CONTENTS

Address of the Chairman of the Board of Directors . . . 3 Financial and Economic Activity . . . . . . . . . . . . . . . . . . 43
- Credit Policy of the Company . . . . . . . . . . . . . . . . . . . . . 44
Basic Information about the Company . . . . . . . . . . . . 5 - Indices of the Company’s Financial Stability,
- Information about the Company . . . . . . . . . . . . . . . . . . . 6 Business Activity and Credit Worthiness . . . . . . . . . . 45
- Information about State Registration. . . . . . . . . . . . . . 6
- Information About Statutory Capital . . . . . . . . . . . . . . . 6 Investment Activity of the Company . . . . . . . . . . . . . 47
- Information about Auditor . . . . . . . . . . . . . . . . . . . . . . . . . 7 - Capital Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
- Specialization of the Company . . . . . . . . . . . . . . . . . . . . . 7 - The Company’s Investments
- Corporate Strategy of the Company . . . . . . . . . . . . . . . . 7 into Other Legal Entities . . . . . . . . . . . . . . . . . . . . . . . . . 48
- Mission of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 - Attraction of Budgetary Funds and Investments for
- Positioning of the Company in Industry. . . . . . . . . . . . 8 Financing, Development and Preproduction
of New Kinds of Products in 2011 . . . . . . . . . . . . . . . . . 49
Structure of the Company . . . . . . . . . . . . . . . . . . . . . . . . . 11
- Business Units Located Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
at the Territory of Ukraine . . . . . . . . . . . . . . . . . . . . . . . . 12 - Analysis of Changes in Cost
- Subdivisions Having Rights to Open Current of the Company’s Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 52
and Settlement Accounts . . . . . . . . . . . . . . . . . . . . . . . . . 12 - Quantity and Structure of Shareholders . . . . . . . . . . 53
- Affiliated Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 - Information about Depositary
- Health Resorts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 of the Company’s Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 53
- Representative Offices of Motor Sich JSC . . . . . . . . . 16 - Information about Custodier
of the Company’s Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Management Bodies of Motor Sich JSC . . . . . . . . . . . 19
- The Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Main Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
- General Meeting of Shareholders . . . . . . . . . . . . . . . . . 22 - Industry Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
- Supervisory Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 - Financial Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
- Internal Audit Commission . . . . . . . . . . . . . . . . . . . . . . . 24 - Legal Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58

Production Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Personnel and Personnel Policy . . . . . . . . . . . . . . . . . . . 61

- Main Indices of Production - Personnel Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
and Financial Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 - Personnel Development . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
- Production Activity - Prospects of Personnel Policy for 2012. . . . . . . . . . . . 62
and Incomplete Production. . . . . . . . . . . . . . . . . . . . . . . 28 - Youth Policy of the Company. . . . . . . . . . . . . . . . . . . . . . 64
- Labour and Salary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 - Social Sphere . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
- Advanced Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
- Certificates and Licences . . . . . . . . . . . . . . . . . . . . . . . . . 32 Financial Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
- Service Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 - Audit Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
- Priority Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 - Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
- Prospects for 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 - Report on Financial Results . . . . . . . . . . . . . . . . . . . . . . . 70
- Main Aspects of Accounting Policy . . . . . . . . . . . . . . . 71
Foreign Economic Activity . . . . . . . . . . . . . . . . . . . . . . . . 37 - Notes to Financial Report . . . . . . . . . . . . . . . . . . . . . . . . . 72
- Cash Inflow by Regions . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
- Participation in Exhibitions . . . . . . . . . . . . . . . . . . . . . 40

1
 A D D RE S S O F T HE C H A I R MA N OF TH E BOA R D OF DI R ECTOR S
2 annual report
Dear Shareholders, Colleagues and Partners!

Motor Sich Joint Stock Company would like to present

the Annual Report for 2011.

To sum up the work done by the Company in the past

year I would like to point out that we have successfully
dealt with our tasks. Our success is based on high qual-
ification of our personnel and utilization of advanced
technologies. The chosen strategy of building up mod-
ern production and adoption of new most demanded in
the world products have confirmed the validity of the
strategy being fulfilled.

Our solid experience allows Motor Sich JSC to act

flexibly and efficiently in the world market. Quality
and reliability of manufactured products is con-
firmed by their successful operation in more than
120 countries worldwide.

In 2011 we have created a solid foundation to increase

the enterprise efficiency and improve production and
financial performance. Implementation of new prospec-
tive investment projects contributes to consolidation of Motor Sich JSC competitive position and
its further development.

At the moment, Motor Sich JSC business fully conforms to the requirements of market economy.
When doing business, we follow the principles of corporate liability. At the same time, we im-
plement a set of social programs. The Company pays special attention to social protection of em-
ployees, creation and maintenance of relevant labour and recreation conditions. Arrangement
of definitive training, provision of medical insurance, solution of labor safety and environmen-
tal protection issues permitted to improve quality and efficiency of labour, as well as to attract
young specialists.

I would like to express thanks to the whole several thousand strong labor team of the Company
for conscientious labour in 2011 and express confidence that all tasks for 2012 will be suc-
cessfully fulfilled. And, of course, I would like to express great thanks to our shareholders and
partners and all those who are closely connected with Motor Sich JSC activities for cooperation
and mutual understanding.

Chairman of the Board of Directors

Motor Sich JSC V.A. Boguslayev

3
BASIC
INFORMATION
ABOUT THE COMPANY

g Information about the Company

g Information about State Registration
g Information About Statutory Capital
g Information about Auditor
g Specialization of the Company
g Corporate Strategy of the Company
g Mission of the Company
g Positioning of the Company in Industry

5
 BASIC INFORMATION ABOUT THE COMPANY

Information about the Company

Short title: Motor Sich JSC
Full title: Motor Sich Joint Stock Company
Enterprise code: 14307794
Legal address: 15 Motorostroiteley Av., Zaporozhye 69068, Ukraine

Tel: (38 061) 720-48-14

Fax: (38 061) 720-50-00
E-mail: motor@motorsich.com
Web-site: www.motorsich.com

Employees, persons. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 841

Assets of the Company, mln. UAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 182,3
Capital, mln. UAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 108,8
Statutory fund, mln. UAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280,5
Net income from selling in 2011, mln. UAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 792,5
Financial result in 2011, mln. UAH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 344,1

Information about Motor Sich JSC state registration

Place of registration – the Executive Committee of Zaporozhye City Council.
Date of state registration – 25.05.1994.
Motor Sich Joint Stock Company was renamed into Motor Sich Public Company pursuant to Law of Ukraine “About Joint Stock
Companies” and resolution of general meeting of shareholders, dated May 19, 2011.

Information about statutory capital

The statutory capital of Motor Sich JSC is UAH 280 528 650 (Two hundred and eighty million, five hundred and twenty-eight
thousand, six hundred and fifty), and is divided into 2 077 990 (Two million, seventy-seven thousand, nine hundred and
ninety) simple registered shares. Nominal value of each share is UAH 135 (One hundred and thirty-five).
The amount of statutory capital of Motor Sich JSC did not change during the last three years.

B A S I C I NF OR MATI ON A BOU T TH E COMPA N Y

6 annual report
Information about auditor
Authenticity and completeness of financial reports of Motor Sich JSC for 2011 is confirmed by private auditing company
“ZaporozhAudit. Taxes. Law” (Enterprise Code 13625523) according to Agreement No 2729/09-Д (General Accounting De-
partment) dated 10.04.2009. Location of auditing company: 8 Tikhy Pereulok Street, Zaporozhye. Date of state registration
of private auditing company “ZaporozhAudit. Taxes. Law” – 21.01.1994; Enterprise code – 1 103 120 0000 012930. Certifi-
cate of Auditing Chamber No. 0057, dated 26.01.2001, about registration as an auditing entity. Validity term of Certificate
is extended till November 04, 2015.

Specialization of the Company

Development and production of gas turbine engines for military and civil aviation, industrial units for ground application
(Gas-turbine power plants, Gas pumping units, Combined heat and power plants).

Corporate strategy of the Company

Corporate strategy of Motor Sich JSC is based on the large-scale diversification of production, strengthening and expansion
of its positions in the market of aviation equipment and services, realized in the following basic strategic directions:
g development and introduction of priority special programmes for manufacture of competitive products;

g expansion of sales and services markets;

g improvement of efficiency of marketing activity;

g creation of efficient high-technology enterprise in the result of its technical reequipment;

g arrangement of efficient quality management system.

Mission of the Company

Motor Sich JSC works to be the best company in the sphere of aviation engine-building.
In the result of successful 100-year activity of the Company, utilizing our highest intellectual potential, using unique
advanced technologies, in close cooperation with our business partners, we make Ukraine an aviation power.

7
Positioning of the Company in Industry
Motor Sich JSC is a specialized enterprise, which basic products are gas turbine engines for civil and military aviation, cre-
ated on their base industrial gas turbine drives for power and gas-pumping stations, as well as gas turbine power stations and
gas-pumping units with these drives.

Tens of thousands of engines produced by Motor Sich JSC are installed in aircraft of worldwide known firms: Antonov, Ilyushin,
Beriev, Tupolev, Yakovlev, Kamov, Mil, Czech «Aero Vodochody» and Chinese NAMC. They are operated in civil and military
aviation of more than 120 countries of the world.

Many engines of the Company became world leaders in their class: AI-25TL turbojet engines lift in the sky more than three
thousand training airplanes and training-combat airplanes in 40 countries of the world; helicopter engines of TV3-117
family, used in 61 countries of the world in all helicopters of average carrying capacity produced in Russia; D-18 engine
for “Ruslan” and “Mriya” the highest capacity transport airplanes in the world; D-136 the most powerful engine in the
world for helicopters and others.

Production of industrial gas-turbine drives, created on the basis of long-term experience of manufacture and field service of
aviation engines, occupies a considerable position in the production program of Motor Sich JSC. This kind of products in-
cludes about ten types of drives with power range from 1 to 8 MW.

Motor Sich JSC is a part of aviation industry complex of Ukraine, traditionally deeply integrated with enterprises of aviation
industry of Russia.

At the present time, Motor Sich JSC has to work in conditions of very hard competition at the aviation world market.
It means that priorities shoud be given to new, perspective products, which are able to compete with the goods of the
leading world companies.

B A S I C I NF OR MATI ON A BOU T TH E COMPA N Y

8 annual report
Motor Sich JSC performs the following works at the present time:

serial production — improvement and modernization of consumer features of such engines, as D-18T and its modifications,
AI9-3B, TV3-117VMA-SBM1, D-36 of all series, TV3-117V family, D-436TP, D-436-148, AI-450-МS.

There was started series production of:

g AI-222 engines intended for use in Yak-130, L-15 and other combat trainers produced in Russia and China;

g TV3-117VMA-SBM1V engine designed for the great fleet of “Mi” and “Ka” helicopters all over the world, as well as for in-

stallation in new helicopters;

g TV3-117VMA-SBM1V series 4, 4E engines designed for remotorization of existing Mi-8T helicopters;

g small MS-400 engines intended for use in unmanned aerial vehicles.

Development, preparation of experimental and serial production of:

g AI-25TLSh engine, a new modification of AI-25TL engine, intended for remotorization of L-39 training airplanes;

g TV3-117VMA-SBM1V series 1 engine with FADEC automatic engine control system and improved performance characteris-

tics intended for use in Mi-28, Mi-17 and other helicopters.

g MS-14 engine designed for modernization of An-2 up to An-3 version;

g MS-500V turbo-shaft engine designed for helicopters with take-off weight from 3.5 to 6 t;

g small MS-400P and MS-450 engines intended for use in unmanned aerial vehicles;

g D-436TP-М engine with thrust reverser intended for use in updated Bе-200 aircraft;

g D-27 engine intended for use in Аn-70 military transport aircraft;

g AI-450М/М1 engines for remotorization of Mi-2 helicopters;

g AI-9V-1 auxiliary power unit intended for installation in «Mi» and «Ка» helicopters;

g D-36MB engine intended for installation in Аn-74 aircraft;

g gas-turbine drives and power stations for Russia and Ukraine, including combined heat and power plants with gas-steam

cycle or co-generation cycle.

9
Structure of the Company

g Business Units Located

at the Territory of Ukraine
g Subdivisions Having Rights to
Open Current and Settlement Accounts
g Affiliated Companies
g Health Resorts
g Representative Offices of Motor Sich JSC

11
 STRUCTURE OF THE COMPANY

Airline
Business Units Located
at the Territory of Ukraine Aircraft fleet of the Airline:

Zaporozhye Machine-Building Plant An-74ТК-200 . . . . 1 ед.

named after V.I. Omelchenko An-12B . . . . . . . . 1 ед.
Year of foundation – 1988. An-12BК . . . . . . . 1 ед.
An-140 . . . . . . . . 1 ед.
Areas of activity: An-24RV . . . . . . . 2 ед.
g testing of aviation engines;
Yak-40 . . . . . . . . 2 ед.
g assembly and testing of EG-1000 and EG-6000 gas-
Airline has representative offices in the following cities
turbine power stations; and countries:
g testing of 6.3, 8, 10 MW gas-turbine drives D-336,
g Kiev – 2 representative offices (Zhyliany and Borispol
AI-336; airports)
g assembly and testing of GPA-K/5.5-GTP/6.3SК gas-
g Istanbul/Turkey – “CASIO AIR SERVIS” Company
turbine pumping units;
g manufacture of blades; International codes:
g foundry. IАТА code — M9
ICAO code — MSI
Volochysk Machine-Building Plant (VMZ) Traffic documents code — 011
Year of foundation – 1971.

