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Power Machines toComplete Financial Report for Y2005 inCompliance with Russian Accounting Standards

In 2005, the net profit ofSilovye Machiny amounted RUR 194mln. (RUR 2.3bln in2004).

The fall ofthe main indicators could beexplained bytransition ofthe company toa new accounting policy inorder harmonize itwith IAS. This led tothe greater amounts ofcurrent profit tax written inthe books and the one-time creation ofextra reserves onnon-liquid stocks and warranty repairs (including those occurred inprevious accounting periods). Besides, incompliance with the new Russian federal law On the alterations inthe second part ofthe RFTax Code, the expense items were reclassified and, subsequently, the taxable base ofthe profit tax was recalculated resulting inthe additional charging ofcurrent profit tax in2005.

Another important factor, which had impact onthe Companys report, was the retail efficiency ofthe contracts part ofthe Concerns bookings, exceeding currently $1.5bln. This accounting period comprises ahigh amount ofdebut contracts, aimed atentering new competitive markets and thus including tough price parameters.

Thus, the drop ofPower Machines profit in2005isnot connected tothe decrease ofcompanys operational activities.