S.P. KOROLEV ROCKET AND SPACE CORPORATION ENERGIA FINANCIAL STATEMENTS OF S.P. KOROLEV ROCKET AND SPACE PUBLIC CORPORATION ENERGIA for 2016 and 2015 1
CONTENT FINANCIAL STATEMENTS FOR 2016... 3 BALANCE SHEET... 4 PROFIT AND LOSS STATEMENT... 9 STATEMENT OF CHANGES IN EQUITY... 13 CASH FLOW STATEMENT... 17 NOTES TO FINANCIAL STATEMENTS FOR 2016... 20 AUDIT REPORT... 90 AUDIT COMMISSION... 93 FINANCIAL STATEMENTS FOR 2015... 95 BALANCE SHEET... 96 PROFIT AND LOSS STATEMENT... 101 STATEMENT OF CHANGES IN EQUITY... 105 CASH FLOW STATEMENT... 109 NOTES TO THE BALANCE SHEET AND PROFIT AND LOSS STATEMENT... 112 AUDIT REPORT... 157 INTERNAL AUDIT COMMISSION... 159 2
FINANCIAL STATEMENTS OF S.P. KOROLEV ROCKET AND SPACE PUBLIC CORPORATION ENERGIA for 2016 In accordance with paragraph 9 of the Decree of the Russian Federation Government No. 1214 "On improvement of management of public companies with shares, related to the federal property, and federal state unitary enterprises", dated 31.12.2010, financial statements shall be presented for a 2-year (current and previous) term and shall become an appendix to the Annual Report of RSC Energia for 2016. 3
BALANCE SHEET as of December 31, 2016 Form as per OKUD S.P. Korolev Rocket and Space Date (day, month, year) Organization Public Corporation Energia as per OKPO Taxpayer ID Number INN Type of Research and development as per activity in the field of natural sciences and technology OKVED Legal organizational form / Form of ownership as per Public Company / Private ownership as per OKOPF/ОКFS Unit of measurement: RUB thousand as per OKEI Location (address) 4A Lenin St., Korolev, Moscow Region, 643, 141070 Codes 0710001 31 12 2016 07530238 5018033937 72.19 12247 16 384 Notes 3.2; 3.3 Intangible assets Item ASSETS I. NON-CURRENT ASSETS Line Code as of December 31, 2016 as of December 31, 2015 as of December 31, 2014 1110 15 386 14 206 12 512 3,3 Research and development results 1120 1 433 098 1 645 562 1 393 579 Intangible development assets 1130 - - - Tangible development assets 1140 - - - 3.4; 3.5 Fixed assets 1150 12 899 009 12 834 821 13 226 145 3,4 Income-bearing investments in tangible assets 1160 286 617 294 966 304 241 3,6 Financial investments 1170 565 286 769 860 3 318 477 Deferred tax assets 1180 1 132 981 114 671 97 510 3.4; 3.5 Other non-current assets 1190 1 188 330 628 058 2 021 699 TOTAL of Section I 1100 3.7; 3.8; II. CURRENT ASSETS 3.9; 3.10 Inventory 1210 17 520 707 16 302 144 20 374 163 20 045 547 19 613 503 22 507 197 Value added tax on acquired assets 1220 326 767 301 377 532 177 3,12 Accounts receivable 1230 37 247 267 35 156 466 32 921 067 3,6 Financial investments (excluding cash equivalents) 1240 2 396 757 3 791 237 994 039 3.11 Cash and cash equivalents 1250 25 064 724 11 001 503 9 233 063 Other current assets 1260 203 708 216 427 289 533 TOTAL of Section II 1200 85 284 770 70 080 513 65 477 076 BALANCE 1600 102 805 477 86 382 657 85 851 239 4
Notes 3, 13 Item LIABILITIES III. CAPITAL AND RESERVES Line Code as of December 31, 2016 as of December 31, 2015 Form 0710001, p.2 as of December 31, 2014 Authorized capital (joint-stock capital, authorized 1310 fund, partners contributions) 1 123 734 1 123 734 1 123 734 Shares repurchased 1320 - - - Non-current assets revaluation 1340 6 685 069 7 104 002 7 237 311 Additional capital (without revaluation) 1350 - - - 3, 13 Reserve capital 1360 168 560 168 560 168 560 3, 13 Retained earnings (uncovered loss) 1370 (5 339 023) 2 446 259 2 161 407 TOTAL of Section III 1300 2 638 340 10 882 555 10 691 012 IV. LONG-TERM LIABILITIES 3,14 Borrowings 1410 7 211 214 1 996 154 1 293 588 Deferred tax liabilities 1420 468 430 410 083 543 149 3,27 Estimated liabilities 1430 2 196 434 - - 3,15 Other long-term liabilities 1450 41 050 141 21 556 450 11 177 748 TOTAL of Section IV 1400 50 926 219 23 962 687 13 014 485 V. SHORT-TERM LIABILITIES 3,14 Borrowings 1510 1 406 434 4 343 010 4 357 922 3,15 Accounts payable 1520 44 323 878 46 071 912 54 582 008 3,18 Deferred revenue 1530 257 175 314 389 332 389 3,27 Estimated liabilities 1540 3 251 175 761 699 566 055 Other short-term liabilities 1550 2 256 46 405 2 307 368 TOTAL of Section V 1500 49 240 918 51 537 415 62 145 742 BALANCE 1700 102 805 477 86 382 657 85 851 239 First Deputy Director General for Financial and Economic Activity: (signature) Vinokurov Pavel Vyacheslavovich (full name) March 31, 2017 5
Breakdown of Separate Balance Sheet Indicators Explanations Name of indicator Line Code As of December 31, 2016 As of December 31, 2015 As of December 31, 2014 1 2 3 4 5 6 Intangible assets (line 1110), including: 3,2; 3,3 Patents, "know-how", copyrights 11101 14 701 13 668 11 841 Uncompleted operations for 11102 3,2; 3,3 acquisition of intangible assets 685 538 662 Research and development results (line 1120), including: 3,3 Completed R&D 11201 1 033 129 810 333 179 657 3,3 In-process R&D 11202 399 969 835 229 1 213 922 Fixed assets (line 1150), including: 3,4 buildings and structures 11501 4 063 283 3 826 634 3 777 188 3,4 machinery and equipment 11502 1 428 855 1 197 521 840 690 3,4 transportation equipment 11503 68 380 64 335 76 016 Uncompleted capital investments (excluding subsidiary account 11504 3,5 08.03.3) 243 710 441 726 1 150 443 Equipment to be installed 11505 Income-bearing investments (line 1160), including: 3,4 Things offered for lease 11601 255 972 294 966 304 241 11602 Financial investments (line 1170), including: 3,6 stocks and shares of affiliates 11701 287 962 632 212 422 650 3,6 stocks and shares of dependent companies 11702 29 487 29 487 29 487 3,6 stocks and shares of other companies 11703 10 636 11 034 325 697 3,6 long-term loans granted 11704 237 201 97 127 2 540 643 Other non-current assets (line 1190), including: expenditures undertaken in connection with the upcoming works under the construction project contract, which are included in the cost of projects 11901 3,5 under construction included in subsidiary account 97.03 Organization of construction works. 1 117 6 848 6 301 uncompleted capital outlays for housing projects included in 11902 3,5 subsidiary account 08.03.3 890 462 239 370 1 383 658 Advances paid out for capital 11902 investments 149 609 151 723 194 728 value-added tax for contract works in housing projects, included in subsidiary account 11903 3,5 19.08 147 142 39 554 246 449 6
Explanations Name of indicator Line Code As of December 31, 2016 As of December 31, 2015 As of December 31, 2014 1 2 3 4 5 6 Inventory (line 1210), including: raw materials, materials and other 12101 3,7 similar objects of value 886 754 449 766 415 587 3,9 Expenses in in-process inventory 12102 18 384 284 19 081 881 21 972 425 Accounts receivable (line 1230), including: Non-current loan receivable 3,12 Buyers and customers 12301 355 440 144 233 224 915 3,12 Advance paid out 12302 9 522 696 5 401 151 14 021 102 Short-term loan receivable 0 0 0 3,12 Buyers and customers 12303 1 122 636 3 079 920 1 321 124 3,12 Advance paid out 12304 24 643 243 25 120 798 15 560 022 Cash and cash equivalents (line 1250), including: 3,11 Money equivalents 12501-539 600 1 834 767 Other current assets (line 1260), including: VAT declared for refund under 12601 agreements and contracts 97 521 161 205 176 564 VAT on advances received 12602 7 413 9 153 4 465 Reserve capital / Fund of capital asset and special movable valuables (line 1360), including: Backlogs formed according to basic 13601 3,13 documents 168 560 168 560 168 560 Borrowings (line 1410), including: 3,14 credit accommodations 14101 7 211 214 1 996 154 1 293 588 Estimated liabilities (line 1430), including: estimated liabilities on holidays 14301 - - - estimated liabilities on costs to be incurred for warranty maintenance 14302 3,27 and technical support of SS 2 196 434 - - estimated liability on investment 14303 project - - - Other long-term liabilities (line 1450), including: 3,15 suppliers and subcontractors 14502 22 510 106 831 1 413 3,15 advances received 14503 40 050 365 21 449 619 11 176 335 3,15 Participation interest in construction 14501 977 266 0 Borrowings (line 1510), including: 3,14 credit accommodations 15101 1 406 434 4 340 959 4 354 436 Accounts payable (line 1520), including: 3,15 suppliers and subcontractors 15201 2 455 594 4 153 313 2 558 940 3,15 payables to organization employees 15202 237 280 267 608 241 982 3,15 debt to state non-budgetary funds 15203 181 432 191 606 136 698 7
Explanation s Name of indicator Line Code As of December 31, 2016 As of December 31, 2015 As of December 31, 2014 1 2 3 4 5 6 3,15 tax and due liabilities 15204 123 257 331 314 192 364 3,15 advances received 15205 41 073 854 40 883 937 51 406 295 3,15 liability owed to participants for payment of dividends 15206 2 2 478 6 233 Deferred revenue (line 1530), including: special-purpose financing of research 15301 3,18 activities 1 000 106 620 332 389 Estimated liabilities (line 1540), including: 3.27 estimated liabilities on holidays 15401 705 526 570 109 566 055 3.27 estimated liabilities on costs to be incurred for warranty maintenance 15402 and technical support of SS 2 545 649 1 027 3.27 estimated liability on capital project 15403-190 563 Other short-term liabilities (line 1550), including: participation interest in construction 15501-7 817 2 303 098 VAT for advances paid out 15502 2 256 38 588 4 269 First Deputy Director General for Financial and Economic Activity: Vinokurov Pavel Vyacheslavovich March 31, 2017 8
S.P. Korolev Rocket and Space Form as per OKUD Organization Public Corporation Energia as per OKPO Taxpayer ID Number Type of Research and development activity in the field of natural sciences and technology Legal organizational form / Form of ownership as per Public Company Unit of measurement: RUB thousand PROFIT AND LOSS STATEMENT for January - December 2016 /Private ownership Date (day, month, year) INN as per OKVED r OKOPF/ОКFS as per OKEI Codes 0710002 31 12 2016 07530238 5018033937 72.19 12247 16 384 Notes Item Line Code for January - December 2016 for January - December 2015 3,19 Revenues 2110 33 828 215 38 519 864 Cost of sales 2120 (31 571 178) (36 539 341) Gross profit (loss) 2100 2 257 037 1 980 523 Selling expenses 2210 (166 493) (346 190) Administrative expenses (G&A) 2220 - - Sales profit (loss) 2200 2 090 544 1 634 333 3,19 Income from participation in other entities 2310 23 544 24 753 3,19 Interest receivable 2320 937 314 874 237 Interest payable 2330 (974 211) (500 237) 3,21 Other income 2340 12 436 922 13 197 523 3,21 Other expenses 2350 (22 433 156) (14 081 369) Profit (loss) before tax 2300 (7 919 043) 1 149 240 3,16 Current income tax 2410 (1 199 607) (793 164) including constant tax liabilities 2421 3,17 (assets) (1 823 453) (413 080) 3,17 Change in deferred tax liabilities 2430 (58 347) 133 066 3,17 Change in deferred tax assets 2450 1 018 310 17 170 Other 2460 (29 074) (72 557) Net profit (loss): 2400 (8 187 761) 433 755 9
Form 0710002, p.2 Notes Item Line Code for January - December 2016 for January - December 2015 FOR REFERENCE Result from the non-current assets revaluation, not included in the net profit (loss) for the period Result from other operations, not included in the net profit (loss) for the period 2510 2520 518 220 4 081 - - Consolidated financial result for the period 2500 (7 669 541) 437 836 3,23 Basic earnings (loss) per share 2900 - - Diluted earnings (loss) per share 2910 - - First Deputy Director General for Financial and Economic Activity: (signature) Vinokurov Pavel Vyacheslavovich (full name) March 31, 2017 10
Breakdown of Profit and Loss Statement Indicators For January December 2016 Notes Name of indicator Line for January - December for January - December code 2016 2015 1 2 3 4 5 Revenues (line 2110), including: research and development activities in the area of natural and technical 21101 3,19 sciences 31 415 921 36 774 139 services in the area of construction, social sphere, distributive services and 21102 3,19 catering 911 358 863 617 services relating to assignment of Corporate assets for value for temporary 21103 3,19 use (temporary possession and use) 316 387 330 251 Cost of sales (line 2120), including: research and development activities in the area of natural and technical 21201 sciences ( 29 613 397) ( 35 169 995) services in the area of construction, social sphere, distributive services and 21202 catering ( 652 958) ( 666 172) services relating to assignment of Corporate assets for value for temporary 21203 use (temporary possession and use) ( 136 979) ( 149 120) Gross profit (loss) (line 2100), including: research and development activities in the area of natural and technical 21001 sciences 1 802 524 1 604 144 services in the area of construction, social sphere, distributive services and 21002 catering 258 400 197 445 services relating to assignment of Corporate assets for value for temporary 21003 use (temporary possession and use) 179 408 181 131 Selling expenses (line 2210), including: research and development activities in the area of natural and technical 22101 sciences ( 79 162) ( 266 211) services in the area of construction, social sphere, distributive services and 22102 catering ( 87 331) ( 79 979) Sales profit (loss) (line 2200), including: research and development activities in the area of natural and technical 22001 sciences 1 723 362 1 337 933 services in the area of construction, social sphere, distributive services and 22002 catering 171 069 117 466 services relating to assignment of Corporate assets for value for temporary 22003 use (temporary possession and use) 179 408 181 131 Other income (line 2340), including: incomings associated with sale of property, plant and equipment and other 23401 3,21 assets 1 541 386 6 746 821 11
Notes Name of indicator Line for January - December for January - December code 2016 2015 1 2 3 4 5 3,21 income associated with compensation of losses 23402 4 992 623 513 Other expenses (line 2350), including: expenses associated with equity holding of other organizations and sale of fixed 23501 ( 1 527 773) ( 6 767 873) 3,21 and other assets Expenses associated with provisioning for doubtful debts for depreciation of financial investments, costs reduction of tangible assets, warranty 23502 ( 14 484 253) ( 4 132 091) 3,21 maintenance and others First Deputy Director General for Financial and Economic Activity: Vinokurov Pavel Vyacheslavovich March 31, 2017 12
Organization Taxpayer ID Number Type of activity Research and development in the field of natural sciences and technology Form as per OKUD as per OKPO Legal organizational form / Form of ownership as per Public Company Unit of measurement: RUB thousand STATEMENT OF CHANGES IN EQUITY for January - December 2016 S.P. Korolev Rocket and Space Public Corporation Energia / Private ownership Date (day, month, year) INN as per OKVED r OKOPF/ОКFS as per OKEI Codes 0710003 31 12 2016 07530238 5018033937 72.19 12247 16 384 1. Changes in Equity Item Line Code Authorized capital Shares repurchased Additional capital Reserve capital Retained earnings (uncovered loss) Total Capital value as of December 31, 2014 3100 1 123 734-7 237 311 168 560 2 161 407 10 691 012 For 2015 Capital increase - total: 3210 - - - - 437 316 437 316 including: Net profit 3211 X X X X 433 755 433 755 Revaluation of assets 3212 X X - X - - Income directly charged to the capital increase 3213 X X - X 3 561 3 561 Additional share issue 3214 - - - X X - Increase in the par value of shares 3215 - - - X - X Legal entity reorganization 3216 - - - - - - 13
Item Line Code Authorized capital Shares repurchased 14 Additional capital Reserve capital Retained earnings (uncovered loss) Form 0710003, p.2 Capital decrease total: 3220 - - (129 228) - (116 545) (245 773) including: Loss 3221 X X X X - - Revaluation of assets 3222 X X (129 228) X - (129 228) Expenses directly charged to the capital decrease 3223 X X - X (9 790) (9 790) Decrease in the par value of shares 3224 - - - X - - Decrease in the number of shares 3225 - - - X - - Legal entity reorganization 3226 - - - - - - Dividends 3227 X X X X (106 755) (106 755) Changes in additional capital 3230 X X (4 081) - 4 081 X Changes in reserve capital 3240 X X X - - X Capital value as of December 31, 2015 3200 1 123 734-7 104 002 168 560 2 486 259 10 882 555 For 2016 Capital increase - total: 3310 - - 99 287-2 417 101 704 including: Net profit 3311 X X X X - - Revaluation of assets 3312 X X 99 287 X - 99 287 Income directly charged to the capital increase 3313 X X - X 2 417 2 417 Additional share issue 3314 - - - X X - Increase in the par value of shares 3315 - - - X - X Legal entity reorganization 3316 - - - - - - Capital decrease total: 3320 - - - - (8 345 919) (8 345 919) including: Loss 3321 X X X X (8 187 761) (8 187 761) Revaluation of assets 3322 X X - X - - Expenses directly charged to the capital decrease 3323 X X - X (6 454) (6 454) Decrease in the par value of shares 3324 - - - X - - Decrease in the number of shares 3325 - - - X - - Legal entity reorganization 3326 - - - - - - Dividends 3327 X X X X (151 704) (151 704) Changes in additional capital 3330 X X (518 220) - 518 220 X Changes in reserve capital 3340 X X X - - X Capital value as of December 31, 2016 3300 1 123 734-6 685 069 168 560 (5 339 023) 2 638 340 Total
Item 2. Adjustments introduced due to changes in the accounting policy and the correction of errors Changes in equity for 2015 Line Code as of December 31, 2014 due to net profit (loss) due to other factors as of December 31, 2015 Form 0710003, p.3 Capital total Prior to adjustments 3400 10 691 012-348 112 11 039 124 Adjustments due to: changes in the accounting policy 3410 - - 0 0 correction of errors 3420 - - (156 569) (156 569) After adjustments 3500 10 691 012-191 543 10 882 555 including: Retained earnings (uncovered loss): Prior to adjustments 3401 2 161 407-481 421 2 642 828 Adjustments due to: changes in the accounting policy 3411 - - 0 0 correction of errors 3421 - - (156 569) (156 569) After adjustments 3501 2 161 407-324 852 2 486 259 Prior to adjustments 3402 - - - - Adjustments due to: - - - - changes in the accounting policy 3412 - - - - correction of errors 3422 - - - - After adjustments 3502 - - - - 15
Form 0710003, p.4 3. Net Assets Item Line Code as of December 31, 2016 as of December 31, 2015 as of December 31, 2014 Net assets 3600 2 895 515 11 157 802 11 023 401 First Deputy Director General for Financial and Economic Activity: (signature) Vinokurov Pavel Vyacheslavovich (full name) March 31, 2017 16
Organization Taxpayer ID Number S.P. Korolev Rocket and Space Public Corporation Energia Type of Research and development activity in the field of natural sciences and technology Form as per OKUD as per OKPO Legal organizational form / Form of ownership as per Public Company Unit of measurement: RUB thousand CASH FLOW STATEMENT for January - December 2016 / Private ownership Date (day, month, year) INN as per OKVED r OKOPF/ОКFS as per OKEI Codes 0710004 31 12 2016 07530238 5018033937 72.19 12247 16 384 Item Line Code For January December, 2016 For January December, 2015 Cash flows from operating activities: Proceeds total 4110 58 195 233 36 604 492 including: from sales of products, goods, works and services 4111 51 912 224 35 670 284 of which: from sales of products, goods, works and services to subsidiaries and affiliates 82 235 150 073 lease payments, license fees, royalties, commissions and other similar payments 4112 121 367 219 155 of which: lease payments, license fees, royalties, commissions and other similar payments from subsidiaries and affiliates 23 290 111 906 from resale of financial investments 4113 - - from investors for the participation in shared construction 4114 982 652 253 220 other proceeds 4119 5 178 990 451 833 of which: other proceeds from subsidiaries and affiliates 477 153 insurance claim 4 927 168 - Payments total 4120 (44 549 701) (33 980 635) including: to suppliers (contractors) for raw materials, supplies, works and services 4121 (31 554 779) (23 366 386) of which: to subsidiaries and affiliates for raw materials, supplies, works and services (18 284 146) (10 931 574) with respect to the employee compensation 4122 (7 440 047) (6 831 620) debenture interest 4123 (971 936) (497 780) corporate income tax 4124 (1 468 195) (666 773) to suppliers (contractors) for raw materials, supplies, works and services under the participation in shared construction 4125 (683 538) (223 262) other payments 4129 (2 431 206) (2 394 814) of which: other payments to subsidiaries and affiliates (52 579) (51 651) Net cash flows from operating activities 4100 13 645 532 2 623 857 17
Cash flows from investing activities Proceeds total 4210 385 520 413 727 including: from the sale of non-current assets (except for financial investments) 4211 347 325 9 210 from the sale of shares (participatory interests) in other entities 4212 5 206 - from the repayment of loans granted, sale of debt securities (rights of claim on cash against other parties) 4213 5 000 dividends, debenture interest and similar proceeds from participation in other entities 4214 26 289 368 547 4215 - - other proceeds 4219 1 700 35 970 Payments total 4220 (1 715 971) (2 505 797) including: with respect to the acquisition, establishment, modernization, reconstruction and preparation for use of non-current assets 4221 (672 713) (1 082 178) of which: To subsidiaries and affiliates with respect to the acquisition, establishment, modernization, reconstruction and preparation for use of non-current assets (267 958) (154 833) with respect to the acquisition of shares (participatory interests) in other entities 4222 - - with respect to the acquisition of debt securities (rights of claim on cash against other parties), granting of loans to other parties 4223 (1 041 329) (1 422 555) of which: with respect to granting of loans to affiliated parties (1 005 829) (1 422 555) debenture interest included in the cost of an investment asset 4224 - - 4225 - - other payments 4229 (1 929) (1 064) Net cash flows from investing activities 4200 (1 330 451) (2 092 070) 18
Item Cash flows from financing activities: Line Code For January December, 2016 Form 0710004, p.2 For January December, 2015 Proceeds total 4310 7 314 205 5 039 699 including: borrowings 4311 7 249 205 5 039 633 monetary contributions of owners (participants) 4312 - - from the issue of shares, increase in participatory interests 4313 - - from the issue of bonds, bills and other debt securities etc. 4314 - - 4315 - - other proceeds 4319 65 000 66 Payments total 4320 (5 124 758) (4 690 226) including: to owners (participants) with respect to the repurchase of shares (participatory interests) from them or their withdrawal from participation 4321 - - for the payment of dividends and other profit distributions to the benefit of owners (participants) 4322 (151 763) (106 959) with respect to the discharge (redemption) of bills and other debt securities, repayment of borrowings 4323 (4 972 995) (4 583 197) 4324 - - other payments 4329 - (70) Net cash flows from financing activities 4300 2 189 447 349 473 Net cash flows for the accounting period 4400 14 504 528 881 260 Opening balance of cash and cash equivalents 4450 11 001 503 9 223 063 Closing balance of cash and cash equivalents 4500 25 064 724 11 001 503 Effect of changes in foreign exchange rates against the Russian ruble 4490 (441 307) 887 180 First Deputy Director General for Financial and Economic Activity: (signature) Vinokurov Pavel Vyacheslavovich (full name) March 31, 2017 19
RSC Energia NOTES TO FINANCIAL STATEMENTS for 2016 20
1.1 General Information 1. General Data S.P. Korolev Rocket and Space Public Corporation Energia (hereinafter referred to as the Corporation, RSC Energia) was founded based on the Decree of the Government of the Russian Federation No. 415 dated April 29, 1994. The certificate of state registration of RSC Energia, together with a corresponding entry to the Unified State Register of Legal Entities under the main state registration No. 1025002032538 dated October 21, 2002, was issued by the Inspectorate of the Federal Tax Service of Russia No. 2 for Moscow Region. The Company is registered at the following address: 4a Lenin St., Korolev, Moscow Region, 141070. Ordinary registered non-certificated shares, State registration number 1-03-01091-A of 30.12.1998 are traded at Moscow Stock Exchange in the Third listing level. 1.2 Corporate Governance Data on Corporation Board of Directors membership as of 31.12.2016 No. Full name Position 1. Yuri Veniaminovich Vlasov Director General, OAO URSC 2. Anatoliy Anatolievich Director General, ZAO Lider Gavrilenko 3. Alexander Nikolaevich Ivanov First Deputy Director General, State Space Corporation ROSCOSMOS 4. Igor Anatolievich Komarov Director General, State Space Corporation ROSCOSMOS 5. Oleg Vladimirovich Lobanov Deputy Director General, State Space Corporation ROSCOSMOS 6. Alexander Alekseevich Medvedev First Deputy Director General, FSUE Khrunichev SR&PSC, Deputy Director General, FSUE TsNIImash 7. Andrei Sergeevich Nikitin Director General, ANO Agency for Strategic Initiatives 8. Sergei Alexandrovich Nikitin Deputy Director General, Head of Corporate Control Department, ZAO Lider 9. Alexei Viktorovich Nuzhdov Deputy Director General, ZAO Lider 10. Maxim Valerievich Petrov Director General, AO RK-AKTIVY (Assets) 11. Vladimir Lvovich Solntsev Director General, RSC Energia 21
Chief Executive Officer The Chief Executive Officer of RSC Energia is Director General who manages the current activities of the Corporation in the manner and within powers defined by the Federal Law on Joint Stock Companies, other legal acts of the Russian Federation, the Corporation Charter, Regulations for the Chief Executive Officer and the contract concluded with him. Information on the members of the Management Board of the Corporation as of 31.12.2016 No. Full name Post held at RSC Energia 1. Vladimir Lvovich Solntsev Director General, RSC Energia 2. Nikolai Albertovich Brukhanov General Designer for Advanced Space Complexes and Systems 3. Pavel Vyacheslavovich First Deputy Director General for Financial and Economic Activity Vinokurov 4. Yugeny Alexeyevich Yermakov Head of Department 5 DP, Chief Engineer 5. Mikhail Viktorovich Komarov Deputy Director General for Personnel and Social Policy 6. Yelena Mikhailovna Chief Accountant Korogodina 7. Alexander Alexandrovich Deputy Director General Head of Chief Project Management Office Kuznetsov 8. Mikhail Yurievich Merkulov Deputy Director General for Security 9. Eugeny Anatolievich Mikrin General Designer First Deputy Director General 10. Nikolai Anatolievich Pirogov Deputy Director General for Interaction with Government Bodies 11. Igor Sergeevich Radugin General Designer of Launch Vehicles 12. Sergei Yurievich Romanov General Designer of Manned Space Complexes 13. Viktor Ivanovich Rykov Adviser to Director General of RSC Energia 14. Sergei Anatolievich Saperov Deputy Director General for Organization-Legal Matters 15. Vladimir Alexeyevich Soloviev First Deputy General Designer for Flight Operation, Tests of Rocket and Space Complexes and Systems 16. Igor Vladimirovich Frolov General Designer of Unmanned Space Complexes and Systems 17. Sergei Yurievich Shachnev Director General, ZAO ZEM RSC Energia 22
1.3 Branches (Structural Units) As of December 31, 2016, the Company has 10 standalone structural units (including branches). List of Standalone Structural Units (Branches) No. Name Location KPP Activities 1 Voskhod Holiday Hotel 15, Sitniki instructional farm village, Sergiyev Posad District, Moscow Region 504202001 Holiday hotel, vacation retreat, etc. 2 Vostok Holiday Hotel with Health Resort Functions Novomikhailovsky-2, Tuapse District, Krasnodar Krai 235502001 Holiday hotel, vacation retreat, etc. 3 Krepost Health Resort 9 Mira Avenue, Kislovodsk Resort Town, Stavropol Krai 262802001 Holiday hotel, vacation retreat, etc. 4 Baikonur Baikonur-8, Kyzylorda Region, 990103001 Maintenance and operation of Republic of Kazakhstan Baikonur Cosmodrome facilities Other Standalone Structural Units No. Name Activities 1 Office of trade and catering Trade, catering 2 Office of health resorts and social facilities management Social services 3 Podlipki Health and Recreation Resort Holiday hotel, vacation retreat, etc. 4 Special department 123 to support works on projects Support of operations at Plesetsk Cosmodrome 5 6 implementation at Plesetsk Cosmodrome Special department 029 to develop AU structures, components, logistics support to assemble AU and containers for transporting SC of various applications Special department 124 to support works on Corporation projects implementation at Vostochny cosmodrome; Activity on developing AU structures, components, logistics support to assemble AU and SC transportation containers Support of operations at Vostochny Cosmodrome 4. Information on staffing number The average Corporation staffing number for 2016 was 7 989 persons. The average Corporation staffing number for 2015 was 7 844 persons. 23
5. Activity Details The main economic activity of RSC Energia is a sale of products, services and R&D using space technologies. Types of products (works, services) offered by the Corporation in the market of its main activity: research and development work on development, ground testing, testing and launch of: space manned stations; dedicated space modules; manned and cargo space vehicles; unmanned spacecraft and systems; upper stages; launch vehicles; flight control, crew training, preparation and performance of space research and experiments at orbital stations and space vehicles; introduction of space high technologies into non-space spheres of production; development of the International Space Station (ISS), its operation; launches of spacecraft (SC) using DM-type upper stages; services on commercial launches of foreign astronauts and tourists, design research, development, testing, production of a complex of prosthetic and orthopedic products and white goods and medicine products. In addition, services are provided for organization of sanatorium-resort therapy, security, communication services, and personnel management. Provided are catering services and food commodities, printing services, etc. 2. Significant Aspects of the Accounting Policy and Presentation of Information in the Financial Statements 2.1 Basis for Preparing the Financial Statements These financial (accounting) statements have been drafted based on the accounting and reporting rules applicable in the Russian Federation, in particular, the Federal Law No.402-FZ "On Accounting" dated December 6, 2011, and the Regulations on Accounting and Reporting in the Russian Federation adopted by the Decree of the Ministry of Finance of the Russian Federation No. 34n dated July 29, 1998, as well as other regulations being parts of the system regulating the accounting and reporting processes of entities in the Russian Federation, The financial statements have been prepared in accordance with the Accounting Policy, approved by the Order of the President of Corporation RSC Energia No. 654 dated December 31, 2015. 2.2 Assets, Liabilities and Transactions in Foreign Currencies Should accounting transactions be made in a foreign currency, the relevant currency s exchange rate set by the Central Bank of the Russian Federation on the date of such transactions is applied. Cash on currency and deposit accounts with banks, float, including loans granted and received, credits denominated in foreign currencies, are recorded in the accounting statements in amounts calculated based on the official exchange rate. The rate amounted to 60,6569 rubles and 72,8827 rubles for 1 US dollar, and 63,8111 rubles and 79,6972 rubles for 1 Euro as of December 31, 2016 and 2015, respectively. Exchange rate differences emerged during the year with respect to transactions with assets and liabilities, 24
and denominated in foreign currencies, as well as its recalculation as of the reporting date, are recognized in other income and expenses. 2.3 Short-Term and Long-Term Assets and Liabilities In the Balance Sheet, the receivables and payables are recognized as short-term ones if its circulation (redemption) periods do not exceed 12 months after the reporting date or are not set. The remaining assets and liabilities specified are presented as long-term ones. Financial investments, as well as credits and loans are classified as short-term or long-term based on the expected period of their use (circulation, possession or redemption) after the reporting date. 2.4 Changes in the Accounting Policy 2016 For the purpose of executing the Order of the President of Corporation No.239 On project organization Maintenance and Current Repair of Gas Equipment and Gas Pipelines of Workshops No. 411 and 412 of ZAO ZEM RSC Energia of 29.04.2016 a new type of activity has been introduced, i.e. running service of the utility power systems and facilities. 2017 The corporation creates an estimated liability for doubtful debts on a quarterly basis Due to transfer of the ownership of water supply and disposal networks to RSC Energia new activities have been opened up: - water transportation; - effluents transportation. The criterion of importance of accounting errors has been changed. The error is recognized to be important, if separately or in the aggregate with other errors for the same accounting period can affect the economic decisions of the users taken by them on the basis of the accounting statements drafted for this accounting period. The criterion for designing objects to investment assets has been changed. An investment asset shall be understood to mean a piece of property which preparation for the intended use requires a long period of time (more than 12 months) and significant expenses for acquisition, construction and (or) manufacture (above RUB 100 million). The appraisal of financial investments at writing-off has been changed. On retiring, financial investments for which the current market value is not determined, are valued at the historical cost of each retiring accounting unit of the financial investments or at an average initial cost of each accounting unit. With the retirement of assets accepted for accounting as financial investments for which the current market value is determined, their value is determined by the Corporation based on the latest assessment. The moment of reflection of the interest paid has been specified. The interest calculation due and payable to the lender (creditor) is recorded in the account evenly on the last day of each month to which they relate (regardless of the contract-stipulated payment schedule). The list of cash equivalents has been changed. The Corporation attributes the following assets to cash equivalents: deposits at short notice, deposits with a maturity of up to three months, unprofitable deposits, which are not recognized as financial investments. The Corporation annually forms the Provision for doubtful debts as of December 31 of the Accounting Period. 25