Areas of activity: Subdivisions Having Rights

g providing aircraft engines with mass-produced parts to Open Current and
and metal products;
g production of technological tooling;
Settlement Accounts
g overhaul of AI-20 engine and its modifications;
g Lubny Machine-Tool Plant (Lubny, Poltava region)
g production of EG-1000, PAES-2500 power stations;
g Pervomaisk Accessories Plant (Pervomaisk, Lugansk
g manufacture and assembly of GTE-MS-2,5; AI-2500M
region)
power drives; g Kiev Accessories Plant (Kiev)
g production of consumer goods with special emphasis
g Calibration Center (Zaporozhye)
on a wide range of mufflers for motor cars and agricul- g Construction Management and Social Development
tural equipment. Department (Zaporozhye)
g Canteen Center (Zaporozhye)
Snezhnoye Machine-Building Plant (SMZ)
g Company Store “MOTOR SICH” (Zaporozhye)
Year of foundation – 1970.
g Medical and Sanitary Department of Motor Sich JSC

Areas of activity: (Zaporozhye)

g production of blades for gas-turbine engines; g Preschool Education Center (Zaporozhye)

g production of parts and assembly units for mining

equipment;
g production of consumer goods with special emphasis

on agricultural and utility equipment.

S T RU CTU R E OF TH E COMPA N Y
12 annual report
 Main areas of activity:
Affiliated Companies g preparation and organization of research and serial

The Company has founded the following affiliated compa- production of aviation engines, aviation equipment and
nies that are carrying out their activities at the present time: property;
g manufacture of electrical machines, equipment and

Gulaypole Machine-Building Plant devices, industrial products;

17, 9th January Street, Town of Gulaypole, Zaporozhye g manufacture of agricultural machines, process equip-

region, Ukraine ment for textile industry, agricultural and garden tools;
g production of paint-and-lacquer materials;
Main areas of activity:
g production of metal and cardboard containers.
g development, preparation and organization of research

and serial production of machine-building products;

g production, procurement and sales of agricultural Lebedin Engine-Building Plant
products; 18 Grushevaya Street, Town of Lebedin, Sumy region, Ukraine
g provision of services to people on repairing and main-

tenance of motor vehicles, as well as delivery of spare Main areas of activity:

g development, preparation and organization of research
parts for them;
g ales of process equipment, cars and tractors, withdrawn and serial production of machine-building products;
g sales of manufactured products;
from process usage.
g manufacture of industrial products, consumer goods,

fuels and oils.

Gulaypole Mechanical Plant Share of Motor Sich JSC in statutory capital of the above
2 Kotovskogo Street, Zheleznodorozhnoye village, Gulay- affiliated companies is 100%.
pole district, Zaporozhye region, Ukraine

Lebedyn

Kiev
Lubny
Volochysk
Vinnytsia
Pervomaisk
ZAPOROZHYE Snezhnoe

Gulaypole

Primorsk

Alushta

13
 Main advantages:
Health g comfortable, home atmosphere; perfect living conditions;

Resorts g the best equipped beach at Azov seashore;

g tennis courts with special cover;

Health Resort “Priboy” g two thousand meters of sport grounds;

g gymnasium;
Location: Primorsk, Zaporozhye region (Azov seashore).
g billiard, cinema and concert halls;

g excellent national cuisine.

Capacity: 7 comfortable buildings for 490 persons.
Number of vacationers per year: about 3 thous. persons.
Line of activity: family recreation. Medical-Care Vacation Hotel “Horizont”

Main advantages: Location: Alushta (South coast of Crimea)

g comfortable rooms;
Capacity: 3 bedroom buildings for 500 persons.
g caloric food;
Number of vacationers per year: more than 4 thous. persons.
g equipped beach;
Specialisation: medical treatment of diseases of respira-
g gymnasium;
tory organs, functional diseases of nervous system, as well
g various leisure facilities. as ear, nose and throat diseases.
Line of activity: family recreation.
Health Resort “Motor”
Main advantages:
Location: Primorsk, Zaporozhye region (Azov seashore). g picturesque scenery, clean air, warm sea;

g comfortable rooms;
Capacity: 4 comfortable buildings for 500 persons g qualified medical service;
Number of vacationers per year: more than 3 thous.
g balanced diet;
persons.
g various leisure facilities;
Line of activity: family recreation.
g equipped sports and play grounds;

g chain of stores and cafes.

S T RU CTU R E OF TH E COMPA N Y
14 annual report
Sanatorium “Raduga” Recreational complex includes six-storeyed building (for
250 persons) with two elevators, comfortable double
Location: Volochysk rooms, medical department, canteen, cinema and concert
Sanatorium can accomodate 100 resting persons at the hall (for 300 persons).
same time. The excellent balanced meal will provide feeling of well-
Specialization: treatment of gastrointestinal tract. being and good mood.

Main advantages: Sanatorium-preventorium provides efficient treatment of:

g comfortable rooms; g locomotor system;

g ancient dendrological park, lake, the Zbruch river; g peripheral nervous system;

g sporting grounds, “Terrainkur” paths for dosed walking; g upper respiratory tracts;

g fishing in summer period, sleighing and skiing in winter g cardiovascular system;

period, activities in gymnasium; g digestive organs.

g library, billiards, evening parties; Adults and children may use “Terrainkur” paths for
g Well No. 35 of “Kryshtaleva krynytsa” mineral water; dosed walking, sporting ground, beach, billiards, sauna.
g two well-rooms with water of different temperature;
There are conducted evening parties - discos, concerts.
There are shown interesting movies.
g skilled medical service.
Besides, sanatorium-preventorium arranges seminars,
conferences, trainings, banquets, professional holidays.
Sanatorium-preventorium

Sanatorium-preventorium of Motor Sich JSC is located 30 km

from Zaporozhye in picturesque park area on the bank of
the Dnieper river.
It posesses all natural and medical factors that are neces-
sary for health improvement.
Time schedule: year-round.

15
Representative Offices
of Motor Sich JSC
Ukraine
30 Shelkovichnaya Street, Kiev, 01080, Ukraine
Phone: +38 044 253 9105, +38 044 253 4083,
Fax: +38 044 253 9034
E-mail: motorsich@voliacable.com

Russia
14 Novopeschanaya Street, Moscow, 125252, Russia
Phone: +7 495 411 5155, Fax: +7 495 411 5155
E-mail: info@motorsich.ru
Http://www.motorsich.ru

China
Representative Office
Asia Hotel, Office #403, #8 Gongti bei lu, Xinzhong xi jie,
Doncheng District, Beijing, 100027, China
Phone: +8610 65515762, Fax: +8610 65515762
E-mail: motorsich_china@mail.ru

U.A.E.
Regional Office
Plot F4-02, SAIF Zone, Sharjah, U.A.E.
Phone: +9 716 557 8097, Fax: +9 716 557 8098
E-mail: motorme@eim.ae

Algeria
Regional Representation
81, Lotissement EI Feth, "Les Sables Rouges",
El Biar, Algiers, Algeria, 16030
Phone: +2 132 192 3720, Fax: +2 132 179 8749
E-mail: suprun.ms@mail.ru

India
India Liaison Office
24 Ferozeshah Rd., New Dehli, 110001, India
Phone: +91 114 350 4903, Fax: +91 114 350 4902
E-mail: msindia@mail.ru

Bangladesh
Representative Office Dakiv Corporation
House #95, Road #06, Block-C, Banani, Dhaka, Bangladesh
Phone: +8 802 883 4617
E-mail: bromotor@dhaka.net, bstech_ms@dhaka.net

Belarus
131 Bogdanovicha Street, Minsk, 220123.

S T RU CTU R E OF TH E COMPA N Y
16 annual report
 Russia
Belarus Ukraine

China
Algeria U.A.E. Bangladesh
India

17
Management Bodies
of Motor Sich JSC

g The Board of Directors

g General Meeting of Shareholders
g Supervisory Board
g Internal Audit Commission

19
 MANAGEMENT BODIES OF MOTOR SICH JSC

The Board of Directors

Vyacheslav Alexandrovich Boguslayev Pavel Dmitrievich Zhemanyuk Mikhail Naumovich Berezovsky

Chairman of the Board of Directors Deputy Chairman of the Board Deputy Chairman of the Board
of Directors, Technical Director of Directors, Director of Construction
and Social Development

Viktor Alekseyevich Lunin Roman Sergeyevich Garanenko Vladimir Borisovich Semenov

Member of the Board Member of the Board Member of the Board of Directors,
of Directors, Financial Director of Directors, Quality Director Director for Corporate Law
and Investment Projects

M A NA GE M EN T BODI ES OF MOTOR S I CH J S C
20 annual report
Vladimir Timofeyevich Shirkov Sergei Anatoliyevich Voitenko Olimpy Valerianovich Pokatov
Deputy Chairman of the Board Member of the Board of Directors, Member of the Board of Directors,
of Directors , Marketing Director Production Director Director of Human Resources
Department

Alexander Petrovich Nedashkovsky Konstantin Ivanovich Gorbik Ruslan Alexandrovich Pidorich

Member of the Board of Directors, Member of the Board Member of the Board of Directors,
Director of Snezhnoye Machine- of Directors, Deputy Technical Head of Youth Department
Building Plant Director of Tool Production

21
 MANAGEMENT BODIES OF MOTOR SICH JSC

Corporate management system of Motor Sich JSC is based

General Meeting of on the following principles:
Shareholders g The Company protects rights of shareholders.

g The Company provides equal attitude to all shareholders, in-

Management bodies of Motor Sich JSC: cluding minority and foreign shareholders.
g General meeting of shareholders (superior body); g The Company acknowledges legal rights of the interested

g Supervisory Board;
parties and encourages active cooperation between Motor
g Board of Directors (executive body).
Sich JSC and all interested parties for increase of social
g Internal Audit Commission.
wealth, creation of new work places and achievement of
financial stability of the Company.
Management bodies of Motor Sich JSC pay particular at- g The Company provides timely disclosure of reliable informa-
tention to honesty, openness, efficiency, responsibility
and achievement of the specified objectives tion about all important aspects of Motor Sich JSC activities,
including data about financial state, results of business ac-
Authorities and obligations of management bodies are tivity, structure of shareholders and management.
clearly divided and balanced. Corporate management sys- g The Board of Directors provides strategic business manage-

tem of Motor Sich JSC is built according to international ment and efficient control of all managers. It regularly reports
standards, the best world experience and current legisla- to its shareholders and the Company.
tion of Ukraine. It provides efficient cooperation between
management and control bodies, as well as external audi- Competency of the Board of Directors of Motor Sich JSC
tors and all interested parties (shareholders, contractors,
state bodies); monitoring of the Company's activity for The Board of Directors is a permanent executive body of the
achievement of the specified objectives. Company that controls its current activities.

Competency of general meeting of shareholders The Board of Directors, within its powers stipulated by effec-
tive legislation, Statute and corporate documents of the Com-
General meeting of shareholders is the superior manage- pany, makes decisions, concludes agreements and acts
ment body of Motor Sich JSC. General meeting of share- otherwise on behalf of the Company in order to achieve the
holders may solve all questions related with the Company’s Company’s objectives.
activity. Questions that are in exclusive competence of
general meeting of shareholders are stipulated by current The Board of Directors consists of 12 persons. Term of powers is
legislationм, the Company’s Statute and may not be trans- 4 years.
ferred for decision of the Company’s other bodies.

M A NA GE M EN T BODI ES OF MOTOR S I CH J S C
22 annual report
The Supervisory Board
Anatoly Nikolayevich Malysh Peter Ivanovich Kononenko
Chairman of the Supervisory Board, Member of the Supervisory
Director of Public Relations Board, Director of Moscow
of Motor Sich JSC. Representative office
of Motor Sich JSC.
Date of birth: 15.04.1956.
Education: higher. Date of birth: 05.12.1955.
Education: higher.

Alexander Vyacheslavovich Valery Mihkailovich Logvin

Boguslayev Member of the Supervisory
Deputy Chairman of the Supervisory Board, Director of Catering
Board of Motor Sich JSC, Leading Center of Motor Sich JSC.
Personnel Training Engineer of
Motor Sich JSC. Date of birth: 23.07.1952.
Education: higher.
Date of birth: 02.08.1978.
Education: higher.

Mikhail Nikolayevich Molchanov Mikhail Ivanovich Trush

Member of the Supervisory Board, Member of the Supervisory
Director of Transport and Board, Chairman of Trade Union
Production Administration Committee of Motor Sich JSC.
of Motor Sich JSC.
Date of birth: 10.06.1949.
Date of birth: 10.11.1954. Education: higher.
Education: higher.

Yury Mikhailovich Grechikha Svetlana Alexandrovna

Member of the Supervisory Board, Khoreva
Assembly fitter of engines of Member of the Supervisory
workshop No. 31 of Motor Sich JSC. Board, Head of Finance-and-
Economy Administration
Date of birth: 06.07.1954. of Motor Sich JSC.
Education: specialized secondary.
Date of birth: 21.12.1953.
Education: higher.

Competency of the Supervisory Board of Motor Sich JSC

The Supervisory Board of Motor Sich JSC is a body that protects rights of the Company’s shareholders and, within its
competency stipulated by Laws and Statute, controls and regulates activities of the executive body.

The Supervisory Board consists of 9 persons. Term of powers is 2 years.

23
 MANAGEMENT BODIES OF MOTOR SICH JSC

Internal Audit Commission

Alexander Nikolayevich Polyviany

Chairman of Internal Audit Commission, Deputy Head of Finance-and-
Economy Administration, Head of Labour and Wages Department
of Finance-and-Economy Administration of Motor Sich JSC.

Date of birth: 10.12.1954.

Education: higher

Sergei Nikolayevich Vishnevsky

Member of Internal Audit Commission, Director of Aviation Engine
Production, Head of Production Administration of Motor Sich JSC.

Date of birth: 01.10.1954.

Education: higher.

Liudmila Ivanovna Zavgorodniaya

Member of Internal Audit Commission, Chief Doctor of Medical
and Sanitary Department of Motor Sich JSC.

Date of birth: 29.05.1954.

Education: higher.

Andrey Valentinovich Zinchenko

Member of Internal Audit Commission, Head of Personnel Administration
of Motor Sich JSC.

Date of birth: 05.11.1975.

Education: higher.

M A NA GE M EN T BODI ES OF MOTOR S I CH J S C
24 annual report
 Valentin Grigoryevich Pasternak
Member of Internal Audit Commission, Director of Volochysk
Machine-Building Plant.

Date of birth: 16.02.1954.

Education: higher.

