New MOTOR SICH PJSC · 2010. 6. 10. · MOTOR SICH annual report 2009 3 Motor Sich PJSC is one of the leading aircraft engine-building factories of the world in the field of develop-ment,

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BASIC DATA ABOUT COMPANY

Information About Company . . . . . . . . . . . . . . 5

Information About Registrar . . . . . . . . . . . . . . . 5

Quantity and Structure of Shareholders . . . . . . 5

Acquiring banks . . . . . . . . . . . . . . . . . . . . . . . . . 6

Information About Statutory Capital . . . . . . . . 8

Strategy of Company . . . . . . . . . . . . . . . . . . . . . 8

Priority Activities of Company . . . . . . . . . . . . . . 9

Mission of Company . . . . . . . . . . . . . . . . . . . . . 10

Specialization . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Positioning in Industry . . . . . . . . . . . . . . . . . . . . 11

Certification . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Securities of JSC “Motor Sich” . . . . . . . . . . . . . . 15

Structure of Company . . . . . . . . . . . . . . . . . . . 16

Air Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Subsidiary Companies . . . . . . . . . . . . . . . . . . . . 19

MAIN RISK FACTORS

Industry Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Financial Risks . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Legal Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

INVESTMENT ACTIVITIES

Trend Analysis of Stock Value . . . . . . . . . . . . . 27

Preproduction Activities . . . . . . . . . . . . . . . . . . 27

Involvement of Budget and Credit Funds . . . . 27

MANAGEMENT BODIES OF JSC “MOTOR SICH”

Corporate Management . . . . . . . . . . . . . . . . . 29

Board of Directors . . . . . . . . . . . . . . . . . . . . . . 30

Supervisory Board . . . . . . . . . . . . . . . . . . . . . . . 33

Internal Audit Commission . . . . . . . . . . . . . . . 36

FOREIGN ECONOMIC ACTIVITY

Business Strategy . . . . . . . . . . . . . . . . . . . . . . . 39

PRODUCTION ACTIVITY

Main Aspects of Production and Financial Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

Production Activity . . . . . . . . . . . . . . . . . . . . . . 46

Advanced Technologies . . . . . . . . . . . . . . . . . . 48

Service Maintenance . . . . . . . . . . . . . . . . . . . . 50

Capital Construction . . . . . . . . . . . . . . . . .51

Prospects for 2010 . . . . . . . . . . . . . . . . . . . . . . 52

FINANCIAL AND ECONOMIC ACTIVITY . . . . . 55

PERSONNEL POLICY

Labour and Wages . . . . . . . . . . . . . . . . . . . . . . 57

SOCIAL SPHERE . . . . . . . . . . . . . . . . . . . . . . . . . 61

FINANCIAL REPORT

Balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63

Report on Financial Results . . . . . . . . . . . . . . . 64

Main Aspects of Accounting Policy . . . . . . . . 65

Notes to Financial Report . . . . . . . . . . . . . . . . 66

CONTENTS


20093

Motor Sich PJSC is one of the leading aircraft engine-building factories of the world in the field of develop-ment, production, testing, in-service support andoverhauling of modern aircraft engines.The factory products are used in versatile airplanes andhelicopters in more than 120 countries worldwide.All products offered by the company to the world marketpossess high functional characteristics and are producedby means of certified production facilities.Modern technologies developed and incorporated at MotorSich PJSC, new engineering and technological solutions,well-developed scientific and technical infrastructure andhighly qualified personnel establish the basis of success andcontinuous development of Motor Sich PJSC.Efficient system of the delivered products servicing allowsrendering highly competitive services in maintenance ofengines practically in any part of the globe.

We are always open to all enterprises and organizationsready to extend their relations for mutually-beneficial andpromising cooperation in the field of development, man-ufacturing and operation of aviation equipment.

V.A. BoguslayevChairman of the Board of DirectorsMotor Sich PJSC

BASIC DATAABOUT COMPANY


20095

Information About RegistrarRecords on the right of ownership of securities ofMOTOR SICH PJSC are kept by an independent regis-trar – Sich-Register Ltd. (Enterprise Code 30801610). Location: 21 Omelchenko Street, Zaporozhye 69068,Zaporozhye region. Operating license – АВ No. 115244 dated 14.06.2006. Phone: 7204863, Fax: 2139764.Web-page: www.s-reestr.com.ua E-mail: [email protected].

Information About AuditorReliability and completeness of financial reports ofMOTOR SICH PJSC for 2009 is confirmed by an auditingcompany ZaporozhAudit-Consult CJSC (Enterprise Code13625523) according to Agreement No 3/2/2140/08 – Д(general accounting) dated 27.02.2008. Location of auditing company: 6 Tikhy Pereulok Street,Zaporozhye.Date of state registration of ZaporozhAudit-Consult JSC – 21.01.1994; Enterprise code – 1 103 120 0000 012930. Certificate of Auditing chamber No. 0057, dated 26.01.2001,about registration as a subject of auditing activity. Validity term of Certificate is extended till December 15, 2010.

Owners of shares(Shareholders)

Q-ty of entities(persons) Q-ty of shares pc. Share in Statutory Capital

of MOTOR SICH PJSC (%)

Legal entities 26 3 515 0,17

Natural persons 9 145 466 881 22,47

Nominee shareholders * 4 1 509 996 72,70

Emitter 97 598 4,70

State 0 0,00

Total 2 077 990 100,00

Title(Full name for natural persons) Q-ty, pc. Total nominal value,

UAHShare in StatutoryCapital, %

Vyacheslav Alexandrovich Boguslayev 311 421 42 041 835,00 14,99

as of 31.12.2009

* Nominee shareholders are not owners of securities

Information About CompanyShort title: Motor Sich PJSC Full title: Motor Sich Public Joint-Stock Company Company Code 14307794Legal address: 15 Motorostroiteley Avenue,Zaporozhye 69068, UkrainePhone: (380 61) 720-48-14Fax: (380 61) 720-50-00E-mail: [email protected] page: www.motorsich.com

Quantity and Structure of Shareholders

As of 01.02.2010 (registration date – date of opening the register for mailing Notifications to the shareholders about holdingthe general meeting of shareholders on 25.03.2010) shareholders of the company are natural persons and legal entities,including: natural persons – 9 320 shareholders; legal entities – 210 shareholders.

Information About StateRegistrationCertificate Series and No. – А00 207866.Record No. – 1 103 107 0031 005089.Registration place – the Executive Committee ofZaporozhye City Council. Date of registration – 25.05.1994.

Holders of More Than 10% Share of Statutory Capital


20096

List of current accounts of Motor Sich PJSCFULL TITLE OF BANKINGINSTITUTION, MFO ACCOUNT NAME NUMBER

DATE OFOPENING

Branch of FUIB PJSCMFO 31362369035 Zaporozhye57, 40 Let Sovetskoy Ukrainy StreetEnterprise Code – 20513546

Current (main) - (980 - UAH) No. 26000976712139 23.11.99

Currency - (643 - Rus. Rub.) No. 26000976712139 29.11.99

Currency - (840 - USA dollars) No. 26000976712139 23.11.00

Currency - (978 - Euro) No. 26000976712139 15.09.00

Donetsk Branch ofCreditprombank OJSCMFO 33559383062 Donetsk113, I. Tkachenko StreetEnterprise Code - 25098916

Current - (980 - UAH) No. 26007198002341 29.04.98



Currency - (978 - Euro) No. 26004197802341 21.04.99

Zaporozhye Branch ofCreditprombank OJSCMFO 37313569005 Zaporozhye5 Gagarina Str., office 106Enterprise Code – 33151845

Current - (980 - UAH) No. 26004099800012 01.02.05


Currency -(978 - Euro) No. 26005099780012 24.03.05


State credit-import bank ofUkraine PJSCMFO 31397969063 ZaporozhyeEnterprise Code – 24905013

Current - (980 - UAH) No. 260090175838 14.02.02



Currency -(978 - Euro) No. 260090175838 11.01.05

Central Department ofDongorbank CJSCMFO 33497001021 Kiev5 Klovsky Spusk StreetEnterprise Code – 20365318

Current - (980 - UAH) No. 26006450001000 26.09.03



OTP Bank PJSCMFO 30052869063 Zaporozhye66 Lenin AvenueEnterprise Code – 21685166

Current - (980 - UAH) No. 26006001301191 24.09.03



Currency - (978 - Euro) No. 26006001301191 24.09.03

SERVICING BANKS


20097

FULL TITLE OF BANKINGINSTITUTION, MFO ACCOUNT NAME NUMBER

DATE OFOPENING

Rodovid Bank OJSCMFO 47171704136 KievEnterprise Code -14349442

Current - (980 - UAH) No. 260056640 26.05.04



UkrSibbank JSCMFO 351005 61050 Kharkiv60 Moskovsky AvenueEnterprise Code – 09807750

Current - (980 - UAH) No. 26003044619000 19.06.06



Currency - (978 - Euro) No. 26001044619002 19.06.06

Zaporozhye Branch ofVTB Bank OJSC69001 Zaporozhye35А Pobedy StreetEnterprise Code – 25970260

Current - (980 - UAH) No. 2600630100153711.10.07



Ukrainian Bank for Reconstructionand Development OJSCMFO 38088304080 Kiev4 Alexey Terehin StreetEnterprise Code – 26520688

Current - (980 - UAH) No. 260050011066 24.10.07

MOTOR-BANK OJSCMFO 313009 69068 Zaporozhye54-b 8 March StreetEnterprise Code – 35345213

Current - (980 - UAH) No. 26006001000017 17.01.08



Currency - (978 - Euro) No. 26006001000017 03.07.08

BROKBUSINESSBANK PJSCMFO 37325469005 Zaporozhye5 Gagarina Street, office 107Enterprise Code – 34540988

Current - (980 - UAH) No. 260075025801 03.12.08



Currency - (978 - Euro) No. 260075025801 03.12.08

Swedbank PJSCMFO 30016469091 Zaporozhye52 А Pobedy StreetEnterprise Code – 19356840

Current - (980 - UAH) No. 26008003842801 04.02.09



Currency - (978 - Euro) No. 26008003842801 04.02.09

Credit Dnepr Bank PJSCMFO 30574969035 Zaporozhye153 Lenin Avenue, Office 89Enterprise Code – 14352406

Current - (980 - UAH) No. 2600430373402 19.10.09



20098

INFORMATION ABOUTSTATUTORY CAPITALThe statutory capital of MOTOR SICH PJSC is UAH 280528 650 (Two hundred and eighty million, five hun-dred and twenty-eight thousand, six hundred andfifty), and is separated into 2 077 990 (Two million,seventy-seven thousand, nine hundred and ninety)simple registered shares. Nominal value of each shareis UAH 135 (One hundred and thirty-five). The amount of statutory capital of MOTOR SICH PJSCdid not change during the last three years.

STRATEGY OF COMPANYStrategy of MOTOR SICH PJSC is directed to:■ increase volume of realized products

■ expand product markets

■ promote products to the world markets

■ develop perspective products

■ receive maximal profit

■ preserve labour collective.

For that purpose MOTOR SICH PJSC:

■ develops progressive research and engineering, processdesign solutions, and intorduces them into production;

■ strengthens and develops cooperation with developersand partners;

■ develops and introduces joint programs, supported byintergovernmental agreements with the RussianFederation: joint production of An-140 airplane in Kharkovand Samara, An-148 in Kiev and Voronezh, Be-200 inTaganrog, renewal of production of An-124 “Ruslan”airplane in Ulyanovsk;

■ participates in joint projects on creation and mod-ernization of civil and military helicopters Mi-28,Mi-17, Ka-50, Ka-52, Ka-32 with engines seriesTV3-117, VK-2500, TV3-117VMA-SBM1V, helicopterMi-26 with Ukrainian engines D-136 having thegreatest carrying capacity, Mi-2 helicopter withMC-500V engines;

■ co-operates with Ukrainian and Russian aviation firmsand research centers in the sphere of aviation engine-building.


20099

Business strategy of MOTOR SICH PJSC is directed to increase inthe volume of realized products, expansion of sales markets,active promotion of products to the world markets, receipt ofmaximal profit, introduction of new perspective goods intoproduction.

In order to hold positions at the aviation engine-buildingmarket, systematic work is required on improvement ofquality and characteristics of manufactured products,as well as development of new engines and modifica-tions which conform to the growing requirements ofcustomers.

MOTOR SICH PJSC constantly introduces new perspectivetypes of aviation engines into production. Priority activityof Company at the present time is to develop productionof engines:

■ D-436-148 and AI-450-МS – dual-flow turbojetengines and auxiliary power units for the newestregional airplanes An-148;

■ AI-25TLK(TLSh) – dual-flow turbojet engine success-fully operating in the training airplanes L-39 and K-8J;

■ TV3-117VMA-SBM1V – turboshaft engine designed forMi-28N, Ka-52, Ka-28/29 helicopters, as well as formodernization of Mi-17, Mi-24, Mi-28, Ka-32, Ka-50helicopters. The engine meets the world level of tur-boshaft engines. Its application in helicopters instead ofTV3-117 engines allows to improve flying characteristicsof aircrafts;

■ AI-222-25 – dual-flow turbojet engine optimized foroperation in modern training airplanes Yak-130, as wellas AI-222К-25F engine for a new Chinese trainingairplane/training-combat airplane L-15;

■ AI-450 – turboshaft engine, which is one of thegreatest expectations of Company. Series of theseengines with power from 450 up to 600 h.p. can beused not only in helicopters Ka-226 and “ANSAT”,but also in pilotless aircrafts. By its technical, eco-nomical and ecological characteristics this engine isone of the best in its class.

In addition, specialists of Company are now designing andmanufacturing prototype models, refining design andintroducing into serial production several perspectiveengines, such as MS-14, MS-500V.

Along with manufacture of aviation equipment, in orderto increase production volume, Company has masteredmanufacture of gas-turbine drives of different power,gas-pumping units, mobile power stations, as well as widerange of consumer goods. MOTOR SICH PJSC has effective corporate strategy, whichprimary purposes and tasks are as follows:

■ to keep up high-attractive image of legal entity with effec-tive control system.

