financial statements · 2017-09-29 · cash flow statement ... short-term loan receivable 0 0 0...

1

S.P. KOROLEV ROCKET AND SPACE CORPORATION ENERGIA

FINANCIAL

STATEMENTS OF S.P. KOROLEV ROCKET AND SPACE PUBLIC CORPORATION

ENERGIA

for 2016 and 2015

2

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

3

FINANCIAL


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.

4

Notes Item Line

Code

as of

December 31,

2016

as of

December 31,

2015

as of

December 31,

2014

ASSETS

1110 15 386 14 206 12 512

I. NON-CURRENT ASSETS

3.2; 3.3 Intangible assets

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 17 520 707 16 302 144 20 374 163

3.7; 3.8; II. CURRENT ASSETS 1210

20 045 547 19 613 503 22 507 197 3.9; 3.10 Inventory

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

Codes

Form as per OKUD

Organization Public Corporation Energia as per OKPO

Taxpayer ID Number INN

Type of Research and development

activity in the field of natural sciences and technology

Legal organizational form / Form of ownership as per

Unit of measurement: RUB thousand as per OKEI

Location (address)

as of December 31, 2016

5018033937

31 12 2016

/ Private ownership

S.P. Korolev Rocket and Space Date (day, month, year)

BALANCE SHEET

0710001

07530238

384

12247 16

72.19 OKVED

as per

as per OKOPF/ОКFSPublic Company

4A Lenin St., Korolev, Moscow Region, 643, 141070

5

Form 0710001, p.2

Notes Item Line

Code

as of

December 31,

2016

as of

December 31,

2015

as of

December 31,

2014

LIABILITIES

III. CAPITAL AND RESERVES

3, 13 Authorized capital (joint-stock capital, authorized

fund, partners’ contributions) 1310

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

7 211 214 1 996 154 1 293 588 3,14 Borrowings 1410

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

1 406 434 4 343 010 4 357 922 3,14 Borrowings 1510

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

Vinokurov Pavel

First Deputy Director General for Financial and Economic Activity: Vyacheslavovich (signature) (full name)

March 31, 2017

6

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

3,2; 3,3

Uncompleted operations for

acquisition of intangible assets 11102

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

3,5

Uncompleted capital investments

(excluding subsidiary account

08.03.3)

11504

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:

3,5

expenditures undertaken in

connection with the upcoming

works under the construction

project contract, which are

included in the cost of projects

under construction included in

subsidiary account 97.03

“Organization of construction

works”.

11901

1 117 6 848 6 301

3,5

uncompleted capital outlays for

housing projects included in

subsidiary account 08.03.3

11902

890 462 239 370 1 383 658

Advances paid out for capital

investments 11902

149 609 151 723 194 728

3,5

value-added tax for contract

works in housing projects,

included in subsidiary account

19.08

11903

147 142 39 554 246 449

7


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:

3,7

raw materials, materials and other

similar objects of value 12101

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

agreements and contracts 12601

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:

3,13

Backlogs formed according to basic

documents 13601

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 - - -

3,27

estimated liabilities on costs to be

incurred for warranty maintenance

and technical support of SS

14302

2 196 434 - -

estimated liability on investment

project 14303

- - -

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


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

8

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:

3,18

special-purpose financing of research

activities 15301

1 000 106 620 332 389


3.27 estimated liabilities on holidays 15401 705 526 570 109 566 055

3.27




15402

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

9

Codes

Form as per OKUD

S.P. Korolev Rocket and Space







for January - December 2016

Public Company

72.19 OKVED

as per

as per OKOPF/ОКFS

12 2016

/Private ownership

PROFIT AND LOSS STATEMENT

0710002

07530238

384

12247 16

Date (day, month, year)

5018033937

31

Notes Item Line

Code

for January - December

2016


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)

3,17

including constant tax liabilities

(assets) 2421

(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

10

Form 0710002, p.2

Notes Item Line

Code


2016


2015

FOR REFERENCE

Result from the non-current assets revaluation,

not included in the net profit (loss) for the

period

2510

518 220 4 081

Result from other operations, not included in

the net profit (loss) for the period 2520

- -

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 - -

Vinokurov Pavel


March 31, 2017

11

Breakdown of Profit and Loss Statement Indicators

For January – December 2016

Notes Name of indicator Line

code


2016


2015

1 2 3 4 5

Revenues (line 2110), including:

3,19

research and development activities in

the area of natural and technical

sciences

21101

31 415 921 36 774 139

3,19

services in the area of construction,

social sphere, distributive services and

catering

21102

911 358 863 617

3,19

services relating to assignment of

Corporate assets for value for temporary

use (temporary possession and use)

21103

316 387 330 251

Cost of sales (line 2120), including:



sciences

21201

( 29 613 397) ( 35 169 995)



catering

21202

( 652 958) ( 666 172)




21203

( 136 979) ( 149 120)

Gross profit (loss) (line 2100), including:



sciences

21001

1 802 524 1 604 144



catering

21002

258 400 197 445




21003

179 408 181 131

Selling expenses (line 2210), including:



sciences

22101

( 79 162) ( 266 211)



catering

22102

( 87 331) ( 79 979)

Sales profit (loss) (line 2200), including:



sciences

22001

1 723 362 1 337 933



catering

22002

171 069 117 466




22003

179 408 181 131

Other income (line 2340), including:

3,21

incomings associated with sale of

property, plant and equipment and other

assets

23401

1 541 386 6 746 821

12


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:

3,21

expenses associated with equity holding

of other organizations and sale of fixed

and other assets

23501 ( 1 527 773) ( 6 767 873)

3,21

Expenses associated with provisioning

for doubtful debts for depreciation of

financial investments, costs reduction

of tangible assets, warranty

maintenance and others

23502 ( 14 484 253) ( 4 132 091)

First Deputy Director General for Financial and Economic Activity: Vinokurov Pavel Vyacheslavovich

March 31, 2017

13

Codes

Form as per OKUD

Organization as per OKPO


Type of

activity Research and development in the field of natural sciences and technology



72.19 OKVED

16

as per OKOPF/ОКFS

as per

STATEMENT OF CHANGES IN EQUITY


0710003

07530238

384

12247


5018033937

31 12 2016

/ Private ownership

S.P. Korolev Rocket and Space Public Corporation Energia

Public Company

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 - - - - - -

14

Form 0710003, p.2

Item Line Code Authorized

capital

Shares


Retained earnings


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 - -


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





Capital decrease – total: 3320 - - - - (8 345 919) (8 345 919)

including:

Loss 3321 X X X X (8 187 761) (8 187 761)






Dividends 3327 X X X X (151 704) (151 704)



Capital value as of December 31, 2016 3300 1 123 734 - 6 685 069 168 560 (5 339 023) 2 638 340

15

Form 0710003, p.3

2. Adjustments introduced due to changes in the accounting policy and the correction of errors

Item Line

Code as of December 31, 2014

Changes in equity for 2015

as of December 31, 2015 due to net profit

(loss) due to other factors

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 - - - -

16

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

Vinokurov Pavel


March 31, 2017

17

Codes

Form as per OKUD


Organization as per OKPO






CASH FLOW STATEMENT

0710004

07530238

384

12247 16


5018033937

31


Public Corporation Energia

Public Company

72.19 OKVED

as per

as per OKOPF/ОКFS

12 2016

/ Private ownership

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

18

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)

19

Form 0710004, p.2

Item Line

Code

For January –

December, 2016

For January –

December,

2015

Cash flows from financing activities:

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

Vinokurov Pavel


March 31, 2017

20

RSC Energia

NOTES TO FINANCIAL STATEMENTS

for 2016

21

1. General Data

1.1 General Information

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

Gavrilenko

Director General, ZAO Lider

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

22

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

Vinokurov

First Deputy Director General for Financial and Economic Activity

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

Korogodina

Chief Accountant

7. Alexander Alexandrovich

Kuznetsov

Deputy Director General – Head of Chief Project Management Office

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

23

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


retreat, etc.

3

Krepost Health Resort 9 Mira Avenue, Kislovodsk

Resort Town, Stavropol Krai


retreat, etc.

4

Baikonur Baikonur-8, Kyzylorda Region,

Republic of Kazakhstan

990103001 Maintenance and operation of

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

implementation at Plesetsk Cosmodrome Support of operations at Plesetsk Cosmodrome

5

Special department 029 to develop AU structures,

components, logistics support to assemble AU and

containers for transporting SC of various applications

Activity on developing AU structures, components, logistics

support to assemble AU and SC transportation containers

6 Special department 124 to support works on Corporation

projects implementation at Vostochny cosmodrome; 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.

24

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,

25

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.

The corporation creates an estimated liability for doubtful debts on a quarterly basis

2017

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.

26

3. Disclosure of Major Indicators

3.1 Segment Information

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.).

RUB thsd.

Indicator Research,

Development and

Experimental Work

Health Resort

Treatment

Services

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

16 562 864 957 843 - - Х 17 520 707

Assets not allocated to

segments

- - - - X -

Assets – total 101 603 266 1 149 269 42 233 10 709 X 102 805 477

27

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


Segment assets 85 291 031 1 052 722 26 982 11 922 X 86 382 657

Including non-circulating

assets

15 462 045 840 099 - - Х 16 302 144


segments

- - - - X -

Assets – total 85 291 031 1 052 722 26 982 11 922 X 86 382 657



segments

- - - - X -

Liabilities - total 74 408 476 1 052 722 26 982 11 922 X 75 500 102


Segment assets 84 928 017 893 147 18 210 11 865 X 85 851 239


segments

- - - - X -

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


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.

28

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:

RUB, thsd. Geographical

Segments

Sales Revenue

(without VAT)

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:

RUB, thsd. Geographical

Segments

Sales Revenue

(without VAT)

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.

29

Intangible Assets and Research, Development and Engineering (R&D) Expenses

Intangible Assets Availability and Flow

Indicator Line

Code

Period Opening balance Changes over a period Closing balance

Acquired Disposed Depreciation

charged

Impairment

losses

Revaluation

Historical

cost 3

Accumulated

depreciation and

impairment

losses3

Historical

cost3

Accumulated

depreciation and

impairment

losses3

Historical

cost3

Accumulated

depreciation3

Historical

cost3

Accumulated

depreciation

and impairment

losses

Intangible assets –

total

5100 for 20161 16 938 ( 3 270) 3 320 ( 1 549) 320 ( 1 058) - - - 18 709 ( 4 008)

5110 for 20152 14 298 ( 2 448) 3 318 ( 678) 113 ( 935) - - - 16 938 ( 3 270)

including:

Patents, licenses,

know-how,

copyrights

5101 for 20161 16 916 ( 3 266) 3 320 ( 1 549) 320 ( 1 056) - - - 18 687 ( 4 002)

5111 for 20152 14 286 ( 2 445) 3 308 ( 678) 113 ( 934) - - - 16 916 ( 3 266)

Industrial designs

and models

5102 for 20161 22 ( 4) ( ) ( 2) - - - 22 ( 6)

5112 for 20152 12 ( 3) 10 ( ) ( 1) - - - 22 ( 4)

Software,

databases

5103 for 20161 - ( -) - ( -) - ( -) - - - - ( -)

5113 for 20152 - ( -) - ( -) - ( -) - - - - ( -)

30


Historical Cost of Internally Generated Intangible Assets

Indicator Line

Code As of December 31, 20164 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



5

Total 5130 - - -

including:


copyrights

5131 - - -

Industrial designs and models 5132 - - -

Software, databases 5133 - - -

31

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 of the Corporation. 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.