Leonid Alekseyevich Pirogov

Member of Internal Audit Commission of Motor Sich JSC,
Deputy Technical Director – Head of Design-Engineering Department.

Date of birth: 14.04.1948.

Education: higher.

Alexander Mikhailovich Pospelov

Member of Internal Audit Commission,
Director of Procurement Administration
of Motor Sich JSC.

Date of birth: 18.09.1956.

Education: higher.

Competency of Internal Audit Commission of Motor Sich JSC

Internal Audit Commission carries out internal control and audit of financial and economic activities
of the Company.

Internal Audit Commission consists of 7 persons. Term of powers is 4 years.

25
Production
Activity

g Main Indices of Production and

Financial Activity
g Production Activity and Incomplete
Production
g Labour and Salary
g Advanced Technologies
g Certificates and Licences
g Service Maintenance
g Priority Activities
g Prospects for 2012

27
 PRODUCTION ACTIVITY

Main Aspects of Production Income from sold products, works and services during
2007 – 2011 period:
and Financial Activity
6000 5792,5
g Growth rate of production volume in comparable prices
5001,8
to 2010 – 114.5%; 5000
g Income from sold products, works and services – 5,792.5 mln.
5313,9
UAH. It is by 787.6 mln. UAH more than in 2010; 4000 3745,7
4399,2
g Specific weight of aviation equipment in the sold
3000 3387,8
products – 93.7%; 2056,4
g Export share in the income from sold products – 93.2%. 1749,7
2000
g Profitability of sales – 23.2%

1000 1398,1 1647,4

Structure of products sold by Motor Sich JSC in 2011 (%): 2007 2008 2009 2010 2011
Total income from sold products, works and services
4,4 1,9 including aviation equipment

12,1
Production Activity
and Incomplete Production
Motor Sich JSC delivered products according to the con-
cluded contracts in 2011. There were executed 199 con-
65,6 tracts for the delivery of series-produced and overhauled
16 engines, drives, power stations. There were manufactured
goods to the amount of 5,846.7 mln. UAH in current
prices. There were shipped goods to the amount of
5,671.9 mln. UAH.

Specific weight of sold products is distributed as follows :

g Aviation equipment – 93.7%;

g General-purpose technical products – 4.4%;

g Consumer goods – 1.9%.

Series-production aviation engines In addition to production of engines the Company per-

formed 83 contracts for the delivery of spare parts (51
Overhauled aviation engines
of them – non-CIS countries, 32 – Aircraft Repair Plants
Other aviation equipment in Russia).
General-purpose products In 2011 there were sold consumer goods to the amount of
Consumer goods 105.4 mln. UAH.

P R ODU CTI ON A CTI V I TY

28 annual report
There were continued works on implementation of se- There were performed works related to development
ries-production of several new aviation products in the and introduction into production of the following
course of the year. There were manufactured: consumer goods:
g 2 МS-500 engines; g There was started series production of “Motor Sich

g 6 АI-450М engines; СЦМ80-19” cream separator with parts made of high-

g 2 MS-14 engines; strength polycarbonate.
g 10 ТV3-117VМА-SBМ1V, series 4E engines; g There was manufactured experimental batch of “Motor

g 1 ТV3-117VМА-SBМ1V, series 1 engine; Sich MБЭ-1” hosehold electrical oil mill;

g 5 AI-222K-25 engines; g There was developed new design of “MС-470” and “MС-475”

g modified Mi-8MSB helicopter with ТV3-117VМА-SBМ1V, petrol-powered saws;

series 4E engines; g There was manufactured batch of “Motor Sich MБ-8Э” walk-

g there was prepared to production and were manufac- ing tractors equipped with electric starter, hood and fenders.
tured parts of prototype МS-500UBE, ТV3-117VМА-SBМ1I,
МS-500V engines. The company has allocated 109.8 million UAH of own as-
sets into the development and preparation to series pro-
Удельный вес реализованной продукции АО «МОТОР duction of new types of aviation products, general
СИЧ» за 2011 г., %: technical products and consumer goods. This amount will
reach 472.2 million UAH, if we take into account ex-
1,9 penses for procurement of equipment, manufacture and
4,4
modification of test benches, performance of research and
development works.
93,7
As of 01.01.2012, the process stock at Motor Sich JSC
amounted to 2,339.6 million UAH. During year 2011 the
process stock increased by 790.2 million UAH (51.0%).
Main production process stock increased by 887.7 million
UAH (64.2%), auxiliary production process stock increased
by 97.5 million UAH (58.6%). The reasons for increase of
main production process stock were: increase of prices for
material resources, creation of process stock for shipments
in year 2012, development and manufacture of prototypes
of new products.

Percentage of main products in the process stock:

g As of 01.01.2011 – 89.3%;
Авиатехника g As of 01.01.2012 – 97.1%.

General-purpose products
Process stock created in 2011 will ensure uninterrupted
Consumer goods and continuous work of the Company in year 2012.

29
 Qualitative indices of staff: production and industrial
personnel structure by categories, %: Labour and Salary
The Company’s labour remuneration system provides fair
remuneration for employees’ labour depending on com-
2,1
plexity and conditions of work, employee’s professional
32,5 and business qualities, results of the employee’s work
and economic activity of the Company’s corresponding
subdivision.

Motor Sich JSC has introduced new wage rates and offi-
cial salaries from April 01, 2011 in order to increase social
40,6 standards for all categories of the Company employees
pursuant to Law of Ukraine.

Increase of average wages from January till December

2011 has made 19.9% at 4.6% average official rate of in-
flation per year.

Average salary of production and industrial personnel in

4,9 December 2011 have amounted to 3,461 UAH, of indus-
19,9 trial workers – 3,691 UAH, of chief foremen – 4,338 UAH,
of foremen – 3,017 UAH.

Industrial workers Motor Sich JSC occupies 11th place amont industrial en-
Auxiliary workers terprises of Zaporozhye as per salary level.

Inspectors The Company constantly analyzes average salary of all

categories of workers, efficiency rate, labour force data.
Engineers and technicians
Average efficiency rate has made 116.5% in year 2011.
Other categories
The Company has no wage arrears, as well as tax arrears to
budgetary and extra-budgetary funds.
The Company’s staff on the payroll during 2007 – 2011
(persons): Growth of the average annual salary of the Company
employees in 2007 – 2011 (UAH):
25 000 21 860 23 841
21 236 20 832 3750
20 000 3295
22 228 2748
19 573 19 248 20 264 3000
15 000 3212
2135 2678
9 024 2250 1871
7 206 7 858
10 000 7 042 1335 2080
1500 1821
5 000
750 1296
2008 2009 2010 2011
2007 2008 2009 2010 2011
Total
including production and industrial personnel of one employee, total
thereof direct workers and apprentices of one production and industrial employee

P R ODU CTI ON A CTI V I TY

30 annual report
The Company’s labour force has increased by 1,981 per- Joint research and development:
sons in 2011. Labour force structure has changed due to g with UkrNIIspetsstal institute on adjustment of condi-

the increased amount of direct workers from 34.6% as of tions of hot isostatic pressing of titanium and heat-resis-
01.01.2011 to 36.1% as of 01.01.2012. tant castings using “AVURE” hot isostatic press;
Labour fluctuations has made 6.61% in year 2011.
g with Zaporozhye National Technical University on complex

investigation and development of methods of repair of GTE

Advanced technologies parts made of high-alloyed titanium compounds by means of
welding using nanostructured additive materials, as well as
Manufacture of aircraft engines which should meet con-
on application of nanotechnologies in foundry process;
temporary demands of the market and be capable to com-
g with FGUP “VIAM” on application of new materials
pete with the products of the leading world companies
requires continuous improvement of production processes (ВЖМ5, ВКНА-25, ВКНА-18, ВЖ-159, ВЖ-175, ВТ-25У, as
with due consideration of the latest achievements of sci- well as СrAIY, FeNiCrAIY, FeNiCrAIY porous-fibrous mate-
ence and engineering. rial for spacers) in prospective engines.
Motor Sich JSC carries out the following activities in this
respect: Information technologies

Implementation of new production processes: The Company carries out purposeful works on manufac-
g plasma-arc welding of aluminium; turing application of computer-integrated technologies.
g manufacture of cast products by means of modified flow

gate system; Main directions of work:

g development of Computer-Aided Design (CAD) System
g restoration of titanium casings of intermediate parts by

means of argon-arc welding; for designing of aircraft engines, enhancement of its func-
g restoration of casing parts made of aluminium and magne-
tionality.
g development of Computer-Aided Process Engineering System;
sium alloys by means of supersonic gas-dynamic spraying;
g development of Management Integrated Control System
g hot isostatic pressing by means of high-pressure hot

isostatic press; (MICS) on the basis of SAP solutions;

g creation and development of Integrated Product Oper-
g orbital welding of small pipes;

g manufacture of plates made of БМК-1 friction material

ation Support System;
g system integration of above mentioned systems and for-
for rotary CNC machining centers;
g restoration of shroud platforms of blades of D-18T
mation of integrated data field of the Company;
g development and integration of control software for CNC
engine by means of microplasma powder surfacing.
machines;
Implementation of advanced part blanks: g manufacturing application of CAD\CAM software: Uni-

g precision investment casting of heat-resistant and struc- graphics, TS CAM, ГеMMa-3D systems;
tural alloys; g manufacturing application of self-made «DEKKa-2D»

g centrifugal precision investment casting of titanium CAM system for CNC machines.
alloys;
g casting of monocrystal blades made of ЖС32, ЖС26
There was purchased new imported process equipment,
as well as components and spare parts to it:
heat-resistant alloys;
g 5-axial machining centers Huron KX 100Evo2;
g metal mould casting of magnesium and aluminum
g turning-miling machining centers DOOSAN;
alloys;
g turning-screwing machines SN 500;
g precise casting of large-size parts made of non-ferrous
g turning machining centers SBL 300, 500;
alloys.
g precision electrospark coordinate-broaching machine

Sodick AG60L;
g high-vacuum furnaces produced by Seco/Warwick Company;

g high-speed spindles FISCHER;

g gas analyzers produced by LECO Company.

31
 Certificates and licences
At the present time, the Company supplies products manufac-
tured using certified production facilities to the world market.
Production of aircraft engines is a high-tech process. Therefore,
in order to ensure and strengthen our competitiveness and pro-
vide world level quality system, the Company carries out con-
tinuous works aimed at improvement of organizational
structure, increase of personnel qualification, procurement of
new high-tech process equipment, implementation of new pro-
duction processes. Production of modern aircraft engines, as
well as repair of all produced aircraft engines, is certified by Avi-
ation Register of Interstate Aviation Committee (IAC) and State
Department of Aviation Transport of Ukraine. Motor Sich JSC is
recognized by Aviation Register of IAC as Designer of aircraft
engines for civil aircraft.

Quality system of Motor Sich JSC is certified by transnational

organization BUREAU VERITAS CERTIFICATION (BVC) for con-
formity to ISO 9001 standard with regard to production, over-
haul and maintenance of aircraft engines, gas turbine drives
and designing of gas turbine power generation sets with ac-
creditation area in USA, UK and Germany.

Certification of quality management system, approval of

production and repair organization

Quality System Compliance Certificate No. HTI/130-009/2010;

development, designing, manufacture and technical mainte-
nance of aircraft engines; issued by HM FHH CERT

Quality System Compliance Certificate No. UA226244; issued by

Bureau Veritas Certification

Quality Management System Compliance Certificate ВР

27.1.4223-2011; issued by Certification Center “Gosaviasertifica”
JSC (Russia)

Quality System Compliance Certificate No. РОСС UA.ИС25.К00031;

issued by Certification Center “Quality” (Russia)

Production Approval Certificate ОП 01-ПД; issued by AR IAC

Production Approval Certificate СВ 0004; issued by Transport and

Communications Ministry of Ukraine – the State Aviation
Administration

Type certificates

Amendment to Type Certificate СТ 260-ВД/Д05 “АI-450-МS aux-

iliary power unit”; issued by AR IAC

P R ODU CTI ON A CTI V I TY

32 annual report
Amendment to Type Certificate СТ 260-ВД/Д06 “АI-450-МS Certificate of Conformance No. UA.1.014.0166717-11 for
auxiliary power unit”; issued by AR IAC “Motor Sich EП-2000-1” hand chain electric motor saw;
issued by R&D Center “Stankocert” (Ukraine)
Amendment to Type Certificate No. ДТВ-0003 for Мi-8МSB
helicopter; issued by the State Aviation Administration Certificate of Conformance No. UA 1.014.0035200-11 for
of Ukraine “Motor Sich-500 (УОР181К-01)” cream separator; issued
by R&D Center “Stankocert” (Ukraine)
Amendment to Type Certificate No. СТ 267-АМ/Д/Д04
“ТV3-117VМА-SBМ1V turboshaft engine” due to introduc- Licenses
tion of series 4 and 4E; issued by AR IAC
License АВ No. 506066 dated 07.12.2009: “Rendering ed-
Type Certificate No. ТД 0035 ver.2 “ТV3-117VМА-SBМ1V ucational services by educational institutions”; issued by
turboshaft engine” due to introduction of series 4 and 4E; the Ministry of Education and Science of Ukraine
issued by the State Aviation Administration of Ukraine
License АГ No. 582372 dated 14.12.2011: “Rendering educa-
Aviation Equipment Developer’s Certificate СР No. 0009, tional services by educational institutions”; issued by the
issued by the State Aviation Administration of Ukraine Ministry of Education and Science, Youth and Sport of Ukraine

Certificates of Conformance and Certificates of Type License АГ No. 572300 dated 10.11.2011: “Rendering
Approval services in the sphere of technical protection of informa-
tion”, issued by the State Service of Special Communica-
Type Approval Certificate No. OДC 0550-0209/2.6 for gas tion and Information Security Administration of Ukraine
turbine drives of D-336 and AI-336 family for compliance
with standard АPI 616; issued by SGS (Ukraine) License АВ No. 583195 dated 16.06.2011: “Rendering
services in fixed local telephone with capacity of network
Certificate of Conformance No. UA1.014.0077625-11 for up to 10,000 numbers with the right of technical mainte-
«Motor Sich СЦМ-80» cream separator; issued by R&D Cen- nance and operation of telecommunication networks and
ter “Stankocert” (Ukraine) selling telecommunication channelsat the territory of Za-
porozhye region”; issued by National Communications
Certificate of Conformance No. UA1.014.0026194-11 for Control Commission of Ukraine
«Motor Sich СЗ-150, 150-1» sharpening machine for saw
chains; issued by R&D Center “Stankocert” (Ukraine) License АГ No. 595276 dated 17.06.2011: “Design, mount-
ing and maintenance of fire protection means and heating
Certificate No. С-UA.АГ17.В.10697 for compliance of “Motor facilities, estimation of fire safety level of the objects”;
Sich ГТЭ-6/6,3 М1УХЛ1” gas turbine power generation set issued by State department of fire security of the Ministry
with technical regulations of Russian Federation; issued by of Emergency Situations of Ukraine.
«Standardization and Certification Center» Ltd. (Russia)
License АВ No. 519339 dated 22.03.2010 “Application of
Certificate of Conformance No. UA1.050.0097624-11 for sources of ionizing radiation”
“Motor Sich МБ-4,05” walking tractor; issued by INPOMT
(Ukraine) License АГ No. 594646 dated 04.07.2011: “Economic ac-
tivity, operations hazardous waste management”
Certificate No. С-UA.МП09.В.00004 for compliance of “Motor
Sich ПЛМ-40Э, 40ЭД” outboard engines with technical regu- License АВ No. 592191 dated 6.09.2011 “Rendering serv-
lations of Russian Federation; issued by Federal State Insti- ices in individuals and property protection”; issued by the
tution “Russian Maritime Register of Shipping” (Russia) Ministry of Internal Affairs of Ukraine

Certificate No. С-UA.АЯ04.В.00259 for compliance of

“Motor Sich-270, -370” power saw with technical regula-
tions of Russian Federation; issued by the All-Russian Sci-
entific Research Institution of Standartization and
Certification in Machine-Building Industry (Russia)

33
 g K-8J airplanes with AI-25ТLK engine in China, Sudan,
Service maintenance Bolivia, Venezuela;
g experimental-industrial operation of Mi-8MSB helicop-
Motor Sich JSC has an after-sales service division (Product
Support Department – PSD) that provides technical support ters with TV3-117VMA-SBM1V series 4E engines, as well
of all manufactured aircraft engines within the whole period as Mi-8MTV and Mi-24 helicopters with TV3-117VMA-
of their operation. PSD is the main link connecting the Com- SBM1V engines;
pany with numerous operating organizations. g experimental-industrial operation of 10 MW gas-turbine

installation in the urban settlement of Novopskov;

All PSD relations with customers are regulated by the g 7 MW gas-turbine drives at CS “Eskisehir” (Turkey), CS
concluded contracts: at present, more than 398 con-
“Volkhov”, CS “Pikaleva”, underground gas storage station
tracts are in force, as well as 330 additional agreements
to them concerning technical support of engines, in- “Kanchurinskaya” (Russia);
g 8 MW gas-turbine drives at BCS “Shurtan”, “Zevardy”,
crease of operating life, performance of light overhaul in
service, and other services. “Pamuk” (Uzbekistan), “Western Shatlyk” (Turkmenia);
g 8 MW gas-turbine drives at CS “Lozinets” (Bulgaria), CS

In 2011, Product Support Department: “Yuzhno-Balykskaya” (Russia), CS “Proletarskaya” (Ukraine);

g GTE-6.3МS at “Severnaya” heat and power station (Be-
g has rendered various services to the amount of
larus), “Kendyk” heat and power station (Kazakhstan),
288.6 mln. UAH; “Igolskaya” gas-turbine power station.
g has performed light overhaul of all in all 117 engines:

thereof in service conditions - 95, at technical Centers Along with aviation engines and engines of ground applica-
(Technical Center “МSME” in UAE; Technical Center tion, PSD performs warranty repairs of consumer goods not
“Borisfen-Avia” in Russia) – 21; only at the Company facilities, but also directly in operating
g continued to master new production processes for light
organizations of Ukraine (Vinnitsa, Kirovohrad, Volyn’, Sumy,
Kiev, Cherkasy regions), as well as in the Commonwealth of In-
overhaul in service of AI-93B, AI-450-МS, D-436-148, ТV3-
dependent States (Russia, Uzbekistan, Kazakhstan, Belarus).
117VМА-SBМ1V, VK-2500, D-336-2-8, D-436ТP engines;
g has performed theoretical and practical training of
The Company successfully provides paid services. There
11 groups of foreign specialists in all aspects of engine were repaired consumer goods to the amount of 59.6
maintenance, as well as 2 groups of specialists of workshops thous. UAH in 2011.
No. 31 and No. 39 in operation of “IPLEX” vision system.

The sphere of PSD activity has become wider, as new gas-

Main directions of the Com-
pumping stations were put into operation in Iran, Turkey, pany activity
Turkmenia, Uzbekistan, Belarus, Russia, Azerbaijan, Kaza-
khstan. Total of 111 engines are now operated at gas-pump- For stable and successful development of the Company
ing stations and 11 engines are operated at power stations. under conditions of hard competition in the world aviation
market, it needs to perform constant monitoring of ten-
Presently, highly experienced specialists of PSD ren- dencies in consumer and raw material markets, and per-
der in-service support of the following new equipment: manent development of the range of goods.

g Аn-148 and An-158 airplanes with D-436-148 and AI- The Company has specified the following main directions
450-МS engines of Russia Airlines JSC (St. Petersburg, Russia), of activity:
g major overhaul and modernization of helicopters, in-
Polet Airlines (Voronezh, Russia), VАSО JSC, Aerosvit (Ukraine),
Ukraine International Airlines (Ukraine); cluding their remotorization;
g development and mastering production of new compet-
g Аn-140-100 airplanes with ТV3-117VМА-SBМ1 and AI9-3B

engines of “Yakutia” Airlines (Russia), “Motor Sich” Airlines itive engines with great export potential that cover de-
(Ukraine), “НЕSA Airlines” and “Police Aviation” Airlines mands of Ukraine in aviation products;
(Iran); g development of engine modifications demanded by the

g Bе-200 airplanes with D-436ТP engines (EMERCOM of the market of aviation products within short time and with
Russian Federation, EMERCOM of Azerbaijan); low money expenses for the development of products;

P R ODU CTI ON A CTI V I TY

34 annual report
g development of scientific and technical reserve in order g supply of parts for AI-222К-25 engine, manufacture of

to provide competitiveness of domestic engines in future; parts and assembly units for AI-222К-25F engine, as well
g development of aviation engine modifications for as testing of prototype engines;
ground application; g preparation of series production of D-27 engines for de-

g high-quality repairs of engines within short period ac- velopment batch of An-70 aircraft;
cording to flexible contract terms and conditions; g continuation of joint manufacture and development of

g field service of series-produced engines, as well as fur- AI-450-MS series 1 and AI-450M/M1 engines with
ther increase of their consumer characteristics (reliabil- Ivchenko-Progress SE;
ity, service life, cost effectiveness); g continuation of development works on MS-450 engine,

g expansion and deep integration of relations with Russ- manufacture of demonstrator engines;
ian aviation engine-building complex; g continuation of manufacture and development of MS-

g expanding presence at the international market with pri- 400 engines.

mary orientation to the market of CIS and Asian countries.
Works on ground equipment:
Prospects for the development g performance of works on creation of GTE-8.3/МS gas-
of new equipment in 2012 turbine drive for EG-8000МS power station;
g manufacture and testing of the prototype model of

Works on aviation engines Motor Sich PAES-2500D gas turbine power station in semi-
trailer van using sandwich panels;
Works on TV3-117VMA-SBM1V engine:
g development of design documentation and manufacture
g performance of flight tests with Mi-24 and Mi-8MT/Mi-17
of two EG6000T/8000MST power stations of tropical version;
helicopters in cooperation with Mil and Kamov Companies;
g development of operational documentation set for
g creation of different modifications of TV3-117VМА-SBМ1V
EG7000MS gas turbine power station, preparation for man-
engine;
ufacture and testing of the first prototype model;
g performance of works with helicopter companies and for-
g manufacture of the first prototype model of EG8000MS
eign customers on application of TV3-117VMA-SBM1V engine
gas turbine power station.
in Mi-8МТ/Mi-17, Mi-24 and Ка-32 helicopters.
Works on helicopter themes:
Works on TV3-117VMA-SBM1V series 4, 4E engine:
g performance of flight tests of engines in Mi-8T helicopters;
g performance of research and development works on
g performance of works on further increase of operating
modernization of Мi-2 into МSB-2 helicopter with instal-
life characteristics of adaptor bushing; lation of АI-450М/М1 engines;
g performance of works with helicopter companies and for-
g certification tests of Мi-8МSB helicopter;
eign customers on application of the engine in Mi-8Т hel- g performance of works on major overhaul and modern-
icopters. ization of helicopters, including their remotorization.
Works on other aviation engines: Development of production facilities:
g manufacture and assembly of MS-500V engines for per-
formance of research and development works, develop- g introduction of progressive technologies for the econ-
mental and special tests on the test bench, certification; omy of materials, increase of materials utilization rate, re-
g manufacture of pilot batch of MS-14 engines, perform-
duction of labour-output ratio;
ance of research and development works, preparation for g reconstruction of ТEК-3 with transfer of steam waste-

certification, participation in flight development tests of heat exchanger to water-heating mode;

An-3-300 aircraft with MS-14 turboprop engine; g mastering of repair of new kinds of equipment at Lubny

g manufacture, bench and flight tests, certification of TV3-

machine-tool plant;
117VMA-SBM1I engine; g introduction of energy-saving technologies, alternative
g cooperative deliveries of assembly units for AI-222-25 tur-
energy sources etc.
bofan engines manufactured under the concluded contracts;

35
Foreign Economic Activity

g Cash Inflow by Regions

g Participation in Exhibitions

37
 FOREIGN ECONOMIC ACTIVITY

Cash inflow by regions:

Cash Inflow by Regions
1. From Russia – 68.8% of total cash inflow. Cash inflow has
Implementation of export contracts concerning aviation increased by 15.5% as compared to 2010. Major part of
and ground equipment is traditionally the main financial money was received for the delivery of series produced avi-
resource. ation engines: TV3-117 (of various modifications), D-436-
148, AI-450-MS, VK-2500, AI-9V.
The Company supplies new aviation engines, gas-turbine
drives and other ground application products, spare parts, The largest Russian customers in 2011 were:
repair-assembling tools, consumer goods. It carries out
overhauling, aftersale maintenance of aviation and ground g Kazan Helicopter Plant JSC;
equipment, renders in-operation services. g Ulan-Ude Aviation Plant JSC;
g Klimov JSC (St. Petersburg);
Export ratio in goods sold is 93.2%. g Kumertau Aviation Plant JSC;

g Rostov Helicopter Plant JSC;

g Voronezh Aircraft Production Association.

Export ratio in goods sold during 2007-2011 period.:
2. From non-CIS countries – 22.6% of total cash inflow.
100 91,5 93,2 Money was received for the delivery and repair of various
87,5 88,7
83,8 modifications of aviation engines, as well as for the deliv-
80 ery of corresponding spare parts.

60 The largest foreign customers in the reporting year were:

40 g India;
g China;
20 g Algeria;

g Peru.

2007 2008 2009 2010 2011

3 . From Ukraine – 5.4% of total cash inflow. The Company
delivered AI-20 series 5, D-436-148, AI-450-МS aviation en-
Cash inflow under the concluded contracts has increased gines, gas turbine drives of D-336 family to the internal
by 15.5% in 2011 as compared to 2010. Cash inflow from market, as well as repaired various modifications of avia-
customers in Russia, CIS and non-CIS countries has in- tion engines and ground equipment.
creased. There was observed growth of cash inflow from
Ukrainian customers. The largest Ukrainian customers in 2011 were:

g Antonov SE (Kiev);
g Lugansk Aircraft Repair Plant SE (Lugansk).

4. From CIS countries, except for Russia - 3.2% of total cash

inflow. The Company repaired aviation engines, rendered
services for extension of service life, as well as delivered and
repaired ground equipment for CIS countries.

F O REI G N ECON OMI C A CTI V I TY

38 annual report
The largest customers were: Cash inflow for the shipped products and rendered
services as per payment currency was as follows:
g Kazakhstan;
g Uzbekistan;
g Belarus. 3,8
4,8 41,8
The import contracts for acquisition, overhaul and refur-
bishment of the equipment to the total amount of
29,117.9 thous. US dollars were paid in the accounting
year according to the foreign currency expediture plan.

The main partners of Motor Sich JSC on importing equip-

ment, spare parts, as well as equipment overhauling and
upgrading are Germany, Switzerland, USA, Poland, Slova-
kia, Czechia, Korea and other countries.

