annual report - ОККО - okko · approaches and principles of human resource management (hrm)....

2009

Annual Report

Facing the worldFacing peopleFacing change

ContentsOur CompanyOur MessageOur Personnel2009 HighlightsShareholders’ StructureSupervisory BoardManagement BoardManagement StructureFuel Market AnalysisOil Products SalesConvenient-stores, Restaurants and ServicesLogisticsQuality ControlFinancial PerformanceInvestmentsStrategic ObjectivesCredit HistoryNon-financial ReportSummarized Financial Information and Independent Auditors’ ReportContact Details

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The Company owns a network of OKKO branded filling complexes that includes 282 modern service complexes*. In general, the Company’s network totals to 305 filling complexes* and more than 20 fuel depots in AR of Crimea, Dnipropetrovsk, Vinnytsiy, Volyn’, Zhytomyr, Zakarpattya, Ivano-Frankivsk, Kirovohrad, Kyiv, L’viv, Odesa, Poltava, Rivne, Ternopil’, Kharkiv, Kherson, Khmelnytskyi, Cherkasy, Chernivtsi and Chernihiv regions, as well as in the city of Kyiv. The Company’s share capital is 195 million UAH. Annual revenue reached 5,588,252 thousand UAH, EBITDA – 459,676 thousand UAH. D&B 5А-2 rating. The Company’s national credit rate is uaA+. Since June 2005 GNG shares are quoted at the First Securities Trading System (PFTS). In December 2005, the depositary notes of Concern Galnaftogaz were added to the list of XETRA Frankfurt Stock Exchange Electronic System. Since January 2010 GNG shares are quoted at Ukrainian Stock Echange. The Company is in full compliance with Ukrainian Corporate Governance Principles. As of June 1, 2010, Concern Galnaftogaz market capitalization was 2,100 million UAH. * As of June 1, 2010.

OUR COmPANy

Public Joint Stock Company ‘Concern Galnaftogaz’ is one of the largest filling complexes owners in Ukraine

market capitalization of Concern Galnaftogaz

2 100 million UAH

Annual report 20094

Key Financial Indicators 2003 2004 2005 2006 2007 2008 2009

Sales Revenue, UAH thousand 942 375 1 283 605 1 944 616 2 599 175 3 208 848 5 509 262 5 588 252

EBITDA, UAH thousand 27 286 48 359 90 793 132 529 183 826 366 166 459 676

EBIT, UAH thousand 17 621 33 860 71 847 107 631 147 312 304 435 356 557

Net profit, UAH thousand 11 087 22 248 40 489 41 967 62 236 -420 937 132 062

Total assets, UAH thousand 336 091 476 032 827 120 1 255 508 2 027 956 4 073 467 5 204 417

Total shareholders’ equity, UAH thousand 167 938 203 906 313 350 450 548 822 274 1 471 922 1 763 804

Liabilities **, UAH thousand 83 287 132 028 315 749 546 205 815 067 1 970 510 2 142 705

ROA 4.4% 5.5% 6.2% 4.0% 3.8% negative 1.7%

ROE 8.8% 12.0% 15.7% 11.0% 9.8% negative 7.0%

Filling Complexes

Total 305OKKO 282LPG 114CNG 2River complexes 2Convenient-stores 257«A la minute» restaurants 20

Fuel Depots

In operation 10

Transportation

Fuel tank trucks 99LPG tank trucks 4HGV 43motor cars 183

Operational Capacity and Infrastructure*

The Company shareholders’ equity195 million UAHConcern Galnaftogaz 5

* As of June 1, 2010

Notes.

* Hereinafter, all financial figures are in accordance with IFRS

** Net financial liabilities = Financial liabilities – money and its equivalents

In a difficult period on the credit markets we have managed to attract significant funding from our longtime partner EBRD in the form of investments. The first tranche of 20 million USD we have been already obtained. These funds are intended to finance the investment program of capital expenditures and the consequent increase of working capital and investments in energy efficiency. The Company performs its obligations to creditors and complies with all relevant financial indicators stipulated in the loan agreements. In 2009 Galnaftogaz consolidated its market position. According to the results of the year, the Company is one of the leaders in the number of filling complexes and a market share of fuel sales (11.7 per cent). In addition, in the crisis 2009, we started with FISHKA loyalty program for regular customers.Also, please note that 2009 was an important milestone for ordering the internal processes of the Company. According to the legislation of Ukraine the general meeting of shareholders changed the name of the Company to Concern Galnaftogaz Public Joint Stock Company (PJSC Concern Galnaftogaz). We also changed the organizational structure by creating the management Board. A significant project in 2009 was the introduction in Galnaftogaz of the comprehensive system of enterprise resources SAP ERP.Let me express my sicere gratitude to all the Company’s employees for their tireless work and a decent result. I hope that our joint work will promote further development and prosperity.

Good luck!

CHAIRmAN OF THE SUPERVISORy BOARD

«The joint work for common result». This phrase can briefly describe the year 2009. Despite the overall decline in economy in 2009, the Company maintained sales through the network of filling complexes and at the same time demonstrated high profitability.

Vitaliy AntonovChairman of the Supervisory Boardof PJSC Concern Galnaftogaz

Annual report 20096

number of filling complexes as of June 1, 2010305

The Company’s market share in terms of fuel sales

11.7%

Concern Galnaftogaz 7

Personnel NumberRatio between Head office and branches in 2009 was 779 to 4575 employees.During the year the ratio between managerial, professional and administrative and technical levels in the head office has changed in the direction of administrative level reduction.Staff turnover in 2009, compared with 2008, decreased by 10 per cent to an average of 2-3 per cent per month, the main reason for the dismissals was the initiative of the administration.

Accents in the approaches to personnel management and resultsAs business opportunities are based on the ability of employees, one of the main problems facing the sector of HR in 2009, was the task of bring-ing qualitative composition of the staff to the requirements of the Com-pany.

The Company reviewed the staff requirements to meet the needs of business, developed internal corporate assessment and development centers and expanded methodology of evaluating candidates, which greatly enhanced the quality of selected personnel.

An optimization of process of bringing new employees into the Com-pany helped to hire more than 80 per cent of all new employees on their

OUR PERSONNEL

For human resources, was a year of internal changes that were caused by the economic situation in the country and in the world and also by business needs. Human resources actively participated in the ongoing restructuring processes. Qualitative changes also have taken place in the approaches and principles of human resource management (HRm).

own, without the help of staffing agencies.

The Company deepened coopera-tion with the specialized Internet resources and educational insti-tutions, providing opportunities for young professionals to get a stable and promising work in the company. Galnaftogaz started co-operation with an international student organization SIFE (Stu-dents in Free Enterprise) and has participated in the Association AISEC project «Business Battle».

As a responsible employer, the Company has chosen to provide job security and stability to their employees as it is one of the key principles of personnel management in times of uncertainty. To achieve this, the Company developed and implemented a complex of preventive and proactive actions in personnel management:

the start in improvement of ▪its organizational efficiency through the introduction of new approaches to business management;

the introduction of a systema- ▪tic approach to personnel management and individual needs of employees;

the development of ▪qualitatively new procedures in HRM;

the review of compensations ▪

Personnel Number and Structure

(12%) 631(7%) 391

(3%) 163

(14%) 752

(35%) 1877

(29%) 1540

Personnel of �lling complexes

3808

Head o�ce

Fuel depots

Branch o�ces

Operators

Junior operators Total for Brach o�ces, 4560 people

Forecourt personnel Total for the Company, 5354 people

Annual report 20098

decrease in staff turnover during 2009

10%

to employees in compliance with market trends.

During the year, the Company met its commitments to the employees in the social sphere. It started the review of the principles of the collective agreement to implement new incentives and guarantees for workers.According to the Company’s business needs the system of remuneration of labor has been improved, the practice of management grades was implemented and the principles of encouragement of high performance in key business processes were reviewed.As a response to the demands of modernity and in order to be highly

Personnel Education

10%

20%

30%

40%

50%

60%

70%

80%

100%

90%

0

Head o�ce 88% Fuel depots 35% Branch o�ces 64% Forecourt personnel 43% Employees who studyfor a second university degree 17% Employees who arepost-graduates, scienti�c researches or lecturers 0,5%

higher education

efficient organization, the Company began implementing knowledge management and mentoring practices.The organization of internal training and implementation of adaptation programs for employees, the possibility to gain the best industry experience, participation in national and international conferences, seminars, opportunities for gaining mBA degree – in this way during the year the Company laid the foundation for future business development by investing in its most valuable asset – its staff.


HIGHLIGHTS 2009

JanuaryIn 2008 yuriy Kuchabskyi ranked among the 250 most successful business leaders of Ukraine (Hvardiya magazine).

February-marchEBRD and Concern Galnaftogaz signed a protocol of intent on investment project worth 50 million USD.

Chairman of the Supervisory Board of Concern Galnaftogaz Vitaliy Antonov and First Deputy Chairman of the Supervisory Board yuriy Kuchabskyi participated in the International Petroleum Week 2009 in London.

The representatives of Concern Galnaftogaz met with experts of monitor Group, the meeting took place during discussion of the draft of economic development strategy of the city.

AprilThe complex system of enterprise resource management SAP ERP was introduced in the Company.

At the General meeting of Galnaftogaz shareholders’ the new members of the Supervisory Board were elected and a new organizational structure was approved.

mayOKKO filling complexes network launched FISHKA loyalty program.

Concern Galnaftogaz was ranked third by the results of research «Business, guided by values» conducted by L’viv Business School at Ukrainian Catholic University.

OKKO filling complexes network implemented accessibility stan-dards for people with limited mobility (physically challenged on wheelchairs).

The first «Tobi» branded store

beyond OKKO filling complex was opened in L’viv.

Representatives of Concern Galnaftogaz attended the 5th Annual Ukraine Investor Conference and in Direct Investment Forum in Kyiv.

JuneThe new OKKO filling complex was opened in the village of Pochayevychi, Drohobych district, L’viv region, at the intersection of highways Truskavets–L’viv and Stryi–Drohobych–Sambir.

Chairmen of Concern Galnaftogaz held a meeting with members of EBRD Board of Directors in L’viv.