32

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

5160 for 20161 835 229 62 981 ( 0) ( 498 241) 399 969

5170 for 20152 1 213 922 474 541 ( 0) ( 853 234) 835 229

including:

R&D performed at the expense

of the Corporation

5161 for 20161 834 717 -22 686 ( 0) ( 413 062) 398 969

5171 for 20152 1 213 631 474 320 ( 0) ( 853 234) 834 717

R&D funded out of special-

purpose financing resources

5162 for 20161 512 85 667 ( -) ( 85 179) 1 000

5172 for 20152 291 221 ( -) ( ) 512

Uncompleted operations on

intangible asset acquisition –

total

5180 for 20161 538 8 176 ( 6) ( 8 022) 686

5190 for 20152 662 3 249 ( 55) ( 3 318) 538

including: inventions

5181 for 20161 538 8 176 ( 6) ( 8 022) 686

5191 for 20152 660 3 245 ( 55) ( 3 312) 538

industrial designs

5182 for 20161 ( -) ( ) 0

5192 for 20152 2 4 ( -) ( 6) 0

databases, software, licenses

5183 for 20161 - - ( -) ( -) -

5193 for 20151 - - ( -) ( -) -

33

R&D Results Availability and Flow

Indicator Line

Code Period

Opening balance Changes over a period Closing balance

Acquired

Disposed Part of cost

written-off as

expenses over a

period

Historical cost

Part of cost

written-off as

expenses

Historical cost

Part of cost

written-off as

expenses

Historical cost

Part of cost

written-off as

expenses

R&D – total 5140 for 2016

1 810 333 ( -) 498 241 ( 275 445) ( -) 1 033 129 ( -)

5150 for 20152 179 657 ( -) 853 234 ( 222 558) ( -) 810 333 ( -)

including:

Assets created as a

result of R&D

performed at the

expense of the

Corporation

5141 for 20161 704 145 ( -) 413 062 ( 237 731) ( -) 879 476 ( -)

5151 for 20152 40 410 ( -) 853 234 ( 189 499) ( -) 704 145 ( -)

Assets created as a

result of R&D funded

out of special-purpose

financing resources

5142 for 20161 106 188 ( -) 85 179 ( 37 714) ( -) 153 653 ( -)

5152 for 20152 139 247 ( -) ( 33 059) ( -) 106 188 ( -)

34

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.

35

Fixed Assets

Fixed Assets Availability and Flow

Indicator Line

Code



charged

Revaluation

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Fixed assets

(excluding income-

bearing investments

in tangible assets –

total

5200 for 20161 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 20152 15 144 699 ( 3 068 996) 1 127 820 ( 296 806) 63 514 ( 447 908) -129 228 - 15 846 485 ( 3 453 390)

including:

Buildings

5201 for 20161 4 871 535 ( 1 239 874) 371 813 ( 68 933) 16 068 ( 78 489) - - 5 174 415 ( 1 302 295)

5211 for 20152 4 751 736 ( 1 170 551) 252 595 ( 132 796) 4 753 ( 74 076) - - 4 871 535 ( 1 239 874)

Structures 5202 for 2016

1 379 225 ( 184 252) 22 809 ( 26 558) 17 885 ( 17 946) - - 375 476 ( 184 313)

5212 for 20152 366 937 ( 170 934) 30 938 ( 18 650) 2 910 ( 16 228) - - 379 225 ( 184 252)

Transfer devices 5203 for 2016

1 766 900 ( 125 900) 328 778 ( 5 886) 5 885 ( 28 877) - - 1 089 792 ( 148 892)

5213 for 20152 702 533 ( 101 597) 143 496 ( 79 129) 371 ( 24 674) - - 766 900 ( 125 900)

Machinery and Equipment

5204 for 20161 2 761 510 ( 1 563 989) 596 641 ( 100 263) 91 515 ( 356 559) - - 3 257 888 ( 1 829 033)

5214 for 20152 2 127 594 ( 1 286 904) 658 238 ( 24 322) 24 118 ( 301 203) - - 2 761 510 ( 1 563 989)

Transport facilities 5205 for 2016

1 297 180 ( 232 845) 33 542 ( 94 092) 90 552 ( 25 957) - - 236 630 ( 168 250)

5215 for 20152 305 106 ( 229 090) 24 142 ( 32 068) 21 872 ( 25 627) - - 297 180 ( 232 845)

Production and

household equipment

5206 for 20161 139 772 ( 100 829) 18 725 ( 4 343) 4 343 ( 6 824) - - 154 154 ( 103 310)

5216 for 20152 133 073 ( 104 361) 16 530 ( 9 831) 9 480 ( 5 948) - - 139 772 ( 100 829)

Perennial plantings 5207 for 2016

1 10 ( 10 ) - ( 0 ) 0 ( - ) - - 10 ( 10 )

5217 for 20152 10 ( 10 ) - ( 0 ) 0 ( - ) - - 10 ( 10 )

Land plots 5208 for 2016

1 6 624 662 ( - ) 5 402 ( 638 576) - ( - ) 99 287 - 6 090 775 ( - )

5218 for 20152 6 752 161 ( ) 1 729 ( ) - ( - ) -129 228 - 6 624 662 ( - )

Other fixed assets 5209 for 2016

1 5 691 ( 5 691) 303 ( 9 ) 9 ( 303) - - 5 985 ( 5 985)

5219 for 20152 5 549 ( 5 549) 152 ( 10 ) 10 ( 152) - - 5 691 ( 5 691)

36

Indicator Line

Code



charged

Revaluation

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Accounted as a part

of income-bearing

investments in

tangible assets –

total

5220 for 20161 329 720 ( 34 754) 0 ( 247) 152 ( 8 254) - - 329 473 ( 42 856)

5230 for 20152 331 042 ( 26 801) 266 ( 1 588) 66 ( 8 019) - - 329 720 ( 34 754)

including:

Property provided

for commercial rent

5221 for 20161 329 720 ( 34 754) ( 247) 152 ( 8 254) - - 329 473 ( 42 856)

5231 for 20152 331 042 ( 26 801) 266 ( 1 588) 66 ( 8 019) - - 329 720 ( 34 754)

Property provided

for commercial rent

5222 for 20161 - ( - ) - ( - ) - ( - ) - - - ( - )

5232 for 20152 - ( - ) - ( - ) - ( - ) - - - ( - )

37

Change in the Value of Fixed Assets as a Result of Further Construction, Further Equipping,

Reconstruction and Partial Liquidation

Indicator Line Code

For 20161 For 2015

1

Increase in the value of fixed assets as a result of

further construction, further equipping, reconstruction –

total 5260

411 034 30 660

including:

Buildings 5261 289 280 11 250

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

( 0) ( 0)

including:

Buildings 5271 ( ) ( )

Structures 5272 ( ) ( )

Transfer devices 5273 ( ) ( )

Machinery and equipment 5274 ( ) ( )

Transport facilities 5275 ( ) ( )

Production and household equipment 5276 ( ) ( )

Perennial plantings 5277 ( -) ( -)

Other fixed assets 5278 ( ) ( )

38

Other Use of Fixed Assets

Line Code As of December 31,

20164

As of December 31,

20152

As of December 31,

20145

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

accounts 5281

- - -

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

undergoing the state registration 5284

17 082 17 082 -

Mothballed fixed assets 5285 27 751 38 726 -

Other use of fixed assets (pledge, etc.) 5286 - - -

39

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.

40

Capital Investments in Progress

Indicator Line

Code Period Opening balance

Changes over a period Closing balance

Expenses over a period Written-off

Accepted for recording as fixed

assets, or cost increase

Construction in progress and

uncompleted operations on fixed asset

acquisition, modernization, etc. - total

5240 for 20161 839 667 2 375 578 ( 550 088) ( 1 367 997) 1 297 160

5250 for 20152 2 735 129 1 355 922 ( 2 223 382) ( 1 028 002) 839 667

including:

Acquisition, construction and creation

of fixed assets

5241 for 20161 71 456 1 095 725 ( 9 072) ( 939 056) 219 053

5251 for 20152 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 20152 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 20152 0 ( ) ( ) 0

etc. 5244 for 2016

1 11 655 16 023 ( 190) ( 15 226) 12 262

5254 for 20152 13 486 1 870 ( ) ( 3 701) 11 655

Housing construction 5245 for 20161 239 370 660 713 ( 9 028) ( 593) 890 462

5255 for 20152 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 20152 194 728 456 444 ( 499 449) ( ) 151 723

41

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.

Other Use of Financial Investments

Indicator Line

Code

As of December 31,

20164

As of December 31,

20152

As of December 31,

20145

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 - - -

42

Financial Investments

Financial Investments Availability and Flow

Indicator Line

Code


Historical

cost Accumulated

adjustments 7

Acquired

Disposed (repaid) Interest accrual

(including

bringing the

historical cost

to the nominal

value)

Established

reserves

Current

market value

(impairment

losses)

Historical

cost

Accumulated

adjustments 7

Historical

cost Accumulated

adjustments 7

Long-term - total 5301 for 20161 1 662 924 (893 064) 140 074 ( 1 267) 670 - (344 051) - 1 801 731 (1 236 445)

5311 for 20152 4 106 445 (787 968) 293 569 (2 737 090) 0 - (105 096) - 1 662 924 (893 064)

including:

Stocks and shares

in subsidiaries

5302 for 20161 649 086 (18 874) ( 200) 0 - (344 050) - 648 886 ( 360 924)

5312 for 20152 422 650 0 226 441 ( 5) 0 - (16 874) - 649 086 ( 16 874)

Stocks and shares

in affiliates

5303 for 20161 29 487 0 ( ) - - - 29 487 0

5313 for 20152 29 487 0 ( ) - - - 29 487 0

Other 5304 for 20161 887 224 (876 190) ( 1 067) 670 - (1) - 886 157 (875 521)

5314 for 20152 1 113 665 (787 968) 1 (226 442) - - (88 222) - 887 224 (876 190)

Loans granted 5305 for 20161 97 127 140 074 ( ) - - - - 237 201

5315 for 20152 2 540 643 - 67 127 (2 510 643) - - - - 97 127

Short-term – total 5305 for 20161 5 975 228 (2 183 991) 1 041 329 ( 5 000) - - (2 310 438) (120 371) 6 891 186 (4 494 429)

5315 for 20152 1 940 480 (946 441) 3 871 071 ( 0) - - (1 237 550) 163 677 5 975 228 (2 183 991)

including:

Debt securities (bonds,

bills)

5306 for 20161 0 - ( ) - - - 0 -

5316 for 20152 0 -

( ) - - - - 0 -

Loans granted 5307 for 20161 5 970 228 (2 183 991) 1 005 829 ( ) - - (2 310 438) (120 371) 6 855 686 (4 494 429)

5317 for 20152 1 940 480 (946 441) 3 866 071 ( ) - - (1 237 550) 163 667 5 970 228 (2 183 991)

Other 5308 for 20161 5 000 - 35 500 ( 5 000) - - - 35 500 -

5318 for 20152 - 5 000 ( ) - - - 5 000 -

Etc. - - - ( -) - - - - -

Financial

Investments - total

5300 for 20161 7 638 152 -3 077 055 1 181 403 ( 6 267) 670 - - 2 654 489 (120 371) 8 692 917 -5 730 874

5310 for 20152 6 046 925 -1 734 409 4 164 640 (2 737 090) 0 - - 1 342 646 163 677 7 638 152 -3 077 055

43

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.

44

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”.