■ to diversify sales markets, expand geography of itspresence and retain steady share of engine-buildingmarket.

■ to provide contractors with complete set of high-qualityaftersales services and repairing of aviation engines.

■ to provide effective system of financial calculations withcontractors for planned reduction of specific debtsreceivable, to introduce quality control system at all pro-duction and realization stages for minimization offinancial losses of Company.

■ to realze aggressive marketing policy at the requiredlevel of profitability taking into account characteristicfeatures of each sales region, to provide further devel-opment of extensive network of service maintenance byskilled personnel.

■ to realze strategy of advanced development of newmodern hi-tech and competitive types of goods on thebasis of perspective development plans.

■ to provide effective management of human resources;permanent improvement of organizational structure;formation of personnel policy directed to achievementof economic success, by providing Company withcompetent employees interested in the end result oftheir labour.

PRIORITY ACTIVITIESOF COMPANY


200910

We work to be the best company of aviation industry inall aspects of activity:

■ in satisfaction of consumer demands – providing

consumer with the best products;

■ in influence upon society – Company’s activityrecognized as socially usefull by society;

■ in business – providing growth of income and profits ofour shareholders;

■ in provision of working conditions and living stan-dards of personnel – people should know that theyare important for Company, which appreciates andtakes care about them.

We enforce harmonious combination of interests ofcustomers, employees, shareholders and Company. We try to satisfy consumers of our products and servicesat the account of:

■ high qualification of employees, permanent increase oftheir professionalism;

■ rightful, active and harmonious cooperation of allinterested persons and Company;

■ ambition to be an influential participant of the market,building mutual relations on principles of amicabilityand mutual respect, reliability and openness, ethics,honest and open fulfillment of their duties.

SPECIALIZATIONDevelopment and production of gas turbine engine for military andcivil aviation, industrial units andpower generating plants, consumer goods.

MISSION OF COMPANY


200911

POSITIONING IN INDUSTRYMOTOR SICH PJSC is a specialized enterprise, whichbasic products are gas turbine engines for civil and mil-itary aviation, as well as created on their base industrialgas turbine drives for power and gas-pumping stations.Tens of thousands of engines produced by MOTORSICH PJSC are installed in aircrafts of worldwide knownfirms of Antonov, Ilyushin, Beriev, Tupolev, Yakovlev,Kamov, Mil, Czech «Aero Vodochody» and ChineseNAMC. They operate in civil and military aviation ofmore than 120 countries of the world.

Many engines, manufactured at the enterprise, becameworld leaders in their class: AI-25TL turbojet engines liftin the sky more than three thousand training airplanesand training-combat airplanes in 40 countries of theworld; helicopter engines TV3-117, used in 61 countriesof the world in all helicopters of average carrying capac-ity produced in Russia; D-18 engine for “Ruslan” and“Mriya” the highest capacity transport airplanes in theworld; D-136 the most powerful engine in the world forhelicopters and others.

For several years Company invests own capitals into thedevelopment of engines of new generation. RussianFederation was and is our leading partner in creation andmanufacture of new products. Development of industry,which potential was significantly reduced due to eco-nomic crisis, is possible by means of maintainance andexpansion of cooperation, consolidation of efforts andfunds with Russian aviation engine-building complex,with remaining in Russia after disintegration of the USSRaviation research centres (TsIAM, TsAGI), developersand manufacturers of aviation materials (VIAM, VILS)and components for aviation engines.

MOTOR SICH PJSC is a part of aviation industry com-plex of Ukraine, traditionally deeply integrated withenterprises of aviation industry of Russia. In 2007 SE«Ivchenko-Progress» and MOTOR SICH PJSC havefounded «Research and Production Association namedafter A. Ivchenko», which is able to satisfy main needsof Ukrainian aircraft industry (ANTK “Antonov”,KiGAZ “AVIANT”, KHGAPP), to provide considerableexport supplies of engines to Russia, CIS and non-CIScountries, as well as to present wide range of groundgas-turbine plants for the energy market.


200912

At the present time production process of MOTORSICH PJSC includes:

serial production – improvement and modernizationof consumer features of such engines, as D-18T andits modifications, AI9-3B, TV3-117VMA-SBM1, D-36of all series, families TV3-117V, D-436T1, D-436TP,D-436-148, AI-450-МS;

development, preparation of experimental and serialproduction of the following goods:

■ new modification of AI-25TL – AI-25TLSh engine formodernization of L-39 training asirplanes;

■ AI-222 engines for training airplanes and light combatairplanes, whch are prepared for production in Russiaand China;

■ TV3-117VMA-SBM1V engine for a great fleet of “Mi”and “Ka” helicopters all over the world;

■ TV3-117VMA-SBM1 engine (series 4) for modernizationof Mi-8Т helicopters;

■ engines series MS-14 for modernization of An-2 up toAn-3 airplanes and new T-107 airplane;

■ turboshaft engine MS-500V for “ANSAT” helicop-ters;

■ MS-400, MS-400P, MS-450, MS-200 small enginesfor light aircrafts;

■ gas-turbine drives and power stations for needs ofRussia and Ukraine.

Production of industrial gas-turbine drives, created on thebasis of long-term experience of manufacture and fieldservice of aviation engines, occupies a considerable placein the production program of MOTOR SICH PJSC. This kindof products includes about ten types of drives with powerrange from 1 to 10 MW.

To provide reliable, cost-effective operation of sev-eral thousand engines the Company has organizednetwork of service centers and representative officesall over the world. Having highly skilled specialists,modern instruments and equipment they render widerange of services from diagnostics to repairs at theplace of operation, observing the strictest require-ments to quality of performed works.

Possessing extensive experience and high technolo-gies, MOTOR SICH PJSC is able to perform high-quality repairs of engines in workshop conditionswithin short period according to flexible contractterms and conditions. The Company introduces thelatest technical achievements, aimed at further

increase of reliability and operating characteristicsof engines.

Except for the basic aviation and industrial products,MOTOR SICH PJSC produces a wide range of consumergoods.

At the present time MOTOR SICH PJSC has to work inconditions of very hard competition at the aviationworld market. It means that priorities shoud be given tonew, perspective products, which are able to competewith the goods of the leading world companies.Thus, based on the analysis of tendencies for thedevelopment of the world and domestic aviationengine-building, as well as needs of the aviation mar-ket and real economic state of Ukrainian aviationindustry, the following main directions of activity arepointed out:

■ to continue works on field service of series-producedengines, as well as to increase their consumer charac-teristics (reliability, service life, cost effectiveness);

■ to develop and master production of new competitiveengines, which have great export potential and coverdemand of Ukraine in aviation products;

■ to develop modifications of engines, which arerequested at the market of aviation products, in orderto reduce time and money expenses for the develop-ment of products;

■ to develop scientific and technical reserve in order toprovide competitiveness of domestic engines in thenear future;

■ to develop modifications of aviation engines forground application (oil and gas pumping, power andtransport industry);

■ to develop modifications of gas-turbine power sta-tions, thermal power complexes and gas pumpingplants;

■ to expand and deepen integration relations withRussian aviation engine-building complex;

■ to expand presence at the international market withprimary orientation to the market of CIS and Asiancountries.


200913

Certification of quality management system, approvalof production and repair organization.

Certification of repairs of aviation equipment and itscomponents was performed by the State AviationAdministration of Ukraine. There was received “Certificate of TechnicalMaintenance Organization” No. VR 0030.

Certification of repairs of aviation equipment wasperformed by the Aviation Register of Interstate AviationCommittee (IAC). There was received “Certificate of Repair Organization”No. SPR-11.

Certification of serial production of aviation equipment wasperformed by the State Aviation Administration of Ukraine.There was received “Production ApprovalCertificate” No. SV 0004.

Certification of serial production of aviation equipmentwas performed by the Aviation Register of IAC. There was received “Production Approval Certificate”No. OP01-PD.

There was performed supervisory audit of quality managementsystem according to the State Aviation Objects CertificationSystem (GOSA) by the commission of Certification Centre“Gosavia-certifica” (Russia) regarding overhauling of all typesof equipment repaired by the Company. There was received “Certificate of Conformance”SK No. 126.

There was performed supervisory audit of quality man-agement system according to “Military Register”Certification System (Russia) regarding development,production, overhauling and technical maintenance ofaviation equipment. There was received “Certificate of Conformance”No. VR 27.1.2516-2009.

Bureau Veritas Certification Company has performedsupervisory audit of quality management system regard-ing development, designing, production, overhauling andtechnical maintenance of aviation engines, gas-turbinedrives and mobile gas-turbine power-stations.There was confirmed validity of “Certificate ofConformance” No. 213545.

CERTIFICATION


200914

Type Certificates of aviation equipment

There was received Supplement to Type Certificate ofAI-450-МS auxiliary power unit No. ST260-VD/D-03(Aviation Register of IAC, Moscow) due to increasedengine service life till the 1st capital repairs and servicelife limit of its main components.

There was received 3rd edition of “Data sheet” to TypeCertificate No. TDD 0009 of AI-450-МS engine (the StateAviation Administration of Ukraine) due to increasedengine service life till the 1st capital repairs and service lifelimit of its main components.

There was received Developer’s Certificate of aviationequipment No. SR 0009, issued by the State AviationAdministration of Ukraine, for the right to developAI-450-МS, TV3-117VMA-SBM1V, TV3-117V, unitsTMA-36, TMT-18Т, VMA-218, VMA-309, VMA-317engines.

There was received Supplement to Type CertificateNo. ST 267-AMD/D-02 (Aviation Register of IAC)of TV3-117VMA-SBM1V engine due to introduction of“continuous takeoff power mode”.

There was received 1st edition of “Data sheet” to TypeCertificate No. TD 0035 of TV3-117VMA-SBM1V engine(the State Aviation Administration of Ukraine).

Complete set of documents was translated intoEnglish. There was submitted application for validationof TV3-117VMA-SBM1V engine in the AviationAdministration of China.

Type Certificates of ground equipment and consumerproductsThere were received Certificates of Conformance acordingto GOST R system:

■ ROSS UA. MX04.V00108 (Certification Centre“Quality”, Russia) of gas-turbine drive D-336-1/2,D-336-2T, AI-336-2-8, D-336-1/2-E, D-336-2T-E,AI-336-2-8-E;

■ ROSS UA. MX04. V00113 (Certification Centre “Quality”,Russia) of GTE-8/МS gas-turbine drive;

■ ROSS UA. MX04. V00114 (Certification Centre “Quality”,Russia) of GTE-6,3/МS gas-turbine drive;

■ ROSS UA. MX04. N00246 (Certification Centre“Quality”, Russia) of “Motor Sich EG6000T-T10500-3VNM1UXL1” gas-turbine power station;

■ ROSS UA. MЕ22. N00245 (ANO “Certification Centre ofElectrical Equipment and Power Consumers”, Russia) of“Motor Sich PAES – 2500” gas-turbine power station;

■ ROSS UA. MЕ22. N00244 (ANO “Certification Centre ofElectrical Equipment and Power Consumers”, Russia) of “MotorSich EG1000T-T400-3UXL1” gas-turbine power station;

■ ROSS UA. MP092. V01309 of “Motor Sich KPO-60-1”stern drives (Federal State Institution “Russian MaritimeRegister of Shipping”).

■ Type Certificate of Approval No. ODC 0550-0209/2.1of D-336 and AI-336 gas-turbine drives issued by FE“SGS-Ukraine”.

There were received the following UKRCEPRO Certificatesof Conformance:

■ No. UA 1.014.0036618-09 of «Motor Sich STsM-80»skimming machine (R&D Centre “Stankocert” Ukraine);

■ No. UA 1.050.0029643-09 of “Motor Sich MB-4,05”motor cultivator (INPOMT, Ukraine).


200915

There was registered one emission of MOTOR SICHPJSC securities. Total amount of shares issued byMOTOR SICH PJSC is 2 077 990 pcs. 2 077 990 pcs. ofshares were distributed among legal entities and natu-ral persons in the course of privatization. There wereregistered two issues of MOTOR SICH PJSC securities.The first isue was cancelled. The second isue was con-nected with indexation of fixed assets by increasingnominal value of shares: 1 original share was exchangedfor 1 share of the second issue.

Issue registration date – 28.03.2001.Issue Registration Certificate No. – 142/1/01.

Body, which has registered issue - State Commission of securities and stock market. Securities code – UA 0800541007.Existence and issue form - documentary. Nominal value (UAH) – 135,00.Quantity of shares (pcs.) - 2 077 990.Total nominal value (UAH) - 280 528 650,00.Share in statutory capital (%) – 100.

There was no additional emission of shares in 2009.Presently, shares of MOTOR SICH PJSC have passedlisting and are actively traded at two Ukrainian StockExchanges: the First Stock Trading System (FSTS) andUkrainian Stock Exchange OJSC:

■ On August 1, 2007 securities of MOTOR SICH PJSC wereincluded into “index basket” of FSTS;

■ On December 18, 2009 securities of MOTOR SICH PJSCwere included into the 1st level of listing of Exchangeregister of Ukrainian Stock Exchange OJSC.

Shares of MOTOR SICH PJSC are included into «index bas-ket» of Ukrainian Trade Index (UТХ) of Vienna StockExchange and Russell Global Index. “Russell Global Index”Company has included shares of sixteen Ukrainian com-panies into its global index, including shares of ten com-panies, which are “blue chips” of FSTS: Avdeyevsky cokingplant, Azovsteel, Dneproenergo, Centrenergo,Yenakiyevsky metallurgical plant, Kievenergo, Motor Sich,Reiffeisen Bank Aval, Ukrnafta and Zapadenergo.Russell Global Index has started up in 2007 andincludes 10 thousand securities from 70 countries ofthe world. The fact that securities were included intoindex baskets by leading index agencies means thatworld pool of investors has recognized viability of theUkrainian stock market. Presently, shares of MOTOR SICH PJSC are one of themost liquid and callable securities at the Ukrainian stockmarket. In 2009 total turnover of the Company’s securitiesat stock exchanges has reached about 297 mln. UAH,including:

■ at Ukrainian Stock Exchange OJSC - about 163 mln. UAH; ■ at FSTS Stock Exchange - about 134 mln. UAH.

