2013 Annual Review

PATRIA ANNUAL REVIEW 2013

Content

Patria briefly 4 Key figures 6 Review by the President and CEO 8 Operating environment 10 The year 2013 at a glance 12 Aviation 14 Land 16 Systems 18 Millog 20 22

Corporate responsibility 24 Corporate responsibility as the basis of profitable operations 24 Ethical operator 26 Good employer 28 Good partner 30 Environment 32

Governance 34 Risk management and internal control 34 Corporate governance 36 Group management 38 Board of Directors and Consultative committee 40 GRI-table 42

Contact information 44

Patria’s Annual Review consists of the Annual Report which includes the Corporate Responsibility Progress Report and a separate Financial Statements Report. These parts complement each other. Further information can be found at Patria’s web page www.patria.fi. The Annual Review can also be viewed with smartphones and tablet computers by reading the attached QR code. The Annual Review 2013 will be Patria’s last annual review published in a printed form. In future Patria’s Annual Review will be published only at the company’s web site. PATRIA ANNUAL REVIEW 2013

Patria briefly Patria is a trusted provider of defence, security and aviation life-cycle support services and technology solutions. Patria is owned by the state of (73.2%) and EADS European Aeronautic Defence and Space Company N.V. ( Group) (26.8%).

Corporate structure Net sales as a share of Group net sales

Aviation and Aerostructures 14% Admin, Finance, Marketing, Extensive life cycle support for aircraft and Business Development and Communication helicopter fleet management including pilot training. The design and manufacture of com- posite structures for aircraft and spacecraft.

Aviation, Aerostructures Land 34% Land Armoured wheeled vehicles, systems, ammunition, and life-cycle support services for these products.

Systems Systems % Millog 61.8% 10 Systems for situational awareness and applications and services supporting critical infrastructure.

Nammo 50% Millog 14% Values Patria’s subsidiary (61,8%) Millog produces life cy- cle support services for the material.

WE WANT TO SUCCEED Nammo OUR OPERATIONS ARE CUSTOMER ORIENTED % TOGETHER WE CREATE SUCCESS 28 Patria’s 50% owned Nammo AS focuses on de- velopment and provision of ammunition systems, missile and space propulsion products as well as environmentally friendly demilitarisation services. 4 PATRIA ANNUAL REVIEW 2013

Patria internationally

Patria operates internationally and the company has operations and projects in countries such as Finland, , , Estonia, , , , Saudi Arabia, USA and

Patria’s operational sites in Finland

1. Tervola 2. Kauhava 3. Lapua 4. Vihtavuori 5. Lievestuore 6. Tikkakoski 7. Jäminkipohja Administration 8. Halli Aerostructures 9. Lyly Aviation 10. Orivesi Land 11. Linnavuori Systems 1 12. Tampere Millog 13. Sastamala Nammo 14. Parolannummi 15. Hämeenlinna 16. Utti 17. Riihimäki 18. Malmi 19. Espoo 20.

2 3

6 4 5 7 9 8 10

11 12 13 14 15 16

17

18 View the GRI table 19 20 on pages 42–43

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Key figures For Patria, 2013 was a year of growth. There was clear growth in net sales and profitability remained at the previous year’s good level. The growth of the order stock has slowed down and its development will depend on whether export projects now in the tendering stage are launched on the international markets.

Net sales EUR million Operating pro t EUR million Gross investments in xed assets EUR million Personnel average

824.8 97.1 4000 3,587 3,614 736.1 87.0 87,0 29.7 3,414 3,397 3,430 618,4 3500 26.7 25.8 618.4 3000 2 810 564.3 24.1 539.5 60,3 60.3 2500

16.0 2000

1500

20.0 1000

10.5 500

0 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Order stock EUR million Equity ratio % Tax footprint on corporate tax EUR million Patria is subject to corporate inco- me tax in the following count-

1,787.2 49.5 ries: Finland, Sweden, Norway, 47.7 1,626.5 43.5 43.5 , Germany, Poland, Latvia 40.0 and Estonia. 1,315.6 1,229.9 9 Patria has a dormant company,

998.2 Vammas Corporation, in Delawa- 18 re, US, which has never been operative and is in liquidation.

Nammo Finland, others 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013

Net sales outside Finland % NET SALES EUR 824.8 million 62 63 OPERATING PROFIT 2009 2010 65 EUR 97.1 million 63 59 PERSONNEL AVERAGE 2013 2011 2012 3,614

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Personnel statistics

Proportion of women 2010 2011 2012 2013 Board of Directors 2/6 2/6 1/5 1/5 Board of Management 0/7 0/7 1/8 1/8 All personnel, % 17 17 17 17 Personnel figures Personnel, on average 3,397 3,430 3,587 3,614 Personnel in Finland 2,414 2,474 2,567 2,592 Blue collar, % 42 41 41 41 Salaried, % 20 21 22 22 Senior salaried, % 38 38 37 37 Education level University, % 18 18 17 17 University of applied sciences, % 33 33 34 33 Vocational/upper secondary school, % 47 46 46 47 Basic education, % 2 3 3 3 Employment Average age 42.9 43.4 43.7 43.8 Length of services, yrs 13.7 13.8 13.9 13.9 Permanent employees, % 95 94 95 92 Part-time employees, % 2.6 2.2 2.2 2.6 Accidents at work Accident at work, qty 28 38 21 29 New permanent disability pensions granted, % of those insured 0.31 0.47 0.38 0.08 Employer image Technology students, Universum 14 20 25 31 Working people (technical education) Universum 13 15 29 52

The figures cover Patria and the employees of companies of which Patria owns more than 50%.