45

Inventory

Inventory Availability and Flow

Indicator Line

Code

Period


Production

cost

Reserve for

impairment

Proceeds

and

expenses

Disposed Impairment

losses

Inventory

turnover

between

groups

(types)

Production

cost

Reserve for

impairment

Production

cost

Reserve for

impairment

Inventory - total 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 20152 23 356 468 ( 849 271) 32 792 166 ( 36 431 090) 745 230 X 19 717 544 ( 104 041)

including:

Raw materials and supplies

5401 for 20161 449 766 ( -) 1 657 723 ( 1 220 735) 0 - - 886 754 ( -)

5421 for 20152 415 587 ( -) 496 325 ( 462 146) 0 - - 449 766 ( -)

Work in progress 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 20152 22 821 696 ( 849 271) 32 273 674 ( 35 909 448) 745 230 - - 19 185 922 ( 104 041)

Prepaid expenses 5403 for 2016

1 - ( -) - ( -) - - - - ( -)

5423 for 20152 - ( -) - ( -) - - - - ( -)

Finished goods and goods

for resale

5404 for 20161 9 345 ( -) 362 144 ( 361 732) 0 - - 9 757 ( -)

5424 for 20152 7 371 ( -) 12 902 ( 10 928) 0 - - 9 345 ( -)

Other 5405 for 20161 72 511 ( -) 733 741 ( 41 500) - - - 764 752 ( -)

5425 for 20152 111 814 ( -) 9 265 ( 48 568) - - - 72 511 ( -)

etc.

46

Pledged Inventory

Indicator Line

Code

As of December 31,

20164

As of December 31,

20152

As of December 31,

20145

Inventory unpaid as of the reporting

date – total 5440 - - -

including:

Pledge agreements 5441 - - -

Inventory pledged under contract –

total 5445 0 0 0

including:

Raw materials and supplies 5446

- - -

Work in progress 5447 - - -

Finished goods and goods for

resale 5448

- - -

Other 5449 - - -

47

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.

48

Accounts Receivable Availability and Flow

Indicator Line

Code

Period


Accounted

under

contract

Reserve for

doubtful

debts

Acquired Disposed Reclassificati

on from long-

term

receivables to

short-term

receivables

Accounted

under

contract

Reserve for

doubtful

debts

Through

business

transactions

(amount of

debt under a

transaction,

operation)8

Interest,

penalties

and other

accruals

due8

Repayment Write-off to

the financial

result8

Reserve

recovery

Long-term accounts

receivable - total

5501 for 20161 5 645 416 (34 576) 10 742 454 - ( 565 381) ( -) 30 729 ( 5 025 133) 10 797 356 ( 588 641)

5521 for 20152 14 290 212 (28 944) 5 126 031 - (6 954 376) ( -) 28 944 ( 6 816 451) 5 645 416 ( 34 576)

including:

Trade receivables

5502 for 20161 153 783 ( 9 550) 332 572 - ( 119 382) ( ) 5 703 ( 229) 366 744 ( 11 304)

5522 for 20152 253 849 (28 944) 39 393 - ( 37 556) ( ) 28 944 ( 101 903) 153 783 ( 9 550)

Advances paid 5503 for 2016

1 5 401 151 ( -) 10 083 592 - (366 041) ( -) - ( 5 018 669) 10 100 033 ( 577 337)

5523 for 20152 14 021 102 ( -) 5 010 105 - (6 915 508) ( -) - ( 6 714 548) 5 401 151 ( -)

Other accounts receivable 5504 for 2016

1 90 482 (25 026) 326 290 - ( 79 958) ( -) 25 026 ( 6 235) 330 579 ( 0)

5524 for 20152 15 261 ( -) 76 533 - ( 1 312) ( -) - ( -) 90 482 ( 25 026)

Short-term accounts

receivable – total

5510 for 20161 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 20152 18 051 679 (391 880) 13 587 328 - (8 113 586) ( 209) 374 305 6 816 451 30 536 391 ( 990 765)

including:

Trade receivables

5511 for 20161 3 095 380 ( 15 460) 975 649 - (2 068 619) ( ) 2 757 229 2 002 639 ( 880 003)

5531 for 20152 1 321 355 ( 231) 2 883 157 - (1 211 035) ( ) 231 101 903 3 095 380 ( 15 460)


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 20152 15 651 635 (91 613) 9 486 114 - (6 472 645) ( 1) 74 038 6 714 548 25 379 651 (258 853)


1 2 061 360 (716 452) 1 599 325 - ( 832 588) ( 681) 6 235 2 833 651 (1 560 978)

5533 for 20152 1 078 689 (300 036) 1 218 057 - ( 235 178) ( 208) 300 036 2 061 360 (716 452)

Total 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 20152 32 341 891 (420 824) 18 713 359 - (15 067 962) ( 209) 403 249 X 36 181 807 (1 025 341)

49

Overdue Accounts Receivable

Indicator Line Code As of December 31, 20164 As of December 31, 2015


5

Accounted under

contract

Book value Accounted under

contract


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

50

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.

51

2015 RUB thsd

Changes over a period

Receipt Retirement

Indicator Unamortized

Principle

Balance at the

beginning of

year

Received for a

year

(principal)

Interest, penalties

and other accruals

due to the loaner for

a year

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)

Korolev Sberbank branch 2570,

00150013/08014201

1 000 000 0 132 970 1 000 000 132 970 0 0 0 2015


00510013/08014201

3 031 720 2 306 412 328 566 1 738 132 325 048 3 600 000 3 518 0 2015-2017


00710013/08014201

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


00150013/08014201

0 0 0


00510013/08014201

1 293 588 1 996 154 2 051


00710013/08014201

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


00150013/08014201

1 000 000 0 0


00510013/08014201

1 738 132 1 603 846 1 467


00710013/08014201

0 2 369 150 2 425

JSB "Rossiya", 00.02-2-2/01/161/15 - 364 071 0

52

2015 RUB thsd

Changes over a period

Receipt Retirement


Principle

Balance at the

beginning of

year

Received for a

year (principal)

Interest,

penalties and

other accruals

due to the loaner

for a year

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)

AO "Rossiya", Korolev branch,

04/04/001/2014*

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


04/04/001/2014*

0

0

0

Short-term credits – total 28 730 0 0


04/04/001/2014*

28 730 0 0

53

2016 Changes over a period RUB thsd

Receipt Retirement


Principle Balance

at the beginning

of year

Received for a

year (principal)

Interest,

penalties and

other accruals

due to the loaner

for a year

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)

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

54

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.

55

Accounts Payable Availability and Flow

Indicator Line

Code

Period Opening

balance

Changes over a period Closing

balance Acquired Disposed Reclassification

from long-term

payables to short-

term payables

Through business

transactions

(amount of debt

under a transaction,

operation)8

Interest, penalties

and other accruals

due8

Repayment Write-off to the

financial result8

Long-term

accounts payable -

total

5551 for 20161 21 556 450 26 529 604 - ( 751 144) ( 68) (6 284 701) 41 050 141

5571 for 20152 11 177 748 10 410 084 - ( 31 382) ( -) ( -) 21 556 450

including:

Trade payables

5552 for 20161 106 831 15 641 - ( 99 894) ( 68) ( -) 22 510

5572 for 20152 1 413 105 418 - ( -) ( -) ( -) 106 831

Other 5553 for 2016

1 - 977 266 - ( -) ( -) ( -) 977 266

5573 for 20152 - ( -) ( -) ( -)

Advances received 5554 for 2016

1 21 449 619 25 536 697 - ( 651 250) ( -) (6 284 701) 40 050 365

5574 for 20152 11 176 335 10 304 666 - ( 31 382) ( -) ( -) 21 449 619

Short-term accounts

payable - total

5560 for 20161 46 071 912 27 530 293 - (35 560 086) ( 2 942) 6 284 701 44 323 878

5580 for 20152 54 582 008 20 652 686 - (29 162 782) ( 0) - 46 071 912

including:

Trade payables

5561 for 20161 4 153 313 1 772 221 - ( 3 469 940) ( ) - 2 455 594

5581 for 20152 2 558 940 3 719 128 - ( 2 124 755) ( ) - 4 153 313


1 40 883 937 25 197 328 - (31 292 112) ( ) 6 284 701 41 073 854

5582 for 20152 51 406 295 15 925 102 - (26 447 460) ( ) - 40 883 937

Other accounts

payable

5563 for 20161 1 034 662 560 744 - ( 798 034) ( 2 942) - 794 430

5583 for 20152 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 20152 65 759 756 31 062 770 - (29 194 164) ( 0) X 67 628 362

56

Overdue Accounts Payable



5

Total 5590 513 401 1 409 117 350 633

including:

Trade payables 5591

513 401 1 409 117 350 633

Other 5592 - - -

57

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.

58

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.



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

59

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 2016 2015

Income Expenses Income Expenses

Income and expenses related to compensation

of losses of Corporation 4 992 623 36 029 - 15 981

Earnings and losses of previous years

identified in the reporting year 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

110 063 262 067 468 291 258 393

Additional Corporation staff expenses (one-

off bonuses, material aid, etc.) - 303 106 - 278 158

Expenses for works and services under

terminated or non-concluded agreements,

works performed at the expense of the

Corporation

- 18 025 - 6 517

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 - 344 051 - 893 064

Reserve for reduction in values of non-

monetary physical things - 860 605 - -

Fines, penalties, forfeits, taxes and charges

paid out of Corporation’s funds 70 338 150 180 - 195 815

Income from the recovery of the unused

reserve for doubtful debts 744 489 - 1 199 496 -

60


reserve for impairment of financial

investments

670 - 787 968 -


reserve for impairment of tangible assets 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.

61

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,

20164

As of December 31,

20152

As of December 31,

20145

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 - - -


surety agreement 5812 - 1 049 406 2 778 866

62

4.25 Government Assistance

Indicator Line code

For 20161

For 20152

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 16 1

5910 - - ( -) -

20 15 2

5920 - - ( -) -

Including: 20 16

1

(objective) 5911

- -

( -)

-

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.


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).

63

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

Roscosmos

58,82 58,82

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.

64

Companies in which the Corporation has an interest in the authorized capital

A list of companies in which RSC Energia has an overall control

Name Place of registration /

location

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

Energia

4A Lenin St. Korolev,

Moscow Region

RUB 40 000 thsd. RUB 40 000 thsd. 100 23 500

ZAO VKB RSC

Energia

26B Zemetsa St., Samara RUB 10 000 thsd. RUB 10 000 thsd. 100 –

AO IK Razvitie 4A Lenin St., Korolev,

Moscow Region

RUB 6 150 thsd. RUB 6 150 thsd. 100 -

LLC RSC

Energia –

Finance

4A Lenin St., Korolev,

Moscow Region

RUB 500 thsd. RUB 500 thsd. 100 -

AO Teplo RSC

Energia


Moscow Region

RUB 69 390,4

thsd.

RUB 69 390,4

thsd.

100 -

LLC OIME 4A Lenin St., Korolev,

Moscow Region

RUB 16 874,3

thsd.

RUB 16 874,3

thsd.

100 –

ZAO

BELROSSAT

Office 416, 15 bldg. 5, P.

Brovki St., Minsk

$25 000 $17 500 70 –

LLC Energia

SAT

1a, Grabina St., Korolev,

Moscow Region

RUB 80 000 thsd. RUB 40 800 thsd. 51 -

ZAO Energia-

Telecom


Moscow Region

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%


location

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

OAO Space

Regatta

Consortium


Moscow Region


OAO NPK

REKOD

40 / 6 bldg.1, 3rd proezd

Maryiny Roshchi, Moscow

RUB 110 867

thsd.

RUB 29 457 thsd. 26,57 -

65

List of other affiliates in which RSC Energia is a shareholder (participant) with the participatory interest in

the authorized capital exceeding 2%


location

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

Limited liability

company Energia-

Cert


Moscow Region

RUB 100 thsd RUB 19,5 thsd 19,5 -

Corporation “ILS

International Launch

Services, Inc.” (ILS

International

Services, Inc.)_

Registered office:

Wilmington, Delaware,

Name of Agent

registered at the address

of the registered office

"Si Ti Corporation"

170 shares (non-

voting share,

type В)

17 -

Open joint-stock

company Gazprom

space systems

OAO Gazprom space

systems

77B, Moscow St.,

Schelkovo, Moscow

Region

RUB 65 683,4

thsd

RUB 10 615,5

thsd

16,16 -

Sea Launch S.a.r.l.

(SEA LAUNCH

S.A.R.L.)