Long-term negotiations and discussions on major terms and conditions of equity deal resulted in positive approval of given equity project by EBRD Board of Directors meeting held in London.

yuriy Kuchabskyi, Chief Commercial Officer of Concern Galnaftogaz, took second place among the most successful head officers of Ukrainian companies, which operate at the fuel market (according to Investgazeta magazine).

JulyThe Company organized separate collection of garbage at OKKO filling complexes in Kyiv.

European Bank for Reconstruction and Development and Concern Galnaftogaz signed an equity injection agreement in the amount of 50 million USD.

Concern Galnaftogaz took the 21st place among two hundred most expensive Ukrainian brands according to the Rating of corporate brands 2009, conducted by the All Ukrainian rating magazine HVardiya.

August

SSPE Cartography supported by The World Bank and Concern Galnaftogaz published Global Problems of the World atlas.

By the decree of President of Ukraine №619/2009 from the 18th of August, 2009, the Head of the Board of Directors of Concern Galnaftogaz Vitaliy Antonov is awarded with an Order of merit of the ІІІ degree.

SeptemberThe Extraordinary meeting of Shareholders has changed the name of the Company to Public Joint Stock Company Concern Galnaftogaz (PJSC Concern Galnaftogaz).

According to accounting and consulting company Deloitte, which analysed the earnings of companies from 18 countries of Central and Eastern Europe, Concern Galnaftogaz took 292nd place among companies with the biggest volume of earnings in 2008.

Representatives of Galnaftogaz took part in the PR-Committee of the American Chamber of Commerce, which shared their experiences implementing Green Office programme.

Сoncern Galnaftogaz and Universalna Insurance Company purchased a car for Social taxi.

Concern Galnaftogaz as a signatory of the UN Global Compact has published the report on progress, which concerns Company’s concrete support of the principles of the Global Compact.

OctoberConcern Galnaftogaz entirely terminated the pilot project with a franchising network (jobbers) in Kyiv and Obukhiv and stoped the use of OKKO brand on these filling stations.

Annual report 200910

Hrebinky petroleum depot of Concern Galnaftogaz was put into operation after the reconstruction in Hrebinky village, Vasylkiv district of Kyiv region.

AEA Technology conducted an audit of OKKO branded filling complexes, transport and petroleum depot facilities of Concern Galnaftogaz and published preliminary report.

Representatives of Concern Galnaftogaz took part in the first Competition Forum of Ukraine in Kyiv.

Vitaliy Antonov, the Chief Executive Officer of Concern Galnaftogaz, appeared with a lecture at Second annual Ukrainian-Arabic conference Investment Opportunities in Ukraine held in Kyiv.

Prime minister of Ukraine yuliya Tymoshenko integrated Chief Executive Officer of Concern Galnaftogaz Vitaliy Antonov into the Council of Investors within the Cabinet of ministers of Ukraine.

Brand «OKKO» took 40th place in the rating of Ukrainian Brands

2009 – Top-50 national brands (consulting company mPP Consulting).

Pulls 95 advertising filmlet is aired on few national TV channels.

NovemberAccording to the rating «The richest companies of Ukraine», conducted by the All Ukrainian rating magazine HVardiya, our Company entered the number of country’s leading companies by the net income in 2008.

The web-site of OKKO filling complexes network became the holder of competition Grand Prix in «corporate sites» category, and Territory of Universal Service magazine took the second place in a category «internal corporate edition».

Top managers of the Company, Vasyl Danyljak and Nazar Kupybida, took part in «Entrepreneurs meet Investors» German Equity Forum conference hosted by Deutsche Boerse and the KfW SmE Bank in Frankfurt am main.

An equity injection agreement between EBRD and Concern Galnaftogaz

$ 50 million

According to the rating TOP-100 of the biggest companies of Ukraine, conducted by Investgazeta and Аvesta-Ukraine, Concern Galnaftogaz took 51st place. Rating was conducted on basis of net profit volume of the biggest Ukrainian companies in 2008.

DecemberConcern Galnaftogaz repre-sentatives participated in German Trade Congress (Deutscher Haldelskongress 09) on November, 18-19.

Concern Galnaftogaz won at the category «Environment protection» at First All Ukrainian Business Case Competition on Corporate Social Responsibility in the project «Development of a national agenda on CSR with its practice of Green office».

PJSC Concern Galnaftogaz was recognized the winner of contest of the best regular information of joint stock companies and companies issuing bonds, which was conducted by Securities and stock market state commission (SSmSC).


Legal entities with more than 5 per cent of all shares

Name % share capital

GNG RETAIL PUBLIC LImITED 71.56

European Bank for Reconstruction and Development (United Kingdom of Great Britain and Northern Ireland)

10.26

The bank of New york mellon (USA) 9.65

PJSC Concern Galnaftogaz Shareholders’ Structure

All shareholders: 11,768

Legal entities: 24

Individuals: 11,744

The share capital is divided into: 19,526,522,868 shares

Legal entities: 98.95%

(19,322,345,693 shares)


Concern Galnaftogaz’ share capital

195 million UAH

2 Water-based filling complexesConcern Galnaftogaz 13

SUPERVISORy BOARD

Vitaliy Antonov Chairman, Chief Executive Officer

Vasyl’ Danylyak Executive Member of the Supervisory Board, Chief Financial Officer

Yuriy Kuchabskyi Executive Member of the Supervisory Board, Chief Commercial Officer

Born in 1962 in Stryi, L’viv region.In 1988 graduated from Ternopil’ Financial and Economic Institute, Dpt. of Finance and Loans, Degree with Distinction.1991–1992 – Head of L’viv Regional Rescue Service of the Red Cross.1992–1995 – Director of Karat Company.1995–1997 – General Director of JSC Concern Galnaftogaz.1997–2001 – President of JSC Concern Galnaftogaz.Since 1999 – Honorary Consul (since 2007 – Honorary Consul-General) of the Lithuanian Republic in L’viv1999–2000 – Ukrainian Union of Industrialists and Businessmen, head of commission on questions of fuel and energy complex of UkraineSince 2001 – Head of the Supervisory Board of OJSC Concern Galnaftogaz (from the 14th of September – PJSC Concern Galnaftogaz)Since 2001 – Chairman of the Ukrainian-Lithuanian Taras Shevchenko fund.2004–2009 – President of Universal Investment Group.Since 2006 – Member of the Supervisory Board of Insurance Company Universalna.Since 2008 – Head of the Supervisory Board of Insurance Company Universalna.Since 2009 – Member of Council of Investors within the Cabinet of Ministers of Ukraine.The co-founder of L’viv Business School of Ukrainian Catholic University.The candidate master in alpinism and the candidate master in mountaineering.Awarded with an Order of Merit of the ІІІ degree and with governmental reward of the Lithuanian Republic «The Star of Lithuania’s Millennium».

Born in 1974 in Stryi, L’viv region.In 1996 graduated from Ivan Franko National University of L’viv, Dpt. of Economics, Degree in Economic Cybernetics.2001–2004 – Director of Financial Department, OJSC Concern Galnaftogaz.Since 2004 – Member of the Supervisory Board of OJSC Concern Galnaftogaz.Since 2004 – Executive Director of Universal Investment Group.Since 2006 – Member of the Supervisory Board of OJSC Concern Khlibprom.Since 2006 – Member of the Supervisory Board of Insurance Company Universalna.2008–2009 – First Deputy Head of the Board of Directors of OJSC Concern Galnaftogaz.Since 2009 – Executive Member of the Supervisory Board of OJSC Concern Galnaftogaz (from 14th of September – PJSC Concern Galnaftogaz), Chief Financial Officer.

Born in 1974 in Stryi, L’viv region.In 1996 graduated from Ivan Franko National University of L’viv, Dpt.of Economics, Degree in Economic Cybernetics.Since 1993 – worked as an accountanting consultant, IT specialist, sales manager, financial department specialist and director of various commercial structures.2001–2008 – General Director of OJSC Concern Galnaftogaz.2008–2009 – First Deputy Head of the Board of Directors of OJSC Concern Galnaftogaz.Since 2009 – Executive Member of the Supervisory Board of OJSC Concern Galnaftogaz (from the 14th of September – PJSC Concern Galnaftogaz), Chief Commercial Officer.


Oleksandr HehedyshExecutive Member of the Supervisory Board, Chief Operational Officer

Yulia AntonovaNon-executive Member of the Supervisory Board

Natalya Antonova Executive Member of the Supervisory Board, Chief Human Resources Officer

Born in 1965 in Mukachevo, Zakarpattya region.In 1993 graduated from L’viv State Institute of Applied and Decorative Arts. Now studies at L’viv Polytechnic University; organizational management specialty.1994–1997 – Director of Stailini Ltd.1997–2000 – worked in Leader dressmaking atelier.2000–2005 – hold management positions at DP Zakarpattiyanaftoprodukt-Uzhgorod.2005–2006 – Director of DP Vinnytsiyanaftoprodukt, a subsidiary of Concern Galnaftogaz2006–2008 – Operations Director of OJSC Concern Galnaftogaz.Since 2008 – Director of OJSC Concern Galnaftogaz.Since 2009 – Executive Member of the Supervisory Board, Chief Operational Officer PJSC Concern Galnaftogaz.

Born in 1985 in Stryi, L’viv region.Graduated from Ivan Franko National University of L’viv, Dpt. of Philosophy. MBA student at L’viv Business School at Ukrainian Catholic University.2004–2005 – specialist of sales department of TD Chamption LLC.Since 2006 – specialist of external economic relations of Universal Investment Group.Since 2006 – Director of Terrin LLCSince 2008 – Non-executive Member of the Supervisory Board of OJSC Concern Galnaftogaz (from the 14th of September – PJSC Concern Galnaftogaz).

Born in 1961 in Stryi, L’viv region.Graduated from the Faculty of Philosophy of Ivan Franko National University of L’viv2000-2001 – Director of Human Resources Department of JSC Galnaftogaz.2001-2008 – Member of the Supervisory Board of OJSC Concern Galnaftogaz.Since 2004 – Vice-president of Universal Investment Group.2006-2007 – Member of the Supervisory Board of OJSC Insurance Company Universalna2006-2008 – Member of the Supervisory Board of OJSC Concern Khlibprom.Since 2009 – Executive Member of the Supervisory Board of OJSC Concern Galnaftogaz (from the 14th of September – PJSC Concern Galnaftogaz), Chief Human Resources Officer.Since 2010 – Member of the Supervisory Board of OJSC Concern Khlibprom.