Stakeholders-specific capital flows (MEUR)

Direct economic value, EUR million 2010 2011 2012 2013 Consolidated net sales 564.3 618.4 736.1 824.8 Other operating income 6.4 5.0 7.9 5.5 Financial income 1.1 1.3 1.3 0.8 Customers Sales Income, total 571.8 624.7 745.3 831.1

Goods, materials, Operating costs exlcuding depreciation Suppliers 384.0 338.2 411.0 481.5 and services and personnel expenses

Personnel Wages, salaries, and fees Personnel expenses 190.8 203.4 224.7 226.3 Public sector Taxes Payments to government (taxes) 3.7 6.5 6.1 14.8 Not-for-profit organisations Support and donations Donations and other charitable payments 0.0 0.1 0.0 0.0 Payments made to shareholders and loan providers Shareholders Dividends Dividends 0.0 0.0 10.3 19.0 Investors Financial costs Interest and other financial expenses 4.4 4.0 3.7 4.3 Expenses Distributed, total 546.9 552.2 655.8 745.9 Sales–expenses = added value Economic value retained for opertional development 24.9 72.5 89.5 85.2

Investments in tangible and intangible assets Investments Acquisitions 17.0 28.9 31.4 36.3 as well as acquisitions

In the beginning of 2014, Nammo Group will be reclassified as joint venture and consolidated using the equity method instead of the proportionate method. This will have a material impact on the illustration of the Group’s consolidated net sales. The Consoli- dated Financial Statements of Patria have been prepared in accordance with International Financial Reporting Standards (IFRS).

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A year of strong growth

For Patria, 2013 was a year of growth. There fence Forces signed an agreement for life cycle the overall investigation initiated by Finland’s was clear growth in net sales and profitabili- upgrades of XA-180 personnel carriers, also National Bureau of Investigation in 2008. The ty remained at the previous year’s good level. known as ’Pasis’, with Patria; this modernisa- matter will proceed in the manner and ac- However, overall growth in orders remained tion project will secure the vehicle’s life cycle cording to the schedule decreed by the court. subdued. Naturally, this will affect our de- and usability long into the future. The project In the autumn, legal proceedings at the Kan- velopment over the next few years. In our will have a major employment effect on both ta-Häme District Court in relation to the Slove- home and other important markets, defence companies. At the year end, we also complet- nian vehicle project ended in the dismissal of budget cuts are driving the defence industry ed the Rauma Class Fast Attack Craft life-cycle all bribery charges, after the period under re- into a transition in which solutions that are upgrade project. This was an important project view, in a decision published in January 2014. more cost effective are being sought on the for Patria, in which it demonstrated its ability basis of decreased resources. In addition, also to succeed in a Navy project demanding procurements already prepared and decided integration expertise of a very high order. ETHICAL AND RESPONSIBLE PRACTICES on are being postponed and reduced in size, Other noteworthy events included the Continuous development of ethical practic- which is also affecting the order book. contract signed with the Finnish Defence es is particularly important to companies like Forces on a research project related to the pro- ours, which operate in the defence materi- tection of data networks. This project is one of el industry. During the year gone by, we at PROJECTS PROGRESSED AS PLANNED the Defence Forces’ technology programmes. Patria again invested in ethical practices, From our point of view, it was positive that sev- Another major event was the Memorandum of highlighting the importance of responsibility eral projects under way progressed well and in Understanding signed by Patria Pilot Training and increasing the transparency of our opera- line with our plans during 2013. As part of the with the Kazakhstan Civil Aviation Academy tions. For example, online training on ethical agreement signed in 2010, Patria delivered on professional pilot training cooperation. Fur- practices was organised for all staff in Patria, the first of 113 Patria AMV armoured vehicles thermore, Patria and NH Industries agreed on and a range of targeted info sessions were to the Swedish Defence Materiel Administra- the role of the Nordic Service Center, as part held. We updated our code of ethics material tion (FMV), in early 2013. The value of this of the life-span support services provide for and distributed it to all Patria locations. In ad- project is around EUR 250 million. The project NH90 helicopters assembled by Patria in Halli, dition, we created a whistleblower channel, is progressing in line with its tight schedule. Jämsä. In the autumn, Patria and Insta DefSec through which employees can, where nec- In the summer, Patria and Polish state-owned Oy agreed on the acquisition by Patria of Insta essary, anonymously inform the company of company Wojskowe Zaklady Mechaniczne S.A. DefSec’s waveform business. any suspected cases of malpractice. (WZM) signed a new manufacturing licence Patria signed the UN’s Global Compact agreement for Rosomak armoured vehicles. In Initiative through which, within their own the autumn, Patria introduced its new vehicle JUDICIAL PROCEEDINGS PROGRESSED spheres of influence, companies commit concept to the international markets at the In February, the Helsinki District Court dis- themselves to adopting, supporting and im- DSEI exhibition in London. This new concept’s missed all charges related to a training aircraft plementing the basic values related to human architecture benefits from and develops the accident that occurred in 2008. At the end of rights, working life principles, the environ- successful Patria AMV solution, based on expe- June, the Court of Appeal of Turku confirmed ment and the fight against corruption. Patria rience gathered in true battlefield conditions. the previous dismissal of all bribery charges by also belongs to the Global Compact Nordic In November, Denel Land Systems and Patria the lower court, related to the Egyptian artil- Network and, naturally, abides by the ethical signed a long-term agreement for the produc- lery export project (1998–2004). During the standards (Common Industry Standards, CIS) tion and delivery of Patria AMV 8x8 armoured summer, the Finnish Prosecution Service com- of ASD (Aerospace and Defence Industries wheeled vehicles to the South African National pleted its consideration of charges in relation Association of Europe). During the year, Defence Force. In December, the Finnish De- to Patria’s Croatian vehicle project, related to Patria also actively engaged in discussions