58, rue Charles Martel,

L-2134 Luxembourg,

Grand Duchy of

Luxembourg

19 195 790

USD

2 880 000 USD 15 -

Closed joint stock

company

Certification Center

for Rocket and Space

Technology

(ZAO IsSKT)

4 Pionerskaya St.,

Korolev, Moscow

Region

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:

RUB. thsd.

Affiliate Name Nature of Relationship Type of operations

Sales revenues

(excluding VAT) in

2015

Sales revenues

(excluding VAT) in

2016

«Energia Logistics,

LTD»

Belongs to a group of bodies

of the Corporation.

The Corporation indirectly

manages more than 50% of

shares of the said body.

Works and services in

the area of space

industry

153 073 17 140

ZAO ZEM 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.

Renting services,

security services

365 733 496 890

66


Sales revenues

(excluding VAT) in

2015

Sales revenues

(excluding VAT) in

2016

ZAO PO Cosmos Corporation has the right to


total number of votes attaching

to shares forming the

authorized capital of this ZAO

until 21.12.2016

Renting services, /

accounting record-

keeping and tax

accounting services

29 667 31 411

AO Teplo RSC Energia Corporation has the right to


total number of votes attaching

to shares forming the

authorized capital of this AO.

Renting services,

security services

39 699 5 022

SC Roscosmos Belongs to a group of bodies

of the Corporation, indirectly

manages more than 50% of

voting shares of the

Corporation.


the area of space

industry

30 547 771 22 990 623

AO V.P.Glushko NPO

Energomash


of the Corporation. 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.


the area of space

industry

214 654 320 690

AO RKTs Progress Belongs to a group of bodies

of the Corporation


the area of space

industry

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

(excluding VAT) in

2015

Sales revenues

(excluding VAT) in 2016

AO IPK Mashpribor Belongs to a group of bodies






capital of this AO.

Training services 297 8 977

AO ISS after

Academician

M.F.Reshetnev







capital of this AO.


the area of space

industry

23 459 48 022

67


Sales revenues

(excluding VAT) in

2015

Sales revenues

(excluding VAT) in 2016

AO NII Komandnykh

priborov


of the Corporation.


the area of space

industry

34 347 54 313

AO NII TP Belongs to a group of bodies

of the Corporation.


the area of space

industry

100 168 102 945

AO NIIFI Belongs to a group of bodies

of the Corporation.


the area of space

industry

16 501 20 298

AO NIIEM Belongs to a group of bodies

of the Corporation.


the area of space

industry

18 996 7 453

AO NPK SPP Belongs to a group of bodies






capital of this AO.


the area of space

industry

- 12 107

AO NPO IT Belongs to a group of bodies

of the Corporation.


the area of space

industry

78 299 50 074

AO NPP Geophysica-

Kosmos


of the Corporation.


the area of space

industry

11 380 2 860

AO NPP Kvant Belongs to a group of bodies

of the Corporation.


the area of space

industry

2 515 2 459

AO NPTs Polyus Belongs to a group of bodies

of the Corporation.


the area of space

industry

1 276 28 746

AO RKTs Progress Belongs to a group of bodies

of the Corporation.


the area of space

industry

79 697 588 890

ZAO ZEM RSC

Energia




attaching to shares forming

the authorized capital of this

ZAO.


the area of space

industry

13 067 179 10 223 313

68


Sales revenues

(excluding VAT) in

2015

Sales revenues

(excluding VAT) in

2016

AO Teplo RSC Energia Corporation has the right to



attaching to shares forming the

authorized capital of this

ZAO.

Purchasing fixed assets 210 335 601 637

ZAO VKB RSC

Energia






ZAO.

Purchasing fixed assets 25 412 79 937

ZAO PO Kosmos Corporation has the right to




authorized capital of this ZAO

until 21.12.2016

Air transportation of

passengers, cargo and

mail.

155 183 85 789

ZAO Energia-Telecom Corporation has the right to





ZAO.


the area of space

industry

874 600 695 523

LLC OIME Corporation has the right to





ZAO.

Other expenses 4 973 31 500

OAO URSC The body has the right to

dispose more than 50% of

voting shares of the

Corporation.


the area of space

industry

11 470 4 144

Total 14 716 087 12 648 987

69

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

of the Corporation.

ZAO RTTs Energia-RiТМ

2. Bondarenko Nina Alexandrovna Belongs to a group of persons

of the Corporation.

ZAO S.P.Korolev Rocket & Space Corporation

Volzhskoe design bureau

3. Mukanin Andrei Alexandrovich Belongs to a group of persons

of the Corporation.

ZAO S.P.Korolev Rocket & Space Corporation

Volzhskoe design bureau

4. Grigoriev Anatoliy Petrovich Belongs to a group of persons

of the Corporation.

AO Investment company Rasvitiye

5. Gerasimenko Oleg

Alexandrovich

Belongs to a group of persons

of the Corporation.

Energia-Overseas Ltd.

6. Kakhno Dmitry Alexandrovich Belongs to a group of persons

of the Corporation.

Energia Logistics Ltd.

7. Karman Brett Allen Belongs to a group of persons

of the Corporation.

Energia Logistics Ltd.

70


8. Gugkaev Sergei Vladimirovich Belongs to a group of persons

of the Corporation.

Sea Launch SA

9. Golovenko Sergei Petrovich Belongs to a group of persons

of the Corporation.

OOO RSC Energia-Finance

10. Abramov Alexei Viktorovich Belongs to a group of persons

of the Corporation.

AO Teplo RSC Energia

11. Evstratov Sergei Vladimirovich Belongs to a group of persons

of the Corporation.

Limited liability company Orthopedic industry

Moscow Energia

12. Vursol Anatoliy Vasilievich Belongs to a group of persons

of the Corporation.

ZAO BELROSSTAT

13. Terekhov Vladimir

Vladislavovich


of the Corporation.

Limited liability company Energia Satellite

Technologies

14. Limited liability company

Telecom-proekt-5


of the Corporation.

RSC Energia

15. Shestakov Andrei Vasilievich Belongs to a group of persons

of the Corporation.

OOO Telecom-proekt-5

16. Botvinko Alla Alexeevna Belongs to a group of persons

of the Corporation.

OAO Consortium Space Regatta

17. Besborodov Vyacheslav

Georgievich


of the Corporation.

OAO Scientific and Production Corporation

RECOD

18. Closed joint stock company

Production Association Cosmos

S.P.Korolev Rocket & Space

Corporation Energia

Belongs to a group of entities

of the Corporation.

State Space Corporation Roscosmos

19. Testoedov Nikolay Alexeevich Belongs to a group of persons

of the Corporation.

AO Information Satellite Systems after

Academician M.F. Reshetnev

20. Open joint stock company NPO

PM – Rasvitiye


of the Corporation.



21. Korablev Alexander Vasilievich Belongs to a group of persons

of the Corporation.

OAO NPO PM – Rasvitiye

22. Open joint stock company NPO

PM Small Design Bureau


of the Corporation.



23. Artyushenko Alexander

Grigorievich


of the Corporation.

OAO NPO PM Small Design Bureau

24. Open joint stock company Test

Technical Center NPO PM


of the Corporation.



25. Orlov Viktor Ivanovich Belongs to a group of persons

of the Corporation.

OAO Test Technical Center NPO PM

26. Open joint stock company

Siberia Design Institute for

Machine Builders


of the Corporation.



71


27. Makarov Alexander

Gennadievich


of the Corporation.

OAO Siberia Design Institute for Machine

Builders

28. Joint stock company Scientific

Production Enterprise

Geophysics – Space


of the Corporation.



29. Egupov Anatoliy Nikolaevich Belongs to a group of persons

of the Corporation.

AO Scientific Production Enterprise Geophysics

– Space


Production Center Polyus


of the Corporation.



31. Rusanovskiy Sergei

Alexandrovich


of the Corporation.

AO Scientific Production Center Polyus


Production Enterprise Kvant


of the Corporation.



33. Nekrasov Anatoliy

Valentinovich


of the Corporation.

AO Scientific Production Enterprise Kvant

34. Joint stock company Siberia

devices and systems


of the Corporation.



35. Eremeev Gennady Karpovich Belongs to a group of persons

of the Corporation.

AO Siberia devices and systems


Scientific Production Enterprise

Medikon


of the Corporation.



37. Bodunov Sergey Bogdanovich Belongs to a group of persons

of the Corporation.

ZAO Scientific Production Enterprise Medikon


Exploratory Research Center AO

ISS


of the Corporation.



39. Gets Evgeny Alexandrovich Belongs to a group of persons

of the Corporation.

OOO Exploratory Research Center AO ISS


UNIVERSUM SPACE

TECHNOLOGIES


of the Corporation.



41. Stepanov Dmitriy Vladimirovich Belongs to a group of persons

of the Corporation.

Limited liability company UNIVERSUM

SPACE TECHNOLOGIES

42. Joint stock company Satellite

system Gonets


of the Corporation.



43. Bakanov Dmitry Vladimirovich Belongs to a group of persons

of the Corporation.

AO Satellite System Gonets

44. Joint stock company

TRIINVEST


of the Corporation.



72


45. Zavaruev Vladimir Andreevich Belongs to a group of persons

of the Corporation.

AO TRIINVEST

46. Makridenko Leonid Alexeevich Belongs to a group of persons

of the Corporation.

AO Scientific and Production Corporation

A.G.Iosifyan Space Monitoring, Information-

Control Systems, and Electromechanical

Complexes

48. Joint stock company Production

– Design Enterprise IRIS


of the Corporation.




Complexes

49. Puntus Andrei Petrovich Belongs to a group of persons

of the Corporation.

AO Production – Design Enterprise IRIS

50. Joint stock company Research

Institute of Electromechanics


of the Corporation.




Complexes

51. Тarabanov Alexei Anatolievich Belongs to a group of persons

of the Corporation.

AO Research Institute of Electromechanics


Novator


of the Corporation.




Complexes

53. Kuprin Valery Viktorovich Belongs to a group of persons

of the Corporation.

ZAO Novator

54. Joint stock company Moscow

plant of electromechanical

equipment


of the Corporation.




Complexes

55. Butrov Vladimir Andreevich Belongs to a group of persons

of the Corporation.

AO Moscow plant of electromechanical

equipment


International Space technologies


of the Corporation.




Complexes

57. Danelyan Andrei Vladikovich Belongs to a group of persons

of the Corporation.

ZAO International Space technologies

73



Scientific and Production

Association Novator


of the Corporation.




Complexes

59. Afonin Viktor Ivanovich Belongs to a group of persons

of the Corporation.

ZAO Scientific and Production Association

Novator

60. Degtyar Vladimir Grigorievich Belongs to a group of persons

of the Corporation.

AO State Rocket Center after Academician

V.P.Makeev

61. Kolmykov Vladimir

Afanasievich


of the Corporation.

AO Krasnoyarsk machine-building plant

62. Yurchikov Andrei Igorevich Belongs to a group of persons

of the Corporation.

AO Miass machine-building plant

63. Joint stock company Zlatoust

machine-building plant


of the Corporation.

AO State Rocket Center after Academician

V.P.Makeev

64. Lobanov Anton Viktorovich Belongs to a group of persons

of the Corporation.

AO Zlatoust machine-building plant


Institute Hermes


of the Corporation.

AO Academician V.P.Makeev State Rocket

Center

66. Golubev Vyacheslav Sergeevich Belongs to a group of persons

of the Corporation.

AO Research Institute Hermes

67. Arbuzov Igor Alexandrovich Belongs to a group of persons

of the Corporation.

AO NPO Energomach after Academician

V.P.Glushko 68. Limited liability company

Energomach – Electric

Communication


of the Corporation.


V.P.Glushko

69. Konstantinov Boris Dmitrievich Belongs to a group of persons

of the Corporation.

OOO Energomach – Electric Communication


Energomach – Finance


of the Corporation.