3.1 Segment Information 3. Disclosure of Major Indicators Pursuant to PBU 12/2010 "Segment Information", based on the analysis of sources and nature of risks associated with the Corporation s operations and profits being generated thereby, in order to group data by segments of the organizational and management structure of the internal accounting system, the information on operating segments is recognized as primary, and the information on each geographical segment is recognized as secondary. Primary information - operating segments One key operating segment may be distinguished in the Corporation s activities: - research, development and experimental work on development and operation of manned orbital complexes, launch vehicles, various classes of launch vehicles, space telecommunications, broadcasting and satellite communications complexes; other segments, including: - health resort treatment services, and children s health camp services; - trade and public catering services; - social services; - other services (security measures, staff recruitment services for subsidiaries, typographical services, etc.). Indicator Research, Development and Experimental Work Health Resort Treatment Services RUB thsd. Trade Services Social Services Other Services Corporation Total 1 2 3 4 5 6 7 For 2016 Segment revenue 31 415 921 653 047 183 038 75 273 1 500 936 33 828 215 Earnings (loss) from segment sales 1 723 362 148 448-2 526 25 147 196 113 2 090 544 Interest receivable 914 456 22 858 - - X 937 314 Interest payable 974 211 - - - X 974 211 Income from participation in other entities 23 544 X 23 544 Other income 12 434 904 2 018 - - X 12 436 922 Other expenses 22 430 519 2 637 - - X 22 433 156 Earnings (loss) before taxation of the segment -8 308 464 170 687-2 526 25 147 196 113-7 919 043 As of December 31, 2016 Segment assets 101 603 266 1 149 269 42 233 10 709 X 102 805 477 Including non-circulating assets Assets not allocated to segments 16 562 864 957 843 - - Х 17 520 707 - - - - X - Assets total 101 603 266 1 149 269 42 233 10 709 X 102 805 477 26
Segment liabilities 100 167 137 1 149 269 42 233 10 709 X 100 167 137 Liabilities not allocated to segments - - - - - - Liabilities - total 100 167 137 1 149 269 42 233 10 709 100 167 137 As of December 31, 2015 Segment assets 85 291 031 1 052 722 26 982 11 922 X 86 382 657 Including non-circulating assets Assets not allocated to segments 15 462 045 840 099 - - Х 16 302 144 - - - - X - Assets total 85 291 031 1 052 722 26 982 11 922 X 86 382 657 Segment liabilities 74 408 476 1 052 722 26 982 11 922 X 75 500 102 Liabilities not allocated to segments - - - - X - Liabilities - total 74 408 476 1 052 722 26 982 11 922 X 75 500 102 As of December 31, 2014 Segment assets 84 928 017 893 147 18 210 11 865 X 85 851 239 Assets not allocated to - - - - X - segments Assets total 84 928 017 893 147 18 210 11 865 X 85 851 239 Segment liabilities 74 237 005 893 147 18 210 11 865 X 75 160 227 Liabilities not allocated to segments - - - - X - Liabilities - total 74 237 005 893 147 18 210 11 865 X 75 160 227 Segment revenue (income) is generated as a result of making transactions with purchasers and customers. Operations with other segments are not allowed. Income tax expenses and other similar payments are not included in the calculation of segment s earnings (loss). Interest receivable, interest payable, income from participation in other entities, other income and expenses have not been allocated between "Research, development and experimental works" and "Other services" segments due to the inexpediency of doing so, and the lack of the basis required. The mentioned income and expenses are attributed to the Corporation s operations as a whole. Segment assets primarily consist of fixed assets, construction in progress, inventory, work in progress, accounts receivable and other current assets other than deferred tax assets, financial investments and cash. Unallocated assets are not included in segment assets, as they are not directly related to reporting segments, and the required allocation basis is lacking. Segment liabilities are disclosed anything but the branches liabilities. The combined share of the net profit of companies in which the Corporation has an interest in the share capital, the total amount of investments in these companies of the Corporation is not disclosed in this section, as it is not directly related to the Corporation's segments allocated. 27
Secondary information geographical segments Information on geographical segments for 2016 (revenue from sales to outside customers and financial result from segment s operations) is presented in the table below: Geographical Segments Sales Revenue (without VAT) RUB, thsd. Production Cost Sales Profit Return on Sales, % Domestic market 29 639 257,29 28 028 270,34 1 610 986,98 5,44 EU countries 46 662,65 31 851,97 14 810,68 31,74 Angola 3 323 103,94 3 025 070,75 298 033,19 8,97 USA 810 906,37 584 662,81 226 243,56 27,90 Egypt 63 230,00-63 230,00 - Japan 8 284,70 4 584,78 3 699,90 44,66 Total 33 828 214,95 31 737 670,65 2 090 544,31 6,18 Information on geographical segments for 2015 (revenue from sales to outside customers and financial result from segment s operations) is presented in the table below: Geographical Segments Sales Revenue (without VAT) RUB, thsd. Production Cost Sales Profit Return on Sales, % Domestic market 33 950 791 31 975 035 1 975 756 5.82 EU countries 244 634 141 092 103 542 42.33 Angola 98 459 94 244 4 215 4.28 USA 635 149 441 207 193 942 30.53 Egypt 3 588 492 4 232 965-644 473 - Japan 2 339 988 1 351 57,76 Total 38 519 864 36 885 531 1 634 333 4,24 Revenue is presented by geographical segments in market locations. Since production facilities of the Corporation are located in the territory of the Russian Federation, assets and investments are referred to a single geographical segment distinguished based on the assets location - the Russian Federation. 3.2 Intangible Assets Accounting of intangible assets of the Corporation is performed in accordance with PBU 14/2007 "Accounting of Intangible Assets" adopted by the Decree of the Russian Ministry of Finance No. 153n dated December 27, 2007. In the accounting statements, intangible assets are presented at their historical (replacement) cost net of depreciation accumulated during the entire period of their use. The useful life of intangible assets is set with due regard to a period during which the Corporation controls the asset, legal or similar restrictions on the use of the asset, expected life of using the asset in the Corporation with the purpose to obtain economic benefits. Intangible assets of the Corporation were not revaluated in 2016. The depreciation of intangible assets is performed using the straight-line method. 28
Indicator Line Code Intangible Assets and Research, Development and Engineering (R&D) Expenses Intangible Assets Availability and Flow Period Opening balance Changes over a period Closing balance Acquired Disposed Depreciation Impairment Revaluation Historical Historical charged losses Historical Accumulated Historical cost 3 cost 3 cost 3 depreciation 3 cost 3 Accumulated depreciation and impairment losses 3 Accumulated depreciation and impairment losses 3 Accumulated depreciation and impairment losses Intangible assets total including: Patents, licenses, know-how, copyrights Industrial designs and models Software, databases 5100 for 2016 1 16 938 ( 3 270) 3 320 ( 1 549) 320 ( 1 058) - - - 18 709 ( 4 008) 5110 for 2015 2 14 298 ( 2 448) 3 318 ( 678) 113 ( 935) - - - 16 938 ( 3 270) 5101 for 2016 1 16 916 ( 3 266) 3 320 ( 1 549) 320 ( 1 056) - - - 18 687 ( 4 002) 5111 for 2015 2 14 286 ( 2 445) 3 308 ( 678) 113 ( 934) - - - 16 916 ( 3 266) 5102 for 2016 1 22 ( 4) ( ) ( 2) - - - 22 ( 6) 5112 for 2015 2 12 ( 3) 10 ( ) ( 1) - - - 22 ( 4) 5103 for 2016 1 - ( -) - ( -) - ( -) - - - - ( -) 5113 for 2015 2 - ( -) - ( -) - ( -) - - - - ( -) 29
Intangible Assets and Research, Development and Engineering (R&D) Expenses Historical Cost of Internally Generated Intangible Assets Indicator Line Code As of December 31, 2016 4 As of December 31, 2015 2 As of December 31, 2014 5 Total 5120 18 709 16 938 14 298 including: Patents, licenses, know-how, copyrights 5121 18 687 16 916 14 286 Industrial designs and models 5122 22 22 12 Software, databases 5123 - - Fully Repaid Intangible Assets Indicator Line Code As of December 31, 2016 4 As of December 31, 2015 2 As of December 31, 2014 5 Total 5130 - - - including: Patents, licenses, know-how, copyrights 5131 - - - Industrial designs and models 5132 - - - Software, databases 5133 - - - 30
3.3 R&D Expenses Non-current assets on separate sub-accounts of account 08 "Non-current assets" include research and development work in progress. Separate subaccounts of account 04 "Intangible assets" include finished research and development work being used in the manufacture of goods (performance of works, provision of services). An accounting unit for R&D expenses is an inventory item. An inventory item is an aggregate of expenses incurred with respect to the work performed, the results of which are independently used in the manufacture of goods (performance of works, provision of services) or for management needs The write-off of expenses is performed using the straight-line method. The period over which R&D expenses are to be written off is determined based on the expected service life of R&D results obtained. The expected service life and the expenses write-off method on each R&D subject shall be set by the Decision of the Technical Commission on the R&D results use, approved by the Project Manager. R&D expenses not providing any positive result shall be written-off to other expenses of the accounting period. In the Balance Sheet, finished R&D work being used in the manufacture of goods (performance of works, provision of services) is recognized in line 1120 "Research and development results". Balance Sheet line 1120 "Research and development results" demonstrates the amount of total expenses for finished R&D work being used in the Corporation s operations amounting to RUB 1 033 129 thsd and RUB 810 333 thsd, unfinished and unexecuted R&D work amounting to RUB 399 969 thsd and RUB 835 229 thsd as of December 31, 2016 and December 31, 2015, respectively. 31
Unfinished and Unexecuted R&D and Uncompleted Operations on Intangible Asset Acquisition Indicator Line Code Period Opening balance Changes over a period Closing balance Expenses over a period Written-off as expenses not provided any positive result Accepted for recording as intangible assets or R&D Expenses for unfinished research and development total including: R&D performed at the expense of the Corporation R&D funded out of specialpurpose financing resources 5160 for 2016 1 835 229 62 981 ( 0) ( 498 241) 399 969 5170 for 2015 2 1 213 922 474 541 ( 0) ( 853 234) 835 229 5161 for 2016 1 834 717-22 686 ( 0) ( 413 062) 398 969 5171 for 2015 2 1 213 631 474 320 ( 0) ( 853 234) 834 717 5162 for 2016 1 512 85 667 ( -) ( 85 179) 1 000 5172 for 2015 2 291 221 ( -) ( ) 512 Uncompleted operations on intangible asset acquisition total including: inventions industrial designs databases, software, licenses 5180 for 2016 1 538 8 176 ( 6) ( 8 022) 686 5190 for 2015 2 662 3 249 ( 55) ( 3 318) 538 5181 for 2016 1 538 8 176 ( 6) ( 8 022) 686 5191 for 2015 2 660 3 245 ( 55) ( 3 312) 538 5182 for 2016 1 ( -) ( ) 0 5192 for 2015 2 2 4 ( -) ( 6) 0 5183 for 2016 1 - - ( -) ( -) - 5193 for 2015 1 - - ( -) ( -) - 32
R&D Results Availability and Flow Indicator Line Code Period Opening balance Changes over a period Closing balance Disposed Part of cost written-off as Part of cost Part of cost Part of cost Acquired expenses over a Historical cost written-off as Historical cost written-off as Historical cost written-off as period expenses expenses expenses R&D total including: Assets created as a result of R&D performed at the expense of the Corporation Assets created as a result of R&D funded out of special-purpose financing resources 5140 for 2016 1 810 333 ( -) 498 241 ( 275 445) ( -) 1 033 129 ( -) 5150 for 2015 2 179 657 ( -) 853 234 ( 222 558) ( -) 810 333 ( -) 5141 for 2016 1 704 145 ( -) 413 062 ( 237 731) ( -) 879 476 ( -) 5151 for 2015 2 40 410 ( -) 853 234 ( 189 499) ( -) 704 145 ( -) 5142 for 2016 1 106 188 ( -) 85 179 ( 37 714) ( -) 153 653 ( -) 5152 for 2015 2 139 247 ( -) ( 33 059) ( -) 106 188 ( -) 33
3.4 Fixed Assets Fixed assets include assets conforming to the requirements of the Russian Accounting Principle "Accounting of fixed assets" (PBU 6/01) adopted by the Decree of the Russian Ministry of Finance No. 26n dated March 30, 2001, and accepted for recording as appropriate from the time of their putting into operation. In the accounting statements, fixed assets are presented at their historical (replacement) cost net of depreciation accumulated during the entire period of their use. As of December 31, 2016, the land plots owned by RSC Energia were revaluated. The depreciation of the fixed assets acquired and constructed prior to January 1, 2002 is performed based on uniform depreciation rates approved by the Decree of the USSR Council of Ministers No. 1072 "On Uniform Depreciation Rates for the Full Recovery of Fixed Assets of the USSR National Economy" dated October 22, 1990, and of those acquired on or after January 1, 2002 at rates calculated based on estimated useful lives thereof. The useful life of fixed assets is established in accordance with the Classification of Fixed Assets, approved by the Decree of the Government of the Russian Federation No. 1 dated January 1, 2002. The depreciation is performed using the straight-line method. Assets with a useful life exceeding 12 months are included in the inventory, provided that their historical cost is below RUB 40 thsd. per unit. As of December 31, 2016, the depreciated cost of fixed assets available on the Corporation s books amounted to RUB 12 643 037 thsd. 34
Fixed Assets Fixed Assets Availability and Flow Indicator Fixed assets (excluding incomebearing investments in tangible assets total including: Buildings Structures Transfer devices Machinery and Equipment Transport facilities Production and household equipment Perennial plantings Land plots Other fixed assets Line Code Period Opening balance Changes over a period Closing balance Acquired Disposed Depreciation Revaluation Historical cost 3 Accumulated depreciation 6 Historical cost 3 Accumulated depreciation 6 charged Historical cost 3 Accumulated depreciation 6 Historical cost 3 Accumulated depreciation 6 5200 for 2016 1 15 846 485 ( 3 453 390) 1 378 013 ( 938 660) 226 257 ( 514 955) 99 287-16 385 125 ( 3 742 088) 5210 for 2015 2 15 144 699 ( 3 068 996) 1 127 820 ( 296 806) 63 514 ( 447 908) -129 228-15 846 485 ( 3 453 390) 5201 for 2016 1 4 871 535 ( 1 239 874) 371 813 ( 68 933) 16 068 ( 78 489) - - 5 174 415 ( 1 302 295) 5211 for 2015 2 4 751 736 ( 1 170 551) 252 595 ( 132 796) 4 753 ( 74 076) - - 4 871 535 ( 1 239 874) 5202 for 2016 1 379 225 ( 184 252) 22 809 ( 26 558) 17 885 ( 17 946) - - 375 476 ( 184 313) 5212 for 2015 2 366 937 ( 170 934) 30 938 ( 18 650) 2 910 ( 16 228) - - 379 225 ( 184 252) 5203 for 2016 1 766 900 ( 125 900) 328 778 ( 5 886) 5 885 ( 28 877) - - 1 089 792 ( 148 892) 5213 for 2015 2 702 533 ( 101 597) 143 496 ( 79 129) 371 ( 24 674) - - 766 900 ( 125 900) 5204 for 2016 1 2 761 510 ( 1 563 989) 596 641 ( 100 263) 91 515 ( 356 559) - - 3 257 888 ( 1 829 033) 5214 for 2015 2 2 127 594 ( 1 286 904) 658 238 ( 24 322) 24 118 ( 301 203) - - 2 761 510 ( 1 563 989) 5205 for 2016 1 297 180 ( 232 845) 33 542 ( 94 092) 90 552 ( 25 957) - - 236 630 ( 168 250) 5215 for 2015 2 305 106 ( 229 090) 24 142 ( 32 068) 21 872 ( 25 627) - - 297 180 ( 232 845) 5206 for 2016 1 139 772 ( 100 829) 18 725 ( 4 343) 4 343 ( 6 824) - - 154 154 ( 103 310) 5216 for 2015 2 133 073 ( 104 361) 16 530 ( 9 831) 9 480 ( 5 948) - - 139 772 ( 100 829) 5207 for 2016 1 10 ( 10 ) - ( 0 ) 0 ( - ) - - 10 ( 10 ) 5217 for 2015 2 10 ( 10 ) - ( 0 ) 0 ( - ) - - 10 ( 10 ) 5208 for 2016 1 6 624 662 ( - ) 5 402 ( 638 576) - ( - ) 99 287-6 090 775 ( - ) 5218 for 2015 2 6 752 161 ( ) 1 729 ( ) - ( - ) -129 228-6 624 662 ( - ) 5209 for 2016 1 5 691 ( 5 691) 303 ( 9 ) 9 ( 303) - - 5 985 ( 5 985) 5219 for 2015 2 5 549 ( 5 549) 152 ( 10 ) 10 ( 152) - - 5 691 ( 5 691) 35
Indicator Line Code Period Opening balance Changes over a period Closing balance Acquired Disposed Depreciation Revaluation Historical cost 3 Accumulated depreciation 6 Historical cost 3 Accumulated depreciation 6 charged Historical cost 3 Accumulated depreciation 6 Historical cost 3 Accumulated depreciation 6 Accounted as a part of income-bearing investments in tangible assets total including: Property provided for commercial rent Property provided for commercial rent 5220 for 2016 1 329 720 ( 34 754) 0 ( 247) 152 ( 8 254) - - 329 473 ( 42 856) 5230 for 2015 2 331 042 ( 26 801) 266 ( 1 588) 66 ( 8 019) - - 329 720 ( 34 754) 5221 for 2016 1 329 720 ( 34 754) ( 247) 152 ( 8 254) - - 329 473 ( 42 856) 5231 for 2015 2 331 042 ( 26 801) 266 ( 1 588) 66 ( 8 019) - - 329 720 ( 34 754) 5222 for 2016 1 - ( - ) - ( - ) - ( - ) - - - ( - ) 5232 for 2015 2 - ( - ) - ( - ) - ( - ) - - - ( - ) 36
Change in the Value of Fixed Assets as a Result of Further Construction, Further Equipping, Reconstruction and Partial Liquidation Indicator Line Code Increase in the value of fixed assets as a result of further construction, further equipping, reconstruction total 5260 For 2016 1 For 2015 1 411 034 30 660 including: 289 280 11 250 Buildings 5261 Structures 5262 13 266 Transfer devices 5263 2 764 419 Machinery and equipment 5264 105 724 18 991 Transport facilities 5265 Production and household equipment 5266 Perennial plantings 5267 Land plots 5268 Other fixed assets 5269 Decrease in the value of fixed assets as a result of further construction, further equipping, reconstruction - total 5270 including: Buildings 5271 ( 0) ( 0) ( ) ( ) Structures 5272 ( ) ( ) Transfer devices 5273 ( ) ( ) Machinery and equipment 5274 ( ) ( ) Transport facilities 5275 ( ) ( ) Production and household equipment 5276 ( ) ( ) Perennial plantings 5277 ( -) ( -) Other fixed assets 5278 ( ) ( ) 37
Other Use of Fixed Assets Line Code As of December 31, 2016 4 As of December 31, 2015 2 As of December 31, 2014 5 Leased out fixed assets held on the balance sheet 5280 157 216 492 011 660 538 Leased out fixed assets held on off-balance-sheet 5281 accounts - - - Leased fixed assets held on the balance sheet 5282 - - - Leased fixed assets held on off-balance-sheet accounts 5283 212 314 221 764 210 870 Real estate accepted for operation and in use 5284 undergoing the state registration 17 082 17 082 - Mothballed fixed assets 5285 27 751 38 726 - Other use of fixed assets (pledge, etc.) 5286 - - - 38
3.5 Construction in Progress Uncompleted capital investments include construction in progress, including fixed assets (line 1150) and other non-current assets (line 1190): Other Non-current Assets Balance Sheet line 1190 Other non-current assets include: - Advances paid out for capital investments as of December 31, 2016 amounted to RUB 149 609 thsd, December31, 2015 amounted to RUB 151 723 thsd. - expenses undertaken in connection with future construction project contract works, which are covered by the cost of projects under construction, included in subsidiary account 97.03 Organization of construction work as of December 31, 2016 amounted to RUB 1 117 thsd; December 31, 2015 amounted to RUB 6 848 thsd; - uncompleted capital outlays for housing projects included in subsidiary account 08.03.3 Housing projects as of December 31, 2016 amounted to RUB 890 462 thsd; as of December 31, 2015 amounted to RUB 239 370 thsd; - value-added tax for contract works in housing projects, included in subsidiary account 19.08 VAT for contract works in housing projects as of December 31, 2016 amounted to RUB 147 142 thsd; as of December 31, 2015 amounted to RUB 39 554 thsd; - investment contribution under contract No.ID-010214 of 01.02.2014 SUE PI «MOSP» included in subsidiary account 76.09.3 Accounts receivable and payable for creation of non-current assets in organization as of December 31, 2015 amounted to RUB 190 563 thsd. Total amount of other non-current assets as of December 31, 2016 is RUB 1 188 330 thsd, as of December 31, 2015 is RUB 628 058 thsd. 39
Indicator Construction in progress and uncompleted operations on fixed asset acquisition, modernization, etc. - total including: Acquisition, construction and creation of fixed assets Line Code Period Capital Investments in Progress Opening balance Expenses over a period Changes over a period Closing balance Accepted for recording as fixed Written-off assets, or cost increase 5240 for 2016 1 839 667 2 375 578 ( 550 088) ( 1 367 997) 1 297 160 5250 for 2015 2 2 735 129 1 355 922 ( 2 223 382) ( 1 028 002) 839 667 5241 for 2016 1 71 456 1 095 725 ( 9 072) ( 939 056) 219 053 5251 for 2015 2 934 387 132 201 ( ) ( 995 132) 71 456 Modernization and reconstruction 5242 for 2016 1 365 463 86 847 ( 16 502) ( 410 034) 25 774 5252 for 2015 2 208 870 185 762 ( ) ( 29 169) 365 463 Acquisition of land plots 5243 for 2016 1 0 3 110 ( 22) ( 3 088) 0 5253 for 2015 2 0 ( ) ( ) 0 etc. 5244 for 2016 1 11 655 16 023 ( 190) ( 15 226) 12 262 5254 for 2015 2 13 486 1 870 ( ) ( 3 701) 11 655 Housing construction 5245 for 2016 1 239 370 660 713 ( 9 028) ( 593) 890 462 5255 for 2015 2 1 383 658 579 645 ( 1 723 933) ( ) 239 370 Advances paid out for capital investments 5246 for 2016 1 151 723 513 160 ( 515 274) ( ) 149 609 5256 for 2015 2 194 728 456 444 ( 499 449) ( ) 151 723 40
3.6 Financial Investments Financial investments with non-determined market values are accounted at their historical costs. The historical cost of financial investments acquired for a fee is recognized as the amount of actual expenses for its acquisition, except for value added tax and other compensated taxes. The analytical accounting of financial investments is performed by investment groups and security types. Disposed financial investments not having a market value are recorded at historical cost of each item. Income and expenses from financial investments are recognized in other income and expenses. Financial investments are presented net of the accrued reserve for impairment of financial investment objects, with respect to which the signs of sustained reduction in their values have been detected. In 2016, a reserve for impairment of long-term financial investments were created for deposits in the amount of RUB 0,6 thsd, and a reserve for depreciation of shares to the amount of RUB 344 050 thsd. During the accounting period the reserve for depreciation of shares was restored, and the reserve of OJSC Fonderservisbank was recognized in other revenues of the Corporation to the amount of RUB 670 thsd due to the write-off of 1 share from the Corporation's separate account. The reserve amounted to RUB 1 236 445 thsd and 893 064 thsd as of December 31, 2016 and 2015, respectively. Indicator Other Use of Financial Investments Line Code As of December 31, As of December 31, As of December 31, 2016 4 2015 2 2014 5 Pledged financial investments - total 5320 - - - including: bills 5321 - - - etc. Financial investments transferred to third parties (except through sale) - total 5325 - - - including: bills 5326 - - - etc. Other use of financial investments 5329 - - - 41
Indicator Line Code Financial Investments Financial Investments Availability and Flow Period Opening balance Changes over a period Closing balance Historical cost Acquired Disposed (repaid) Interest accrual Established reserves Historical cost Accumulated adjustments 7 Historical cost Accumulated adjustments 7 (including bringing the historical cost to the nominal value) Current market value (impairment losses) Accumulated adjustments 7 Long-term - total 5301 for 2016 1 1 662 924 (893 064) 140 074 ( 1 267) 670 - (344 051) - 1 801 731 (1 236 445) 5311 for 2015 2 4 106 445 (787 968) 293 569 (2 737 090) 0 - (105 096) - 1 662 924 (893 064) including: 5302 for 2016 1 649 086 (18 874) ( 200) 0 - (344 050) - 648 886 ( 360 924) Stocks and shares in subsidiaries 5312 for 2015 2 422 650 0 226 441 ( 5) 0 - (16 874) - 649 086 ( 16 874) Stocks and shares 5303 for 2016 1 29 487 0 ( ) - - - 29 487 0 in affiliates 5313 for 2015 2 29 487 0 ( ) - - - 29 487 0 Other 5304 for 2016 1 887 224 (876 190) ( 1 067) 670 - (1) - 886 157 (875 521) 5314 for 2015 2 1 113 665 (787 968) 1 (226 442) - - (88 222) - 887 224 (876 190) Loans granted 5305 for 2016 1 97 127 140 074 ( ) - - - - 237 201 5315 for 2015 2 2 540 643-67 127 (2 510 643) - - - - 97 127 Short-term total 5305 for 2016 1 5 975 228 (2 183 991) 1 041 329 ( 5 000) - - (2 310 438) (120 371) 6 891 186 (4 494 429) 5315 for 2015 2 1 940 480 (946 441) 3 871 071 ( 0) - - (1 237 550) 163 677 5 975 228 (2 183 991) including: 5306 for 2016 1 0 - ( ) - - - 0 - Debt securities (bonds, bills) 5316 for 2015 2 0 - ( ) - - - - 0 - Loans granted 5307 for 2016 1 5 970 228 (2 183 991) 1 005 829 ( ) - - (2 310 438) (120 371) 6 855 686 (4 494 429) 5317 for 2015 2 1 940 480 (946 441) 3 866 071 ( ) - - (1 237 550) 163 667 5 970 228 (2 183 991) Other 5308 for 2016 1 5 000-35 500 ( 5 000) - - - 35 500-5318 for 2015 2-5 000 ( ) - - - 5 000 - Etc. - - - ( -) - - - - - Financial 5300 for 2016 1 7 638 152-3 077 055 1 181 403 ( 6 267) 670 - - 2 654 489 (120 371) 8 692 917-5 730 874 Investments - total 5310 for 2015 2 6 046 925-1 734 409 4 164 640 (2 737 090) 0 - - 1 342 646 163 677 7 638 152-3 077 055 42
3.7 Inventory Inventory is accepted for recording at its actual cost (in the amount of actual expenses for its acquisition). The valuation of writing-off the inventory is carried out at an average cost with the exception of assets with an asset depreciation range exceeding 12 months and with a historical cost no more than 40 000 rubles per unit. The method of calculating the average value is an average rolling valuation per nomenclature, warehouse, work order. The valuation of writing-off the assets with an asset life exceeding 12 months and with a historical cost no more than 40,000 rubles per unit is carried out using FIFO method. As of December 31, 2016, the Corporation doesn t have any inventory, which has become obsolete, lost its historical cost in whole or in part, or the current market price of which has decreased, on its books. Therefore, as of 31 December 2016, the reserve for tangible assets impairment was not created by the Corporation. 3.8 Special clothing and special equipment Special tools and special devices include hardware with individual (unique) properties and designed for production (release) of specific types of products (works, services). Hardware designed to produce generic types of products (works, services) are not taken into account as a special tool and special devices. Special equipment includes facilities reusable in production, which enable to perform specific (non-standard) technological operations. Technological equipment used to perform mechanical, thermal, galvanic and other processing of parts and products, standard test equipment for checking purchased semi-finished products, components and materials, as well as other general-purpose equipment is not considered as special equipment. Special clothing includes individual protection gear for the Corporation employees and technological clothing made of special fabrics to protect air space against contamination caused by personnel working in clean rooms. Special clothing includes special clothes, special footwear and safety devices. The timeframe of value-added use of special equipment is established depending on the type of equipment and its purpose, based on the statutory standards of the legislation of the Russian Federation stipulated in the Generic Industry Standards for free issue of special clothing, special footwear and other protective equipment, as well as in the Rules for providing workers with special clothing, special footwear and other protective means approved by the Decree of the Ministry of Labor and Social Development of the Russian Federation No. 51 of December 18, 1998. For special clothing as a technological one the timeframe of value-added is determined in accordance with the requirements of the National Standard of the Russian Federation Clean rooms. Technological clothing. General requirements GOST R 52538-2006. When special clothing is handed over into operation, which normative period of use does not exceed 12 months, non-recurrent write off is effected for manufacturing expenses. When special clothing is handed over into operation, which normative period of use does not exceed 12 months, its cost is written off to manufacturing expenses evenly (in a linear fashion) during the period of use. 43
3.9 Expenses, Work in Progress and Finished Goods Work in progress is evaluated based on total actual expenses incurred, including the appropriate portion of general expenses. General expenses are monthly allocated to orders in proportion to the increase in values of items composing the "Payroll expenses" section, Direct Manufacturing Expenses, over the accounting month. The administrative expenses are allocated in accordance with guidebook Matrix of primary function cost categorization for a group of administrative expenses. Due to the corrections as of December 31, 2015, line 1210 Inventory of the balance sheet was increased to include the amount of RUB 209 766 thsd with regard to expenses for work in process. 3.10 Prepaid Expenses Costs incurred by the Corporation over the accounting period though related to future periods are recognized as prepaid expenses. Prepaid expenses comprise as follows: Payment for the non-exclusive right to use software products; Expenses related to the construction work arrangement. The mentioned expenses are evenly written-off as intended or based on special calculations over the periods they pertain to. The expenses of the future periods as of December 31, 2016 amounted to RUB 60 475 thsd are added to line Other in Table Inventory. Inventory Availability and Flow. 44
Indicator Line Code Inventory Inventory Availability and Flow Period Opening balance Changes over a period Closing balance Production cost Reserve for impairment Disposed Impairment losses Production cost Proceeds and expenses Production cost Reserve for impairment Inventory turnover between groups (types) Reserve for impairment Inventory - total including: Raw materials and supplies Work in progress Prepaid expenses Finished goods and goods for resale 5400 for 2016 1 19 717 544 ( 104 041) 34 205 918 ( 33 017 310) 104 041 (860 605) X 20 906 152 ( 860 605) 5420 for 2015 2 23 356 468 ( 849 271) 32 792 166 ( 36 431 090) 745 230 X 19 717 544 ( 104 041) 5401 for 2016 1 449 766 ( -) 1 657 723 ( 1 220 735) 0 - - 886 754 ( -) 5421 for 2015 2 415 587 ( -) 496 325 ( 462 146) 0 - - 449 766 ( -) 5402 for 2016 1 19 185 922 ( 104 041) 31 452 310 ( 31 393 343) 104 041 (860 605) - 19 244 889 ( 860 605) 5422 for 2015 2 22 821 696 ( 849 271) 32 273 674 ( 35 909 448) 745 230 - - 19 185 922 ( 104 041) 5403 for 2016 1 - ( -) - ( -) - - - - ( -) 5423 for 2015 2 - ( -) - ( -) - - - - ( -) 5404 for 2016 1 9 345 ( -) 362 144 ( 361 732) 0 - - 9 757 ( -) 5424 for 2015 2 7 371 ( -) 12 902 ( 10 928) 0 - - 9 345 ( -) Other 5405 for 2016 1 72 511 ( -) 733 741 ( 41 500) - - - 764 752 ( -) 5425 for 2015 2 111 814 ( -) 9 265 ( 48 568) - - - 72 511 ( -) etc. 45
Pledged Inventory Indicator Inventory unpaid as of the reporting date total including: Pledge agreements Line Code As of December 31, As of December 31, As of December 31, 2016 4 2015 2 2014 5 5440 - - - 5441 - - - Inventory pledged under contract total 5445 0 0 0 including: - 5446 Raw materials and supplies - - Work in progress 5447 - - - Finished goods and goods for - 5448 resale - - Other 5449 - - - 46
3.11 Cash Pursuant to the Decree of the Russian Ministry of Finance No. 66n "On Forms of Accounting Reports of Organizations" dated July 2, 2010, and para 18 of PBU 23 "Cash Flow Statement", cash flow statement indicators shall be indicated in the currency of the Russian Federation - rubles. Cash flow values in a foreign currency shall be converted into rubles at the official exchange rate established by the Central Bank of the Russian Federation on the date of payment effecting or receipt. Line 1250 Cash and cash equivalents reflects the Corporation cash amounted to RUB 25 064 724 thsd as of December 31, 2016 including: On account 50 "Cash account" amounted to RUB 2 707 thsd; On account 51 Payment accounts amounted to RUB 22 216 033 thsd; On account 52 Currency accounts amounted to RUB 2 729 799 thsd; On account 55 Special bank accounts amounted to RUB 112 272 thsd; On account 57 Transfers in transit amounted to RUB 3 843 thsd. Line 1250 Cash and cash equivalents reflects the Corporation cash amounted to RUB 11 001 503 thsd as of December 31, 2015, including: On account 50 "Cash account" amounted to RUB 3 627 thsd; On account 51 Payment accounts amounted to RUB 9 217 771 thsd; On account 52 Currency accounts amounted to RUB 1 105 752 thsd; On account 55 Special bank accounts amounted to RUB 671 745 thsd; On account 57 Transfers in transit amounted to RUB 2 608 thsd Within the framework of the State Defense Order the Corporation has monetary assets with a limited access for use as required by Federal Law No.275-FZ On State Defense Order amounted to RUB 18 520 954 thsd as of December 31, 2016 and RUB 8 333 822 thsd as of December 31, 2015. 3.12 Accounts Receivable Trade receivables are determined based on the prices specified in agreements between the Corporation and purchasers (customers), including VAT. Due to the correction as of December 31, 2015 in line 1230 Accounts receivable of the balance sheet the short-term loan receivable (advances paid) is decreased to the amount of RUB 103 998 thsd. Accounts receivable include advances for future settlements paid to other entities under the agreements. As of December 31, 2016, the amount of advances is RUB 37 972 129 thsd, and the reserve for advances paid equaled to RUB 3 656 581 thsd. 47
Accounts Receivable Availability and Flow Indicator Long-term accounts receivable - total including: Trade receivables Advances paid Other accounts receivable Short-term accounts receivable total including: Trade receivables Advances paid Other accounts receivable Total Line Code Period Opening balance Changes over a period Closing balance Accounted under contract Reserve for doubtful debts Through business transactions (amount of debt under a transaction, operation) 8 Acquired Disposed Reclassificati Interest, penalties and other accruals due 8 Repayment Write-off to the financial result 8 Reserve recovery on from longterm receivables to short-term receivables Accounted under contract Reserve for doubtful debts 5501 for 2016 1 5 645 416 (34 576) 10 742 454 - ( 565 381) ( -) 30 729 ( 5 025 133) 10 797 356 ( 588 641) 5521 for 2015 2 14 290 212 (28 944) 5 126 031 - (6 954 376) ( -) 28 944 ( 6 816 451) 5 645 416 ( 34 576) 5502 for 2016 1 153 783 ( 9 550) 332 572 - ( 119 382) ( ) 5 703 ( 229) 366 744 ( 11 304) 5522 for 2015 2 253 849 (28 944) 39 393 - ( 37 556) ( ) 28 944 ( 101 903) 153 783 ( 9 550) 5503 for 2016 1 5 401 151 ( -) 10 083 592 - (366 041) ( -) - ( 5 018 669) 10 100 033 ( 577 337) 5523 for 2015 2 14 021 102 ( -) 5 010 105 - (6 915 508) ( -) - ( 6 714 548) 5 401 151 ( -) 5504 for 2016 1 90 482 (25 026) 326 290 - ( 79 958) ( -) 25 026 ( 6 235) 330 579 ( 0) 5524 for 2015 2 15 261 ( -) 76 533 - ( 1 312) ( -) - ( -) 90 482 ( 25 026) 5510 for 2016 1 30 536 391 (990 765) 13 596 584 - (16 750 034) ( 1 020) 203 628 5 025 133 32 558 777 (5 520 225) 5530 for 2015 2 18 051 679 (391 880) 13 587 328 - (8 113 586) ( 209) 374 305 6 816 451 30 536 391 ( 990 765) 5511 for 2016 1 3 095 380 ( 15 460) 975 649 - (2 068 619) ( ) 2 757 229 2 002 639 ( 880 003) 5531 for 2015 2 1 321 355 ( 231) 2 883 157 - (1 211 035) ( ) 231 101 903 3 095 380 ( 15 460) 5512 for 2016 1 25 379 651 (258 853) 11 173 333 - (13 848 827) ( 339) 200 871 5 018 669 27 722 487 (3 079 244) 5532 for 2015 2 15 651 635 (91 613) 9 486 114 - (6 472 645) ( 1) 74 038 6 714 548 25 379 651 (258 853) 5513 for 2016 1 2 061 360 (716 452) 1 599 325 - ( 832 588) ( 681) 6 235 2 833 651 (1 560 978) 5533 for 2015 2 1 078 689 (300 036) 1 218 057 - ( 235 178) ( 208) 300 036 2 061 360 (716 452) 5500 for 2016 1 36 181 807 (1 025 341) 24 339 038 - (17 315 415) ( 1 020) 234 357 X 43 356 133 (6 108 866) 5520 for 2015 2 32 341 891 (420 824) 18 713 359 - (15 067 962) ( 209) 403 249 X 36 181 807 (1 025 341) 48
Overdue Accounts Receivable Indicator Line Code As of December 31, 2016 4 As of December 31, 2015 2 As of December 31, 2014 5 Accounted under contract Book value Accounted under contract Book value Accounted under contract Book value Total 5540 498 527-633 282-258 837 597 including: - Trade receivables 5541 498 527-633 282-258 837 148 Advances paid 5542 - - - - - - Other accounts receivable 5543 - - - - - 449 49