Vadym Vyshnevskyi Non-executive Member of the Supervisory Board

Oleh Pas’ko Executive Member of the Supervisory Board, Chief Legal Officer

Matteo Colangeli Non-executive Member of the Supervisory Board

Born in 1963 in Sadgora, Chernivtsi region.Graduated from the law faculty of Transcarpathian State Unuiversity and from the law faculty of Kyiv University of Law of the National Academy of Sciences of Ukraine.1994-1996 – Director and President of TNK-Service LLC1996-1997 – Deputy Director of manufacturing and trading enterprise Karat-Trading1997-1998 – Deputy Head on overhead questions of manufacturing and trading enterprise Karat-Trading1998-2000 – Chairman on overhead questions of CJSC Galnaftazbut2000-2002 – Мember of the Board of Directors of OJSC Concern Galnаftogaz2002-2003 – Deputy Director on strategic development of OJSC L’viv bakery No.52003-2008 – General Director of OJSC Concern KhlibpromSince 2008 – Vice-president of Universal Investment GroupSince 2008 – Head of the Supervisory Board of OJSC Concern KhlibpromSince 2008 – Member of the Supervisory Board of OJSC Insurance Company UniversalnaSince 2009 – Non-executive Member of the Supervisory Board of OJSC Concern Galnaftogaz (from the 14th of September – PJSC Concern Galnaftogaz).

Born in 1973 in L’viv.In 1995 graduated from Ivan Franko National University of L’viv, Dpt. of Economics,in 1999 – got degree in Law in Ivan Franko National University of L’viv. Lawyer.1995–2000 – Worked in different state tax offices.2001–2003 – Legal adviser at OJSC Concern Galnaftogaz.2003–2005 – Director of Law Department, OJSC Concern Galnaftogaz.2005–2008 – Law Director, OJSC Concern Galnaftogaz.2008–2009 – Member of the Board of Directors of OJSC Concern Galnaftogaz.Since 2009 – Executive Member of the Supervisory Board of OJSC Concern Galnaftogaz (from the 14th of September – PJSC Concern Galnaftogaz), Chief Legal Officer.

Born 21.10.1974 in Italy. Citizen of Italy.Took a degree in politics in the University of Sussex (UK) and master degree in European studies at London School of Economics (UK).Worked as a senior consultant at Arthur Andersen, then worked in the Royal Bank of Scotland, first in credit, and then as an associate director in capital markets origination.Since 2005 he has been working in EBRD and today he is the principal banker of Natural Resources department.EBRD representative in Board of directors of Kazakh company Balykshy LLP.


Stephan DuCharme Independent Member of the Supervisory Board

Andriy Kostyuk Corporate Secretary

Born in 20.04.1964 in Addis Abeba, Ethiopia, citizen of the USA and GermanyGraduated from the University of California at Berkeley, Degree with Distinction and received an MBA degree at INSEAD business school.Has held executive positions in such organizations and companies as EBRD, Alfa Group and SUN Group.Has served as a member of the Boards of Directors of CSA Czech Airlines, Alfa-Bank and SUN-Interbrew Ltd, and also as an independent director of Siberian coal energy company OJSC (SCEC).Currently Mr. Stephan DuCharme holds a position of Adviser in SUN Group, and is the member of the Board of Directors (on behalf of EBRD) of Iberia Refreshments (Georgia) and the member of the Board of Directors of Х5 Retail Group.

Born in 1969.In 1994 graduated with distinction from the faculty of law of Ivan Franko L’viv State University.Since 1997 – Advocate of the Advocate company Pavlenko, Statsenko and Osinchuk.Since 1997 – Master’s degree in philosophy, International academy of philosophy in Liechtenstein.Since 2002 – Guest lecturer of philosophy department of Ukrainian Catholic University.Since 2003 – Vice-president of the Advocate company Pavlenko, Statsenko and Osinchuk.2008-2009 – Vice-president of Universal Investment Group.Since 2008 – Corporate Secretary of OJSC Concern Galnaftogaz.


mANAGEmENT BOARD

Nazar Kupybida Head of the Management Board

Oleh Antonov Member of the Management Board

Andriy Vyshnevskyi Member of the Management Board

Born in 1978.In 2000 graduated from Ivan Franko National University of L’viv, Dpt. of Economics2001–2002 – specialist of Financial Office, OJSC Concern Galnaftogaz2002–2004 – Head of Financial Office, OJSC Concern Galnaftogaz2004–2005 – Director of Financial Department, of OJSC Concern Galnaftogaz2005–2008 – Financial Director of OJSC Concern Galnaftogaz2008 – Member of the Board of Directors of OJSC Concern GalnaftogazSince 2009 – Head of Management Board of PJSC Concern GalnaftogazMBA student at Kyiv-Mohyla Business School.

Born in 1956 in Petrovs’ke village of Narofominsk district, Moscow oblast’1978 – graduated from Kamyanets’-Podils’kyi Teacher Training College, Dpt. of Physical Training and in1989 – graduated from Ivan Franko State University of L’viv, Dpt. of Law1978 – teacher-organizer of Stryi municipal housing administration1980–1981 – Head of department of Komsomol organisations of Stryi urban Komsomol Committee1982–1999 – service at executive positions in Ministry of Internal Affairs1999 – Head of security service of OJSC L’vivnaftoprodukt1999–2001 – assistant of Head of the Management Board of CJS Concern Galnaftogaz in security issues2001–2003 – Director of security department of OJSC Concern GalnaftogazSince 2003 – Head of the Management Board of CJS Agency of economic security EfortSince 2009 – Member of the Management Board of PJSC Concern Galnaftogaz.

Born on the 9th of February, 1979 in Stryi, L’viv region.Incomplete higher education; Department of Applied Mathematics and Informatics of Ivan Franko State University of L’viv1998–1999 – Programmer of JV OJSC Galnafta-Ventus 1999–2001 – Programmer of Joint-Stock Company Galnaftogaz2001 – Director of software department of Joint-Stock Company Galnaftogaz2001–2004 – Director of software department of OJSC Concern Galnaftogaz2004–2005 – Director of IT-department of OJSC Concern Galnaftogaz2005–2009 – Head of IT-department of OJSC Concern Galnaftogaz2009 – Chief of IT-department of OJSC Concern GalnaftogazSince 2009 – Director of IT-department of OJSC Concern GalnaftogazSince 2009 – Member of Management Board of PJSC Concern Galnaftogaz.


Vasyl’ Dmytriv Member of the Management Board

Olena Leksikova Member of the Management Board

Roman Syvyi Member of the Management Board

Born in 19781999 – graduated from Ivan Franko National University of L’viv, Dpt. of Mechanics and Mathematics, Degree with Distinction1999–2003 – graduate student of Differential Equations chair of Ivan Franko National University of L’viv2002–2004 – postmaster program Mathematics for Industry, Eindhoven University of Technology, Netherlands. Gained Professional Doctorate in Engineering Degree2004–2005 – manager on external economic relations, PE Ukrchemreserve2005 – manager on oil products delivery and sale, The trading house Galnaftogaz LLC2005–2007 – chief specialist-analyst on commodity market research of marketing department, OJSC Concern Galnaftogaz2007–2008 – head of the sector of analysis and research of marketing department, OJSC Concern Galnaftogaz2008 – head of analysis and research department, OJSC Concern Galnaftogaz2008–2009 – head of marketing department, OJSC Concern Galnaftogaz Since 2009 – Chief of marketing department, OJSC Concern GalnaftogazSince 2009 – Member of Management Board of PJSC Concern Galnaftogaz.

Born in 1963.In 1985 graduated from Ivan Franko National University of L’viv, Dpt. of Economics.Worked as an economist and an accountant at different companies.2001– 2005 – Chief Accountant of OJSC Concern Galnaftogaz.2005 – 2006 – Accounting and Reporting Director, Chief Accountant.2006 –2008 – Auditing Director of OJSC Concern Galnaftogaz.2008 – 2009 – Head othe Audit Commission of OJSC Concern Galnaftogaz.Since 2009 – Member of Management Board of PJSC Concern Galnaftogaz.

Born in 1981 in L’viv.2003 – graduated from Ivan Franko National University of L’viv, Dpt. of Law, Degree with Distinction, master’s degree in law, Cand. Sc. in law, advocate.2004–2007 – graduate student of scientific-research institute of private law and enterprise of Academy of law sciences of Ukraine.2004–2006 – assistant of civil law and process chair of Ivan Franko National University of L’viv2005–2006 – legal adviser of OJSC Concern Galnaftogaz.2006–2008 – head of department of contract and legal activity of OJSC Concern Galnaftogaz.2007–2009 – research officer of scientific-research institute of private law and enterprise of Academy of law sciences of Ukraine.2008–2009 – head of department of corporate governance and competitive law of OJSC Concern Galnaftogaz.Since 2007 – associate professor of special legal disciplines chair of L’viv state institute of the newest technologies and management named after V. ChornovilSince 2009 – director of law department of OJSC Concern Galnaftogaz.Since 2009 – member of the Management Board of PJSC Concern GalnaftogazMember of the Securities and Stock Market State Commission’s Expert Advisory Board.Author (co-author) of more than 60 research and practical works.


PJSC Concern Galnaftogaz management Structure

Shareholders meeting Executive Body

Supervisory BoardExecutive Director

Chief Operation Officer

Chairman of the Supervisory BoardChairman and CEO

Head of the Board of Directors

PRESIDENTHead office divisions

Operational management,

implementation of decisions made by

the management board

Branches and Subsidiaries

of PJSC Concern Galnaftogaz

Implementation of the Company’s strategy

in the covered regions

Vinnytsiya branch

Zakarpattya branch

Ivano-Frankivsk branch

Kyiv branch

Kirovohrad branch

L’viv branch

Odesa branch

Rivne branch

Kharkiv branch

Tobi-GNG Private Enterprise

(to operate a network of convenient-stores)

Avtotranskom Private Enterprise

(to operate a fleet)

Executive memberof the Supervisory Board

ChiefFinancial Officer


ChiefCommercial Officer


ChiefHuman Resources Officer

Executive memberof the Supervisory Board,

ChiefLegal Officer

Non-Executive members

of the Supervisory Board

Other subsidiaries working in construction, economic security, chemical production,

distribution and transport industries


The total number of the Company’s employees

5 354 people


FUEL mARKET ANALySIS

The undoubted and significant impact of economic crisis on fuel retail market in Ukraine resulted in reducing of total fuel consumption in 2009. In general, the fall was 10.1 per cent, while in previous years there was a clear annual market growth of 5-7 per cent. It should be noted that the major drop occurred in direct sales to industrial enterprises, which consumption fell by 22.2 per cent (estimated).

