1

Corporate governance practice

London, 28th of February, 2004

Pavel G SkitovichDeputy General Director

Strategy and Corporate Affairs

2

Reorganization Process

Stage 1 Establishing a holding

company JSC “Power Machines” (completed in the middle of 2003)

1. Acquisition of shares of

plants (subsidiaries) on the market by PM

2. Authorized capital increase by additional issue, which was paid by the plants’ (subsidiaries) shares

Stage 2 Establishing a unified share

for JSC “Power Machines” by the merger of all plants (completed in February 2004)

1. Approval of the reorganization decision. Approval of the reorganization agreement

2. Authorized capital increase by addition issue

3. Exclusion of the plants as a legal entities form the State Register

4. Insertion of changes into the Charter of PM

3

Decision-making process

Board of Directors:- Redemption share price definition- Approval of conditions feasibility and

procedures of reorganization- Approval of the shares converting procedures

General Meeting of Shareholders - Merger decision approval- Merger agreements approval - Authorized capital of JSC “Power Machines” increase. Additional issue approval

Combined General Meeting of Shareholders (ZTL, LMZ, PM, Electrosila):

- Insertion of changes into the Charter of PM

4

0,020

99,23

0,0111,49

88,24

0,010,03

99,91

1,560,05

98,33

0

20

40

60

80

100

120

Yes No Abstain

% of the shareholders on GM

PM

LMZ

ZTL

Electrosila

Voting Results on the Question of Reorganization

5

0,1

0,0070,01

0,08

0

0,02

0,04

0,06

0,08

0,1

0,12

% of authorized capital

PM

LMZ

Electrosila

ZTL

Shares redeemed under the shareholders’ requests

6

Authorized capital structure of Power Machines

85,51%

14,49%

Ordinary sharesPreferred shares

Authorized capital – RUR 72 169 387,08

Nominal price of 1 ordinary share – RUR 0,01

Nominal price of 1 preferred share – RUR 0,01

7

Interros with partners

Siemens AGMinority

shareholders

LMZ KTZ TzKTI

>25%vot.

>35%vot.

>75% >75% >75%

ZTLElectrosila

4,9%75,4%

19,7%

Power Machines structure before the reorganization

8

Interros with partners

Siemens AG

Minority shareholders

Production units(Electrosila, LMZ, ZTL)

KTZ TzKTI

4,4%2,6%

Lenenergo

71%

>25%vot.

>35%vot.

22,2%

Power Machines structure nowadays

9

PM has to comply all the obligations to the EBRD loan agreementregard to corporate governance

Placing of PM shares as a part of company restructuring process obliges PM to meet the requirements according to the “corporate governance best practice”: - high level of transparency- independent directors in the Board of Directors- maximum protection of the rights of shareholders- reliable registration of the property rights

HSBC was acting as a financial adviser to the company during the secondary offering and was responsible for the communications with the investor community

Corporate governance improving

10

No actions which are designed to or may result in, the stabilisation, maintenance or manipulation of the share price

No announcements which may adversely affect the share price, without prior consent with HSBC

No share transaction without prior consent with HSBC

No capital reduction or public announcements about any intention to do so without prior consent with HSBC

Russian Trading System listing (category “B”)

Obligations to the HSBC

11

Incorporate compliance statement into the annual report for 2003 with a commitment to fully comply with the Corporate Governance Code by 2005

Approve own corporate governance code as part of the Company’s by laws in 1st half of 2004

Establish an IR Department in 1st quarter 2004

Establish an Audit Committee and Remuneration Committee of the Board of Directors in 2004

Commence producing semi-annual audits under IAS from 2nd half 2004

Obligations to the EBRD

PM commits to undertake the following measures with regard to corporate governance improvements:

12

Merger with UHM

13

ONSHORE & OFFSHORE

NPPEQ** MINEQ** STEELOTHER ASSETS

OIL & GAS EQUIPMENT

DRILLING TOOLS & TECHNOLOGY

SHIP OFFHORE DESIGN

PRESSURE VESSELS

CRANES ROLLS INSTRUMENTS OTHER

UHM is the largest Russian private heavy engineering corporationUHM’s 2002 GAAP sales amounted to $435 million, a 39% increase over 2001. The company has manufacturing and engineering facilities in Russia, USA, Romania and the Ukraine and sells its products to over 30 countries in the world UHM is one of four Russian companies whose securities are listed on the London Stock Exchange The Company’s shares are also traded on the RTS stock exchange in Russia

* According to Listing Particulars dated 29.09.03**NPPEQ – Nuclear Power Plant Equipment**MINEQ – Mining Equipment

*

UHM overview

14

Power Machines Group is a leading Russian manufacturer and supplier of equipment for hydro, steam, gas and nuclear power stations, equipment for transmission and distribution of electricity as well as transportation and railway equipmentPower Machines 2002 IAS sales amounted to $276 million, a 13% increase over 2001Enterprises within the Group include some of the largest manufacturers and suppliers of heat and electricity generation equipment such as Leningradsky Metallichesky Zavod, Electrosila, Turbine Blades Plant (St.Petersburg), Kaluga Turbine Works (Kaluga)

Production units(Electrosila, LMZ, ZTL)

KTZ TzKTI

>25%vot.

>35%

Power Machines overview

15

UHM minorities

UralmashIzhorskiyeZavody SpecStal Krasnoe

SormovoOther subsid.

Interros with partners

Siemens AG

Minority shareholders

Production units(Electrosila, LMZ, ZTL)

KTZ TzKTI

Management of UHM

Treasury stocks (not voting)

4,4%

2,6%

Lenenergo71%

>25%vot.

>35%

UHM and Power Machines (nowadays)

16

The merger reasoning

Major objective – creation of the large single national operator on the machines building market should lead through integration and synergy to a company value growth multiplied, as opposed to a share addition of both values

Shareholders of PM are set to benefit from a large value growth potential hidden in UHM and PM business integration

Interros takes all risks by swapping its shares on UHM shares, giving a free-of-charge option for the PM shareholders either to swap their shares or to keep shares of PM

The final objective is to create an additional value for shareholders, based on UHM share

Reasons for that – a longer history of UHM being a public company, a significant range of capital market instruments in operation (prime savings for PM shareholders)

17

> 71% of Power Machines

Subsidiaries of UHM

Interros with partners

UHM minorities

Former PM minorities

KTZ TzKTI

PM’s minorities

approx.41%*vot.

Former management

of UHM

?

?

UHM-PM

>25%vot.

>35%

Treasury stocks (not voting)

*based on the scenario when 100% of PM’s minorities are swapped

Expected holding structure of UHM-PM (end of 2004)

18

Management of the new company

Mr. Yakovlev to be appointed as a CEO as of late Q1

Mr. Bendukidze to be appointed as a Chairman of the Board of Directors as of late Q1

19

Communications with shareholders and investor community

Valuation of PM and UHM and their subsidiary companies

Capital structure of the company

General market intelligence and feedback

Providing advice in relation to the Russian and UK take-over rules

IR program of the company

HSBC will assist PM on the execution of the merger

Responsibilities of HSBC with respect to the merger: