The regular meeting of Board of Directors of KAMAZ Inc. took place on October 27, 2003. Representatives of owners of KAMAZ Inc. have discussed the issue of correction of the business-plan for 2003 and plan of cost reduction by KAMAZ Inc.’s Group of companies.

According to the Company’s business plan for 2003, approved in December 2002, it was planned to earn 112 million rubles as profit. While developing the plan there were taken into consideration both the amounts forecasted by the Ministry of Economics of Russia and also an anticipated economic effect from cost reduction of labour content, reduction in specific consumption of materials, and cost reduction of purchased components per one unit, and also cost of localization. The above plan on cost reduction for the first three Qs of this year has been successfully completed. That helped the Company to maintain the utilities’ cost on the same level as a year before, though tariffs in Russia were increased by 20 %. This year’s plan KAMAZ Inc. has exceeded by 2% and has increased its sales volumes by 22 % vs. 2002. The Company has returned its share at the domestic market mainly due to reduction of the share of second-hand western manufactured vehicles.

Nevertheless, this couldn’t totally compensate the negative impact of macro economic factors that caused sharp changes in outside activities of vehicle manufacturing companies. Thus, for example, calculated cost increase of ferrous and non-ferrous products within the three Qs of the year should not have exceeded more than 7,8 %, but actually it has made 24,1% and 11,8% accordingly. Total rise in price of components purchased by KAMAZ Inc, as compared with the expected one has reached 700 mln rubles. In other words, 1 ruble of commercial output costs to KAMAZ 5 kopecks more than it was stipulated by the business plan.

The Company’s top managers are currently negotiating alternative purchasing of raw materials and components outside of the country – in Ukraine, China, Western Europe. Another important factor that has significantly reduced the Company’s profit was actual growth of US dollar, used as a currency of payment for export transactions. It didn’t meet the official forecasts for 2003 either. As a consequence, KAMAZ has lost 136 million rubles of profit from export due to exchange rate.

Under such conditions, the financial results from the Company’s operation within the first three Qs of the year were negative, and if no emergency measures are undertaken then forecasted losses in 2003 can make 681 million rubles.

To materialize KAMAZ Inc.’s business plan for 2003 successfully, the management of the Company has developed a number of measures aimed at cost reduction in the 4Q of 2003, in addition to the programs currently in progress. Realization of these measures will ensure positive result by the end of the fiscal year and earn 92 million rubles. It stipulates e.g. material cost reduction by 61 million rubles additionally, utilities cost reduction by 14,7 million rubles, and optimization of components supply by replacing western manufactured components by domestic ones to the amount of 227 mln rubles.

Board of Directors has authorized the plan of activities being carried out by the Company’s top management.