V.P.Glushko

71. Chopik Marina Stepanovna Belongs to a group of persons

of the Corporation.

OOO Energomach – Finance


Sotsbytservice


of the Corporation.


V.P.Glushko

73. Basmanov Vladomir

Anatolievich


of the Corporation.

OOO Sotsbytservice


Agropolis


of the Corporation.


V.P.Glushko

75. Pilipenko Alexei Yakovlevich Belongs to a group of persons

of the Corporation.

OOO Agropolis


Voktoriya


of the Corporation.


V.P.Glushko 77. Limited liability company

Konvem


of the Corporation.


V.P.Glushko

74


78. Limited liability company Med -

EM


of the Corporation.


V.P.Glushko

79. Bairachenko Valeriya

Anatolievna


of the Corporation.

OOO Med - EM


Research Company AKAr


of the Corporation.


V.P.Glushko 81. Corporation International Space

Engines, Inc.


of the Corporation.


V.P.Glushko 82. Chvanov Dmitry Vladimirovich Belongs to a group of persons

of the Corporation.

Corporation International Space Engines, Inc.


Innovation Activity Center OAO

NPO Energomach


of the Corporation.


V.P.Glushko

84. Bibko Viktor Vasilievich Belongs to a group of persons

of the Corporation.

OOO Innovation Activity Center OAO NPO

Energomach

85. Joint stock company Rocket

Space Center Progress


of the Corporation.

URSC

86. Kirilin Alexander Nikolaevich Belongs to a group of persons

of the Corporation.

AO Rocket Space Center Progress


Samara Research Center of

Space Technologies


of the Corporation.


88. Limited liability company Center

of Nanosatellites Launch

Services


of the Corporation.


89. Belokonov Igor Vitalievich Belongs to a group of persons

of the Corporation.

OOO Center of Nanosatellites Launch Services


Makopse health resort


of the Corporation.


91. Takhmaziyan Ashot Siropovich Belongs to a group of persons

of the Corporation.

ZAO Makopse health resort


Institute for Control Devices


of the Corporation.

Joint stock company Rocket Space Center

Progress

93. Mkrtychan Alexander

Rachikovich


of the Corporation.

AO Research Institute for Control Devices

94. Joint stock company

Academician A.Semikhatov

Research and Production

Association of Automatics


of the Corporation.


95. Misyura Andrei Vasilievich Belongs to a group of persons

of the Corporation.

AO Research and Production Association of

Automatics after Academician A.Semikhatov

75


96. Tyulin Andrei Evgenievich Belongs to a group of persons

of the Corporation.

AO Russian Corporation of Rocket and Space

Instrument Engineering and Information Systems


Institute of Physical

Measurements


of the Corporation.



98. Dmitrienko Alexey

Gennadievich


of the Corporation.

AO Research Institute of Physical Measurements


NIIFI & VT


of the Corporation.



100. Lapshin Vladimir Ilich Belongs to a group of persons

of the Corporation.

ZAO NIIFI & VT

101. Joint stock company Specialist

design department of Moscow

Power Engineering Institute


of the Corporation.



102. Chebotarev Alexander

Semenovich


of the Corporation.

AO Specialist design department of Moscow

Power Engineering Institute


and Production Organization

Orion


of the Corporation.



104. Filippov Igor Alexandrovich Belongs to a group of persons

of the Corporation.

AO Research and Production Organization Orion


and Production Association of

Measurement Equipment


of the Corporation.



106. Artemiev Vladimir Yurievich Belongs to a group of persons

of the Corporation.

AO Research and Production Association of

Measurement Equipment


Sinertek


of the Corporation.




Institute of Precision Instruments


of the Corporation.



109. Shishanov Anatoliy Vasilievich Belongs to a group of persons

of the Corporation.

AO Research Institute of Precision Instruments

110. Limited liability company OKB

– Telecom


of the Corporation.



111. Shatrov Vladimir Borisovich Belongs to a group of persons

of the Corporation.

PC Research and Production Association Iskra


Iskra-R


of the Corporation.

PC Research and Production Association Iskra

113. Volchok Mark Efimovich Belongs to a group of persons

of the Corporation.

ZAO Iskra-R

76



Rosprodmach


of the Corporation.

AO Corporation Compomach


МZEM


of the Corporation.

ZAO Rosprodmach

116. Sazonov Valeriy Stanislavovich Belongs to a group of persons

of the Corporation.

OAO МZEM


Mozhaisk Medical

Instrumentation Plant


of the Corporation.

AO Corporation Compomash

118. Fotiev Nikolay Vitalievich Belongs to a group of persons

of the Corporation.

OAO Mozhaisk Medical Instrumentation Plant

119. Roi Yury Arsentievich Belongs to a group of persons

of the Corporation.

AO Research and Production Corporation

Precision Instrument Making Systems


Engineering Center of

Electrotechnical University


of the Corporation.


Precision Instrument-Making Systems

121. Ekalo Yury Vladimirovich Belongs to a group of persons

of the Corporation.

AO Research Engineering Center of

Electrotechnical University

122. Joint stock company The 106th

Experimental Optical

Mechanical Plant


of the Corporation.


Precision Instrument Making Systems

123. Kozodaev Nikolay

Alexandrovich


of the Corporation.

AO The 106th

Experimental Optical Mechanical

Plant


Crioservice


of the Corporation.

AO Design Department for Chemical

Automatics.

125. Bashkarev Vladimir

Alexandrovich


of the Corporation.

OOO Cryoservice

126. Limited liability company Proton

– Finance


of the Corporation.

PC Proton – Perm Motors

127. Tselischev Mikhail Grigorievich Belongs to a group of persons

of the Corporation.

OOO Proton – Finance


Cosmos - P


of the Corporation.


129. Parmenov Viktor

Konstantinovich


of the Corporation.

OOO Cosmos - P


Laboratory of Effective Power

Engineering Solutions


of the Corporation.


131. Kleschevnikov Alexei

Mikhailovich


of the Corporation.

OOO Laboratory of Effective Power

Engineering Solutions

132. Joint stock company Technical

Center Novator


of the Corporation.


133. Kosarev Alexander Nikolaevich Belongs to a group of persons

of the Corporation.

AO Technical Center Novator

134. Limited liability company МV-

Master


of the Corporation.


77


135. Ganeles Mikhail Lvovich Belongs to a group of persons

of the Corporation.

OOO МV- Master


Kosmos-stroy


of the Corporation.


137. Vronsky Sergey Vladimirovich Belongs to a group of persons

of the Corporation.

OOO Kosmos – Stroy

138. Afonin Andrei Yurievich Belongs to a group of persons

of the Corporation.

AO Institute of Staff Training for Machine-

Building and Instrument Making

139. Joint stock company ECHO Belongs to a group of entities

of the Corporation.

140. Mironenko Yury Dmitrievich Belongs to a group of persons

of the Corporation.

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,

2016 Recovery of reserve

Accumulation of

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:

RUB thsd.

Indicator 2016 2015

Short-term remuneration (labor compensation, taxes accrued thereon and

other mandatory payments) 676 624,2 672 221,1

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

78

(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:

Estimated liabilities on claims 5701 - ( -) ( -) -

Estimated liabilities on onerous

contracts 5702 - - ( -) ( -) -

Estimated liabilities on

reorganization 5703 - - ( -) ( -) -

Estimated liabilities on warranties

of goods sold quality 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

5706 1 027 5 195 642 ( 454 586) ( -) 4 742 083

Estimated liabilities on capital

investment project 5707 190 563 ( 190 563) ( -) -

Estimated liabilities on other

payments 5708 - ( -) ( -) -

79

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.

80

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.





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.





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).

81

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.





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)


Matter in contest is a claim for recovery of forfeit penalty amounted to RUB

12 903 150,00.


The preliminary court session is scheduled for 06.03.2017.

9. Court proceedings on penalty of money indebtedness under the contract.


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 preliminary hearing is scheduled for 08.02.2017.

10. Court proceedings on recovery of principal debt, forfeit penalties and statutory interests under the

law.


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

82

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.


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.


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.


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 of the Corporation.

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,

83

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 of the Corporation.

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:

84

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

85

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

86

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.

In the period from 2013 to 2015, borrowing funds within the credit lines were effected at below-market

rates.

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

87

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);

88

- 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;

89

- 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 of the Corporation.

Vinokurov Pavel

First Deputy Director General for Financial and Economic Activity: Vyacheslavovich

(signature) (full name)

March 31, 2017

90

AUDIT REPORT

On financial statements of S.P. Korolev Rocket and

Space Public Corporation Energia summarizing the

results of activity for 2016

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

Tel: +7 495 797 56 65

Fax: +7 495 797 56 60

[email protected]

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.

mailto:[email protected]

http://www.bdo.ru/

92

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 V.Yu. Pogulayev

April 21, 2017

Stamp here

93

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.

94

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

95

FINANCIAL


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.

96

as of December 31, 2015

Codes

Form as per OKUD








Location (address) 4A Lenin St., Korolev, Moscow Region, 141070


5018033937

31 12 2015

/ Mixed Russian ownership with patial

federal ownership

BALANCE SHEET

0710001

07530238

384

12247 49

73.10 OKVED

as per

as per OKOPF/ОКFS

Notes Item Line

Code

as of

December 31,

2015

as of

December 31,

2014

as of

December 31,

2013

ASSETS

1110 14 206 12 512 11 082

I. NON-CURRENT ASSETS

Intangible assets

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 16 111 279 20 179 435 14 832 442

II. CURRENT ASSETS 1210

19 403 737 22 507 197 17 521 769 Inventory

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

97

Form 0710001, p.2

Notes Item Line

Code

as of

December 31,

2015

as of

December 31,

2014

as of

December 31,

2013

LIABILITIES

III. CAPITAL AND RESERVES

Authorized capital (joint-stock capital, authorized

fund, partners’ contributions) 1310

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

1 996 154 2 293 588 3 031 720 Borrowings 1410

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

4 343 010 4 357 922 100 271 Borrowings 1510

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

98

Breakdown of Separate Balance Sheet Indicators



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

3.5

Capital investments in progress

(excluding subsidiary account

08.03.3)

11504

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

3.6

stocks and shares of other

companies 11703 11034 325697 99256

3.6 long-term loans granted 11704 97127 2540643

Other non-current assets (line 1190), including:

3.4

expenditures undertaken in

connection with the upcoming

works under the construction

project contract, which are

included in the cost of projects

under construction included in

subsidiary account 97.03

“Organization of construction

works”.

