notes may be offered and sold (i) within the United
States to qualified institutional buyers (‘‘QIBs’’) (as defined in Rule 144A under the Securities Act (‘‘Rule 144A’’)) that are also qualified
purchasers (‘‘QPs’’) asdefined inSection 2(a)(51)ofthe U.S.InvestmentCompanyActof 1940(the ‘‘Investment Company Act’’)in reliance
on the exemption from registration under the Securities Act provided by Rule 144A (such Notes, the ‘‘Rule 144A Notes’’); and (ii) outside
the United States to non-U.S. persons in offshore transactions in reliance on Regulation S (such Notes, the ‘‘Regulation S Notes’’). TCI
Limited has not been and will not be registered under the Investment Company Act. Prospective purchasers are hereby notified that sellers
of the Notes may be relying on the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a
descriptionoftheseandcertainfurtherrestrictions,see‘‘SubscriptionandSale’’and‘‘TransferRestrictions’’.
Application has been made to the Irish Financial Services Regulatory Authority (the ‘‘Financial Regulator’’), as competent authority under
Directive 2003/71/EC (the ‘‘Prospectus Directive’’), for the prospectus (the ‘‘Prospectus’’) to be approved. Application has been made to the
Irish Stock Exchange for the Notes to be admitted to the OfficialList and trading on its regulated market (the ‘‘Market’’). The Market is a
regulated market for the purposes of the Markets in Financial Instruments Directive 2004/39/EC. References in this Prospectus to Notes
being‘‘listed’’inIreland(andallrelatedreferences)shallmeanthatsuchNoteshavebeenadmittedtotrading ontheMarketandhavebeen
listed onthe Irish StockExchange. There isno assurance that atrading marketinthe Noteswill develop orbe maintained. This Prospectus
constitutesa‘‘prospectus’’forthepurposesoftheProspectusDirective.
The Notes will be offered and sold in the minimum denomination of U.S.$100,000 and integral multiples of U.S.$1,000 thereafter. The
Regulation S Notes will initially be represented by interests in (i) a global unrestricted Note in registered form in respect of the 2013 Notes
(the ‘‘Regulation S 2013 Global Note’’) and (ii) a global unrestricted Note in registered form in respect of the 2018 Notes (the ‘‘Regulation
S 2018 Global Note’’ and together with the Regulation S 2013 Global Note, the ‘‘Regulation S Global Notes’’) each without interest
coupons, which will be deposited with a common depositary for, and registered in the name of a nominee of, Euroclear Bank S.A./N.V.
(‘‘Euroclear’’) and Clearstream Banking, socie´te´ anonyme (‘‘Clearstream, Luxembourg’’) on 7 August 2008 (the ‘‘Issue Date’’). Beneficial
interests in the Regulation S Global Notes will be shown on, and transfers thereof will be effected only through, records maintained by
Euroclear or Clearstream, Luxembourg. The Rule 144A Notes will initially be represented by (i) a global restricted Note in registered form
in respect of the 2013 Notes (the ‘‘Rule 144A 2013 Global Note’’) and (ii) one or more global restricted Notes in registered form in respect
of the 2018 Notes (the ‘‘Rule 144A 2018 Global Notes’’ and together with the Rule 144A 2013 Global Note, the ‘‘Rule 144A Global
Notes’’) each without interest coupons, which will be deposited with a custodian for, and registered in the name of a nominee of, The
Depository Trust Company (‘‘DTC’’) on the Issue Date. Beneficial interests in the Rule 144A Global Notes will be shown on, and transfers
thereof will be effected only through, records maintained by DTC and its participants. The Regulation S Global Notes and the Rule 144A
Global Notes are together referred to as the ‘‘Global Notes’’. See ‘‘Summary of the Provisions Relating to the Notes in Global Form’’.
IndividualdefinitiveNotesinregisteredform(‘‘DefinitiveNotes’’)willonlybeavailableincertainlimitedcircumstancesasdescribedherein.
