By the Supervisory Board of Rostec Corporation (Minutes from ______2015, No
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APPROVED 2014 Annual Report by the Supervisory Board of Rostec Corporation (Minutes from _________2015, No. __ ) of Rostec Corporation Rostec: A company of highly qualified, world-class professionals. In supporting the advancement of Russian industry, Rostec brings together the best Rostec Corporation traditions of Russian engineering, the latest technological innovations, and its significant expertise in the strategic development of mechanical engineering. Rostec Corporation is successfully restoring the relationship between science and industry by developing advanced technologies, introducing advanced know-how, and promoting effective cooperation between Russian industrial enterprises. Rostec’s experienced and highly qualified specialists enable the creation of unique products, opening new export opportunities for Russia. ANNUAL REPORT Rostec Corporation’s global objective is securing for Russia a leading position in high technology and mechanical engineering. for 2014 2014 Annual Report CEO CHIEF ACCOUNTANT OF ROSTEC CORPORATION OF ROSTEC CORPORATION of Rostec Corporation S.V. CHEMEZOV N.V. BORISOVA 2015 2015 4 ROSTEC CORPORATION Annual Report // 2014 5 Table of Contents Introductory notes from D. V. Manturov, Chairman of the Supervisory 5. Rostec production 6 Board, and S. V. Chemezov, CEO 108 5.1. Rostec contributions to Russian industry 5.2. New products and technologies 5.3. Import substitution 5.4. Military-technical cooperation, state orders, and federal target programs 5.5. Product optimization and restructuring 1. General information about Rostec corporation 5.6. Conversion of federal state unitary enterprises into joint-stock companies 10 1.1. History of Rostec 5.7. Management and production informatization 1.2. Supervisory board 5.8. Creating a single corporate treasury for Rostec organizations 1.3. Managing board 5.9. Consolidated financial statements for Rostec and its holding companies 1.4. Corporate structure 5.10. Ecology 1.5. Strategic goals and objectives 1.6. Key figures for 2014 158 6. Investments Commentary from A. S. Laletina, Head of the Legal Department, 34 regarding sanctions and their impact on Rostec 7. Scientific activity 162 Implementing innovative development programs 2. Reforming Rostec corporate governance 36 2.1. Boards of directors for Rostec subsidiaries 8. Human resource management 2.2. Standing committees of the boards of directors 178 2.3. Corporate secretaries 8.1. Key performance indicators and remuneration 8.2. Training and staff development 8.3. Policies for increasing employee output and efficient personnel management 44 3. Overview of Rostec’s subsidiaries 3.1. Rostec companies 9. Social responsibility 3.2. Development of important Rostec projects 186 • RT-Business Development 9.1. Support for socially significant events • RT-Global Resources 9.2. Social programs of Rostec holding companies and enterprises • National Center of Informatization • RT-Inform 194 10. Anticorruption 82 4. Geography of work 4.1. Market presence 4.2. Focus on Asian, African and Latin American markets 11. Rostec property use 4.3. Key international achievements 198 11.1. Land plots and real estate 4.4. Participation in exhibitions 11.2. Management of shares 4.5. Significant international projects of Rostec and its subsidiaries 11.3. Public property contributions and subsidies of the territorial entities of Russian Federation 4.6. Communication 11.4. Property acquired by subsidies 11.5. Donations 6 INTRODUCTORY NOTE ROSTEC CORPORATION Annual Report // 2014 7 Introductory note from D. V. Manturov, Chairman of Rostec Corporation Supervisory Board In 2014, Rostec Corporation carried Rostec also continued to implement tasks assigned by the state, such as structural reform, developing promising sectors, and out its operations in difficult conditions improving global competitiveness. related to international competition, as Rostec has successfully solved import substitution problems, 2014 well as the economic sanctions imposed especially in the field of high-tech products and equipment, by IN FIGURES by the US and the European Union against increasing the share of products manufactured exclusively from a number of its subsidiaries. components produced in Russia. However, the Corporation has continued to Rostec successfully developed projects in the field of rare earth metals (REM), which is a strategic raw material for military and steadily expand its export markets. Rostec nuclear industries, as well as electronics and rocket production. developed joint ventures with the Italian These projects are designed to strengthen the role of Russia in the world REM market in the coming years and to ensure the 101.4 billion rubles – companies