The following machines were purchased: machining cen-

ters HURON, turning-milling centers DOOSAN, high-vac-
uum furnaces SECO/WARWICK, precision electrospark
coordinate-piercing-broaching machine SODICK, turning 49,6
machining centers SBL 300, 500, other process equipment.
RUR
There were concluded contracts for purchasing high-vac- US dollars
uum furnaces SECO/WARWICK and TAV, five-axis machining
centers, special-purpose grinding machines ESSM 500, UAH
other equipment and components.
Euro

39
 FOREIGN ECONOMIC ACTIVITY

The meetings and negotiations with Operators and Cus-

Participation in Exhibitions tomers of aircraft engines and ground equipment manu-
factured by Motor Sich JSC were held during all events.
Motor Sich JSC persistently implements professional mar- Advertising and presentation of the prospective products
keting policy that makes it possible not only to keep tradi- was actively carried out during negotiations, in special-
tional sales markets of our products, but also to develop new ized publications and mass media of the countries holding
ones. The following methods are used by the Company to exhibitions. Participation in exhibitions and concluded
organize product sales: contracts made it possible to consolidate the results
achieved by the Company in the development of sales mar-
g marketing research of sales markets for determining prior- kets. Motor Sich JSC holds firm positions in the markets
ities and implementing merchantable production projects, of Russia, South-East Asia, Middle East, countries of Africa
as well as sales of aviation and ground equipment; and Latin America.
g participation in prestigious specialized exhibitions related

to the products manufactured by the Company; Enhanced growth of cash inflow under foreign economic
g establishment of regional representative offices in dif-
contracts is expected to be kept in 2012.
ferent regions of the world: Russia, South-East Asia, China,
India, Middle East, Africa, Latin America. By means of the
regional representative offices Motor Sich JSC takes part Russian aircraft manufacturing plants are still priority
in all tenders for delivery of the Company products and partners of the Company. TV3-117VM(VMA), VK-2500 and
services, conducted by the state organizations of differ- AI-9(9V) engines will be delivered under five-year con-
ent countries, such as: China, India, Thailand, Bangladesh, tract with Russian Helicopters JSC to helicopter-build-
Sri Lanka, Algeria, the Gulf States, Bulgaria, Hungary, Turk- ing plants of Kazan, Ulan-Ude, Kumertau, St. Petersburg.
menistan, Russia etc.; There were concluded contracts for the delivery of D-136,
g establishment of the vast network of service centers all VK-2500, АI-9V engines with Rostov helicopter-building
over the world for improving quality and efficiency of assis- plant, and for the delivery of D-436TP engines for Be-200
tance to the Customers of our products; aircraft with Beriev Taganrog Aviation Scientific Techni-
g purposeful advertising campaigns aimed at promoting our cal Complex. The Company continues execution of con-
products in new markets, publications in specialized maga- tract with VASO JSC (Voronezh) for the delivery of
zines and catalogues. D-436-148 and AI-450MS engines for Аn-148 aircraft.

In 2011, Motor Sich JSC took part in all major international Contracts for the delivery of PAES-2500, EG-6000 power-
exhibitions related to the Company’s products: generating units to Russia are being coordinated in the
result of tender.
g exhibitions of aviation equipment – AERO INDIA 2011

(India), “Heli Russia 2011”, “MAKS 2011” (Russia), “Paris Air In addition to cooperation with the Russian Federation,
Show” (France), “Aviation Expo China 2011”, “China Heli- great attention is paid to keeping and expansion of sales
copter Exposition” (China), “Dubai Airshow 2011” (UAE). markets in non-CIS countries that operate aviation
g products of ground application were demonstrated at equipment of the Soviet and Russian origin. The Com-
the following exhibitions: “IRAN OIL SHOW 2011” (Iran), pany expects to hold the achieved volumes of coopera-
“MIOGE-2011” (Russia), “Oil and Gas 2011” (Ukraine, tion with constant foreign partners in 2012. The
Kazakhstan). Company continues performance of the Indian three-year
contract for the delivery of AI-20D engines and the con-
Besides, the Company actively participated in different exhi- tract with China for the delivery of AI-25-TLK engines.
bitions related to consumer goods, in competitions of loggers. There was signed long-term contract with China for the

F O REI G N ECON OMI C A CTI V I TY

40 annual report
delivery of new modern AI-222K-25 engine. The Company At the present time, the Company successfully carries out
continues cooperation with Algeria under long-term con- Project on remotorization of Мi-8 helicopters into Мi-8МSB
tract for repairs of AI-25TL, TV3-117 engines of different version. The Project is based on the new ТV3-117-SBМ1V se-
modifications, and AI-9V engines. ries 4Е engine. The Company completes Project on remotor-
ization of Мi-2 helicopter with the new АI-450М engine. In
There were concluded long-term agreements with the coun- 2012, Motor Sich JSC also plans to sell Мi-2 helicopters in
tries of South-East Asia and Latin America, such as standard configuration that passed major overhaul.
Bangladesh, Sri Lanka, Peru, Columbia and others that oper-
ate airplanes and helicopters powered with the engines man- In order to increase turnover and expand sales markets in
ufactured by Motor Sich JSC. 2012, Motor Sich JSC plans to take part in major interna-
tional exhibitions, such as: “DefExpoIndia” (India), “Farn-
Antonov SE and KHGAPP are major ukrainian customers of borough International Airshow” (Geat Britain), “ILA Berlin
Motor Sich JSC. Contract with Antonov SE for the delivery of Air Show” (Germany), “Airshow China” (China), “Engines-
АI-20D engines will be completed in 2012. Contracts with 2012” (Russia), “Dubai Helishow 2012” (UAE) etc.
Antonov SE for the delivery of D-436-148 and АI-450-МS en- All in all, the concluded contracts and signed agreements
gines are coordinated under joint Ukrainian-Russian Project will let Motor Sich JSC to have positive rates of sales in 2012.
on manufacture of Аn-148 and Аn-158 aircraft.

41
Financial
and economic
activity

g Credit Policy of the Company

g Indices of the Company’s Financial
Stability, Business Activity
and Credit Worthiness

43
 FINANCIAL AND ECONOMIC ACTIVITY

Credit Policy of the Company

Financial and economic activity of Motor Sich JSC is aimed Careful choice of banks and analysis of credit terms and
at provision of financial soundness, stable inflow of fi- conditions allowed to reduce interest rate and decrease
nancial resources and their efficient usage, rational bal- expenses on maintenance of credits.
ance between internal and borrowed funds. Credit portfolio of Motor Sich JSC at the end of 2011 was
reduced by 154.1 mln. UAH.
During the year, credit funds were used for procurement
of equipment, replenishment of circulating funds, payment Credit resources share on the liabilities has reduced from
of salary and other kinds of payments related to produc- 8.9% to 4.8% during the reporting period.
tion activities of the Company.

Dynamics of credit resources share on the liabilities in 2007 – 2011 (%)

20 18,1

16 15,5

13,0
12
8,9
8
4,8
4

2007 2008 2009 2010 2011

F I NA NC I A L A N D ECON OMI C A CTI V I TY

44 annual report
Indices of the Company’s Financial Stability, Business Activity and
Credit Worthiness
Profitability of sales (index that shows net profit share in Return on equity that is determining productivity of in-
volume of sales) was 23.2% in 2011. vestments into the Company has increased in the ac-
counting period up to 30.2%. Return on equity of Motor
Profitability of current assets (that shows productivity of Sich JSC is at rather high level. It testifies to its effi-
circulating assets, as well as the profit earned by the unit cient activity.
of circulating capital of the Company) has grown from
24.1% up to 27.2%. It positively characterizes financial
activity of the Company.

45
Investment Activity
of the Company

g Capital investments
g The Company’s Investments
into Other Legal Entities
g Attraction of Budgetary Funds
and Investments for Financing,
Development and Preproduction
of New Kinds of Products in 2011.

47
 INVESTMENT ACTIVITY OF THE COMPANY

Installation of solar collecting panels at Health Resort

Capital investments g

“Motor”, Catering Center.

The scope of capital construction of social facilities
In 2011, the Company performed works on reconstruction planned for the year was performed. All recreation cen-
and technical reequipment of the operating production fa- ters, preventoriums and children's health camps were
cilities, construction of social facilities, capital and light timely prepared for summer recreational season.
repair of buildings and structures. 615.7 mln. UAH of the
Company’s own funds were directed for these purposes.
Thereof, 330.0 mln. UAH were spent for procurement of The Company’s Investments
equipment for main production facilities.
into Other Legal Entities
Динамика приобретения оборудования для основ- As of 01.01.2012, the Emitter owns the shares and equity
ного производства за 2007–2011 гг., млн грн stakes of more than 40 companies.

400 330,0 The Emitter owns the shares (equities) of the companies
located in Ukraine and Russia. The share of the Emitter
308,9
320 varies from several thousands to tens of mln. UAH. The
Emitter carries out work aimed at restructuring of these as-
240 sets and abandonment of non-core investments. Invest-
ments into aviation industry are priority ones for strategic
160 129,7 development of the Emitter and further investments.
75,3 56,5
80 The following investments were made in 2011:
g founded “Aviaremont MS” Ltd. (Russia);

2007 2008 2009 2010 2011 g founded “Vinnitsa aircraft plant” Ltd.;

g contributed funds into Statutory fund of “MOTOR

DEALER” Ltd.
124 pieces of equipment were distributed among work-
g founded the Company’s subdivision - Lubny machine-tool
shops during the year:
plant (its main activity is repairing of machine tools).
g CNC milling machining centers;
g purchased administrative building for Representative of-
g CNC turning machining centers;
fice of Motor Sich JSC in Republic of Belarus.
g CNC turning semiautomatic machines;

g CNC circular grinding machines;

In 2012, the Company plans to strengthen its presence
g Electrical discharge machines and other process
at the market by means of investments into aviation in-
equipment.
dustry of Republic of Belarus. In January 2012, the Com-
pany has purchased controlling share of “Orsha aircraft
The following works were carried out:
repair plant” JSC.
g Construction of foundations for installation of new high-
technology machining centers;
g Reinforcement of foundation of buiding No.18 by in-

stallation of piles and anterides;

g Reconstruction of test benches for MS-500V, AI-450M,

TV3-117, VK-2500 engines;

g Commissioning of test bench No.3 (Zaporozhye Me-

chanical Plant) for AI-222K-25 engines;

g Completion of the first stage of construction of the Com-

pany’s Labour Glory Museum;

I NV E S T M EN T A CTI V I TY OF TH E COMPA N Y
48 annual report
 ian Federation and the Cabinet of Ministers of Ukraine
Attraction of budgetary about introduction of supplements to the Agreement be-
funds and investments tween the Government of the Russian Federation and the
Government of Ukraine about cooperation in the devel-
for financing, development opment, manufacture, deliveries and operation of aviation
and preproduction of new equipment, dated August 20, 1997.
g have developed package of documents on participation

kinds of products in 2011 in tender for selection of private partner for implemen-
tation of state-private partnership concerning objects of
Since there were no funds in the budget of Ukraine of the state and municipal property, as well as objects be-
2011 for financing the investment projects on the longing to the Autonomous Republic of Crimea, and di-
Company’s themes, and, therefore, the Cabinet of Min- rected it to the Ministry of Defence, the Ministry of
isters of Ukraine has not held any tenders, the Com- Industrial Policy, the State Property Agency, State Com-
pany did not submit any investment projects for mittee “Ukroboronprom”, the Ministry of Finance.
participating in tenders.

To reduce the Company’s expenses by getting preferences

on taxes and dues, and commit free resources to modern-
ization of production facilities, the Company’s specialists:
g have passed the 1st stage of coordination of “The State

special scientific and technical programme on the devel-

opment of aviation industry of Ukraine for the period till
2020” with Ministries and Administrations.
g have developed “Concept of the state special scientific

and technical program on creation of light helicopter” and

“the State scientific and technical program on creation of
light helicopter”, co-ordinated these Projects with UkrNI-
IAT and directed for coordination with Ministries and Ad-
ministrations.
g have prepared data under the Project of the European

Commission “Effective systems and power units for small

aircraft” (project ESPOSA). Preliminary financing was re-
ceived according to Funding Agreement No. 284859.
g have introduced offers in the Law of Ukraine No.4282

VI, dated 22.12.2011, “About the State budget of Ukraine

for 2012” for obtainment of budgetary funds for financing
of investment projects.
g have introduced amendments and supplements to Res-

olution of the Cabinet of Ministers of Ukraine No. 680,

dated 21.07.2010, “On import of the goods to customs ter-
ritory of Ukraine by aircraft manufacturers”.
g ogether with “Systems of investments and innovations”

JSC (Belarus) have developed and got approval of “the

Concept of complex development of “Orsha aircraft repair
plant ”JSC.
g have prepared and introduced offers of Motor Sich JSC to

the 5th Protocol signed by the government of the Russ-

49
Securities

g Analysis of Changes in Cost

of the Company’s Shares
g Quantity and Structure of Shareholders
g nformation about Depositary
of the Company’s Shares
g Information about Custodier
of the Company’s Shares

51
 SECURITIES

Analysis of Changes in Cost of the Company’s Shares.

In 2011, deals with Motor Sich JSC shares (code in trade systems – «MSICH») were carried out at FSTS Stock Exchange and the
Ukrainian Stock Exchange, as well as at off-exchange market. Total amount of deals with the Company shares in 2011 has
made about 4 billion UAH.
Year 2011 was one of the most difficult ones for the world and domestic share markets. According to expert analyses, Ukrain-
ian share market has lost more than 30% from the beginning of 2011. There were observed essential fluctuations of share prices
of Ukrainian emitters in this period. Securities of Motor Sich JSC did not become an exception. There was registered minimum
price of 1602 UAH and maximum price of 3868 UAH per 1 share of Motor Sich JSC.
Price and the scope of deals with Motor Sich JSC shares at the Ukrainian Stock Exchange, UAH.
Year Minimum Maximum As of the end of period Average daily scope
of deals
2010 1 505 3 040 2 978 4 332 721
2011 1 609 3 868 2 230 13 936 487
Change 6,91% 27,24% - 25,11% 221,7%

Inter-temporal changes of FSTS index and cost of Motor Sich JSC shares
4500
4000 FSTS index
3500 Average price of deals, UAH
3000
2500
2000
1500
1000
500
0
06.01.2006
06.04.2006
06.07.2006
06.10.2006
06.01.2007
06.04.2007
06.07.2007
06.10.2007
06.01.2008
06.04.2008
06.07.2008
06.10.2008
06.01.2009
06.04.2009
06.07.2009
06.10.2009
06.01.2010
06.04.2010
06.07.2010
06.10.2010
06.01.2011
06.04.2011
06.07.2011
06.10.2011

Price and scope of deals with Motor Sich JSC shares at FSTS Stock Exchange, UAH.
Year Minimum Maximum As of the end of period Average daily scope
of deals
2006 275 475 415 246 802
2007 430 1 778 1 729 2 516 041
2008 166 1 757 365 1 982 324
2009 280 1 810 1 645 676 047
2010 1 550 3 070 2 967 600 137
2011 1 602 3 850 2 170 471 969
Change 3,36% 25,41% - 26,86% -21,36%
(2011/2010 )

S ECU R I TI ES
52 annual report
In 2011, shares of Motor Sich JSC have become leaders of turnover at the Ukrainian stock exchange. The scope of deals has
reached 3.7 billion UAH.
Capitalization (market cost) of Motor Sich JSC as of the end of 2011 has made 4.6 billion UAH.
According to forecasts of analysts, Motor Sich JSC shares have notable fundamental potential of growth in 2012. They are
still among the most liquid securities that are attractive for investments in Ukraine.