Sole Lead Manager
Credit Suisse
Senior Co-Lead Manager
OJSC Promsvyazbank
ThedateofthisProspectusis6August2008.
This Prospectus comprises a prospectus for the purposes of Article 5 of the Prospectus Directive and
for the purpose of giving information with respect to Transneft, TCI Limited, the Loans and the
Notes. Each of Transneft and TCI Limited accepts responsibility for the information given in this
Prospectus. Having taken all reasonable care to ensure that such is the case, each of Transneft and
TCI Limited declares that the information given in this Prospectus is, to the best of its knowledge, in
accordance with the facts and does not omit anything likely to affect its import.
This Prospectus does not constitute an offer of, or an invitation by or on behalf of any of TCI
Limited, Transneft or any Manager (as defined in ‘‘Subscription and Sale’’) to subscribe for or
purchase any Notes. The distribution of this Prospectus and the offer or sale of the Notes in certain
jurisdictions may be restricted by law. TCI Limited, Transneft and the Managers each require any
persons into whose possession this Prospectus comes to inform themselves about and to observe any
such restrictions.
The Notes and the Loans have not been and will not be registered under the Securities Act and,
subject to certain exemptions, may not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons (as defined in Regulation S). Rule 144A Notes are being offered
and sold within the United States to QIBs that are also QPs in reliance on the exemption from
registration under the Securities Act provided by Rule 144A and Regulation S Notes are being
offered and sold outside the United States to non-U.S. persons in offshore transactions in reliance on
Regulation S. Prospective purchasers are hereby notified that sellers of the Notes may be relying on
the exemption from the provisions of Section 5 of the Securities Act provided by Rule 144A. For a
description of these and certain further restrictions on offers, sales and transfers of the Notes and the
distribution of this Prospectus, see ‘‘Subscription and Sale’’ and ‘‘Transfer Restrictions’’.
This document is only being distributed to and is only directed at:
* persons who are outside the United Kingdom of Great Britain and Northern Ireland (the
‘‘United Kingdom’’);
* investment professionals falling within Article 19(5) of the Financial Services and Markets Act
2000 (Financial Promotion) Order 2005 (the ‘‘Order’’); and
* high net worth companies, and other persons to whom it may lawfully be communicated, falling
within Article 49(2)(a) to (d) of the Order,
such persons collectively being referred to as ‘‘relevant persons’’. The Notes are only available to, and
any invitation, offer or agreement to subscribe, purchase or otherwise acquire the Notes will be
engaged in only with, relevant persons. Any person who is not a relevant person should not act or
rely on the contents of this Prospectus.
Information set forth in this Prospectus is not an advertisement of the Notes in the Russian
Federation and is not intended to create or maintain an interest in Transneft, TCI Limited, the Notes
or the Loans or to facilitate any sale, exchange or transfer of the Notes in the Russian Federation or
to or for the benefit of any Russian person or entity.
Any foreign language used in the document is for convenience purposes only and does not form part
of the Prospectus.
The Notes are securities of a foreign issuer under Russian law. No sale, exchange or transfer of the
Notes may take place in the Russian Federation or to or for the benefit of any Russian person or
entity. Neither the issue of the Notes nor a securities prospectus in respect of the Notes has been, or
is intended to be, registered with the Federal Service for Financial Markets of Russia. The
information set forth in this Prospectus is not an offer of, or an invitation to make offers of, sell,
exchange or transfer, the Notes in the Russian Federation or to or for the benefit of any Russian
person or entity.
This Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore.
Accordingly, this Prospectus and any other document or material in connection with the offer or sale,
or invitation for subscription or purchase, of the Notes may not be circulated or distributed, nor may
the Notes be offered or sold, or be made the subject of an invitation for subscription or purchase,
whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under
Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the ‘‘SFA’’), (ii) to a
relevant person pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of
the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise
pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
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In making an investment decision, prospective investors must rely on their own examination of TCI
Limited and Transneft and the terms of this Prospectus, including the risks involved. No person is
authorised to provide any information or to make any representation not set forth in this Prospectus.
