5.3.5.28. Related Party Transactions

Transactions between NCSP and its subsidiaries have been eliminated on consolidation and are not disclosed in this note. Related party receivables and payables resulting from operating activities are settled in the normal course of business. Details of transactions with related parties are disclosed below.

Given that the Federal Agency of the Russian Federation owns a 20% interest in NCSP, significant balances and transactions with state-controlled entities are considered to be transactions with related parties. During 2012 and 2011, the Group transacted with Sberbank, Russian Agricultural Bank, VTB, Rosneft, Russian Railways and other state-controlled entities (apart from Transneft).

Transactions with state-controlled entities:

Year ended 31 December 2012 Year ended 31 December 2011
Sales
Sales of goods and services 107,404 113,671
Interest income 4,000 2,357
Purchases
Services and materials received 22,018 76,098
Finance costs 123,581 121,832

Balances with state-controlled entities:

31 December 2012 31 December 2011
Cash and cash equivalents
Cash and cash equivalents 18,896 50,034
Deposits 4,840
Receivables
Long-term receivables 2,264
Trade and other receivables 3,319 7,929
Advances to suppliers 1,025 437
Payables
Trade and other payables 310 1,045
Advances received from customers 3,606 2,080
Debt
Long-term debt 2,040,395 2,113,843
Current portion of long-term debt 88,219 90,172

During 2011, ultimate control and ownership of the Group changed. In conjunction with the Group’s acquisition of PTP, Kadina Limited Company, the prior ultimate parent of the Group, sold 100% of the shares in Novoport Holding Ltd. (which owned 50.1% of the Group) to OMIRICO LIMITED, the prior owner of PTP, and now ultimate parent of the Group. OMIRICO LIMITED is registered under the legislation of the Republic of Cyprus, and is jointly controlled by OJSC Transneft and Z. Magomedov.

The owner of 100% of the OJSC Transneft ordinary shares is the Russian Federation represented by the Federal Agency for the Management of Federal Property. The OJSC Transneft preferential shares are owned by various legal entities and private individuals and are traded on the secondary stock market.

Other related parties include parties jointly controlling the ultimate parent and their subsidiaries and affiliates as well as NFT.

Transactions with NFT:

Year ended 31 December 2012 Year ended 31 December 2011
Sales and income
Sales of goods and services 3,600 109
Interest income 2,499 1,085
Purchases
Capital expenditures 11

Balances with NFT:

31 December 2012 31 December 2011
Receivables
Trade and other receivables 6
Long-term loans and interest receivable 18,179 35,655
Short-term loans and interest receivable 45,000
Payables to related parties
Advances received from customers 972 3

Transactions with other related parties:

Year ended 31 December 2012 Year ended 31 December 2011
Sales
Sales of goods and services 91,683 84,816
Interest income 264 206
Purchases
Services and materials received 39,583 56,747
Capital expenditures 8

Balances with other related parties:

31 December 2012 31 December 2011
Receivables
Trade and other receivables 1,455 2,917
Advances to suppliers 671 62
Short-term loans and interest receivable 4,571 3,353
Long-term loans and interest receivable 2,530
Payables
Trade and other payables 3,563 2,154
Advances received from customers 10,699 14,700

Compensation of key management personnel

For the year ended 31 December 2012 and 31 December 2011, the remuneration of the directors and other members of key management was 20,767 (including termination benefits in the amount of 1,079) and 11,622 (including termination benefits in the amount of 512), respectively, which represented short-term employee benefits and social security contributions.

The remuneration of directors and key executives is determined by the Board of Directors with regard to the performance of individuals and market trends.

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