11901

6848 6301 175409

3.4

uncompleted capital outlays for

housing projects included in

subsidiary account 08.03.3

11902

239370 1383658 1515159

3.4

value-added tax for contract

works in housing projects,

included in subsidiary account

19.08

11903

39554 246449 298557

99


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:

3.7

raw materials, materials and other

similar objects of value 12101

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

agreements and contracts 12601

161205 176564 8362

VAT on advances received 12602 9153 4465 9646

Reserve capital / Fund of capital asset and special movable valuables (line 1360), including:

3.12

Backlogs formed according to basic

documents 13601

168560 168560 168560


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


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

100


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

activities 15301

106620 332389 399157


3.25 estimated liabilities on holidays 15401 570109 566055 414815

3.25




15402

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


Lvovich

March 30, 2016

101


Codes

Form as per OKUD








73.10 OKVED

as per

as per OKOPF/ОКFS


0710002

07530238

384

12247 49


5018033937

31 12 2015

/ Other Mixed Russian ownership

Notes Item Line

Code


2015


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)

102

Form 0710002, p.2

Notes Item Line

Code


2015


2014

FOR REFERENCE

Result from the non-current assets revaluation,

not included in the net profit (loss) for the

period

2510

4 081 3 537

Result from other operations, not included in

the net profit (loss) for the period 2520

- -

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


March 30, 2015

103

Breakdown of Profit and Loss Statement Indicators

For January – December 2015


code


2015


2014

1 2 3 4 5

Revenues (line 2110), including:

3.18



sciences

21101

36774139 23744363

3.18



catering

21102

863617 760968

3.18




21103

330251 297041

Cost of sales (line 2120), including:



sciences

21201

(35169995) (22750022)



catering

21202

(666172) (660860)




21203

(149120) (134587)

Gross profit (loss) (line 2100), including:



sciences

21001

1614144 994341



catering

21002

197445 100108




21003

181131 162454

Selling expenses (line 2210), including:


the area of natural and technical,

services in the social sphere,

distributive services and catering

22101

(346190) (250600)

Sales profit (loss) (line 2200), including:



sciences

22001

1347933 829449



catering

22002

117466 14400




22003

181131 162454

Other income (line 2340), including:

3.18, 3.20

incomings associated with sale of

property, plant and equipment and other

assets

23401

6746821 5054005

23402

104


code


2015


2014

1 2 3 4 5

Other expenses (line 2350), including:

3.18, 3.20

expenses associated with equity holding

of other organizations and sale of fixed

and other assets

23501

(6767873) (5041963)


Lvovich

March 30, 2016

105

Codes

Form as per OKUD

Organization S.P. Korolev Rocket and Space Public Corporation Energia as per OKPO


Type of

activity Research and development in the field of natural sciences and technology



на 31 декабря на 31 декабря на 31 декабря

2012 г. 2011 г. 2010 г.Пояснения Наименование показателя Код

73.10 OKVED

49 as per OKOPF/ОКFS

as per

0710003

07530238

384

12247


5018033937

31 12 2015


2. Changes in Equity

Item Line Code Authorized capital Shares


Retained earnings


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





106

Form 0710003, p.2

Item Line Code Authorized

capital

Shares


Retained earnings


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)




Dividends 3227 X X X X - -




For 2015

Capital increase - total: 3310 - - - - 593 885 593 885

including:

Net profit 3311 X X X X 590 324 590 324






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 - -





Dividends 3327 X X X X (106 755) (106 755)




107

Form 0710003, p.3

2. Adjustments introduced due to changes in the accounting policy and the correction of errors

Item Line

Code as of December 31, 2013

Changes in equity for 2014

as of December 31, 2014 due to net profit

(loss) due to other factors

Capital – total


Adjustments due to:




including:

Retained earnings (uncovered loss):


Adjustments due to:




As per other capital items


Adjustments due to: - - - -




108

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



March 30, 2015

109


Codes

Form as per OKUD








73.10 OKVED

as per

as per OKOPF/ОКFS

CASH FLOW STATEMENT

0710004

07530238

384

12247 49


5018033937

31 12 2015


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

110

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)

111

Form 0710004, p.2

Item Line

Code

For January –

December, 2015

For January –

December, 2014

Cash flows from financing activities:

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



March 30, 2015

112

OAO RSC Energia

NOTES TO THE BALANCE SHEET AND


for 2015

113

3. General Data

3.1 General Information

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

Gavrilenko

General Director, ZAO Lider

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

114

Single-member executive body

RSC Energia single-member executive body is the President who carries out management of the Corporation day-to-

day 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

Vinokurov

Vice-President for Financial-Economic Activity

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

Korogodina

Chief Accountant

7. Mikhail Yurievich Merkulov Vice-President for Security

8. Eugeny Anatolievich Mikrin General Designer

9. Vladimir Yefimovich

Osmolovsky

Senior Vice-President for Economics and Corporate Governance

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).

115

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


retreat, etc.

2

Vostok Holiday Hotel with

Health Resort Functions

Novomikhailovsky-2, Tuapse

District, Krasnodar Krai


retreat, etc.

3

Krepost Health Resort 9 Mira Avenue, Kislovodsk

Resort Town, Stavropol Krai


retreat, etc.

4

Baikonur Baikonur-8, Kyzylorda Region,

Republic of Kazakhstan

990103001 Maintenance and operation of

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 Support of operations at Plesetsk Cosmodrome

5 029 structural unit of OAO RSC Energia in Samara 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)

116

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.

4. Disclosure of Major Indicators

3.5 Segment Information

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.).

RUB thsd.

Indicator Research,

Development and

Experimental

Work

Health Resort

Treatment

Services

Trade

Services

Social Services Other

Services

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

117

Interest receivable 866 962 7 275 - - X 874 237

Interest payable 500 237 - - - X 500 237

Income from

participation in other

entities

24 753 - - - X 24 753

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


segments

- - - - X -

Assets – total 85 146 121 1 052 722 26 982 11 922 X 86 237 747


Liabilities not allocated

to segments

- - - - X -


As of December 31,

2014

Segment assets 84 928 017 893 147 18 210 11 865 X 85 851 239


segments

- - - - X -

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


to segments

- - - - X -


As of December 31,

2013

Segment assets 66 923 179 1 322 816 35 213 8 230 X 68 289 438


segments

- - - - X -

Assets – total 66 923 179 1 322 816 35 213 8 230 X 68 289 438



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

118

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:

RUB, thsd.

Geographical

Segments Sales Revenue

(without VAT) 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.

119


Intangible Assets Availability and Flow

Indicator Line

Code



charged

Impairment

losses

Revaluation

Historical

cost 3

Accumulated

depreciation and

impairment

losses3

Historical

cost3

Accumulated

depreciation and

impairment

losses3

Historical

cost3

Accumulated

depreciation3

Historical

cost3

Accumulated

depreciation

and impairment

losses

Intangible assets –

total

5100 for 20151 14 298 ( 2 448) 3 318 ( 678) 113 ( 935) - - - 16 938 ( 3 270)

5110 for 20142 11 966 ( 1 758) 3 039 ( 707) 112 ( 802) - - - 14 298 ( 2 448)

including:

Patents, licenses,

know-how,

copyrights

5101 for 20151 14 286 ( 2 445) 3 308 ( 678) 113 ( 934) - - - 16 916 ( 3 266)

5111 for 20142 11 950 ( 1754) 3 039 ( 703) 110 ( 801) - - - 14 286 ( 2 445)

Industrial designs

and models

5102 for 20151 12 ( 3) 10 ( ) - ( 1) - - - 22 ( 4)

5112 for 20142 16 ( 4) - ( 4) 2 ( 1) - - - 12 ( 3)

Software,

databases

5103 for 20151 - ( -) - ( -) - ( -) - - - - ( -)

5113 for 20142 - ( -) - ( -) - ( -) - - - - ( -)

120


Historical Cost of Internally Generated Intangible Assets

Indicator Line



5

Total 5120 16 938 14 298 11 966

including:


copyrights

5121 16 916 14 286 11 950

Industrial designs and models 5122 22 12 16


Fully Repaid Intangible Assets

Indicator Line



5

Total 5130 - - -

including:


copyrights

5131 - - -

Industrial designs and models 5132 - - -


121

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 of the Corporation. 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.

122

R&D Results Availability and Flow

Indicator Line

Code Period


Acquired

Disposed Part of cost

written-off as

expenses over a

period

Historical cost

Part of cost

written-off as

expenses

Historical cost

Part of cost

written-off as

expenses

Historical cost

Part of cost

written-off as

expenses

R&D – total 5140 for 2015

1 179 657 ( -) 853 234 ( 222 558) - ( -) 810 333 ( -)

5150 for 20142 181 755 ( -) 180 273 ( 182 371) - ( -) 179 657 ( -)

including:

Assets created as a

result of R&D

performed at the

expense of the

Corporation

5141 for 20151 40 410 ( -) 853 234 ( 189 499) - ( -) 704 145 ( -)

5151 for 20142 111 812 ( -) 19 734 ( 91 136) - ( -) 40 410 ( -)

Assets created as a

result of R&D funded

out of special-purpose

financing resources

5142 for 20151 139 247 ( -) - ( 33 059) - ( -) 106 188 ( -)

5152 for 20142 69 943 ( -) 160 539 ( 91 235) - ( -) 139 247 ( -)

123

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

5160 for 20151 1 213 922 474 541 ( -) ( 853 234) 835 229

5170 for 20142 743 258 650 937 ( -) ( 180 273) 1 213 922

including:

R&D performed at the expense

of the Corporation

5161 for 20151 1 213 631 474 320 ( -) ( 853 234) 834 717

5171 for 20142 445 258 788 107 ( -) ( 19 734) 1 213 631

R&D funded out of special-

purpose financing resources

5162 for 20151 291 221 ( -) ( -) 512

5172 for 20142 298 000 -137 170 ( -) ( 160 539) 291

Uncompleted operations on

intangible asset acquisition –

total

5180 for 20151 662 3 249 ( 55) ( 3 318) 538

5190 for 20142 874 2 827 ( -) ( 3 039) 662

including: inventions

5181 for 20151 660 3 245 ( 55) ( 3 312) 538

5191 for 20142 872 2 827 ( -) ( 3 039) 660

industrial designs

5182 for 20151 2 4 ( -) ( 6) -

5192 for 20142 2 - ( -) ( -) 2

databases, software, licenses

5183 for 20151 - - ( -) ( -) -

5193 for 20142 - - ( -) ( -) -

124

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”.

125

Fixed Assets


Indicator Line

Code



charged

Revaluation

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Fixed assets

(excluding income-

bearing investments

in tangible assets –

total

5200 for 20151 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 20142 12 185 660 ( 2 717 452) 1 926 126 ( 254 861) 44 848 ( 396 392) 1 287 774 - 15 144 699 ( 3 068 996)

including:

Buildings

5201 for 20151 4 751 736 ( 1 170 551) 252 595 ( 132 796) 4 753 ( 74 076) - - 4 871 535 ( 1 239 874)

5211 for 20142 3 424 643 ( 1 109 468) 1 344 345 ( 17 252) 3 965 ( 65 048) - - 4 751 736 ( 1 170 551)

Structures 5202 for 2015

1 366 937 ( 170 934) 30 938 ( 184506) 2 910 ( 16 228) - - 379 225 ( 184 252)

5212 for 20142 318 889 ( 159 693) 66 794 ( 18 746) 9 556 ( 14 797) - - 366 937 ( 170 934)

Transfer devices 5203 for 2015

1 702 533 ( 101 597) 143 496 ( 79 129) 371 ( 24 674) - - 766 900 ( 125 900)

5213 for 20142 797 967 ( 79 308) 79 174 ( 174 608) 1 839 ( 24 128) - - 702 533 ( 101 597)

Machinery and Equipment

5204 for 20151 2 127 594 ( 1 286 904) 658 238 ( 24 322) 24 118 ( 301 203) - - 2 761 510 ( 1 563 989)

5214 for 20142 1 752 832 ( 1 061 647) 411 377 ( 36 615) 28 561 ( 253 818) - - 2 127 594 ( 1 286 904)

Transport facilities 5205 for 2015

1 305 106 ( 229 090) 24 142 ( 32 068) 21 872 ( 25 627) - - 297 180 ( 232 845)

5215 for 20142 297 011 ( 197 984) 9 763 ( 1 668) 1 668 ( 32 774) - - 305 106 ( 229 090)

Production and

household equipment

5206 for 20151 133 073 ( 104 361) 16 530 ( 9 831) 9 480 ( 5 948) - - 139 773 ( 100 829)

5216 for 20142 123 891 ( 103 967) 14 491 ( 5 309) 5 251 ( 5 645) - - 133 073 ( 104 361)

Perennial plantings 5207 for 2015

1 10 ( 10) - ( -) - ( -) - - 10 ( 10)

5217 for 20142 10 ( 10) - ( -) - ( -) - - 10 ( 10)

Land plots 5208 for 2015

1 6 752 161 ( -) 1 729 ( -) - ( -) -129 228 - 6 624 662 ( -)

5218 for 20142 5 465 042 ( -) - ( 655) - ( -) 1 287 774 - 6 752 161 ( -)