Any information or representation not so set forth must not be relied upon as having been authorised
by or on behalf of any of TCI Limited, Transneft, the Trustee or any Manager. The delivery of this
Prospectus at any time does not imply that the information set forth in it is correct as at any time
after its date.
Neither the delivery of this Prospectus nor the offering, sale or delivery of any Note shall in any
circumstances create any implication that there has been no adverse change, or any event reasonably
likely to involve any adverse change, in the condition (financial or otherwise) of TCI Limited or
Transneft since the date of this Prospectus. None of TCI Limited, Transneft or any Manager or any
of their respective representatives makes any representation to any offeree or purchaser of the Notes
offered hereby regarding the legality of an investment by such offeree or purchaser under applicable
legal, investment or similar laws. Each investor should consult with their own advisers as to the legal,
tax, business, financial and related aspects of the purchase of the Notes.
Prospective purchasers must comply with all laws that apply to them in any place in which they buy,
offer or sell any Notes or possess this Prospectus. Any consents or approvals that are needed in order
to purchase any Notes must be obtained. TCI Limited, Transneft and the Managers are not
responsible for compliance with these legal requirements. The appropriate characterisation of the
Notes under various legal investment restrictions, and thus the ability of investors subject to these
restrictions to purchase the Notes, is subject to significant interpretative uncertainties. No
representation or warranty is made as to whether or the extent to which the Notes constitute a legal
investment for investors whose investment authority is subject to legal restrictions. Such investors
should consult their legal advisers regarding such matters.
The Prospectus has been filed with and approved by the Financial Regulator as required by the
Prospectus Directive. Upon approval of this Prospectus by the Financial Regulator, this Prospectus
will be filed with the Companies Registration Office of Ireland in accordance with Regulation 38(1)(b)
of the Irish Prospectus (Directive 2003/71/EC) Regulations 2005 (the ‘‘Prospectus Regulations’’).
TCI Limited is not and will not be regulated by the Financial Regulator as a result of issuing the
Notes. Any investment in the Notes does not have the status of a bank deposit and is not within the
scope of the deposit protection scheme operated by the Financial Regulator.
The Managers and their respective affiliates may perform in the future various financial advisory,
investment banking and commercial banking services for, may arrange non-public market financing
for, and may enter into derivatives transactions with, Transneft and its affiliates.
NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, IS MADE BY THE
MANAGERS OR ANY OF THEIR AFFILIATES AS TO THE ACCURACY OR
COMPLETENESS OF THE INFORMATION SET FORTH IN THIS PROSPECTUS, AND
NOTHING CONTAINED IN THIS PROSPECTUS IS, OR SHALL BE RELIED UPON AS, A
PROMISE OR REPRESENTATION, WHETHER AS TO THE PAST OR THE FUTURE.
EACH PERSON RECEIVING THIS PROSPECTUS ACKNOWLEDGES THAT SUCH PERSON
HAS NOT RELIED ON THE MANAGERS OR ANY OF THEIR AFFILIATES OR ANY
PERSON ACTING ON THEIR BEHALF IN CONNECTION WITH ITS INVESTIGATION OF
THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION OR ITS INVESTMENT
DECISION. EACH PERSON CONTEMPLATING MAKING AN INVESTMENT IN THE
NOTES FROM TIME TO TIME MUST MAKE ITS OWN INVESTIGATION AND ANALYSIS
OF THE CREDITWORTHINESS OF TCI LIMITED AND TRANSNEFT AND ITS OWN
DETERMINATION OF THE SUITABILITY OF ANY SUCH INVESTMENT, WITH
PARTICULAR REFERENCE TO ITS OWN INVESTMENT OBJECTIVES AND EXPERIENCE
AND ANY OTHER FACTORS WHICH MAY BE RELEVANT TO IT IN CONNECTION WITH
SUCH INVESTMENT.