3.13 Capital and Reserves The authorized capital of the Corporation as of December 31, 2016 and December 31, 2015 equals to RUB 1 123 734 thsd and consists of the Corporation-issued and fully paid ordinary shares totaling 1 123 734 shares. Based on the results of work for 2015, dividends amounted to RUB 151 704 thsd were distributed and transferred in 2016. The Charter of the Corporation provides for the establishment of a reserve fund in the amount of at least 15% of the authorized capital. The fund is formed by means of compulsory annual deductions equal to 15% of the net profit. The reserve fund of the Corporation is completely formed. As of December 31, 2015 in line 1370 Retained earnings (uncovered loss) the amount was decreased by RUB 195 711 thsd. The reason for making changes is disclosed in section 3.16 Taxation. 3.14 Loans and Credits Expenses for loans and credits received are recognized as costs of the period, during which they have been incurred (current expenses), and are included in other expenses. Additional expenses associated with obtaining loans and credits are included in other expenses as they are paid. Interest on borrowings is evenly (monthly) accrued, and is recognized as other expenses in the accounting periods, which these accruals pertain to. The Corporation transfers long-term payables on loans and credits received to short-term payables at the time when there are 365 days left to repay the principals of such borrowings pursuant to loan agreements. Line 1410 Borrowings of the balance sheet demonstrates bank loan proceeds with maturity exceeding 365 days as of December 31, 2016. The line 1510 "Borrowings" demonstrates Corporation s debts with maturity not exceeding 365 days under loan agreements with banks as of December 31, 2016. 50
2015 RUB thsd Changes over a period Indicator Korolev Sberbank branch 2570, 00150013/08014201 Korolev Sberbank branch 2570, 00510013/08014201 Korolev Sberbank branch 2570, 00710013/08014201 Unamortized Principle Balance at the beginning of year Received for a year (principal) Receipt Interest, penalties and other accruals due to the loaner for a year Repaid for a year (principal) Retirement Paid % for a year Unamortized Principle Balance at the end of year Balance of accrued interest at the end of a year Credit balance of credit agreement at the end of the year Amortization period (year) 1 000 000 0 132 970 1 000 000 132 970 0 0 0 2015 3 031 720 2 306 412 328 566 1 738 132 325 048 3 600 000 3 518 0 2015-2017 0 2 369 150 29 118 0 26 694 2 369 150 2 425 2 369 150 2016 JSB "Russia", 00.02-2-2/01/161/15-364 071 1 506 0 1 506 364 071 0 635 929 2016 TOTAL: 4 031 720 5 039 633 492 160 2 738 132 486 217 6 333 221 5 943 3 005 078 Including: Long-term credits total 1 293 588 1 996 154 2 051 Korolev Sberbank branch 2570, 00150013/08014201 Korolev Sberbank branch 2570, 00510013/08014201 Korolev Sberbank branch 2570, 00710013/08014201 0 0 0 1 293 588 1 996 154 2 051 0 0 0 JSB "Rossiya", 00.02-2-2/01/161/15-0 0 Short-term credits total 2 738 132 4 337 067 3 892 Korolev Sberbank branch 2570, 00150013/08014201 Korolev Sberbank branch 2570, 00510013/08014201 Korolev Sberbank branch 2570, 00710013/08014201 1 000 000 0 0 1 738 132 1 603 846 1 467 0 2 369 150 2 425 JSB "Rossiya", 00.02-2-2/01/161/15-364 071 0 51
2015 RUB thsd Changes over a period Indicator AO "Rossiya", Korolev branch, 04/04/001/2014* Unamortized Principle Balance at the beginning of year Received for a year (principal) Receipt Interest, penalties and other accruals due to the loaner for a year Retirement Repaid for a year (principal) Paid % for a year Unamortized Principle Balance at the end of year Balance of accrued interest at the end of a year Credit balance of credit agreement at the end of the year Amortization period (year) 28 730 0 235 28 730 235 0 0 0 2015 TOTAL: 28 730 0 235 28 730 235 0 0 0 Including: Long-term credits total 0 0 0 AO "Rossiya", Korolev branch, 04/04/001/2014* 0 0 0 Short-term credits total 28 730 0 0 AO "Rossiya", Korolev branch, 04/04/001/2014* 28 730 0 0 52
2016 Changes over a period RUB thsd Indicator Unamortized Principle Balance at the beginning of year Received for a year (principal) Receipt Interest, penalties and other accruals due to the loaner for a year Retirement Repaid for a Paid % for a year (principal) year Unamortized Principle Balance at the end of year Balance of accrued interest at the end of a year Credit balance Amortization of credit period (year) agreement at the end of the year PC Sberbank, 00510013/08014201 3 600 000 0 363 951 1 603 846 362 191 1 996 154 1 759 0 2016-2021 PC Sberbank, 00510013/08014201 2 369 150 0 127 065 2 369 150 127 065 0 0 0 2016 PC Sberbank, 00510013/08014201-2 964 925 316 818 0 313 237 2 964 925 3 581 35 075 2019 PC Sberbank, 00510013/08014201-1 850 135 34 559 0 32 413 1 850 135 2 146 749 865 2017 PC Sberbank, 00510013/08014201-400 000 15 110 0 14 379 400 000 731 0 2019 AO "Rossiya", 00.02-2-2/01/161/15 364 071 635 929 41 485 1 000 000 41 485 0 0 1 000 000 2016 AO "Rossiya", 00.02-2-2/01/036/16-1 398 217 81 165 0 81 165 1 398 217 0 1 601 783 2017 TOTAL: 6 333 221 7 249 205 980 153 4 972 995 971 936 8 609 431 8 217 3 386 723 Long-term credits total 1 996154 7 211 214 8 217 PC Sberbank, 00510013/08014201 1 996 154 1 996 154 1 759 PC Sberbank, 00390015/08014201-2 964 925 3 581 PC Sberbank, 00010016/08014201-1 850 135 2 146 PC Sberbank, 00250016/08014101-400 000 731 Short-term credits total 4 337 067 1 398 217 0 PC Sberbank, 00510013/08014201 1 603 846 0 0 PC Sberbank, 00710013/08014201 2 369 150 0 0 AO "Rossiya", 00.02-2-2/01/161/15 364 071 0 0 AO "Rossiya", 00.02-2-2/01/036/16-1 398 217 0 53
3.15 Accounts Payable In 2015, as a result of the court proceedings at the suit of the Ministry of Defense of the Russian Federation on recovery of the penalty amounted to RUB 195 711 thsd for failure to perform obligations under the state contract on its due date, a decision was taken to exactly sustain the claim. Thus, the Corporation documented expenses for payment of penalties in the amount of RUB 195 711 thsd in the financial statements for 2015. As of December 31, 2015 in line 1520 «Accounts Payable» the following corrections were made: - trade accounts payable increased to the amount of RUB 105 768 thsd; - accounts payable in other accrued expenses increased to the amount of RUB 195 711 thsd. 54
Accounts Payable Availability and Flow Indicator Long-term accounts payable - total including: Trade payables Other Advances received Line Code Period Opening balance Changes over a period Acquired Disposed Reclassification Through business Interest, penalties Repayment Write-off to the from long-term transactions and other accruals financial result 8 payables to shortterm payables (amount of debt due 8 under a transaction, operation) 8 Closing balance 5551 for 2016 1 21 556 450 26 529 604 - ( 751 144) ( 68) (6 284 701) 41 050 141 5571 for 2015 2 11 177 748 10 410 084 - ( 31 382) ( -) ( -) 21 556 450 5552 for 2016 1 106 831 15 641 - ( 99 894) ( 68) ( -) 22 510 5572 for 2015 2 1 413 105 418 - ( -) ( -) ( -) 106 831 5553 for 2016 1-977 266 - ( -) ( -) ( -) 977 266 5573 for 2015 2 - ( -) ( -) ( -) 5554 for 2016 1 21 449 619 25 536 697 - ( 651 250) ( -) (6 284 701) 40 050 365 5574 for 2015 2 11 176 335 10 304 666 - ( 31 382) ( -) ( -) 21 449 619 Short-term accounts payable - total including: Trade payables Advances received Other accounts payable 5560 for 2016 1 46 071 912 27 530 293 - (35 560 086) ( 2 942) 6 284 701 44 323 878 5580 for 2015 2 54 582 008 20 652 686 - (29 162 782) ( 0) - 46 071 912 5561 for 2016 1 4 153 313 1 772 221 - ( 3 469 940) ( ) - 2 455 594 5581 for 2015 2 2 558 940 3 719 128 - ( 2 124 755) ( ) - 4 153 313 5562 for 2016 1 40 883 937 25 197 328 - (31 292 112) ( ) 6 284 701 41 073 854 5582 for 2015 2 51 406 295 15 925 102 - (26 447 460) ( ) - 40 883 937 5563 for 2016 1 1 034 662 560 744 - ( 798 034) ( 2 942) - 794 430 5583 for 2015 2 616 773 1 008 456 - ( 590 567) ( ) - 1 034 662 Total 5550 for 2016 1 67 628 362 54 059 897 - (36 311 230) ( 3 010) X 85 374 019 5570 for 2015 2 65 759 756 31 062 770 - (29 194 164) ( 0) X 67 628 362 55
Overdue Accounts Payable Indicator Line Code As of December 31, 2016 4 As of December 31, 2015 2 As of December 31, 2014 5 Total 5590 513 401 1 409 117 350 633 including: 5591 Trade payables 513 401 1 409 117 350 633 Other 5592 - - - 56
3.16 Taxation Value-added tax The value added tax (VAT) on goods, products, works and services sold is calculated as of the date of actual shipment (delivery) of such goods, products, works and services. Income tax For the purposes of the income tax calculation, income is recognized in the reporting (tax) period, during which it occurred, regardless of the actual receipt of cash or any other property (works, services), and (or) property rights (accrual basis). The amount of provisional profits tax income came to RUS 1 583 809 thsd for 2016. The amount of provisional profits tax expense was corrected to the amount of RUS 39 142 thsd and came to RUS 229 848 thsd for 2015. In 2015, as a result of the court proceedings at the suit of the Ministry of Defense of the Russian Federation on recovery of the penalty amounted to RUB 195 711 thsd for failure to perform obligations under the state contract on its due date, a decision was taken to exactly sustain the claim. Thus, the Corporation disclosed expenses in line 2350 Other expenses of the Profit and Loss Statement for payment of penalties in the amount of RUB 195 711 thsd in the financial statements for 2015. For this reason, the provisional profits tax expense decreased by RUB 39 142 thsd. The current income tax recognized in the line 2410 of the Profit and Loss Statement equaled to RUB 1 199 607 thsd. in 2016, RUB 793 164 thsd in 2015. 3.17 Deferred Taxes In its accounting and reporting documents, the Corporation discloses deferred tax assets and liabilities, as well as permanent tax assets and liabilities, i.e. the amounts, which may influence the income tax value in the current and/or forthcoming accounting periods. Permanent Differences Permanent differences have emerged in the Corporation s accounting as a result of the excess of actual expenses included in the accounting earnings (loss) calculation over expenses accepted for tax purposes, with respect to which certain cost restrictions are provided, and other differences. The sum of permanent tax liabilities (assets) calculated based on permanent differences is recorded in the line 2421 of the Profit and Loss Statement in 2016 and amounted to RUB 1 823 453 thsd and recorded in the line 2421 in 2015 and amounted to RUB 413 080 thsd, respectively. Deductible Temporary Differences In 2016, deductible temporary differences in the amount of RUB 5 091 550 thsd emerged as a result of as follows: recognition of targeted funding in records for accounting and tax purposes; recognition of service sector losses in records for accounting and tax purposes; recognition of other income and expenses in records (including the estimated liability) for accounting and tax purposes. 57
Changes in deferred tax assets are shown in the line 2450 of the Profit and Loss Statement and equaled to RUB 1 018 310 thsd in 2016, and RUB 17 170 thsd in 2015. Taxable Temporary Differences In 2016, taxable temporary differences in the amount of RUB 291 735 thsd emerged as a result of as follows: evaluation of work in progress in records for accounting and tax purposes; recognition of R&D expenses in records for accounting and tax purposes; depreciation of fixed assets in records for accounting and tax purposes; recognition of other income and expenses in records for accounting and tax purposes. Changes in deferred tax liabilities are shown in the line 2430 of the Profit and Loss Statement in the amount of RUB 58 347 thsd in 2016 and RUB 133 066 thsd in 2015. 3.18 Deferred Revenue As of December 31, 2016, the Balance Sheet line 1530 Deferred Revenue indicates the amount of target funding received equal to RUB 257 175 thsd. In the accounting period R&D expenses were recognized to the amount of RUB 106 620 thsd for the Ministry of Education and Science of Russia. R&D expenses to the amount of RUB 58 170,2 thsd and amortization expenses for the parking lot received from ZAO ZEM RSC Energia to the amount of RUB 3,4 thsd were written off. In the accounting period, monetary assets were received from the Ministry of Investments and Innovations of Moscow Region to the amount of RUB 1 000 thsd. As of December 31, 2015, the Balance Sheet line 1530 Deferred Revenue indicates the amount of target funding received equal to RUB 314 389 thsd. 3.19 Recognition of Income (Revenue) Revenue from the provision of services (performance of works) is recognized as services are provided to customers (or upon the works completion) and payment documents are submitted to them. It is recorded in accounts net of value added tax, excises and similar payments. Income from ordinary activities includes receipts from the sale of products and goods, incomings associated with performance of works, provision of services. Incomings relating to assignment of Corporate assets for value for temporary use (temporary possession and use) are revenues from ordinary activities. Other incomes of the Corporation include: - Incomes associated with granting of rights for value originated from patents for inventions, industrial designs and other types of intellectual property of the Corporation; - Incomes from participation in the authorized capitals of other organizations; - Proceeds for fixed assets, inventories, financial investments, foreign exchange; - Interest received for making available for use the Corporation's assets; - Difference between the historic and nominal value of the securities. The Corporation recognizes revenue from the performance of works, provision of services, selling of goods 58
with a long manufacturing cycle in its accounts upon the completion of such works, services, or goods manufacture in general. 3.20 Production Expenses Indicator Line Code For 2016 1 For 2015 2 Material costs 5610 22 073 193 24 546 539 Payroll expenses 5620 5 321 443 5 135 408 Social benefit costs 5630 1 501 514 1 453 339 Depreciation 5640 475 663 400 299 Other expenses 5650 2 635 344 1 464 537 Total by elements 5660 32 007 157 33 040 122 Change in balances (increase [+], decrease [-]): Work in progress 5670-268 733 3 845 540 Finished products 5680-753 -131 Total expenses for ordinary activities 5600 31 737 671 36 885 531 3.21 Other Income and Expenses RUB thsd. Other income / expenses Income and expenses related to compensation of losses of Corporation Earnings and losses of previous years identified in the reporting year 2016 2015 Income Expenses Income Expenses 4 992 623 36 029-15 981 119 912 237 273 1 193 123 534 Exchange and sum differences 1 301 622 1 926 497 2 721 440 1 935 071 Exchange differences under contracts in conventional units Additional Corporation staff expenses (oneoff bonuses, material aid, etc.) 110 063 262 067 468 291 258 393 59-303 106-278 158 Expenses for works and services under terminated or non-concluded agreements, works performed at the expense of the - 18 025-6 517 Corporation Bank services - 35 607-6 203 Sale of fixed assets 57 038 18 410 9 589 14 298 Sale of other assets 1 483 901 1 509 311 6 737 233 6 753 576 Expenses associated with obtaining loans and credits - 2 527 - - Reserves for doubtful debts - 8 140 993-3 048 463 Reserves for impairment of financial investments Reserve for reduction in values of nonmonetary physical things Fines, penalties, forfeits, taxes and charges paid out of Corporation s funds Income from the recovery of the unused reserve for doubtful debts - 344 051-893 064-860 605 - - 70 338 150 180-195 815 744 489-1 199 496 -
Income from the recovery of the unused reserve for impairment of financial investments Income from the recovery of the unused reserve for impairment of tangible assets 670-787 968-104 041-745 226 - Saves on investment project 1 492-425 047 - Provision for warranty service 413 420 5 138 605 - - Other income (expenses) 93 700 506 258 82 037 552 296 Accruals and refund of sums by judicial decision 2 943 613 2 943 613 Total other income / expenses 12 436 922 22 433 156 13 197 523 14 081 369 3.22 Procedure of Recognizing Commercial and Administrative Expenses Administrative expenses include expenses, which are not related to industrial or commercial activities of the enterprise: for human resources, legal department; lighting and heating of non-production facilities, as well as for business trips, communication services and other similar expenses. Administrative expenses are accounted for in sub-account 26.02 to separate orders in terms of the cost items. Expenses for the sale of goods are commercial expenses and are written off in full in the debit of account 90 "Sales". Tracking of expenses for the sale of goods is kept on account 44 Expenses for sale under the cost items. Administrative expenses for 2016 equaled to RUB 3 957 745 thsd. Administrative expenses for 2015 equaled to RUB 3 735 271 thsd. 3.23 Earnings Per Share As of December 31, 2015 line 2400 Net profit (loss) was corrected. The earnings was reduced by RUS 195 711 thsd and amounted to RUS 433 755 thsd. The average weighted number of outstanding ordinary shares is 1 123 734 shares and remained unchanged during 2015. The basic earning per share amounted to RUB 385, that RUB 140 less as compared to the previous earning. As of December 31, 2016 the loss per share amounted to RUB 7 286. A loss of RUB 8 187 761 thsd was used for calculation, and the average weighted number of outstanding ordinary shares amounted to 1 123 734 shares. During 2016 a number of ordinary shares remained unchanged. 60
The Profit and Loss Statement does not indicate diluted earnings per share as the Corporation does not have any convertible securities and contracts on ordinary share sale/purchase from its issuer on the books. 3.24 Security Indicator Line Code As of December 31, As of December 31, As of December 31, 2016 4 2015 2 2014 5 Received - total 5800 0 0 0 including: Pledge 5801 - - - Bank guarantee agreement, surety agreement 5802 Granted total 5810 0 1 049 406 2 778 866 including: Pledge 5811 - - - Bank guarantee agreement, surety agreement 5812-1 049 406 2 778 866 61
4.25 Government Assistance Indicator Line code For 2016 1 For 2015 2 Budgeting funds received total 5900 - - Including: 5901 Recurrent costs - - Investments in non-current assets 5905 - - Opening balance Received for the year Returned for the year Closing balance Public budget loan total 20 16 1 5910 - - ( -) - 20 15 2 5920 - - ( -) - Including: ( -) 20 16 1 5911 (objective) - - - 20 15 2 5921 - - ( -) - etc. - - ( -) - Notes: 1. The accounting year is indicated. 2. The previous year is indicated. 3. In case of reapprisal column Historical cost demonstrates current market value or current (replacement) cost. 4. The reporting date of the reporting period is presented. 5. The year preceding the previous year is indicated. 6. Nonprofit organization entitles column Accumulated amortization and Accrued amortization as Accumulated depreciation and Accrued depreciation 7. Integrated correction is determined as: A difference between the historical and current market values for financial investments, which can determine the current market value; Difference accrued during the circulation period between the historical cost and nominal value for debt security, which cannot determine the current market value; Value of investment depreciation reserve created at the previous balance sheet date, for financial investments, which do not determine the current market value. 8. The data is released by deducting the payables received and redeemed (written-off) within one accounting period. 9. The data is released by deducting the payables received and redeemed (written-off) within one accounting period. 3.26 Related Parties The principal shareholder of the Corporation is OAO URSC. OAO URSC owns 38,22052% of shares of RSC Energia. Since December 19, 2016, blocks of shares of RSC Energia amounted to 3,16837% transferred to ZAO ZEM RSC Energia and 17,42628% transferred to AO IC Razvitiye are also in trust management (TM). 62
Profile of parent company of RSC Energia # Name of company Parent company Participation as of December 31, 2016, % Direct Indirect Total 1 2 3 4 5 6 1 RSC Energia State Corporation 58,82 58,82 Roscosmos 2 RSC Energia OAO URSC 38,22 3,17 TM 17,43 TM 38,22 3,17 TM 17,43 TM Affiliates of RSC Energia recognized as such under Art. 105.1 item 2 (3) of the Tax Code of the Russian Federation through OAO URSC as of December 31, 2016 # Name of affiliate Basis on which a party is recognized as affiliated party (Tax Code of the Russian Federation) OAO URSC Article 105.1, item 2 (1,3,4) 1 AO NPO Energomash Article 105.1, item 2 (3) 2 AO ISS Article 105.1, item 2 (3) 3 AO NPK SPP Article 105.1, item 2 (3) 4 AO Corporation VNIIEM Article 105.1, item 2 (3) 5 AO Russian Space Systems Article 105.1, item 2 (3) 6 AO GRTs Makeeva Article 105.1, item 2 (3) 7 AO IGGK Mashpribor Article 105.1, item 2 (3) 8 AO Corporation Compomash Article 105.1, item 2 (3) 9 PC NPO Iskra Article 105.1, item 2 (3) 10 AO ММZ Article 105.1, item 2 (3) 11 AO Krasmash Article 105.1, item 2 (3) 12 PC Proton-PМ Article 105.1, item 2 (3) 13 AO KBKhA Article 105.1, item 2 (3) Affiliates of RSC Energia recognized as such under Art. 105.1 item 2 (3) of the Tax Code of the Russian Federation through State Corporation Roscosmos as of December 31, 2016 State Corporation Roscosmos Article 105.1, item 2 (1,3,4) 1 AO Corporation Strategic Control Centers Article 105.1, item 2 (3) 2 OAO Glavcosmos Article 105.1, item 2 (3) 3 AO SKhZ Article 105.1, item 2 (3) 4 OAO Turbonasos Article 105.1, item 2 (3) 5 AO NIIMP - K Article 105.1, item 2 (3) 6 AO TsKB Geophysika Article 105.1, item 2 (3) 7 OAO Bazalt Article 105.1, item 2 (3) 8 ZAO PO Cosmos Article 105.1, item 2 (3) Information on the Board of Directors and Management Board of the Corporation is given in paragraph 1.2 of the present commentary. 63
Companies in which the Corporation has an interest in the authorized capital Name Place of registration / location A list of companies in which RSC Energia has an overall control Authorized Capital Corporation s participatory interest as of December 31, 2016 Corporation s participatory interest as of December 31, 2016 (%) Income from participation for 2015, RUB thsd. 1 2 3 4 5 6 ZAO ZEM RSC 4A Lenin St. Korolev, RUB 40 000 thsd. RUB 40 000 thsd. 100 23 500 Energia Moscow Region ZAO VKB RSC 26B Zemetsa St., Samara RUB 10 000 thsd. RUB 10 000 thsd. 100 Energia AO IK Razvitie 4A Lenin St., Korolev, RUB 6 150 thsd. RUB 6 150 thsd. 100 - Moscow Region LLC RSC Energia Finance 4A Lenin St., Korolev, Moscow Region RUB 500 thsd. RUB 500 thsd. 100 - AO Teplo RSC Energia LLC OIME ZAO BELROSSAT LLC Energia SAT ZAO Energia- Telecom 4A Lenin St., Korolev, Moscow Region 4A Lenin St., Korolev, Moscow Region Office 416, 15 bldg. 5, P. Brovki St., Minsk 1a, Grabina St., Korolev, Moscow Region 4A Lenin St., Korolev, Moscow Region RUB 69 390,4 thsd. RUB 69 390,4 thsd. 100 - RUB 16 874,3 RUB 16 874,3 100 thsd. thsd. $25 000 $17 500 70 RUB 80 000 thsd. RUB 40 800 thsd. 51 - RUB 1 000 thsd. RUB 501,0 thsd. 50,1 - List of other affiliates in which RSC Energia is a shareholder (participant) with the participatory interest in the authorized capital exceeding 20% Name Place of registration / location OAO Space Regatta Consortium Authorized Capital Corporation s participatory interest as of December 31, 2016 Corporation s participatory interest as of December 31, 2016 (%) Income from participation for 2015, RUB thsd. 1 2 3 4 5 6 4A Lenin St., Korolev, RUB 100 thsd. RUB 30 thsd. 30 - Moscow Region OAO NPK REKOD 40 / 6 bldg.1, 3rd proezd Maryiny Roshchi, Moscow RUB 110 867 thsd. RUB 29 457 thsd. 26,57-64
List of other affiliates in which RSC Energia is a shareholder (participant) with the participatory interest in the authorized capital exceeding 2% Name Place of registration / location Limited liability company Energia- Cert Authorized Capital Corporation s participatory interest as of December 31, 2016 Corporation s participatory interest as of December 31, 2016 (%) Income from participation for 2015, RUB thsd 1 2 3 4 5 6 4A Lenin St., Korolev, RUB 100 thsd RUB 19,5 thsd 19,5 - Moscow Region Corporation ILS International Launch Services, Inc. (ILS International Services, Inc.)_ Open joint-stock company Gazprom space systems OAO Gazprom space systems Sea Launch S.a.r.l. (SEA LAUNCH S.A.R.L.) Closed joint stock company Certification Center for Rocket and Space Technology (ZAO IsSKT) Registered office: Wilmington, Delaware, Name of Agent registered at the address of the registered office "Si Ti Corporation" 77B, Moscow St., Schelkovo, Moscow Region 58, rue Charles Martel, L-2134 Luxembourg, Grand Duchy of Luxembourg 4 Pionerskaya St., Korolev, Moscow Region RUB 65 683,4 thsd 19 195 790 USD 170 shares (nonvoting share, type В) RUB 10 615,5 thsd 17-16,16-2 880 000 USD 15 - RUB 10,75 thsd RUB 0,25 thsd 2,33 43,5 Operations with Related Parties In the accounting period, the Corporation performed works for and provided services to the related parties as follows: Affiliate Name Nature of Relationship Type of operations «Energia Logistics, LTD» ZAO ZEM RSC Energia Belongs to a group of bodies The Corporation indirectly manages more than 50% of shares of the said body. Corporation has the right to dispose more than 50% of the total number of votes attaching to shares forming the authorized capital of this ZAO. Works and services in the area of space industry Renting services, security services Sales revenues (excluding VAT) in 2015 RUB. thsd. Sales revenues (excluding VAT) in 2016 153 073 17 140 365 733 496 890 65
Affiliate Name Nature of Relationship Type of operations ZAO PO Cosmos Corporation has the right to dispose more than 50% of the total number of votes attaching to shares forming the authorized capital of this ZAO until 21.12.2016 AO Teplo RSC Energia Corporation has the right to dispose more than 50% of the total number of votes attaching to shares forming the authorized capital of this AO. SC Roscosmos AO V.P.Glushko NPO Energomash AO RKTs Progress Belongs to a group of bodies of the Corporation, indirectly manages more than 50% of voting shares of the Corporation. Belongs to a group of bodies OAO URSC has the right to dispose more than 50% of the total number of votes attaching to shares forming the authorized capital of this AO. Belongs to a group of bodies of the Corporation Renting services, / accounting recordkeeping and tax accounting services Renting services, security services Works and services in the area of space industry Works and services in the area of space industry Works and services in the area of space industry Sales revenues (excluding VAT) in 2015 Sales revenues (excluding VAT) in 2016 29 667 31 411 39 699 5 022 30 547 771 22 990 623 214 654 320 690 3 021 5 394 Total 31 353 618 23 867 170 In the accounting period, the following affiliates provided services to (performed works for) the Corporation: Sales revenues Sales revenues Affiliate Name Nature of Relationship Type of operations (excluding VAT) in (excluding VAT) in 2016 2015 AO IPK Mashpribor Belongs to a group of bodies Training services 297 8 977 OAO URSC has the right to dispose more than 20% of the total number of votes attaching to shares forming the authorized capital of this AO. AO ISS after Academician Belongs to a group of bodies OAO Works and services in the area of space 23 459 48 022 M.F.Reshetnev URSC has the right to dispose industry more than 20% of the total number of votes attaching to shares forming the authorized capital of this AO. 66
Affiliate Name Nature of Relationship Type of operations AO NII Komandnykh priborov AO NII TP AO NIIFI AO NIIEM AO NPK SPP AO NPO IT AO NPP Geophysica- Kosmos AO NPP Kvant AO NPTs Polyus AO RKTs Progress ZAO ZEM RSC Energia Belongs to a group of bodies Belongs to a group of bodies Belongs to a group of bodies Belongs to a group of bodies Belongs to a group of bodies OAO URSC has the right to dispose more than 20% of the total number of votes attaching to shares forming the authorized capital of this AO. Belongs to a group of bodies Belongs to a group of bodies Belongs to a group of bodies Belongs to a group of bodies Belongs to a group of bodies Corporation has the right to dispose more than 50% of the total number of votes attaching to shares forming the authorized capital of this ZAO. Works and services in the area of space industry Works and services in the area of space industry Works and services in the area of space industry Works and services in the area of space industry Works and services in the area of space industry Works and services in the area of space industry Works and services in the area of space industry Works and services in the area of space industry Works and services in the area of space industry Works and services in the area of space industry Works and services in the area of space industry Sales revenues Sales revenues (excluding VAT) in (excluding VAT) in 2016 2015 34 347 54 313 100 168 102 945 16 501 20 298 18 996 7 453-12 107 78 299 50 074 11 380 2 860 2 515 2 459 1 276 28 746 79 697 588 890 13 067 179 10 223 313 67
Affiliate Name Nature of Relationship Type of operations AO Teplo RSC Energia Corporation has the right to dispose more than 50% of the total number of votes attaching to shares forming the authorized capital of this ZAO. ZAO VKB RSC Energia ZAO PO Kosmos Corporation has the right to dispose more than 50% of the total number of votes attaching to shares forming the authorized capital of this ZAO. Corporation has the right to dispose more than 50% of the total number of votes attaching to shares forming the authorized capital of this ZAO until 21.12.2016 ZAO Energia-Telecom Corporation has the right to dispose more than 50% of the total number of votes LLC OIME OAO URSC attaching to shares forming the authorized capital of this ZAO. Corporation has the right to dispose more than 50% of the total number of votes attaching to shares forming the authorized capital of this ZAO. The body has the right to dispose more than 50% of voting shares of the Corporation. Sales revenues (excluding VAT) in 2015 Sales revenues (excluding VAT) in 2016 Purchasing fixed assets 210 335 601 637 Purchasing fixed assets 25 412 79 937 Air transportation of passengers, cargo and mail. Works and services in the area of space industry 155 183 85 789 874 600 695 523 Other expenses 4 973 31 500 Works and services in the area of space industry 11 470 4 144 Total 14 716 087 12 648 987 68
Status of cash payments of the Corporation with the affiliates as of December 31, 2016 and December 31, 2015: RUB thsd. Company Name Accounts Receivable Accounts Payable 31.12.2016 31.12.2015 31.12.2016 31.12.2015 AO IPK Mashpribor 2 075 136 AO ISS after Academician M.F.Reshetnev 53 800 63 912 18 368 15 717 AO NII Komandnykh Priborov 233 314 112 520 1 260 5 583 AO NII TP 53 873 22 500 6 113 329 AO NIIFI 2 428 4 241 AO NIIEM 12 204 8 133 293 8 400 AO NPK SPP 10 000 AO NPO IT 12 273 586 9 494 20 129 AO NPP Geophysica-Kosmos 17 271 AO NPP Kvant 481 675 AO NPTs Polyus 6 942 570 120 AO RKTs Progress 1 498 779 1 890 869 161 880 47 661 ZAO ZEM RSC Energia 22 276 515 14 471 810 1 177 544 1 066 717 ZAO Teplo RSC Energia 551 551 445 684 51 519 146 680 ZAO VKB RSC Energia 45 531 260 ZAO PO Kosmos 412 990 244 497 1 555 25 001 ZAO Energia Telecom 14 468 303 691 64 747 415 121 LLC OIME 4 444 2 773 OAO URSC 30 000 10 829 2 708 090 940 "Energia Logistics, LTD" 875 342 1 033 552 SC Roscosmos 151 746 307 350 54 952 924 37 940 181 AO Academician V.P.Glushko NPO Energomash 6 264 21 932 16 916 18 000 A list of other related entities which had no operations in the accounting period. # Related entity Nature of Relationships 1 Smelov Alexander Nikolaevich Belongs to a group of persons ZAO RTTs Energia-RiТМ 2. Bondarenko Nina Alexandrovna Belongs to a group of persons ZAO S.P.Korolev Rocket & Space Corporation Volzhskoe design bureau 3. Mukanin Andrei Alexandrovich Belongs to a group of persons ZAO S.P.Korolev Rocket & Space Corporation Volzhskoe design bureau 4. Grigoriev Anatoliy Petrovich Belongs to a group of persons AO Investment company Rasvitiye 5. Gerasimenko Oleg Belongs to a group of persons Energia-Overseas Ltd. Alexandrovich 6. Kakhno Dmitry Alexandrovich Belongs to a group of persons Energia Logistics Ltd. 7. Karman Brett Allen Belongs to a group of persons Energia Logistics Ltd. 69