According to our estimates, retail sales, where the Company is actively operating, fell by 8.7 per cent, while sales through our network fell only by 5.7 per cent.

The most profound fall in sales was that of corporate clients. Sales to individuals in general in 2009 fell by 3 per cent compared with 2008. Fall was negligible due to record sales of new cars in 2008 in Ukraine. In terms of sales to public OKKO filling complexes network boosted with 10 per cent growth. This result was achieved due to the fact that, despite the crisis, we guarantee our clients high-quality fuel from European refineries in the whole network. Also, despite the fact that last year many companies reduced their marketing budgets, we chose the opposite way. With the help of active marketing policy we managed to increase cash sales by 15-20 per cent in the second half of the year compared with 2008 and kept these and even the higher rates before the end of the year. In particular, in the second half of 2009 FISHKA loyalty bonus program was launched and already more than half of our customers are active members of it. Due to this program we have become closer to our customers and have actually established a direct communication with them.

If you return to the market analysis, another trend became clearly visible. market share of sales in small local networks decreased from 35 per cent in 2008 to 25 per cent in 2009. This indicates that the client prefers large

branded networks. We expect the continuing reduction of this segment. And we will try to do everything possible for the client to opt OKKO filling complexes.

By the end of 2009, the number of filling stations in Ukraine totalled to 6217, which was 72 outlets more than in December 2008.

As to fuel supply, Ukrainian refiners increased fuel production by 6.2 per cent (diesel – by 7.7 per cent, petrol – 4.7 per cent). Fuel import decrease was 29.6 per cent in comparison to 2008. The share of imported fuels in 2009 reached 38.7 per cent (49.3 per cent in 2008), in particular petrol – 34.7 per cent (42.5 per cent), and diesel – 42.5 per cent (55.5 per cent).

Key fuel retailers and their networks

0

200

Dec 2007

Dec 2008

Dec 2009

400

600

800

1 000

1 200

ANP

467

458

451

WOG

328

376

381

GNG

251

293

309

Lukoil

256

274

280

Shell

140

152

160

Formula

100

107

115

Avias/Ukrnafta

Gefest/Ukrnafta

105

104

108

1 084

1 101

1 136


Volatility of A-95 retail prices (relation between the lowest and the highest prices within a certain period) was 46 per cent, and wholesale 51 per cent, and for diesel – 21 per cent and 46 per cent respectively.

We expect further market growth. Since the number of cars per 1000 people in Ukraine is among the lowest in Europe, the positive trend of new cars sales in the near future is to recover, leading to market growth of individual sales. As the country will recover the crisis, the market sales of oil products to corporate clients are to increase.

cash sales increase due to the Company’s marketing policy

15-20%


OIL PRODUCTS SALES

In 2009 filling complexes sold 641 thousand tons of light oil products, that was 5.03 per cent less than in 2008. We estimated our market share in fuel retail and by the end of 2009 it reached 11.7 per cent (9 per cent at the end of 2008). Concern Galnaftogaz is the company of a national scale, as it is represented in all regions of Ukraine, except Sumy, Donetsk and Luhansk regions.

LPG sales increased by 47.9 per cent. This growth was secured by new LPG facilities (12 modules), correct pricing policy and increased demand due to the rapid increase of petrol prices (daily LPG sales grew by 4.0 per cent in comparison to 2008). LPG share in the fuel sales structure grew from 1.6 per cent in 2008 to 2.4 per cent in 2009. Taking onto consideration the current price situation, we forcast that the demand for LPG, as alternative and cheaper fuel, will continue to grow.

The ratio of fuel sales in 2009 compared to 2008 is -2.2 per cent, diesel was -11.9 per cent. As of cash sales, the increase for fuel sales was 5.4 per cent, diesel 24.5 per cent. Total non-cash sales of fuel were -26.6 per cent, diesel -41.9 per cent. As we can see, a much larger impact of the crisis was on non-cash sales. Although there has been a fact of non-cash outflow of customers to small wholesale, and its growth in 2008 was 26.0 per cent. The total ratio for non-cash sales plus small wholesale was down 22.3 per cent.

During 2009 the Company sold only imported A-95 of Euro 4 and Euro 5 standards. Due to its high quality and advertising support we provided fuel sales growth of 24.5 per cent.

In 2009, OKKO branded filling complexes continued to sell Pulls 95 branded fuel of the highest international standards (Euro 5) with improved technical properties. This fuel has 16.4 per cent in total A-95 sales volumes.

A-95 and diesel prices at complexes

4,50

5,00

RON 95

Diesel

5,50

6,00

6,50

7,00

7,50

8,00

Jan

5.45

5.78

Feb

5.72

5.84

Mar

5.73

5.59

Apr

5.83

5.38

May

6.02

5.37

Jun

6.62

5.33

Jul

6.83

5.49

Aug

7.44

6.08

Sep

7.81

6.47

Oct

7.55

6.25

Nov

7.63

6.39

Dec

7.15

5.87

Concern Galnaftogaz supply structure 2009

Russia 0.4%Lithuania 16.0%Romania 7.0%

Belarus 57.3%

Poland 19.3%


At the end of 2008 Concern Galnaftogaz operated 288 filling complexes, of which 260 complexes were OKKO-branded. At the end of 2009 Concern Galnaftogaz operated 301 filling complexes, of which 278 complexes were OKKO branded.

Diesel supply to Ukrainian market in 2006-2009, thousand tons

0

500

Dec 2006

Dec 2007

Dec 2008

1 000

1 500

2 000

2 500

3 000

3 500

Lysychansk

1 401

1 615

1 239

Dec 2009 1 386

Kremenchuk

1 837

1 653

774

1 014

Odesa

0

0

655

660

Nadvirna

477

322

122

56

Drohobych

282

221

206

147

Shebelynka

214

280

212

190

Import

1 768

2 123

3 173

2 160

Export

501

533

660

565

Sales dynamics through the OKKO network, tons

0

50 000

2005

2006

2007

100 000

150 000

200 000

250 000

300 000

350 000

400 000

450 000

Petrol

210 319

238 283

326 334

2008 411 889

2009 403 072

Diesel

146 595

183 766

239 518

251 933

221 902

LPG

932

2 660

8 389

10 544

15 666

Average daily sales, litres

0

2 000

2005

2006

2007

4 000

6 000

8 000

10 000

12 000

OKKO complexes

10 468

9 890

10 435

2008 9 640

2009 7 816

Non branded complexes

2 499

2 709

2 841

2 685

2 566

All complexes

7 663

7 987

8 964

8 681

7 367


CONVENIENT-STORES, RESTAURANTS AND SERVICESAt the end of 2009, the filling complexes network operated 274 outlets, of which 254 outlets were designed in OKKO convenient-store format. In total, 18 new convenient-stores at OKKO filling complexes were opened in 2009.

sales of consumer goods at OKKO convenient-stores, which was up by 19.7 per cent to 2008.

monthly average sales per convenient-store grew to 119,608 UAH. OKKO convenient-stores had average monthly sales of 130,113 UAH per outlet, up by 4.5 per cent in comparison to 2008.

Average retail floor at OKKO forecourt grew from 59.2 sq m in 2008 to 62.9 sq m in 2009. Sales revenue per 1 sq m reached 2,069 UAH in 2009 and in 2008 it was 2,102 UAH.

Such an important indicator as sales revenue per 1,000 litres also grew up making 608 UAH, which is up by 34.0 per cent in comperison to the previous year.

Customer goods revenue through Khlibna Khata and Ecolan networks was 169,025 thousand UAH (including VAT). It drew by 1.6 per cent in acoordance with 2008. Although the average monthly sales per outlet grew by 16.2 per cent, in 2009 it reached 145,961 UAH.

Average retail floor of Khlibna Khata and Ecolan outlets was 50.6 sq m in 2009. Sales revenue per 1 sq m reached 3,396 UAH (in 2008 it was 3,164 UAH).

OKKO convenient-stores average monthly sales, UAH

2009

130 113

4.5

0

20 000

year

for year

growth

40 000

60 000

80 000

100 000

120 000

140 000

2008

124 537

19

2007

104 919

24

2006

84 802

11

2005

76 457

17

2004

65 270

30

2003

50 018

- - -

Convenient-stores average monthly sales per 1,000 litres, UAH

2009

608

34.9

0

100

year

for year

growth

200

300

400

500

600

700

2008

451

23

2007

366

31

2006

278

15

2005

243

0

2004

242

70

2003

142

- - -

Consumer goods revenue through the Company’s convenient-store network reached 387,890 thousand UAH (including VAT) in 2009. It grew 19.1 per cent in comparison to 2008. This includes 384,875 thousand UAH


Car washesOKKO filling complexes network offered car wash service at 27 sites, including 25 automatic car washes and 2 truck wash units. Revenues from services in 2009 amounted to 7,970 thousand UAH.

Non-cash salesIn 2009 Ukrainian companies experienced the impact of the crisis. Due to this there was a significant reduction in the market of oil products consumption – by 14 per cent compared with 2008. This is especially noticeable in the following sectors: construction – 41 per cent, finance – 26.8 per cent, consumer goods industry – 29.3 per cent, intermediacy – 19.8 per cent, food production – 19.7 per cent, transportation – 18 per cent. At the same time there was a significant worsening of the financial performance of enterprises, which in turn threatened the growth of cases of unclosed payments.

The need for total savings regime has forced some companies to search for cheaper resource, thus enterprises started to filling their transport not at filling complexes but from the tanks installed on their own territory. To recent sales volumes in this category we used small wholesale from Galnaftogaz’ fuel depots. In 2009 sales from small wholesale grew by 26 per cent compared with 2008.

The non-cash sales market share in 2009 was 10.8 per cent (compared with 11.9 per cent in 2008).

RestaurantsA la minute restaurants became an integral feature of motorway OKKO filling complexes. These cozy fast food restaurants offer customers dishes of European cuisine at reasonable prices.