Quantity and structure of shareholders as of 16.05.2011*

Owners of shares Q-ty of Q-ty of shares, pcs. Share in Statutory Nominal value
Shareholders Capital,% of securities, UAH.
Legal entities 279 1 530 005 73,6 206 550 675,00
Natural persons 7 870 450 387 21,7 60 802 245,00
Emitter 97 598 4,7 13 175 730,00
Total 2 077 990 100,0 280 528 650,00
* Date of the drawn up Summary Register of Shareholders that have the right to receive dividends per 2010.
The state is not a shareholder of Motor Sich JSC.

Holders of more than 10% share of the Company’s Statutory Capital

Shareholder Q-ty of shares, pcs. Share in Statutory Capital, %
Vyacheslav Alexandrovich Boguslayev 311 421 14,98665

In 2011, Motor Sich JSC has not effected emissions of bonds and other securities, which issue is subject to registration. The
Company has not made decisions about repurchase of own shares.
According to the decision of general meeting of Motor Sich JSC shareholders, dated 24.03.2011, all issued shares were dema-
terialized – transferred from paper to paperless form.

Information about Depositary of the Company’s Shares

“All-Ukrainian depositary of securities” Private JSC performs accounting of Motor Sich JSC shares ownership (Enterprise
code: 35917889).
Licence for depositary activity as a depositary of securities: series АВ No. 498004 issued by the State Committee on
Securities and Share Market, dated 19.11.2009.

Location: 7-g Tropinina Street, Kiev, 04107, Ukraine

Phone: (044) 585 42 40 (41,42). Site: www.ausd.com.ua

Information about Custodier of the Company’s Shares

Custodier, MOTOR-DEALER JSC, performs accounting of Motor Sich JSC shares ownership of shareholders, for whom the
Company has opened securities accounts on the basis of the Register of Shareholders received from the registrar in the
course of dematerialization.

Licence for depositary activity as a custodier of securities: series АВ No. 456918 issued by the State Committee on
Securities and Share Market, dated 18.02.2009.

Location: 21 Omelchenko Street, Zaporozhye, 69068, Ukraine

Phone: (061) 720 49 85. E-mail: diler@optima.com.ua
Site: www.motor-diler.com.ua

53
Main risk factors

g Industry Risks
g Financial Risks
g Legal Risks

55
 MAIN RISK FACTORS

of new customers and diversification of sales markets.

Industry risk Complex competitive environment
Risk of consumer loss
At the foreign market, Motor Sich JSC has to compete with
Until now the demand for aviation engine-building prod- such big companies as Prat&Whitney (Canada),
Snecma/Turbomeca (France), BMW Rolls-Royce (Ger-
ucts was not too high at the Ukrainian market. Ukrainian
many/England), General Electriс (USA) that possess sig-
airlines do not have enough funds for financing of air-
nificant financial resources for improvement, development
craft-building process, and budget financing is not pro-
and introduction of new kinds of products. Leading com-
vided on regular basis. Therefore, Russia and Asian
panies are diversified structures uniting manufacture of
countries remain main sales markets.
products with aftersale service and provision of financial
services (insurance, leasing of aircraft and engines etc.). At
Substantial risk for Motor Sich JSC is orientation of sales
the present time, they provide their customers with wide
to the Russian market that traditionally occupies more range of modern aviation engines for different aircraft.
than half of sold products and services. At the present They mainly supply new engines.
time, due to increased attention to aviation problems at
Motor Sich JSC regularly increases quality and character-
all levels of the Russian government, we can see growth
istics of its products, develops new aircraft engines and
of aviation equipment maintenance and overhaul market their modifications, improves engine in-service support
in Russia. In conditions of serious competition with Russ- system to hold its positions at the world markets. Such
ian aircraft repair plants, there is a high risk of partial con- works require considerable expenses. Until the present
sumer loss due to intention of Russian airlines to carry out time, financing of works on preparation to series produc-
tion was performed mainly at the account of own funds
aviation engine overhaul and technical maintenance at and bank credits. Budgetary financing was quite insignif-
their domestic facilities. Nowadays, many Russian aircraft icant. The Company particularly needs government sup-
repair plants (in Rostov-on-Don, Aramil, Yeysk, Kaliningrad, port in conditions of severe competition. In 2010, there
Staraya Russa, Omsk, Khabarovsk) may repair different was adopted Law of Ukraine “About amendments to some
laws regarding the state support of aircraft manufacturing
types of aircraft engines produced by Motor Sich JSC.
industry”. This law should create favourable conditions
for the development of aircraft manufacturing, provide for
For provision of stable work and increase of profits, the Com- competitiveness of airplanes, aviation engines and equip-
pany pursues consistent marketing policy aimed at search ment of domestic production. On the basis of this law,

MA I N R I S K FA CTOR S
56 annual report
Motor Sich JSC has got some privileges till 01.01.2016 g analysis of credit terms and conditions that allowed for

that will let it use circulating assets for technical reequip- reduction of interest rates under credit agreements, as
ment, mastering of new types of products and increase of well as expenses on credit maintenance;
production volumes more effectively. g constant control of the Company’s financial state, its

ability and readiness to cancel the credit that allowed for

Financial risks reduction of the Company’s overall credit indebtedness;
Successful fulfilment of these measures guaranteed re-
Financially-economic activity of the Company in com- duction of Motor Sich JSC credit risk to a minimum.
petitve environment is related with numerous risks. Their
influence upon the results of the Company’s activity is Inflation risk
rather high. Risk means probability of loss of the part of
resources, getting less profits or occurence of additional
Inflation risk is characterized by possibility of deprecia-
expenses in the result of certain production and financial
activity. It is necessary to manage risk, id est to use dif- tion of the real cost of capital (in form of financial assets
ferent measures for forecasting of risk events and take of the Company), as well as the expected profits and in-
measures for reduction of risk level. Risks that are related come of the Company from financial transactions in con-
to financial activity of the Company are designated as a ditions of inflation. The source of this risk is an external
special group of risks - financial risks. Since all branches environment in relation to the Company, id est risk that
of economy are bound in a single mechanism due to fi- does not depend on its activity. The Company can not in-
nancial sphere, financial risks play a considerable role in fluence upon external financial risks, it can only foresee
the general portfolio of the Company risks. At the modern
and take them into account.
stage, the basic and most dangerous types of financial
risks are as follows: credit risk, liquidity risk, currency risk The following methods were used to minimize negative
and inflation risk. influence of inflation risk upon activity of Motor Sich JSC:
g timely control of profitability level, included in the cost

Credit risk of products;

g gaining real income from financial deals and mainte-

nance of credit portfolio in stable convertible currencies,

Credit risk is connected with failure of the Company to pay
such as USA dollar and Euro.
principal debt and interests accrued on credit. In 2010,
the Company has fully and timely fulfilled all terms and
conditions under credit agreements, bank guarantee In 2011, Motor Sich JSC has successfully detected and es-
agreements and letters of credit. The following factors timated risks, has made effective administrative decisions
helped to avoid increase of credit risk: on their reduction in order to get maximum income at
g thorough selection of banks based on the image and sta- minimum expenses, and strengthen leading positions in
bility of financial institution; the world market.

57
 MAIN RISK FACTORS

regularly performs monitoring of risk factors and exe-

Currency risk cutes complex program aimed at depreciation of ac-
countable monetary assets and planning of the Company
Such risks are connected with adverse changing of cur- budget. Taken measures on liquidity risk management
rency exchange rate. Foreign economic activity is espe- allow Motor Sich JSC to preserve competitiveness and
cially subjected to such risks. Exporters bear losses in case long-term financial stability.
of devalorization of currency. Importers bear losses in case
of revaluation of currency.
Legal risks
Selection of the most reliable currencies with relatively
stable exchange rates as the contract currency is a wide- Uncertainties of regulatory environment
spread practice in international trade relations.
Motor Sich JSC, as an export-oriented company, deeply
Motor Sich JSC is able to protect itself significantly from feels deformities of current legislation, its inconsis-
currency risks, as it has a large scope of export and import tencies and susceptibility to changes that hinder ef-
operations, carried out in one currency. Basic currencies of fective foreign economic activity. For example, the
the international contracts of the Company are USA dol- Company regularly runs into problems during customs
lars and Russian Federation roubles. Besides, basic part of clearance of goods (difficult procedure of customs reg-
credit resources for the purchase of new imported equip- istration, difficulties with timely and complete sub-
ment is in foreign currency for minimization of currency mission of documents), as well as during obtainment
risk. of permits from the State Export Control Authorities
(prolonged and multi-stage procedure for obtainment
Liquidity risk of permits on negotiations and execution of export
contracts). The Company also undergoes hardship with
Liquidity risk is probability of losses, caused by impossi- timely implementation of warranty obligations on the
bility to purchase or sell assets in the required amount for exported products, because of requirement to perform
short period of time due to worsening of the market con- additional registration of permits both for the export
ditions, probability of deficit of financial resources or of warranty service and goods for its implementation
other highly liquid assets for fulfilment of contractual li- (spare parts, tools etc.)
abilities. Management and minimization of liquidity risk is
performed by means of complex measures aimed at in- For legal settlement of export problems, Motor Sich JSC
crease of profits and reduction of expenses. offers to introduce amendments in current legislative
instruments in the sphere of export control and cus-
Management of liquidity risk is aimed at maintenance toms clearance of goods, as well as Laws of Ukraine,
of sufficient level of financial resources for financing of legislative instruments of the Cabinet of Ministers and
production, administrative and investment needs, pro- different ministries and administrations that regulate
vision of stable fulfilment of financial liabilities, cre- other spheres of the Company activity. These offers
ation of optimal capital structure. The Company will assist to develop Ukrainian aviation engine man-

MA I N R I S K FA CTOR S
58 annual report
ufacturing industry, improve terms of the companies’ many years. The Company has got stable financial sta-
economic activity, strengthen positions of Ukrainian tus. Shares of the Company have high liquidity level and
enterprises in foreign markets, and stimulate develop- are actively quoted at the stock market. Legal acts that
ment and mastering of new equipment. regulate import and export of capital, and may influence
upon payment of dividends or other payments to non-
Risk of investment in securities residents are well-known, and interested parties should
estimate their influence by themselves.
As regards risk of investment in Motor Sich JSC securi-
ties, legal risks should not be considered as significant Procedure of securities income taxation may affect the
ones. Shareholders of Motor Sich JSC have got equal size of yield of shareholders. This factor is also well-
rights to influence upon the settlement of questions re- known. Any changes in tax legislation may affect the
garding election of members of management bodies or current taxation procedure and, correspondingly, the
other questions that are settled by means of voting. The size of yield of shareholders.
Company conducts common clear dividend policy for

59
Personnel
and Personnel Policy

g Personnel Structure
g работа с персоналом
g Prospects of Personnel Policy for 2012
g Youth Policy of the Company
g Social Sphere

61
 PERSONNEL AND PERSONNEL POLICY

Personnel Structure Personnel Development

Labour force at the parent enterprise has increased by In 2011, the Company has employed 443 young special-
1619 persons as compared to January 1, 2011. Labour ists, including 232 young specialists with higher educa-
force structure has changed due to the increased quan- tion, 99 graduates of Zaporozhye Aviation College,
tity of additionally recruited direct workers. Produc- Electrotechnical College, Hydroelectrical College, Trade
tion and industrial personnel structure is as follows: College and other colleges, and 112 graduates of techni-
60.5% – direct and auxiliary workers, 32.5% – engi- cal vocational schools.
neers and technicians, 4.9% – quality control person- 395 specialists of the Company were advanced in qual-
nel and 2.1 % – other categories. ification categories according to the results of ex-
traordinary attestation of engineers and technicians,
including 116 young specialists that have worked for
less than 3 years.

34 specialists of the Company among the newly-ap-

Структура персонала на 01 января 2012 года, в %:
pointed department managers and deputy managers
were trained at administrative courses conducted by the
2,1 Academy of National Economy at the government of
Russian Federation in “Modern Methods of Joint-Stock
4,9 60,5 Company Management”.
Regular work is carried out with young workers of mili-
tary age. During the military service period, the Com-
pany staff maintains correspondence with them,
arranges meetings, reserves workplaces for their em-
ployment after demobilization. In 2011, 48 demobilized
young workers were reemployed by the Company of 72
persons that were called to military service in 2010.
Good work was carried out with recruits in workshops
Nos. 3, 5, 8, 9, 10, 11, 14, 15, 16, 17, 18, 30, 37, 38, 41, 44,
47, 50, 60, 61, Design and Process Department, Culture
and Public Relations Department, Communication De-
partment, Transport and Production Department.

42 workers of the Company have got honorary title “Dis-

tinguished engine-builder”. 26 workers have got honorary
32,5 title “Master with golden hands”.

