FALSE MINORITY SHAREHOLDERS

The conflict around TogliattiAzot which occured two years ago is yet to subside. Nevertheless, one of the claims against the enterprise may possibly fall through in the near future. TogliattiAzot’s spokesperson believes that Tringal Equities Inc. the offshore company that is claiming $85 million in damages from JSC TogliattiAzot and ToAz’s Board of Directors has submitted forged documents to the court. According to RBC Daily, a criminal investigation concerning this case will be finished in the near future. Thus, the proceedings in the state arbitration courts with respect to the Tringal Equities Inc. claim may be dismissed and the representatives of this company may face criminal charges.

OAO TogliattiAzot (ToAz) is the sixth largest world producer of fertilizers and the first global producer of ammonia (supplying 8% of the world market). In 2006, ToAz’s output of ammonia increased by more than 10% up to 2 635 000 tons in comparison to the previous year. The output of methanol was increased by 6% up to 407 000 tons, the production capacity of carbamide-formaldehyde concentrate (CFC) increased by nearly 20% up to 36.7 thousand tons and the production volume of carbamide amounted 783 000 tons and exceeded the result of 2005.

Last year the offshore company Tringal Equities Inc. (Tringal) who has a 2% stake in the share capital of ToAz argued that ToAz’s export prices on ammonia had been devised negligently. As a result of these claims the minority shareholders have demanded $42 million from JSC TogliattiAzot and the same amount from eight members of ToAz’s Board of Directors. However the Prosecutor’s Office in the Samara Region has recently initiated criminal proceedings against the parties connected to the forgery of the documents submitted to the court. Andrei Moskovsky, ToAz’s attorney observes, “If it is proved that the documents are false then the proceedings in the state arbitration courts with respect to the claim of Tringal will be dismissed and their representatives will face criminal charges”. A RBC Daily source, close to the investigation believes that the case will be dismissed within the next two months. “There are really no doubts that the documents have been forged, - he said. – However it is necessary to carry out some formal proof procedures”.

According to RBC Daily, Tringal’s claim is reliant on the expert analysis of OOO Expert-GUM, who has in turn, based their estimated value of damages against ToAz on Nitrochem Distribution (Switzerland) letters. Tringal argues that in the period between April to December 2005, Nitrochem had sent ToAZ several letters in connection to the ammonia price agreement. However ToAz’s officials deny receiving these letters and point out that such correspondence could not have taken place. The relations between ToAz and their Swiss contracting party evolved from earlier agreements, which had been subject to amendments. Such agreements are highly confidential; therefore Tringal would not have been afforded the opportunity to gain access to such documents. Nitrochem emphasises that the documents containing signatures by the chief executive of the company are forged. These documents were submitted to court however the CEO had not signed these documents.

Industry experts suggest that if the investigatory bodies accept ToAz’s version of events then Tringal will have no chance to proceed with their claim in the arbitration court. Andrei Moskovsky proposes that “in such event, Tringal will have to disclose the source from which the documents have been received.’’ According to Igor Bashunov, ToAz’s representative, Tringal was responsible for exerting pressure on the ToAZ with the aim to force the actual owners to sell valuable assets.

Furthermore, in late February of this year the Samara Region Federal Tax Authorities filed a tax evasion claim against ToAz for the amount of 658 million rubles for the year 2003. ToAz disputes the value of the balance owed. The tax authorities’ calculations are strongly disputed within the enterprise. In the past 18 months, the tax authorities have carried out 5 site examinations and118 account checks on ToAz. No serious tax offences have been identified. Prosecutor’s inspection into the actions of the tax authorities has proved that no tax crimes were committed by the ToAz management in 2003-2004.

In spite of the raiser’s attempts for a hostile takeover, the shareholders’ meeting was held and the board of directors were elected. Vladimir N. Makhlai was re-elected as Chairman of the Board. Igor Bashunov emphasised that “the board meeting has been held in accordance with the existing legislation” The Labour Agreement for the period 2007-2009 had been adopted earlier, prior to the meeting taking place.

26.12.2007TOGLIATTIAZOT HAS GAINED A VICTORY OVER AN OFFSHORE SHAREHOLDER

The Tverskoy District Court of Moscow has found a resolution in the dispute between the General Prosecutor’s Office and the Investigating Committee of the Russian Federation Ministry of Internal Affairs with respect to the legality of a new criminal suit against Vladimir Makhlai, TogliattiAzot President, and Alexander Makarov, TogliattiAzot CEO, which was instigated by the Investigating Committee. V. Makhlai and A. Makarov are accused of fraud and tax evasion and are currently fugitives from justice. The new case against them was petitioned a month ago by the offshore company Tringal Equities Inc. whom are claiming 30 million rubles from TogliattAzot, in underpaid dividends. However, the General Prosecutor’s Office dismissed this case and the Court had approved the decision.

24.12.2007ALL-ROUND DEFENCE OF TOGLIATTIAZOT

The details of the Federal Arbitration Court of Povolzhsky Territory related to the case of privatization of 6.1% shares of TogliattiAzot (ToAz), the largest world producer of ammonia were made public.

06.12.2007ENDLESS TRIALS

One can understand the state of affairs at the giant chemical company and the largest in the world ammonia producer from the fact that its employees celebrate allowance of cassational appeal as a majour victory in their fight with raiders.they According to the Interfax agency, the Federal Arbitration Court of Povolzhsky Territory has recently sent the case of privatization of 6.1% of TogliattiAzot (ToAz) shares for review. It is going to bethe third reviewal of the case.