THE NOTES AND THE LOANS HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
U.S. SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION IN THE UNITED STATES OR ANY OTHER U.S. REGULATORY
AUTHORITY NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR
ENDORSED THE MERITS OF THE OFFERING OF NOTES OR THE ACCURACY OR THE
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENCE IN THE UNITED STATES.
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In connection with the issue of the Notes, Credit Suisse Securities (Europe) Limited (the ‘‘Stabilising
Manager’’) or any person acting on behalf of the Stabilising Manager may over-allot Notes or effect
transactions with a view to supporting the market price of the Notes at a level higher than that
which might otherwise prevail. However, there is no assurance that the Stabilising Manager (or any
persons acting on behalf of the Stabilising Manager) will undertake stabilisation action. Any
stabilisation action may begin on or after the date on which adequate public disclosure of the terms
of the offer of the Notes is made and, if begun, may be ended at any time, but it must end no later
than the earlier of 30 days after the issue date of the Notes and 60 days after the date of the
allotment of the Notes. Any stabilisation action or over-allotment shall be conducted in accordance
with all applicable laws and rules.
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT, NOR AN APPLICATION
FOR A LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE
REVISED STATUTES WITH THE STATE OF NEW HAMPSHIRE, NOR THE FACT THAT A
SECURITY IS EFFECTIVELY REGISTERED, NOR A PERSON IS LICENSED IN THE STATE
OF NEW HAMPSHIRE CONSTITUTES A FINDING BY THE SECRETARY OF STATE OF
NEW HAMPSHIRE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS TRUE,
COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT
AN EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION
MEANS THAT THE SECRETARY OF STATE OF NEW HAMPSHIRE HAS PASSED IN ANY
WAY UPON THE MERITS OR QUALIFICATIONS OF, OR RECOMMENDED OR GIVEN
APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT IS UNLAWFUL TO
MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER, OR
CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS
PARAGRAPH.
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
Distribution of the Notes in Canada is being made only on a private placement basis exempt from
the requirement that TCI Limited prepare and file a prospectus with the securities regulatory
authorities in each province where trades of the Notes are made. Any resale of the Notes in Canada
must be made under applicable securities laws, which will vary depending on the relevant jurisdiction
and which may require resales to be made under available statutory exemptions or under a
discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers
are advised to seek legal advice prior to any resale of the Notes.
Representations of Purchasers
By purchasing the Notes in Canada and accepting a purchase confirmation, a purchaser is
representing to TCI Limited, Transneft and each Manager (or affiliate thereof) from whom the
purchase confirmation is received that:
* the purchaser is entitled under applicable provincial securities laws to purchase the Notes
without the benefit of a prospectus qualified under those securities laws;
* where required by law, the purchaser is purchasing as principal and not as agent;
* the purchaser has reviewed the text above under Resale Restrictions; and
* the purchaser acknowledges and consents to the provision of specified information concerning its
purchase of the Notes to the regulatory authority that by law is entitled to collect the
information.
Further details concerning the legal authority for this information collection is available on request
from the Managers.
Rights of Action – Ontario Purchasers Only
Under Ontario securities legislation, certain purchasers who purchase a security offered by this
Prospectus during the period of distribution will have a statutory right of action for damages, or
iv
while still the owner of the Notes, for rescission against TCI Limited in the event that this Prospectus
contains a misrepresentation, without regard to whether the purchaser relied on the misrepresentation.