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with e.g. Transparency International and par- ticipated in its events. Patria is a member of the corporate responsibility network FIBS. The three-year Get Moving project supported by Patria ended with excellent results. This project achieved major progress in promoting the participation of conscripts in leisure-time sports clubs during their mil- itary service. During the project, the amount of exercise done by conscripts outside their service period grew by over 25 percent.

A GLANCE AT THE FUTURE We are already aware that 2014 will be a less favourable year than its predecessors. It is clear that our net sales will fall, particularly following the exclusion from the financial re- sults of the figures for Nammo, which Patria 50% co-owns with the Norwegian state (50% line-by-line consolidation), in line with a change to the IFRS standards. Although defence force procurements will decrease, several equipment life cycle management projects already under way, and which are progressing as planned, will provide us with operational stability. In terms of orders, the situation will depend on whether export pro- jects now in the tendering stage are launched on the international markets. Within Patria, we will increase the cost-effectiveness and flexibility of our operations, in order to pre- pare our organisation thoroughly for changes in the business environment. I would like to thank all of our customers, owners, partners and other stakeholders and all of our employees for a good year and excellent cooperation.

Heikki Allonen President and CEO

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Keeping a close eye on the markets The creation of an open defence materiel market has inten- sified competition within the industry in Europe, at the same time as financial resources set aside for defence procurement have been cut. In the prevailing business environment, defence industry companies must be alert and able to identify growing business activities within a changing market.

The effects of the world-wide recession COOPERATION AND NATO – A SOURCE OF STANDARDS sparked off in 2008 can still be felt to- COST-EFFECTIVENESS In Europe NATO is a key player whose influ- day. Within the defence industry, the af- Several EU countries have cut back on their ence extends beyond the alliance’s member ter-tremors rumble on in the form of states defence resources, while solutions have states, to operating models and equipment cutting their defence budgets alongside been sought to common problems, for ex- standards. Patria’s products and systems are other expenditure, and postponing defence ample by stepping up levels of cooperation NATO-compatible, which is an important is- procurements. and bolstering the competitiveness of the sue both within Finland and internationally. Defence expenditure has been cut in European defence industry. Of the EU’s 27 member states, 21 are NATO Finland too, in addition to which savings Joint use of military capabilities and the members, with some non-NATO countries, are being sought through the 2012–2014 Pool & Sharing initiative on sharing, aimed such as Finland, participating as active part- reform of the . The at achieving a range of joint benefits, have ners in NATO operations. goal is to render the defence forces more also come to the fore in European defence cost-effective and employ fewer person- cooperation. Close attention will be paid nel, while maintaining the defence forces’ to the progress of this timely venture, and EU DIRECTIVES HAVE effectiveness with respect to the security work on the issue will continue. The equiv- AN EFFECT ON THE MARKETS environment. alent initiative within NATO is known as The European markets are closely monitoring In the Government report on the Finnish Smart Defence. the effects of EU directives intended to open Security and Defence Policy, published in Major procurements have been post- up defence materiel markets. Change was 2012, the Finnish Defence Forces’ current poned in the current market situation, sparked off by the EU Defence and Security tasks, the defence of all Finnish territory and making the procurement and modernisa- Procurement Directive of 2009 (2009/81/EC), general conscription were set as the basis of tion of spare defence materiel a timely op- which was integrated into the national legisla- Finland’s military defence. However, it was tion. From the perspective of the defence tion of member states. In Finland, national leg- believed that additional funding would be industry, this could lead to new business islation (1531/2011) putting the directive into required to realise these prerequisites, with based on various upgrade and maintenance effect was enacted at the beginning of 2012. the related financial evaluations being left projects, as a substitute for the dwindling The directive opened up a considerable share to the next government. production of new materiel. of formerly national defence materiel procure- In the national defence of the future, Growth is also evident in the civil avia- ment to international competitive bidding. defence sector players that can produce tion sector. Air traffic has continued on its The aim of the directive is to open up solutions, products and services cost-ef- long-term growth trajectory, despite the markets and increase competition. However, ficiently will be in a key position. Patria fluctuations in the world economy over past in the worst case scenario, it is thought that subsidiary Millog is a prime example of just decades and the currently fierce competi- the new legislation and the time required to such a player; founded in 2009, this stra- tive situation. This has led to growth in the form the related practices could lead to pro- tegic partner of the Finnish Army produces aviation industry. Orders placed with major cesses which delay procurements. life-cycle support services for army systems airliner manufacturers currently amount to In changing markets, the success of the in several fields of operation. as much as eight years or so of production. defence industry cannot rest on domes-

