AT THE FOREFRONT OF THE INDUSTRY ANNUAL REPORT Contents Public Joint Stock Company No. 1 “Research and production by production of freight cars corporation “United Wagon About Company 2 For more information Key events of 2017 4 Company” (PJSC “RPC UWC”, see Production p. 52 UWC, the “Company”, the Highlights of 2017 8 “Holding”, the “Group”) Message from the Chairman of the Board of Directors 10 Message from the CEO 12 is the innovative railcar building leader in the area of the “track gauge zone 15201”. Strategic Report 14 Top 3 Railway market and UWC’s position 16 The railway holding is an integrated provider by the fleet of new Business model 24 generation railcars in the area of production, operational Product line and prospective developments 26 leasing, engineering and maintenance of For more information see Strategy implementation 38 Operating lease p. 68 the new generation freight cars, as well as Key investment appeal factors 44 the transportation services. Overview of Business Activities 46 Engineering and innovation 48 Production 52 Operating lease 68 Operation 70 Service 72 Financial Report 76 Overview of financial results 78 Investment activities 85 Corporate Social Responsibility 90 Human resources and occupational safety 92 Annual Report Environmental protection 102 in the Internet Development of the regions where we operate 108 Read our annual report on the website: https://www.uniwagon.com/en/investors/results_and_reports/annual_reports/ or download it with QR code on your smartphone. Corporate Governance 112 Corporate governance bodies 114 Internal control and risk management 120 Information for shareholders and investors 124 Appendix 130 Disclaimer 130 Brief history of the Company 131 Auditor’s report and consolidated financial statement 133 Brief biographical details of members of the Board of Directors 230 Risk chart 234 Contact information 242 1 Standard rail gauge of 1520 mm, used in countries of the former USSR and Finland. 2 1 About Company Principles and values Leadership. To become the best in all areas of operation, to set the rate and new UWC manufactures and sells freight cars with improved industrial standard for business and production technologies. technical and economic characteristics being the leader by their production in Russian and CIS countries. The new Sustainability. To make well-considered decisions in economic and social areas, as well as in the area of environmental protection, safety of production and products. generation rolling stock is characterised by improved load capacity, longer service life, operational reliability and lower Honesty and integrity. To be devoted to the idea of respect and integrity, first of all in life cycle cost representing its economic benefits compared to treatment of own employees, as well as customers, partners and suppliers of the Company. railcars mounted on old generation bogies. The Company’s reputation is of key importance to us. Staff. To attract gifted and talented employees making every effort for their Mission development in the Company, to create favourable atmosphere in order that contribution of each employee makes a positive impact on the business growth. To provide for the increase of carrying capacity and Focus on innovation. To develop constantly in an effort to make efficient use of the operation safety of the railway transport. resources, to maintain the high technological level of production and the team expertise as a crucial competitive advantage. OPERATING ENGINEERING PRODUCTION LEASE OPERATION SERVICE Production of railcars and parts JSC Tihvin Assembly Plant “RAIL1520” LLC, “RAIL1520 “UNICON 1520” LLC “Titran-Express” SERVICE” LLC, “MRC 1520” LLC, (UNICON1520) (TAP “Titran-Express”)1 LLC “All-Union Research “TH “UWC” LLC (RAIL1520) and Development Centre for Transportation JSC “Tikhvin Freight JSC “TikhvinСhemMash” Technology” (VNICTT) Car Building Plant” (TVSZ) (TikhvinСhemMash) >13 Top 10 637 66 thsd on the tank containers service centres in the railcars operational CIS and Baltic countries leasing market >480 JSC “TikhvinSpetsMash” LLC Springs Industrial patents in Russia (TikhvinSpetsMash) Technology Center For more information see For more information For more information and CIS countries (NPC Springs) Operating lease see Operation see Service p. 68 p. 70 p. 72 >50 Joint ventures for production of parts certified models UWC’s geography UWC’s enterprises have For more St. Petersburg information see “JV “Wabtec-UWC” “Timken UWC” LLC favourable location in Engineering and LLC (Wabtec-UWC) (Timken UWC) innovation Tikhvin terms of intragroup flows, p. 48 supply of raw materials up thsd thsd up thsd t to 22 >19 to 90 and components for railcars per annum – railcars castings per annum – production of railcars and production capacity manufactured production capacity Moscow No. 1 export of products.