In 2009 MOTOR SICH PJSC has not effected emissionsof bonds and other securities, which issue is subject toregistration. In 2009 the Company has not made decisionsabout repurchase of own shares.

Information regarding issued securities certificates:

■ quantity of ordered forms of securities certificates –50 000 pcs.;

■ quantity of securities certificates issued to the owners asof 01.01.2010 - 34 200 pcs.

SECURITIES OF JSC “MOTOR SICH”


200916

Volochysk

Zaporozhye

KIEV

Snezhnoye

Primorsk

Alushta

Snezhnoye Machine-Building Plant (SMZ)Year of foundation - 1974

Line of activity:

■ production of blades for gas-turbine engines; ■ production of components and assembly units for mining equipment; ■ production of consumer goods with special emphasis on agricultural and

utility equipment.

Volochysk Machine-Building Plant (VMZ)Year of foundation - 1971

Zaporozhye Machine-Building Plant namedafter V.I. OmelchenkoYear of foundation - 1988

Line of activity:

■ providing aircraft engines with mass-produced parts and metal products;■ production of technological tooling;■ overhaul of AI-20 engine and its modifications;■ production of EG-1000, PAES-2500 power stations;■ manufacture and assembly of GTE-MS-2,5; AI-2500M power drives;■ production of consumer goods with special emphasis on a wide range of

mufflers for motor cars and agricultural equipment.

Line of activity:

■ testing of aviation engines; ■ assembly and testing of EG-1000 and EG-6000 gas-turbine power stations;■ testing of 6.3 and 8 MW gas-turbine drives D-336, AI-336; ■ assembly and testing of GPAK/5,5-GTP/6,3SК gas-turbine pumping units;■ manufacture of blades; ■ foundry.

STRUCTURE OF COMPANY


200917

Health Centre “Priboy”Primorsk, Zaporozhye region (Azov seashore)

Main advantages:

comfortable rooms, caloric food, equipped beach, vari-ous leisure facilities, gymnasium.

Health Centre “Motor”Primorsk, Zaporozhye region (Azov seashore)

Capacity: 4 comfortable buildings for 500 persons. Number of vacationers p.a.: more than 3 thous. persons. Line of activity: family recreation.

Medical-Care Vacation Hotel “Horizont”South coast of Crimea, Alushta

Capacity: 3 bedroom buildings for 500 persons.Number of vacationers p.a.: more than 4 thous. persons.Specialisation: medical treatment of diseases of respiratoryorgans, functional diseases of nervous system, as well asear, nose and throat diseases.

Main advantages:

■ comfortable, home atmosphere; perfect living condi-tions; ■ the best equipped beach at Azov seashore; ■ tennis courts with special cover; ■ two thousand square meters of sport grounds; ■ gymnasium; ■ billiard, cinema and concert halls; ■ excellent national cuisine.

Line of activity: family recreation.

Main advantages: comfortable rooms, picturesque scenery, clean air, warmsea, qualified medical service, balanced diet, variousleisure facilities, equipped sports and play grounds, chainof stores and cafes.


200918

Representation offices:

Kiev (Ukraine), Moscow (Russia), Istanbul and Ankara (Turkey)

International codes:■ ICAO code – MSI.■ IATA code – M9 and 011.

MOTOR SICH PJSC Airline was founded in 1984 and isa structural subdivision of MOTOR SICH PJSC. At present,it operates on the market of cargo and passenger airtransportation in Ukraine, CIS, non-CIS countries.Base airfield is Zaporozhye airport (OZH/UKDE) –“Mokraya” airfield.Since 2004 the Air Company is accredited at UN as anofficial supplier of air transportation services for UN andtakes part in air transportation according to UN programin Sudan using An-74TK-200 aircraft.

AIR COMPANY

Aircraft fleet of the Air Company consists of passenger,cargo/passenger and cargo planes:

Yak-42...........................................................1 planeYak-40...........................................................2 planeAn-24PB..................................... .................2 planesAn-140......................................................... ..1 planeAn-74TK-200.................................................1 planeAn-12............................................................3 planes.

Services:

■ cargo and passenger air transportation (scheduled,charter flights and business flights) to all regions ofthe world;

■ air transportation of hazardous cargo and special-pur-pose cargo;

■ line maintenance and periodic maintenance ofairplanes: An-140, An-24, An-12 and Yak-40,line maintenance of An-74TK-200 airplane.

Airline uses the following aviation systems:

■ AFTN aviation communication system (УКДЕМСИЬ);

■ SITA international commercial aviation system(OZHSMXH);

■ SIRENA, Amadeus, Gabriel, Galileo and other systemsfor sale and reservation of air tickets.

Charter flights are performed to: Iran, India, Thailand,Bangladesh, Sri-Lanka, Algeria, Israel, Armenia,Georgia, Syria, Italy, Spain, Turkey, Egypt, Kyrgyzstan,Kazakhstan, UAE, Slovenia, Germany, France,Hungary, Belgium and other countries.


200919

The Company has founded the following subsidiaries,which are carrying out their activity at the present time.

GulaypoleMachine-BuildingPlant

Ukraine, Zaporozhye region,Town of Gulaypole, 17, 9thJanuary Street

Main lines of activity:

■ development, preparation and organization of research and serial productionof machine-building products;

■ sales of manufactured products; ■ production, procurement and sales of agricultural products; ■ provision of services to people on repairing and maintenance of motor vehicles,

as well as delivery of spare parts for them; ■ sales of process equipment, cars and tractors, withdrawn from process usage.

Gulaypole MechanicalPlantUkraine, Zaporozhye region,Gulaypole district. Zheleznodorozhnoye village, 2 Kotovskogo Street

LebedinEngine-buildingPlantUkraine, Sumy region. Town of Lebedin, 18Grushevaya Street


■ preparation and organization of research and serial production of aviationengines, aviation equipment and property;

■ development, manufacture, sales and repairs of weapons, individual protectiveequipment and cold steel according to licences, issued by special authoritiesaccording to effective Ukrainian legislation;

■ manufacture of electrical machines, equipment and devices,industrial products;

■ manufacture of agricultural machines, process equipment for textile industry,agricultural and garden tools;

■ production of paint-and-lacquer materials; ■ production of metal and cardboard containers.


■ development, preparation and organization of research and serial productionof machine-building products;

■ sales of manufactured products;

■ development of personal market gardens;

■ manufacture of industrial products, consumer goods, fuel and lubricants.

Share of MOTOR SICH PJSC in statutory capitalof the above subsidiary companies is 100%.

SUBSIDIARY COMPANIES

MAINRISK FACTORS■ Industry Risks

■ Financial Risks

■ Legal Risks

Demand for aviation engine-building products isnot too high at the Ukrainian market. Ukrainian aircompanies do not have enough funds for financing ofaicraft-building process, and budget financing is notprovided on regular basis. The State discourages pro-curement of domestic aviation equipment. Therefore,Russia and Asian countries remain main sales markets.However, volume of cash inflow may decrease due tounpredictable foreign policy of the State concerningrelations with Russian consumers, general crisis in avi-ation industry, intention of operators to extend service

life, and to avoid overhauling of engines or purchaseof new products. Moreover, we must add the follow-ing adverse factors, as intention of Russian competi-tors represented by aircraft repair plants, designers(Klimov OJSC) and producers of aviation engines(Salut MMPP, Saturn NPO and others), as well as theMinistry of Defence of Russia to force MOTOR SICHPJSC out of their domestic, and then out of foreignmarkets in the whole range of products by dumpingprices for them.

Degree of competition is very high at the market ofaviation engines. Serious competitors are Snecma(France), BMW Rolls-Royce (Germany/England)General Electriс (USA), which are still at the top of thelist of leading producers of aviation engines. Regularwork on improvement of quality and characteristics ofproducts, as well as development of new engines andtheir modifications in accordance with increasedrequirements of customers, is required to hold and

strengthen positions at the market. Such work requiresconsiderable material expenses. Till the present timefinancing of works on serial production preparationwas performed mainly at the account of own funds,investments and bank credits. Volume of budgetfinancing is quite insignificant. The Company particu-larly needs state support in hard conditions of worldeconomic crisis.


200921

INDUSTRY RISKS

Risk of consumer loss

Complex competitive environment


200922

мaterials and assembly units, which list includesmore than 51.1 thous. titles, are purchased by theCompany from more than 300 suppliers of Ukraine,Russia and other countries of the world. Delayed sup-ply of assembly parts creates risk of failure to performcontract terms. Narrow circle of suppliers leads tounreasonable escalation in prices. It is necessary todevelop domestic production of assembly parts andstimulate development of business competition.MOTOR SICH PJSC maintains friendly and confidentialrelations with many companies. Therefore, it is theirregular customer. Describing long-standing relationswith suppliers, it is necessary to note that MOTOR

SICH PJSC works with many of them for manydecades. In particular, with Aviation Bearing PlantOJSC (Samara) - over 45 years, with FED CorporationCJSC (Kharkov), VSMPO-AVISMA (Verkhniaya Salda) -over 30 years, with Uglekompozit OJSC (Zaporozhye),Electric Machine Building Works “Lepse” JSC (Kirov),Electropribor PJSC (Kazan) - over 25 years. As a resultof long-standing relations with partners, in the pastdecade there was reached financial stability andincreased responsibilty of suppliers for fulfilment ofcontractual obligations.

Risk of losing the supplier of raw materials and assembly units

It is poossible that companies with large volume ofpurchased materials and assembly units will concludeoverpriced delivery contracts. Furthermore, due toproduction specifics assembly units and parts shlouldmeet technical and quality parameters. Suppliers ofassembly units and parts for the goods of MOTORSICH PJSC are indicated in design documentation ofproduct. It is not allowed to purchase assembly units

from the supplier, which is not mentioned in designdocumentation, till introduction of corresponding rea-sonable amendments into design documentation.Tender commission is created and works at theCompany for selection of economically favourablesuppliers and minimization of risks connected withpurchase of goods and services, which suppliers arenot regulated by design documentation.

Risk of purchasing overpriced orlow-quality materials and assembly units

While worldwide accepted practice implies partialfinancing of the development of aviation equipmentat the account of state budget, state support of newequipment creation and implementation of innovativetechnologies is practically not available in Ukraine inrecent years. Almost all innovative activities of MOTORSICH PJSC are performed at the account of own funds.The Company regularly introduces into production newadvanced kinds of aviation engines, general-purpose

and consumer goods. Over 100 mln. UAH are annuallyspent for research and design works, as well as formastering new kinds of products. Special attention ispaid to inroduction of innovative technologies at allstages of engine life cycle – from its development upto operation.

Compliance of the Company’s products withinnovative technologies


200923

Significant problem for companies of aircraft industry in Ukraine is shortage of qualified engineering and regularlabor force. MOTOR SICH PJSC has developed and introduced «Personnel» programme, which aim is to preserve andadditionally attract highly-qualified staff.

Insufficient quantity of qualified staff


200924

Credit risks

Liquidity risks

Risks are mainly connected with weakening ofUkrainian hryvnia and strengthening of US dollar. Mainpart of credit resources of MOTOR SICH PJSC committedfor purchase of imported equipment, as well as forrequired completion and technical upgrade of productionand engineering base of the Company, is attracted in for-eign currency in order to reduce currency risk.

Currency risks

Liquidity risk is a probability of losses due to cashshortage in certain period of time, and, consequently,failure of the Company to fulfill its obligations. Detailed budgeting, cash flow forecasting, financialand industrial planning is used at MOTOR SICH PJSC forminimization of liquidity risks. Such procedures allow toreveal liquidity strain and to attract required financialresources in due time. Reduction of nonpayment risk on the part of customers,which may also lead to liquidity problems, is achieved bymeans of advance payment of orders.

FINANCIAL RISKS

Credit risks are connected with failure of borrowerto pay principal debt and interests accrued on credit.Credit indebtedness was timely repayed in 2009. It hasallowed to avoid fines, penalties and to reduce interestrisks. Bank guarantees has become basic instrumentfor reduction of credit risk. Such approach has allowednot only to reduce risk and losses of the Company, butalso to provide our contractors with convenient tool ofmutual settlements. As a result, there was abandonednecessity to exclude significant monetary assets fromthe turnover for performance of advance payments.Sales of aviation engines have received additionalincentive.

MOTOR SICH PJSC has determined the following risk factorsconnected with investment in its securities:

■ Factors, which are limiting ability of shareholders toinfluence upon decisions concerning election of mem-bers of management bodies or other questions, whichare settled by means of voting. These factors shouldbe estimated as insignificant ones. Shareholders ofMOTOR SICH PJSC have got equal rights to influenceupon settlement of questions regarding election ofmembers of management bodies or other questions,which are settled by means of voting.

■ Factors, which may cause “dilution” of existing sharein the statutory capital of MOTOR SICH PJSC. Theyshould not be considered significant ones, as author-ized body has not taken decision about additional issueof shares in 2009.

■ Factors, which may limit payment of dividends onshares of MOTOR SICH PJSC. These factors should beconsidered insignificant ones, as the Company con-ducts common clear dividend policy for many years.

■ Insufficient liquidity of securities and other factors,which may limit possiblility to purchase securities ofMOTOR SICH PJSC. These factors should be consideredinsignificant ones, as the Company has got stable

financial state, shares of the Company have got highlevel of liquidity and are actively quoted at the organ-ized stock market.

■ Legal acts, which regulate import and export of capi-tal, and which may influence upon payment of divi-dends or other payments to nonresidents. These factorsare well-known, and interested parties should estimatetheir influence by themselves.

■ Procedure of securities income taxation may influenceupon the size of yield. This factor is also well-known.Any changes in tax legislation may influence upon thecurrent taxation procedure and, correspondingly, uponthe size of yield.