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In the national defence of the future, defence sector players that can produce solutions, products and services cost-efficiently will be in a key position. Patria subsidiary Millog is a prime example of just such a player.

tic customers alone. This makes interna- perience of Nordic cooperation has already tion of common international practices with- tionalisation a critical issue for companies, been accumulating for a number of years. in the sector. particularly in the development of new joint Nammo, which is 50 % owned by Patria, is a In April 2013, the United Nations General defence systems. good example of this. Assembly approved an arms trade treaty, the Finland held the chairmanship of NOR- first ever to regulate global trade in conven- DEFCO in 2013. Three themes were empha- tional arms. The International Arms Trade A FINNISH PERSPECTIVE sised during this period: the streamlining of Treaty (ATT) agreement includes provisions ON NORDIC COOPERATION activities already under way, the long-term on issues such as small arms, ammunition, Nordic defence forces and administrations objectives of Nordic defence cooperation and helicopters, missiles and armoured vehi- are seeking joint benefits for all participants bringing the Nordic perspective into topical cles, as well as their parts and components. from defence cooperation covering areas discussions of security and defence policy. Patria supports the work of the ATT and was such as joint training, exercises, informa- a member of Finland’s delegation. tion sharing and material procurement. The Patria signed the UN’s Global Compact membership of NORDEFCO, which promotes RESPONSIBLE OPERATION Initiative through which, within their own defence cooperation, includes Iceland, Nor- TAKES CENTRE STAGE spheres of influence, companies commit way, Sweden, Finland and Denmark. The nature of the defence industry tends to to adopt, support and implement the basic Such cooperation will probably only emphasise the role of social responsibility values related to human rights, working life produce concrete results at some point in and ethical conduct. The European defence principles, the environment and the fight the future. Within the industry, valuable ex- industry is strongly championing the adop- against corruption.

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The Finnish Defence Forces and Patria The year 2013 signed a contract on the lifecycle up- date of XA-180 personnel carriers, Pasi armoured vehicles. This modernisation project will secure the vehicles’ lifecycles at a glance and usability way into the future.

• Denel Land Systems and Patria signed an agreement re- garding Patria AMV 8x8 armoured wheeled vehicle serial production and delivery to South Africa. The agreement in- cludes 238 vehicles, out of which 5 pre-series vehicles have already been delivered during the development phase. The first 16 serial vehicles will be assembled by Patria. Thereaf- 11 ter the assembly will be migrated to South Africa to Denel Land Systems. • Patria signed United Nations’ Global Compact initiative, in which companies embrace, support and enact, within their sphere of influence, a set of core values in the areas of human rights, labour standards, the environment and anti-corruption. 10

The court proceedings of the Slovenian export project were completed during the financial period in the District Court of Kan- ta-Häme which dismissed all brib- ery charges in January 2014. The state prosecutor has appealed. 09

• Patria introduced its new armoured wheeled vehicle concept at the DSEI 2013 exhibition in London. The new concept is built on the success of the market leader Patria AMV, but takes the overall performance of the modern 8x8 armoured wheeled vehicle platform to a new level ful- filling the customer needs of tomorrow. • Patria and NH Industries (NHI) signed a NH90 Service Center Agree- 08 ment enhancing their co-operation in the helicopter life-cycle support services for the Nordic customers. Through this agreement, Patria got an official status to act as NHI authorized Nordic NH90 Service Center in Finland, Sweden and Norway in the agreed perimeter of activities. • Patria and Insta DefSec Oy agreed on the acquisition by Patria of Insta DefSec’s waveform business.

Patria and Wojskowe Zaklady Mechan- The Finnish Prosecution Service com- iczne S.A. (WZM) owned by the Ministry pleted its consideration of charges in of Defence of Poland signed a new licence relation to Patria’s Croatian vehicle pro- agreement on manufacturing for Roso- ject, based on the pre-trial investigations mak armoured vehicles. The agreement initiated by Finland’s National Bureau enables parties to take the good coopera- of Investigation in 2008. The case will tion started already in 2003 even further. proceed within the timeframe and in the manner ordered by the court.

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Patria and IDG Europe AB signed a MOU concerning provison of Sat- com equipment and air time as well as installation and maintenance of Satcom equipment to the helicopter industry.

12 01 Patria showcased its essential export products, armoured wheeled vehicle Patria AMV and Patria Nemo mortar sys- 11 02 tem at IDEX 2013 in Abu Dhabi.