The right of action for damages is exercisable not later than the earlier of 180 days from the date the
purchaser first had knowledge of the facts giving rise to the cause of action and three years from the
date on which payment is made for the Notes. The right of action for rescission is exercisable not
later than 180 days from the date on which payment is made for the Notes. If a purchaser elects to
exercise the right of action for rescission, the purchaser will have no right of action for damages
against TCI Limited. In no case will the amount recoverable in any action exceed the price at which
the Notes were offered to the purchaser, and if the purchaser is shown to have purchased the
securities with knowledge of the misrepresentation, TCI Limited will have no liability. In the case of
an action for damages, TCI Limited will not be liable for all or any portion of the damages that are
proven to not represent the depreciation in value of the Notes as a result of the misrepresentation
relied upon. These rights are in addition to, and without derogation from, any other rights or
remedies available at law to an Ontario purchaser. The foregoing is a summary of the rights available
to an Ontario purchaser. Ontario purchasers should refer to the complete text of the relevant
statutory provisions.
Enforcement of Legal Rights
All of the directors and officers of TCI Limited, as well as the experts named herein, may be located
outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service
of process within Canada upon TCI Limited or those persons. All or a substantial portion of the
assets of TCI Limited, and the assets of those persons, may be located outside of Canada and, as a
result, it may not be possible to satisfy a judgment against TCI Limited or those persons in Canada
or to enforce a judgment obtained in Canadian courts against TCI Limited or those persons outside
of Canada.
Taxation and Eligibility for Investment
Canadian purchasers of the Notes should consult their own legal and tax advisers with respect to the
tax consequences of an investment in the Notes in their particular circumstances and about the
eligibility of the Notes for investment by the purchaser under relevant Canadian legislation.
AVAILABLE INFORMATION
Each of Transneft and TCI Limited has agreed that, for so long as any Notes are ‘‘restricted
securities’’ within the meaning of Rule 144(a)(3) under the Securities Act, Transneft or TCI Limited
will, during any period in which it is neither subject to Section 13 or 15(d) of the Exchange Act nor
exempt from reporting pursuant to Rule 12g3-2(b) thereunder, provide to any holder or beneficial
owner of such restricted securities or to any prospective purchaser of such restricted securities
designated by such holder or beneficial owner or to the Trustee for delivery to such holder, beneficial
owner or prospective purchaser, in each case upon the request of such holder, beneficial owner,
prospective purchaser or Trustee, the information required to be provided by Rule 144A(d)(4) under
the Securities Act.
v
FORWARD-LOOKING STATEMENTS
Certain statements in this Prospectus are not historical facts but constitute ‘‘forward-looking
statements’’. This Prospectus contains certain forward-looking statements in various sections,
including, without limitation, under the headings ‘‘Overview’’, ‘‘Risk Factors’’, ‘‘Management’s
Discussion and Analysis of Results of Operations and Financial Condition’’ and ‘‘Business’’.
Transneft may from time to time make written or oral forward-looking statements in reports to
shareholders, holders of debt securities and in other communications. Examples of such forward-
looking statements include, but are not limited to:
* statements of Transneft’s plans, objectives or goals, including those related to its business;
* statements of future economic performance; and
* statements of assumptions underlying such statements.
Forward-looking statements that may be made by Transneft from time to time (but that are not
included in this Prospectus) may also include projections or expectations of revenues, income (or
loss), earnings (or loss) per share, dividends, capital structure or other financial items or ratios.
Words such as ‘‘believes’’, ‘‘anticipates’’, ‘‘expects’’, ‘‘estimates’’, ‘‘intends’’ and ‘‘plans’’ and similar
expressions are intended to identify forward-looking statements but are not the exclusive means of
identifying such statements.
By their very nature, forward-looking statements involve inherent risks and uncertainties, both general
and specific, and risks exist that the predictions, forecasts, projections and other forward-looking
statements will not be achieved. Prospective investors should be aware that a number of important
factors could cause actual results to differ materially from the plans, objectives, expectations,
estimates and intentions expressed in such forward-looking statements. These factors include:
* the effects of, and changes in, the policy of the government (the ‘‘Government’’ or the ‘‘Russian
Government’’) of the Russian Federation (‘‘Russia’’), in particular with respect to the regulation
of, and tariff setting for, Transneft’s core business;
* the effects of changes in laws, regulations, taxation or accounting standards or practices;
* mergers, acquisitions or divestitures;
* technological changes;
* the effects of international political events on Transneft’s business; and
* Transneft’s success at managing the risks of the aforementioned factors.