Производственные и вспомогательные рабочие

Prospects of Personnel
ИТР
Policy for 2012
ОТК One of the basic directions of work with personnel in 2012
will be development of helicopter engineering, namely:
прочие g selection of specialists participating in production of

helicopters, their retraining and professional development

under the Program “Production of helicopters” in Khar’kov

P E R S O NN EL A N D P ER S ON N EL P OL I CY
62 annual report
National Aerospace University named after N.E. Zhukovsky Joint-Stock Company Management” at Moscow Academy
(KhAI) and the State Research and Test Center of Armed of National Economy.
Forces of Ukraine (Feodosiya);
g internship of specialists at aviation enterprises of Ukraine Taking into account complete technical reequipment of the
in specific issues related with production of helicopters; Company, constant updating of machine-tools, introduction of
g training of sudents of Zaporozhye Aviation College and advanced technologies and methods of material processing,
Electrotechnical College at KhAI in specialties: “Produc- personnel policy will be aimed at continuous improvement of
tion of aircraft” and “Aircraft Control Systems”; professional skills of machine-operators, programmers, tech-
g assistance to Zaporozhye Aviation College for opening nicians and their training in operation, maintenance and pro-
of new specialty “Technical Maintenance of Aircraft and gramming of CNC systems Fanuc, Sinumerik (Siemens), West
Engines”, provision of material and technical basis. Labs in Voronezh, Kharkov, Minsk and Moscow, as well as at
For improvement of professional skills of department man- the leading European companies-producers of advanced CNC
agers and deputy managers that were appointed in 2011- machine-tool equipment.
2012, it is planned to train them in “Modern Methods of

Educational structure of production and industrial Age structure of personnel, %:

personnel, %:
22,5 8,7
28,5 32,3
9,9

11,5
18,4

30,6 18,8 18,8

Higher education up to 30 years 51 - 55 years

Secondary technical education 31 - 40 years 56 - 60 years
Secondary education 41 - 50 years over 60 years
Specialized secondary education

30 Candidates of Science are employees of the Company. Average age of the Company’s employees is 40.7 years.
In 2011, turnover rate of personnel at the parent enter-
prise has made 6.61%.

63
 g 43 subdivisions of the Company took part in cre-
Youth Policy of the Company ative competition of wall newspapers “I am proud of
my profession”;
In 2011, Motor Sich JSC carried out the following work
g 34 young workers of the Company took part in planting
with young people under the Company’s Youth policy:
of trees and bushes and collecting of waste in the park
g 195 persons, including 32 persons from 10 companies of named after Тaras Shevchenko.
Russia, 35 workers from 9 companies of Ukraine and 128
workers of Motor Sich JSC took part in the V Youth Scien- Social Sphere
tific and Technical Conference “Young people in aviation:
new decisions and prospective technologies”; The Company’s social sphere includes practically all types
g 228 young workers from 34 subdivisions took part in of social benefits: health care, education, recreation,
professional skill competition in 12 specialties. 73 par- sports, housing. Social facilities are financed from the
ticipants took top places and were awarded with money Company’s assets.
bonuses. 16 winners of competition were advanced in
skill categories, 47 persons thereof with less than 1 year The Company has spent 37.82 mln. UAH for capital in-
experience of work; vestments into the objects of social sphere in 2011.
g 430 persons took part in improvement of territory and The Company is proud of the best local children’s
maintenance of tourist base “Meridian”. 4497 young health and sport camps fully equipped for physical,
workers took part in sports and cultural events on a reg- psychical and social development of the younger gen-
ular basis during the year; eration. Children are provided with opportunities for

P E R S O NN EL A N D P ER S ON N EL P OL I CY
64 annual report
individual improvement, development of artistic skills from Kakhovka artificial lake. Holiday-makers are pro-
and activation of their natural potential. 1 461 chil- vided with more than 100 cottages, sports ground, ten-
dren of the Company’s employees have recreated at the nis tables, billiard-room, rental boats and fascinating
camps. Vacation hotel “Horizont” in Crimea and health youth leasure programs. 17 781 persons, including 12
centers “Motor” and “Priboy” at the Azov sea are 617 employees of the Company and their children, have
equipped with comfortable sleeping buildings, spa- recreated at the health Centers in 2011. The Company
cious halls, improved rooms (suites and semi-suites), has introduced collective arrivals, mother and child ar-
as well as canteens with three daily meals, bars, saunas, rivals, arrivals of veterans of the Great Patriotic War
billiard-rooms, cinema halls, libraries, sports grounds and veterans of labour.
and children’s playgrounds.
1 628 persons live at the Company’s dormitories. 498 chil-
Sanatorium-preventorium in Volnoandreyevka village dren study at the Center of preschool education.
at the bank of the Dnieper river and sanatorium
“Raduga” located in the town of Volochysk (Khmelnit- Collectives of Cultural Center named after T.G. Shevchenko
sky region) provide the resting people with different and “Motor Sich” sports complex are well-known outside
medical and preventive procedures: baths, inhalations, Zaporozhye and Ukraine.
ozokerite therapy, massage, remedial gymnastics, phys-
ical and therapeutic procedures. Tourist camp “Merid-
ian” is the most affordable recreation site for the
Company’s youth for many years. It is situated in one
of the most picturesque places, Sedlasty island, not far

65
FINANCIAL
REPORT

g Audit Report
g Balance
g Report on Financial Results
g Main Aspects of Accounting Policy
g Notes to Financial Report

67
 FI N A N CI A L R EP OR T
68 annual report
 FINANCIAL REPORT

Balance (thous. UAH)

Note No. 31.12.2010 31.12.2011
ASSETS
Intangible assets in residual value 1 1 394 9 757
Fixed assets in residual value 2 1 197 879 1 820 594
Incomplete construction 3 287 023 310 819
Long-term financial investments 4 388 180 395 203
Long-term debt 6 6 595 6 646
Other non-circulating assets 642 642
Production stock 5 2 243 511 3 444 399
Settlements with debtors 6 1 384 001 1 580 625
Monetary resources and their equivalents 7 443 199 347 876
Current financial investments 4 69 031 100 108
Other circulating assets 116 844 152 746
Deferred expenses 3 604 12 924
Total assets 6 141 903 8 182 339

LIABILITIES
Provision of deferred expenses and payments 9 6 869 538 044
Long-term liabilities 10 265 896 83 200
Short-term credits 10 401 533 291 621
Settlements with creditors 10 1 682 405 2 160 478
Deferred income 60 198
Total liabilities 2 356 763 3 073 541

OWNERSHIP CAPITAL
Statutory capital 8 280 529 280 529
Additional invested capital 8 171 757 171 757
Other additional capital 8 656 557 655 858
Capital reserves 8 70 145 70 145
Retained profit 8 2 611 030 3 935 387
Withdrawn capital 8 -4 878 -4 878
Total ownership capital 3 785 140 5 108 798
Total liabilities 6 141 903 8 182 339

69
Report on Financial Results (thous. UAH)
Note No. 2010 2011
Income
Net income (proceeds) obtained from sale
of products (goods, works, services) 11 5 004 916 5 792 524
Other operating income 11 3 166 194 4 194 492
Profit of capital share 11 29 002 26 006
Other financial income 11 2 634 2 830
Other income 11 50 836 27 836
Total income from operating activities 8 253 582 10 043 688
Extraordinary income – –

Expenses
Cost of sold products
(goods, works, services) 2 666 571 2 927 924
Administrative expenses 372 558 474 070
Sales expenses 288 264 315 110
Other operating expenses 11 3 254 936 4 182 952
Financial expenses 11 75 005 42 425
Capital share expenses 11 30 256 15 708
Other expenses 11 47 287 28 829
Profit tax 12 285 307 712 509
Total expenses from operating activities 7 020 184 8 699 527
Extraordinary expenses
Net profit 1 233 398 1 344 161
Net profit per one ordinary share
(UAH per share) 622,80 678,73

FI N A N CI A L R EP OR T
70 annual report
Main Aspects
of Accounting Policy
The principles of accounting policy used as a basis for Assets and liabilities are reflected in the Balance Sheet at
preparation of summary financial report are determined by historical (actual) cost, with the account of the fact that the
effective legislation of Ukraine, Regulations (Standards) for cost of fixed assets, intangible assets and stocks may be
Accounting (R(S)A), accounting policy of Motor Sich JSC revaluated in compliance with the requirements of National
approved by Chairman of the Board of Directors, and other accounting standards.
regulatory documents of the Company. Currency of the Company’s Financial Report – national
Accounting and financial reporting at the Company is based monetary unit of Ukraine, hryvnya (UAH).
on the principles of continuity, full coverage, discretion and
priority of content over form.
Accounting policy is common for the head plant and all its
subsidiaries.

71
 NOTES TO FINANCIAL REPORT

Note 1
Intangible assets
Intangible assets are accounted according to the follow- marks acquired from the third parties are considered as
ing groups: software products for personal computers, intangible assets.
rights to products and services trademarks, rights to ob- Intangible assets of the Company consist mainly of com-
jects of industrial property, incomplete capital invest- puter software and computer networks. Intangible as-
ments in intangible assets, licenses for effecting definite sets depreciation is calculated according to the
types of activity for more than one year period. Intangi- straightforward method. Useful life is determined for
ble assets should be estimated by cost price when they each intangible asset.
are entered to balance. The Company has no intangible assets that are under limi-
Expenses for creation of the Company's own trademark tation of the right of ownership and that have been regis-
are included in costs of the period under account. Trade- tered as security deposits.

Structure and flow of intangible assets (thous. UAH)

Other
Item Software intangible assets Total

Cost
Balance as of 31.12.10 16 604 163 16 767
Received per year 11 107 168 11 275
Retired per year 24 24
Balance as of 31.12.11 27 687 331 28 018

Depreciation
Balance as of 31.12.10 15 279 94 15 373
Accrued per year 2 843 66 2 909
Retired per year 21 21
Balance as of 31.12.11 18 101 160 18 261
Net Balance value as of 31.12.10 1 325 69 1 394
Net Balance value as of 31.12.11 9 586 171 9 757

FI N A N CI A L R EP OR T
72 annual report
Note 2
Fixed assets and low-value
non-negotiable tangible assets
Fixed assets include tangible assets held by the Company in Fixed assets are assets, which useful life is more than one
order to use them during production or delivery of goods year and cost is more than 1000 UAH.
and rendering of services, as well as lease to other persons Fixed assets and low-value non-negotiable tangible assets
or performance of administrative and social-and-cultural are shown in the balance with respect to their historical and
functions; their expected useful life is more than one year. depreciated cost.

Structure and flow

of fixed assets (thous. UAH)
Buildings,
Machines Tools, equip- Other Low-value
Item structures,
and ment and fixed non-negotiable Total
transfer
equipment facilities assets tangible assets
facilities

Cost
Balance as of 31.12.10 852 867 967 000 139 187 252 042 313 757 2 524 853
Received per year 206 351 504 634 27 783 22 677 59 687 821 132
Retired per year 446 9 623 285 1 936 20 107 32 397
Balance as of 31.12.11 1 058 772 1 462 011 166 685 272 783 353 337 3 313 588

Depreciation
Balance as of 31.12.10 315 799 553 596 76 482 108 570 272 527 1 326 974
Accrued per year 21 174 102 435 8 094 12 306 50 290 194 299
Retired per year 90 9 465 266 1 564 16 894 28 279
Balance as of 31.12.11 336 883 646 566 84 310 119 312 305 923 1 492 994
Net Balance value
as of 31.12.10 537 068 413 404 62 705 143 472 41 230 1 197 879
Net Balance value
as of 31.12.11 721 889 815 445 82 375 153 471 47 414 1 820 594

Initial evaluation of objects of fixed assets and low-value The Company has fixed assets, with respect to which there
non-negotiable tangible assets is carried out with re- are limitations stipulated by effective legislation regarding
spect to their first cost. First cost of the object of fixed the right of ownership to the amount of 54 445 thous.
assets and low-value non-negotiable tangible assets UAH. Cost of fixed assets registered as security deposits is
consists of acquisition price and costs that are directly 852 500 thous. UAH. Cost of fixed assets received under
related to bringing fixed assets to condition at which operational lease conditions is 42 446 thous. UAH.
their planned usage is possible. In 2011, fixed assets were acquired for monetary funds
Residual value of fixed assets was not used in the ac- and built up by the Company. Fixed assets were retired
counting year. Additional evaluation of fixed assets was due to liquidation, since they no longer met criteria for
not carried out. acceptance as assets, as well as since they were sold or
Depreciation of fixed assets is accrued during useful life of transferred gratis.
the object by means of straightforward method.

73
Note 3
Capital Investments

Incomplete capital investments form a separate group. An the date of the Balance Sheet, as well as advance payments
individual object of incomplete capital investments is con- for financing of construction.
sidered as a unit for their accounting. Incomplete capital investments are accounted by their his-
Incomplete capital investments in capital tangible assets are torical cost. Depreciation is not accrued for them.
capital investments in construction, manufacture, recon- The amount of 856 203 thous. UAH was spent for capital
struction, modernization, acquisition of objects of non-ne- investments in fixed assets during the accounting year.
gotiable tangible assets, which were not put in service as of

Structure and Movement

of Capital Investments (thous. UAH)
Balance as of Received Balance as of
Item Retired per year
31.12.10 per year 31.12.11

Capital construction 240 632 146 665 217 405 169 892
Acquisition (manufacture)
of fixed assets 30 895 587 898 517 655 101 138
Acquisition (manufacture)
of other non-negotiable tangible assets 15 496 102 669 78 519 39 646
Other 18 971 18 828 143
Total 287 023 856 203 832 407 310 819

FI N A N CI A L R EP OR T
74 annual report
Note 4
Financial Investments

Investments are classified by following categories for finan- Financial investments with the stakes exceeding 20% are
cial accounting: accounted by method of participation in capital and are
• intended for trade; shown as of the date of Balance Sheet with the value de-
• retained till retirement; termined taking into consideration change of total value of
• investments in associated companies; ownership capital of investment object.
• investments in subsidiary companies. Balance value of investments has been increased/decreased
Investments intended for trade are accounted by fair value. by the sum that is the investor’s stake in net profit/loss of
Changes of fair value are referred to income or losses of cor- the investment object and is included into the amount of
responding accounting period. income/losses from the shareholding. At the same time,
Financial investments retained till retirement are bonds that balance value of investments is decreased by the amount of
are subject to retention by the Company due to certain in- declared dividends. All other financial investments as of the
tentions and capabilities. date of Balance Sheet are shown at their self-cost.

