Federal<br/>Passenger Company Annual Report

Address from the Chairman of the Board of Directors

Dear Friends,

Open Joint Stock Company Federal Passenger Company, during its four years of operations as an independent business unit of the Russian Railways Holding, has proved itself a reliable, high-tech carrier, providing competitive services for passengers.

Fully compliant with its core principle of customer focus, the company provides transport and transportation for wide sectors of the public, as well as currently improving the route network, updating and renewing rolling stock and creating attractive fare price offers.

The company’s business activity is deeply integrated with the country’s economy — the demand for transportation acts as a stimulus for the development of the transport sector and related industries, and generates a multiplication effect for many other industries.

The state’s long-term policy with regard to passenger services was designed to act as the growth engine for the country’s passenger rail service. The law, ‘On the Organisation of Regular Passenger Rail Services in the Russian Federation’, had to be passed, and a long-term subsidisation scheme for long-haul passenger rail services was set up, with full compensation from the federal budget and the budgets of the constituent territories for any losses incurred in the carriers’ income.

The approved 2013-2015 anti-crisis programme has resulted in a reduction in costs for 2013 by RUB 3.5 billion. The programme includes improving the amount of train traffic, cancelling unprofitable train services, developing the channels and technology for the sale of tickets, raising the company’s operations standards, effective personnel and staff policies and the efficient management of the company’s assets.

It should be noted that the company’s budget deficit was fully eliminated in 2013 for the first time.

The innovative projects JSC FPC is working on contribute to the Company’s revenue. The introduction of dynamic pricing helped increase transportation services profit margins and make Company’s services affordable to a wider range of consumers.

In 2013, a brand new double-decker train, the first such train in the history of modern Russia created with new technology and materials, started to run from Moscow to Adler. It can carry twice as many passengers as an ordinary train, ensuring a dramatic decrease in operating costs.

The Company is taking steps to improve the quality of its international passenger service. It has a supply contract for unique RIC cars that have no counterparts anywhere in the EU (manufactured by a joint venture of JSC TVZ and Siemens). Alongside that effort, Patentes Talgo S.L., a Spanish company, has started to work on train sets.

One of the ways to improve passenger transport services on long-haul routes and to enhance the company’s financial status, is to be involved in mutually beneficial regional cooperation. The company has currently entered into cooperation agreements with 16 constituent entities of the Russian Federation, all of which are financially involved in organising the operation of socially desirable train services.

JSC FPC is open for cooperation and every new project is designed to promote positive changes, which are implemented through the company’s mission: to improve the quality of life by making train travel safe, reliable and comfortable.

Valery Ilyich Reshetnikov