■ Any other factors, which may negatively influence uponthe rights of shareholders of MOTOR SICH PJSC, includingpossibility to realize their rights. They are not forecastedfor 2010.


200925

Risk factors connectedwith investment in securities of MOTOR SICH PJSC

LEGAL RISKS

MOTOR SICH PJSC has initiated introduction ofamendments into a number of legislative acts ofUkraine, which will increase the level of domesticengine-building, improve conditions of economicactivity for enterprises of aviation industry, form sta-ble positions of Ukrainian enterprises at the foreignmarkets, as well as promote the development andmastering of new equipment. If in 2010 the SupremeCouncil of Ukraine will adopt law “About introduction

of amendments into certain laws regarding the statesupport of aircraft industry”, which provides taxadvantages for the period till 2016, simplification ofcustoms procedures and increases payment terms ofexport deliveries, - there will be significantly reducedproduction expenses of the Company and will beimproved foreign economic relations of the Companywith nonresident customers.

Uncertainty of regulatory situationfor emitter’s activity

INVESTMENTACTIVITIES


200927

Trend Analysis of Stock Value of MOTOR SICH PJSC

New Products Preproduction Activities

Involvement of Budget and Credit Funds for Financing of New Products Developmentand Preproduction Activities in 2009

At the present time shares of MOTOR SICH PJSC areone of the most liquid and called-up secutities at thestock market of Ukraine. Price of shares hasincreased from 400 up to 1870 UAH/piece from2007 till the beginning of 2010. Shares of MOTORSICH PJSC have indicated their ability to withstandgeneral market tendency and to increase in priceeven, when price of other securities falls due to theworld financial instability. Cost of shares of MOTORSICH PJSC was skyrocketing in 2009: shares of theCompany have become one of the main index growthdrivers of the First Stock Trading System and theUkranian Stock Exchange from April 2009. Shares ofMOTOR SICH PJSC are constantly among five securi-

ties of Ukranian stock exchanges with maximum levelof unsatisfied demand. MOTOR SICH PJSC has man-aged to bring the cost of its shares closer to fair mar-ket price, to increase capitalization of the Company,to attract additional financial resources at theaccount of domestic and foreign investors, to raisefunds, providing appropriate supervision over theireffective use.

Investments of the Company in legally independenteconomic entities

ВIn 2009 the Company has made investments in enterprises,which are included into financial-industrial group of MOTORSICH PJSC, in the amount of about 20 mln. UAH.

MOTOR SICH PJSC has developed business plans ofinvestment projects:

■ “Research and development work on modernization ofpower unit of An-26 airplane by replacement of outdatedengines for ТV3-117VМА-SBМ1 engines”.

■ “Research and development work on modernizationof power unit of Мi-8Т helicopter by replacement of

outdated engines for TV3-117VМА-SBМ1V series 4engines”.

■ “Construction of facilities for mounting of gasostaticextruder”.

■ “Modernization of Мi-2 helicopter with replacement ofoutdated engines for AI-450M turboshaft gas-turbineengines”.

The Company has not submitted investment projects to the State Innovation Finance and Credit Organization (SIFCO)and the Ministry of Industrial Policy, as there were held no tenders due to the absence of funds for investment projectsin the budget of 2009. Nevertheless, specialists of the Company have developed the following projects, which are readyto tenders:

■ “Mastering and serial production of ТV3-117VМА-SBМ1 engines for An-26 airplane”. Project intends modernization ofAn-26 airplane into An-26М variant with ТV3-117VМА-SBМ1 engines.

■ “Mastering and serial production of TV3-117VМА-SBМ1V engines for Мi-17, Мi-8МТV helicopters”.

■ “Mastering and serial production of “Motor Sich VEU-5-1500/5-96” wind-driven power plant”. Investment projectwas submitted to SIFCO. However, tenders were not held due to the absence of funds in the budget of 2009.

■ Corporate Management

■ Board of Directors

■ Supervisory Board

■ Internal Audit Commission

MANAGEMENT BODIES OFMOTOR SICH PJSC

Management and control bodies of MOTOR SICH PJSC pay particular attention to openness, efficiency, honesty,responsibility and achievement of the specified objectives in order to provide efficient corporate management accord-ing to international standards. The Company guarantees quality control in all directions of its activity under the corporate management system.It maintains good and fair relations with shareholders, provides transparent and prompt accounting reports.

Management bodies of MOTOR SICH PJSC:■ General meeting of shareholders; ■ Supervisory Board; ■ Board of Directors.

Authorities and obligations of management bodies are clearly divided and balanced. Corporate management sys-tem of MOTOR SICH PJSC is built according to international standards, the best world experience and legislation ofUkraine. It provides:

■ efficient cooperation between management and control bodies, as well as external auditors and all interested parties(shareholders, contractors, state bodies);

■ monitoring of the Company’s activity for achievement of the specified objectives.

Corporate management system of MOTOR SICH PJSCis based on the following principles:

■ The Company protects rights of shareholders. ■ The Company provides equal relations towards all shareholders, including minority and foreign shareholders. ■ The Company acknowledges legal rights of the interested parties and encourages active cooperation between

MOTOR SICH PJSC and all the interested parties for increase of social wealth, creation of new work places andachievement of financial stability of the Company.

■ The Company provides timely disclosure of reliable information about all important aspects of MOTOR SICHPJSC activities, including data about financial state, results of business activity, structure of shareholders andmanagement.

■ Board of Directors provides strategic business management and efficient control of all subdivisions. It regularlyreports to its shareholders.


200929

CORPORATEMANAGEMENT

Vasily Vasillyevich TKACHENKO

Deputy Chairmanof the Board of Directors,Production Director

Pavel Dmitrievich ZHEMANYUK

Deputy Chairmanof the Board of Directors,Technical Director

Alexander Petrovich NEDASHKOVSKY

member of the Board of Directors,Director of Snezhnoye Machine-Building Plant

Mikhail Naumovich BEREZOVSKY

Deputy Chairmanof the Board of Directors,Director of Constructionand Social Development

Viktor Alekseyevich LUNIN

member of the Board ofDirectors, Financial Director

Vladimir Borisovich SEMENOV

member of the Board ofDirectors, Director of CorporateLaws and Investment Projects

СОВЕТДИРЕКТОРОВ

Vyacheslav AlexandrovichBOGUSLAYEV

Chairmanof the Board of Directors

Olimpy Valerianovich POKATOV

member of the Board ofDirectors, Director ofPersonnel Management

Konstantin Ivanovich GORBIK

member of the Board ofDirectors, Head ofWorkshop No. 17

Vasily Vladimirovich KHVOSTAK

member of the Board ofDirectors, Deputy FinancialDirector

Vladimir Timofeyevich SHIRKOV

member of the Board ofDirectors, Marketing Director

The Board of Directors is a permanent executive bodyof the Company, which shall perform management ofits current activities according to the Statute ofMOTOR SICH PJSC. The Board of Directors at its own discretion, within itspower stipulated by effective legislation, Statute andinternal documents of the Company, shall make deci-sions, conclude agreements and carry out activities,which belong to its authorities according to legislationof Ukraine and are its rights or obligations. Chairman of the Board of Directors is in charge of itswork. He shall allocate responsibilities among theelected members of the Board of Directors. Chairmanof the Board of Directors shall perform management

of the Company’s current activities according to theStatute and legislation of Ukraine. Chairman of the Board of Directors shall perform alllegitimate activities out of the Company’s power ofattorney. He shall represent the Company in all rela-tions with the third parties, hold negotiations andconclude any agreements (contacts, treaties etc.),sign legal acts (documents) related to the Company’sactivities, issue Powers of Attorney (Orders), openbank accounts, sign labour contract with work collec-tive, issue orders, directives to conclude labour con-tracts with the Company’s employees and dischargethem according to current labour code of Ukraine.


200932

Position Full nameQ-ty of shares,

pcs.Share in statute

capital (%)

Chairman of theBoard of Directors

Vyacheslav Alexandrovich Boguslayev 311 421 14,99

Deputy Chairman of theBoard of Directors

Pavel Dmitrievich Zhemanyuk 87 0,0042


Vasily Vasillyevich Tkachenko 3 0,00014


Mikhail Naumovich Berezovsky - -

member of the Board of Directors Alexander Petrovich Nedashkovsky 41 0,00197

member of the Board of Directors Olimpy Valerianovich Pokatov 23 0,0011

member of the Board of Directors Vladimir Timofeyevich Shirkov 22 0,0011

member of the Board of Directors Viktor Alekseyevich Lunin 12 0,00058

member of the Board of Directors Vladimir Borisovich Semenov 10 0,00048

member of the Board of Directors Konstantin Ivanovich Gorbik 6 0,00029

member of the Board of Directors Vasily Vladimirovich Khvostak 1 0,000048

Information about MOTOR SICH PJSC shareholders among the membersof the Board of Directors

Competence of the Board of Directors according to Statute of MOTOR SICH PJSC


200933

Anatoly Nikolayevich MALYSH,Chairman of the Supervisory Board, Director of public relationsof MOTOR SICH PJSC.

Date of birth: 15.04.1956.Education: higher.

Alexander Vyacheslavovich BOGUSLAYEV, Deputy Chairman of the Supervisory Boardof MOTOR SICH PJSC, Leading Manpower Training Engineer of thePersonnel Training Department of MOTOR SICH PJSC.


Sergey Anatolyevich VOITENKO, Secretary of the Supervisory Board, Quality Director of MOTOR SICH PJSC.


SUPERVISORY BOARD


200934

Yury Vladimirovuch BURYA,member of the Supervisory Board, Head of workshop No. 41 of MOTOR SICH PJSC.


Yury Mikhailovich GRECHIKHA, member of the Supervisory Board, Assembly fitter of engines of workshop No. 31of MOTOR SICH PJSC.

Date of birth: 06.07.1954. Education: specialized secondary.

Peter Ivanovich KONONENKO,member of the Supervisory Board, Director of Moscow Representative officeof Motor Sich PJSC.


Valery Mikhailovich LOGVIN,member of the Supervisory Board,Director of Catering Centreof MOTOR SICH PJSC.



200935

The Supervisory Board of MOTOR SICH PJSC is a body, which shallprotect rights of shareholders and, within the scope of its functionsstipulated by Laws and Statute, shall control and regulate activities ofthe executive body.

Scope of functions of the Supervisory Board of MOTORSICH PJSC according to Statute

Mikhail Ivanovich TRUSH,member of the Supervisory Board,Chairman of trade union committeeof MOTOR SICH PJSC.


Svetlana Alexandrovna KHOREVA,member of the Supervisory Board, Head of Finance-and-Economy Departmentof MOTOR SICH PJSC.



200936

Alexander Nikolayevich POLYVIANY,Chairman of Internal Audit Commission of MOTOR SICH PJSC, Deputy Head of Finance-and-Economy Department, Head of Labour and Wages Departmentof MOTOR SICH PJSC.

Date of birth: 10.12.1954. Education: higher.

Anatoly Yuryevich GRINCHENKO, member of Internal Audit Commission, Chief dispatcher - Head of Assemblyand Testing Department of MOTOR SICH PJSC.


Valentin Grigoryevich PASTERNAK,Member of Internal Audit Commission, Director of Volochysk Machine-Building Plant.


Valentina Nikolayevna MOLCHANOVA,Member of Internal Audit Commission, Nondestructive testing operator of X-ray and gamma-rayexamination of workshop No. 60 of MOTOR SICH PJSC.

Date of birth: 26.02.1955 Education: secondary.

INTERNAL AUDIT COMMISSION


200937

Igor Andreyevich PETRIK,member of Internal Audit Commission of MOTOR SICH PJSC,Chief welder of the Chief Metallurgist Departmentof MOTOR SICH PJSC.


Leonid Alekseyevich PIROGOV,member of Internal Audit Commission of MOTOR SICH PJSC, Deputy Technical Director - Headof Design-Engineering Department.


Viktor Yuryevich Kotsyuba, member of Internal Audit Commission, Head of workshop No. 20 of MOTOR SICH PJSC.


General meeting of shareholders shall elect Internal Audit Commission for auditing of financial and economicactivities of the Company. Members of the Board of Directors, Supervisory Board and other officials may notbe members of Internal Audit Commission. Internal Audit Commission shall prepare conclusions on theCompany’s Annual Reports and Balance Sheets, as well as supervise:

■ implemention of plans and main directions of the Company’s activities accepted at the General meeting ofshareholders;

■ implemention of decisions of the Board of Directors concerning the Company’s financial and economic activities;

■ settlement of accounts with shareholders;

■ implemention of decisions on elimination of revealed faults.

Competence of Internal Audit Commission according to Statute of MOTOR SICH PJSC

■ BUSINESS STRATEGY OF MOTOR SICH PJSC

FOREIGN ECONOMICACTIVITY


200939

Implementation of export contracts concerning aviationand ground equipment is traditionally the main financialresource in 2009. The Company supplies new aviationengines, gas-turbine drives and other ground products,spare parts, repair-assembling tools, consumer goods. Itcarries out overhauling, aftersale maintenance of aviationand ground equipment, renders in-operation services.

Cash inflow under the concluded contracts has increasedby 16.2% in 2009 as compared to 2008. Cash inflow fromconsumers in Russia, CIS and non-CIS countries hasincreased. Cash inflow from Ukraine has remained at thelevel of 2008.

BUSINESS STRATEGYOF MOTOR SICH PJSC


200940

USA Dollars – 56.77%,Rus. Roubles – 29.53%,Euro – 7.96%, UAH – 5.74%.

Earned money for shipped products and renderedservices as per the form of payment currency wasdistributed as follows:

Cash inflow in 2009:

56,7729,53

5,74

7,96

Cash inflow by regions in 2009: 1. From Russia – 59,4% of total receipts.Increase against the level of 2008 was about 115%. Major part of money was received for the delivery ofdifferent modifications of serial aviation enginesTV3-117, VK-2500, AI-9V. The largest Russian consumersin 2009 were: - Kazan Helicopter Plant OJSC; - Ulan-Ude Aviation Plant OJSC; - Klimov OJSC (St. Petersburg); - Kumertau Aviation Plant OJSC; - Rostov Helicopter Plant OJSC; - Ilyushin Finance Co. OJSC (Voronezh).