A’la minute network focuses on customers who are traveling with their families, and business class customers, offering a wide selection of exquisite dishes. The menu also includes vegetarian and dietary dishes, food for children. For Ukrainian cuisine lovers we have traditional Ukrainian menu, which is also very popular among customers.

In 2009, A la minute restaurant network gained 4 new restaurants, and at the end of 2009 the network consisted of 19 restaurants located on major motorways in Ukraine at OKKO filling complexes.

Financial performance in 2009 indicates the growing popularity of restaurants. Total sales revenues had doubled during the year and reached 30,947 thousand UAH. The average monthly number of customers increased by 7.3 per cent in comparison with 2008. The average monthly sales per restaurant grew up by 23.7 per cent and sale per 1 sq m of sales floor grew up by 26 per cent. In 2009 the network of fast food restaurants A la minute had 1,117,333 orders (589,000 receipts in 2008).

Key indicators 2008 2009 growthTotal sales, UAH 14 131 552 30 946 571 119%

Average monthly sales, per restaurant 110 776 142 797 29%

Number of restaurants (at the end of the year) 15 19 27%

Number of orders 588 240 1 117 333 90%

Average order, UAH 24.0 27.7 15%

Clients turnover, per seat/month 85.0 93.4 10%

growth of monthly average sales per A la minute restaurant

23.7per cent


LOGISTICS

Fuel depots

The Company has access to storage facillities of 11 fuel depots in western and central parts of the country with the total storage capacity of 100 thousand cubic metres. At the end of the year, the Company operated 10 fuel depots, 1 was in rent, and 17 tank farms with storage capacity of 140 thousand cubic metres were put for temporary shutdown.

Existing fuel tanks provide the necessities of oil storage, and their convenient geographic location solves logistics challenges.

Today the main efforts are made to develop fuel depots in order to improve existing facilities. In particular, large-scale or local activities are conducted to replace existing equipment to increase the efficiency of oil storage.

In 2009 extensive works has been conducted in the village of Hrebinky, Kyiv region, where after the reconstruction Hrebinkivska fuel depot was put into operation. The fuel discharge from a tank from the fuel depot started in October. At Hrebinkivska depot the reconstructions were conducted on storage tanks and automatic fuel stock management system was installed. At the fuel depot there is a certified petroleum quality control laboratory. All equipment meets state standards of Ukraine.

In 2009 the planned reconstructions were done at fuel depot in yarmolyntsi, Khmelnytskyi region. The total storage volume of light oil products at yarmolynetska depot is 5 thousand cubic metres. It was put into peration after the reconstruction in February, 2010.

total fuel storage capacity

Up to 100 thousand cubic metres


Transport

In the structure of Concern Galnaftogaz there is Avtotranskom transportation company, which offers freighting and oil products transportation. The available technological resources and extensive experience in logistics significantly affect the solution of transport problems of the Company.

The fleet capacity helps to provide passenger transportation, freighting and transportation of dangerous goods, serving for both internal and external needs.

As of December 31, 2009, the total number of vehicles amounted to 473, including 99 oil tank trucks and 4 gas tank trucks. The total oil tank capacity is about 2.9 million litres. Transport dislocation covers a number of cities in different regions of Ukraine, providing fast oil products transportation to OKKO branded filling complexes and other clients. All the fleet vehicles and 142 motor cars are equiped with GPS devices.

The fleet was renewed in 2007-2008 with total investments of about 70 million UAH (including VAT). The fleet consists of tank trucks with a wide range of capacities (from 6 to 32 thousand litres), trailers and semi-trailers. This allows to provide optimal transportation to different locations. In addition, large-capacity tank trucks are divided into sections, allowing a flight to meet the needs of filling stations in the four types of fuel. According to the terms of transportation and mileage calculations, tank trucks’ lifetime is 6-7 years.

investments into the renewal of the fleet

70 million UAH


In addition, accreditation helped to reduce the cost for the certification of oil products in 2009 (from may to December) by 800 thousand UAH.

The device determining the coke residue in Euro diesel was purchased for Rivne laboratory. In 2009 L’viv, Vinnytsya, Hrebinky and 2 mobile laboratories were certified by Derzhstandart to perform fuel quality tests. This confirms the legitimacy of laboratories and allows them to provide analysis on a paying basis.

Laboratory in yarmolyntsi, Khmelnytskyi region, is equiped and opened. In particular, the unit for measuring the sulfur content Spektroskan was purchased. Despite difficult market conditions, laboratories managed to avoid staff turnover and retain a staff of experienced professionals, although by reducing the workload of each employee. At the same time, Hrebinky fuel depot, Kyiv region, was reequiped and laboratory in Khust, Zakarpattya region, was closed.

In 2009 the fuel test center laboratories made considerable work on research into alternative fuels and the effect of additives on the quality of fuel and diesel.

L’viv laboratory was licensed by Committee on Drug Control for the right of acquisition, storage and use of precursor drugs, the documents for the licensing of related precursors in other laboratories is being prepared. In connection with this project in the laboratories in Galych, Uzhgorod and Vinnytsya fire alarm systems were installed.

reduction in oil products certification costs in 2009

800 thousand UAH

In may, 2009 Rivne fuel test centre was accredited at Ukraine’s National Centre of Accreditation. This allows this unit to conduct certification tests for compliance certificates for all imported fuel and lubricants (POL).

QUALITy CONTROL


Concern Galnaftogaz’ mobile laboratories expanded the range of indicators for filling complexes control. In connection with the operation of Hrebinkivska and Kharkiv stationary laboratories mobile laboratories’ sphere of responsibility has shifted to the south of Ukraine: the complexes were actively tested in Odesa, mykolayiv, Kherson regions and the Crimea. It provides ongoing oil products quality control in regions where there are no stationary laboratories of the Company. In addition, mobile laboratories provide quality control at the filling complexes, which are supplied with fuel from Brody, Stryi and Vapnyarka fuel depots. These complexes are located in the south of Vinnytsya region, south and north of L’viv region, and in Ternopil’ region.

including 2 mobile laboratories

8 laboratories were accredited

The fourth level of fuel control was fanilized in 2009, it implies a fuel quality control in a tank carriage in a customs zone. The effect of the implementation of this procedure is absence of doubt concerning the fuel quality at customs and possible penalties.

In 2009 the implementation of SAP ERP applications in the process of fuel quality control was completed. The advantage of the program is that, when transporting fuel from a fuel depot to a filling complex, fuel is provided with all necessary documents (such as passport, certificate of authenticity, etc.).

In 2009 the sales revenue of laboratory services decreased due to the crisis. One reason of this was the termination of state funding of the Consumer Protection Office, one of the most important customers of our laboratories.

In 2009 the quality control department staff participated in international conference «Biofuels Ukraine – 2009», seminar «Tytrometrical methods of analysis and use of automatic titrator», press conference of L’viv Press Club «The quality of oil products in Ukraine: new standards and market realities», and were trained to work in SAP.


FINANCIAL PERFORmANCE

In 2009 Concern Galnaftogaz used the investments to expand OKKO network through construction and upgrading existing complexes, acquisition of new complexes, and also financed its working capital.

In 2009 the Company adhered to the restrained policy in development of filling complexes network due to the negative impact of the global economic crisis. Long-term credit funds for the development of filling complexes network were provided by creditors, international financial institutions and reliable partners of Galnaftogaz – European Bank for Reconstruction and Development (EBRD) and International Finance Corporation (IFC). Short-term credit funds were provided by domestic branches of foreign banks – OTP Bank, ING Bank, UniCredit Bank, Calyon Bank and others. Short-term credits were successfully prolonged in difficult 2009.

By the end of 2009, Concern Galnaftogaz credit liabilities were up by 23.3 million USD in comparison with 2008 and reached 289.6 million USD. Overall, in 2009 the Company had loans in amount of 638.0 million UAH and made payments on loans of 433.9 million UAH.

In 2009 the Company has not signed any new investment loan agreement, but instead received loans in amount of 80 million USD under the current investment loan agreements signed between Galnaftogaz and EBRD / IFC in 2007 for the total amount of 200 million USD. At the end of 2009, the amount of loans involved for the investment programme has increased (compared with 2008) by 55.4 million USD to 289.5 million USD.

The Company’s loan portfolio consisted of four large long-term credits from EBRD – 40 per cent, IFC – 39 per cent, Raiffeisen Bank Aval – 12 per cent and the Black Sea Trade and Development Bank – 8 per cent. Series E, D, F bonds occupied only 0.1 per cent of the total loan portfolio, and all short-term loans were repaid by the Company, as of 31 December 2009. Investment credits, which are denominated in US dollars and are pegged to LIBOR rate, are to be paid under the relevant loan agreements for up to 2016. The overall limit on short-term loans, all of which are blank (unsecured), as of 31 December 2009 was about 100 million USD.

To strengthen the financial stability in times of financial crisis and political instability, we decided to join our longtime partner EBRD to the

equity. The Agreement states that the Company sold shares worth 20 million USD in 2009 and has the right but not the obligation, according to clearly defined mechanisms, to sell EBRD shares in the amount of 30 million USD during the period of 3 years since the signing of the Agreement (July 2009). The decision to sell the stake in the Company was difficult, but at the moment, the Company has the financial credit institution with global reputation as its shareholder, which will make the contribution to the development of the Company, especially in the sphere of corporate governance. Funds raised from the shares sale were used to repay short-term loans, partially to fund capital costs, increase working capital, and as investments in company’s energy efficiency.

Thus, in September 2009, the Company’s shareholders agreed to issue additional shares in the amount of 2,931,936,197 at a nominal value of 0.01 UAH and with cost allocation of 0.08 UAH. Galnaftogaz statutory capital was increased to 19,526,522,868 common shares and as of 31 December 2009, it totaled to 195,265,228 UAH. Formal procedure of capital increase has ended in 2010.

EBRD funds for shares of a new release almost did not change the equity ratio to the total value of liabilities – its share in total amount of liabilities compared to 2008 was 33.9 per cent, while as of December 31, 2008 it was 36.1 per cent. However, in terms of financial stability, due to the contribution of the EBRD to Galnaftogaz equity, shareholders’ equity increased by 20,027 million UAH, allowing to

Loan portfolio structure, million USD

EBRD 117.9 USD

IFC 113.7 USD

BSTDB 22.5 USD

Bonds 0.1 USD

Total 291.6 USD

Rai�eisen Bank Aval 35.4 USD

IFC 39%

BSTDB 8%

Rai�eisen Bank Aval 12%

EBRD 40%


disburse investment loans in the amount of 65 million USD by the end of the year, under the credit agreement of 2007, signed with the EBRD/IFC.