# Related entity Nature of Relationships 8. Gugkaev Sergei Vladimirovich Belongs to a group of persons Sea Launch SA 9. Golovenko Sergei Petrovich Belongs to a group of persons OOO RSC Energia-Finance 10. Abramov Alexei Viktorovich Belongs to a group of persons AO Teplo RSC Energia 11. Evstratov Sergei Vladimirovich Belongs to a group of persons Limited liability company Orthopedic industry Moscow Energia 12. Vursol Anatoliy Vasilievich Belongs to a group of persons ZAO BELROSSTAT 13. Terekhov Vladimir Vladislavovich Belongs to a group of persons Limited liability company Energia Satellite Technologies 14. Limited liability company Belongs to a group of persons RSC Energia Telecom-proekt-5 15. Shestakov Andrei Vasilievich Belongs to a group of persons OOO Telecom-proekt-5 16. Botvinko Alla Alexeevna Belongs to a group of persons OAO Consortium Space Regatta 17. Besborodov Vyacheslav Georgievich Belongs to a group of persons OAO Scientific and Production Corporation RECOD 18. Closed joint stock company Belongs to a group of entities State Space Corporation Roscosmos Production Association Cosmos S.P.Korolev Rocket & Space Corporation Energia 19. Testoedov Nikolay Alexeevich Belongs to a group of persons AO Information Satellite Systems after Academician M.F. Reshetnev 20. Open joint stock company NPO PM Rasvitiye Belongs to a group of entities AO Information Satellite Systems after Academician M.F. Reshetnev 21. Korablev Alexander Vasilievich Belongs to a group of persons OAO NPO PM Rasvitiye 22. Open joint stock company NPO PM Small Design Bureau Belongs to a group of entities AO Information Satellite Systems after Academician M.F. Reshetnev 23. Artyushenko Alexander Belongs to a group of persons OAO NPO PM Small Design Bureau Grigorievich 24. Open joint stock company Test Technical Center NPO PM Belongs to a group of persons AO Information Satellite Systems after Academician M.F. Reshetnev 25. Orlov Viktor Ivanovich Belongs to a group of persons OAO Test Technical Center NPO PM 26. Open joint stock company Siberia Design Institute for Machine Builders Belongs to a group of entities AO Information Satellite Systems after Academician M.F. Reshetnev 70
# Related entity Nature of Relationships 27. Makarov Alexander Gennadievich Belongs to a group of persons OAO Siberia Design Institute for Machine Builders 28. Joint stock company Scientific Production Enterprise Belongs to a group of entities AO Information Satellite Systems after Academician M.F. Reshetnev Geophysics Space 29. Egupov Anatoliy Nikolaevich Belongs to a group of persons AO Scientific Production Enterprise Geophysics Space 30. Joint stock company Scientific Production Center Polyus Belongs to a group of entities AO Information Satellite Systems after Academician M.F. Reshetnev 31. Rusanovskiy Sergei Belongs to a group of persons AO Scientific Production Center Polyus Alexandrovich 32. Joint stock company Scientific Production Enterprise Kvant Belongs to a group of entities AO Information Satellite Systems after Academician M.F. Reshetnev 33. Nekrasov Anatoliy Belongs to a group of persons AO Scientific Production Enterprise Kvant Valentinovich 34. Joint stock company Siberia devices and systems Belongs to a group of entities AO Information Satellite Systems after Academician M.F. Reshetnev 35. Eremeev Gennady Karpovich Belongs to a group of persons AO Siberia devices and systems 36. Closed joint stock company Scientific Production Enterprise Medikon Belongs to a group of entities 37. Bodunov Sergey Bogdanovich Belongs to a group of persons 38. Limited liability company Belongs to a group of entities Exploratory Research Center AO ISS 39. Gets Evgeny Alexandrovich Belongs to a group of persons 40. Limited liability company Belongs to a group of entities UNIVERSUM SPACE TECHNOLOGIES 41. Stepanov Dmitriy Vladimirovich Belongs to a group of persons 42. Joint stock company Satellite Belongs to a group of entities system Gonets 43. Bakanov Dmitry Vladimirovich Belongs to a group of persons 44. Joint stock company Belongs to a group of entities TRIINVEST AO Information Satellite Systems after Academician M.F. Reshetnev ZAO Scientific Production Enterprise Medikon AO Information Satellite Systems after Academician M.F. Reshetnev OOO Exploratory Research Center AO ISS AO Information Satellite Systems after Academician M.F. Reshetnev Limited liability company UNIVERSUM SPACE TECHNOLOGIES AO Information Satellite Systems after Academician M.F. Reshetnev AO Satellite System Gonets AO Information Satellite Systems after Academician M.F. Reshetnev 71
# Related entity Nature of Relationships 45. Zavaruev Vladimir Andreevich Belongs to a group of persons AO TRIINVEST 46. Makridenko Leonid Alexeevich Belongs to a group of persons AO Scientific and Production Corporation A.G.Iosifyan Space Monitoring, Information- Control Systems, and Electromechanical 48. Joint stock company Production Design Enterprise IRIS Belongs to a group of entities 49. Puntus Andrei Petrovich Belongs to a group of persons 50. Joint stock company Research Belongs to a group of entities Institute of Electromechanics 51. Тarabanov Alexei Anatolievich Belongs to a group of persons 52. Closed joint stock company Belongs to a group of entities Novator 53. Kuprin Valery Viktorovich Belongs to a group of persons 54. Joint stock company Moscow Belongs to a group of entities plant of electromechanical equipment 55. Butrov Vladimir Andreevich Belongs to a group of persons 56. Closed joint stock company Belongs to a group of entities International Space technologies 57. Danelyan Andrei Vladikovich Belongs to a group of persons Complexes AO Scientific and Production Corporation A.G.Iosifyan Space Monitoring, Information- Control Systems, and Electromechanical Complexes AO Production Design Enterprise IRIS AO Scientific and Production Corporation A.G.Iosifyan Space Monitoring, Information- Control Systems, and Electromechanical Complexes AO Research Institute of Electromechanics AO Scientific and Production Corporation A.G.Iosifyan Space Monitoring, Information- Control Systems, and Electromechanical Complexes ZAO Novator AO Scientific and Production Corporation A.G.Iosifyan Space Monitoring, Information- Control Systems, and Electromechanical Complexes AO Moscow plant of electromechanical equipment AO Scientific and Production Corporation A.G.Iosifyan Space Monitoring, Information- Control Systems, and Electromechanical Complexes ZAO International Space technologies 72
# Related entity Nature of Relationships 58. Closed joint stock company Scientific and Production Association Novator Belongs to a group of entities AO Scientific and Production Corporation A.G.Iosifyan Space Monitoring, Information- Control Systems, and Electromechanical Complexes 59. Afonin Viktor Ivanovich Belongs to a group of persons ZAO Scientific and Production Association Novator 60. Degtyar Vladimir Grigorievich Belongs to a group of persons AO State Rocket Center after Academician V.P.Makeev 61. Kolmykov Vladimir Belongs to a group of persons AO Krasnoyarsk machine-building plant Afanasievich 62. Yurchikov Andrei Igorevich Belongs to a group of persons AO Miass machine-building plant 63. Joint stock company Zlatoust machine-building plant Belongs to a group of entities AO State Rocket Center after Academician V.P.Makeev 64. Lobanov Anton Viktorovich Belongs to a group of persons AO Zlatoust machine-building plant 65. Joint stock company Research Institute Hermes Belongs to a group of entities AO Academician V.P.Makeev State Rocket Center 66. Golubev Vyacheslav Sergeevich Belongs to a group of persons AO Research Institute Hermes 67. Arbuzov Igor Alexandrovich Belongs to a group of persons AO NPO Energomach after Academician 68. Limited liability company Energomach Electric Communication Belongs to a group of entities 69. Konstantinov Boris Dmitrievich Belongs to a group of persons 70. Limited liability company Belongs to a group of entities Energomach Finance 71. Chopik Marina Stepanovna Belongs to a group of persons 72. Limited liability company Belongs to a group of entities Sotsbytservice 73. Basmanov Vladomir Belongs to a group of persons Anatolievich 74. Limited liability company Belongs to a group of entities Agropolis 75. Pilipenko Alexei Yakovlevich Belongs to a group of persons 76. Limited liability company Belongs to a group of entities Voktoriya 77. Limited liability company Belongs to a group of persons Konvem V.P.Glushko AO NPO Energomach after Academician V.P.Glushko OOO Energomach Electric Communication AO NPO Energomach after Academician V.P.Glushko OOO Energomach Finance AO NPO Energomach after Academician V.P.Glushko OOO Sotsbytservice AO NPO Energomach after Academician V.P.Glushko OOO Agropolis AO NPO Energomach after Academician V.P.Glushko AO NPO Energomach after Academician V.P.Glushko 73
# Related entity Nature of Relationships 78. Limited liability company Med - Belongs to a group of entities AO NPO Energomach after Academician EM V.P.Glushko 79. Bairachenko Valeriya Anatolievna Belongs to a group of persons OOO Med - EM 80. Limited liability company Belongs to a group of entities AO NPO Energomach after Academician Research Company AKAr V.P.Glushko 81. Corporation International Space Belongs to a group of entities AO NPO Energomach after Academician Engines, Inc. V.P.Glushko 82. Chvanov Dmitry Vladimirovich Belongs to a group of persons Corporation International Space Engines, Inc. 83. Limited liability company Belongs to a group of entities AO NPO Energomach after Academician Innovation Activity Center OAO V.P.Glushko NPO Energomach 84. Bibko Viktor Vasilievich Belongs to a group of persons OOO Innovation Activity Center OAO NPO Energomach 85. Joint stock company Rocket Belongs to a group of entities URSC Space Center Progress 86. Kirilin Alexander Nikolaevich Belongs to a group of persons AO Rocket Space Center Progress 87. Closed joint stock company Samara Research Center of Space Technologies 88. Limited liability company Center of Nanosatellites Launch Services Belongs to a group of entities Belongs to a group of entities 89. Belokonov Igor Vitalievich Belongs to a group of persons 90. Closed joint stock company Belongs to a group of entities Makopse health resort 91. Takhmaziyan Ashot Siropovich Belongs to a group of persons 92. Joint stock company Research Belongs to a group of entities Institute for Control Devices 93. Mkrtychan Alexander Belongs to a group of persons Rachikovich 94. Joint stock company Belongs to a group of entities Academician A.Semikhatov Research and Production Association of Automatics 95. Misyura Andrei Vasilievich Belongs to a group of persons AO Rocket Space Center Progress AO Rocket Space Center Progress OOO Center of Nanosatellites Launch Services AO Rocket Space Center Progress ZAO Makopse health resort Joint stock company Rocket Space Center Progress AO Research Institute for Control Devices AO Rocket Space Center Progress AO Research and Production Association of Automatics after Academician A.Semikhatov 74
# Related entity Nature of Relationships 96. Tyulin Andrei Evgenievich Belongs to a group of persons AO Russian Corporation of Rocket and Space Instrument Engineering and Information Systems 97. Joint stock company Research Institute of Physical Belongs to a group of entities AO Russian Corporation of Rocket and Space Instrument Engineering and Information Systems Measurements 98. Dmitrienko Alexey Belongs to a group of persons AO Research Institute of Physical Measurements Gennadievich 99. Closed joint stock company NIIFI & VT Belongs to a group of entities AO Russian Corporation of Rocket and Space Instrument Engineering and Information Systems 100. Lapshin Vladimir Ilich Belongs to a group of persons ZAO NIIFI & VT 101. Joint stock company Specialist design department of Moscow Power Engineering Institute 102. Chebotarev Alexander Semenovich 103. Joint stock company Research and Production Organization Orion Belongs to a group of entities Belongs to a group of persons Belongs to a group of entities 104. Filippov Igor Alexandrovich Belongs to a group of persons 105. Joint stock company Research Belongs to a group of entities and Production Association of Measurement Equipment 106. Artemiev Vladimir Yurievich Belongs to a group of persons 107. Limited liability company Belongs to a group of entities Sinertek 108. Joint stock company Research Belongs to a group of entities Institute of Precision Instruments 109. Shishanov Anatoliy Vasilievich Belongs to a group of persons 110. Limited liability company OKB Belongs to a group of entities Telecom 111. Shatrov Vladimir Borisovich Belongs to a group of persons 112. Closed joint stock company Belongs to a group of entities Iskra-R 113. Volchok Mark Efimovich Belongs to a group of persons AO Russian Corporation of Rocket and Space Instrument Engineering and Information Systems AO Specialist design department of Moscow Power Engineering Institute AO Russian Corporation of Rocket and Space Instrument Engineering and Information Systems AO Research and Production Organization Orion AO Russian Corporation of Rocket and Space Instrument Engineering and Information Systems AO Research and Production Association of Measurement Equipment AO Russian Corporation of Rocket and Space Instrument Engineering and Information Systems AO Russian Corporation of Rocket and Space Instrument Engineering and Information Systems AO Research Institute of Precision Instruments AO Russian Corporation of Rocket and Space Instrument Engineering and Information Systems PC Research and Production Association Iskra PC Research and Production Association Iskra ZAO Iskra-R 75
# Related entity Nature of Relationships 114. Closed joint stock company Belongs to a group of entities AO Corporation Compomach Rosprodmach 115. Open joint stock company МZEM Belongs to a group of entities ZAO Rosprodmach 116. Sazonov Valeriy Stanislavovich Belongs to a group of persons OAO МZEM 117. Open joint stock company Belongs to a group of entities AO Corporation Compomash Mozhaisk Medical Instrumentation Plant 118. Fotiev Nikolay Vitalievich Belongs to a group of persons OAO Mozhaisk Medical Instrumentation Plant 119. Roi Yury Arsentievich Belongs to a group of persons AO Research and Production Corporation 120. Joint stock company Research Engineering Center of Electrotechnical University Belongs to a group of entities 121. Ekalo Yury Vladimirovich Belongs to a group of persons 122. Joint stock company The 106 th Belongs to a group of entities Experimental Optical Mechanical Plant 123. Kozodaev Nikolay Alexandrovich Belongs to a group of persons 124. Limited liability company Belongs to a group of entities Crioservice 125. Bashkarev Vladimir Belongs to a group of persons Alexandrovich 126. Limited liability company Proton Belongs to a group of entities Finance 127. Tselischev Mikhail Grigorievich Belongs to a group of persons 128. Limited liability company Belongs to a group of entities Cosmos - P 129. Parmenov Viktor Belongs to a group of persons Konstantinovich 130. Limited liability company Belongs to a group of entities Laboratory of Effective Power Engineering Solutions 131. Kleschevnikov Alexei Mikhailovich Belongs to a group of persons 132. Joint stock company Technical Belongs to a group of entities Center Novator 133. Kosarev Alexander Nikolaevich Belongs to a group of persons 134. Limited liability company МV- Belongs to a group of entities Master Precision Instrument Making Systems AO Research and Production Corporation Precision Instrument-Making Systems AO Research Engineering Center of Electrotechnical University AO Research and Production Corporation Precision Instrument Making Systems AO The 106 th Experimental Optical Mechanical Plant AO Design Department for Chemical Automatics. OOO Cryoservice PC Proton Perm Motors OOO Proton Finance PC Proton Perm Motors OOO Cosmos - P PC Proton Perm Motors OOO Laboratory of Effective Power Engineering Solutions PC Proton Perm Motors AO Technical Center Novator PC Proton Perm Motors 76
# Related entity Nature of Relationships 135. Ganeles Mikhail Lvovich Belongs to a group of persons OOO МV- Master 136. Limited liability company Kosmos-stroy Belongs to a group of entities PC Proton Perm Motors 137. Vronsky Sergey Vladimirovich Belongs to a group of persons OOO Kosmos Stroy 138. Afonin Andrei Yurievich Belongs to a group of persons AO Institute of Staff Training for Machine- Building and Instrument Making 139. Joint stock company ECHO Belongs to a group of entities 140. Mironenko Yury Dmitrievich Belongs to a group of persons AO ECHO A list of other related entities for which reserves for doubtful debts were accumulated in the accounting period: Flow of reserves for doubtful debts in organizations, related entities Name As of January 01, Accumulation of Recovery of reserve 2016 reserve as of December 31, 2016 Sea Launch AG 0 0 3 075 589 895 3 075 589 895 AO Krasmach 0 0 219 535 960 219 535 960 ZAO VKB RSC Energia 42 601 045 42 601 045 0 0 AO Teplo RSC Energia 12 489 850 1 798 116 0 10 691 734 ZAO PO Cosmos 5 477 249 5 477 249 0 0 ZAO RTTs Energia-RiТМ 0 0 1 955 416 1 955 416 LLC OIME 2 455 791 450 663 0 2 005 128 Energia - Logistics, LLC 1 832 441 995 493 471 246 358 335 768 1 697 306 518 Prices for products, goods, works, and services provided to the Corporation by its subsidiaries and supplied by the Corporation to its subsidiaries are set based on the contracts concluded in accordance with market prices. The Corporation settles accounts with its subsidiaries in cash. The amount of interest accrued on loans granted by the Corporation to its affiliates (ZAO PO Cosmos), was RUB 22 979 thsd. and RUB 5 657 thsd. in 2016 and 2015, respectively. The amount of interest accrued on loans granted by the Corporation to its largest other related entities (Energia Overseas, LLC and Energia - Logistics, LLC) equaled to RUB 687 244 thsd. and RUB 553 474,4 thsd. in 2016 and 2015, respectively. The Corporation lent its largest affiliate (Energia Overseas, LLC and Energia - Logistics, LLC) and other organizations at the rate of from 6% to 16% and from 4,5% to 11%. The balance on granted loans was RUB 6 855 686 thsd and RUB 5 970 228 thsd as of 31.12.2016 and 31.12.2015, respectively. The remuneration paid to the administrative and management staff of the Corporation over 2016 and 2015 amounted to as follows: Indicator 2016 2015 77 RUB thsd. Short-term remuneration (labor compensation, taxes accrued thereon and 676 624,2 672 221,1 other mandatory payments) The administrative and management staff of the Corporation includes as follows: Director General, Deputy Director General, Deputy General Designers, heads of research and development centers, departments, branches, directorates, project offices, centers, administrations and services, program directors and other persons
(exercising powers of an executive body under a power of attorney), administration and management personnel. The remuneration of the Director General is approved by the Chairman of the Corporation s Board of Directors. The remuneration of members of the Corporation s Board of Directors is approved by the General Meeting of shareholders. The remuneration paid to members of the Corporation s Board of Directors was RUB 6 075 thsd and RUB 6 182 thsd in 2016 and 2015, respectively. No payments in 2015 and 2016 were made to the Corporation management. 3.27 Estimated Liabilities In the Balance Sheet for 2015, line 1540 "Estimated liabilities contains the value of estimated liability on carry-over vacations of Corporation s employees amounting to RUB 570 109 thsd as of December 31, 2015. In the Balance Sheet for 2016, as of December 31, 2016 in line 1430 Estimated liabilities on costs to be incurred on warranty maintenance and performance of technical support of SS amount to RUB 2 196 434 thsd. Line 1540 Estimated liabilities displays the amount of RUB 705 526 thsd for estimated liability unused vacations of the Corporation employees and estimated liabilities on warranty maintenance and performance of technical support of SS in the amount of RUB 2 545 649 thsd. Indicator Line Code Opening balance Recognized Repaid Written-off as a surplus amount Closing balance Estimated liabilities total 5700 761 699 5 924 944 (1 239 034) ( -) 5 447 609 including: 5701 - ( -) ( -) - Estimated liabilities on claims Estimated liabilities on onerous contracts Estimated liabilities on reorganization Estimated liabilities on warranties of goods sold quality 5702 - - ( -) ( -) - 5703 - - ( -) ( -) - 5704 - - ( -) ( -) - Estimated liabilities on vacations 5705 570 109 729 302 ( 593 885) ( -) 705 526 Estimated liabilities on warranty maintenance and performance of technical support of SS Estimated liabilities on capital investment project Estimated liabilities on other payments 5706 1 027 5 195 642 ( 454 586) ( -) 4 742 083 5707 190 563 ( 190 563) ( -) - 5708 - ( -) ( -) - 78
3.28 Contingent Assets and Liabilities 3.28.1 The Corporation is one of the parties in the following court legal proceedings: 1. On February 1, 2013 the court of central district, California, received the statement of claim of companies Boeing and Boeing Commercial Space Company (BCSC) which included 4 claims: bringing suit against Design Bureau Yuzhnoye and PO Yuzhmashzavod (Ukraine) for breach of the Agreement on Creation of the Sea Launch Companies dated May 3, 1995. The amount claimed is 55 million US dollars. bringing suit against DB Yuzhonoye/PO Yuzhmash for breach of the Agreement on the Guarantees and Security dated February 3, 1996. The amount claimed is 78 million US dollars. bringing suit against RSC Energia (FR), Energia Overseas LLC (USA) and Energia Logistics Ltd (USA) for breach of the Agreement on Creation of the Sea Launch Companies dated May 3, 1995. The amount claimed is 92 million US dollars. bringing suit against RSC Energia (FR), Energia Overseas LLC (USA) and Energia Logistics Ltd (USA) for breach of the Agreement on the Guarantees and Security dated February 3, 1996. The amount claimed is 130 million US dollars. In addition, claims are made to collect interest on all the amounts claimed (at the rate to be determined by the court). RSC Energia disagreed with the due claims, and on July 5, 2013 presented corresponding counter-arguments, as well as a counter claim for 430 million US dollars. On December 18, 2013, the court decerned a partial satisfaction and partial denial to approve the petition of the plaintiffs to reject the counter claims of RSC Energia. The court also pointed out that RSC Energia counter claims are subject to arbitration in Stockholm, Sweden. On September 28, 2015 Boeing claims in action against RSC Energia were reviewed, and a preliminary judicial act was issued, indicating that the plaintiffs arguments (Boeing and BKSK) against the claim to RSC Energia is reasonably sufficient, RSC Energia arguments are not reasonably sufficient, and the evidence in the case is sufficient to make a decision without conducting court hearings. On November 10-23, 2015, hearings at the suit of Boeing against Energia Overseas LLC (USA) and Energia Logistics Ltd (USA) were held on grounds of alter ego. On April 1, 2016 Boeing filed a petition for provisional measures in the form of arrest of assets and/or a court injunction to sell Sea Launch. On May 12, 2016, the California Central District Court delivered a judgment against the claims of Boeing to RSC Energia, in which the court satisfied Boeing requirements to RSC Energia for the amount approximately 330 million US dollars. On May 13, 2016, the California Central District Court delivered a judgment in which the court recognized Energia Overseas LLC (USA) and Energia Logistics Ltd (USA) to be alter ego of RSC Energia. On July 22, 2016, the court delivered a judgment to suspend procedural actions in accordance with the legal statements submitted by the parties following the negotiations of a settlement agreement. As of December 31, 2016, the representatives of the parties reached an agreement on the majority of elements of the final settlement agreement. The settlement agreement was reached. The court delivered a judgment to terminate the case in connection with the settlement agreement reached by the parties. 79
2. Trial concerning the matter of insolvency (bankruptcy) of the organization. Plaintiff (Applicant) is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Defendant (Debtor) is SUE NPTs SPURT (4 Zapadny 1st proyezd, Zelenograd, Moscow, 124460). Matter in contest is the creditor s claim for recovery of 55 360 000,00 rubles within the framework of the matter of insolvency (bankruptcy) of the organization. Arbitration court of the first instance issued judicial determination on 27.03.2014 that the claim was to be entered into the schedule of creditors. As for SUE NPTs SPURT, proceedings in bankruptcy are opened. By Moscow Arbitration court determination of 15.12.2015 the bankruptcy proceedings were prolonged till 13.06.2017. 3. Court proceedings on award of penalty under a state contract. Plaintiff is State Corporation Roscosmos (42 Schepkin street, Moscow, GSP-6, 107996). Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev, 141070). Matter in contest is a claim for recovery of forfeit penalty under the state contract amounted to RUB 582 524 294,50. The decision of the Moscow Arbitration Court was to dismiss the claims. SC Roscosmos filed in appeal. By the court decision of 18.01.2017 the judicial decision remained unchanged, and the appeal unsatisfied. 4. Court proceedings on award of penalty under a state contract. Plaintiff is State Corporation Roscosmos (42 Schepkin street, Moscow, GSP-6, 107996). Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev, 141070). Matter in contest is a claim for recovery of forfeit penalty under the state contract amounted to RUB 2 943 612 740. The decision of the Arbitration Court of the Moscow Region was to dismiss the claims. The court decision of the appeals instance accepted a new judicial act, which satisfied SC Roskosmos claims in full. The court of cassation expedited the cause for retry to the first-instance court. The court session is scheduled for 03.03.2017. 5. Court proceedings on award of penalty under a state contract. Plaintiff is State Corporation Roscosmos (42 Schepkin street, Moscow, GSP-6, 107996). Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev, 141070). Matter in contest is a claim for recovery of forfeit penalty under the state contract amounted to RUB 67 529 378,32. By decision of the Moscow Arbitration Court was the claims were dismissed. By decision of the appeals instance the ruling is upheld. SC Roscosmos filed a cassation appeal. The cause is expedited for retry to the Moscow Arbitration Court. The court session is scheduled for 13.02.2017. 6. Court proceedings on specific performance. Plaintiff is RSC Energia (4A Lenin Street, Moscow Region, Korolev, 141070). 80
Defendant is FKU Tsentravtomagistral (139, Novaya street, Akulovo village, Odintsovsky Region, Moscow Region, 143002). Matter in contest is performance of installation of plastic noise-protective windows in RSC Energia buildings. By the decision of Moscow Region Arbitration Court the statement of claim was noted, the court session was scheduled for 16.02.2016. By the decision of Moscow Region Arbitration Court the court session was postponed to April 28, 2016. By the decision of Moscow Region Arbitration Court as of 04.07.2016 an expert testimony in court with regard to case was called for, in this connection the hearing of the case was suspended. 7. Court proceedings on award of penalty under a state contract. Plaintiff is State Corporation Roscosmos (42 Schepkin street, Moscow, GSP-6, 107996). Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev, 141070). Matter in contest is a claim for recovery of forfeit penalty under the state contract amounted to RUB 228 666 666,67. The statement of claim was initiated by the Arbitration Court of the Moscow Region in December 2016. The court session is scheduled for 13.02.2017. 8. Court proceedings on award of penalty under the contract. Plaintiff is FSUE TsENKI (42, Schepkin street, bld.1, 2, Moscow, 107996) Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev, 141070). Matter in contest is a claim for recovery of forfeit penalty amounted to RUB 12 903 150,00. The statement of claim was initiated by the Arbitration Court of the Moscow Region in December 2016. The preliminary court session is scheduled for 06.03.2017. 9. Court proceedings on penalty of money indebtedness under the contract. Plaintiff is RSC Energia (4A Lenin Street, Moscow Region, Korolev, 141070). Defendant is OAO Teploset (2A 50 let VLKSM street, Korolev, 141070) Matter in contest is recovery of the principal debt in the amount of RUB 172 313 380,74 and penalties for out-of-time funds transfer in the amount of RUB 21 429 361,50. The statement of claim was initiated by the Arbitration Court of the Moscow Region in December 2016. The preliminary hearing is scheduled for 08.02.2017. law. 10. Court proceedings on recovery of principal debt, forfeit penalties and statutory interests under the Plaintiff is RSC Energia (4A Lenin Street, Moscow Region, Korolev, 141070). Defendant is FSUE TsENKI (42, Schepkin street, bld.1, 2, Moscow, 107996) Matter in contest is recovery claims of the principle debt amounted to RUB 331 450 400,00, forfeit penalty amounted to RUB 24 030 154,00 and RUB 18 064 046,80, statutory interests amounted to RUB 3 386 952,17. The Arbitration Court of the Moscow Region by its decision of 08.08.2016. satisfied the plaintiff's claims in full 81
FSUE TsENKI filed in appeal. The Court of Appeal by its decision of 07.11.2016 upheld the judicial act. A settlement agreement was concluded. The case on approval of the settlement agreement was appointed by the court for hearing on 28.02.2017. 11. Court proceedings on recovery of the monetary debt under the Contract. Plaintiff is RSC Energia (4A Lenin Street, Moscow Region, Korolev, 141070). Defendant is LLC Atlantis (5, Staroalekseevskaya street, Moscow, 129626) Matter in contest is debt recovery under the contract amounted to RUB 15 000 000. The statement of claim was initiated by the Arbitration Court of Moscow in September 2016. The court session is scheduled for 19.01.2017. The settlement agreement was approved. 12 Court proceedings on recovery of damages. Plaintiff is RSC Energia (4A Lenin Street, Moscow Region, Korolev, 141070). Defendant is LLC PROMSTROISERVICE (14, Kievskaya street, Moscow, 123592) Matter in contest is recovery of damages in the amount of RUB 1 655 226,72. The statement of claim was initiated by the Arbitration Court of the Moscow Region in November 2016. The preliminary hearing is scheduled for 28.02.2017. 13 Court proceedings on collection of unreasonable earnings. Plaintiff is RSC Energia (4A Lenin Street, Moscow Region, Korolev, 141070). Defendant is FBU ЕS AKPS (37, Leningradsky prospect, Moscow, 125993) Matter in contest is collection of unreasonable earnings in the amount of RUB 88 417 964,88. The statement of claim was initiated by the Arbitration Court of Moscow in December 2016. The preliminary court session is scheduled for 03.03.2017. 3.28.2 Non-state Pension Provision Program As of December 31, 2016 the Corporation has an estimated liability under the Non-State Pension Provision Program (NSPP) for employees that is not recognized in the accounting records and disclosed as an indirect liability due to failure to fulfill the condition provided for in Clause 5 (c) of the Accounting Regulations "Estimated liabilities, indirect liabilities and contingent assets" (PBU 8/2010), namely, the value of estimated liability cannot be reasonably estimated, as the NSPP conditions are liable to change based on certain economic conditions and the financial capabilities According to the Corporation s calculation, the value of the indirect liability as of December 31, 2016 is approximately RUS 3 000 000 thsd. 3.28.3 Risks Related to Business Operations In the course of its operations, RSC Energia is largely exposed to risks related to the economy and financial markets of the Russian Federation. Should one or more risks of those listed below arise, RSC Energia will undertake all possible measures to minimize its negative consequences. The license requirements established by the applicable legislation are duly observed by the Corporation. Changes in the legislation, as well as draft documents in the field of core activities licensing provided on official websites of licensing authorities are carefully examined. In order to reduce some of the risks to the extent possible, the Corporation undertook certain protective measures primarily related to the implementation of the main production program of the Corporation (in particular, insurance against certain risks is common). However, it should be noted that working out preliminarily adequate measures to counteract unforeseen events is difficult due to the uncertainty about how the situation unfolds. The risk management function in the Corporation is distributed, i.e. risks identification and analysis, 82
making and implementing necessary decisions to counteract/minimize risk consequences are provided by top managers responsible for relevant areas: economic risks are managed by First Deputy Director General for Economics and Corporate Governance; Project managers; technical risks are considered by Designer General, First Deputy Designer General, Deputies Designer General, Chief Designers for core business activities; technological risks are undertaken by the Corporation Chief Engineer, the management of the main technological entity, ZAO ZEM RSC Energia; legal risks are dealt with by Deputy Director General for organization legal matters, etc. When responsible top manager does not have enough authority for decision taking or risk may affect several lines of activity, the Board of Management and RSC Energia Director General are to be involved. 3.28.4. Space Industry Risks At the present time, demand for space services (both manned and unmanned) on the world market is gradually increasing. After closure of the Space Shuttle Program, Russia dominates on the manned flights market. The demand for RSC Energia made manned transport space vehicles such as the Soyuz and cargo vehicles Progress from a near-term outlook (throughout ISS operational use as a minimum) is expected to be stable. It is determined by the need to meet international commitments by Russia to deliver crew members and cargo to support the ISS operation (including fuel supply). However, under the Federal Space Program intended for the 2016-2025 period, the number of annually launched cargo transport spacecraft has decreased to three. Since 2012, the US Space Agency NASA can use cargo transport spacecraft Dragon in order to deliver and return cargo to/from the ISS on its own. Since 2013, NASA cargo can also be delivered to the ISS via cargo transport spacecraft Cygnus. As a result, NASA s orders for cargo transportation by the Progress spacecraft have reduced. As the US commercial companies continue to implement their plans for building manned space vehicles, Russia s dominance on the manned space flights market will not be held for a long time, while competition will be sharpening (according to the forecasts). So, NASA plans to start flight tests of commercial spacecraft SpaceX in August 2017, while commercial spacecraft of the Boeing will be put to tests (CFT) in December 2017. The Corporation has no competitors in this area on the home market. Steady demand is expected for the Corporation activities aimed to operate the ISS and use it for specified purposes, including international projects for Earth and space research; building new ISS elements (MLM-U, NM, SPM), as well as conduct advanced developments in manned cosmonautics, including creation of an advanced manned transportation system and deep space exploration. The above plans are part of the Federal Space Program planned for the period from 2016 to 2025. Prospects for further development of Russian manned cosmonautics regarding transportation spacecraft involve building new generation crew transportation spacecraft, as well as cargo transportation spacecraft with an increased lifting capacity. For the Corporation, space industry risks are associated with an increase in the product cost and the ratio between dynamics of this increase and those of world analogues. There is a possibility of increased risks due to economic problems that allied organizations involved in traditional cooperation At the present time, demand for space services using unmanned spacecraft (SC) on the Russian and world markets tends to grow steadily. Currently, the main priorities on the world market of communication and broadcasting commercial satellites are: 83
building SC with upgraded performance (service life, power, transmission capacity, etc.) operating in C and Ku frequency bands for a scheduled replacement of operational SC; manufacture of SC operating in Ka frequency band making it possible to dramatically rise transmission capacity of satellites and provide new satellite communication services: wide-band access to Internet network and high-rate trunk communication channels. The most critical factors determining space industry risks on the world market for unmanned spacecraft manufacture are the following: keen competition among major manufacturers of spacecraft on the world market; new world players from the countries with high rates of economic growth (such as China, India, Japan) entering the market of unmanned spacecraft manufacture and launch; political instability in some developing countries which create potential market for the Corporation products and services; trend towards integration of the world space services market into common open free partnership for space services and technologies manufacture and application. Also it is worth noting that there is a robust competition among national manufacturers of spacecraft such as OAO Information Satellite Systems after academician M.F. Reshetnev, AO RSC Progress, AO NPO after S.A. Lavochkin, etc. In order to prevent possible negative consequences of space industry risks, RSC Energia pursues an active scientific-technical policy of participation in the RF Federal Space Program, conducts continually search for potential Russian and foreign customers of satellites and foreign partners interested in advanced space technologies. RSC Energia gives great attention to research and development activities on improvement and mastering new technologies. Work is currently underway for building a new modification of multipurpose space bus. In order to master and introduce advanced technologies in designing and manufacturing of SC for different applications, RSC Energia extends cooperation with the leading European company such as Airbus Defence & Space, including cooperation within joint venture Energia-Satellite Technologies (LCC Energia SAT). Regarding RSC Energia-made DM-type Upper Stages, the Corporation competes with Russian manufacturers of such Upper Stages as FSUE Khrunichev SR&PSC (the Briz-M Upper Stages which are operated with Proton-M launch vehicle and since 2014 with Angara A5 LV) and AO NPO after S.A. Lavochkin (the Fregat-SB Upper Stages which are designed to operate with Zenit and Soyuz launch vehicles). The Corporation, therefore, is busy all the time with efforts to improve and upgrade technical and operational characteristics of the DM-type Upper Stages which present, by current estimates, one of the best choices worldwide in energy efficiency, ecological compatibility, accuracy in delivery of «heavy» payloads and SC to desired high-energy orbits/flight courses. 3.28.5 Country and regional and logistics risks Core activities of the Corporation are concentrated in Russia. The enterprise operation can be impacted by risks associated with instability on world markets as a whole and its adverse effect on national economy, industry, financial system. Risks mitigation factor is the political situation nationwide remaining stable, as well as production diversification and outlined trend of competitive growth of the Russian electronic component base. The corporation does not forecast adversely changing situation in Russia which could affect economic position of the Corporation and its business in the immediate future. However, one must not rule out a possibility of economic destabilization in the country related to mounting crisis on financial markets or a sharp 84