2. From non-CIS countries – 31,4% of total receipts.Increase of receipts was 120,0%. Money was receivedfor the delivery and repair of different modificationsof aviation engines, as well as for delivery of corre-sponding spare parts. The largest foreign consumersof products in reporting year were: - China; - Algeria;- UAE; - India.

3. From CIS countries, except for Russia , – 2,4% of totalreceipts. The Company repaired aviation engines, ren-dered services for extension of service life, as well asdelivered and repaired ground equipment of nearabroad companies. The largest consumers: - Azerbaijan; - Belarus.

4. From Ukraine – 6,7% of total receipts. Tht Company has delivered D-36 series 3А, D-436-148,AI-450-МS aviation engines to the internal market, aswell as repaired different modifications of aviationengines for Ukrainian air companies, and D-336 gas-turbine drives for the gas-pipeline system of Ukraine.The largest Ukrainian consumers in 2009 were:- KiGAZ “AVIANT” (Kiev); - KHGAPP (Kharkov).

59,4

31,4

6,7 2,4

From Russia – 59.4% From non-CIS countries – 31.4% From Ukraine – 6.7% From CIS countries, except for Russia, – 2.4%


200941

Total amount paid under the import contracts in2009 was 8 168.2 thous. USD, of them:

■ for purchase of equipment – 54.2%;■ for overhaul and modernization of equipment –

26.3%; ■ for equipment spare parts – 11.0%;■ for computers and software – 1.6%; ■ зfor production components – 6.9%.

There were purchased milling machine centers “Huron”(France) and “Fehlmann” (Switzerland), turret machines“Benzinger” (Germany) and other process equipment. There were concluded contracts for the purchase of“Hermle” machining centers, “SIEMENS” machine con-trol systems, “Hauser” coordinate grinding machine,“LIECHTI TURBOMILL” machining center, as well asother equipment and components. Switzerland, Germany, Sweden, USA, as well asCzechia, Bulgaria, Hungary, Austria, Japan are mainpartners of MOTOR SICH PJSC in import of equipment,spare parts, overhaul and modernization.

MOTOR SICH PJSC conducts persistent and professionalmarketing policy, which allows not only to retain tradi-tional sales markets of our products, but also to subduenew ones. The following methods are used by theCompany for organization of product sales: ■ marketing research of sales markets for determina-

tion of priorities and implementation of economicallysound projects connected with production and salesof aviation and ground equipment;

■ system of regional representative offices in differentregions of the world: Russia, South-East Asia, China,India, Near East and Middle East, Africa, Latin America.The Company through its representative offices partici-pates in all tenders for the delivery of appropriateproducts and services, conducted by state organiza-tions of different countries, such as China, India,Thailand, Bangladesh, Sri Lanka, Algeria, countries of

54,2

26,3

1,66,9

11,0

Technical reequipment of the Company continued in2009. New import contracts were concluded for theamount about 18.3 mln. USD in the reporting yearaccording to the foreign currency spending plan. Inaddition, previously concluded contracts were executed.


200942

the Persian Gulf, Bulgaria, Hungary, Turkmenistan,Russia etc.;

■ creation of the vast network of service centers all overthe world for improved quality and efficiencyof consumer services;

■ purposeful advertising campaigns for promotion of ourproducts to new markets, publications in specializedmagazines and catalogues;

■ participation in prestigious specialized exhibitionsrelated to products of our Company.

MOTOR SICH PJSC took part in the following prestigiousinternational exhibitions in 2009:■ connected with aviation equipment - “Aero India-

2009” (India), “Paris Airshow-2009” (France), “AviationExpo China” (China), “MAKS-2009” (Russia);

■ connected with ground equipment: “Oil and Gas”(Kiev) and “Russia Power 2009” (Moscow). As aresult of participation in Kiev exhibition, was an invi-tation to participate in tenders for gas-turbine drivesrepairing, in Moscow exhibition – receipt of ordersfor the delivery of PAES-2500 power stations forRussian oil producing companies.

Besides, our Company actively participated in differ-ent exhibitions related to consumer goods, in competi-tions of timber cutters in Zhitomir and Kiev regions, aswell as in exhibitions and conferences devoted to theproblems of traumatic surgery and orthopedics. Participation in exhibitions allows the Company notonly to demonstrate its products and to represent newtechnologies, but also to review market state, assessoptions, strong and weak points of their partners andcompetitors, form contacts with future businesspartners.

MOTOR SICH PJSC will continue cooperation withour permanent consumers, as well as to conduct thesearch for new partners and customers in 2010.Russian aviation plants in Kazan, Ulan-Ude,Kumertau, Rostov, Voronezh, Samara remain priori-ty partners of our Company, with which it has signedcontracts for delivery of aviation engines for differ-ent types of helicopters and airplanes. Russian aircompanies “Kuban Airlines”, “UTair”, “Volga-Dnepr”, “Polet” and others, as well as aircraft repairplants in Aramile, Rostov-on-Don, Staraya Russa,Khabarovsk, Omsk, Yeisk, Kaliningrad are traditional


200943

partners of MOTOR SICH PJSC.Signed contracts and purchasing orders from aviationenterprises and operating entities for the delivery ofproducts and rendering of services provide basis for apositive regional forecast for 2010. Apart from cooperation with the Russian Federation,great attention is paid to retention and expansion ofsales markets in non-CIS countries. We plan to keepthe achieved volume of cooperation with our regularforeign partners in 2010. There were concluded sever-al big contracts, including contract with India (for theterm of 3 years) for the delivery of AI-20D engines,contract with China for the delivery of VK-2500 andAI-25TLК engines. MOTOR SICH PJSC is planning tosign long-term contract with China for the delivery ofnew modern AI-222К-25 engines. The Company hassigned contracts with Algeria for the delivery andrepair of different modifications of AI-25TL, TVZ-117and AI-9V engines, as well as for the delivery of non-standard equipment, repair and installation tools, test

bench and reference samples for the arrangement ofrepair line for TV3-117 engines.

Good prospects are expected for selling of aviationengines at the internal market in 2010. MOTOR SICHPJSC is going to execute contracts KHGAPP for thedelivery of D-36 series 3А, D-36 series 4А, TV3-117VМА-SBМ1 and AI9-3B engines, as well as contractswith SE “Antonov” for the delivery of AI-20D series 5,D-436-148 and AI-450-МS engines. All in all, the concluded contracts and reached agree-ments will provide positive sales growth rates forMOTOR SICH PJSC in 2010.

■ Main Aspects of Production and Financial Activity

■ Production Activity

■ Advanced Technologies

■ Service Maintenance

■ Capital Construction

■ Prospects for 2010

PRODUCTIONACTIVITY

■ Growth rate of production volume in comparable pricesto 2008 – 119.2%;

■ Income from sold products, works and services –3 740.4 mln. UAH.

It is by 1 683.9 mln. UAH more than in 2008;■ Specific weight of aviation equipment in the sold

products – 93.5%; ■ Export share in the income from sold products – 88.7%.


200945

MAIN ASPECTS OF PRODUCTIONAND FINANCIAL ACTIVITY

Structure of products sold byMOTOR SICH PJSC in 2009 (%)

Серийные авиационные двигатели

Ремонтные авиационные двигатели

Прочая авиатехника

Продукция общетехнического назначения

ТНП

2009 67,9

15,3

10,3

4,2 2,3

MOTOR SICH PJSC delivered products according to theconcluded contracts in 2009. There were executed 164contracts for the delivery of series-produced and over-hauled engines, drives, power stations. There were manu-factured goods to the amount of 3 mlrd. 654 mln. UAH incurrent prices. There were shipped goods to the amountof 3 mlrd. 625.6 mln. UAH.

Specific weight of sold products is distributed asfollows:

■ Aviation equipment – 93.5%; ■ General-purpose technical products – 4.2%; ■ Consumer goods – 2.3%.

PRODUCTIONACTIVITY

Income from sold products, works and services, mln. UAHincluding aviation equipment, mln. UAH

2005

mln

. UAH

UAH

2006 2007 2008 2009

Yield of capital investments, UAH

2005 2006 2007 2008 2009

1090,4 1238,1

1749,7

2056,4

3740,4

859,1 982,0

1398,1 1647,4

3387,8

0

500

1000

1500

2000

2500

3000

3500

4000

0,6120,687

0,905 0,907

1,725

0

0,5

1

1,5

2


200946

Income from sold products, worksand services for 2005 - 2009.

Yield of capital investmentsfor 2005 – 2009 (UAH)

93,5

4,2 2,3


200947

In addition to production of engines the Company per-formed 140 contracts for the delivery of spare parts (75of them - non-CIS countries, 65 - Aircraft Repair Plantsin Russia). The Company provides in-service maintenance ofengines, warranty and after- warranty maintenance.There were organized 189 points of periodic mainte-nance and constant location of PSD experts, functionssystem of air worthiness support. Work with operatingentities is formed on the contractual basis. In 2009there were concluded about 270 contracts and 430additional agreements to running contracts with avia-tion plants of CIS countries for the increase of servicelife, technical maintenance of engines produced byMOTOR SICH PJSC.In 2009 continued mastering of serial production of newkinds of aviation products. There were manufactured: ■ 3 engines МS-500; ■ 4 engines AI-450M; ■ modified D-36МB ventilator; ■ there was performed pre-production and production of

hardware for МS-350, AI-450-MS series 1,ТV3-117VМА-SBМ1V series 4 prototype engines;

■ there were manufactured heat exchangers for D-36,AI9-3B, D-18Т engines.

The following consumer goods were developed andintroduced in production: ■ there was developed design documentation, manufac-

tured preproduction series and performed testing ofwind power station “Motor Sich” VES-5;

■ there was manufactured preproduction series of motorcultivator “Motor Sich МB-8”;

■ there was developed design documentation andlaunched serial production of the set of hip jointimplants “Motor Sich ETBS-1”.

Credit funds, received for introduction of cogenerationplant “Thermal energy complex “Motor Sich” in theamount of 20.3 mln. UAH, were mastered in full volumein the reporting period. There was completely mountedTEC-3 prototype model. There was performed trial run,performed further development of complex. TEC-6 was completed for more than 60%. There was increased amount of incomplete works onauxiliary products due to created reserve for produc-tion of accessories, modernization and overhaul ofequipment in 2010. Specific weight of main products in the scope ofincomplete production: ■ as of 01.01.2009 – 93.6%; ■ as of 01.01.2010 – 90.9%. Reserve of incomplete production, created in2009, shall provide continuous and smooth workof the Company in 2010.


200948

Manufacture of aviation engines, which meet con-temporary requirements of the market and may com-pete with products of the leading world companies,demands constant improvement of production processtaking into account the latest achievements of scienceand engineering.

MOTOR SICH PJSC carries out the following activities inthis respect:

1. Introduction of new production processes:■ production process of BMK-1 friction disks for rotary

table of NC machines; ■ Automatic arc welding technologies of machine welding

of branch pipes by new automatic machine FСР-600; ■ production processes for 2 046 components and assem-

bly units for new AI-450-MS, AI-222-25, D-436-148engines and other products.

2. Introduction of advanced preforms:■ precise casting by consumable patterns made of heat-

resistant and structural alloys;■ precise centrifugal casting by consumable patterns

made of titanium alloys; ■ casting of monocrystal blades made of heat-resistant

alloys ЖС32, ЖС26; ■ chill casting of magnesium and aluminum alloys; ■ precise casting of large-size components made of

nonferrous alloys.

3. Joint research and development works:■ MOTOR SICH PJSC and UkrNIIspetssteel carry out

complex of research works on introduction of newinstrument and stamping steels in order to increaselife of thread milling tools and life of structural stressdies by 30 - 40%;

■ MOTOR SICH PJSC and VILS OJSC, UkrNIIspetssteeland Kharkov Physics and Technology Institute carryout research works on the development of gasostat-ic extrusion of castings made of heat-resistant and

ADVANCED TECHNOLOGIES


200949

titanium alloys, as well on technologies of granula-tion metallurgy;

■ MOTOR SICH PJSC and NPP Eltechmash OJSC(Vinnitsa) work on further development of theprocess of ceramic coating application on turbineblades of AI-450-MS engine.

4. Development and introduction of control programsfor numerical control (NС) equipment.5. Development of new software products:■ post-processors for TORNADO, DZ-45, МА-665/А/А2

machines; ■ Translated NC data for machines: 4FSL-8P, МА-

665А/А2, МК 6713, IR-500, WOHLENBERG, MCFHD.

6. Purchased new imported process equipment:■ DEGEN TB 1200/1 deep hole drilling machine; ■ PICOMAX 820 VERSA machining center with numerical

control; ■ BENZINGER GoFuture B2 turning machine with

numerical control; ■ SMS SG1000U semiautomatic thread-grinding machine

and others.

7. Introduction of efficient cutting tools and produc-tion accessories.

MOTOR SICH PJSC has an after-sales service divisionstaffed with highly experienced specialists (ProductSupport Department – PSD), which is ready to effecttechnical support of all manufactured aircraft engineswithin the whole period of their operation. PSD works with customers on the basis of the concludedcontracts: at present more than 300 contracts are effec-tive, 200 of them were concluded with Air Companiesfrom CIS countries. In 2009 Product Support Department: ■ has rendered various services to the amount of 242.1

mln. UAH; ■ has performed light overhaul of 107 engines: in serv-

ice conditions - 68, at technical centres (TechnicalCentre МSME, UAE; Technical Centre Borisfen-Avia,Russia) - 39;

■ continued to master light overhaul of D-336, AI-336-2-8, D-436Т1/TP, D-436-148, AI-450-МS,ТV3-117VМА-SBМ1, AI9-3B engines;

■ has developed new kinds of repair technologies forТV3-117VМА-SBМ1, AI9-3B, D-18Т, D-36 engines.

