Independent Auditor’s Report

We have audited the accompanying consolidated balance sheet of ОАО АК Transneft and its subsidiaries (the "Group") as of 31 December 2003, and the related consolidated statements of income, cash flows and changes in shareholders’ equity for the year then ended. These consolidated financial statements, as set out on the pages 6 to 25 are the responsibility of the Group’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of the Group for the year ended 31 December 2002 were audited by another auditor, whose report dated 26 May 2003 expressed an unqualified opinion on those statements.

We conducted our audit in accordance with International Standards on Auditing as issued by the International Federation of Accountants. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Group .is of 31 December 2003 and the results of its operations, cash flows and changes in equity for the year then ended in accordance with International Financial Reporting Standards promulgated by the International Accounting Standards Board.

Without qualifying our opinion, we draw your attention to the fact that, whilst there have been improvements in the economic situation in the Russian Federation in resent years, the country continues to display some of the characteristics of an emerging market. These characteristics include, but are not limited to, the existence of a currency that is not freely convertible in most countries outside of the Russian Federation, restrictive currency controls, and relatively high inflation. The prospects for future economic stability in the Russian federation are largely dependent upon the effectiveness of economic measures undertaken by the government, together with legal, regulatory, and political developments.

KPMG Limited

Moscow, Russian Federation

28 June 2004

Translation Practice

1. Translate the first and second paragraphs of the text “Independent Auditor’s Report” in writing.

2. Look through the table which represents “Consolidated Balance Sheet” of Transneft Company. Translate the terms into Russian.

Consolidated Balance sheet derived from the consolidated financial statements – year ended 31 December 2003

(in millions of Russian roubles, unless otherwise stated)

Assets	31 December 2003	31 December 2002
Non-current assets
Intangible assets	535	510
Property, plant and equipment, net	261.185	225.74
Available-for sale investments	1.198	1.380
Total non-current assets	262.918	227.064
Current assets
Inventories, net	7.515	6.051
Receivables and prepayments, net	6.842	2.394
VAT assets	19.501	15.686
Prepaid profit tax	3.234	700
Available-for-sale short-term investments	890	-
Cash and cash equivalents	17.219	13.472
Total current assets	55.201	38.303
Total assets	318.119	265.367
Shareholders’ Equity, Minority interests and liabilities
Shareholders’ equity
Share capital	307	307
Retained earnings	228.719	200.803
Total shareholders’ equity	229.026	201.110
Minority interests	10.014	8.573
Non-current liabilities
Borrowings	15.952	3.485
Deferred taxes	28.694	28.019
Provisions for liabilities and charges	5.195	2.907
Total non-current liabilities	49.841	34.411
Current liabilities
Trade and other payables	26.236	11.968
Profit tax liabilities	570	321
Borrowings	2.432	8.984
Total current liabilities	29.238	21.273
Total liabilities	79.079	55.684
Total shareholders’ equity, minority Interests and liabilities	318.119	265.367

Quick Reading

Look through the newspaper article and be ready to answer some questions.

1. Can you guess from the title what the article deals with?

2. What is PwC?

3. What was the reason for Russia’ annulling a contract with PwC?

4. Does PwC agree with a court decision?