decline in oil and gas prices; aggravation of international, military, political and economic situation due in part to the events taking place in the Ukraine and Middle East. The enterprise operation can be impacted by risks associated with phasing out or short delivery any particular purchased component parts that can increase the risks of non-execution of certain agreements on product delivery. The Corporation is registered and conducts its activities in such economically stable and dynamically developing region, as Moscow Region one of the most prospective area with fast-growing economy of the federal subjects of the Russian Federation. Geographic features of the region account for extremely low risks of exposure to disasters (including hurricanes, floods, earthquakes, etc.). The region is located in the central part of the Russian Federation where transportation is well developed. Moscow region is connected via motor, railway and air transport with all Russian regions, as well as all countries, which entirely excludes the risk of possible termination of transportation due to remoteness of the region and/or its being difficult of access. Moscow Region is regarded as one of the most politically stable areas which do not border directly upon zones of military conflicts, as well as the regions, in which there is a high probability of introducing state of emergency. However, being aware of current international situation, we cannot rule out the risks associated with attempts to commit terrorist acts by extremist groups. Due to this, the Corporation give particular emphasis on internal premises security, as we as IT security. At the same time, geographical remoteness of the Corporation from sites of vehicles prelaunch processing on Processing Facility and Launch Complex of cosmodromes (including Baikonur Cosmodrome) determines arising of risks of the Corporation property loss and damage during its transportation to point of destination. The Corporation provides for insurance against these kinds of risks. Due to the fact that the Corporation conducts its activities on the territory of the Republic of Kazakhstan (Baikonur Cosmodrome), impact of country risks associated with unfavorable development of political and economic factors on interstate relations is possible. However, the agreement concluded between Russia and Kazakhstan on the use of Baikonur Cosmodrome until 2050, as well as the agreement on the Eurasian Economic Union come into effect on January 1, 2015, which ensures freedom of movement of goods, services, capital and labor power, allow to assess risk like that as insignificant. The Parties do their best to create necessary conditions for a steady economic development of the member states; provide (among other things) coordinated state backing of their priority industries and works; pursue agreed customs policy; develop united transportation systems. In addition, the commissioning of Vostochnyi cosmodrome in the foreseeable future will make it possible to minimize the country risk in space activity of Russia. Due to the fact that the Corporation is involved in a number of projects for foreign customers located in African countries, unstable political situation in the above region might have an adverse effect on the Corporation operation. These risks are insured as well. 3.28.6 Financial risks Inflation risks, exchange risks and credit interest rate risks negatively impact the operation and financial stability of RSC Energia, as well as the size of proceeds of the sale of goods (works, services) and amount of profit. Changes in the consumer price index, which result in appreciation of products and materials used in economic activities, if a compensation component is not present in the price of salable or purchasable products, may affect negatively the size of net profit of all the Corporation's ongoing activities. Notwithstanding the fact that even with significant increase of a level of consumer prices RSC Energia retained operating profitability, there is no guarantee that a possible increase or decrease in consumer prices will 85
not lead to a fall of a level of profitability of the enterprise in the future. According to the forecasts of the Ministry of Economic Development, the estimated expected inflation in 2017 may be between 4% and 6%. For RSC Energia, currency fluctuations are important due to the fact that the Corporation is an exporter, and also an importer of science-intensive and high-tech products. Currency valuation of import contracts with foreign contracting parties is carried out in US dollars and euros, therefore the Corporation does not benefit from their high rates to ruble. Currently, the volume of foreign trade contracts has decreased, in this regard, the impact of currency risks on the business and financial performance indicators is not significant. In the conditions of shortage of financial resources, the Corporation is actively searching for borrowings to fulfill the terms of state contracts, commercial projects and business activities. rates. In the period from 2013 to 2015, borrowing funds within the credit lines were effected at below-market However possible actions of the Central Bank of the Russian Federation to change the refinancing rate and the key rate upwards may negatively affect the entire activity of the Corporation and its financial performance, as the company actively uses borrowed funds in its activities. In case of occurrence of the above risks, RSC Energia will take all possible measures to minimize negative consequences, but it must be taken into account that security measures can be hampered by uncertainty in the development of the geopolitical situation, high volatility of the exchange rate, unstable situation in both domestic and external financial markets. 3.28.7. Legal risks Range of the Corporation legal risks includes the following: risks of losses due to potential illegitimacy of transaction or its improper documentation; infringement of codes and rules of doing business; risks of the party concerned handling a transaction with insufficient authority thereto; risk of lawsuit court judgement duration and costs which involve negative property consequences for the Corporation; risk of taking inadequate or incorrect legal advice; legally unsettled problems and situations arising in the course of the Corporation operation; risk of changing current legislation. In order to minimize the abovementioned risks, the Corporation arranged the process of submission of transactions for approval which includes mandatory agreeing on all transactions with the Department of organizational and legal issues. When consummating civil transactions implemented by the Corporation, as well as in the process of satisfying debt or duty to perform on the basis of these transactions, the Auditing Department verifies contracting parties for reliability, possibility of the contracting parties to provide quality goods (works, services), and absence of hidden affiliation. In the Corporation great importance is paid to prevention of corruption offenses and corruption management as key factors of direct impact on the level of corporate risk. Measures to prevent and reduce corruption risks are formalized in the internal regulatory documents of the Corporation, such as: Anticorruption Policy, Code of Corporate Conduct, Code of Ethics, Regulation on Gifts, Regulation on Conflict of Interest. Procurement activities of the Corporation are fully regulated, mandatory competitive procedures have been introduced. One of the most important components of legal risks is tax risk. One of the peculiarities of the Russian legislation on taxes and charges is its continuous changeability. The laws making amendments to the Russian Federation Tax Code with respect to changes to specific tax calculation and payment procedure are passed annually. This adds complexity to making medium-term and long-terms forecasts for taxpayer activity, complicates tax planning as a whole. Instability of tax regulations exposes the Corporation to risk of being charged and having to pay rather high penalties and fines, despite its intention to operate in strict compliance 86
with the legislation, as well as can lead to an increase in tax burden as a whole. Corporation continues to carry out an analysis of amendments to existing tax legislation with the aim to reduce tax risks. A change of customs regulation rules can definitely and sufficiently impact the Corporation activity. In the reporting period there were no significant changes of the custom registration rules, which could have increased the Corporation risks in this area. The Corporation is a participant in foreign economic relations, part of its commitments was undertaken to be in foreign currency; therefore, the Corporation is running the risks related to exchange adjustment change. At the present time, liberalization of foreign exchange legislation is underway; the reporting period showed no significant changes in exchange rate adjustment regulations; therefore, the above risks are assessed as low. Changes in the licensing requirements for the core activities of the Corporation may result in some additional costs associated with obtaining a new license, or extending or replacing the already existing one, but the Corporation predicts the risk of occurrence of such events as unlikely. RSC Energia timely and fully fulfills all licensing requirements, no difficulties in renewal of the existing licenses are predicted by the Corporation. The reporting period revealed no changes in judicial practice concerning operation of the Corporation (including licensing issues) which could affect its performance, as well as the results of current legal proceedings to which the Corporation is a party. Legal risks associated with the change of judicial practice on issues related to the Corporation's activities, which may adversely affect the results of its activities, are considered as minimal. 3.28.8 Analysis of factors and conditions affecting the Corporation activity. The basic competitive strengths of RSC Energia in the market of space products and services are as follows: - experience in the implementation of manned programs, including the function of integrator of major international projects; - high quality and reliability of spacecraft provided by the availability of highly-qualified staff and certified quality management system; - wide experience of cooperation with Russian and foreign customers and partners; - stability of the Company ensured by stable state orders and availability of skills in some areas of space technology; - availability of the acquired image (brand) of a fleet leader and pioneer in the national and foreign world space industry; - presence of a wide and stable cooperation across Russia; - methodical work with advanced technical higher education institutions of the country on staff training and continuous replenishment of the personnel with highly intellectual young personnel; - extensive bench-top base and full-scale ground testing of space products as a guarantee of high quality and reliability of products. To hold and strengthen positions in the market of commercial launches, the following actions are required: - orientation of all new developments to the advanced hardware components of domestic production; - improvement of the provided services, both in content and quality, provided by advanced hardware components and new system-project solutions; - decrease of the unit cost of products and services due to modernization of production and increase of its volume (batch fabrication); 87
- constant increase of labor productivity; - reducing the time for product manufacture, which reduces the risk to the potential customer; - a comprehensive solution of the worldwide endemic problem of removing space debris of terrestrial artificial origin from the Earth s orbits; - large-scale implementation of space technology insurance. In the area of development and operation of manned transport vehicles, the Corporation occupies a stable leading position. Competition in the area of developing automatic spacecraft is improved. The most serious competitors are foreign companies, and in Russia: OAO Information Satellite Systems after academician M.F.Reshetnev - in the segment of communication systems, AO "RKTs" Progress "(reorganized FSUE GNPRKTs" TsKB - Progress ") - in the segment of Earth remote sensing satellites. In July 2015 two contracts on cooperation in production of automatic spacecraft were signed. RSC Energia and OOO Gascom space technologies (Gascom ST) intend to expand and deepen cooperation in development of Yamal and Smotr orbit groups, including the experience of successful joint work on the Yamal-100 and Yamal-200 projects. Under the contract RSC Energia will use payloads developed by Gazkom KT for spacecraft of various application. In its turn, Gazcom KT will use RSC Energia-developed satellite buses. Development of Yamal 501 spacecraft considered to be the first joint project. In July 2015, RSC Energia and FSUE Kosmicheskaya Svyaz (GP KS) signed an agreement on cooperation in development of advanced satellite communication and broadcasting systems. Technical requirements for advanced systems, including those created in the interests of GP KS are planned to be developed. It is expected that the combined efforts of the two enterprises will make it possible to use more effectively the resources available to the parties. 3.28.9 Corporation Policy in Internal Risk Control and Management The Corporation activity in the area of risk management is aimed at increasing shareholder value and improving the quality of corporate management by identifying risks, analyzing their materiality, and developing measures to minimize risks. In 2016 the Corporation carried out works aimed at improving the risk management system. The policy of RSC Energia in the area of internal risk control and management is based on the following key principles: - increasing the business worth of RSC Energia: internal risk control and management system (hereinafter referred to as IRCMS) helps towards the attainment of an end and performance improvement, human health support and safety assurance, security of all RSC Energia activities, compliance with statutory and regulatory requirements, environmental protection, improvement in the quality of production, efficiency of operations, management and reputation; - continuity: IRCMS operates on a permanent basis; - integration: IRCMS is an integral part of the corporate management system and is used to develop and generate the strategy; - integrity: IRCMS captures all areas of RSC Energia activity and all types of risks occurred in their frameworks. Control procedures exist in all business processes at all levels of management. - unity of methodological base: processes in IRCMS are implemented on the basis of common approaches and standards for all structural units; 88
- priority: RSC Energia takes all necessary measures, primarily with regard to risks critical for the activity. - disclosure of information: IRCMS provides control over disclosure of information on RSC Energia activities to external users; - functionalities: assignment of target responsibility for risk management of various activities of RSC Energia is provided in accordance with the separation of functional duties in RSC Energia and its subsidiaries and affiliates; - separation of duties: functions between employees and structural units of RSC Energia are distributed in such a way that one person or structural unit was not simultaneously assigned with duties for implementation of functions and duties for their compliance control; - optimality: scope and complexity of internal control procedures and risk management measures are necessary and sufficient to fulfill the tasks and achieve the objectives of IRCMS operation; - equilibrium: all control functions and risk management functions are provided with means and authorities for their implementation; - clear regulation: all operations are conducted in accordance with the implementation procedure; - message expediency: information on the identified risks and non-fulfillment of control functions should be provided in due time to persons authorized to take appropriate decisions; - authorizations and approvals: all business transactions shall be formally approved or authorized by responsible persons within their authority; - transparency: proper and timely participation of parties concerned ensures that IRCMS remains relevant and timely; - use of the best available information; - adaptability: IRCMS is regularly improved to identify all possible operational risks and maximize the effective application of risk control and management methods 3.29 Events after the Reporting Date Over the period between the reporting date and the execution date of the financial statements, the Corporation didn't face any events, which impacted or were likely to have a significant impact on the financial condition, cash flows or operating results First Deputy Director General for Financial and Economic Activity: (signature) March 31, 2017 Vinokurov Pavel Vyacheslavovich (full name) 89
AUDIT REPORT On financial statements of S.P. Korolev Rocket and Space Public Corporation Energia summarizing the results of activity for 2016 90
Tel: +7 495 797 56 65 Fax: +7 495 797 56 60 reception@bdo.ru www.bdo.ru JSC BDO UNICON, Russia, 117587, Moscow, 125 Varshavskoie shosse, building 1, section 11 AUDIT REPORT to the shareholders of S.P. Korolev Rocket and Space Public Corporation Energia Audited Entity S.P. Korolev Rocket and Space Public Corporation Energia (RSC Energia) Registered by the Interdistrict Inspectorate No.2 for Moscow Region for the main state registration number 1025002032538. Location: 141070, Russian Federation, Moscow Region, Korolev, ul. Lenina, 4A. Auditor Joint stock company BDO Unicon (JSC BDO Unicon) Registered by the Inspectorate of the Ministry of Taxes and Levies No. 26 in the Southern Administrative District of Moscow for the main state registration number 1037739271701. Location: 117587, Russia, Moscow, 125 Varshavskoie shosse, building 1, section 11. JSC BDO Unicon is a member of the professional audit association self-regulating organization of auditors "Russian Union of Auditors" (Association), the main registration number of the entry in the state register of auditors and audit organizations 11603059593. We have audited the accompanying accounting (financial) statements of RSC Energia for 2016 in the following composition: - Balance Sheet as of December 31, 2016; - Profit and Loss Account for 2016; - Appendices to Balance Sheet and Profit and Loss Account, including: equity change statement for 2016; cash flow statement for 2016; notes to the financial statements for 2016. Responsibility of the Entity under Audit for financial statements RSC Energia management bears responsible for preparation and fair presentation of these financial statements in accordance with the requirements of the legislation of the Russian Federation for preparation of financial statements, and internal control necessary for preparation of financial statements that are free from material misstatement whether due to fraud or error. JSC BDO Unicon, a company registered in accordance with legislation of the Russian Federation, is a member of BDO international, a chain of independent companies. BDO is a trademark of BDO chain and each member company of BDO chain. 91
Responsibility of the Auditor Our responsibility is to express an opinion on the fair presentation of these accounting statements based on our audit. We conducted our audit in accordance with the federal standards of auditing. Those standards require that we comply with the applicable ethical norms, as well as plan and perform the audit in a manner to obtain the reasonable assurance about whether the accounting statements are free from material misstatement. The audit involved the performance of procedures to obtain audit evidence about the amounts and disclosures in the accounting statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control system relevant to the entity s preparation and fair presentation of the accounting (financial) statements in order to select audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control system. An audit also included evaluation of the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the management of the Entity under Audit, as well as evaluation of the overall presentation of the accounting (financial) statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion with regard to the fair presentation of the accounting (financial) statements. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of RSC Energia as of December 31, 2016, the results of its operations and its cash flows for 2016 in accordance with Russian regulations of the financial statements. Other data The financial statements from the period from January 1 through December 31, 2016 were audited by another auditor whose report dated 29.04.2016 expressed an unmodified opinion about these financial statements. JSC BDO Unicon Director General April 21, 2017 Stamp here V.Yu. Pogulayev 92
S.P. KOROLEV ROCKET AND SPACE PUBLIC CORPORATION ENERGIA, AUDIT COMMISSION May 15, 2017 In accordance with the provisions of Art. 85 of the Federal Law of 26.12.1995 number 208-FZ "On Joint Stock Companies", the Audit Commission, elected by the decision of the annual general meeting of shareholders of S.P. Korolev Rocket and Space Public Corporation Energia (RSC Energy, the Company) composed of: A.V. Ardeev, K.V. Vakulin, A.A.Zelepukin, V.V. Kardanov, M.Yu. Kiseleva, A.B. Kosenko, E.P. Polezhaeva, D.N. Chirkin, with due regard to the Company's documents and materials carried out a selective test of the financial and economic activities of the Company for 2016. The following documents submitted by the Company were reviewed during the audit of the Audit Commission: Balance sheet of RSC Energia as of December 31, 2016 (form 0710001 per National Index of Administrative Documents (NIAD)); Profit and Loss Account of RSC Energia for 2016 (Form 0710002 per NIAD): Equity change statement of RSC Energia for 2016 (Form 0710003 per NIAD); Cash flow statement of RSC Energia for 2016 (Form 0710004 per NIAD); Explanations of individual indicators of financial statements; Annual report of RSC Energia work progress for 2016; Audit report of auditing company JSC BDO Unicon on accounting (financial) statements of RSC Energia for the period from January 1 through December 31, 2016; Minutes of the meetings of the Board of Directors of RSC Energia; Minutes of general meetings of RSC Energia shareholders. A check of accounts and financial statements for 2016 was carried out in the Corporation by an independent auditor, JSC BDO Unicon, being a member of the self-regulating organization of auditors of Association "Russian Union of Auditors", registered under the Principal Number of Registration Entry (PNRE) 11603059593 According to the auditors, the Company's financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2016, the financial and operating performance and cash flows for 2016 in accordance with Russian regulations of the financial statements. The accounting and tax records in the Company are organized in accordance with: the Tax Code of the Russian Federation; Federal Law of the Russian Federation of 06.12.2011 No.402-FZ On Accounting ; Order of the Russian Finance Ministry of 29.07.1998 No. 34-n On Approval of the regulations on accounting and financial reporting in the Russian Federation (as amended); accounting standards in accordance with the orders of the Ministry of Finance of Russia; Company's accounting policies for accounting and taxation purposes. In accordance with paragraph 3 of Article 88 of the Federal Law of 26.12.1995 No. 208-FZ On Joint Stock Companies fairness of the representations contained in the company's annual report, annual financial statements shall be confirmed by the audit commission (auditor) of the company. 93
The Audit Commission analyzed the results of financial and economic activities of the Company, organization of performance and effectiveness of risk management and internal control systems, as well as the random check of transactions conducted by the Company in 2016 related to financial investments, contracting of loans and credits, interested-party transactions and major transactions following which the Audit Commission made the following conclusion: taking into account the revealed facts of the financial and economic activity summarizing the Company's activities in 2016, which may affect the decisions by the owner, as well as taking into account the positive audit report, the Audit Commission considers it possible to confirm the fairness of the representations contained in the Company's annual report and annual financial statements and recommends to approve them. The present conclusion should be reviewed in conjunction with the Audit Commission Act, as well as all statements and explanatory notes being integral parts of the Company Annual Report. Chairman of the Commission A.A.Zelepukin 94
FINANCIAL STATEMENTS OF S.P. KOROLEV ROCKET AND SPACE PUBLIC CORPORATION ENERGIA for 2015 In accordance with paragraph 9 of the Decree of the Russian Federation Government No. 1214 "On improvement of management of public companies with shares, related to the federal property, and federal state unitary enterprises", dated 31.12.2010, financial statements shall be presented for a 2-year (current and previous) term and shall become an appendix to chapter 9 of the Annual Report of RSC Energia for 2015. 95
S.P. Korolev Rocket and Space BALANCE SHEET as of December 31, 2015 Form as per OKUD Organization Public Corporation Energia as per OKPO Taxpayer ID Number Type of Research and development activity in the field of natural sciences and technology Legal organizational form / Form of ownership as per / Mixed Russian ownership with patial federal ownership r OKOPF/ОКFS Unit of measurement: RUB thousand as per OKEI Location (address) 4A Lenin St., Korolev, Moscow Region, 141070 Date (day, month, year) INN as per OKVED Codes 0710001 31 12 2015 07530238 5018033937 73.10 12247 49 384 Notes Intangible assets Item ASSETS I. NON-CURRENT ASSETS Line Code as of December 31, 2015 as of December 31, 2014 as of December 31, 2013 1110 14 206 12 512 11 082 Research and development results 1120 1 645 562 1 393 579 925 013 Intangible development assets 1130 - - - Tangible development assets 1140 - - - Fixed assets 1150 12 834 821 13 226 145 10 919 020 Income-bearing investments in tangible assets 1160 294 966 304 241 315 431 Financial investments 1170 769 860 3 318 477 560 756 Deferred tax assets 1180 75 529 97 510 112 015 Other non-current assets 1190 476 335 1 826 971 1 989 125 TOTAL of Section I 1100 Inventory II. CURRENT ASSETS 1210 16 111 279 20 179 435 14 832 442 19 403 737 22 507 197 17 521 769 Value added tax on acquired assets 1220 301 626 532 177 642 300 Accounts receivable 1230 35 412 187 32 115 795 22 894 111 Financial investments (excluding cash equivalents) 1240 3 791 237 994 039 4 121 012 Cash and cash equivalents 1250 11 001 503 9 233 063 8 141 982 Other current assets 1260 216 427 289 533 135 822 TOTAL of Section II 1200 70 126 468 65 671 804 53 456 996 BALANCE 1600 86 237 747 85 851 239 68 289 438 96
Notes Item LIABILITIES III. CAPITAL AND RESERVES Line Code as of December 31, 2015 as of December 31, 2014 Form 0710001, p.2 as of December 31, 2013 Authorized capital (joint-stock capital, authorized 1310 fund, partners contributions) 1 123 734 1 123 734 1 123 734 Shares repurchased 1320 - - - Non-current assets revaluation 1340 7 104 002 7 237 311 5 953 074 Additional capital (without revaluation) 1350 - - - Reserve capital 1360 168 560 168 560 168 560 Retained earnings (uncovered loss) 1370 2 642 828 2 161 407 3 190 630 TOTAL of Section III 1300 11 039 124 10 691 012 10 435 998 IV. LONG-TERM LIABILITIES Borrowings 1410 1 996 154 2 293 588 3 031 720 Deferred tax liabilities 1420 410 083 543 149 394 084 Estimated liabilities 1430 - - - Other long-term liabilities 1450 21 556 450 11 177 748 3 845 632 TOTAL of Section IV 1400 23 962 687 13 014 485 7 271 436 V. SHORT-TERM LIABILITIES Borrowings 1510 4 343 010 4 357 922 100 271 3.14 Accounts payable 1520 45 770 433 65 582 008 46 643 105 3.14 Deferred revenue 1530 314 389 332 389 399 157 3.24 Estimated liabilities 1540 761 699 566 055 414 815 Other short-term liabilities 1550 46 405 2 307 368 3 024 656 TOTAL of Section V 1500 51 253 936 62 145 742 50 582 004 BALANCE 1700 86 237 747 85 851 239 68 289 438 Chief Executive Officer: Solntsev Vladimir Lvovich March 30, 2016 97
Breakdown of Separate Balance Sheet Indicators As of December 31, 2015 Explanations Name of indicator Line Code As of December 31, 2015 As of December 31, 2014 As of December 31, 2013 1 2 3 4 5 6 Intangible assets (line 1110), including: 3.2 Patents, "know-how", copyrights 11101 13668 11841 10196 3.2 In-process R&D 11102 538 662 874 Research and development results (line 1120), including: 3.3 Completed R&D 11201 810333 179657 181755 3.3 In-process R&D 11202 835229 1213922 743258 Fixed assets (line 1150), including: 3.4 buildings and structures 11501 3826634 3777188 2474371 3.4 machinery and equipment 11502 1197521 840690 691185 3.4 transportation equipment 11503 64335 76016 99027 Capital investments in progress (excluding subsidiary account 11504 3.5 08.03.3) 441726 1150443 1450812 Equipment to be installed 11505 Income-bearing investments (line 1160), including: 3.4 Things offered for lease 11601 294966 304241 315431 11602 Financial investments (line 1170), including: 3.6 stocks and shares of affiliates 11701 632212 422650 422650 3.6 stocks and shares of dependent companies 11702 29487 29487 38850 stocks and shares of other 3.6 companies 11703 11034 325697 99256 3.6 long-term loans granted 11704 97127 2540643 Other non-current assets (line 1190), including: expenditures undertaken in connection with the upcoming works under the construction project contract, which are included in the cost of projects 11901 3.4 under construction included in subsidiary account 97.03 Organization of construction works. 6848 6301 175409 uncompleted capital outlays for housing projects included in 11902 3.4 subsidiary account 08.03.3 239370 1383658 1515159 value-added tax for contract works in housing projects, included in subsidiary account 11903 3.4 19.08 39554 246449 298557 98
Explanations Name of indicator Line Code As of December 31, 2015 As of December 31, 2014 As of December 31, 2013 1 2 3 4 5 6 Inventory (line 1210), including: raw materials, materials and other 12101 3.7 similar objects of value 449766 415587 613462 3.8 Expenses in in-process inventory 12102 18872115 21972425 16811184 Accounts receivable (line 1230), including: Non-current loan receivable 3.11 Buyers and customers 12301 144233 224915 137335 3.11 Advance paid out 12302 5401151 14021102 7430940 Short-term loan receivable 3.11 Buyers and customers 12303 3079920 1321124 1332072 3.11 Advance paid out 12304 25376519 15754750 13353726 Cash and cash equivalents (line 1250), including: 3.10 Money equivalents 12501 539600 1834767 5275 Other current assets (line 1260), including: VAT declared for refund under 12601 agreements and contracts 161205 176564 8362 VAT on advances received 12602 9153 4465 9646 Reserve capital / Fund of capital asset and special movable valuables (line 1360), including: Backlogs formed according to basic 13601 3.12 documents 168560 168560 168560 Borrowings (line 1410), including: 3.13 credit accommodations 14101 1996154 1293588 3031720 Other long-term liabilities (line 1450), including: joint development means 14501 3.14 suppliers and subcontractors 14502 106831 1413 1513 3.14 advances received 14503 21449619 11176335 3844119 Borrowings (line 1510), including: credit accommodations 15101 4340959 4354436 98188 Accounts payable (line 1520), including: 3.14 suppliers and subcontractors 15201 4047545 2558940 1782746 3.14 payables to organization employees 15202 267608 241982 452062 3.14 debt to state non-budgetary funds 15203 191606 136698 119560 3.14 tax and due liabilities 15204 331314 192364 146117 3.14 advances received 15205 40883937 51406295 44080705 3.14 liability owed to participants for payment of dividends 15206 2478 6233 8078 99
Explanations Name of indicator Line Code As of December 31, 2015 As of December 31, 2014 As of December 31, 2013 1 2 3 4 5 6 Deferred revenue (line 1530), including: special-purpose financing of research 15301 activities 106620 332389 399157 Estimated liabilities (line 1540), including: 3.25 estimated liabilities on holidays 15401 570109 566055 414815 3.25 estimated liabilities on costs to be incurred for warranty maintenance 15402 and technical support of SS 1027 3.25 estimated liability on capital project 15403 190563 Other short-term liabilities (line 1550), including: participation interest in construction 15501 7817 2303098 3003054 VAT for advances paid out 15502 38588 4269 21602 Chief Executive Officer: Solntsev Vladimir Lvovich March 30, 2016 100
S.P. Korolev Rocket and Space PROFIT AND LOSS STATEMENT for January - December 2015 Form as per OKUD Organization Public Corporation Energia as per OKPO Taxpayer ID Number Type of Research and development activity in the field of natural sciences and technology Legal organizational form / Form of ownership as per / Other Mixed Russian ownership Unit of measurement: RUB thousand Date (day, month, year) INN as per OKVED r OKOPF/ОКFS as per OKEI Codes 0710002 31 12 2015 07530238 5018033937 73.10 12247 49 384 Notes Item Line Code for January - December 2015 for January - December 2014 3.18 Revenues 2110 38 519 864 25 025 382 Cost of sales 2120 (36 539 341) (23 725 007) Gross profit (loss) 2100 1 980 523 1 300 375 Selling expenses 2210 (346 190) (250 600) Administrative expenses (G&A) 2220 - - Sales profit (loss) 2200 1 634 333 1 049 775 3.18 Income from participation in other entities 2310 24 753 40 895 3.18 Interest receivable 2320 874 237 637 210 Interest payable 2330 (500 237) (319 723) 3.20 Other income 2340 13 197 523 7 574 514 3.20 Other expenses 2350 (13 885 658) (9 637 252) Profit (loss) before tax 2300 1 344 951 (654 581) 3.15 Current income tax 2410 (793 164) (214 501) 3.16 including constant tax liabilities (assets) 2421 (413 080) (508 988) 3.16 Change in deferred tax liabilities 2430 133 066 (149 066) 3.16 Change in deferred tax assets 2450 (21 972) (14 505) Other 2460 (72 557) (1 622) Net profit (loss): 2400 590 324 (1 034 275) 101