03 Patria delivered the first Patria AMV ar- moured wheeled vehicles to the Swedish Defence Materiel Administration (FMV). This was the first delivery of altogeth- er 113 Patria AMV armoured wheeled vehicles to the Swedish Defence Forces, based on the agreement signed with FMV 2013 in 2010. The total value of the contract is 04 approximately EUR 250 millions.

08 05 The Kazakhstan Civil Aviation Academy and Patria Pilot Training have signed a Memorandum of Understanding regard- ing professional pilot training coopera- tion. The signing of the MoU is of great importance to Patria´s intentions to ex- 07 06 pand pilot training services.

Patria signed an agreement with the Finnish Defence Forces regarding a re- search project related to network protec- tion. The aim of the project is to improve The Court of Appeal of Turku con- the ability to detect and prevent cyber firmed the decision given by the Pir- threats. kanmaa District Court related to the Egyptian export deal (1998–2004). Under the Court of Appeal’s decision, all bribery charges were dismissed.

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AVIATION LAND SYSTEMS MILLOG NAMMO Multi-skilled aviation expert

Patria made major deliveries in its key aviation projects during 2013. Additionally, the company strengthened its position as a provider of life-cycle support services, with an agreement for a Nordic NH90 Service Center.

Patria’s aviation competence comprises as- made in early 2014. The second life-cycle sembly, parts manufacture, maintenance, upgrade (MLU2) of Hornet fighters is under and modifications of aircraft and helicopters, way, and the first eleven upgraded aircraft as well as flight training. The company’s ex- were delivered to the customer during 2013. Aviation perience of over 90 years in the sector guar- Patria reached a good level of delivery reli- antees solid know-how and commitment to ability in its Hawk and Hornet maintenance The Aviation and Aerostructures developing the aviation industry. activity. Operations related to the mainte- business units offer life-cycle nance of Vinka training aircraft and trans- support services for aircraft port aircraft progressed according to plan. and helicopters, primarily to the CONTROLLED ADJUSTMENT TO THE authorities and military clients FINNISH DEFENCE FORCES REFORM in Northern Europe. Life-cycle The Finnish Defence Forces Reform brought GOOD PROGRESS IN NH90 PROJECT support services cover fuselage, changes also to the Air Force. Patria re- In July, Patria and NH Industries (NHI) signed engine, and equipment repair; sponds to the new cost-saving pressures by a NH90 Service Center Agreement enhancing maintenance and modification; creating cost-effective solutions that help their co-operation in the helicopter life-cy- and pilot training. Additionally, the Air Force maintain its performance level cle support services for the Nordic custom- Patria offers design and manu- with fewer financial resources. ers. Through this agreement, Patria gets an facture of composite structures. During 2013, Patria made preparations official status to act as NHI authorized Nordic to expand and reorganise its operations in re- NH90 Service Center in Finland, Sweden and sponse to the Finnish Defence Forces Reform. Norway in the agreed perimeter of activities. Personnel The aim is to safeguard the availability, quality, The agreement strengthens the two and cost-efficiency of Patria’s life-cycle support companies’ partnership in relation to heli- services. Besides improving Patria’s own oper- copter life-cycle support services offered to 1,016 ations, the plans are aimed at strengthening Nordic customers. the Aircraft unit’s existing functions at the Tik- Assembly of Swedish and Finnish NH90 kakoski and Pirkkala locations, to correspond to transport helicopters continued, and by the Net sales as a share the customer’s functions, so that maintenance end of 2013, 22 of the rotorcraft had been of group net sales work is conducted not only at the Halli site but, delivered to the customer. In the latter half of increasingly, near the customer’s facilities. 2013, Patria started preparing for a modifica- As a part of the reform, the Air Force’s tion project related to the Finnish helicopters, 14% Flight Test Centre was moved from Halli in according to which the technical specifications Jämsä to Pirkkala, and the Technical School of the first 15 helicopters that were delivered Personnel as a share moved to Tikkakoski. The test flight operations will be upgraded to the level of the final ones of group personnel required by Patria’s activities remain in Halli. that are to be delivered. Where possible, the changes will be carried out in Halli, in conjunc- tion with maintenance operations scheduled PROGRESS OF PROJECT DELIVERIES 28% according to flight hours, and they will be com- The Hawk trainer aircraft upgrade project pleted by the end of 2018. An agreement cov- was nearly completed during the year, and ering the Finnish NH90 retrofits was signed the final deliveries to the customer were between Eurocopter and Patria in December.

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The proximity of Patria’s Utti site to the established procedures. The number of The Multi-Crew Pilot Licence (MPL) pro- customer has proven to be a significant advan- flight and theory training hours in civil gramme developed in co-operation with the tage. The partnership between Patria and the aviation training fell slightly compared to Flight Academy has progressed ac- Defence Forces’ Helicopter Battalion has been the previous year. In April, the Kazakhstan cording to plan. Patria contributes its strong smooth and uncomplicated from the start. Civil Aviation Academy and Patria signed a basic flight training competence and modern memorandum of understanding regarding flight training equipment to the Multifly professional pilot training cooperation. In product. Finnair’s excellent reputation as an DIVERSIFIED FLIGHT TRAINING December, Patria made an agreement with airline, type training organisation, and Air- The status of military pilot training is good the Finnish Aviation Academy in relation to bus operator provides a strong foundation and the training has continued in line with training for the SIO23 course. for cooperation for the clientele.