This list of important factors is not exhaustive. When relying on forward-looking statements,
prospective investors should carefully consider the aforementioned factors and other uncertainties and
events, especially in light of the political, economic, social and legal environment in which Transneft
operates. Such forward-looking statements speak only as at the date on which they are made and are
not subject to any continuing obligations under any guidelines issued by the Irish Stock Exchange.
Accordingly, Transneft does not undertake any obligation to update or revise any of them, whether
as a result of new information, future events or otherwise. Transneft does not make any
representation, warranty or prediction that the results anticipated by such forward-looking statements
will be achieved, and such forward-looking statements represent, in each case, only one of many
possible scenarios and should not be viewed as the most likely or standard scenario.
vi
ENFORCEABILITY OF JUDGMENTS
Transneft is an open joint-stock company incorporated under the laws of Russia and all its assets and
the assets of its subsidiaries are currently located outside the United States and the United Kingdom.
In addition, all of Transneft’s directors and executive officers are residents of countries other than the
United States and the United Kingdom. As a result, it may not be possible for Noteholders to:
* effect service of process within the United States or the United Kingdom upon Transneft or any
of its directors or executive officers named in this Prospectus, notwithstanding that Transneft
has, under each Loan Agreement, appointed an agent for service of process; or
* enforce, in the U.S. or English courts, judgments obtained outside U.S. or English courts
against Transneft or any of Transneft’s directors and executive officers named in this Prospectus,
including actions under the civil liability provisions of the U.S. securities laws or any state or
territory of the United States.
In addition, it may be difficult for Noteholders to enforce, in original actions brought in courts in
jurisdictions located outside the United States or the United Kingdom, liabilities predicated upon U.S.
securities laws or upon English laws.
Judgments rendered by a court in any jurisdiction outside Russia will be recognised by courts in
Russia only if (i) an international treaty providing for the recognition and enforcement of judgments
in civil cases exists between Russia and the country where the judgment is rendered and/or (ii) a
federal law of Russia provides for the recognition and enforcement of foreign court judgments. No
such treaty exists between the United States and Russia or the United Kingdom and Russia for the
reciprocal enforcement of foreign court judgments. However, we are aware of at least one instance in
which Russian courts have recognised and enforced an English court judgment. The basis for this was
a combination of the principle of reciprocity and the existence of a number of bilateral and
multilateral treaties to which both the United Kingdom and the Russian Federation are parties. The
courts decided that such treaties constituted grounds for the recognition and enforcement of the
relevant English court judgment in Russia. In the absence of established court practice, however, it is
difficult to predict whether a Russian court will be inclined in any particular instance to recognise
and enforce an English court judgment on these grounds. Even if there were such a treaty, Russian
courts could nonetheless refuse to recognise or enforce a foreign court judgment on the grounds set
forth in such treaty and in Russian law in effect on the date on which such recognition or
enforcement is sought. Moreover, Russia has adopted no such law.
Each Loan Agreement will be governed by English law and will provide for certain disputes,
controversies and causes of action between TCI Limited and Transneft to be settled by arbitration in
accordance with the Rules of the London Court of International Arbitration (‘‘LCIA’’). Russia is a
party to the 1958 United Nations (New York) Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (the ‘‘New York Convention’’). However, it may be difficult to enforce
arbitral awards in Russia due to:
* the inexperience of the Russian courts in international commercial transactions;
* official and unofficial political resistance to the enforcement of awards against Russian
companies in favour of foreign investors; and
* the inability of Russian courts to enforce such awards.