Form 0710002, p.2 Notes Item FOR REFERENCE Result from the non-current assets revaluation, not included in the net profit (loss) for the period Result from other operations, not included in the net profit (loss) for the period Line Code 2510 2520 for January - December 2015 for January - December 2014 4 081 3 537 - - Consolidated financial result for the period 2530 594 405 (1 030 738) 3.21 Basic earnings (loss) per share 2900 - - Diluted earnings (loss) per share 2910 - - Chief Executive Officer: [signature] Solntsev Vladimir Lvovich (signature) (full name) March 30, 2015 102
Breakdown of Profit and Loss Statement Indicators For January December 2015 Notes Name of indicator Line for January - December for January - December code 2015 2014 1 2 3 4 5 Revenues (line 2110), including: research and development activities in the area of natural and technical 21101 3.18 sciences 36774139 23744363 services in the area of construction, social sphere, distributive services and 21102 3.18 catering 863617 760968 services relating to assignment of Corporate assets for value for temporary 21103 3.18 use (temporary possession and use) 330251 297041 Cost of sales (line 2120), including: research and development activities in the area of natural and technical 21201 sciences (35169995) (22750022) services in the area of construction, social sphere, distributive services and 21202 catering (666172) (660860) services relating to assignment of Corporate assets for value for temporary 21203 use (temporary possession and use) (149120) (134587) Gross profit (loss) (line 2100), including: research and development activities in the area of natural and technical 21001 sciences 1614144 994341 services in the area of construction, social sphere, distributive services and 21002 catering 197445 100108 services relating to assignment of Corporate assets for value for temporary 21003 use (temporary possession and use) 181131 162454 Selling expenses (line 2210), including: research and development activities in the area of natural and technical, services in the social sphere, 22101 distributive services and catering (346190) (250600) Sales profit (loss) (line 2200), including: research and development activities in the area of natural and technical 22001 sciences 1347933 829449 services in the area of construction, social sphere, distributive services and 22002 catering 117466 14400 services relating to assignment of Corporate assets for value for temporary 22003 use (temporary possession and use) 181131 162454 Other income (line 2340), including: incomings associated with sale of property, plant and equipment and other 23401 3.18, 3.20 assets 6746821 5054005 23402 103
Line for January - December for January - December Notes Name of indicator code 2015 2014 1 2 3 4 5 Other expenses (line 2350), including: expenses associated with equity holding of other organizations and sale of fixed 23501 3.18, 3.20 and other assets (6767873) (5041963) Chief Executive Officer: Solntsev Vladimir Lvovich March 30, 2016 104
Form as per OKUD Organization S.P. Korolev Rocket and Space Public Corporation Energia as per OKPO Taxpayer ID Number Type of activity Research and development in the field of natural sciences and technology Legal organizational form / Form of ownership as per Unit of measurement: RUB thousand / Other Mixed Russian ownership Date (day, month, year) INN as per OKVED r OKOPF/ОКFS as per OKEI Codes 0710003 31 12 2015 07530238 5018033937 73.10 12247 49 384 Пояснения Наименование показателя Код на 31 декабря на 31 декабря на 31 декабря 2012 г. 2011 г. 2010 г. 2. Changes in Equity Item Line Code Authorized capital Shares repurchased Additional capital Reserve capital Retained earnings (uncovered loss) Total Balance as of December 31, 2013 3100 1 123 734-5 953 074 168 560 3 190 630 10 435 998 For 2014 Capital increase - total: 3210 - - 1 287 775-1 514 1 2898 289 including: Net profit 3211 X X X X 416 218 416 218 Revaluation of assets 3212 X X 1 287 775 X - 1 287 775 Income directly charged to the capital increase 3213 X X - X 1 514 1 514 Additional share issue 3214 - - - X X - Increase in the par value of shares 3215 - - - X - X Legal entity reorganization 3216 - - - - - - 105
Item Line Code Authorized capital Shares repurchased 106 Additional capital Reserve capital Retained earnings (uncovered loss) Form 0710003, p.2 Capital decrease total: 3220 - - - - (1 034 275) (1 034 275) including: Loss 3221 X X X X (1 034 275) (1 034 275) Revaluation of assets 3222 X X - X - (83 669) Expenses directly charged to the capital decrease 3223 X X - X - (7 805) Decrease in the par value of shares 3224 - - - X - - Decrease in the number of shares 3225 - - - X - - Legal entity reorganization 3226 - - - - - - Dividends 3227 X X X X - - Changes in additional capital 3230 X X (3 538) - 3 538 X Changes in reserve capital 3240 X X X - - X Balance as of December 31, 2012 3200 1 123 734-7 237 311 168 560 2 161 407 10 691 012 For 2015 Capital increase - total: 3310 - - - - 593 885 593 885 including: Net profit 3311 X X X X 590 324 590 324 Revaluation of assets 3312 X X - X - - Income directly charged to the capital increase 3313 X X - X 3 561 3 561 Additional share issue 3314 - - - X X - Increase in the par value of shares 3315 - - - X - X Legal entity reorganization 3316 - - - - - - Capital decrease total: 3320 - - (129 228) - (116 545) (245 773) including: Loss 3321 X X X X - (129 228) Revaluation of assets 3322 X X (129 228) X - - Expenses directly charged to the capital decrease 3323 X X - X (9 790) (9 790) Decrease in the par value of shares 3324 - - - X - - Decrease in the number of shares 3325 - - - X - - Legal entity reorganization 3326 - - - - - - Dividends 3327 X X X X (106 755) (106 755) Changes in additional capital 3330 X X (4 081) - 4 081 X Changes in reserve capital 3340 X X X - - X Balance as of December 31, 2015 3300 1 123 734-7 104 002 168 560 2 642 828 11 039 124 Total
2. Adjustments introduced due to changes in the accounting policy and the correction of errors Changes in equity for 2014 Form 0710003, p.3 Item Line Code as of December 31, 2013 due to net profit (loss) due to other factors as of December 31, 2014 Capital total Prior to adjustments 3400 - - - - Adjustments due to: changes in the accounting policy 3410 - - - - correction of errors 3420 - - - - After adjustments 3500 - - - - including: Retained earnings (uncovered loss): Prior to adjustments 3401 - - - - Adjustments due to: changes in the accounting policy 3411 - - - - correction of errors 3421 - - - - After adjustments 3501 - - - - As per other capital items Prior to adjustments 3402 - - - - Adjustments due to: - - - - changes in the accounting policy 3412 - - - - correction of errors 3422 - - - - After adjustments 3502 - - - - 107
Form 0710003, p.4 3. Net Assets Item Line Code as of December 31, 2015 as of December 31, 2014 as of December 31, 2013 Net assets 3600 11 3353 513 11 023 401 10 835 155 Chief Executive Officer: [signature] Solntsev Vladimir Lvovich (signature) (full name) March 30, 2015 108
S.P. Korolev Rocket and Space CASH FLOW STATEMENT for January - December 2015 Form as per OKUD Organization Public Corporation Energia as per OKPO Taxpayer ID Number Type of Research and development activity in the field of natural sciences and technology Legal organizational form / Form of ownership as per / Other Mixed Russian ownership Unit of measurement: RUB thousand Date (day, month, year) INN as per OKVED r OKOPF/ОКFS as per OKEI Codes 0710004 31 12 2015 07530238 5018033937 73.10 12247 49 384 Item Line Code For January December, 2015 For January December, 2014 Cash flows from operating activities: Proceeds total 4110 36 604 495 40 634 178 including: from sales of products, goods, works and services 4111 35 670 284 39 474 169 of which: from sales of products, goods, works and services to subsidiaries and affiliates 150 073 202 109 lease payments, license fees, royalties, commissions and other similar payments 4112 219 155 217 366 of which: lease payments, license fees, royalties, commissions and other similar payments from subsidiaries and affiliates 111 906 116 265 from resale of financial investments 4113 - - from investors for the participation in shared construction 4114 253 220 870 286 other proceeds 4119 451 833 72 357 Payments total 4120 (33 980 635) (40 853 795) including: to suppliers (contractors) for raw materials, supplies, works and services 4121 (23 366 386) (29 878 544) of which: to subsidiaries and affiliates for raw materials, supplies, works and services (10 931 574) (16 143 911) with respect to the employee compensation 4122 (6 831 620) (4 878 883) debenture interest 4123 (497 780) (318 321) corporate income tax 4124 (666 773) (165 653) to suppliers (contractors) for raw materials, supplies, works and services under the participation in shared construction 4125 (223 262) (716 002) other payments 4129 (2 394 814) (4 896 392) Net cash flows from operating activities 4100 2 623 857 (219 617) Cash flows from investing activities Proceeds total 4210 413 727 369 763 including: from the sale of non-current assets (except for financial investments) 4211 9 210 364 from the sale of shares (participatory interests) in other entities 4212-89 from the repayment of loans granted, sale of debt securities (rights of claim on cash against other parties) 4213-85 000 dividends, debenture interest and similar proceeds from participation in other entities 4214 368 547 235 573 4215 - - other proceeds 4219 35 970 48 737 109
Payments total 4220 (2 505 797) (1 675 676) including: with respect to the acquisition, establishment, modernization, reconstruction and preparation for use of non-current assets 4221 (1 082 178) (1 369 288) with respect to the acquisition of shares (participatory interests) in other entities 4222 - - with respect to the acquisition of debt securities (rights of claim on cash against other parties), granting of loans to other parties 4223 (1 422 555) (115 000) debenture interest included in the cost of an investment asset 4224 - - 4225 - - other payments 4229 (1 064) (191 388) Net cash flows from investing activities 4200 (2 092 070) (1 305 913) 110
Cash flows from financing activities: Item Line Code For January December, 2015 Form 0710004, p.2 For January December, 2014 Proceeds total 4310 5 039 699 2 720 620 including: borrowings 4311 5 039 699 2 720 620 monetary contributions of owners (participants) 4312 - - from the issue of shares, increase in participatory interests 4313 - - from the issue of bonds, bills and other debt securities etc. 4314 - - 4315 - - other proceeds 4319 66 - Payments total 4320 (4 690 226) (806 624) including: to owners (participants) with respect to the repurchase of shares (participatory interests) from them or their withdrawal from participation 4321 - - for the payment of dividends and other profit distributions to the benefit of owners (participants) 4322 (106 959) (331) with respect to the discharge (redemption) of bills and other debt securities, repayment of borrowings 4323 (4 583 197) (806 293) 4324 - - other payments 4329 (70) - Net cash flows from financing activities 4300 349 473 1 913 996 Net cash flows for the accounting period 4400 881 260 388 466 Opening balance of cash and cash equivalents 4450 9 223 063 8 141 982 Closing balance of cash and cash equivalents 4500 11 001 503 9 233 063 Effect of changes in foreign exchange rates against the Russian ruble 4490 887 180 702 615 Chief Executive Officer: [signature] Solntsev Vladimir Lvovich (signature) (full name) March 30, 2015 111
OAO RSC Energia NOTES TO THE BALANCE SHEET AND PROFIT AND LOSS STATEMENT for 2015 112
3.1 General Information 3. General Data OAO S.P. Korolev Rocket and Space Public Corporation Energia (hereinafter referred to as the Corporation, ОАО RSC Energia ) was founded based on the Decree of the Government of the Russian Federation No. 415 dated April 29, 1994. The certificate of state registration of RSC Energia, together with a corresponding entry to the Unified State Register of Legal Entities under the main state registration No. 1025002032538 dated October 21, 2002, was issued by the Inspectorate of the Federal Tax Service of Russia No. 2 for Moscow Region. The Company is registered at the following address: 4a Lenin St., Korolev, Moscow Region, 141070. Ordinary registered non-certificated shares, State registration number 1-03-01091-А of 30.12.1998 are admitted for sales in the third level of List of Securities listed at ZAO MICEX Stock Exchange from 09.06.2014. 1.2 Corporate Governance Data on Corporation Board of Directors membership as of 31.12.2015 # Full name Position 1. Yuri Veniaminovich Vlasov General Director ОАО United Rocket and Space Corporation 2. Anatoly Anatolievich General Director, ZAO Lider Gavrilenko 3. Vitaly Anatolievich Davydov Deputy General Director, Chairman of Scientific-Technical Council, Advanced Research Fund 4. Andrei Nikolaevich Klepach Deputy Chairman, Chief Economist of State Corporation Bank for Development and Foreign Economic Affairs (Vnesheconombank), governor of Vnesheconombank, Deputy Chairman of the board of directors 5. Igor Anatolievich Komarov General Director, Public Space Corporation ROSCOSMOS, Chairman of the Board of Directors 6. Andrei Sergeevich Nikitin General Director, autonomous noncommercial organization Agency for Strategic Initiatives 7. Sergei Alexandrovich Nikitin Deputy General Director, head of department ZАО Lider 8. Alexei Viktorovich Nuzhdov Deputy General Director, ZAO Lider 9. Maxim Valerievich Petrov Deputy General Director, Public Space Corporation ROSCOSMOS 10. Pavel Dmitrievich Popov First Deputy General Director, OAO United Rocket and Space Corporation 11. Vladimir Lvovich Solntsev President, RSC Energia 113
Single-member executive body RSC Energia single-member executive body is the President who carries out management of the Corporation day-today operation in accordance with the established procedure and within the limits of power laid down by Federal Law On Joint-Stock Companies, other Russian Federation legal acts, the Corporation Articles of Incorporation, Single-Member Executive Body Provision and Labor Agreement concluded with single-member executive body. Data on Corporation Board of Directors membership as of 31.12.2015. Full name Position 1. Vladimir Lvovich Solntsev President, RSC Energia 2. Nikolai Albertovich Brukhanov General Designer for Advanced Space Complexes and Systems 3. Pavel Vyacheslavovich Vice-President for Financial-Economic Activity Vinokurov 4. Yugeny Alexeyevich Yermakov Head of Department 5 ДП, Chief Engineer 5. Mikhail Viktorovich Komarov Vice-President for Personnel and Social Policy 6. Yelena Mikhailovna Chief Accountant Korogodina 7. Mikhail Yurievich Merkulov Vice-President for Security 8. Eugeny Anatolievich Mikrin General Designer 9. Vladimir Yefimovich Senior Vice-President for Economics and Corporate Governance Osmolovsky 10. Nikolai Anatolievich Pirogov Vice-President for interaction with government bodies 11. Igor Sergeevich Radugin General Designer of Launch Vehicles 12. Sergei Yurievich Romanov General Designer of Manned Space Complexes 13. Viktor Ivanovich Rykov Vice-President for Control-Auditing Activity 14. Sergei Anatolievich Saperov Vice-President for Organization-Legal Matters 15. Vladimir Alexeyevich Solovyov First Deputy General Designer. Head of NTTs-11Ts 16. Igor Vladimirovich Frolov General Designer of unmanned space complexes and systems 1.3 Branches (Structural Units) As of December 31, 2015, the Company had 9 standalone structural units (including branches). 114
List of Standalone Structural Units (Branches) No. Name Location KPP Activities 1 Voskhod Holiday Hotel 15, Sitniki instructional farm village, Sergiyev Posad District, Moscow Region 504202001 Holiday hotel, vacation retreat, etc. 2 Vostok Holiday Hotel with Health Resort Functions Novomikhailovsky-2, Tuapse District, Krasnodar Krai 235502001 Holiday hotel, vacation retreat, etc. 3 Krepost Health Resort 9 Mira Avenue, Kislovodsk Resort Town, Stavropol Krai 262802001 Holiday hotel, vacation retreat, etc. 4 Baikonur Baikonur-8, Kyzylorda Region, 990103001 Maintenance and operation of Republic of Kazakhstan Baikonur Cosmodrome facilities Other Standalone Structural Units No. Name Activities 1 Catering Administration Trade, catering 2 Social Services Administration Social services 3 Podlipki Health and Recreation Resort Holiday hotel, vacation retreat, etc. 4 Standalone structural unit to support operations at Plesetsk Cosmodrome 5 029 structural unit of OAO RSC Energia in Samara Support of operations at Plesetsk Cosmodrome Development of structures composing the ascent unit, support of the ascent unit assembly 4. Significant Aspects of the Accounting Policy and Presentation of Information in the Accounting Statements 4.1 Basis for the Accounting Statements Preparation These accounting statements have been drafted based on the accounting and reporting rules applicable in the Russian Federation, in particular, the Federal Law No.402-FZ "On Accounting" dated December 6, 2011, and the Regulations on Accounting and Reporting in the Russian Federation adopted by the Decree of the Ministry of Finance of the Russian Federation No. 34n dated July 29, 1998, as well as other regulations being parts of the system regulating the accounting and reporting processes of entities in the Russian Federation, The accounting statements have been prepared in accordance with the Accounting Policy, approved by the Order of the President of RSC Energia No. 532 dated December 31, 2014. 4.2 Assets, Liabilities and Transactions in Foreign Currencies Should accounting transactions be made in a foreign currency, the relevant currency s exchange rate set by the Central Bank of the Russian Federation on the date of such transactions is applied. Cash on currency and deposit accounts with banks, float, including loans granted and received, credits denominated in foreign currencies, are recorded in the accounting statements in amounts calculated based on the official exchange rate. The rate amounted to 72.8827 rubles and 56.2584 rubles for 1 US dollar, and 79.6972 rubles and 68.3427 rubles for 1 Euro as of December 31, 2015 and 2014, respectively. Exchange rate differences emerged during the year with respect to transactions with assets and liabilities, and denominated in foreign currencies, as well as its recalculation as of the reporting date, are recognized in other income and expenses. 4.3 Short-Term and Long-Term Assets and Liabilities In the Balance Sheet, the receivables and payables are recognized as short-term ones if its circulation (redemption) 115
periods do not exceed 12 months after the reporting date or are not set. The remaining assets and liabilities specified are presented as long-term ones. Financial investments, as well as credits and loans are classified as short-term or long-term based on the expected period of their use (circulation, possession or redemption) after the reporting date. 4.4 Changes in the Accounting Policy 2015 The Сorporation creates an estimated liability for warranty maintenance and technical support for Space System (SS). With the aim of implementing the Resolution of Board of Directors of 29.05.2015 on redistribution of types of activities between RSC Energia, ZAO ZEM RSC Energia and АО Teplo RSC Energia, new kinds of activities were open: - production of thermal energy in the form of vapor; - production of thermal energy in the form of hot water; - production of coolant. With the aim of implementing the Board Resolution No.15/2015 of 10.09.2015 on changing the schematic diagram for Corporation power supply a new kind of activity, i.e. electric power transmission was open. 2016 No changes were made to the accounting policy for 2016 which can significantly affect the accounting statements. 3.5 Segment Information 4. Disclosure of Major Indicators Pursuant to PBU 12/2010 "Segment Information", based on the analysis of sources and nature of risks associated with the Corporation s operations and profits being generated thereby, in order to group data by segments of the organizational and management structure of the internal accounting system, the information on operating segments is recognized as primary, and the information on each geographical segment is recognized as secondary. Primary information - operating segments One key operating segment may be distinguished in the Corporation s activities: - research, development and experimental work on development and operation of manned orbital complexes, launch vehicles, various classes of launch vehicles, space telecommunications, broadcasting and satellite communications complexes; other segments, including: - health resort treatment services, and children s health camp services; - trade and public catering services; - social services; - other services (security measures, staff recruitment services for subsidiaries, typographical services, etc.). Indicator Research, Development and Experimental Work Health Resort Treatment Services Trade Services Social Services Other Services RUB thsd. Corporation Total 1 2 3 4 5 6 7 For 2015 Segment revenue 36 774 139 619 070 172 176 72 371 882 108 38 519 864 Earnings (loss) from segment sales 1 347 933 98 370-3 697 22 794 168 933 1 634 333 116
Interest receivable 866 962 7 275 - - X 874 237 Interest payable 500 237 - - - X 500 237 Income from 24 753 - - - X 24 753 participation in other entities Other income 13 196 051 1 472 - - X 13 197 523 Other expenses 13 881 825 3 833 - - X 13 885 658 Earnings (loss) before taxation of the segment 1 053 637 103 284-13 697 22 794 168 933 1 344 951 As of December 31, 2015 Segment assets 85 146 121 1 052 722 26 982 11 922 X 86 237 747 Assets not allocated to segments - - - - X - Assets total 85 146 121 1 052 722 26 982 11 922 X 86 237 747 Segment liabilities 74 106 997 1 052 722 26 982 11 922 X 75 193 623 Liabilities not allocated - - - - X - to segments Liabilities - total 74 237 005 893 147 18 210 11 865 X 75 160 227 As of December 31, 2014 Segment assets 84 928 017 893 147 18 210 11 865 X 85 851 239 Assets not allocated to - - - - X - segments Assets total 84 928 017 893 147 18 210 11 865 X 85 851 239 Segment liabilities 74 237 005 893 147 18 210 11 865 X 75 160 227 Liabilities not allocated to segments - - - - X - Liabilities - total 74 237 005 893 147 18 210 11 865 X 75 160 227 As of December 31, 2013 Segment assets 66 923 179 1 322 816 35 213 8 230 X 68 289 438 Assets not allocated to segments - - - - X - Assets total 66 923 179 1 322 816 35 213 8 230 X 68 289 438 Segment liabilities 56 487 181 1 322 816 35 213 8 230 X 57 853 440 Liabilities not allocated to segments - - - - X - Liabilities - total 56 487 181 1 322 816 35 213 8 230 X 57 853 440 Segment revenue (income) is generated as a result of making transactions with purchasers and customers. Operations with other segments are not allowed. Income tax expenses and other similar payments are not included in the calculation of 117
segment s earnings (loss). Interest receivable, interest payable, income from participation in other entities, other income and expenses have not been allocated between "Research, development and experimental works" and "Other services" segments due to the inexpediency of doing so, and the lack of the basis required. The mentioned income and expenses are attributed to the Corporation s operations as a whole. Segment assets primarily consist of fixed assets, construction in progress, inventory, work in progress, accounts receivable and other current assets other than deferred tax assets, financial investments and cash. Unallocated assets are not included in segment assets, as they are not directly related to reporting segments, and the required allocation basis is lacking. The segment liabilities primarily include short-term liabilities, with the exception of liabilities to the budget for corporate income tax and liabilities for loans and credit lines received for funding of the Corporation activity as a whole, deferred tax liabilities. The combined share of the net profit of companies in which the Corporation has an interest in the share capital, the total amount of investments in these companies of the Corporation is not disclosed in this section, as it is not directly related to the Corporation's segments allocated. Secondary information geographical segments Information on geographical segments (revenue from sales to outside customers and financial result from segment s operations) is presented in the table below: Geographical Segments Sales Revenue (without VAT) RUB, thsd. Production Cost Sales Profit Return on Sales, % Domestic market 33 950 791 31 975 035 1 975 756 5.82 EU countries 244 634 141 092 103 542 42.33 Angola 98 459 94 244 4 215 4.28 USA 635 149 441 207 193 942 30.53 Egypt 3 588 492 4 232 965-644 473 - Japan 2 339 988 1 351 57.76 Total 38 519 864 36 885 531 1 634 333 4.24 Revenue is presented by geographical segments in market locations. Since production facilities of the Corporation are located in the territory of the Russian Federation, assets and investments are referred to a single geographical segment distinguished based on the assets location - the Russian Federation. 3.6 Intangible Assets Accounting of intangible assets of the Corporation is performed in accordance with PBU 14/2007 "Accounting of Intangible Assets" adopted by the Decree of the Russian Ministry of Finance No. 153n dated December 27, 2007. In the accounting statements, intangible assets are presented at their historical (replacement) cost net of depreciation accumulated during the entire period of their use. Intangible assets of the Corporation were not revaluated in 2015. The depreciation of intangible assets is performed using the straight-line method. 118
Indicator Line Code Intangible Assets and Research, Development and Engineering (R&D) Expenses Intangible Assets Availability and Flow Period Opening balance Changes over a period Closing balance Acquired Disposed Depreciation Impairment Revaluation Historical Historical charged losses Historical Accumulated Historical cost 3 cost 3 cost 3 depreciation 3 cost 3 Accumulated depreciation and impairment losses 3 Accumulated depreciation and impairment losses 3 Accumulated depreciation and impairment losses Intangible assets total including: Patents, licenses, know-how, copyrights Industrial designs and models Software, databases 5100 for 2015 1 14 298 ( 2 448) 3 318 ( 678) 113 ( 935) - - - 16 938 ( 3 270) 5110 for 2014 2 11 966 ( 1 758) 3 039 ( 707) 112 ( 802) - - - 14 298 ( 2 448) 5101 for 2015 1 14 286 ( 2 445) 3 308 ( 678) 113 ( 934) - - - 16 916 ( 3 266) 5111 for 2014 2 11 950 ( 1754) 3 039 ( 703) 110 ( 801) - - - 14 286 ( 2 445) 5102 for 2015 1 12 ( 3) 10 ( ) - ( 1) - - - 22 ( 4) 5112 for 2014 2 16 ( 4) - ( 4) 2 ( 1) - - - 12 ( 3) 5103 for 2015 1 - ( -) - ( -) - ( -) - - - - ( -) 5113 for 2014 2 - ( -) - ( -) - ( -) - - - - ( -) 119
Intangible Assets and Research, Development and Engineering (R&D) Expenses Historical Cost of Internally Generated Intangible Assets Indicator Line Code As of December 31, 2015 4 As of December 31, 2014 2 As of December 31, 2013 5 Total 5120 16 938 14 298 11 966 including: Patents, licenses, know-how, copyrights 5121 16 916 14 286 11 950 Industrial designs and models 5122 22 12 16 Software, databases 5123 - - - Fully Repaid Intangible Assets Indicator Line Code As of December 31, 2015 4 As of December 31, 2014 2 As of December 31, 2013 5 Total 5130 - - - including: Patents, licenses, know-how, copyrights 5131 - - - Industrial designs and models 5132 - - - Software, databases 5133 - - - 120
3.7 R&D Expenses Non-current assets on separate sub-accounts of account 08 "Non-current assets" include research and development work in progress. Separate subaccounts of account 04 "Intangible assets" include finished research and development work being used in the manufacture of goods (performance of works, provision of services). An accounting unit for R&D expenses is an inventory item. An inventory item is an aggregate of expenses incurred with respect to the work performed, the results of which are independently used in the manufacture of goods (performance of works, provision of services) or for management needs The write-off of expenses is performed using the straight-line method. The period over which R&D expenses are to be written off is determined based on the expected service life of R&D results obtained. The expected service life and the expenses write-off method on each R&D subject shall be set by the Decision of the Technical Commission on the R&D results use, approved by the Project Manager. R&D expenses not providing any positive result shall be written-off to other expenses of the accounting period. In the Balance Sheet, finished R&D work being used in the manufacture of goods (performance of works, provision of services) is recognized in line 1120 "Research and development results". Expenses for research and development work in progress are recorded in line 1170 "Other non-current assets". Balance Sheet line 1120 "Research and development results" demonstrates the amount of total expenses for finished R&D work being used in the Corporation s operations, which is equal to RUB 810 333 thsd, unfinished and unexecuted R&D work which is equal to RUB 835 229 thsd. 121
R&D Results Availability and Flow Indicator Line Code Period Opening balance Changes over a period Closing balance Disposed Part of cost written-off as Part of cost Part of cost Part of cost Acquired expenses over a Historical cost written-off as Historical cost written-off as Historical cost written-off as period expenses expenses expenses R&D total including: Assets created as a result of R&D performed at the expense of the Corporation Assets created as a result of R&D funded out of special-purpose financing resources 5140 for 2015 1 179 657 ( -) 853 234 ( 222 558) - ( -) 810 333 ( -) 5150 for 2014 2 181 755 ( -) 180 273 ( 182 371) - ( -) 179 657 ( -) 5141 for 2015 1 40 410 ( -) 853 234 ( 189 499) - ( -) 704 145 ( -) 5151 for 2014 2 111 812 ( -) 19 734 ( 91 136) - ( -) 40 410 ( -) 5142 for 2015 1 139 247 ( -) - ( 33 059) - ( -) 106 188 ( -) 5152 for 2014 2 69 943 ( -) 160 539 ( 91 235) - ( -) 139 247 ( -) 122
Unfinished and Unexecuted R&D and Uncompleted Operations on Intangible Asset Acquisition Indicator Line Code Period Opening balance Changes over a period Closing balance Expenses over a period Written-off as expenses not provided any positive result Accepted for recording as intangible assets or R&D Expenses for unfinished research and development total including: R&D performed at the expense of the Corporation R&D funded out of specialpurpose financing resources Uncompleted operations on intangible asset acquisition total including: inventions industrial designs databases, software, licenses 5160 for 2015 1 1 213 922 474 541 ( -) ( 853 234) 835 229 5170 for 2014 2 743 258 650 937 ( -) ( 180 273) 1 213 922 5161 for 2015 1 1 213 631 474 320 ( -) ( 853 234) 834 717 5171 for 2014 2 445 258 788 107 ( -) ( 19 734) 1 213 631 5162 for 2015 1 291 221 ( -) ( -) 512 5172 for 2014 2 298 000-137 170 ( -) ( 160 539) 291 5180 for 2015 1 662 3 249 ( 55) ( 3 318) 538 5190 for 2014 2 874 2 827 ( -) ( 3 039) 662 5181 for 2015 1 660 3 245 ( 55) ( 3 312) 538 5191 for 2014 2 872 2 827 ( -) ( 3 039) 660 5182 for 2015 1 2 4 ( -) ( 6) - 5192 for 2014 2 2 - ( -) ( -) 2 5183 for 2015 1 - - ( -) ( -) - 5193 for 2014 2 - - ( -) ( -) - 123
3.8 Fixed Assets Fixed assets include assets conforming to the requirements of the Russian Accounting Principle "Accounting of fixed assets" (PBU 6/01) adopted by the Decree of the Russian Ministry of Finance No. 26n dated March 30, 2001, and accepted for recording as appropriate from the time of their putting into operation. In the accounting statements, fixed assets are presented at their historical (replacement) cost net of depreciation accumulated during the entire period of their use. As of December 31, 2015, the land plots owned by OAO RSC Energia were revaluated. The depreciation of the fixed assets acquired and constructed prior to January 1, 2002 is performed based on uniform depreciation rates approved by the Decree of the USSR Council of Ministers No. 1072 "On Uniform Depreciation Rates for the Full Recovery of Fixed Assets of the USSR National Economy" dated October 22, 1990, and of those acquired on or after January 1, 2002 at rates calculated based on estimated useful lives thereof. The useful life of fixed assets is established in accordance with the Classification of Fixed Assets, approved by the Decree of the Government of the Russian Federation No. 1 dated January 1, 2002. The depreciation is performed using the straight-line method. Assets with a useful life exceeding 12 months are included in the inventory, provided that their historical cost is below RUB 40 thsd. per unit. As of December 31, 2014, the depreciated cost of fixed assets available on the Corporation s books amounted to RUB 12 393 095 thsd. Other Non-current Assets Balance Sheet line 1190 Other non-current assets as of December 31, 2015 demonstrates the amount of RUB 476 335 thsd, including - expenses undertaken in connection with future construction project contract works, which are covered by the cost of projects under construction, included in subsidiary account 97.03 Organization of construction work to the amount of RUB 6 848 thsd; - uncompleted capital outlays for housing projects included in subsidiary account 08.03.3 Housing projects to the amount of RUB 239 370 thsd; - value-added tax for contract works in housing projects, included in subsidiary account 19.08 VAT for contract works in housing projects to the amount of RUB 39 554 thsd; Investment contribution under contract No.ИД-010214 of 01.02.2014 SUE PI «MOSP» included in subsidiary account 76.09.3 Accounts receivable and payable for creation of non-current assets in organization to the amount of RUB 190 563 thsd. As of December 31, 2013, the following adjustments were made: the amount of RUB 1 515 159 thsd is excluded from balance sheet line 1150 Fixed assets and included in balance sheet line 1190 Other non-current assets. The amount of RUB 298 557 thsd is excluded from line 1220 Value added tax on acquired assets and included in line 1190 Other non-current assets. As of December 31, 2014, the following adjustments were made: the amount of RUB 1 383 658 thsd is excluded from balance sheet line 1150 Fixed Assets and included in line 1190 Other non-current assets. The amount of RUB 246 449 thsd is excluded from line 1220 Value added tax on acquired assets and included in line 1190 Other non-current assets. 124
Fixed Assets Fixed Assets Availability and Flow Indicator Fixed assets (excluding incomebearing investments in tangible assets total including: Buildings Structures Transfer devices Machinery and Equipment Transport facilities Production and household equipment Perennial plantings Land plots Other fixed assets Line Period Opening balance Changes over a period Closing balance Code Acquired Disposed Depreciation Revaluation Historical cost 3 Accumulated depreciation 6 Historical cost 3 Accumulated depreciation 6 charged Historical cost 3 Accumulated depreciation 6 Historical cost 3 Accumulated depreciation 6 5200 for 2015 1 15 144 690 ( 3 068 996) 1 127 820 ( 296 806) 63 514 ( 447 908) -129 228-15 846 485 ( 3 453 9360 5210 for 2014 2 12 185 660 ( 2 717 452) 1 926 126 ( 254 861) 44 848 ( 396 392) 1 287 774-15 144 699 ( 3 068 996) 5201 for 2015 1 4 751 736 ( 1 170 551) 252 595 ( 132 796) 4 753 ( 74 076) - - 4 871 535 ( 1 239 874) 5211 for 2014 2 3 424 643 ( 1 109 468) 1 344 345 ( 17 252) 3 965 ( 65 048) - - 4 751 736 ( 1 170 551) 5202 for 2015 1 366 937 ( 170 934) 30 938 ( 184506) 2 910 ( 16 228) - - 379 225 ( 184 252) 5212 for 2014 2 318 889 ( 159 693) 66 794 ( 18 746) 9 556 ( 14 797) - - 366 937 ( 170 934) 5203 for 2015 1 702 533 ( 101 597) 143 496 ( 79 129) 371 ( 24 674) - - 766 900 ( 125 900) 5213 for 2014 2 797 967 ( 79 308) 79 174 ( 174 608) 1 839 ( 24 128) - - 702 533 ( 101 597) 5204 for 2015 1 2 127 594 ( 1 286 904) 658 238 ( 24 322) 24 118 ( 301 203) - - 2 761 510 ( 1 563 989) 5214 for 2014 2 1 752 832 ( 1 061 647) 411 377 ( 36 615) 28 561 ( 253 818) - - 2 127 594 ( 1 286 904) 5205 for 2015 1 305 106 ( 229 090) 24 142 ( 32 068) 21 872 ( 25 627) - - 297 180 ( 232 845) 5215 for 2014 2 297 011 ( 197 984) 9 763 ( 1 668) 1 668 ( 32 774) - - 305 106 ( 229 090) 5206 for 2015 1 133 073 ( 104 361) 16 530 ( 9 831) 9 480 ( 5 948) - - 139 773 ( 100 829) 5216 for 2014 2 123 891 ( 103 967) 14 491 ( 5 309) 5 251 ( 5 645) - - 133 073 ( 104 361) 5207 for 2015 1 10 ( 10) - ( -) - ( -) - - 10 ( 10) 5217 for 2014 2 10 ( 10) - ( -) - ( -) - - 10 ( 10) 5208 for 2015 1 6 752 161 ( -) 1 729 ( -) - ( -) -129 228-6 624 662 ( -) 5218 for 2014 2 5 465 042 ( -) - ( 655) - ( -) 1 287 774-6 752 161 ( -) 5209 for 2015 1 5 549 ( 5 549) 152 ( 10) 10 ( 152) - - 5 691 ( 5 691) 5219 for 2014 2 5 375 ( 5 375) 182 ( 8) 8 ( 182) - - 5 549 ( 5 549) 125
