Steady Development
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2016 STEADY DEVELOPMENT TATNEFT COMPANY ANNUAL REPORT ABOUT COMPANY BOARD OF DIRECTORS’ REPORT CONTENT Joint Address to Shareholders, Investors and Partners ......................................................................................................................... 02 ABOUT COMPANY 04 Steady Development .............................................................................................................................................................. 04 Business Model .................................................................................................................................................................... 08 Strategy 2025 ....................................................................................................................................................................... 10 Strategy by Business Segments.............................................................................................................................................. 12 Sustainability ......................................................................................................................................................................... 24 TATNEFT Group Structure ...................................................................................................................................................... 26 General Industrial Trends ....................................................................................................................................................... 28 BOARD OF DIRECTORS’ REPORT 30 Investment Policy .................................................................................................................................................................. 34 Financial Policy ...................................................................................................................................................................... 35 Operations ........................................................................................................................................................................... 36 Energy and Resource Efficiency Program ................................................................................................................................ 52 Technology and Innovation ..................................................................................................................................................... 54 The annual report of TATNEFT Company for 2016 was prepared on a single integrated basis, combining the requirements applied to annual reportы of public companies, and standards CORPORATE MANAGEMENT 62 for the preparation of corporate reporting in the field of sustainable development. The integrated annual report takes into account Recommendations of the Corporate Company Management System .............................................................................................................................................. 64 General Shareholders’ Meeting .............................................................................................................................................. 66 Governance Code approved by the Government the Russian Federation and the letter Board of Directors ................................................................................................................................................................. 67 recommended by the Bank of Russia No. 06-52/2463 of 10/04/2014. Corporate Secretary .............................................................................................................................................................. 76 PJSC TATNEFT Board of Director’s Committees ...................................................................................................................... 77 In terms of the information disclosure, the annual report corresponds to: General Director .................................................................................................................................................................... 80 – Federal Law No. 208-FZ of 26.12.1995 «On Joint Stock Companies»; Management Board ............................................................................................................................................................... 81 – Federal Law No. 39-FZ of April 22, 1996 «On the Securities Market»; Commitment to the Best Practice of Corporate Management .................................................................................................... 88 – Regulations of the Central Bank of the Russian Federation «On disclosure of information Interaction with Shareholders. Ensuring Sharehoders’ Rights .................................................................................................... 90 by issuers of securities» No. 454-P, approved on December 30, 2014, registered by the Ensuring the Rights of Shareholders for Receiving Income As Dividends .................................................................................... 92 Ministry of Justice of the Russian Federation on February 12, 2015; Principles and the Information Disclosure Procedure ................................................................................................................ 94 – Information letter of the Bank of Russia dated February 17, 2016 No. IN-06-52/8 «On Protection of Insider Information ............................................................................................................................................ 97 Management of Risks ............................................................................................................................................................ 98 disclosure of the compliance report with principles and recommendations of the System of Corporate Control and Internal Audit .......................................................................................................................104 Corporate Governance Code in the annual report of the Public Joint Stock Company». Anti-Corruption Policy of PJSC TATNEFT ................................................................................................................................106 PJSC TATNEFT’s Report on Compliance with Principles and Recommendations of Corporate Governance Code .........................108 In terms of sustainability aspects, the Company’s integrated annual report is designed to Information on Related Party Transactions Concluded by PJSC TATNEFT n.a. V.D. Shashin in 2016 ............................................126 meet the following standards: Personnel Management ........................................................................................................................................................136 – Guidelines for reporting on sustainable development of the Global Reporting Initiative for GRI G4; FINANCIAL RESULTS 142 – AA 1000 Stakeholder Engagement Standard; Accounting Statements Prepared in Accordance with Russian Accounting Standards ................................................................144 – ISO Standard: 26000 «Guide to Social Responsibility»; Auditor’s Opinion .................................................................................................................................................................144 – Social Charter of Russian Business; Accounting Reports of PJSC TATNEFT, FY 2016 ......................................................................................................................151 – International Standard of Integrated Reporting (Www.theiirc.org/international-ir- Balance Sheet Report ...........................................................................................................................................................152 framework/). Report on Financial Results in 2016 .......................................................................................................................................153 Essential Aspects of the Accounting Policy and Presentation of the Accounting Statements........................................................154 The Annual Report of the Public Joint-Stock Company TATNEFT for 2016 was preliminarily Consolidated Financial Statements in Accordance with International Financial Reporting approved by the Board of Directors of PJSC TATNEFT. Standards as of and for the Year Ended December 31, 2016. ...................................................................................................164 Protocol No. 13 of May 27, 2017. Independent Auditor’s Report ................................................................................................................................................164 Consolidated Statements of Financial Position ........................................................................................................................172 Consolidated Statements of Profit or Loss and Other Comprehensive Income ...........................................................................174 Consolidated Statements of Changes in Equity .......................................................................................................................176 Consolidated Statements of Cash Flows .................................................................................................................................177 Notes to the Consolidated Financial Statements ......................................................................................................................179