Pirelli and AgustaVestland and independence of its own industry. total investment strengthened cooperation with the Chinese One of the most important Rostec activities has been creating volume corporation Shenhua. KAMAZ assembly plants conditions for the long-term development of the corporation’s industrial infrastructure and sources of growth. The restructuring of were established in Azerbaijan, Kazakhstan, leading countries’ economies will continue for about five years, and Latin America. after which they will need to begin a new cycle of economic growth. The Russian industrial sector, and in particular Rostec, is Joint projects in Algeria, Uganda, Zimbabwe, facing an important task: to strengthen its competitiveness in this South Africa, and other countries are currently new environment and to raise Russian industry to a new level of 2.176 million rubles – in progress. technological development. output per In my opinion, Rostec’s primary results for 2014 are the successful employee changes it made in all key areas of activity, as well as its search for new development opportunities and the development of innovative technologies that will lay the foundation for the longterm success of the corporation. 443 people – the total number of employees D.V. MANTUROV MINISTER OF TRADE AND INDUSTRY OF THE RUSSIAN FEDERATION 8 INTRODUCTORY NOTE ROSTEC CORPORATION Annual Report // 2014 9 Percentage of innovative products Percent of civllian 24% products Introductory note 28% from S. V. Chemezov, CEO In 2014, Rostec successfully continued the process of forming a At the same time, Rostec furthered the process of import world-class industrial corporation. Despite political and economic substitution. New large-scale programs, particularly in the fields difficulties, Rostec managed to maintain a high level of basic of engine-building, software, and electronic components, were 2014 economic indicators, such as revenue and profit. Reforms in the developed. First of all, we must eliminate our dependence on IN FIGURES management of holding companies were carried out, the system foreign developments in the military arena, which is a matter of of motivating their leaders was improved, and important new national security. projects, including international ones, were launched. Thus, the corporation’s chosen strategy for development has proved its effectiveness on the ground. The volume of state defense orders for Rostec’s In 2014, Rostec paid particular attention to its holding companies. enterprises increased by more than 60% when compared They should become not only centers of value, but also industry 964.5 with 2013. Rosoboronexport has exported arms and billion rubles – leaders and highly competitive, world-class companies. Most of consolidated our holdings already manage their own enterprises, whose shares military equipment worth 13.2 billion USD, exceeding the were transferred to the holdings by the сorporation. Thus, Rostec revenue has renounced direct intervention in the ongoing activities of its planned targets. holding companies, choosing to rely instead on modern market mechanisms. An important result of 2014 was the increase in the share of revenue Improving the holdings’ operational independence as well as from sales of civilian products. The second-generation YotaPhone their degree of responsibility for the results of their operations smartphone, a unique Russian development recognized by the has required the introduction of a new model of corporate international professional community, was released. Diversified 33.9 billion rubles – governance that relies on the best global practices and increases production and the release of new civilian products provided consolidated the companies’ efficiency as well as their transparency for the further financial stability to the corporation’s ventures. transferred assets’ management. The main objective of the net income corporate governance reform is the capitalization increase of the In order to increase productivity, Rostec paid great attention to holdings. investment in human capital and training young professionals who will make technological breakthroughs and bring Russian industry A control system based on target values was developed in to a new level. Rostec’s enterprises require employees capable order to increase the motivation of holding companies’ senior of operating the most cutting-edge equipment. In strategically management. Boards of directors were formed according to this important sectors, including defense, this is a task of national new principle, which reduced the number of state workers and importance. Rostec actively cooperates both with universities and 14.84 billion USD – senior executives in the corporation and increased the number with institutions of secondary vocational education. In particular, volume of of independent