The sphere of PSD activity has become wider, whennew gas-pumping stations were put into operation in

Iran, Turkey, Turkmenia, Uzbekistan, Bulgaria,Belarus, Russia, Azerbaijan. Totally 101 engines arenow operating at gas-pumping stations and 6 enginesare used at power stations.Presently, PSD renders in-service support of newequipment: ■ Аn-148-100B airplanes with D-436-148 and AI-450-

МS engines of Russia STC and ВАСО OJSC air compa-nies;

■ Аn-140-100 airplanes with ТV3-117VМА-SBМ1 andAI9-3B engines of “Motor Sich” (Ukraine),“Yakutia” (Russia) air companies;

■ Bе-200 airplanes with D-436ТP engines; ■ К-8j airplanes with AI-25ТLK engine in China; ■ Mi-24 helicopters with ТV3-117VМА-SBМ1V engines; ■ 10 MW gas-turbine drive at CS “Novopskov”; ■ 7 MW gas-turbine drive at CS “Eskisehir” (Turkey); ■ 8 MW gas-turbine drive at BCS “Shurtan”, «Zevardy»,

“Pamuk” (Uzbekistan); ■ 8 MW gas-turbine drive at CS “Lozenets” (Bulgaria),

CS “Yuzhno-Balykskaya” (Russia);■ 6 MW gas-turbine drive at “Igolskaya” gas-turbine

power station.

SERVICE MAINTENANCE


200950


200951

CAPITAL CONSTRUCTION

At the reporting period of 2009 Construction andSocial Development Department has completely ful-filled tasks for reconstruction and technical reequip-ment of operating production facilities, constructionof social facilities, capital and light repair of buildingsand structures.222.6 mln. UAH of the Company’s own funds weredirected for these purposes, including: ■ purchase of required equipment; ■ modernization of equipment; ■ construction and installation works on reconstruction of

facilities; ■ capital and current repair of buildings and struc-

tures.These significant funds were spent for the replace-ment of physically and morally obsolete equipmentand reconstruction of production facilities. It hasallowed MOTOR SICH PJSC to increase labour effi-ciency and production standards, to improve labourconditions of production personnel, as well asmaintain the Company’s buildings and structures ingood technical state.

Construction and Social Development Department hasperformed the following works at the reporting period:■ complex of works on construction and installation of

equipment of thermal energy complex (TEC-3) ofexperimental industrial sample on generation of thermaland electric power;

■ reconstruction of test benches; ■ overhaul of substation; ■ reconstruction of premises; ■ construction and installation works on mounting of

thermal vacuum furnace; ■ construction of boiler house, utility and storage facilities. Therу was performed the planned scope of capitalconstruction of social facilities. All recreation centers,preventoriums and children's health camps were time-ly prepared for summer recreational season.There was performed significant volume of design andspecial works on reconstruction and technical reequip-ment of operating production facilities; valuation ofinventory, certification and inspection of buildings andstructures; valuation of inventory and topographic-geodetic survey of the Company’s lands.


200952

Works on aviation engines■ To perform experimental and design works on adap-

tation of TV3-117VMA-SBМ1-26 engine for An-26airplane;

■ To continue cooperative deliveries of assembly units forAI-222-25 and AI-222К-25 turbofan engines for manu-facture of engines under the concluded contracts;

■ To manufacture parts and assembly units of AI-222К-25F engine, as well as to perform tests of prototypeengines;

■ To start in-series production of AI-25TLSh engine andmaster modernization of AI-25TL into AI-25TLSh;

■ To participate in completion and design supervision ofD-27 engines for performance of state certificationtests;

■ To manufacture components and assembly unitsfor AI-450-MS series 1 and AI-450M engines. Toperform experimental tests of AI-450M engine inМi-2М helicopter;

■ To continue work in accordance with integratedschedule for launching production of AI9-3B series1 engine;

■ To sign Terms of Reference for MS-14S1 engines ofТ-107 airplane produced by ТК&Т OJSC;

■ To continue works on MS-500V engine.

Works on TV3-117VМА-SBМ1V engine: ■ To perform flight tests of Mi-24 helicopter engines

under hot-and-high conditions, as well as flight tests ofMi-8МТ/ Mi-17 helicopter engines;

■ To increase engine life; ■ To create modifications of TV3-117VМА-SBМ1V

series 1 engine with new full authority digital enginecontrol (FADEC) and redundancy hydromechanicalsystem;

■ To perform works with helicopter companies andforeign customers on application of TV3-117VМА-SBМ1V engine in Mi-8МТ/Mi-17, Mi-24 and Ка-32helicopters;

■ To manufacture МS-450 demonstrator engine; ■ To continue works on МS-400 engine; ■ To develop Terms of Reference and prepare pilot project

on МS-200 engine; ■ To carry out pilot operation of AI-20DMN gas conden-

sate engine at Sterkhovoye Field (Russian Federation).

Works on ground equipment■ To continue 5000-hour tests of GTE-МS-2,5 gas-turbine

drive reducer with sleeve bearings; ■ To continue optimization of dual-fuel system of

GTE-МS-2,5D engine as a part of dual-fuel powerstation;

■ To perform works on creation of GTE-8,3/МS gas-turbine drive for EG-8000МS power station;

■ To complete design documentation for AI-312N gas-turbine drive at SE “Ivchenko-Progress” and manufac-ture prototype model at MOTOR SICH PJSC;

■ To manufacture and test the first prototype model ofEG-1000МS power station;

■ To develop gas control unit and air bleed valve’s controlsystem with new electronic components for 2.5 MWpower station;

■ To develop design documentation and operational doc-umentation on modernization of PAES-2500G powerstations;

■ To develop design documentation for modernization ofPAES-2500 gas-turbine power station with acceleratedstartup;

■ To complete tests of the prototype model of gaspumping unit at test bench;

PROSPECTS FOR 2010


200953

■ To continue experimental works aimed at cheapening ofthe design of gas pumping modules and units, replace-ment of materials, standardization of components andassembly units, their application in the development ofdesign documentation for the further deliveries of gaspumping units;

■ To complete complex operational, preliminary, accept-ance tests of the prototype model of gas pumping unitand to put the first gas pumping unit in pilot operation;

■ To develop Terms of Reference and conceptualdesign of new gas pumping unit GPA-К/5,5-GTD/12with 12 MW gas-turbine drive.

Works on consumer goods■ To manufacture, perform development and acceptance

tests of MGT-02U mini-tractor; ■ To manufacture and perform acceptance tests of

“МS-475” chain saw of enhanced design; ■ To carry out in-series manufacture of МB-8 motor

cultivators; ■ To develop and manufacture pilot batch of “Motor

Sich ETBS” hip joint implant system; “Motor SichINETS-1” and “Motor Sich INEKS-1” instrument sets.

Works on capital construction■ To perform reconstruction of main production shops; ■ To perform reconstruction of two hangars of MOTOR

SICH PJSC Air Company for assembly of helicopters; ■ To complete construction of TEC-3; ■ To complete works on installation of TEC-6;■ To perform reconstruction of test benches; ■ To continue construction of the Company’s museum; ■ To continue works on energy conservation.

FINANCIAL AND ECONOMICACTIVITY


200955

MOTOR SICH PJSC has carried out flexible financialpolicy aimed at attraction of additional credit capitalfrom residential and non-residential financial andbanking institutions in order to provide stable financialand economic activity of the Company. Long-termcredits were attracted for the purchase of equipment(Long-term credit agreement with Swiss “UBS AG”

Bank) and implementation of investment projects(contract with SIFCO for introduction of “Thermalenergy complex “Motor Sich” cogeneration plant).

Specific weight of credit resources on the liabilitiesside has reduced from 18.1 up to 15.7% at the endof 2009.

%

2005 2006 2007 2008 2009

13,8 14,2

13,0

18,1

15,7

0

2

4

6

8

10

12

14

16

18

20

Indices of financial stability, business activity andfinancial soundness of the CompanyProfitability of sales - index, which is reflecting share ofnet profit in volume of sales, has increased in 2009 andhas made 19.8%. Efficiency of current assets (which is reflecting effi-ciency of negotiable asset and showing, what profitis produced by a unit of the Company’s circulatingcapital) has increased and has made 28.9%. It is a

positive result of the Company’s activity.Return on equity, determining efficiency of invest-ments into the Company, has increased in the report-ing period, and has made 34.1%.

Return on equity of MOTOR SICH PJSC is at rather highlevel. It is an evidence of its efficient activity.

Specific weight of credit resources on the liabilities side for 2005 - 2009 (%)

■ Labour and Wages

PERSONNEL POLICY


200957

Labour force at the parent enterprise has increased by266 persons in 2009. Labour force structure haschanged due to the increased amount of direct workers.Personnel structure is as follows as of 31st December2009: 34% - direct workers, 20% -auxiliary workers,37% - engineers and technicians, 6% - quality controldepartment, 3% - other categories.

Labour fluctuations at the parent enterprise havereduced by 2.1 times in 2009: at the average from8.92% per 2008 up to 4.32% per 2009.

The Company’s labour remuneration system shallprovide fair remuneration for employees’ labourdepending on complexity and conditions of work,employee’s professional and business qualities, resultsof the employee’s work and economic activity of theCompany’s corresponding subdivision.Pursuant to Article No.56 of Law of Ukraine No.835-VI dated 26.12.2008 “On the state budget of Ukrainefor 2009” in order to increase social standards for allcategories of workers, MOTOR SICH PJSC has intro-duced new wage rates and official salaries from01.05.2009.

Increase of average wages from January till December2009 has made 134.5% at 115.9% average official rate ofinflation per year.

Average wages of production and industrial personnelin December 2009 amounted to 2 439 UAH, of industri-al workers - 2 606 UAH, of chief foremen - 3 336 UAH,of foreman - 2479 UAH. Main indices of the Company’sperformance (average wages of all categories of work-ers, efficiency rates, wages of retired persons) wereconstantly analyzed. Average efficiency rate in 2009has made 117.2%. The Company has no wage arrears, as well as tax arrearsto budgetary and extra-budgetary funds.

34

20

37

36

0,54

0,73

0,61

0,98

0,77 0,77

0,92 0,86

0,92 0,94

0,53

0,34

0,25 0,33 0,29

0,36 0,36 0,47

0,52

0,37 0,37 0,4

0,31 0,29

0

0,2

0,4

0,6

0,8

1,0

1,2

2008

1 2 3 4 5 6 7Month

8 9 10 11 12

%

2009

Comparative analysis of labour fluctuations for 2009

Personnel structure as of 31.12.2009, %


200958

Staff recruitment system:■ competitive selection of employees; ■ psychological testing for objective estimation of the

candidate’s intellectual and psychological potential;■ candidate’s interview by the head of subdivision; ■ probation period.

Training and professional development oriented atsystematic and comprehensive work with personnelreserve:■ production-technical training courses, special training

courses; ■ cooperation with educational institutions; ■ training in Personnel Training Department.

Educational structureof production and industrialpersonnel for the parent enterprise, %:

Age structurefor the parent enterprise, %

Industrial workers . . . . . . . . . . . . . . . . . . . . . . . . . . 34,0 Auxiliary workers . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,0Engineers and technicians . . . . . . . . . . . . . . . . . . . . 37,0Other categories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,0From total amount:disabled persons – 4%, working pensioners – 20%.

Qualitative indices of staff: Personnel structure by categories, %

up to 30 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,231 - 40 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,841 - 50 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,551-55 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,256 - 60 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,4over 60 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,9The average age of the Company’s employees is 42.2 years.

Higher education . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,4Specialized secondary education . . . . . . . . . . . . . . 23,4Secondary technical education . . . . . . . . . . . . . . . . 16,7Secondary education . . . . . . . . . . . . . . . . . . . . . . . . 31,4Incomplete secondary education . . . . . . . . . . . . . . . 2,128 Candidates of Science are employed at the Company.