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AVIATION LAND SYSTEMS MILLOG NAMMO High-tech exports

Deliveries associated with the Land business unit’s vehicle and mortar system projects proceeded as planned. The year’s high- lights included the début of the new vehicle concept, designed to meet the developing future needs of customers. In order to maintain and enhance Patria’s strong market position, sales and marketing efforts were continued in several current and potential projects.

The armoured wheeled vehicles and mortar AMV armoured wheeled vehicles to the systems developed by Patria represent the Swedish Defence Materiel Administration latest technology in the industry. Patria’s (FMV) in March. The agreement also includes Land expertise is based on decades of experience an option for 113 vehicles and the related and major investment in product develop- life cycle support services. The value of the Patria’s key competence ment. Patria works in close cooperation with project is approximately EUR 250 million. areas include cutting-edge its customers and its extensive network of In addition, deliveries under the agree- armoured wheeled vehicles, international industrial partners. Patria’s ment signed with Poland in 2003 progressed mortar systems and related life products and services are NATO-compatible as planned. Patria’s contribution to the ini- cycle support services. Patria and are customised on an individual, cus- tial 690 vehicle project to be implemented AMV product family and Patria tomer-by-customer basis. alongside Polish partner Wojskowe Zakłady Nemo mortar system are the Mechaniczne S.A. (WZM) was completed. The highest-profile products in this Polish Army has been delighted with the ca- range. Both AMV and Nemo are MAJOR PROJECTS pabilities of these vehicles, for example in cri- market leaders in their product Patria AMV, the market leader among 8x8 sis management operations in . segments. armoured wheeled vehicles, is Patria’s key In August, Patria signed a new manu- export product. Patria has contracts for facturing licence agreement for Patria AMV nearly 1400 vehicles. AMV products are un- vehicles with WZM, a Polish state-owned der continuous development and are fitted company. This will enable further sales by Personnel with the latest technology. Patria AMV’s WZM in Poland. The agreement will provide structural solutions enable high payload ca- WZM with a vehicle manufacturing licence pacity, high level of protection and integra- until 2023, as well as the right until 2052 to 499 tion of heavy weapon systems. Patria AMV provide overhaul and maintenance services has received excellent feedback from cus- for the vehicles it delivers. Patria owns the Net sales as a share tomers for its performance in crisis manage- product rights to the vehicle and will contin- of group net sales ment operations in Afghanistan and Chad. ue to deliver critical components to WZM. At the DSEI 2013 exhibition organised in In Poland, Patria AMV is known as Rosomak London, Patria introduced its new armoured (the Wolverine in Polish). 34% wheeled vehicle concept, which takes The project involving the delivery of 126 performance to a new level. This concept Patria AMVs to the Croatian Armed Forces complements Patria’s range of armoured was completed on schedule and concluded Personnel as a share vehicles and provides the best solutions to in the spring. This highly successful project of group personnel match the customer needs of tomorrow. was implemented alongside the Croatian The project for the delivery of 113 ar- company ÐURO ÐAKOVIĆ. moured wheeled vehicles to the Swedish In November, Denel Land Systems and 14% Armed Forces proceeded to the delivery Patria signed a contract for the serial produc- phase, with Patria delivering the first Patria tion and delivery of Patria AMVs to the South

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African National Defence Force. The contract the market. Key products include single strategic partner of the Finnish Defence includes 238 vehicles; of which five proto- and twin-barrelled 120 mm mortar sys- Forces, participates in implementation and type series vehicles were already delivered tems, in which Patria is an international support activities related to tasks assigned during the development phase of the project. market leader. to the latter. In addition, Patria is respon- Patria will handle production of the first 16 Delivery of the first four Patria Nemo sible for a major share of material mainte- vehicles. Thereafter, serial production will be systems got under way at the end of the nance for the army and air force; this also moved to South Africa, with Denel Land Sys- year, as part of the US government’s Foreign entails product development and testing, in- tems being responsible for the production Military Sales project. These systems were cluding test firing. Finnish Defence Force fir- and final integration of the vehicles. In South installed on General Dynamics LAV II plat- ing ranges are used for the testing of weap- Africa, Patria AMV is known as Badger. forms in Canada and were approved by the ons systems, ensuring the development of In December, the Finnish Defence Forces US government. such systems within Finland. and Patria signed a contract for mid-life up- The first three Patria Nemo Navy sys- grade of XA-180 personnel carriers, also well tems were delivered to the United Arab known as ‘Pasi’. According to this contract, the Emirates Navy, following their successful- A GLANCE TO THE FUTURE first vehicle will be modernised and tested ly accomplished installation on Ghannatha In addition to contracts already signed, during 2014, and a series of 70 vehicles will vessels, test firings and handover to the Patria has armoured wheeled vehicle and undergo the same process during 2015–2017. customer. mortar system marketing and sales projects The contract also includes an option, whose By the end of 2013, eight of the AMOS in the pipeline for several existing and new implementation would extend to 2021, for mortar systems ordered by the Finnish De- customers. Patria is also involved in a major the modernisation of additional 210 vehicles. fence Forces were delivered. The remaining armoured wheeled vehicle bidding competi- deliveries are scheduled for 2014. tion in the United Arab Emirates. A purchase In 2013, Patria performed export pro- decision is expected in 2014. MARKET LEADER IN ject-related test firings in locations such as Based on these projects, we expect the TURRETED MORTAR SYSTEMS Reila and Lohtaja, where around 10 days successful continuation of the internation- Patria’s turreted mortar systems are among of test firings were carried out last year. In alisation of Patria’s product and service busi- the most advanced indirect fire systems on both normal and crisis situations, Patria, the nesses over the next decade.

