Federal<br/>Passenger Company Annual Report

Other Expenses and Income

The net effect of other income and expenses in 2013 was income of RUB 20.0 billion.

A major part of receipts reported as JSC FPC’s other income was generated by subsidies received from the federal budget as compensation of income shortfalls due to regulation by the state of the long-distance passenger service tariffs applicable to second-class sleepers and standard cars. In 2013, carriage-related subsidies from the budget totalled RUB 23.2 billion. In addition, RUB 0.15 billion was received from the regional budgets of the Ingush and Komi Republics as compensation of income loss unrelated to price and tariff regulation by the state (continuation of socially-oriented service).

Interest earned on bank deposits and interest on cash held in current accounts contributed a substantial portion of the other income and expenses. In 2013, a total of RUB 0.8 billion was received through effective cash management.

A contract of exchange with JSC RZD and a sales contract for 281 cars with the Central Track Maintenance Directorate, a branch of JSC RZD, gave another RUB 0.45 billion in income from sale of fixed assets.

Reversal of an allowance of doubtful accounts of RUB 0.8 billion was reported along with income of prior years of RUB 0.2 billion resulting from adjustment of the expenses on the infrastructure services provided by JSC RZD.

In February 2013, the Arbitration Court of Moscow considered a claim for compensation of income loss caused by reduced long-distance service rates for schoolchildren brought by JSC FPC in 2012 against the Russian Federation and awarded RUB 263.2 million to the Company in damages. The amount was paid by the Federal Agency for Railway Transport and credited to the Company’s current account in October 2013.

The key item in the structure of other expenses is cash collection, cash management and payment services, which account for RUB 2.0 billion. To reduce the cost of such services, the Company held an open auction in December 2012, which helped it get considerably lower rates for cash collection and acquiring services.

Interest expense totalled RUB 0.7 billion or 9.9% of the total amount of expenses in 2013. A RUB 0.3 billing increase in interest payments compared to 2012 was due to loan portfolio expansion to RUB 11.4 billion.

Also, other income and expenses as of December 31, 2013, include RUB 0.9 billion in an allowance for doubtful accounts and RUB 0.7 billion in revaluation of fixed assets and income-bearing investments in tangible assets.

Breakdown of other income, RUB billion

Indicators 2011 2012 2013 2013/2012 change 2013/2012 growth
Other income 31.2 33.7 26.9 −6.8 −20.3%
interest receivable 0.4 1.0 0.8 −0.2 −19.4%
receipts from budgets 29.5 29.6 23.4 −6.2 −20.8%
other 1.3 3.1 2.7 −0.4 −15.7%

Breakdown of other expenses, RUB billion

Indicators 2011 2012 2013 2013/2012 change 2013/2012 growth
Other expenses 4.7 6.7 6.9 0.2 3.1%
interest payable 0.0 0.4 0.7 0.3 60.4%
social policy-related expenses 1.1 1.2 1.3 0.1 6.1%
cash management and payment services 1.5 1.9 2.0 0.1 4.9%
other 2.1 3.2 2.9 −0.3 −6.8%