Significant Judgments

In the process of applying the Group’s accounting policies, management has made the following judgments, apart from those judgments involving estimates, which have a significant effect on the amounts recognised in the consolidated financial statements:

Consolidation of Special Purpose Entities

The Group determined that the substance of the relationship between the Group and TMK Capital S.A., a special purpose entity, indicates that the Group controls TMK Capital S.A. In September 2006 and in July 2008, TMK Capital S.A. issued notes due September 2009 and July 2011 respectively to provide financing to the Group’s companies (Note 24).

The Group determined that the substance of the relationship between the Group and TMK Bonds, a special purpose entity, indicates that the Group controls TMK Bonds. In February 2010, TMK Bonds completed the offering of convertible bonds due 2015 convertible into Global Depository Receipts each representing four ordinary shares of OAO TMK to provide financing to the Group’s companies (Note 25).

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