Enforcement of any arbitral awards pursuant to arbitration proceedings in accordance with the rules
of the LCIA is subject to the exceptions and limitations provided for in the New York Convention
and Russian procedural laws.
vii
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
This Prospectus includes:
* audited consolidated financial statements of Transneft and its consolidated subsidiaries as at and
for the year ended 31 December 2007, the audit report of ZAO KPMG thereon and the related
notes thereto; and
* audited consolidated financial statements of Transneft and its consolidated subsidiaries as at and
for the year ended 31 December 2006, the audit report of ZAO PricewaterhouseCoopers Audit
thereon and the related notes thereto.
The audited consolidated financial statements of Transneft and its consolidated subsidiaries contained
in this Prospectus have been prepared in accordance with International Financial Reporting Standards
(‘‘IFRS’’), as promulgated by the International Accounting Standards Board (‘‘IASB’’). The audited
consolidated financial statements as at and for the year ended 31 December 2007 have been audited
by ZAO KPMG, independent auditors, located at 18 Krasnopresnenskaya naberezhnaya, Block C,
123317 Moscow, Russia. The audited consolidated financial statements as at and for the year ended
31 December 2006 have been audited by ZAO PricewaterhouseCoopers Audit, independent auditors
(‘‘PwC’’), located at Kosmodamianskaya Nab. 52, Building 5, 115054 Moscow, Russia.
Such annual financial statements are available as described in ‘‘General Information’’.
Transneft selects its independent auditors on the basis of an annual tender. Transneft’s independent
auditors for the year ended 31 December 2007 were ZAO KPMG. Following the tender process,
ZAO PricewaterhouseCoopers Audit has been selected as Transneft’s independent auditors for 2008.
The consolidated financial statements of the Group apply the Russian rouble as their functional
currency.
Hydrocarbons
Hydrocarbons are compounds formed from the elements hydrogen (H) and carbon (C) and exist in
solid, liquid or gaseous forms. In this Prospectus, all references to:
* ‘‘crude oil’’ are to oil and gas condensate; and
* ‘‘gas’’ are to non-associated gas (i.e. natural gas) and associated gas.
Like many other Russian and European oil companies, Transneft uses the metric ton as the standard
unit of measurement for quantities of crude oil.
Currencies
In this Prospectus:
* ‘‘Russian rouble’’, ‘‘Russian roubles’’ or ‘‘RUR’’ refers to the lawful currency of Russia;
* ‘‘U.S. dollar’’, ‘‘U.S. dollars’’ or ‘‘U.S.$’’ refers to the lawful currency of the United States of
America; and
* ‘‘euro’’ or ‘‘c’’ refers to the single currency of the participating member states in the Third
Stage of the European Economic and Monetary Union of the Treaty Establishing the European
Community, as amended from time to time.
Convenience Translations
This Prospectus contains conversions of certain amounts into U.S. dollars at specified rates solely for
the convenience of the reader. The U.S. dollar amounts have been translated from the Russian rouble
amounts at the rate of RUR 24.55 = U.S.$1.00, which was the rate published by the Central Bank of
Russia (‘‘CBR’’) on 31 December 2007.
No representation is made that the U.S. dollar amounts referred to in this Prospectus could have
been or could be converted into Russian roubles or vice versa, as the case may be, at the above
exchange rates or at all.
Rounding
Rounding adjustments have been made in calculating some of the financial information included in
this Prospectus. As a result, numerical figures shown as totals in some tables may not be exact
arithmetic aggregations of the figures that precede them.
viii
Tariffs and Oil Sales Prices
Average tariffs and oil sales prices are stated on a VAT-exclusive basis and are calculated by the
Group on the basis of Russian Accounting Standards (‘‘RAS’’).
The Group
Unless the context otherwise requires or as specified to the contrary herein, references to the ‘‘Group’’
are to Transneft and its consolidated subsidiaries, excluding Transnefteproduct (as defined below).