Россия in 2017 by the model range of new generation railcars For more information see by production Izhevsk of freight cars Production p. 52 1 The Production segment of UWC’s Consolidated Financial Statements includes financial results of the Company, as in 2017 the depot’s production capacities were mostly used for providing the Holding’s railcar building enterprises with components (assembly of bogies and wheel sets). 2 3 Key events of corrosion-resistant steel for shipment of and other chemical freight to large producers formalin to Metafrax, the largest Russian of chemical goods – Khimprom (Kemerovo) of 2017 producer and exporter of chemical cargo. and Khimprom (Novocheboksarsk). FEBRUARY UWC and rail operator Lokotrans signed a Business development AUGUST contract for the supply of 40 boxcars with UWC supplied Metafrax with the first loading capacity increased to 73 tonnes and MARCH The gondola with unloading hatches (19-9853 consignment of Tpr1 tank cars with loading effective body volume of 175 m3. model) with carrying capacity of 75 tonnes and capacity of 71.7 tonnes and boiler volume of UWC acquired a stake in the capital of PTK- body volume of 92 m3, produced by TVSZ, was 94 m3 for shipment of methanol. JUNE Holding, a major owner and operator of railway acknowledged for its best quality rolling stock and freight cars, by purchasing 19.9% of its shares complex technical systems, coming in first place in UWC and Sberbank Leasing signed an and selling 100% of Vostok1520 shares in the Rolling Stock category at the Russian Railways agreement for the supply of 100 hopper cars November 2016. 8th annual contest. with loading capacity of 76.5 tonnes and body volume enlarged to 120 m3 for transportation of APRIL SEPTEMBER grain and regrinding products. UWC established UNICON 1520, which TVSZ received a quality certificate from the UWC supplied a batch of Tpr tank cars to specialises in organising transport services and Association of American Railroads and started transport ammonia to JSC URALCHEM, one multimodal logistics of liquid cargo, particularly shipping large railcar casting (side frames of the biggest producers of mineral fertilisers in hazardous liquid cargo, in tank containers and and bolsters for Barber1 S-2-HD® bogies) for Russia, CIS countries, and East Europe. containers. American freight cars. NOVEMBER MARCH UWC became a member of the Russian Union UWC won a tender held by Sredneuralsk of Industrialists and Entrepreneurs, which Copper Smelter and the company Svyatogor represents interests of domestic business (part of Ural Mining and Metallurgical communities both in Russia and in the Company) for the supply of 24 tank cars with international arena. loading capacity increased to 77 tonnes for shipment of sulphuric acid. DECEMBER UWC and KuibyshevAzot, one of the leading TVSZ and TikhvinChemMash were among enterprises in Russia’s chemical industry, the first Russian companies to undergo concluded an agreement to supply 100 Tpr certification for the compliance of their tank cars with loading capacity of 60.2 tonnes UWC launched a project to implement a quality management systems with the new and boiler volume of 92.7 m3 for shipment of unified resource management system based international standard in the railway industry – ammonia. on SAP S/4HANA. ISO/TS 22163:2017. JULY APRIL MAY UWC opened a service centre in Latvia based UWC started shipping 20 boxcars to at the Daugavpils Railcar Repair Centre of NPC Springs began to provide serial supply of Kuchukterminal, a joint transport enterprise of TikhvinSpetsMash’s quality management LDZ ritošā sastāva serviss (LDZ Rolling Stock high-quality springs for locomotives and metro Kuchukasfalt, a large manufacturer of sodium system was certified for compliance with the Service, Ltd.). railcars on a serial basis at Transmashholding, sulphate, and LTB international logistics requirements of international standard ISO the largest domestic producer of rolling stock company. 9001:2015. for rail transport. Contracts and supplies UNICON 1520 and JSC URALCHEM JUNE UWC delivered a batch of tank cars with concluded a contract to provide services JANUARY loading capacity of 73 tonnes and boiler related to organising transportation of liquid UWC opened the first service centre in the volume of 54.5 m3 to transport caustic soda cargo in tank containers. Baltic states, based at the Valga Depoo railcar UWC supplied 20 tank cars with loading repair company, part of Skinest Rail (Estonia). capacity of 75.6 tonnes and a boiler made 1 Tpr – a gauge for gondolas admitted to routes of the general rail network, external and internal access roads of industrial and transport enterprises, structures