26,4

23,416,7

31,4

2,1

34

20

37

9

27,2

17,8

13,2

21,5

8,9

11,4

Average wage 2005 2006 2007 2008 2009 of an employee, total 733,3 920,6 1 295,9 1 821,4 2 080,3of a PIP employee* 751,0 946,8 1 335,3 1 871,2 2 134,8

Growth of the average wages of employeesat MOTOR SICH PJSC in 2005 - 2009 (UAH)

* production and industrial personnel


200959

In 2009 the Company has employed 149 yоung specialstswith higher education, 96 graduates of ZaporozhyeAviation College, Electrotechnical College, HydroelectricalCollege and Zaporozhye Metallurgical secondary technicalschool, graduates of technical vocational schools - 124persons. All together - 369 young specialists.Basic educational institutions for the Company are:Zaporozhye National Technical University (ZNTU),Khar’kov National Aerospace University named afterN.E. Zhukovsky (KhAI), Zaporozhye Aviation College(ZAC), Zaporozhye Electrotechnical College (ZEC),Higher vocational school No.27. The Company has concluded contracts with all youngspecialists, who will get additional payment up to theCompany’s average wage during 2 - 3 years. The Company pays much attention to perparation ofqualified specialists by means of correspondence edu-cation on-the-job. The majority of such students areput to reserve. Competitive selection was performed onthe basis of partnership agreements with ZNTU andZEC. 33 young employees having more than 5-yearexperience of work at the Company have got opportu-nity to study at the 1st – 4th course of these educa-tional institutions on-the-job at the expense of thestate budget as a result of this selection.More than 950 employees of the Company are gettingeducation via correspondence.Cooperation with Zaporozhye Aviation College notonly provides the Company with specialists havingsecondary special education, but gives an opportunityto send them to the 3rd course of higher educationalinstitutions for further studies to complete earlierformed groups. 16 graduates of ZAC were sent to the3rd course of KhAI at the expense of the state budg-et this year. 19 students of ZAC undergo training atpreliminary courses.More than 500 children of the Company’s employeeswere sent to the full-time department of the branchof Pre-university Training Faculty to get in-demandspecialties according to the agreement with ZNTUduring the period from 2005 till 2009.Such form of specialist training, as establishment ofbranches of specialized departments of higher educa-tional institutions at the plant, has got further devel-opment. Branch of KhAI Department “Technology ofproduction of aviation engines” functions at the plant

from 1996. ZNTU Department “Equipment of castingproduction” functions from 1992. ZNTU has estab-lished new specialty “Aircraft engines and powerunits” according to recommendations of MOTOR SICHPJSC in 2005. The following number of students was trained at the plantin 2009:■ 580 students of the 3rd – 5th course of eleven higher

educational institutions were trained in 43 specialties;■ more than 370 students of 11 secondary technical

schools and colleges were trained in 21 specialties;■ more than 630 students of 10 vocational schools were

trained in 16 specialties. 71 children of the Company’s employees have success-fully passed entrance examinations at Pre-universityTraining Department and were enlisted to ZNTU tostudy the following machine-building specialties at theaccount of the state budget:■ “Aviation Engines Production Process”; ■ “Aircraft Engines and Power Units”; ■ “Mechanical Engineering”; ■ “Metal-cutting Machines and Systems”. The Company has rewarded 78 employees, whose chil-dren have come to the plant after graduation fromhigher educational institutions and vocational schools,in order to maintain the corporate spirit and labourdynasties.75 children of the Company’s employees were enlisted toZNTU Pre-university Training Department in 2009.The Company systematically works on occupational guid-ance of schoolchildren of the 9th, 10th and 11th forms ofthe schools of Zaporozhye and Zaporozhye region,recruiting students for the basic Higher vocational schoolNo. 27, Zaporozhye Aviation College, ZaporozhyeElectrotechnical College, ZNTU Pre-university TrainingDepartment. The Company constantly maintains cooperation withShevchenkovsky District Employment Centre andZaporozhye Regional Employment Centre in order toreturn unemployed persons to productive activity. The Company’s Personnel Training Department isfunctioning for more than 70 years. The PTD has gotlicences of the Ministry of Education and Science ofUkraine for personnel training in 18 professions.

SOCIAL SPHERE


200961

Capital investments into social sphere in 2009 haveamounted to 13.0 mln. UAH, including 0.9 mln. UAHfor procurement of equipment. The Company hasspent 54.2 mln. UAH for the health-care measuresand maintenance of social facilities. That is by 0.7mln. UAH more than in 2008. The Company’s socialsphere includes practically all types of social benefits:health care, education, recreation, sports, housing.Social facilities are financed from the Company’sassets. The Company is proud of the best local chil-dren’s health and sport camps with all conditions forphysical, psychological and social development of theyounger generation. Children are provided withopportunities for individual improvement, develop-ment of artistic skills and activation of their naturalpotential. 1428 children of the Company’s employeesand 485 children of the workers of other enterpriseshave recreated at the camps. Vacation hotel“Horizont” in Crimea and health centers “Motor” and“Priboy” at the Azov sea are equipped with comfort-able sleeping buildings, spacious halls, improvedrooms (suites and semi-suites), as well as canteenswith three daily meals, bars, saunas, billiard-rooms,cinema halls, libraries, sports grounds and children’splaygrounds. Sanatorium-preventorium in Andreyevkavillage at the bank of the Dnieper river and sanatorium“Raduga” located in the town of Volochysk

(Khmelnitsky region) provide the resting people withdifferent medical and preventive procedures: baths,inhalations, ozokerite therapy, massage, remedialgymnastics, physical and therapeutic procedures.Tourist camp “Meridian” is the most affordable recre-ation site for the Company’s youth for many years. It issituated in one of the most picturesque places,Sedlasty island, not far from Kakhovka artificial lake.Holiday-makers are provided with more than 100 cot-tages, sports ground, tennis tables, billiard-room,rental boats and fascinating youth leasure programs.17979 persons, including 12207 employees of theCompany and their children have recreated in thehealth centres in 2009. The Company has introducedcollective arrivals, mother and child arrivals, veteransof the Great Patriotic War and veterans of labour. 1527persons are dwelling in the Company’s dormitories.555 children study at the centre of preschool educa-tion.Medical division of MOTOR SICH PJSC is equippedwith up-to-date equipment and manned with thebest medical staff. Thousands of engine-builders andinhabitants of Zaporozhye get qualified medical carethere every year.Collectives of the Cultural Center named afterT.G. Shevchenko and “Motor Sich” Sports Complexare well-known outside Zaporozhye and Ukraine.

FINANCIAL REPORT


200963

Note No. 31. 12. 2008 31. 12. 2009ASSETSIntangible assets in residual value 1 548 839Fixed assets in residual value 2 845 358 921 056Incomplete construction 3 146 358 213 187Long-term financial investments 4 239 382 253 514Long-term debt 6 6 595 6 595Other non-circulating assets 642 2 837Production stock 5 1 513 866 1 585 229Settlements with debtors 6 564 305 846 182Monetary resources and their equivalents 7 48 947 187 390Current financial investments 4 113 964 104 970Other circulating assets 55 201 87 419Deferred expenses 2 148 1 445Total for Assets 3 537 314 4 210 663

LIABILITIESProvision of deferred expenses and payments 4 692 6 769Long-term liabilities 9 125 766 235 405Short-term credits 589 121 538 687Settlements with creditors 9 1 014 983 883 311Deferred income 119 234Total for liabilities 1 734 681 1 664 406

OWNERSHIP CAPITALStatutory capital 8 280 529 280 529Additional invested capital 8 171 757 171 757Other additional capital 8 656 127 658 522Capital reserves 8 70 145 70 145Retained profit 8 628 953 1 370 182Withdrawn capital 8 (4878) (4878)Total for ownership capital 1 804 562 2 546 257Total for liabilities 3 539 243 4 210 663

BALANCE (THOUS. UAH)


200964

Note No. 2008 2009IncomeNet income (proceeds) obtained from sale ofproducts (goods, works, services) 10 2 056 424 3 740 353Other operational income 10 1 381 562 2 478 380Profit of capital share 10 18 700 9 513Other financial income 10 217 787Other income 10 151 169 64 764Total for income from cost accounting 3 608 072 6 293 797Extraordinary income – –

ExpensesCost of sold products (goods, works, services) 1 326 556 2 137 504Administrative expenses 275 792 308 658Sales expenses 150 874 224 449Other operating expenses 10 1 426 649 2 443 130Financial expenses 10 53 379 84 279Capital share expenses 10 6 816 11 887Other expenses 10 355 310 88 277Profit tax 10 142 254 384Total expenses from cost accounting 3 605 518 5 552 568Extraordinary expensesNet profit 2 554 741 229

REPORT ON FINANCIAL RESULTS (THOUS. UAH)


200965

Main Aspects ofAccounting Policy

The principles of accounting policy used as a basis forpreparation of summary financial report are determinedby effective legislation of Ukraine, Regulations(Standards) for Accounting (R(S)A), accounting policy ofMOTOR SICH PJSC approved by Chairman of the Board ofDirectors, and other regulatory documents of theCompany.Accounting policy is common for the head plant and allits subsidiaries.Assets and liabilities are reflected in the Balance Sheet athistorical (actual) cost, with the account of the fact thatthe cost of fixed assets, intangible assets and stocks maybe revaluated in compliance with the requirements ofNational accounting standards. Currency of the Company’s Financial Report – nationalmonetary unit of Ukraine, hryvnya (UAH).


200966

Intangible assetsNote 1

Intangible assets are accounted according to the fol-lowing groups: software products for personal com-puters, rights to products and services trademarks,rights to objects of industrial property, incompletecapital investments in intangible assets, licenses foreffecting definite types of activity for over one year.Intangible assets should be estimated by cost pricewhen they are entered to balance.Costs for creating Company's own trademark are includedin costs of the period under account. Assets acquired fromthe third parties are considered as intangible ones.

Intangible assets of the Company consist mainly of thecomputer software and computer networks.Intangible assets depreciation is calculated accordingto the straightforward method. Useful life is deter-mined for each intangible asset. The Company has nointangible assets, which are under limitation of theright of ownership and which have been registeredunder security conditions.

Item Software Other intangible assets Total

Cost

Balance as of 31.12.2008 14 276 163 14 439Received per year 802 – 802

Retired per year – – –

Balance as of 31.12.2009 15 078 163 15 241

Depreciation

Balance as of 31.12.2008 13 827 64 13 891Accrued per year 511 – 511

Retired per year – – –

Balance as of 31.12.2009 14 338 64 14 402

Net Balance value as of 31.12.2008 449 99 548Net Balance value as of 31.12.2009 740 99 839

Structure and flowof intangible assets (thous. UAH)

NOTESTO FINANCIALREPORT


200967

Fixed assets and low-valuenon-negotiable tangible assets

Note 2

Fixed assets include tangible assets held by the Companyin order to use them during production or delivery ofgoods and rendering of services, as well as to lease toother persons or to realize administrative and social-and-cultural activities; their expected useful life is more thanone year.Fixed assets and low-value non-negotiable tangible assetsare shown in the balance with respect to their historicaland depreciated cost.Initial evaluation of objects of fixed assets and low-value non-negotiable tangible assets is carried out with

respect to their first cost. First cost of the object offixed assets and low-value non-negotiable tangibleassets consists of acquisition price and costs that aredirectly related to bringing fixed assets to condition atwhich their operation is possible.Residual value of fixed assets was not used in theaccounting year. Additional evaluation of fixed assetswas not carried out.Depreciation of fixed assets is accrued during useful lifeof the object by means of straightforward method.

Historical cost

Balance as of 31.12.2008 754 846 690 570 148 740 227 781 136 020 1 957 957Received per year 48 567 74 840 32 108 42 965 10 681 209 161

Retired per year 20 095 12 265 2 339 11 553 25 271 48 417

Balance as of 31.12.2009 783 318 753 145 178 509 259 193 121 430 2 118 701

Depreciation

Balance as of 31.12.2008 290 512 483 510 66 916 195 936 75 725 1 112 599Accrued per year 17 537 39 387 14 553 37 913 8 513 117 903

Retired per year 8 368 11 018 1 432 10 345 22 384 32 857

Balance as of 31.12.2009 299 681 511 879 80 037 223 504 82 544 1 197 645Net balance value as of31.12.2008 464 334 207 060 81 824 31 845 60 295 845 358Net balance value as of31.12.2009 483 637 241 266 98 472 35 689 38 886 921 056

Structure and flowof fixed assets (thous. UAH)

Item

Buildings,structures,

transferfacilities

Tools,equipment and

facilities

Machines andequipment

Low-valuenon-negotiabletangible assets

Otherfixed assets Total


200968

Capital InvestmentsNote 3

The Company does not have fixed assets, with respectto which there exist limitations stipulated by theeffective legislation regarding the right of ownership,possession, management, as well as fixed assets,which are temporarily not in use.Historical (revaluated) cost of fully depreciated fixed assets,which continue to be used, is 457 483 thous. UAH, cost offixed assets issued as mortgage is 619 382 thous. UAH.

Incomplete capital investments form a separate group;an individual object of incomplete capital investments isconsidered as a unit for their accounting.Incomplete capital investments in capital tangible assetsare capital investments in construction, manufacture,reconstruction, modernization, acquisition of objects of

non-negotiable tangible assets, which were not put inservice as of the date of the Balance Sheet, as well asadvance payments for financing of construction.Incomplete capital investments are accounted by theirhistorical cost. Depreciation is not accrued for them.The amount of 276 792 thous. UAH was spent for capitalinvestments in fixed assets during the accounting year.

Cost of fixed assets received under operational leaseconditions is 19 074 thous. UAH.In 2009 fixed assets were acquired for monetary fundsand built up by the Company. Fixed assets were retireddue to liquidation, since they no longer met the criteriafor acceptance as assets, as well as since they were soldor transferred gratis.

Item Balance as of31.12.2008

Receivedper year

Retiredper year

Balance asof 1.12.2009

Capital construction 111 871 167 535 102 710 176 696Acquisition (manufacture) of fixed assets 21 041 60 922 58 838 23 125Acquisition (manufacture) of other non-negotiable tangible assets 11 675 47 388 45 710 13 353Other 1 771 947 2 705 13Total 146 358 276 792 209 963 213 187

Structure and Movement of CapitalInvestments (thous. UAH)


200969

Financial InvestmentsNote 4

Оne of directions of the Company’s activity is invest-ment activity. The Company holds 100% of shares of sub-sidiaries and has stakes in statutory capitals of Motor SichMiddle East (SAIF zone, Sharjah, United Arab Emirates) -100%, Energo-Service CJSC (Strizhevoye, RussianFederation) - 49%, Dubnenskiye motory CJSC, (Dubna,Russian Federation) - 24.9%, Sodruzhestvo story Ltd.(Zaporozhye) - 99.74%, Iveco - Motor Sich CJSC(Zaporozhye) - 10.37%, Motor Bank Ltd. (Zaporozhye) -4.99%, Zaporozhye fish factory CJSC (Zaporozhye) -72.73%, Motor Garant Insurance Company ALC(Zaporozhye) - 30% and a number of other enterprises inUkraine and Russia.Long-term financial investments of the Company make247,251 thous. UAH as of 31.12.2009.All in all, the Company has made investments into

38 enterprises.Financial investments with the stakes exceeding 20% areaccounted by method of participation in capital and areshown as of the date of Balance Sheet with the valuedetermined taking into consideration change of totalvalue of ownership capital of investment object.Balance value of investments has beenincreased/decreased by the sum that is the investor’sstake in the net profit/negative profit of the invest-ment object and is included into the amount ofincome/losses from the shareholding. At the sametime the balance sheet value of the investment isdecreased by the amount of declared dividends. Allother financial investments as of the date of balancestatement are shown at their self-cost.