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AVIATION LAND SYSTEMS MILLOG NAMMO System integrations and secure data transfer

The highly successful completion of the Rauma Class Fast Attack Craft upgrade project was the key event of 2013. Patria also strengthened its expertise in secure data transfer. The company is involved in several sys- tem projects of various sizes, related to areas such as network defence, system integration and space technology.

Patria is a system integration expert, whose aim of the project is to improve the ability to strength lies in decades of experience of detect and prevent cyber threats. The key both national and international projects and objective is to evaluate the possibilities for technologies. As an integrator, Patria ensures successful distributed network protection. Systems both the performance of overall systems assembled from sub-systems, as well as the Systems makes comprehensive life-cycle management of systems and soft- INVESTMENT IN WIRELESS system and equipment deliver- ware. Cooperation with partners and supply COMMUNICATIONS EXPERTISE ies to defence forces and secu- chain management are emphasised by the In September, Patria and Insta DefSec Oy rity authorities. Areas of special fact that sub-systems can be based on sever- agreed on the acquisition by Patria of Insta expertise are intelligence, al technologies from a range of suppliers. DefSec’s waveform business; the two compa- surveillance and command Data transfer and its reliability form an nies have been engaged in long-term coop- and control systems, as well as important part of defence systems. Patria has eration on data links. Waveform development their integration, software and solid expertise in secure wireless data trans- has been a key element in this. The business life-cycle support. fer solutions. The operating environment of transaction strengthened data link develop- modern defence systems is no longer limited ment in Finland and the related international to land, sea and air – cyber threats must also competitiveness, by combining mutually com- be taken into account. This serves to en- plementary development teams into a single Personnel hance the importance of information system whole. The business acquisition has no effect and network protection. Patria has actively on other operations within the companies. strengthened its expertise and service and 281 product range in these areas. UNMANNED SYSTEMS Net sales as a share AS AN OPPORTUNITY of group net sales MAJOR PROJECTS Unmanned systems are proliferating; in Patria has acted as the main supplier in 2013, several plans were unveiled around the the major upgrade project for Rauma Class world for improving the regulations enabling 10% Fast Attack Craft, which involves securing a operation of such systems. The nature of un- lifespan for this class of vessel lasting into manned systems operations makes reliable the 2020s and upgrading the related combat data transfer a critical element. Personnel as a share system to meet modern requirements. All four Patria is actively involved in internation- of group personnel vessels in this class had been modernised for al cooperation on unmanned systems, with the Finnish Navy’s use by the end of 2013. new application areas in prospect for the In May, Patria signed an agreement with MPNDL (Multi-Purpose Networking Data 8% the Finnish Defence Forces regarding a re- Link) system, which had its maiden flight in search project related to network protection. the summer of 2012. Patria’s waveform busi- This project is a part of the Finnish Defence ness acquisition will improve the company’s Forces’ technology programmes. The re- possibilities of developing new business op- search focuses on network defence, and the erations in unmanned systems.

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AVIATION LAND SYSTEMS MILLOG NAMMO Millog – a partner in cost-effective maintenance Millog is an expert in cost-effective maintenance services, providing services for the Finnish Defence Forces as their strategic partner. Millog’s positive development continued in its fifth year in business.