In 2009, the shares of PJSC Concern Galnaftogaz continued to be placed on the PFTS, and depository receipts – on the Frankfurt Stock Exchange. In late 2009 the Company started and successfully completed in 2010 the process of listing shares on an alternative PFTS Stock Exchange – Ukrainian Stock Exchange. Due to the negative impact of the global financial crisis, 2009 was not the best time for the growth of the Company’s share price – according to agreements carried out on the PFTS, the average share price of Concern Galnaftogaz in 2009 fell by 1.3 times and amounted to 0.0774 UAH (0.1036 UAH in 2008). The first transaction at a price of 0.08 UAH per share was made on January 14, 2009, and the last at a price of 0.102 UAH per share on December 30, 2009. In 2009 the deals worth 1,662.3 thousand UAH were signed on the PFTS (43,198.2 thousand UAH in 2008). Galnaftogaz’ shares bid price was in the range from 0.01 UAH per share to 0.08 UAH per share, and ask price was in the range from 0.07 UAH per share to 0.2 UAH per share. In 2008 this prices varied from 0.01 UAH to 0.12 UAH per share, and from 0.05 UAH to 0.3 UAH per share respectively.

On the Frankfurt Stock Exchange in 2009 there was a small number of transactions amounting to about 1,800.0 thousand USD. Galnaftogaz’ depositary receipt price (1 depositary receipt = 500 shares) during the year showed a slight tendency to increase, especially at the end of the year. At the beginning of the year (01/02/2009) the price of one receipt amounted to 1.750 EURO, and at the end of the year (30/12/2009) – 2.700 EURO. The maximum value during the whole year – 2.700 EURO, minimum – 1.650 EURO. The average price of a receipt in 2009 was 1.946 EURO, or 0.0445 UAH per share.

Concern Galnaftogaz cash �ow, thousand UAH

Cash �ow fromoperational activity

Cash �ow from�nancial activity

Cash �ow frominvestment activity

Repayments of loansand interestЕBITDA

0

-200 000

-400 000

-600 000

200 000

400 000

600 000

-69 327

57 083

220 273

88 987

177 014

202 674

432 669

436 008

-104 693

-223 333

-649 036

-511 974

82 357

132 750

182 288

366 166

-63 442

-126 106

-255 139

-318 849

2005

2006

2008

201 016 177 148 -279 460 459 676 -620 6772009

2007


INVESTmENTS

In 2009 Concern Galnaftogaz continued to implement the strategy of expantion of the nationwide network of OKKO filling complexes.

In 2009 the Company’s capital investments amounted to 319.8 million UAH and were, in comparison with 2008, down by 42 per cent. This was due to the global economic crisis, and as a result, due to careful attitude to capital investments. The main areas of investments as previously were: the acquisition, construction and reconstruction of the complexes, preparation of filling stations to be set in operation, and reconstruction of fuel depots and land acquisition for the construction of new filling complexes.

The Company’s filling complexes network has increased by 13 complexes and at the end of 2009 it has numbered 301 filling complexes, of which 278 OKKO filling complexes and 23 non-branded filling complexes. The total number of OKKO branded filling complexes increased by 18 complexes. At the end of the year few filling complexes were under reconstructions and were set in operation in 2010. In 2009, 11 LPG stations were set in operation (the total amount of LPG stations as of December 31, 2009 was 110).

In 2009 Concern Galnaftogaz has been successfully implementing a strategy to consolidate its position in the oil market of Ukraine and continued to increase its presence in new regions of Ukraine – two SLR OKKO filling complexes were opened in Chernivtsi region.

In 2009 the Company continued to increase the number of «high speed» (with high average daily sales) OKKO filling complexes – motorway complexes that offer customers a wide range of services: comsumer goods, carwashes, cafes, restaurants, internet, laundry, etc. Four new motorway complexes were opened in Rivne and Odesa regions.

In Ivano-Frankivsk region the first Concern Galnaftogaz CNG (compressed natural gas) filling station was opened in June. At the time this is the only Company’s CNG filling station, but 6 more are to be opened in near future.

In 2009 the Company successfully continued to develop French cuisine fast-food restaurants A la minute. At the end of the year, there were 19 such restaurants at big motorway OKKO filling complexes, which is up by 5 in comperison to December 31, 2008. In addition, in 2009 the Company developed network of To Kava branded coffee shops and network of TOBI branded stores located at OKKO filling complexes..

Investments

2009

319 807

0

100 000

year

capitalinvestments

200 000

300 000

400 000

500 000

600 000

700 000

2008

555 329

2007

651 253

2006

224 812

2005

109 350

2004

65 948

Concern Galnaftogaz �lling complexes

2009

297

274

0

50

year

Total number

OKKO-brandedcomplexes

100

150

200

250

300

2008

288

260

2007

252

208

2006

200

157

2005

176

115

2004

159

94


capital investments in 2009

319.8 million UAH

increase in the number of Company’s filling complexes in 2009, with the total number of 278 complexes18


2010 STRATEGIC OBJECTIVES

Total number of filling complexes 322 (299 OKKO branded)

New OKKO-branded complexes 21

motorway complexes 17

Retail

Fuel sales709 thousand tons /

5 702.5 million UAH

Ukraine’s fuel market share, tons 10.8 %

Consumer goods and services sales revenue

521.4 million UAH (including top-up cards)

Share of consumer goods and services in total sales 8.4 %

Share of consumer goods and services in gross margin 12.4 %

Financial indicators

Sales revenue 7 312.6 million UAH

EBITDA 522.3 million UAH

EBIT 395.3 million UAH

Net profit 126.1 million UAH

Capital investments 525.2 million UAH

Total assets 5 377.0 million UAH

Equity 2 026.2 million UAH

Liabilities 2 116.0 million UAH

Share of shareholder’s equity 37.7 %

ROA 2.4 %

ROE 6.6 %


2013 STRATEGIC OBJECTIVES

Total number of filling complexes 358 (335 OKKO branded)

New OKKO-branded complexes 58

motorway complexes 22

Retail

Fuel sales913.8 thousand tons /

8 121.6 million UAH

Ukraine’s fuel market share, tons 13.8 %

Consumer goods and services sales revenue

957.6 million UAH (including top-up cards)

Share of consumer goods and services in total sales 10.5 %

Share of consumer goods and services in gross margin 16.3 %

Financial indicators

Sales revenue 10 289.1 million UAH

EBITDA 763.3 million UAH

EBIT 569.7 million UAH

Net profit 318.8 million UAH

Capital investments 174.2 million UAH

Total assets 6 428.6 million UAH

Equity 3 705.6 million UAH

Liabilities 1 248.5 million UAH

Share of shareholder’s equity 57.6 %

ROA 5.0 %

ROE 9.1 %


CONCERN GALNAFTOGAZ CREDIT HISTORy

* The beginning of cooperation** As of June 1, 2010 in circulation remained bonds (Series «D», «E», «F») for a total amount of 691 thousand UAH. The rest were redeemed by the Company

PJSC Concern Galnaftogaz

International loans Credit lines* Bond credits

2001 EBRD 1.2 million USD

2007 OTP Bank Ukraine 2003

А series, 10 million UAH Lead-manager – Creditprombank2003

EBRD 1.3 million USD2007

Calyon Bank Ukraine

2004 BSTDB 23 million USD

16,1 million USD

2007 ING Bank Ukraine 2003

В series, 10 million UAH Lead-manager –

Ukrsotsbank2005

IFC 25 million USD

10,5 million USD

2007 UniCredit Bank Ukraine

2005

EBRD 25 million USD

9,4 million USD 2003 С series, 10 million UAH

Lead-manager – Ukrsotsbank

2007 Raiffeisen Bank Aval

50 million USD 17,8 million USD

2007

BSTDB 14 million USD1,7 million USD

2005 D series, 30 million UAH**

Lead-manager – ING Bank Ukraine

2007

EBRD/IFC 200 million USD 14,3 million USD

2005 E series, 30 million UAH**


2005 F series, 30 million UAH**



number of LPG skids as of June 1, 2010

114 gas skids

number of filling complexes Sas of June 1, 2010305Concern Galnaftogaz 39

Non-financial report


GO GREEN!

Environmental issues are one with the highest priority in the world today. And unlike many other projects that can be implemented with the help of efforts of individual companies, corporations or states, environmental programmes require collective actions, cooperation, and start from individual behavior change. Environmental projects ever contradict the companies’ activities; on the contrary, they only supplement its strategy making the company even more useful to society.

As a large nationwide enterprise, the company with more than 5 thousand employees and 305 filling complexes, certanly affects the environment. In its activities, Concern Galnaftogaz maintains environmental standards required by Ukrainian legislation. However, we know how to handle the issues of environmental protection beyond the law regulations. One of these «steps forward» was the implementation of the program Green Office.

The Company began implementing the principles of Green Office in the Head office, at 9 branches and at OKKO filling complexes. We are developing this project within the Company and try to spread it out to partners and customers. Due to the Company’s initiative the project is implemented in other companies of the Universal Investment Group Holding – Insurance company Universalna and Concern Khilbprom. Our initiative was supported by L’viv Business School of the Ukrainian Catholic University, which promotes the principles of Green Office among its students. Concern Galnaftogaz has also produced campaign stickers Go green for L’viv City Council.

Concern Galnaftogaz is promoting principles of environmental protection among the clients of OKKO filling stations. The Company imports fuel from EU countries. It conforms to modern European ecological standards Euro 4 and Euro 5, it is not only better, but much environmentaly friendly than domestic oil products. We constantly stress the environmental problems in media. By choosing our network Ukrainian drivers make air in our cities cleaner.


November 2008 – the start of Green Office project implementation in Company’s head office and in the offices of other companises members of Universal Investment Group Holding (Insurance company Universalna and Concern Khilbprom). L’viv Business School of the Ukrainian Catholic University also joined the project.

February 2009 – con-tainers for plastic collection were installed at 5 filling complexes in L’viv.

march 2009 – L’viv Business School of the Ukrainian Catholic University held informative and practical seminar «Energy efficiency - a practical experience», initiated by the British Council in Ukraine and Concern Galnaftogaz.