Other fixed assets 5209 for 2015

1 5 549 ( 5 549) 152 ( 10) 10 ( 152) - - 5 691 ( 5 691)

5219 for 20142 5 375 ( 5 375) 182 ( 8) 8 ( 182) - - 5 549 ( 5 549)

126

Fixed Assets


Indicator Line

Code



charged

Revaluation

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Historical

cost3

Accumulated

depreciation6

Accounted as a part

of income-bearing

investments in

tangible assets –

total

5220 for 20151 331 042 ( 26 801) 266 ( 1 588) 66 ( 8 019) - - 329 720 ( 34 754)

5230 for 20142 334 571 ( 19 140) - ( 3 529) 287 ( 7 948) - - 331 042 ( 26 801)

including:

Property provided for

commercial rent

5221 for 20151 331 042 ( 26 801) 266 ( 1 588) 66 ( 8 019) - - 329 720 ( 34 754)

5231 for 20142 334 571 ( 19 140) - ( 3 529) 287 ( 7 948) - - 331 042 ( 26 801)

Property provided for

commercial rent

5222 for 20151 - ( -) - ( -) - ( -) - - - ( -)

5232 for 20142 - ( -) - ( -) - ( -) - - - ( -)

127

Change in the Value of Fixed Assets as a Result of Further Construction, Further Equipping,

Reconstruction and Partial Liquidation

Indicator Line Code

For 20151 For 2014

2

Increase in the value of fixed assets as a result of

further construction, further equipping, reconstruction –

total

5260 30 6608 851 228

including:

Buildings 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

5270 ( -) ( 6 459)

including:

Buildings 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)

128

Other Use of Fixed Assets



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

accounts 5281

- - -

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

undergoing the state registration 5284

17 082 - -

Mothballed fixed assets 5285 38 726 - -

Other use of fixed assets (pledge, etc.) 5286 - - -

129

4.5 Construction in Progress

Balance Sheet line 1150 "Other non-current assets" demonstrates:

Capital Investments in Progress

Indicator Line

Code Period Opening balance

Changes over a period Closing balance

Expenses over a period Written-off

Accepted for recording as fixed

assets, or cost increase

Construction in progress and

uncompleted operations on fixed asset

acquisition, modernization, etc. - total

5240 for 20151 2 540 401 899 478 ( 1 723 933) ( 1 028 002) 687 944

5250 for 20142 3 141 380 2 399 443 ( 1 135 048) ( 1 8653746) 2 540 401

including:

Acquisition, construction and creation

of fixed assets

5241 for 20151 934 387 132 201 ( -) ( 995 132) 71 456

5251 for 20142 1 134 016 671 192 ( 17 952) ( 852 869) 934 387

Modernization and reconstruction 5242 for 2015

1 208 870 185 762 ( -) ( 29 169) 365 463

5252 for 20142 477 794 701 331

( 1

092) ( 969 163) 208 870

Acquisition of land plots 5243 for 2015

1 - - ( -) ( -) -

5253 for 20142 2 380 6 ( -) ( 2 386) -

etc. 5244 for 2015

1 13 486 1 870 ( -) ( 3 701) 11 655

5254 for 20142 12 031 41 183 ( -) ( 39 728) 13 486

Housing construction 5245 for 20151 1 383 658 579 645 ( 1 723 933) ( -) 239 370

5255 for 20142 1 515 159 985 731 ( 1 116 004) ( 1 228) 1 383 658

130

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 short-

term 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).

Other Use of Financial Investments

Indicator Line

Code

As of December 31,

20154

As of December 31,

20142

As of December 31,

20135

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 - - -

131

Financial Investments

Financial Investments Availability and Flow

Indicator Line

Code


Historical

cost Accumulated

adjustments 7

Acquired

Disposed (repaid) Interest accrual

(including

bringing the

historical cost

to the nominal

value)

Established

reserves

Current

market value

(impairment

losses)

Historical

cost

Accumulated

adjustments 7

Historical

cost Accumulated

adjustments 7

Long-term - total 5301 for 20151 4 106 445 (787 968) 293 569 (2 737 090) - - (105 096) - 1 662 924 (893 064)

5311 for 20142 1 349 480 (788 724) 2 767 085 ( 10 120) 756 - ( -) - 4 1064452 (787 968)

including:

Stocks and shares

in subsidiaries

5302 for 20151 422 650 ( -) 226 441 ( 5) - - (16 874) - 649 086 ( -)

5312 for 20142 422 650 ( -) - ( -) - - ( -) - 422 650 ( -)

Stocks and shares

in affiliates

5303 for 20151 29 487 ( -) - ( -) - - ( -) - 29 487 ( -)

5313 for 20142 39 606 ( 756) - ( 10 119) 756 - ( -) - 29 487 ( -)

Other 5304 for 20151 1 113 665 (787 968) 1 (226 442) - - (88 222) - 887 224 (867 190)

5314 for 20142 887 224 (787 968) 226 442 ( 1) - - ( -) - 1 113 665 (787 968)

Loans granted 5309 for 20151 2 540 643 ( -) 67 127 (2 510 643) - - ( -) - 97 127 ( -)

5319 for 20142 - ( -) 2 540 643 ( -) - - ( -) - 2 540 643 ( -)

Short-term – total 5305 for 20151 1 940 480 (946 441) 3 871 071 ( -) - - (1 237 550) 163 677 5 975 228 (2 183 991)

5315 for 20142 4 121 013 ( -) - (2 46 539) - 24 347 (946 441) 231 659 1 940 480 (946 441)

including:

Debt securities (bonds,

bills)

5306 for 20151 - ( -) - ( -) - - ( -) - - ( -)

5316 for 20142 2 412 192 ( -) - (2 436 539) - 24 347 ( -) - - ( -)

Loans granted 5307 for 20151 1 940 480 (946 441) 3 866 071 ( -) - - (1 237 550) 163 667 5 970 228 (2 183 991)

5317 for 20142 1 708 821 ( -) - ( -) - - (946 441) 231 659 1 940 480 (946 441)

Other 5308 for 20151 - ( -) 5 000 ( -) - - ( -) - - ( -)

5318 for 20142 - ( -) - ( -) - - ( -) - - ( -)

Etc. - - - ( -) - - - - - ( -)

Financial

Investments - total

5300 for 20151 6 046 925 (1 734 409) 4 164 640 (2 737 689) - - (1 342 646) 163 677 7 638 152 (3 077 055)

5310 for 20142 5 470 493 (788 724) 2 767 085 (2 446 659) 756 24 347 (946 441) 231 659 6 046 925 1 734 409

132

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.

133

Inventory

Inventory Availability and Flow

Indicator Line

Code

Period


Production

cost

Reserve for

impairment

Proceeds

and

expenses

Disposed Impairment

losses

Inventory

turnover

between

groups

(types)

Production

cost

Reserve for

impairment

Production

cost

Reserve for

impairment

Inventory - total 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 20142 17 521 769 ( -) 30 308 442 ( 24 473 743) - (849 271) X 23 356 468 ( 849 271)

including:

Raw materials and supplies

5401 for 20151 415 587 ( -) 496 325 ( 462 146) - - - 449 766 ( -)

5421 for 20142 613 462 ( -) 535 059 ( 732 934) - - - 415 587 ( -)

Work in progress 5402 for 2015

1 22 821 696 ( 849 271) 32 063 908 ( 35 909 448) 745 230 - - 18 976 156 ( 104 041)

5422 for 20142 16 811 184 ( -) 29 277 808 ( 23 267 296) - (849 271) - 22 821 696 ( 849 271)

Prepaid expenses 5403 for 2015

1 - ( -) - ( -) - - - - ( -)

5423 for 20142 - ( -) - ( -) - - - - ( -)

Finished goods and goods

for resale

5404 for 20151 7 371 ( -) 12 902 ( 10 928) - - - 9 345 ( -)

5424 for 20142 7 740 ( -) 415 556 ( 415 925) - - - 7 371 ( -)

Other 5405 for 20151 111 814 ( -) 9 265 ( 48 568) - - - 72 511 ( -)

5425 for 20142 89 383 ( -) 80 019 ( 57 588) - - - 111 814 ( -)

etc.

134

Pledged Inventory

Indicator Line

Code

As of December 31,

20154

As of December 31,

20142

As of December 31,

20135

Inventory unpaid as of the reporting

date – total 5440 - - -

including:

Pledge agreements 5441 - - -

Inventory pledged under contract –

total 5445

- - -

including:

Raw materials and supplies 5446

- - -

Work in progress 5447 - - -

Finished goods and goods for resale 5448 - - -

Other 5449 - - -

135

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.

136

Accounts Receivable Availability and Flow

Indicator Line

Code

Period


Accounted

under

contract

Reserve

for

doubtful

debts

Acquired Disposed Reclassificati

on from long-

term

receivables to

short-term

receivables

Accounted

under

contract

Reserve for

doubtful

debts

Through

business

transactions

(amount of

debt under a

transaction,

operation)8

Interest,

penalties

and other

accruals

due8

Repayment Write-off to

the financial

result8

Reserve

recovery

Long-term accounts

receivable - total

5501 for 20151 14 290 212 (28 944) 5 126 031 - (6 954 376) ( -) 28 944 ( 6 816 451) 5 645 416 ( 34 576)

5521 for 20142 7 573 493 ( -) 11 068 600 - (1 648 421) ( -) - ( 2 703 460) 14 290 212 ( 28 944)

including:

Trade receivables

5502 for 20151 253 849 (28 944) 39 393 - ( 37 556) ( -) 28 944 ( 100 903) 153 783 ( 9 550)

5522 for 20142 137 335 ( -) 127 324 - ( 10 810) ( -) - ( -) 253 849 ( 28 944)


1 14 021 102 ( -) 5 010 105 - (6 9155084) ( -) - ( 6 714 548) 5 401 151 ( -)

5523 for 20142 7 430 940 ( -) 10 929 256 - (1 635 634) ( -) - ( 2 703 460) 14 021 102 ( -)


1 15 261 ( -) 76 533 - ( 1 312) ( -) - ( -) 90 482 ( -)

5524 for 20142 5 218 ( -) 12 020 - ( 1 977) ( -) - ( -) 15 261 ( -)

Short-term accounts

receivable – total

5510 for 20151 18 246 407 (391 880) 13 691 326 - (7 931 863) ( 209) 374 305 6 816 451 30 792 112 (990 765)

5530 for 20142 15 491 235 (170 617) 16 510 834 - (13 730 279) ( 25 383) 83 014 - 18 246 407 (391 880)

including:

Trade receivables

5511 for 20151 1 321 355 ( 231) 2 588 157 - (1 211 035) ( -) 231 101 903 3 095 380 ( 15 460)

5531 for 20142 1 390 797 (58 725) 573 090 - ( 642 532) ( -) 58 494 - 1 321 355 ( 231)


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 20142 13 465 618 (111 892) 15 431 642 - (13 026 377) ( 24 520) 24 520 - 15 846 363 ( 91 613)


1 1 078 689 (300 036) 2 218 057 - ( 235 178) ( 208) 300 036 - 2 061 360 (716 452)

5533 for 20142 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 20142 23 064 728 (170 617) 27 579 434 - (15 378 700) ( 25 383) 83 014 X 32 536 619 (420 824)

137

Overdue Accounts Receivable



5

Accounted under

contract


contract


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 - -

138

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”.