Flow of financial investments (thous. UAH)

as of the year end
Item Per year
long-term current

Financial investments as per

the method of participation in capital of:
Associated companies 38 824 370 587
Subsidiary companies 1 059 3 178
Other financial investments into:
stakes and shares of statutory
capital of other companies 597
Shares 28 103 100 108
Bonds 20 840
Other 1
Total 67 986 395 203 100 108

75
Note 5
Process Stock
The stock is considered to be an asset, if it is possible that their consumption, and stock audit is performed annually.
the Company will get future economical benefits connected The stock is reflected in accounting and balance statement
with their utilization and their cost can be reliably deter- at the historical cost as of the date of Balance Sheet. If price
mined. Each item of valuables is a stock unit. of the stock has decreased or inventory items have got
When stock is transferred into production, sold or disposed spoiled, become obsolete or lost originally expected eco-
otherwise, their evaluation is done according to the first-in- nomic value as of the date of Balance Sheet, they are shown
first-out method. To control consumption of inventory by net liquidation value.
items, accounting of their quantity is organized in places of

Balance value of the stock (thous. UAH.)

Item Balance value as of Balance value as of

31.12.2010 31.12.2011

Raw staff and materials 290 952 385 858

Vendor semi-finished items and component parts 155 826 321 997
Fuel 10 749 12 969
Construction materials 1 969 1 159
Spare parts 61 534 109 921
Low-value and rapidly amortizable items 23 988 43 043
Incomplete production 1 549 420 2 339 595
Finished products 135 758 217 507
Commodities 5 542 5 166
Other stock 7 773 7 184
Total 2 243 511 3 444 399

FI N A N CI A L R EP OR T
76 annual report
Note 6
Debt Receivables
Debt receivables are considered to be assets, if there is a lows: debt, which limitation period is expiring earlier
possibility that the Company will get future economical ben- than 12 months after the accounting date, if the debtor
efits and their cost can be reliably determined. Current debt is declared a bankrupt or is absent at the address indi-
receivables for products/goods and services are accepted cated in documents.
as the asset simultaneously with acceptance of sales income Debt receivables for products and goods are reflected in the
and is evaluated by historical cost. Balance Sheet by net cost of sales that is equal to the amount
Current debt receivables for products, goods and services of debt receivables minus the reserve of doubtful debts.
are included in the balance total by net cost of sales. Reserve Bad debt receivables are written off from the assets with
of doubtful debts is accrued as of the date of Balance Sheet non-recurring reduction of the reserve of doubtful debts. If
for determining net cost of sales. This reserve is reflected in the reserve amount of doubtful debts is not sufficient,
the report on financial results being included in other oper- doubtful debts are written off from the assets of the Com-
ational expenses. pany to other operating expenses. The compensation
Reserve amount of doubtful debts is determined based amount of earlier written off debt receivables is included in
on financial solvency of individual debtors. Criteria of re- other operating income.
ferring to debt receivables as doubtful debts are as fol-

Debt Receivables (thous. UAH)

Item As of 31.12.2010 As of 31.12.2011

Bills received – –
Debt receivables for products, goods and services:
net cost of sales 328 356 415 548
Debt receivables for settlements:
of budgetary payments 200 687 242 757
for advances granted 766 729 731 861
for internal settlements 3 717 5 242
Other current debt receivables 84 512 185 217
Long-term debt receivables 6 595 6 646
Total 1 390 596 1 587 271

The other debt receivables in the accounting are debt receiv- Item ‘Long-term debt receivables’ reflects contribution to
ables for sums granted against reports, settlements of claims, the joint activity with Zaporozhye Plant of Consumer
and debt receivables for non-commercial operations. Goods Ltd.

77
Note 7
Funds and their equivalents
Funds of the Company include cash accounts, current and the use of the currency rate as of the date of payment or re-
other accounts at the bank that may be used for financing ceipt of advance payment.
of current activities, as well as cash equivalents that have Balance value of the stated balance sheet items will be de-
no limitations in usage. termined (evaluated) in future according to corresponding
Foreign currency transactions are reflected at primary ac- provisions (standards) of business accounting.
knowledgment by conversion of the sum in foreign cur- Exchange rate differences as per the foreign currency mon-
rency into the balance currency according to the etary items are determined as of the date of settlement and
exchange rate of the National Bank of Ukraine as of the the date of balance.
date of transaction. Exchange rate differences from conversion of the balance
The amounts of paid and received advance payments in for- sheet items denominated in foreign currency are reflected in
eign currency are converted into the reporting currency with operating and other profits (expenses).

Funds (thous. UAH)

Item 2010 2011

Cash account 179 349

Current accounts in banks 403 350 201 480
Other accounts in banks (letters of credit, cheque-books) 30 683 48 401
Funds in transit – –
Equivalent funds 8 987 97 646
Total 443 199 347 876

FI N A N CI A L R EP OR T
78 annual report
Note 8
Ownership Capital
Statutory capital includes cost of property that was obtained The other additional capital includes the cost of fixed assets
by the Company in the result of privatization. indexation and incomplete construction, additional evalua-
Registered statutory fund of Motor Sich JSC was tion of stock, property received free of charge in the result
280,528,650 UAH in 2011. It consisted of 2,077,990 or- of privatisation.
dinary registered shares with nominal value of 135 UAH. Correction of mistakes made during preceding periods has
The amount of shares in circulation has made 1,980,394 at been effected by correcting the balance of undistributed
the end of the year. All shares give equal rights for taking part profit with simultaneous acknowledgement of profits and
in voting, receiving dividends and returning the corporate cap- expenses.
ital part. Net profit per one share amounted to 678.73 UAH.

Changes in ownership capital during 2011 (thous. UAH)

Additionally Other
Item Statutory additional Reserve Undistributed Withdrawn
invested Total
fund capital capital profits capital
capital

Balance as of the beginning of year 280 529 171 757 656 493 70 145 2 625 686 (4 878) 3 799 732
Adjustment:
changes of accounting policy
correction of mistakes 64 (14 656) (14 592)
Adjusted balance as
of the beginning of year 280 529 171 757 656 557 70 145 2 611 030 (4 878) 3 785 140
Net profit during
reporting period 1 344 161 1 344 161
Distribution of profit:
Payments of dividends (19 804) (19 804)
Other changes in capital
(exchange differences per
financial investments) (699) (699)
Total number of changes in capital (699) 1 324 357 1 323 658
Balance as of the end of year 280 529 171 757 655 858 70 145 3 935 387 (4 878) 5 108 798

Прочий дополнительный капитал включает стоимость Исправление ошибок, допущенных в предыдущих пе-
индексации основных фондов и незавершенного риодах, осуществлялось путем корректировки сальдо
строительства, дооценку запасов, имущество, получен- нераспределенной прибыли с одновременным призна-
ное безвозмездно в результате приватизации. нием доходов и расходов.

79
Note 9
Provision of future expenses and payments
Reserves are acknowledged, if the Company has legal or ac- of previous reporting periods taking into account adjust-
tual liabilities in the result of certain event in the past, for ment for reporting period data.
settlement of which, with the greater degree of probability, There were not created reserves for warranty service, an-
outflow of resources will be required, and which can be es- nual remuneration for employment years etc. In the report-
timated with sufficient reliability. ing period, there were accrued provisions for payment of
The Company acknowledges reserve for vacations as re- vacation allowances to the amount of 95 398 thous. UAH.
serves, that is formed monthly based on the salary fund There were used 93 476 thous. UAH.
and estimated rating. Rating is calculated based on data

Provision of future expenses and payments (thous. UAH)

Items As of 31.12.10 As of 31.12.11

Provision of payments to personnel 6 389 8 311

Target financing 480 529 733
Total 6 869 538 044

“Target financing” item contains funds in the amount of of basic activity, as well as out of the Company’s research
529 353 thous. UAH that were released in the result of in- and development works used for the needs of aircraft-
come tax allowance for aircraft-building enterprises, got out building industry.

Note 10
Liabilities
The Company acknowledges liabilities, if their value can be (redemption period is up to 12 months).
truly assessed and there is possibility of decreasing eco- Current credit indebtedness is accounted and reflected in
nomic gains in future due to their liquidation. If formerly ac- Balance Sheet as per the initial cost that equals to the fair
knowledged liabilities are not subject to liquidation as of the value of obtained assets or services.
balance sheet date, their amounts are included into the in- The Company transferres part of long-term liabilities into
come of the reporting period. short-term ones, when less than 365 days remains till the
The Company’s liabilities are classified as long-term ones return of part of amount due according to contractual terms
(redemption period is over 12 months) and current ones and conditions as of the date of Balance Sheet.

Long-term liabilities (thous. UAH)

Item As of 31.12.10 As of 31.12.11

Long-term bank credits 103 771 72 721

Other long-term financial liabilites 6 035 –
Deferred tax liabilities 156 090 10 479
Total 265 896 83 200

FI N A N CI A L R EP OR T
80 annual report
Deferred tax liabilities (amount of income tax that will be The amount of deferred tax assets and liabilities is repre-
paid during next periods out of timing tax differences sub- sented as per “Deferred tax liabilities” item of Balance Sheet.
ject to taxation) have decreased by the amount of 145 611
thous. UAH in the reporting year.

Current Liabilities (thous. UAH)

Items As of 31.12.10 As of 31.12.11

Short-term bank credits 401 533 291 621

Current debt under long-term liabilities 36 518 29 463
Bills issued 473 473
Credit indebtedness for goods, works and services 67 102 121 293
Current liabilities on settlements:
of obtained advance payments 1 368 072 1 851 853
with budget 85 615 23 804
of insurance 18 272 25 850
of salary 38 179 44 223
with participants 3 438 10 044
Other current liabilities 64 736 53 475
Total 2 083 938 2 452 099

Items of current liabilities reflect indebtedness, which liq- “Other current liabilities” item reflects the amount of liabil-
uidation term did not become due as of the Balance ities on non-commercial transactions and settlements with
Sheet date. other creditors.

Note 11
Income and Expenses
Items of income and expenses are accounted and estimated Accounting of interest income and expenses is carried out
at the moment of sale of assets or provision of services. The mainly by means of accrual method. Cash method is used
Company’s income and expenses that belong to the report- only for accounting of interest income accrued on the bal-
ing period are reflected in that period, regardless of the date ance at bank accounts.
of actual receipt or payment of monetary assets. Income from selling of products (goods, works, services) in
Income that was received in the reporting period, but was 2011 has made 2 864 600 thous. UAH.
to be registered in the future one, is accounted as deferred The basic kinds of activities of Motor Sich JSC in 2011 were
income. Expenses and payments that belong to the future production and repairing of aviation engines and ground
periods are accounted as deferred expenses. equipment produced on their basis.

81
Sale income (thous. UAH)
Item 2010 2011

Net income (proceeds) from selling products (works, services) 5 004 916 5 792 524
from production and repairing of aviation engines 4 399 226 5 313 931
from production of ground equipment 192 836 252 535
from consumer goods 95 968 105 427
other goods, works, services 316 886 120 631

Structure of income with respect to ordinary types of activ- ground equipment. Income from selling consumer goods is
ity has not changed since the previous reporting period. In- negligible. Absolute values of income from ordinary kinds
come from ordinary types of activity, the same as in the of activity have increased by 15.7% in 2011 against figures
previous period, for more than 90% consists of income of the previous period.
from production and repairing of aircraft engines and

Income and expenses from other kinds of operating, investment and financial activity (thous. UAH)
Item 2010 2011

Other kinds of operating income

Income from selling foreign currency 3 003 745 3 877 551
Operating lease of assets 5 343 7 209
Operating difference in rates 11 793 48 845
Income from selling other circulating assets 64 162 49 910
Received penalties, fines and forfeits 835
Maintenance of municipal housing,
social and cultural facilities 3 921 3 938
Other kinds of operating income and expenses 76 395 207 039
Total 3 166 194 4 194 492
Income from participation in capital from investments in:
Associated companies 28 473 24 947
Subsidiary companies 529 1 059
Total 29 002 26 006
Other kinds of financial income
Dividends
Other kinds of financial income 2 634 2 830
Total 2 634 2 830
Other kinds of income
Selling of financial investments 15 003 426
Non-operating difference in rates 35 480 26 539
Assets received free of charge 51
Other kinds of income 353 820
Total 50 836 27 836

продолжение таблицы — на стр. 83

FI N A N CI A L R EP OR T
82 annual report
Income and expenses from other kinds of operating, investment and financial activity (thous. UAH)
Items 2010 2011

Other operating expenses

Cost of sold foreign currency 3 007 798 3 878 677
Operating lease of assets 84 72
Operating difference in rates 40 098 52 303
Selling of other negotiable assets 47 847 33 208
Penalties, fines and forfeits 1 592 4 756
Maintenance of municipal housing,
social and cultural facilities 100 597 129 520
Other operating expenses 56 920 84 416
Total 3 254 936 4 182 952
Expenses from participation in capital from investments in:
Associated companies 29 833 15 670
Subsidiary companies 423 38
Total 30 256 15 708
Other financial expenses
Interest on credit 42 425 75 005
Total 42 425 75 005
Other expenses
Selling of financial investments 721 12 879
Selling of capital assets 208
Non-operating difference in rates 27 660 31 667
Non-operating difference in rates 433
Other expenses 15 2 533
Total 28 829 47 287

The highest figures in items regarding other kinds of operating income and expenses belong to income and expenses
related to selling of foreign currency and other negotiable assets, as well as maintenance of social facilities. Absolute
values of income/expenses have increased significantly in comparison with the previous year.

83
Note 12
Income Tax
Income tax expenses, reflected in the Report on financial re-
sults, consist of sums of current and deferred income tax.
Current income tax is determined based on taxable income
for the reporting period, estimated according to the rules of
tax law of Ukraine.
Deferred tax assets and liabilities are estimated according to
tax rates, that, as expected, will be applicable in the period,
when assets will be sold or liquidated on the basis of tax
rates, that were effective as of the reporting date, or it was
credibly known about introduction of which in the near fu-
ture as of the reporting date.

Income Tax (thous. UAH)

Items 2010 2011

Current income tax 249 197 858 120

Deferred tax assets:
as of the beginning of the reporting year
as of the end of the reporting year
Deferred tax liabilities:
as of the beginning of the reporting year 119 980 156 090
на конец отчетного года 156 090 10 479
Included in the Rport on Financial Results - total 285 307 712 509
including: current income tax 249 197 858 120
Decrease (increase)
of deferred tax assets
Increase (decrease)
of deferred tax liabilities 36 110 -145 611
Shown in structure of ownership capital

FI N A N CI A L R EP OR T
84 annual report