April 22, 2009 – community works were done at St. George Garden together with students of L’viv Polytechnic National University and representatives of environmental organizations (city centre).

Concern Galnaftogaz supported environmental project «Save the resource» of Lviv student organization SIFE at Ivan Franko National University of L’viv. The project was aimed at highlighting the issue of resources conservation. In 9 University buildings information stickers were posted and waste paper collection was

organized. The project numbered 20,000 participants, University’s students and teachers among them. Electricity and water consumption in these buildings decreased by 7 per cent. It was collected 900 kg of waste paper.

may 2009 – waste paper collection was arranged in offices of 9 branches of Concern Galnaftogaz.

June 2009 – information stickers were placed at OKKO filling complexes. In L’viv, Press Club was organized to discuss the topic: «Why do Ukrainian companies create «Green offices»? Experience of the first», among the participants were Concern Galnaftogaz, representatives of the British Council and the International Student Organiza-tion SIFE.

July 2009 – separate containers for collection of recyclable materials (paper/cardboard, plastic/PET, glass, metal) were installed at 5 OKKO filling complexes in Kyiv.

August 2009 – «Green stickers» were made for L’viv City Council.

September 2009 – Company’s representatives participated in the meeting of PR-Committee of the American Chamber of Commerce dedicated to issues of green marketing.

The presentation on topic «The introduction of the concept of «Green Office» in Concern Galnaftogaz» was made.

The notes on Company’s experience in implemention of «Green office» project were published in the first Ukrainian edition dedicated to the topic «Green Office: caring about environment for the benefit of business» that was published with the help of the Delegation of the UN Global Compact in Ukraine, the National University of Kyiv-mohyla Academy and companies that fully implement «green» projects in their work. Participation at the presentation of the publication September 24, 2009 in Kyiv.

November 2009 – the Company representatives participated in the International Conference «Waste management – civilizational challenges», organized by the L’viv Chamber of Commerce. Report «Principles of the program «Green Office» in Concern Galnaftogaz» was presented.

December 2009 – containers for recycable materials collection were installed at one more OKKO filling complexes in Kyiv.

The case of Concern Galnaftogaz «Green office» programme in won First All-Ukrainian CSR business case competition in the category «environmental protection».


ACCESSIBILITy PROGRAmmE

Сoncern Galnaftogaz proceeds to implement the programme of introduction of accessibility requirements at the filling complexes. Since 2008 all OKKO filling complexes have been designed and constructed in accordance with accessibility requirements (unimpeded access for disabled people to residential and social facilities). We try to provide accessibility requirements at the filling complexes, designed before 2008, where possible.

The first such complex accessible to physically challenged people, with separate parking spaces and equipped with bathrooms, was OKKO filling complex in 12 Dzh. Vashynhtona Str., in L’viv. By the way, at the meeting of Accessibility Committee at L’viv regional state administration this filling complex was noted as the first in Ukraine that was audited and received confirmation on compliance with accessibility standards.

In particular, in 2009 the signs of invalid parking place were set and the layout of parking places was done at such filling complexes in L’viv: 174 Zamarstynivska St., 58 Volodymyra Velykoho St., 54А Lypynskoho St., 284/1 Horodotska St., 12 yuriya Lypy St., 35А Chervonoyi Kalyny Ave., 2А Naukova St., 283 Zelena St.

The handholds made from stainless steel were set in a lavatory at OKKO filling complex on 12 Dzh. Vashynhtona Str. in L’viv so that physically challenged people could comfortably use a washstand and a toilet. Except for that, the rampants for easier access to the toilet rooms were set at two filling complexes (Lviv, 54А Lypynskoho Str., and 35А Chervonoyi Kalyny Ave.).

The project of Social taxi was a continuation of the Company’s comprehensive programme to extend accessibility standards in our society. The project, founded by the organization «Narodna dopomoga – Lviv», is to provide social services of transportation to physically chalenged people – people in wheelchairs. In August, 2009 Concern Galnaftogaz and Universalna Insurance Company contributed 130,000 UAH on the acquisition, registration and insurance of the special car for Social taxi in L’viv. During the period from September 1, 2009 to march 31, 2010 due to Social taxi project 400 such transportations were carried out. monthly traffic analysis states the continuing increase in the number of users. Since the program launch the number of services requests has doubled.

To our opinion, accessibility project, and Social taxi particularly, is very successful example of international standards of human rights protection. It is also an additional incentive for mutual understanding between different groups of people. We also strive to make our environment in line with high international humanitarian standards. On April 16, 2010 another car was purchased for Social taxi service in partnership with Carpathian Foundation. Concern Galnaftogaz also provides Social taxi with fuel.

Programme of accessibility standards extention in Ukraine is going on. We equip OKKO filling complexes with parking places, ramps and handrails for physically challenged people. Our goal in this project is to ensure equal conditions for all citizens without exception for a full life in our society. In 2010 we started another social project aimed at the youngest of our visitors – establishing special child seats in A la minute restaurants and children’s changing tables in bathrooms at OKKO filling complexes.


transportations done by Social taxi service for the period of 6 months

more than 400


SOCIAL EVENTS 2009

With the support of Concern Galnaftogaz «Global problems of the world» atlas was published

Accessibility standards are implemented at OKKO filling complexes network

Concern Galnaftogaz maintains separate garbage collection at OKKO filling complexes in Kyiv

OKKO filling complexes network celebrated World’s Earth Day by cleaning up the garden of St. George Cathedral in L’viv

Concern Galnaftogaz helps physically challenged children

New CD «music on the road #3» appeared in OKKO convenient-stores. This is the third album of the series initiated by OKKO network.


«2009 Carpathians Cham-pionship in rock-climbing. Ihor Sharabura memorial» supported by OKKO network

«Tarasova Gora» International moto Festival

Ukrainian Festival of medi-eval Culture «Tu Stan!»

Сoncern Galnaftogaz and Universalna Insurance Com-pany purchased a car for Social taxi

OKKO network, Vasyl’ Virastyuk and Anhelyatko magazine announced a Drawing Competition for children «We are the nation of strong people»

New page for children on OKKO website – here you can download various cuttings and coloring books for children’s creativity.


Independent Auditors’ Report To the Board of Directors and Shareholders ofJoint Stock Company «Concern Galnaftogaz» We have audited the consolidated financial statements of Joint Stock Company «Concern Galnaftogaz» and its subsidiaries («the Group») as at 31 December 2009 and for the year then ended, from which the accompanying summarized financial statements were derived, in accordance with International Standards on Auditing. In our report dated 28 may 2010 we expressed an unqualified opinion on the consolidated financial statements from which the summarized financial statements were derived.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group as of 31 December 2009, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.

For a better understanding of the Group’s financial position and the results of its operations for the year ended 31 December 2009, and of the scope of our audit, the summarized financial statements should be read in conjunction with the consolidated financial statements from which the summarized financial statements were derived and our audit report thereon.

28 травня 2010

Ernst & Young Audit Services LLCKhreschatyk Street, 19AKyiv, 01001, UkraineTel: 380 (44) 490-3000Fax: 380 (44) 490-3030Ukrainian Chamber of AuditorsCertificat: 3516www. ey.com/ukraine

TОВ «Ернст енд ЯнгАудиторські послуги»Україна, 01001, Київвул. Хрещатик, 19АTeл: 380 (44) 490-3000Факс: 380 (44) 490-3030Свідоцтво АудиторськоїПалати України: 3516


Joint Stock Company «Concern Galnaftogaz»

Consolidated statement of comprehensive income for the year ended 31 December 2009 (In thousands of Ukrainian hryvnia, except per share information)

2009 2008

Revenues 5 588 252 5 509 262

Cost of sales (4 944 823) (5 039 141)

Gross profit 643 429 470 121

General and administrative expenses (184 335) (130 197)

Other operating income 26 606 15 728

Other operating expenses (146 225) (151 555)

Operating profit 339 475 204 097

Gain on disposal of subsidiary 2 431 —

Finance expenses (171 864) (127 458)

Finance income 2 792 563

Foreign currency exchange losses (63 347) (639 967)

Profit / (loss) before income tax 109 487 (562 765)

Income tax 22 575 141 828

Net profit / (loss) for the year 132 062 (420 937)


Attributable to:

Equity holders of the parent 132 308 (421 198)

Non-controlling interests (246) 261

Other comprehensive income

Revaluation of land and buildings — 1 404 434

Income tax relating to the components of other comprehensive income

— (351 109)

Other comprehensive income for the period, net of tax — 1 053 325

Total comprehensive income for the period, net of tax 132 062 632 388

Attributable to:

Equity holders of the parent 132 308 632 127

Non-controlling interests (246) 261

Earnings/ (loss) per share (in Ukrainian hryvnia)

- basic and diluted (0,0068) (0,0240)


Публічне акціонерне товариство «Концерн Галнафтогаз»

Consolidated statement of financial position as of 31 December 2009 (In thousands of Ukrainian hryvnia)

ASSETS 2009 2008

Non-current assetsNon-current assets 3 412 198 3 188 865Intangible assets 70 153 64 710Investments — —Deferred tax assets 85 268 1 060Other non-current assets 334 340

3 567 953 3 254 975

Current assetsInventories 356 746 214 250Trade and other receivables 309 604 196 675Prepayments and other current assets 796 865 301 071Prepaid income tax 4 852 31 439Cash and cash equivalents 168 397 75 057

1 636 464 818 492

Total assets 5 204 417 4 073 467

LIABILITIES AND EQUITY

EquityShare capital 195 265 175 238Additional paid-in capital 377 493 237 700Revaluation reserve 1 288 773 1 288 773Accumulated deficit (98 494) (230 802)

1 763 037 1 470 909Non-controlling interests 767 1 013 Total equity 1 763 804 1 471 922

Non-current liabilities

Loans and borrowings 1 872 491 1 608 733

Deferred tax liabilities 371 738 309 592

2 244 229 1 918 325

Current liabilities

Loans and borrowings 438 611 436 834

Payables and advances received 750 058 246 097

Other current liabilities 7 715 289

1 196 384 683 220

Total liabilities and equity 5 204 417 4 073 467



Consolidated cash flow statement for the year ended 31 December 2009 (In thousands of Ukrainian hryvnia, unless otherwise noted)