Long-term financial investments increased during reportingperiod by the amount of 20 474 thous. UAH. During currentreporting period there was received capital share income forthe amount of 9 513 thous. UAH and there were sufferedlosses for the amount of 11 887 thous. UAH. The stakes ofcorporate rights in the property of some enterprises have

been partially sold during reporting period for the amount of13 734 thous. UAH. Financial investments into associatedcompanies amounted to 21 567 thous. UAH in 2009. Current financial investments of emitters include theshares with total amount of 104 970 thous. UAH acquiredfor further resale.

Balance as of 31.12.2008 224 293 2 484 12 605 239 338 113 964Investments acquired 21 567 1 000 22 567 34 774

Additional capital 1 307 1 351

Profit from shareholding 9 488 25 9 513

Readjustment of rates 1 088 1 088

Acquired dividends

Investments retired 1 114 7 342 8 456 43 768

Expenditures due to shareholding 11 405 482 11 887

Balance as of 31.12.2009 245 224 2 027 6 263 253 514 104 970

Item

Financial investment, according to theshareholdings method, in:

SubsidiariesAssociatedenterprises

Other financialinvestments Total

Currentfinancial

investments

Flow of financial investments (thous. UAH)


200970

Process StockNote 5

The stock is considered to be an asset, if there isa possibility that the Company will get future eco-nomical benefits connected with their utilizationand their cost can be reliably determined. Each itemof valuables is a stock unit.When stock is transferred into production, sold ordisposed otherwise, their evaluation is done accord-ing to the first-in-first-out method. For monitoringconsumption of inventory items, accounting of

their quantity is organized in places of their con-sumption, and stock audit is regularly performed.The stock is reflected in accounting and balance statementat the historical cost as of the balance date. If price of thestock has decreased or inventory items got spoiled,became obsolete or lost originally expected economicvalue as of the date of balance statement, they arereflected by net liquidation value.

Raw staff and materials 88 837 204 195

Vendor semi-finished items and component parts 92 737 80 826

Fuel 23 685 10 755

Construction materials 1 260 1 780

Spare parts 37 616 44 898

Low-value and rapidly amortizable items 13 185 16 939

Work-in-progress 1 161 936 1 118 765

Finished products 88 816 96 522

Commodities 3 661 4 298

Other stock 2 133 6 251

Total 1 513 866 1 585 229

Item Balance value as of31.12.2008

Balance value as of31.12.2009

Balance value of the stock (thous. UAH)


200971

Debt ReceivablesNote 6

Debt receivables are considered to be assets, if there isa possibility that the Company will get future economicalbenefits and their cost can be reliably determined. Currentdebt receivables for products/goods and services areaccepted as the asset simultaneously with acceptance ofsales income and is evaluated by historical cost.Current debt receivables for products, goods and servic-es are included in the balance total by net cost of sales.Reserve of doubtful debts is accrued as of the date ofbalance statement for determining net cost of sales.This reserve is reflected in the report on financial resultsbeing included in other operational expenses.Reserve amount of doubtful debts is determined basedon financial solvency of individual debtors. Criteria ofreferring to debt receivables as doubtful debts are asfollows: debt, which limitation period is expiring earli-er than 12 months after the accounting date, if thedebtor is declared a bankrupt or is absent at theaddress indicated in documents.

Debt receivables for products and goods are reflectedin the balance by net cost of sales, which is equal tothe amount of debt receivables minus the reserve ofdoubtful debts.Bad debt receivables are written off from the assetswith non-recurring reduction of the reserve ofdoubtful debts. If the reserve amount of doubtfuldebts is not sufficient, doubtful debts are writtenoff from the assets of the Company to other opera-tional expenditures. The compensation amount ofearlier written off debt receivables is included inother operational profits.Bad debt receivables in the amount of 1,309 thous. UAHwere written off in the accounting year at the account ofreserve of doubtful debts.

The debts with connected persons is 20,442 thous. UAHas of the end of the year.

The other debt receivables in the accounting are debtreceivables for sums granted against reports, settlements

of claims, and debt receivables for non-commercialoperations.Item ‘Long-term debt receivables’ reflects contributionto the joint activity with Zaporozhye Plant of ConsumerGoods Ltd.

Bills received – –

Debt receivables for products, goods and services:

■ net cost of sales 194 848 140 299

Debt receivables for settlements:

■ of budgetary payments 49 686 69 697

■ for advances granted 230 845 529 099

■ for internal settlements 2 818 4 305

Other current debt receivables 86 108 102 782

Total 564 305 846 182

Item as of 31.12.2008 as of 31.12.2009

Structure of the Company debt receivables (thous. UAH)


200972

Funds Note 7

Funds of the Company are allocated on the currentaccounts and cash accounts of the Company both innational and foreign currency. Foreign currency transac-tions are reflected at primary acknowledgment by conver-sion of the sum in foreign currency into the balance cur-rency according to the exchange rate of National Bank ofUkraine as of the date of transaction. The amounts of paidand received advance payments in foreign currency areconverted into the reporting currency with the use of thecurrency rate as of the date of payment or receipt of

advance payment.Balance value of the stated balance sheet items in futurewill be determined (evaluated) according to correspon-ding provisions (standards) of business accounting. Exchange rate differences as per the foreign currencymonetary items are determined as of the date of settle-ment and the date of balance. Exchange rate differencesfrom conversion of the balance sheet items denominatedin foreign currency are reflected in operational and otherprofits (expenses).

Ownership CapitalNote 8

The registered Statutory fund of MOTOR SICH PJSCwas 280,528,650 UAH in 2009. It consisted of2,077,990 ordinary registered shares with nominalvalue of 135 UAH.Given below is the structure of capital stock of thefactory with respect to types of owners as of31.12.2009.At the end of the year the amount of shares in circula-tion made 1,980,394. All shares give equal rights fortaking part in voting, receiving dividends and returning

the corporate capital part. Net profit per one shareamounted to 374.28 UAH. The other additional capital includes the cost of fixedassets indexation and unfinished construction, addi-tional evaluation of stock, property received free ofcharge as a result of privatisation. Correction of mis-takes made during preceding periods has been effect-ed by correcting the balance of undistributed profitwith simultaneous acknowledgement of income andexpenses.

Payment office 143 186

Current accounts in banks 33 751 146 834

Other accounts in banks

(letters of credit, cheque-books) 15 053 25 369

Funds in transit - 1

Equivalent funds - 15 000

Total 48 947 187 390

Item 2008 2009

Funds (thous. UAH)


200973

LiabilitiesNote 9

The Company acknowledges liabilities, if their valuecan be truly assessed and there is possibility ofdecreasing economic gains in future due to their liqui-dation. If formerly acknowledged liabilities are notsubject to liquidation as of the balance sheet date,their amounts are included into the incomes of thereporting period.

Reserve of future expenses for payment of vacationallowances is accrued by the Company. Reserves forwarranty service, for annual remuneration for employ-ment years etc. were not created. In the reporting periodthere were accrued provisions for payment of vacationallowances in the amount of 56 749 thous. UAH. Therewere used 54 570 thous. UAH.

Changes in ownership capital during 2009 (thous. UAH)

Balance as ofthe beginning of year 280 529 171 757 656 767 70 145 630 242 (4 878) 1 804 562Adjustment:

■ correction of mistakes (640) (1 289) (1 929)

■ other changes

Adjusted balance as ofthe beginning of year 280 529 171 757 656 127 70 145 628 953 (4 878) 1 802 633Increases in the value

of fixed assets 1 307 1 307

Net profit during

reporting period 741 229 741 229

Distribution of profit: – –

Payments of dividends

Contribution to reserve capital – – –

Other changes in capital

(exchange differences

per financial investments) 1 088 1 088

Total number of changesin capital 2 395 741 229 743 624Balance as of the end of year 280 529 171 757 658 522 70 145 1 370 182 (4 878) 2 546 257

ItemAdditionally

investedcapital

Statutoryfund

Reservecapital

Otheradditional

capital

Undistributedprofits

Withdrawncapital

Total

Items of current liabilities reflect debts, which liquidation term did not become due as of the balance sheet date.Item “Other current liabilities” reflects the amount of liabilities on non-commercial transactions and transactionswith other creditors.


200974

Item “Other long-term liabilites” reflects credit givenby the State innovation-and-crediting institution forincorporation and implementation of the innovationproject ‘Implementation of cogeneration power-sav-ing plant “Motor Sich thermal power generationcomplex”.Deferred tax liabilities were accrued on the amounts ofreceived and issued advance payments, residues ofincomplete production and finished products to theextent of direct overhead costs, on the amount of sur-plus of residual cost of industrial fixed assets over their

residual cost in the tax accounting, incomes andexpenses of future periods. Deferred tax liabilities (amount of profit tax that will bepaid in future periods from the time-based tax differ-ences subject to taxation) were increased for theamount of 62 701 thous. UAH in the reporting period. The amount of deferred tax assets and liabilities is reflect-ed in item “Deferred tax liabilities” of the balance sheet.

Bills issued 108 601 9 312

Accounts payable for goods, works and services 146 802 86 701

Current liabilities on settlements:■ of obtained advance payments 684 003 657 279

■ with budget 6 031 49 122

■ of insurance 14 251 19 142

■ of salary 30 171 38 827

■ with participants 10 917 9 953

Other current liabilities 14 207 12 975

Total 1 014 983 883 311

Items as of 31.12.2008 as of 31.12.2009

Structure of the Company's current liabilities (thous. UAH)

Long-term bank credits 48 187 96 222

Other long-term financial liabilites 20 300 19 203

Deferred tax liabilities 57 279 119 980

Total 125 766 235 405

Item as of 31.12.2008 as of 31.12.2009

Structure of the Company's long-term liabilities (thous. UAH)


200975

Incomes and ExpensesNote 10

Items of incomes and expenses are taken into accountand evaluated at the moment of assets sale or serviceprovision. All the Company's incomes and expensestaking place in the reporting period are reflected with-in the same period regardless of date of actual acquisi-tion or payment of monetary funds.Incomes, which were received in the reporting period,but were to arrive in the next period, are accounted asincomes of future periods. Incurred expenses and pay-ments relating to future periods are accounted asexpenses of future periods.

Accounting of percentage incomes and expenses iscarried out by accrual method. Cash basis method isused only for accounting of percentage incomesadded to demand balance on bank accounts.Profit from selling products (goods, works, services)amounted to 1 602 849 thous. UAH in 2009.Basic types of activity of Motor Sich PJSC in 2009 wereproduction and overhaul of aircraft engines, as well asground equipment based on aircraft engines.

Structure of incomes with respect to ordinary types ofactivity has not changed since the previous reporting peri-od. Incomes from the ordinary types of activity, the sameas in the previous period, for 90% consist of incomesfrom production and overhaul of aircraft engines, andground equipment. Income from selling consumer goodsis negligible. Absolute values of incomes from the ordinary types ofactivity increased by 81.9% in 2009 against the figures ofthe previous period due to increased volumen of sales ofhelicopter engines and exchange rate fluctuations.

Item Reportingperiod

Precedingperiod

Absolutechanges

Rate ofgrowth, %

Net income (proceeds) from selling products

(works, services) 3 740 353 2 056 424 1 683 929 81,9

from production and repairing of air-engines 3 387 759 1 656 445 1 731 314 104,5

from production of ground equipment 153 466 178 347 -24 881 -14,0

from consumer goods 84 411 78 189 6 222 8,0

other goods, works, services 114 717 143 443 -28 726 -20,0

Structure of incomes with respectto ordinary types of activity (thou. UAH)


200976

Item Reportingperiod

Precedingperiod

Absolutechanges

Other operating incomesOperating lease of assets 3 681 2 865 816 Operating difference in rates 33 721 52 415 -18 694Income from selling other circulating assets 65 152 32 443 32 709Received penalties, fines and forfeits 87 30 57 Maintenance of objects of housing andcommunal services, social sector 3 610 3 011 599 Income from selling foreign currency 2 344 346 1 259 923 1 084 423 Other operating incomes and expenses 27 783 30 875 -3 092 Total 2 478 380 1 381 562 1 096 818 Incomes from participation in capital from investments in:Associated enterprises 9 488 18 402 -8 914 Subsidiary companies 25 298 -273 Total 9 513 18 700 -9 187 Other financial incomeOther financial income 787 217 -217 Total 787 217 -217 Other incomeRealization of financial investments 38 397 125 256 -86 859 Non-operating difference in rates 25 090 19 498 5 592 Other income 1 277 6 415 -5 138 Total 64 764 151 169 -86 405 Other operating expensesOperating difference in rates 42 836 34 616 8 220Selling of other negotiable assets 41 386 23 171 18 215Penalties, fines and forfeits 4 157 5 331 -1 174Doubtful and bad debts 3 066 -3 066Maintenance of objects of housing andcommunal services, social sector 69 815 68 033 1 782Self-cost of selling foreign currency 2 275 590 1 274 290 1 001 300Other operating incomes and expenses 9 346 17 670 -8 324Total 2 443 130 1 426 177 1 016 953Incomes from participation in capital from investments in:Associated enterprises 11 405 4 813 6 592Subsidiary companies 482 848 -366Total 11 887 5 661 6 226Other financial expensesInterest on credit 84 279 53 379 30 900Total 84 279 53 379 30 900Other expensesRealization of financial investments 38 199 137 255 -99 056Non-operating difference in rates 46 063 212 755 -166 692Other expenses 4 015 5 300 -1 285Total 88 277 355 310 -267 033

Given below are the incomes and expenses from other operating,investment and financial activity:

The highest figures in items “Other operating incomes and expenses” belong to the receipts and expenses related to selling offoreign currency and other negotiable assets, as well as maintenance of social sphere facilities. Absolute values ofreceipts/expenses have increased significantly in comparison with the previous year.

MOTOR SICH PJSC15 Motorostroiteley Avenue, Zaporozhye 69068,Ukraine Tel.: (380 61) 720-48-14Fax: (380 61) 720-50-00Е-mail: [email protected]

Documents

New MOTOR SICH PJSC · 2010. 6. 10. · MOTOR SICH annual report 2009 3 Motor Sich PJSC is one of the leading aircraft engine-building factories of the world in the field of develop-ment,