Indicator Line Code Fixed Assets Fixed Assets Availability and Flow Period Opening balance Changes over a period Closing balance Acquired Disposed Depreciation Revaluation Historical cost 3 Accumulated depreciation 6 Historical cost 3 Accumulated depreciation 6 charged Historical cost 3 Accumulated depreciation 6 Historical cost 3 Accumulated depreciation 6 Accounted as a part of income-bearing investments in tangible assets total including: Property provided for commercial rent Property provided for commercial rent 5220 for 2015 1 331 042 ( 26 801) 266 ( 1 588) 66 ( 8 019) - - 329 720 ( 34 754) 5230 for 2014 2 334 571 ( 19 140) - ( 3 529) 287 ( 7 948) - - 331 042 ( 26 801) 5221 for 2015 1 331 042 ( 26 801) 266 ( 1 588) 66 ( 8 019) - - 329 720 ( 34 754) 5231 for 2014 2 334 571 ( 19 140) - ( 3 529) 287 ( 7 948) - - 331 042 ( 26 801) 5222 for 2015 1 - ( -) - ( -) - ( -) - - - ( -) 5232 for 2014 2 - ( -) - ( -) - ( -) - - - ( -) 126
Change in the Value of Fixed Assets as a Result of Further Construction, Further Equipping, Reconstruction and Partial Liquidation Indicator Line Code For 2015 1 For 2014 2 Increase in the value of fixed assets as a result of further construction, further equipping, reconstruction total including: Buildings 5260 30 6608 851 228 5261 11 250 776 431 Structures 5262-12 364 Transfer devices 5263 419 1 022 Machinery and equipment 5264 18 991 60 746 Transport facilities 5265 - - Production and household equipment 5266-665 Perennial plantings 5267 - - Land plots 5268 - - Other fixed assets 5269 - - Decrease in the value of fixed assets as a result of further construction, further equipping, reconstruction - total including: Buildings 5270 ( -) ( 6 459) 5271 ( -) ( 1 546) Structures 5272 ( -) ( 460) Transfer devices 5273 ( -) ( 27) Machinery and equipment 5274 ( -) ( 3 311) Transport facilities 5275 ( -) ( -) Production and household equipment 5276 ( -) ( 1 112) Perennial plantings 5277 ( -) ( -) Other fixed assets 5278 ( -) ( 3) 127
Other Use of Fixed Assets Indicator Line Code As of December 31, 2015 4 As of December 31, 2014 2 As of December 31, 2013 5 Leased out fixed assets held on the balance sheet 5280 492 011 660 358 1 737 953 Leased out fixed assets held on off-balance-sheet 5281 accounts - - - Leased fixed assets held on the balance sheet 5282 - - - Leased fixed assets held on off-balance-sheet accounts 5283 221 764 210 870 212 166 Real estate accepted for operation and in use 5284 undergoing the state registration 17 082 - - Mothballed fixed assets 5285 38 726 - - Other use of fixed assets (pledge, etc.) 5286 - - - 128
4.5 Construction in Progress Balance Sheet line 1150 "Other non-current assets" demonstrates: Indicator Construction in progress and uncompleted operations on fixed asset acquisition, modernization, etc. - total including: Acquisition, construction and creation of fixed assets Line Code Period Capital Investments in Progress Opening balance Expenses over a period Changes over a period Closing balance Accepted for recording as fixed Written-off assets, or cost increase 5240 for 2015 1 2 540 401 899 478 ( 1 723 933) ( 1 028 002) 687 944 5250 for 2014 2 3 141 380 2 399 443 ( 1 135 048) ( 1 8653746) 2 540 401 5241 for 2015 1 934 387 132 201 ( -) ( 995 132) 71 456 5251 for 2014 2 1 134 016 671 192 ( 17 952) ( 852 869) 934 387 5242 for 2015 1 208 870 185 762 ( -) ( 29 169) 365 463 Modernization and reconstruction 5252 for 2014 2 ( 1 477 794 701 331 092) ( 969 163) 208 870 Acquisition of land plots 5243 for 2015 1 - - ( -) ( -) - 5253 for 2014 2 2 380 6 ( -) ( 2 386) - etc. 5244 for 2015 1 13 486 1 870 ( -) ( 3 701) 11 655 5254 for 2014 2 12 031 41 183 ( -) ( 39 728) 13 486 Housing construction 5245 for 2015 1 1 383 658 579 645 ( 1 723 933) ( -) 239 370 5255 for 2014 2 1 515 159 985 731 ( 1 116 004) ( 1 228) 1 383 658 129
4.6 Financial Investments Financial investments with non-determined market values are accounted at their historical costs. The historical cost of financial investments acquired for a fee is recognized as the amount of actual expenses for its acquisition, except for value added tax and other compensated taxes. The analytical accounting of financial investments is performed by investment groups and security types. Disposed financial investments not having a market value are recorded at historical cost of each item. Income and expenses from financial investments are recognized in other income and expenses. Financial investments are presented net of the accrued reserve for impairment of financial investment objects, with respect to which the signs of sustained reduction in their values have been detected (the reserve amount equaled to RUB 893 064 thsd. and RUB 787 968 thsd. as of December 31, 2015 and 2014, respectively). As of December 31, 2013, changes were made including the transfer of the amount of RUB 5 201 031 thsd from shortterm financial investments (line 1240 of the balance sheet) to cash (line 1250 of the balance sheet). As of December 31, 2014, changes were made including the addition of the borrowing amounted to RUB 30 000 thsd for ZAO PO Cosmos to long-term financial investments (line 1170 of the balance sheet) having excluded them from short-term financial investments (line 1240 of the balance sheet). As of December 31, 2015, changes were made including the addition of the borrowing amounted to RUB 2 510 643 thsd for ООО Energia-Oversees to long-term financial investments (line 1170 of the balance sheet) having excluded them from short-term financial investments (line 1240 of the balance sheet). Indicator Pledged financial investments - total including: Bills etc. Financial investments transferred to third parties (except through sale) - total including: Bills etc. Other Use of Financial Investments Line Code As of December 31, As of December 31, As of December 31, 2015 4 2014 2 2013 5 5320 - - - 5321 - - - 5325 - - - 5326 - - - Other use of financial investments 5329 - - - 130
Indicator Line Code Financial Investments Financial Investments Availability and Flow Period Opening balance Changes over a period Closing balance Historical cost Acquired Disposed (repaid) Interest accrual Established reserves Historical cost Accumulated adjustments 7 Historical cost Accumulated adjustments 7 (including bringing the historical cost to the nominal value) Current market value (impairment losses) Accumulated adjustments 7 Long-term - total 5301 for 2015 1 4 106 445 (787 968) 293 569 (2 737 090) - - (105 096) - 1 662 924 (893 064) 5311 for 2014 2 1 349 480 (788 724) 2 767 085 ( 10 120) 756 - ( -) - 4 1064452 (787 968) including: 5302 for 2015 1 422 650 ( -) 226 441 ( 5) - - (16 874) - 649 086 ( -) Stocks and shares in subsidiaries 5312 for 2014 2 422 650 ( -) - ( -) - - ( -) - 422 650 ( -) Stocks and shares 5303 for 2015 1 29 487 ( -) - ( -) - - ( -) - 29 487 ( -) in affiliates 5313 for 2014 2 39 606 ( 756) - ( 10 119) 756 - ( -) - 29 487 ( -) Other 5304 for 2015 1 1 113 665 (787 968) 1 (226 442) - - (88 222) - 887 224 (867 190) 5314 for 2014 2 887 224 (787 968) 226 442 ( 1) - - ( -) - 1 113 665 (787 968) Loans granted 5309 for 2015 1 2 540 643 ( -) 67 127 (2 510 643) - - ( -) - 97 127 ( -) 5319 for 2014 2 - ( -) 2 540 643 ( -) - - ( -) - 2 540 643 ( -) Short-term total 5305 for 2015 1 1 940 480 (946 441) 3 871 071 ( -) - - (1 237 550) 163 677 5 975 228 (2 183 991) 5315 for 2014 2 4 121 013 ( -) - (2 46 539) - 24 347 (946 441) 231 659 1 940 480 (946 441) including: 5306 for 2015 1 - ( -) - ( -) - - ( -) - - ( -) Debt securities (bonds, bills) 5316 for 2014 2 2 412 192 ( -) - (2 436 539) - 24 347 ( -) - - ( -) Loans granted 5307 for 2015 1 1 940 480 (946 441) 3 866 071 ( -) - - (1 237 550) 163 667 5 970 228 (2 183 991) 5317 for 2014 2 1 708 821 ( -) - ( -) - - (946 441) 231 659 1 940 480 (946 441) Other 5308 for 2015 1 - ( -) 5 000 ( -) - - ( -) - - ( -) 5318 for 2014 2 - ( -) - ( -) - - ( -) - - ( -) Etc. - - - ( -) - - - - - ( -) Financial 5300 for 2015 1 6 046 925 (1 734 409) 4 164 640 (2 737 689) - - (1 342 646) 163 677 7 638 152 (3 077 055) Investments - total 5310 for 2014 2 5 470 493 (788 724) 2 767 085 (2 446 659) 756 24 347 (946 441) 231 659 6 046 925 1 734 409 131
4.7 Inventory Inventory is accepted for recording at its actual cost (in the amount of actual expenses for its acquisition). The write-off cost of inventory shall be evaluated based on its average production cost. The average value is calculated using the weighted estimate as of the month-end. As of December 31, 2015, the Corporation doesn t have any inventory, which has become obsolete, lost its historical cost in whole or in part, or the current market price of which has decreased, on its books. Therefore, as of 31 December 2015, the reserve for tangible assets impairment was not created by the Corporation. 3.8 Expenses, Work in Progress and Finished Goods Work in progress is evaluated based on total actual expenses incurred, including the appropriate portion of general expenses. General expenses are monthly allocated to orders in proportion to the increase in values of items composing the "Payroll expenses" section, Direct Manufacturing Expenses, over the reporting month. The administrative expenses are allocated in accordance with guidebook Matrix of primary function cost categorization for a group of administrative expenses. 3.9 Prepaid Expenses Costs incurred by the Corporation over the accounting period though related to future periods are recognized as prepaid expenses. Prepaid expenses comprise as follows: Expenses for obtaining licenses to perform certain activities; Payment for the non-exclusive right to use software products; Expenses related to the construction work arrangement. The mentioned expenses are evenly written-off as intended or based on special calculations over the periods they pertain to. 132
Indicator Line Code Inventory Inventory Availability and Flow Period Opening balance Changes over a period Closing balance Production cost Reserve for impairment Disposed Impairment losses Production cost Proceeds and expenses Production cost Reserve for impairment Inventory turnover between groups (types) Reserve for impairment Inventory - total including: Raw materials and supplies Work in progress Prepaid expenses Finished goods and goods for resale 5400 for 2015 1 23 3561 468 ( 849 271) 32 582 400 ( 36 431 090) 745 230 - X 19 507 778 ( 104 041) 5420 for 2014 2 17 521 769 ( -) 30 308 442 ( 24 473 743) - (849 271) X 23 356 468 ( 849 271) 5401 for 2015 1 415 587 ( -) 496 325 ( 462 146) - - - 449 766 ( -) 5421 for 2014 2 613 462 ( -) 535 059 ( 732 934) - - - 415 587 ( -) 5402 for 2015 1 22 821 696 ( 849 271) 32 063 908 ( 35 909 448) 745 230 - - 18 976 156 ( 104 041) 5422 for 2014 2 16 811 184 ( -) 29 277 808 ( 23 267 296) - (849 271) - 22 821 696 ( 849 271) 5403 for 2015 1 - ( -) - ( -) - - - - ( -) 5423 for 2014 2 - ( -) - ( -) - - - - ( -) 5404 for 2015 1 7 371 ( -) 12 902 ( 10 928) - - - 9 345 ( -) 5424 for 2014 2 7 740 ( -) 415 556 ( 415 925) - - - 7 371 ( -) Other 5405 for 2015 1 111 814 ( -) 9 265 ( 48 568) - - - 72 511 ( -) 5425 for 2014 2 89 383 ( -) 80 019 ( 57 588) - - - 111 814 ( -) etc. 133
Pledged Inventory Indicator Inventory unpaid as of the reporting date total including: Pledge agreements Line Code As of December 31, As of December 31, As of December 31, 2015 4 2014 2 2013 5 5440 - - - 5441 - - - Inventory pledged under contract - 5445 total - - including: - 5446 Raw materials and supplies - - Work in progress 5447 - - - Finished goods and goods for resale 5448 - - - Other 5449 - - - 134
3.10 Cash Pursuant to the Decree of the Russian Ministry of Finance No. 66n "On Forms of Accounting Reports of Organizations" dated July 2, 2010, and para 18 of PBU 23 "Cash Flow Statement", cash flow statement indicators shall be indicated in the currency of the Russian Federation - rubles. Cash flow values in a foreign currency shall be converted into rubles at the official exchange rate established by the Central Bank of the Russian Federation on the date of payment effecting or receipt. 3.11 Accounts Receivable Trade receivables are determined based on the prices specified in agreements between the Corporation and purchasers (customers), including VAT. The Balance Sheet line 1230 "Accounts Receivable" demonstrates the value of trade receivables (net of reserves for doubtful debts) in the amount of RUB 25 011 thsd. as of December 31, 2015. Accounts receivable include advances for future settlements paid to other entities under the agreements. As of December 31, 2015, the amount of advances is RUB 30 777 670 thsd., and the reserve for advances paid equaled to RUB 258 853 thsd. 135
Accounts Receivable Availability and Flow Indicator Long-term accounts receivable - total including: Trade receivables Advances paid Other accounts receivable Line Code Period Opening balance Changes over a period Closing balance Accounted under contract Reserve for doubtful debts Through business transactions (amount of debt under a transaction, operation) 8 Acquired Disposed Reclassificati Interest, penalties and other accruals due 8 Repayment Write-off to the financial result 8 Reserve recovery on from longterm receivables to short-term receivables Accounted under contract Reserve for doubtful debts 5501 for 2015 1 14 290 212 (28 944) 5 126 031 - (6 954 376) ( -) 28 944 ( 6 816 451) 5 645 416 ( 34 576) 5521 for 2014 2 7 573 493 ( -) 11 068 600 - (1 648 421) ( -) - ( 2 703 460) 14 290 212 ( 28 944) 5502 for 2015 1 253 849 (28 944) 39 393 - ( 37 556) ( -) 28 944 ( 100 903) 153 783 ( 9 550) 5522 for 2014 2 137 335 ( -) 127 324 - ( 10 810) ( -) - ( -) 253 849 ( 28 944) 5503 for 2015 1 14 021 102 ( -) 5 010 105 - (6 9155084) ( -) - ( 6 714 548) 5 401 151 ( -) 5523 for 2014 2 7 430 940 ( -) 10 929 256 - (1 635 634) ( -) - ( 2 703 460) 14 021 102 ( -) 5504 for 2015 1 15 261 ( -) 76 533 - ( 1 312) ( -) - ( -) 90 482 ( -) 5524 for 2014 2 5 218 ( -) 12 020 - ( 1 977) ( -) - ( -) 15 261 ( -) Short-term accounts receivable total including: Trade receivables Advances paid Other accounts receivable 5510 for 2015 1 18 246 407 (391 880) 13 691 326 - (7 931 863) ( 209) 374 305 6 816 451 30 792 112 (990 765) 5530 for 2014 2 15 491 235 (170 617) 16 510 834 - (13 730 279) ( 25 383) 83 014-18 246 407 (391 880) 5511 for 2015 1 1 321 355 ( 231) 2 588 157 - (1 211 035) ( -) 231 101 903 3 095 380 ( 15 460) 5531 for 2014 2 1 390 797 (58 725) 573 090 - ( 642 532) ( -) 58 494-1 321 355 ( 231) 5512 for 2015 1 15 846 363 (91 613) 9 590 112 - (6 515 650) ( 1) 74 038 6 714 548 25 635 372 (258 853) 5532 for 2014 2 13 465 618 (111 892) 15 431 642 - (13 026 377) ( 24 520) 24 520-15 846 363 ( 91 613) 5513 for 2015 1 1 078 689 (300 036) 2 218 057 - ( 235 178) ( 208) 300 036-2 061 360 (716 452) 5533 for 2014 2 634 820 ( -) 506 102 - ( 61 370) ( 863) - - 1 078 689 (300 036) Total 5500 for 2015 1 32 536 619 (420 824) 18 817 357 - (14 916 239) ( 209) 403 249 X 36 437 528 (1 025 341) 5520 for 2014 2 23 064 728 (170 617) 27 579 434 - (15 378 700) ( 25 383) 83 014 X 32 536 619 (420 824) 136
Overdue Accounts Receivable Indicator Line Code As of December 31, 2015 4 As of December 31, 2014 2 As of December 31, 2013 5 Accounted under contract Book value Accounted under contract Book value Accounted under contract Book value Total 5540 633 282-258 837 597 126 815 - including: Trade receivables 5541 633 282-258 837 148 126 815 - Advances paid 5542 - - - - - - Other accounts receivable 5543 - - - 449 - - 137
3.12 Capital and Reserves The authorized capital amounts to RUB 1 123 734, and in 2015 its value was not changed. At 2014 year-end a loss was made, as a result dividends for 2014 were not paid. The Charter of the Corporation provides for the establishment of a reserve fund in the amount of at least 5% of the authorized capital. The fund is formed by means of compulsory annual deductions equal to minimum 5% of the net profit. The reserve fund of the Corporation is completely formed. 4.13 Loans and Credits Expenses for loans and credits received are recognized as costs of the period, during which they have been incurred (current expenses), and are included in other expenses. Additional expenses associated with obtaining loans and credits are included in other expenses as they are paid. Interest on borrowings is evenly (monthly) accrued, and is recognized as other expenses in the accounting periods, which these accruals pertain to. The Corporation transfers long-term payables on loans and credits received to short-term payables at the time when there are 365 days left to repay the principals of such borrowings pursuant to loan agreements. Line 1410 Borrowings of the balance sheet demonstrates bank loan proceeds with maturity exceeding 365 days as of December 31, 2015. The line 1510 "Borrowings" demonstrates Corporation s debts with maturity not exceeding 365 days under loan agreements with banks as of December 31, 2015. As of December 31, 2014 the following adjustments were made: the amount RUB 1 000 000 thsd. is excluded from line 1410 «Borrowings of section Long-term liabilities and added to line 1510 Borrowings of section Short-term liabilities. 3.14 Account Payable As of December 31, 2013 the following adjustments were made: the amount RUB 3 845 632 thsd was excluded from line 1520 Accounts payable and included in line 1450 Other long-term liabilities. As of December 31, 2014 the following adjustments were made: the amount of RUB 11 177 748 thsd. Is excluded from line 1520 Accounts payable and included in line 1450 Other long-term liabilities. 138
Accounts Payable Availability and Flow Indicator Long-term accounts payable - total including: Trade payables Other Advances received Short-term accounts payable - total including: Trade payables Advances received Other accounts payable Total Line Code Period Opening balance Changes over a period Acquired Disposed Reclassification Through business Interest, penalties Repayment Write-off to the from long-term transactions and other accruals financial result 8 payables to shortterm payables (amount of debt due 8 under a transaction, operation) 8 Closing balance 5551 for 2015 1 11 177 748 10 410 084 - ( 31 382) ( -) ( -) 21 556 450 5571 for 2014 2 3 845 632 9 592 699 - ( 2 260 583) ( -) ( -) 11 177 748 5552 for 2015 1 1 413 105 418 - ( -) ( -) ( -) 106 831 5572 for 2014 2 1 513 - - ( 100) ( -) ( -) 1 413 5553 for 2015 1 - - - ( -) ( -) ( -) - 5573 for 2014 2 - - - ( -) ( -) ( -) - 5554 for 2015 1 11 176 335 10 304 666 - ( 31 382) ( -) ( -) 21 449 619 5574 for 2014 2 3 844 119 9 592 699 - ( 2 260 483) ( -) ( -) 11 176 335 5560 for 2015 1 54 582 008 20 351 207 - (29 162 782) ( -) - 45 770 433 5580 for 2014 2 46 643 105 54 519 799 - (46 579 546) ( 1 350) - 54 582 008 5561 for 2015 1 2 558 940 3 613 360 - ( 2 124 755) ( -) - 4 047 545 5581 for 2014 2 1 782 746 2 559 316 - ( 1 781 772) ( 1 350) - 2 558 940 5562 for 2015 1 51 406 295 15 925 102 - (26 447 460) ( -) - 40 883 937 5582 for 2014 2 44 080 705 51 386 295 - (44 060 705) ( -) - 51 406 295 5563 for 2015 1 616 773 812 745 - ( 590 567) ( -) - 838 951 5583 for 2014 2 779 654 574 188 - ( 737 069) ( -) 616 773 5550 for 2015 1 65 759 756 30 761 291 - (29 194 164) ( -) X 67 326 883 5570 for 2014 2 50 488 737 64 112 498 - (48 840 129) ( 1 350) X 65 759 756 139
Overdue Accounts Payable Indicator Line Code As of December 31, 2015 4 As of December 31, 2014 2 As of December 31, 2013 5 Total 5590 1 409 117 350 633 92 584 including: 5591 Trade payables 1 409 117 350 633 92 584 Other 5592 - - - 140
3.15 Taxation Value-added tax The value added tax (VAT) on goods, products, works and services sold is calculated as of the date of actual shipment (delivery) of such goods, products, works and services. Income tax For the purposes of the income tax calculation, income is recognized in the reporting (tax) period, during which it occurred, regardless of the actual receipt of cash or any other property (works, services), and (or) property rights (accrual basis). The income tax determined based on the accounting earnings (provisional income tax expenses) amounted to RUB 268 990 thsd. and RUB 130 916 thsd. in 2015 and 2014, respectively. The current income tax recognized in the line 2410 of the Profit and Loss Statement equaled to RUB 793 164 thsd. in 2015, RUB 214 501 thsd. in 2014. 3.16 Deferred Taxes In its accounting and reporting documents, the Corporation discloses deferred tax assets and liabilities, as well as permanent tax assets and liabilities, i.e. the amounts, which may influence the income tax value in the current and/or forthcoming accounting periods. Permanent Differences Permanent differences have emerged in the Corporation s accounting as a result of the excess of actual expenses included in the accounting earnings (loss) calculation over expenses accepted for tax purposes, with respect to which certain cost restrictions are provided, and other differences. The sum of permanent tax liabilities (assets) calculated based on permanent differences is recorded in the line 2421 of the Profit and Loss Statement in 2015 and amounted to RUB 413 080 thsd. and recorded in the line 2421 in 2014 and amounted to RUB 508 988 thsd., respectively. Deductible Temporary Differences In 2015, deductible temporary differences in the amount of RUB 109 860 thsd. emerged as a result of as follows: recognition of targeted funding in records for accounting and tax purposes; recognition of service sector losses in records for accounting and tax purposes; recognition of other income and expenses in records for accounting and tax purposes. Changes in deferred tax assets are shown in the line 2450 of the Profit and Loss Statement and equaled to RUB 21 972 thsd. in 2015, and RUB 14 505 thsd. in 2014. Taxable Temporary Differences In 2015, taxable temporary differences in the amount of RUB 665 330 thsd. emerged as a result of as follows: evaluation of work in progress in records for accounting and tax purposes; recognition of R&D expenses in records for accounting and tax purposes; depreciation of fixed assets in records for accounting and tax purposes; recognition of other income and expenses in records for accounting and tax purposes. 141
Changes in deferred tax liabilities are shown in the line 2430 of the Profit and Loss Statement in the amount of RUB 133 066 thsd. in 2015 and RUB 149 066 thsd. in 2014. 3.17 Deferred Revenue As of December 31, 2015, the Balance Sheet line 1530 Deferred Revenue indicates the amount of target funding received equal to RUB 314 389 thsd. 3.18 Recognition of Income (Revenue) Revenue from the provision of services (performance of works) is recognized as services are provided to customers (or upon the works completion) and payment documents are submitted to them. It is recorded in accounts net of value added tax, excises and similar payments. The Corporation recognizes revenue from the performance of works, provision of services, selling of goods with a long manufacturing cycle in its accounts upon the completion of such works, services, or goods manufacture in general. Other income of the Corporation may include: proceeds related to the provision of Corporation s assets for temporary use for a fee; proceeds related to the provision of rights arising from patents on inventions, industrial designs and other intellectual property of the Corporation for a fee; proceeds related to the participation in authorized capitals of other entities; proceeds from the sale of fixed assets, inventory, financial investments, foreign currency; interest received from the provision of Corporation s funds for use; difference between historical and nominal values of securities. 3.19 Production Expenses Indicator Line Code For 2015 1 For 2014 2 Material costs 5610 24 546 539 21 562 232 Payroll expenses 5620 5 135 408 4 980 332 Social benefit costs 5630 1 453 339 1 321 557 Depreciation 5640 400 299 399 638 Other expenses 5650 1 464 537 1 723 360 Total by elements 5660 33 040 122 29 987 119 Change in balances (increase [+], decrease [-]): Work in progress 5670 3 845 540-6 011 512 Finished products 5680-131 - Total expenses for ordinary activities 5600 36 885 531 23 975 607 142
3.20 Other Income and Expenses RUB thsd. Other income / expenses Income and expenses related to compensation of losses of Corporation Earnings and losses of previous years identified in the reporting year 2015 2014 Income Expenses Income Expenses - 15 981.2 24 849.9 27 663.5 1 193.4 123 534.2 2 594.8 49 123.9 Exchange and sum differences 3 209 730.7 2 135 463.1 1 826 640.7 1 095 564.4 Additional Corporation staff expenses (oneoff bonuses, material aid, etc.) - 278 158.1-278 463.5 Expenses for works and services under terminated or non-concluded agreements, works performed at the expense of the - 6 517.2-149 733.4 Corporation Bank services - 6 203.3-20 688.2 Sale of fixed assets 9 588.8 14 297.6 364.4 57.5 Sale of other assets 6 737 232.6 6 753 575.8 5 054 005.5 5 041 963.5 Expenses associated with obtaining loans and credits - - - 3 175.5 Reserves for doubtful debts - 3 048 463.2-1 312 589.4 Reserves for impairment of financial investments Reserve for reduction in values of nonmonetary physical things Fines, penalties, forfeits, taxes and charges paid out of Corporation s funds Income from the recovery of the unused reserve for doubtful debts Income from the recovery of the unused reserve for impairment of financial investments Income from the recovery of the unused reserve for impairment of tangible assets - 893 064.3 - - - - - 849 270.5-104.4 460.7 1 554.2 1 199 495.8-114 858.2-787 968.0-756 - 745 225.5 - - - Saves on investment project 425 047.0-355 924.3 - Other income (expenses) 82 037.2 552 295.6 194 059.5 807 404.5 Total other income / expenses 13 197 523.0 13 885 658.0 7 574 514 9 637 252 3.21 Earnings Per Share The margin of basic earnings per share is 525 rubles. The basic earnings of RUB590 324 thsd. and average weighted number of ordinary outstanding shares in the amount of 1 123 734 shares are used for calculation. During 2015 a number of ordinary shares remained unchanged. 143
The Profit and Loss Statement does not indicate diluted earnings per share as the Corporation does not have any convertible securities and contracts on ordinary share sale/purchase from its issuer on the books. 3.22 Security Indicator Line Code As of December 31, As of December 31, As of December 31, 2015 4 2014 2 2013 5 Received - total 5800 - - - including: Pledge 5801 - - - Bank guarantee agreement, surety agreement 5802 - - - Granted total 5810 1 049 406 2 778 866 3 319 654 including: Pledge 5811 - - - Bank guarantee agreement, surety agreement 5812 1 049 406 2 778 866 3 319 654 4.23 Government Assistance Indicator Line code For 2015 1 For 2014 2 Budgeting funds received total 5900 - - Including: Recurrent costs 5901 - - Investments in non-current assets 5905 - - Opening balance Received for the year Returned for the year Closing balance Public budget loan total 20 15 1 5910 - - ( -) - 20 14 2 5920 - - ( -) - Including: ( -) 20 15 1 5911 (objective) - - - 20 14 2 5921 - - ( -) - etc. - - ( -) - Notes: 10. The accounting year is indicated. 11. The previous year is indicated. 12. In case of reapprisal column Historical cost demonstrates current market value or current (replacement) cost. 13. The reporting date of the reporting period is presented. 14. The year preceding the previous year is indicated. 15. Nonprofit organization entitles column Accumulated amortization and Accrued amortization as Accumulated depreciation and Accrued depreciation 16. Accumulated adjustment is determined as: A difference between the historical and current market values for financial investments, which can determine the current market value; Difference accrued during the circulation period between the historical cost and nominal value for debt security, which cannot determine the current market value; Value of investment depreciation reserve created at the previous balance sheet date, for financial investments, which do not determine the current market value. 17. The data is released by deducting the payables received and redeemed (written-off) within one accounting period. 144
3.24 Related Parties With regard to the Corporation there is no controller having more than 50% of the Corporation shares, or having a right to give mandatory instructions. The main shareholders of the Corporation are OAO URSC and AO Razvitiye. The participatory interest of OAO URSC is 38.22052%. The participatory interest of AO Razvitiye is 17.42628%. The Corporation is included into a corporate group of OAO URSC. A list of entities belon ging to the corporate group is provided on the Internet page (http://www.e - disclosure.ru/portal/files.aspx?id=1615&type=6, http://fas.gov.ru/activity/antimonopolyregulation/groups-of-people/from-01-01-2011.html?id=960&convert=topdf). Information on the Board of Directors and the Management Board of the Corporation is provided in paragraph 1.2 of these explanations. Companies in which the Corporation has an interest in the authorized capital A list of companies in which OAO RSC Energia has an overall control. Name Place of registration / location Authorized Capital Corporation s participatory interest as of December 31, 2015 Corporation s participatory interest as of December 31, 2015 (%) Income from participation for 2014, RUB thsd. 1 2 3 4 5 6 ZAO ZEM RSC 4A Lenin St. Korolev, RUB 40 000 RUB 40 000 100 23 950.0 Energia Moscow Region thsd. thsd. ZAO VKB RSC 26B Zemetsa St., RUB 10 000 RUB 10 000 100 Energia Samara thsd. thsd. ZAO PO Kosmos RUB 200 thsd. RUB 200 thsd. 100 LLC IK Razvitie LLC RSC Energia Finance AO Teplo RSC Energia LLC OIME CJSC BELROSSAT LLC Energia SAT ZAO Energia- Telecom Room 1, bldg. 1,Vnukovo-3, Borovskoye Highway, Moscow 4A Lenin St., Korolev, Moscow Region 4A Lenin St., Korolev, Moscow Region 4A Lenin St., Korolev, Moscow Region 4A Lenin St., Korolev, Moscow Region Office 416, 15 bldg. 5, P. Brovki St., Minsk 1a, Grabina St., Korolev, Moscow Region 4A Lenin St., Korolev, Moscow Region RUB 6 150 thsd. RUB 6 150 thsd. 100 - RUB 500 thsd. RUB 500 thsd. 100 - RUB 69 390.4 thsd. RUB 69 390.4 thsd. 100 - RUB 16 874.3 RUB 16 874.3 100 thsd. thsd. $25 000 $17 500 70 RUB 80 000 thsd. RUB 40 800 thsd. 51 - RUB 1 000 thsd. RUB 501.0 thsd. 50.1 240.5 145
Name Place of registration / location OJSC Space Regatta Consortium List of other companies, in which RSC Energia is a shareholder (participant). Authorized Capital Corporation s participatory interest as of December 31, 2015 Corporation s participatory interest as of December 31, 2015 (%) Income from participation for 2014, RUB thsd. 1 2 3 4 5 6 4A Lenin St., Korolev, RUB 100 thsd. RUB 30 thsd. 30 - Moscow Region OJSC NPK REKOD 40 / 6 bldg.1, 3rd proezd Maryinoy Roshchi, Moscow RUB 110 867 thsd. RUB 29 457 thsd. 26.57 314.1 In the reporting year, Corporation s shares in authorized capitals of affiliates were not changed. List of other affiliates in which RSC Energia is a shareholder (participant) with the participatory interest in the authorized capital exceeding 2% Name Place of registration / location Limited liability company Energia- Cert Authorized Capital Corporation s participatory interest as of December 31, 2015 Corporation s participatory interest as of December 31, 2015 (%) Income from participation for 2014, RUB thsd. 1 2 3 4 5 6 4A Lenin St., Korolev, RUB 1000 RUB 19.5 thsd. 19.5 - Moscow Region thsd. Limited liability company Center of Automated Hydraulic Devices (LLC AHD Center) Corporation ILS International Launch Services, Inc. (ILS International Services, Inc.)_ Open joint-stock company Gazprom space systems ОАО Gazprom space systems 4A Lenin St., Korolev, Moscow Region Registered office: Wilmington, Delaware, Name of Agent registered at the address of the registered office "Si Ti Corporation" 77B, Moscow St., Schelkovo, Moscow Region RUB 10 thsd. RUB 1.9 thsd. 19 213.5 RUB 65 683.4 thsd. 170 shares (non-voting share, type В) RUB 10 615.5 thsd. 17-16.16-146
Name Place of registration / location Sea Launch S.a.r.l. (SEA LAUNCH S.А.R.L.) Authorized Capital Corporation s participatory interest as of December 31, 2015 Corporation s participatory interest as of December 31, 2015 (%) Income from participation for 2014, RUB thsd. 1 2 3 4 5 6 58, rue Charles Martel, 19 195 790 2 880 000 USD 15 - L-2134 Luxembourg, USD Grand Duchy of Luxembourg Limited liability company International Space Systems (LLC ISS) Closed joint stock company Certification Center for Rocket and Space Technology (ZAO IsSKT) 71, Izmailovo road, building 8, Moscow 4 PIonerskaya St., Korolev, Moscow Region RUB 3 960 thsd. RUB 10.75 thsd. RUB 396 thsd. 10 - RUB 0.25 thsd. 2.33 34.8 Operations with Related Parties In the reporting year, the Corporation performed works for and provided services to the related parties as follows: RUB. thsd. Sales revenues (excluding Affiliate Name Nature of Relationship Type of operations VAT) in 2015 CJSC ZEM RSC Energia Renting services, security 365 733 Overall control services CJSC PO Kosmos Renting services, security 29 667 Overall control services LLC OIME Renting services, security 1 193 Overall control services CJSC Teplo RSC Energia Renting services, security 39 699 Overall control services Total 436 292 147
In the accounting period, the following affiliates provided services to (performed works for) the Corporation: Affiliate Name CJSC ZEM RSC Energia CJSC Teplo RSC Energia CJSC VKB RSC Energia CJSC PO Kosmos CJSC Energia-Telecom Nature of Relationship Overall control Overall control Overall control Overall control Overall control Type of operations Activities, services and using space technologies Heat production services Performance of R&D activities and experimental works for execution of RSC Energia space programs Air-passenger, freight and mail operations Development, production of SS-based satellite communication components and systems RUB thsd. Sales revenues (excluding VAT) in 2015 13 081 465 198 965 21 939 162 888 874 600 Total 14 339 857 Status of cash payments of the Corporation with the affiliates as of December 12, 2015 and December 12, 2014: Company Name Accounts Receivable 148 Accounts Payable 2015 2014 2015 2014 RUB thsd. CJSC ZEM RSC Energia 14 471 810.2 17 480 911.6 1 066 716.9 330 645.9 LLC OIME 2 773.2 3 101.2 4.8 - Reserve (2 455.8) (984.1) LLC IMPROVEN - 8.0 - - LLC IK Razvitie - - - - CJSC PO Kosmos 244 497.1 137 195.6 25 001.8 8 160.0 Reserve (5 477.2) (4 954.5) CJSC VKB RSC Energia 70 556.9 64 208.5 259.9 1 299.4 Reserve (42 601.1) (61 278.7) LLC RSC Energia Finance - 1.3 - - CJSC Teplo RSC Energia 445 683.7 116 853.1 146 679.8 53 047.2 Reserve (12 489.8) (12 489.8) CJSC Energia Telecom 303 691.0 205 688.4 415 121.2 132 796.1 LLC Energia Space Technologies 28.9 65.9 - - Total 15 476 017.1 17 928 326.5 1 653 784.4 525 948.6 Prices for products, goods, works, and services provided to the Corporation by its subsidiaries and supplied by the Corporation to its subsidiaries are set based on the contracts concluded in accordance with market prices. The Corporation settles accounts with its subsidiaries in cash.