2009 2008

Cash flows from operating activities

Profit / (loss) before income tax 109 487 (562 765)

Adjustments for:

Depreciation and amortisation 103 119 61 731

(Gain) / loss on disposal of property, plant and equipment (688) 6 243

Property, plant and equipment revaluation decrease — 86 334

Impairment / reversal of impairment of property, plant and equipment

416 (26)

Impairment of trade and other receivables 14 698 13 729

Foreign currency exchange losses 63 572 634 025

Finance expense 171 864 127 458

Finance income (2 792) (563)

Operating profit before changes in working capital 459 676 366 166

Increase in inventories (142 161) (66 064)

Increase in trade and other receivables (119 467) (54 048)

Increase in prepayments and other current assets (527 953) (153 725)

Increase in payables and advances received 496 892 30 969

(Increase)/decrease in other current liabilities 7 429 (683)

Cash flows generated from operations 174 416 122 615

Income tax returned / (paid) 26 600 (33 628)

Net cash from operating activities 201 016 88 987


Consolidated cash flow statement for the year ended 31 December 2009 (In thousands of Ukrainian hryvnia, unless otherwise noted)

Cash flows from investing activities

Acquisition of subsidiaries, net of cash acquired 74 —

Proceeds from sale of subsidiaries and available-for sale investments 35 600 32 060

Purchases of property, plant and equipment (315 476) (549 886)

Purchases of intangible assets (4 331) (5 443)

Proceeds from sale of property, plant and equipment 1 881 10 732

Interest received 2 792 563

Net cash used in investing activities (279 460) (511 974)

Cash flows from financing activities

Issue of share capital 159 820 17 260

Proceeds from long-term borrowings 638 005 596 514

Proceeds from short-term borrowings — 141 083

Repayments of long-term borrowings (186 324) (83 852)

Repayments of short-term borrowings (247 558) (127 569)

Interest paid (186 795) (107 428)

Net cash provided by financing activities 177 148 436 008

Net increase in cash and cash equivalents 98 704 13 021

Cash and cash equivalents at the beginning of the year 69 693 56 672

Cash and cash equivalents at the end of the year 168 397 69 693



Consolidated statement of changes in equity for the year ended 31 December 2009(In thousands of Ukrainian hryvnia)

Attributable to equity holders of the parent

Share capital

Additionalpaid-incapital

Revaluationreserve

(Accumulateddeficit)/retainedearnings

TotalNon-

controlling interests

Total

Balance at 31December 2007 160 000 235 678 235 448 190 396 821 522 752 822 274

Net loss — — — (421 198) (421 198) 261 (420 937)

Other comprehensive income

— — 1 053 325 — 1 053 325 — 1 053 325

Total comprehensive income

— — 1 053 325 (421 198) 632 127 261 632 388

Increase in sharecapital

15 238 2 022 — — 17 260 — 17 260

Balance at 31December 2008 175 238 237 700 1 288 773 (230 802) 1 470 909 1 013 1 471

922

Net profit — — — 132 308 132 308 (246) 132 062

Total comprehensive income

— — — 132 308 132 308 (246) 132 062

Increase in sharecapital

20 027 139 793 — — 159 820 — 159 820

Balance at 31December 2009 195 265 377 493 1 288 773 (98 494) 1 763 037 767 1 763

804



2009 2008

Retail sales of petroleum products 4 255 210 4 305 781

Large lot wholesale of petroleum products 307 330 473 022

Small lot wholesale of petroleum products 606 980 416 837

Sales of consumer products and other services 418 441 307 727

Sales of transportation services 291 5 895

5 588 252 5 509 262

Basis of consolidation

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries drawn up to 31 December 2008. The financial statements of the subsidiaries are prepared for the same reporting year as the Company, using consistent accounting policies.

Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards («IFRS») promulgated by the International Accounting Standards Board («IASB») and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB.

1.Revenues

Revenues for the year ended 31 December were as follows:

Small lot represents parcels of up to 10 tons in average while large parcels are more than 10 tons.

Notes to consolidated financial statements for the year ended 31 December 2009(In thousands of Ukrainian hryvnia, unless otherwise noted)



2009 2008

Petroleum and consumer products 4 616 144 4 749 176

Salary, wages and related charges 105 571 102 188

Depreciation 77 560 42 237

Transportation 54 034 59 069

Rent 26 714 29 700

Utilities 24 271 16 797

Repair and maintenance 13 249 15 708

Security 12 496 9 102

Storage 9 280 9 276

Other 5 504 5 888

4 944 823 5 039 141

2009 2008

Property, plant and equipment, net 3 027 447 2 853 367

Prepayments for property, plant and equipment 251 184 164 641

Construction in progress and uninstalled equipment 133 567 170 857

3 412 198 3 188 865

3. Property, plant and equipment

Property, plant and equipment were as follows as of 31 December:

2. Cost of sales

Cost of sales for the year ended 31 December was as follows:


Changes in property, plant and equipment, Construction in progress and uninstalled equipment are as follows:

Land

Build

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Equi

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Offi

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Cons

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inpr

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At cost/ revalued amount

At 31 December 2007 382 441 579 238 110 578 53 772 51 201 294 758 1 471 988

Additions 44 058 — 150 720 1 773 42 702 170 079 409 332

Transfers — 287 396 — — — (287 396) —

Disposals (511) (906) (2 352) (1 819) (2 431) (6 584) (14 603)

Revaluation 821 286 445 051 — — — — 1 266 337

At 31 December 2008 1 247 274 1 310 779 258 946 53 726 91 472 170 857 3 133 054

Additions throughacquisition

— — — 73 98 41 212

Additions 16 294 — 70 630 3 927 1 196 147 520 239 567

Transfers — 184 794 — — — (184 794) —

Disposals — — (643) (444) (2 790) (57) (3 934)

At 31 December 2009 1 263 568 1 495 573 328 933 57 282 89 976 133 567 3 368 899

Accumulateddepreciation

At 31 December 2007 — 36 443 25 157 26 182 16 853 — 104 635

Depreciation charge — 15 532 27 280 2 785 15 093 — 60 690

Impairment charge/(reversal)

— (70) 44 — — — (26)

Disposals — (142) (836) (1 724) (2 004) — (4 706)

Revaluation — (51 763) — — — — (51 763)

At 31 December 2008 — — 51 645 27 243 29 942 — 108 830

Depreciation charge — 39 515 35 412 10 098 16 355 — 101 380

Impairment charge — 106 310 — — — 416

Disposals — — (360) (309) (2 072) — (2 741)

At 31 December 2009 — 39 621 87 007 37 032 44 225 — 207 885

Net book value

At 31 December 2008 1 247 274 1 310 779 207 301 26 483 61 530 170 857 3 024 224

At 31 December 2009 1 263 568 1 455 952 241 926 20 250 45 751 133 567 3 161 014


If land properties and buildings were measured using the cost model, the carrying amounts of land would be UAH 128 231 as of 31 December 2009 (2008: UAH 111 937) and the carrying amount of buildings would be UAH 1 050 522 (2008: UAH 865 728).

Property, plant and equipment with carrying amount of UAH 2 442 413 is subject to a registered debenture to secure bank loans (2008: UAH 1 196 052).

As of 31 December 2009, property, plant and equipment with cost of UAH 37 015 were fully depreciated but still in use (2008: UAH 24 297).

2009 2008

Petroleum products 317 256 180 058

Consumer products 33 612 29 478

materials and spare parts 5 878 4 714

356 746 214 250

2009 2008

Trade accounts receivable 319 222 172 765

Other receivables 2 761 4 906

Receivables from related parties 6 464 32 762

328 447 210 433

Less: Impairment allowance (18 843) (13 758)

309 604 196 675

4. Inventories

Inventories were as follows as of 31 December:

5. Trade and other receivables

Trade and other receivables were as follows as of 31 December:

2009 2008

Prepayments for inventories and services 619 971 238 128

Prepayments to related parties 88 568 4 377

Prepayments for taxes other than income tax 68 990 43 458

Other current assets 19 336 15 108

796 865 301 071

6. Prepayments and other current assets

Prepayments and other current assets were as follows as of 31 December:


2009 2008

Non-current:

Secured bank loans, long-term portion 1 872 491 1 608 733

1 872 491 1 608 733

Current:

Unsecured bonds 691 2 471

Unsecured short-term bank loans — 251 686

Current portion of long-term secured bank loans 437 920 182 677

438 611 436 834

2 311 102 2 045 567

7. Loans and borrowings

The Group’s loans and borrowings were as follows as of 31 December:

2009 2008

Advances received 469 150 46 532

Trade payables for inventories 170 764 104 249

Payables to related parties for inventories and securities 59 903 24 573

Wages 25 061 19 105

Interest payable 14 517 26 791

Payables for securities 2 595 502

Payables for taxes other than income tax 2 402 2 018

Payables for commission 710 17 935

Other 4 956 4 392

750 058 246 097

8. Payables and advances received

Payables and advances received were as follows as of 31 December:


2009 2008

Balances with related parties:

Trade and other receivables 6 464 32 762

Prepayments and other currents assets 88 568 4 337

Payables and advances received 59 903 24 573

Transactions with related parties included inthe consolidated income statement::

Purchases of inventories and petroleum products 89 389 184 272

Rent services received 20 050 357

Insurance 2 790 2 636

Security services 4 698 6 469

Professional services received — 214

Transportation services received — 664

Sales of petroleum products 14 034 13 735

Rent services provided 1 210 3 537

9. Related parties

The Group had the following transactions and balances as of 31 December with related parties:



Contact Details

Legal Address:1 Plastova Str.

Lviv, Ukraine 79056

Postal address72 Heroiv UPA Str.

Lviv, Ukraine 79015

Email [email protected]

Phone +38 (032) 298 96 01/03

Fax +38 (032) 298 96 02/ 07/ 08

Press Centre+38 (032) 298 96 31

[email protected]

Relations with Shareholders+38 (032) 298 96 95

[email protected]

Corporate Finance and Relations

with Investors Department

+38 (032) 298 96 27

[email protected]

Oil Products Quality Control Department+38 (032) 298 89 90

[email protected]

Web-sites

www.galanftogas.com

www.okko.ua

www.okko-card.com.ua

www.myfishka.com

www.pulls.okko.ua

ОККО hotline 0 800 501 10 10

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