139

Accounts Payable Availability and Flow

Indicator Line

Code

Period Opening

balance

Changes over a period Closing

balance Acquired Disposed Reclassification

from long-term

payables to short-

term payables

Through business

transactions

(amount of debt

under a transaction,

operation)8

Interest, penalties

and other accruals

due8

Repayment Write-off to the

financial result8

Long-term

accounts payable -

total

5551 for 20151 11 177 748 10 410 084 - ( 31 382) ( -) ( -) 21 556 450

5571 for 20142 3 845 632 9 592 699 - ( 2 260 583) ( -) ( -) 11 177 748

including:

Trade payables

5552 for 20151 1 413 105 418 - ( -) ( -) ( -) 106 831

5572 for 20142 1 513 - - ( 100) ( -) ( -) 1 413

Other 5553 for 2015

1 - - - ( -) ( -) ( -) -

5573 for 20142 - - - ( -) ( -) ( -) -


1 11 176 335 10 304 666 - ( 31 382) ( -) ( -) 21 449 619

5574 for 20142 3 844 119 9 592 699 - ( 2 260 483) ( -) ( -) 11 176 335

Short-term accounts

payable - total

5560 for 20151 54 582 008 20 351 207 - (29 162 782) ( -) - 45 770 433

5580 for 20142 46 643 105 54 519 799 - (46 579 546) ( 1 350) - 54 582 008

including:

Trade payables

5561 for 20151 2 558 940 3 613 360 - ( 2 124 755) ( -) - 4 047 545

5581 for 20142 1 782 746 2 559 316 - ( 1 781 772) ( 1 350) - 2 558 940


1 51 406 295 15 925 102 - (26 447 460) ( -) - 40 883 937

5582 for 20142 44 080 705 51 386 295 - (44 060 705) ( -) - 51 406 295

Other accounts

payable

5563 for 20151 616 773 812 745 - ( 590 567) ( -) - 838 951

5583 for 20142 779 654 574 188 - ( 737 069) ( -) 616 773

Total 5550 for 2015

1 65 759 756 30 761 291 - (29 194 164) ( -) X 67 326 883

5570 for 20142 50 488 737 64 112 498 - (48 840 129) ( 1 350) X 65 759 756

140

Overdue Accounts Payable



5

Total 5590 1 409 117 350 633 92 584

including:

Trade payables 5591

1 409 117 350 633 92 584

Other 5592 - - -

141

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;


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;


142

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



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

143

3.20 Other Income and Expenses RUB thsd.

Other income / expenses 2015 2014

Income Expenses Income Expenses

Income and expenses related to compensation

of losses of Corporation - 15 981.2 24 849.9 27 663.5

Earnings and losses of previous years

identified in the reporting year 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 (one-

off 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

Corporation

- 6 517.2 - 149 733.4

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 - 893 064.3 - -

Reserve for reduction in values of non-

monetary physical things - - - 849 270.5

Fines, penalties, forfeits, taxes and charges

paid out of Corporation’s funds - 104.4 460.7 1 554.2


reserve for doubtful debts 1 199 495.8 - 114 858.2 -


reserve for impairment of financial

investments

787 968.0 - 756 -


reserve for impairment of tangible assets 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.

144

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,

20154

As of December 31,

20142

As of December 31,

20135

Received - total 5800 - - -

including:

Pledge 5801 - - -


surety agreement 5802 - - -

Granted – total 5810 1 049 406 2 778 866 3 319 654

including:

Pledge 5811 - - -


surety agreement 5812 1 049 406 2 778 866 3 319 654

4.23 Government Assistance

Indicator Line code

For 20151

For 20142

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

(objective) 5911

- -

( -)

-

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.


145

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/antimonopoly-

regulation/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.


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

Energia

4A Lenin St. Korolev,

Moscow Region

RUB 40 000

thsd.

RUB 40 000

thsd.

100 23 950.0

ZAO VKB RSC

Energia

26B Zemetsa St.,

Samara

RUB 10 000

thsd.

RUB 10 000

thsd.

100 –

ZAO PO

Kosmos

Room 1, bldg.

1,Vnukovo-3,

Borovskoye Highway,

Moscow

RUB 200 thsd. RUB 200 thsd. 100 –

LLC IK Razvitie 4A Lenin St., Korolev,

Moscow Region

RUB 6 150 thsd. RUB 6 150 thsd. 100 -

LLC RSC

Energia –

Finance


Moscow Region


AO Teplo RSC

Energia


Moscow Region

RUB 69 390.4

thsd.

RUB 69 390.4

thsd.

100 -

LLC OIME 4A Lenin St., Korolev,

Moscow Region

RUB 16 874.3

thsd.

RUB 16 874.3

thsd.

100 –

CJSC

BELROSSAT

Office 416, 15 bldg. 5,

P. Brovki St., Minsk

$25 000 $17 500 70 –

LLC Energia

SAT

1a, Grabina St.,

Korolev, Moscow

Region

RUB 80 000

thsd.

RUB 40 800

thsd.

51 -

ZAO Energia-

Telecom


Moscow Region

RUB 1 000 thsd. RUB 501.0 thsd. 50.1 240.5

http://fas.gov.ru/activity/antimonopoly-regulation/groups-of-people/from-01-01-2011.html?id=960&convert=topdf

http://fas.gov.ru/activity/antimonopoly-regulation/groups-of-people/from-01-01-2011.html?id=960&convert=topdf

146

List of other companies, in which RSC Energia is a shareholder (participant).


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

OJSC Space

Regatta

Consortium


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%


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

Limited liability

company Energia-

Cert


Moscow Region

RUB 1000

thsd.

RUB 19.5 thsd. 19.5 -

Limited liability

company Center of

Automated

Hydraulic Devices

(LLC AHD Center)


Moscow Region

RUB 10 thsd. RUB 1.9 thsd. 19 213.5

Corporation “ILS

International

Launch Services,

Inc.” (ILS

International

Services, Inc.)_

Registered office:

Wilmington, Delaware,

Name of Agent

registered at the address

of the registered office

"Si Ti Corporation"

170 shares

(non-voting

share, type В)

17 -

Open joint-stock

company Gazprom

space systems

ОАО Gazprom

space systems

77B, Moscow St.,

Schelkovo, Moscow

Region

RUB 65 683.4

thsd.

RUB 10 615.5

thsd.

16.16 -

147


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

Sea Launch S.a.r.l.

(SEA LAUNCH

S.А.R.L.)

58, rue Charles Martel,

L-2134 Luxembourg,

Grand Duchy of

Luxembourg

19 195 790

USD

2 880 000 USD 15 -

Limited liability

company

International Space

Systems

(LLC ISS)

71, Izmailovo road,

building 8, Moscow

RUB 3 960

thsd.

RUB 396 thsd. 10 -

Closed joint stock

company

Certification Center

for Rocket and

Space Technology

(ZAO IsSKT)

4 PIonerskaya St.,

Korolev, Moscow

Region

RUB 10.75

thsd.

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.

Affiliate Name Nature of Relationship Type of operations Sales revenues (excluding

VAT) in 2015

CJSC ZEM RSC Energia Overall control

Renting services, security

services

365 733

CJSC PO Kosmos Overall control


services 29 667

LLC OIME Overall control


services 1 193

CJSC Teplo RSC Energia Overall control


services 39 699

Total 436 292

148

In the accounting period, the following affiliates provided services to (performed works for) the Corporation:

RUB thsd.

Affiliate Name Nature of Relationship Type of operations Sales revenues (excluding

VAT) in 2015

CJSC ZEM RSC Energia

Overall control

Activities, services and

using space

technologies

13 081 465

CJSC Teplo RSC Energia Overall control

Heat production

services

198 965

CJSC VKB RSC Energia

Overall control

Performance of R&D

activities and

experimental works for

execution of RSC

Energia space programs

21 939

CJSC PO Kosmos Overall control

Air-passenger, freight

and mail operations

162 888

CJSC Energia-Telecom

Overall control

Development,

production of SS-based

satellite communication

components and

systems

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:

RUB thsd.

Company Name Accounts Receivable Accounts Payable

2015 2014 2015 2014

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.

149

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:

RUB thsd.

Indicator 2014 2013

Short-term remuneration (labor compensation, taxes accrued thereon and

other mandatory payments) 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 carry-

over vacations of Corporation’s employees amounting to RUB 414 815 thsd. as of December 31, 2013.





150

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:

Estimated liabilities on claims 5701 - - ( -) ( -) -

Estimated liabilities on onerous

contracts 5702 - - ( -) ( -) -

Estimated liabilities on

reorganization 5703 - - ( -) ( -) -

Estimated liabilities on warranties

of goods sold quality 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/

5706 - 14 823 ( 13 796) ( -) 1 027

Estimated liabilities on capital

investment project 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.

151

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



152

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.




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.




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.




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.


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

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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)

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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

155

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 of the Corporation. 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 science-

intensive 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

156

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 of the Corporation.

President [signature] V.L. Solntsev

March 30, 2016

Stamp here

157

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: [email protected], www.vneshaudit.ru

TIN 7706118254 Account 40702810538040102385 in Moscow bank of Sberbank of Russia, Moscow CA 30101810400000000225 BIK 044525225

mailto:[email protected]

http://www.vneshaudit.ru/

158

Responsibility of the Entity under Audit for the Accounting Statements

Management S.P. Korolev Rocket and Space Corporation Energia is responsible for the preparation and fair presentation of these financial statements in accordance with Russian rules of preparation of financial statements and internal control necessary for the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

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.

An 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

statements in order to design 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 includes evaluating

the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the

management of the Entity under Audit, as well as evaluating the overall presentation of the accounting statements.

An audit also included evaluating the appropriateness of accounting policies used and the reasonableness

of the estimates made by the management of the public company S.P. Korolev Rocket and Space Public

Corporation Energia, as well as evaluating the overall presentation of financial statements as a whole.

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 statements.

Opinion

In our opinion, the financial statements present fairly, in all material respects, the financial position of S.P. Korolev Rocket and Space Public Corporation Energia as of December 31, 2015, the results of its operations and its cash flows for 2015 in accordance with Russian regulations of the financial statements.

CEOCJSC "HLB LB Vneshadit" LM MitrofanovApril 29, 2016 Mr.

По нашему мнению, бухгалтерская отчетность отражает достоверно во всех существенных отношениях финансовое положение открытого акционерного общества «Ракетно-космическая корпорация «Энергия» имени С.П. Королёва» по состоянию на 31 декабря 2015 года, результаты его финансово-хозяйственной деятельности и движение денежных средств за 2015 год в соответствии с российскими правилами составления бухгалтерской отчетности.

General Director

CJSC "HLB Vneshadit" L.M. Mitrofanov

April 29, 2016 ________________________

Stamp here

159

S.P. KOROLEV ROCKET AND SPACE PUBLIC CORPORATION ENERGIA,

CONCLUSION OF AUDIT COMMISSION

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 Corporation Energia (RSC Energy, the Company)

composed of: A.B. Ardeev, A.V.Vakulin, K.V.Vyaznik AI, A.I. Gaiduk (A.O.Solomatina), V.V.

Kardanov, M.Yu. Kiseleva, A.B.Kosenko, E.P.Polezhaeva, D.N.Chirkina, 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 2015.

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, 2015 (form 0710001 per National Index of

Administrative Documents (NIAD));

- Profit and Loss Account of RSC Energia for 2015 (Form 0710002 per NIAD):

- Equity change statement of RSC Energia for 2015 (Form 0710003 per NIAD);

- Cash flow statement of RSC Energia for 2015 (Form 0710004 per NIAD);

- Explanations of individual indicators of financial statements;

- Annual report of RSC Energia work progress for 2015;

- Audit report of audit company CJSC HLB Vneshaudit on the financial statements of RSC Energia

for the period from January 1 to December 31, 2015;

- Minutes of the meetings of the Board of Directors of RSC Energia;

- Minutes of general meetings of RSC Energia shareholders.

The Company has carried out a check of accounts and financial statements for 2015 by an

independent auditor, CJSC HLB Vneshaudit.

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, 2015, the financial and operating performance

and cash flows for 2015 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.

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 random check of transactions conducted by the Company in 2015 related to financial investments,

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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 financial and economic activity summarizing the Company's

activities in 2015, 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.

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.

The Audit Commission recommends to approve the annual financial statements and annual report of

RSC Energia for 2015.

Chairman of the Commission [signature] D.N.Chirkin