The amount of interest accrued on loans granted by the Corporation to its affiliates (CJSC PO Cosmos), was RUB 5 657 thsd. and RUB 1 564 thsd. in 2015 and 2014, respectively. The amount of interest accrued on loans granted by the Corporation to its largest other related entities (Energia Overseas, LLC and Energia - Logistics, LLC) equaled to RUB 553 474.4 thsd. and RUB 416 438.6 thsd. in 2015 and 2014, respectively. The Corporation lent its largest affiliate (Energia Overseas, LLC and Energia - Logistics, LLC) and other organizations at the rate of from 6% to 16% and from 4.5% to 11%. The balance on granted loans was RUB 5 970 228 thsd. and RUB 4 451 123 thsd. as of 31.12.2015 and 31.12.2014, respectively. The remuneration paid to the administrative and management staff of the Corporation over 2015 and 2014 amounted to as follows: Indicator 2014 2013 Short-term remuneration (labor compensation, taxes accrued thereon and other mandatory payments) RUB thsd. 672 221.1 748 229.6 The administrative and management staff of the Corporation includes as follows: the President, General Designer, vice presidents, deputy General designers, heads of research and development centers, departments, branches, directorates, project offices, centers, administrations and services, program directors and other persons (exercising powers of an executive body under a power of attorney), administration and management personnel. The remuneration of the President is approved by the Chairman of the Corporation s Board of Directors. The remuneration of members of the Corporation s Board of Directors is approved by the General Meeting of shareholders. The payment of remuneration to the members of the Corporation s Board of Directors was RUB 6 182 thsd. and RUB 3 130 thsd. in 2015 and 2014, respectively. 3.25 Estimated Liabilities In the Balance Sheet for 2013, the line 1540 "Estimated liabilities contains the value of estimated liability on carryover vacations of Corporation s employees amounting to RUB 414 815 thsd. as of December 31, 2013. In the Balance Sheet for 2014, the line 1540 "Estimated liabilities contains the value of estimated liability on carryover vacations of Corporation s employees amounting to RUB 566 055 thsd. as of December 31, 2014. In the Balance Sheet for 2015, the line 1540 "Estimated liabilities contains the value of estimated liability on carryover vacations of Corporation s employees amounting to RUB 570 109 thsd. as of December 31, 2015. 149
Indicator Line Code Opening balance Recognized Repaid Written-off as a surplus amount Closing balance Estimated liabilities total 5700 566 055 756 747 (561 103) ( -) 761 699 including: 5701 - - ( -) ( -) - Estimated liabilities on claims Estimated liabilities on onerous contracts Estimated liabilities on reorganization Estimated liabilities on warranties of goods sold quality 5702 - - ( -) ( -) - 5703 - - ( -) ( -) - 5704 - - ( -) ( -) - Estimated liabilities on vacations 5705 566 055 551 361 (547 307) ( -) 570 109 Estimated liabilities on warranty maintenance and performance of technical support of SS/ Estimated liabilities on capital investment project 5706-14 823 ( 13 796) ( -) 1 027 5707-190 563 ( -) ( -) 190 563 3.26 Contingent Assets and Liabilities The Corporation is one of the parties in the following court legal proceedings: 12. Under legal proceedings on the part of the Boeing and Aker Groups for a total amount of about 112 million US dollars, on October 11, 2010 the arbitrator made on award for termination of the legal [proceedings on procedural grounds (because the case is out of his jurisdiction0 and reimbursement of the Corporation legal proceedings costs. On January 11, 2011 the Boeing and Aker Groups of Companies submitted notice of appeal regarding the arbitrator award to the court of Stockholm. On 11.04.2014 the court of appeal determined to reject the claims lodged by the Boeing and Aker (Kvaerner). On 09.05.2014 the Boeing and Aker (Kvaerner) filed an appeal against the decision of the Board of Appeals to the Supreme Court of Sweden. In July 2014 the Aker (Kvaerner) withdrew its claims, the case with respect to the Aker (Kvaerner) made claims had been dismissed. On December 21, 2015 the Supreme Court of Sweden Satisfied the Boeing s notice of appeal and returned the case to the Board of Appeals of Stockholm. A new trial may start in the Board of Appeals in the event that the Boeing Company will submit relevant application. As the situation is currently uncertain, it is hardly should take on this matter. In view of the above, a real assessment of respective risks cannot be made. 13. On February 1, 2013 the court of central district, California, received the statement of claim Space Company (BCSC) which included the 4 claims: bringing suit against Design Bureau Yuzhnoye and PA Yuzhmash zavod (Ukraine) for breach of the Agreement on Creation of the Sea Launch Companies dated May 3, 1995. The amount claimed is 55 million US dollars. bringing suit against DB Yuzhonoye/PA Yuzhmash for breach of the Agreement on the Guarantees and Security dated February 3, 1996. The amount claimed is 78 million US dollars. bringing suit against OAO RSC Energia (FR), Energia Overseas LLC (USA) and Energia Logistics Ltd (USA) for breach of the Agreement on Creation of the Sea Launch Companies dated May 3, 1995. The amount claimed is 92 million US dollars. bringing suit against OAO RSC Energia (FR), Energia Overseas LLC (USA) and Energia Logistics Ltd (USA) for breach of the Agreement on the Guarantees and Security dated February 3, 1996. The amount claimed is 130 million US dollars. 150
In addition, claims are made to collect interest on all the amounts claimed (at the rate to be determined by the court). In June 2013 the Kvaerner (Aker) company added its claims to those made by the Being Company and the Boeing Commercial Space Company (BCSC). The amount claimed by the Kvaiener Company is determined at the rate of at least 84,7 million US dollars; besides, the claims are made to collect interest at the rate to be determined by the court ruling. RSC Energia does not agree to the claims lodged and on July 5, 2013 RSC Energia raised appropriate objections, as well as the counter claim for the amount of 430 million US dollars. In July 2014 the Kvaener (Aker) Company withdrew its claims; insofar as the Kvaerner s (Aker s) claims are concerned, the case is dismissed. The litigation proceedings still go on insofar as the Boeing s and the BCSC s claims are concerned. On September 28, 2015 consideration of the claims made by the Boeing against RSC Energia took place; preliminary judicial act was delivered pointing out that plaintiffs arguments (the Boeing and BCSC companies) concerning their claims to RSC Energia were reasonable enough while RSC Energia s arguments were not well-grounded; that the evidence produced on the matter was sufficient t take a decision without hearing the case in court. On November 10-23, 2015 the hearings concerning the Boeing s claim against the Energia Overseas LLC and Energia Logistics Ltd were conducted. Making one overall final decision of the court with respect to the Boeing s claims to RSC Energia and the Energia Overseas LLC and Energia Logistics Ltd is pending. By estimate of the lawyers team the court decision is going to be finalized in March - April 2016. There is no fixed date for delivery of court judgment (has not determined yet by the US court); by initial forecast, the court decision delivery was expected till the end of Mach; later the forecast deferred delivery of the curt decision to April May. As on 31.03.2016, no court decision has been delivered yet. In view of international peculiarities of this case, it does not seem possible to make any forecast about its final outcome for the resent. 14. Trial concerning the matter of insolvency (bankruptcy) of the organization. Plaintiff (Applicant) is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Defendant (Debtor) is SUE NPTs SPURT (4 Zapadny 2st proyezd, Zelenograd, Moscow, 124460). Matter in contest is the creditor s claim for recovery of 55 360 000 rubles within the framework of the matter of insolvency (bankruptcy) of the organization. Arbitration court of the first instance issued judicial determination on 27.03.2014 that the claim was to be entered into the schedule of creditors. As for SUE NPTs SPURT, proceedings in bankruptcy are opened. By Moscow Arbitration court determination of 15.12.2015 the bankruptcy proceedings were prolonged till 14.06.2016. 15. Court proceedings on the matter of recovery of damages under government contract. Plaintiff is the RF Ministry of Defense (19 Znamenka Street, Moscow, 119160). Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Matter in contest is the claim for recovery of damages in the amount of 195 710 790 rubles for failure to meet commitments under government contract on schedule. By the court judgement of 02.09.2015 the RF Ministry of Defense claims were satisfied in full scope. By ruling of the ninth Arbitration court of appeal of 16.11.2015 the court judgment remained unchanged; by RSC Energia on 17.12.2015 is to be considered in the Arbitration court of Moscow district on 05.02.2016. 16. Court proceedings on the matter of recovery of actual costs under government contract. Plaintiff is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Defendant is the RF Ministry of Defense (19 Znamenka Street, Moscow, 119160). Matter in contest is the claim for recovery of actual costs in the amount of 104 040 957,17 rubles under the government contract. By the court judgement of 26.06.2015 the claims lodged by RSC Energia were satisfied in full volume. By ruling of the ninth Arbitration court of appeal of 06.11.20 the judgment was revoked; 25.12.2015 the cassation appeal was filed with the Arbitration court of Moscow district; sitting of the court was fixed for 09.03.2016. 17. Court proceedings on the matter of recovery of damages under government contract Plaintiff is Federal Space Agency (42 Schepkina Street, Moscow, GSP-6, 107996). Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Matter in contest is the claim for recovery of damages under the government contract in the amount of 43 505 000 rubles. The Arbitration court of Moscow made an award of 03.11.2015 to refuse to satisfy the claims lodged in full scope. By ruling of the ninth Arbitration court of appeal of 26.01.2016 the award remained unchanged; the cassation appeal was not satisfied. 18. Court proceedings on the matter of recovery of damages under government contract Plaintiff is Federal Space Agency (42 Schepkina Street, Moscow, GSP-6, 107996). Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Matter in contest is the claim for recovery of damages under the 151
government contract in the amount of 582 524 294,50 rubles. By ruling issued by the arbitration court of Moscow Region (28.04.2015) the proceedings were suspended. 19. Court proceedings on the matter of recovery of damages under government contract. Plaintiff is Federal Space Agency (42 Schepkina Street, Moscow, GSP-6, 107996). Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Matter in contest is the claim for recovery of damages under the government contract in the amount of 147 977 042,13 rubles. By the court judgement of 18.01.2016 the claims were satisfied in full scope. On 11.04.2016 the case is to be considered in the court of appeal. 20. Court proceedings on the matter of recovery of damages under government contract. Plaintiff is Federal Space Agency (42 Schepkina Street, Moscow, GSP-6, 107996). Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Matter in contest is the claim for recovery of damages under the government contract in the amount of 67 529 378,32 rubles. Arbitration court of Moscow made an award on 11.09.2015 to refuse to satisfy the claims lodged in full scope. By ruling of the court of appeal of 22.03.2016 the award remained in force. 21. Court proceedings on the matter of declaration as invalid of non-statutory acts. Plaintiff in RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Defendant is MRI of FTS of Russia No. 8 relative to the largest tax bearers. Matter in contest is declaration as invalid the decision No. 14-09/30R of 27.10.2014 and the claim No. 8 of 15.04.2015. Arbitration court of Saint-Petersburg and Leningrad Region made an award to satisfy partially the claims for 23.11.2015. 22. Court proceedings on the matter of recovery of money in the amount of 123 463 367,17 rubles under the contract. Plaintiff is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Defendant is OAO Teploset (2q 50th anniversary of VLKSM Street, Korolev city, 141070). Matter in contest is recovery of principal debt and damages for failure to transfer the money in due time. Amicable settlement was reached and approved by the Arbitration court of Moscow Region on 23.03.2016. 23. Court Proceedings on the matter of fulfillment of the obligations in kind. Plaintiff is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Defendant is FKU Tesntroavtomagistral (139 Novaya Street, vil. Akulovo, Odintsovo district, Moscow Region, 143002). Matter in contest is fulfillment of the obligations to install plastic noiseproof windows in RSC Energia s buildings. By ruling of the Arbitration court in Moscow Region the statement of claim was accepted, sitting of the court was fixed for 05.04.2016. 24. Court proceedings on the matter of recovery of money in the amount of 51 715 431,79 rubles under the Contract. Plaintiff is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Defendant is AO PKP IRIS (9 Krasnoarmeyskaya Street, Rostov-on-Don, 344011). Matter in contest is recovery of principal debt and damages for failure to transfer the money in due time. The Arbitration court of Moscow Region made the award to satisfy the Corporation s claims in full scope. Consideration of the case in the court of appeal is fixed for 19.04.2016. 25. Court proceedings on the matter of recovery of damages under government contract. Plaintiff is Federal Space Agency (42 Schepkina Street, Moscow, GSP-6, 107996). Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Matter in contest is the claim for recovery of damages under the government contract in the amount of 2 072 354 749,80 rubles. By the court decision of 18.06.2015 the claims were satisfied partially. By ruling of the tenth arbitration court of appeal of 09.09.2015, the court decision remained unchanged; the appeal was not satisfied. 26. Court proceedings on the matter of recovery of damages under government contract. Plaintiff is federal Space Agency (42 Schepkina Street, Moscow, GSP-6, 107996). Defendant is RSC Energia (4A Lenin Street, Moscow Region, Korolev city, 141070). Matter in contest is the claims for recovery of damages under the government contract in the amount of 2 943 612 740 rubles. By the court judgement of 03.12.2015 the claims were rejected to be satisfied in full scope. 3.27 Risks Related to Business Operations 152
In the course of its operations, RSC Energia is largely exposed to risks related to the economy and financial markets of the Russian Federation. Should one or more risks of those listed below arise, OAO RSC Energia will undertake all possible measures to minimize its negative consequences. The license requirements established by the applicable legislation are duly observed by the Corporation. Changes in the legislation, as well as draft documents in the field of core activities licensing provided on official websites of licensing authorities are carefully examined. In order to reduce some of the risks to the extent possible, the Corporation undertook certain protective measures primarily related to the implementation of the main production program of the Corporation (in particular, insurance against certain risks is common). However, it should be noted that working out preliminarily adequate measures to counteract unforeseen events is difficult due to the uncertainty about how the situation unfolds. 3.27.1. Industry Risks At present, the demand for space services (both manned and unmanned) in the global market is gradually increasing. After termination of the Space Shuttle program, Russia became dominant in the manned flight market. The demand for OAO RSC Energia-produced manned transport vehicles Soyuz and logistics vehicles Progress is likely to be stable for the short-term (at least for the ISS operation period). It is determined by the need to meet the international commitments of Russia to deliver international crew members and cargo to support the station, including the propellant. Starting from 2012, the US Space Agency NASA may independently perform cargo delivery and return cargo items from the ISS by means of logistics vehicle Dragon, and from 2013 by means of another logistics vehicle Cygnus. Resulting from this, cargo delivery by Progress vehicles have slightly decreased. The demand for the Corporation s operations related to the ISS operation and utilization, including International projects on Earth and space exploration from the ISS, building new ISS elements, advanced developments in the area of manned cosmonautics, including the development of an advanced manned transportation system and long-term programs of deep space exploration is expected to be stable. These plans are reflected in the draft Federal Space Program of Russia for a period from 2016 till 2025. Due to the plans of the US commercial companies being implemented on development of manned space vehicles, Russia s dominance in the global market of manned space flights will be completed by the end of the current decade, and the competition will be increasing. The Corporation has no competitors in this area of activity in the internal market. Prospects for further development of the Russian manned cosmonautics in the area of transport spacecraft are associated with the development of a new-generation manned transport spacecraft. Space industry risks of the Corporation are associated with an increase in the product cost. Risks due to economic problems experienced by subcontractors of the traditional Corporation cooperation can be growing. At present, the demand for space services to be provided using unmanned spacecraft (SC) tends to grow steadily in the Russian and global markets. Nowadays, the main areas of growth in the global market of commercial communications and broadcasting space vehicles are as follows: Creation of a SC with improved performance (service life, capacity, throughput, etc.) in C and Ku bands in order to perform the planned replacement of existing SC; Manufacture of SC in an advanced frequency range Ka-band - allowing to boost up the satellite throughput, provide new types of satellite communications services the broadband Internet access, and arrange high-speed trunk communications channels. The most critical factors determining space industry risks in the global market of unmanned spacecraft are as follows: keen competition between major global manufacturers of spacecraft; new global players from the countries with high rates of economic growth (such as China, India, Japan) 153
entering the market of unmanned spacecraft manufacture and launch; political instability in certain developing countries forming the potential market for the Corporation s products and services; trend towards the global space services market integration into the common open area of free partnership for space services and technologies manufacture and application. It should also be noted that there is a strong competition between national spacecraft manufacturers, such as CJSC M.F. Reshetnev ISS, JSC RCTs Progress, S.A.Lavochkin NPO, etc. OAO RSC Energia gives considerable consideration to research and development activities dedicated to the improvement and mastering of new technologies for building unmanned spacecraft. Activities for developing a new modification of the universal satellite bus are in good progress. In order to master and introduce advanced technologies in the field of designing and manufacturing SC for various purposes, OAO RSC Energia is promoting their cooperation with the leading European company Airbus Defence & Space, specifically within the joint venture Energia Satellite Technologies (LLC Energia SAT). With regard to DM-type upper stages produced by OAO RSC Energia, which are used with LVs, such as Proton and Zenit, there is a competition with Russian upper stage manufacturers - M.V. Khrunichev SRP RSC (Breeze-M upper stages are used with Proton-M LVs) and S.A.Lavochkin NPO (Fregat-SB upper stages are designated to be used with Zenit, Soyuz LVs). Therefore, the Corporation constantly takes measures to improve and advance operating characteristics of the DM-type upper stage, which is considered to be one of the best in the world in terms of energy efficiency, accuracy of heavy payload (SC) delivery to specified high-energy orbits/paths, and environmental safety. 3.27.2. Country and Regional Risks The core activities of the Corporation are concentrated in Russia. Its operations may be impacted by the risks associated with the political situation, and the industrial output downturn. The domestic political situation remains stable despite of crisis developments in the financial and mineral markets. The Corporation operation can be affected by risks related to the phase-out or short deliveries of certain commercial component parts which could increase risks of nonfulfillment of some contracts for delivery of products. The Corporation is registered and performs its operations in a rapidly developing area the Moscow Region, which is considered to be one of the most promising regions with its economy growing at a fast pace. Moscow Region is an economically stable area. Geographic features of this region provide for extremely low risks of exposure to disasters (including hurricanes, floods, earthquakes, etc.). This area is located in the central part of the Russian Federation, where the transportation is well developed. Moscow Region is connected with all other Russian and world regions via motor, railway and air transport, which allows to absolutely eliminate the risk of possible transportation termination due to the remoteness of the region and/or its being hard to reach. Moscow Region is regarded as one of the most politically stable areas, which does not directly border upon warfare zones, as well as the regions with a high probability of introducing the state of emergency. At the same time, the geographical remoteness of the Corporation from sites of vehicle prelaunch processing at technical and launching complexes of cosmodromes (including Baikonur Cosmodrome) generates risks of the Corporation s property loss and damage during its transportation to the destination point. The Corporation provides for insurance against such risks. Due to the fact that the Corporation performs certain operations in the territory of the Republic of Kazakhstan (Baikonur Cosmodrome), the impact of country risks related to the unfavorable development of political and economic factors in interstate relations is possible. However, the agreement between Russia and Kazakhstan on the use of Baikonur Cosmodrome up to 2050, and the Treaty on the Euro-Asian Economic Union came in force on January 1, 2015 which is provide free flow of goods, movement of capital, services and manpower allow to assess this risk as insignificant. The Corporation implements certain projects for foreign customers located in African countries, the unstable political 154
situation in the mentioned region may adversely impact the Corporation s operations due to the possible customers waiving to extend the contracts. 3.27.3. Financial Risks OAO RSC Energia s operations and its financial stability, as well as the proceeds from sales of goods (works, services) and earnings are impacted by inflation risks, changes in foreign exchange rates and loan interest rates. Should there be no compensating component in prices for goods to be sold, the inflationary processes resulting in costlier products and materials used in business operations may have a significant negative effect on the Corporation s net profit value. If inflationary processes show an upward tendency, it will result in an increased cost of products manufacture which could affect unfavorably operation As the RF Central Bank forecasted, inflation in 2015 would vary from 8% at the beginning of the year to 11.5% by the end of the year. Changes in interest rates may affect the Corporation s financial and credit activities, as the enterprise extensively uses borrowed resources in its operations. Also, the government is currently taking a range of measures, such as the real sector crediting system improvement, which is sure to result in positive consequences for the enterprise. Due to the measures being undertaken, risk of changing interest rates is highly improbable for the Corporation. Exchange rate risks are important to OAO RSC Energia due to the fact that the Corporation is the exporter of scienceintensive and high-technology products; accordingly, its proceeds are partly denominated in US dollars or Euros, while expenses are mostly incurred in rubles. In this regard, the results of financial and economic activity are definitely effected by changes of inflation and exchange rates. The contracts with foreign contractors are valuated in US dollars and Euro, so their high rates against ruble are beneficial for the Corporation. The Corporation is also exposed to credit and liquidity risks. Credit risks are associated with possible consequences unfavorable for the Corporation at non-performance (improper performance) of obligations by other persons for work performed or services rendered, and borrowed assets provided thereto. The following activities are carried out to reduce the credit risk: analysis of the accounts receivable for the identification of the doubtful debt; by the analysis results a doubtful debts allowance is created; regular monitoring of the timing of payments. The liquidity risk is associated with the Corporation abilities in a timely manner and to the full extent to repay financial liabilities existing at the balance sheet date: accounts payable to suppliers and contractors, indebtedness under credits and loans for debt holders. To improve the solvency and liquidity indicators the Corporation is carrying out tax planning, procurement planning, implementation inventory, production equipment and spare parts unclaimed throughout the year. 3.27.4. Legal risks One of the most important components with regard to legal risks is a tax risk. The laws introducing amendments to the Tax Code of the Russian Federation in terms of changes in specific tax calculation and payment procedures are passed annually. This adds complexity to making middle-term and long-terms forecasts with respect to taxpayer activities, and complicates the tax planning as a whole. The tax regulations instability exposes the Corporation to the risk of being charged and having to pay rather high penalties and fines (despite its intention to operate in strict compliance with the legislation), as well as may lead to an increase in the aggregate tax burden. The Corporation regularly reviews the amendments being introduced to the existing tax legislation in order to reduce tax risks. A change of customs regulation rules can definitely and sufficiently impact the Corporation activity. The Corporation is a participant in foreign economic relations, part of its commitments was undertaken to be in foreign currency; therefore, the Corporation is running the risks related to exchange adjustment change. At the present time, liberalization of foreign exchange legislation is underway; the reporting period showed no significant changes in exchange rate adjustment regulations; therefore, the above risks are assessed as low. The reporting period revealed no changes in judicial practice concerning operation of the Corporation (including 155
licensing issues) which could affect its performance, as well as the results of current legal proceedings to which the Corporation is a party. Changing requirements for the Corporation core business licensing can entail certain extra expenses associated with getting a new license or extension or replacement of the license already in place; however, the Corporation forecasts the risk of arising events like that as most unlikely. OAO RSC Energia meets all license requirements in a timely manner and in full scope; no difficulties in extension of validity of the existing licenses are forecasted by the Corporation. According to the Russian Federation Government Decree No 160 Provision on Space Activity Licensing of 22.01.2012, the requirements for space activity licensing have not changed much. The above risk that the Corporation is running can be considered minimal 3.28 Events After the Reporting Date Over the period between the reporting date and the accounting statements execution date, the Corporation didn't face any events, which impacted or were likely to have a significant impact on the financial condition, cash flows or operating results President [signature] V.L. Solntsev March 30, 2016 Stamp here 156
Audit report to the shareholders of S.P. Korolev Rocket and Space Public Corporation Energia Audited entity: Full name: S.P.Korolev Rocket and Space Public Corporation Energia. Abbreviated name: RSC Energia. Primary registration number: 1025002032538 (Certificate of Entry in the Unified State Register of Legal Entities Series 50 No. 002516454 of October. 21 2002, issued by Inter-District Inspectorate No. 2 in Moscow Region). Location: 4a Lenin St., Korolev, Moscow Region, 141070, Russian Federation Audit organization: Full name: Closed Joint-Stock Company "HLB Vneshaudit". Abbreviated name: CJSC "HLB Vneshaudit". Primary registration number: 1027739314448 (Certificate of Entry in the Unified State Register of Legal Entities Series 77 No. 007858681 of October 4, 2002, issued by Inter-District Inspectorate, Ministry of Taxation of Russia No.39 in Moscow). Location: 109180, 25-27/2, Bolshya Yakimanka, Moscow (phone 8 (495) 967-04-95, fax 8 (495) 967-04- 97). Member of the self-regulatory organization of auditors of the non-commercial partnership Institute of Professional Auditors. Principal Number of Registration Entry (PNRE) in the Register of auditors and audit organizations 10202000095. We have audited the attached accounting statements of Rocket and Space Public Corporation Energia consisting of the Balance Sheet as of December 31, 2015; Profit and Loss Statement for 2015; Statement of Changes in Equity and Cash Flow Statement for 2015; Notes to the Balance Sheet and Profit and Loss Statement, for 2015. Global in Reach, Local in Touch CJSC " HLB Vneshaudit " 12, Krasnopresnenskaya emb., access 3, office 701, Moscow, 123610, Russia, Phone: (4951 967 04-95, Fax: (495) 967-04-97, e-mail: info@vneshaudit.ru, www.vneshaudit.ru TIN 7706118254 Account 40702810538040102385 in Moscow bank of Sberbank of Russia, Moscow CA 30101810400000000225 BIK 044525225 157