INFORMATION DERIVED FROM THIRD PARTIES
Transneft has obtained certain statistical and market information that is presented in this Prospectus
on such topics as the Russian oil industry, the Russian economy in general and related subjects from
the following third party sources:
* statistics provided by the Central Dispatch Unit of the Ministry of Industry and Energy of
Russia (now succeeded by the Ministry of Energy of Russia and the Ministry of Industry and
Trade of Russia);
* statistics provided by the Agency of Petroleum Information;
* statistics provided by Rosstat, the Federal State Statistics Service of Russia;
* statistics provided by the Ministry of Finance of Russia;
* statistics provided by the Ministry of Industry and Energy of Russia (now succeeded by the
Ministry of Energy of Russia and the Ministry of Industry and Trade of Russia);
* the Statistical Review of World Energy, June 2008, published by British Petroleum plc; and
* annual and other reports published by other international hydrocarbons transportation
companies and Russian oil producing companies.
This third party information is presented in the following sections of this Prospectus: ‘‘Overview’’,
‘‘Risk Factors’’, ‘‘Management’s Discussion and Analysis of Results of Operations and Financial
Condition’’ and ‘‘Business’’.
Transneft takes responsibility for the accurate reproduction of such information and, as far as
Transneft is aware and is able to ascertain from information published by such third parties, no facts
have been omitted that would render the reproduced information inaccurate or misleading.
Nevertheless, prospective investors are advised to consider this data with caution. 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 that
Transneft’s estimates are based on such third party information. None of Transneft, TCI Limited or
the Managers has independently verified the figures, market data or other information on which third
parties have based their studies.
Some of the information contained in this Prospectus has been derived from official data of Russian
Government agencies and the CBR. The official data published by Russian federal, regional and local
government agencies are substantially less complete or researched than those of more developed
countries. Official statistics, including those produced by the CBR, may also be produced on different
bases than those used in more developed countries. Any discussion of matters relating to Russia in
this Prospectus must, therefore, be subject to uncertainty due to concerns about the completeness or
reliability of available official and public information.
ix
EXCHANGE RATE INFORMATION
The table below sets forth, for the periods and dates indicated, certain information regarding the
exchange rate between the Russian rouble and the U.S. dollar, based on the official exchange rate
quoted by the CBR. Fluctuations in the exchange rates between the Russian rouble and the U.S.
dollar in the past are not necessarily indicative of fluctuations that may occur in the future.
Period
High Low average(1) Period end
(RUR per U.S. dollar)
Year ended 31 December
2007....................................................................... 26.58 24.26 25.49 24.55
2006....................................................................... 28.48 26.18 27.19 26.33
2005....................................................................... 29.00 27.46 28.33 28.78
2004....................................................................... 29.45 27.75 28.73 27.75
2003....................................................................... 31.88 29.25 30.61 29.45
Month ended
31 July 2008 (up to and including 30 July 2008).. 23.56 23.13 23.33 23.34
30 June 2008.......................................................... 23.81 23.46 23.64 23.46
31 May 2008.......................................................... 23.88 23.55 23.72 23.74
30 April 2008......................................................... 23.67 23.34 23.51 23.65
31 March 2008....................................................... 24.05 23.51 23.76 23.52
29 February 2008................................................... 24.78 24.12 24.53 24.12
31 January 2008..................................................... 24.89 24.29 24.50 24.48
31 December 2007................................................. 24.73 24.42 24.57 24.55
Source:CentralBankofRussia
Note:
(1)Theaverageoftheexchangeratesonthelastbusinessdayofeachmonthfortherelevantannualperiodandoneachbusinessday
foranyotherperiod.
This Prospectus contains conversions of certain amounts into U.S. dollars at specified rates solely for
the convenience of the reader. The U.S. dollar amounts have been translated from the Russian rouble
amounts at the rate of RUR 24.55 = U.S.$1.00, which was the rate published by the CBR on 31
December 2007.
No representation is made that the U.S. dollar amounts referred to in this Prospectus could have
been or could be converted into Russian roubles or vice versa, as the case may be, at the above
exchange rates or at all.
x