The company specialises in life cycle support The modernisation project for the Finn- services, which it produces close to the cus- ish Army’s heavy rocket launchers pro- tomer by participating in life cycle cost plan- gressed as planned and will be completed Millog ning and the management of materiel and in early 2014. This project will strengthen equipment. Millog is an expert in the special Millog’s expertise and create domestic capa- Millog is a strategic partner of the requirements of systems, from product in- bilities in system maintenance. Finnish Defence Forces and pro- formation management to practical repair Millog’s subsidiary, Oricopa, delivered a vides defence materiel life-cycle and maintenance. The company is also a pro- prototype for the BMP-2 infantry fighting support to the Finnish Army. This vider of cost-effective maintenance. vehicle modernisation project. includes maintenance and materiel Millog is a strategic partner of the Finnish As a result of a quality audit performed in services for platforms and sys- Defence Forces, offering the life-cycle servic- the autumn, Inspecta extended the validity of tems related to non-armoured and es required by the Defence Forces’ systems in the ISO 9001 certificate previously awarded to armoured vehicles, electronic sys- all readiness conditions. Its service range in- Millog, to cover the period 2014–2016. Millog’s tems, as well as modifications and cludes life cycle, configuration management operations were first certified, in line with the re- installations for all systems. Millog and product information services, as well quirements of the partnership agreement made participates in the Finnish Army’s as maintenance and modification work, for with the Finnish Defence Forces, in late 2010. materiel projects, based on the equipment and the related systems whose Millog participated in the UN’s UNIFIL company’s expertise in land forces. maintenance lies under the Finnish Army’s re- peacekeeping mission in Lebanon through a sponsibility. The company also aims to make repair shop located in the country. Finland’s its services available to other customers. need for maintenance and servicing in- Personnel In September, Raskone Oy, which specialis- creased upon its becoming a Lead Nation in es in repair and maintenance services for com- the peacekeeping mission in November. mercial vehicles, sold its 8% share of Millog Oy 702 to the company’s current owners Patria Oyj and HIGH VISIBILITY Insta Group Oy, in proportion to their ownership Net sales as a share (Patria 55% and Insta 34%). This transaction Millog has invested in optronics by creating of group net sales means that Patria now owns 61.8 % of Millog. a major centre of expertise in Finland and investing in product development. The com- pany is the biggest Nordic producer of night HIGHLY APPRECIATED COOPERATION vision systems, managing the entire produc- 14% In 2013, Millog’s successfully commissioned tion chain from design to final testing. new SAP ERP system received major recog- Based on a contract signed in April, Millog Personnel as a share nition, by being placed first in the medium to will provide the Finnish Defence Forces with of group personnel large implementation category of the SAP night vision systems from 2013 to 2016. This Quality Award for the Nordic Region. Millog’s deal is worth EUR 14.8 million and will have transfer to a SAP system is related to its part- an overall employment effect for Millog and 19% nership with the Finnish Defence Forces. its subcontractors of around 56 person years.

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In September, Millog introduced LISA, a proposal related to the further consideration Planning for the creation of this establishment monocular thermal imager intended for tar- of extending its partnership with Millog into progressed well in 2013, with Millog participat- get acquisition, to the markets. This product the area of materiel maintenance. The min- ing in operational planning. Millog is preparing was well received at the DSEI event in Lon- istry is considering the issue alongside De- for this change by reinforcing its organisation. don. The product is thought to have good fence Command Finland and will reach a de- A decision is expected on the next stage prospects in the export markets. cision during the spring of 2014. If a positive (100 vehicles) of the modernisation project decision is made, the broader partnership will for the BMP-2 infantry fighting vehicle in au- take effect from the beginning of 2015. tumn 2014. In addition, Oricopa will partici- A GLANCE AT THE FUTURE As part of the reform of the Finnish De- pate as a Patria subcontractor in the upgrad- In December 2013, Defence Command Fin- fence Forces, the Forces’ new logistics estab- ing of the XA vehicle fleet. Both projects are land presented the Ministry of Defence with a lishment will begin operating in early 2015. important to job and skill retention.

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AVIATION LAND SYSTEMS MILLOG NAMMO Nammo – a strong international player

Nammo is a defence industry group, jointly and equally owned by Patria and the state of Norway, which develops and produces high-technology ammunition for military and civilian use. Other core products of the group include shoulder-launched munitions systems and rocket motors for military and space applications. Nammo is the world-leading provider of environmentally sound demilitarisation services.

Nammo’s operations have a significant inter- Nordic region, are North America and con- national focus, with over 70% of its net sales tinental Europe. Most of Nammo’s ammuni- coming from outside the Nordic market. tion supplies can be used in several weapons Nammo Defence budget cuts have introduced systems that are currently in military use in challenges for Nammo, but the company’s various countries. Nammo AS focuses on develop- aim is to maintain and enhance its lead- The breadth of the group’s product ing and producing ammunition ing position. In 2013, Nammo’s growth was range and the size of the global clientele and missile products, as well as furthered by rocket motor and ammunition help to even out the impact of economic environmentally sound demilita- products, energy solutions, and demilita- fluctuations on the group’s results. Depend- risation services. Nammo has sub- risation services. Profitability continued to ing on market performance, the business fo- sidiaries in Australia, Canada, Fin- be good, as in previous years, with Patria’s cus in Nammo’s five segments can shift from land, Germany, Norway, Sweden, share of Nammo’s net sales totalling EUR one year to the next, with the segments and the USA. Nammo 235,3 million in 2013. balancing each other out, as required by is owned jointly by Patria and the The competitive advantages of the Nam- economic cycles. The Nammo Group seeks state of Norway, on a 50/50 basis. mo Group include high-tech products and growth in its current markets, both organi- an extensive product selection, as well as cally and through acquisitions. its foothold in international markets. Two of Nammo AS publishes its own annual re- Net sales as a share the group’s major market areas, besides the port at www.nammo.com. of group net sales 28%

Personnel as a share of group personnel 29%

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Corporate responsibility as the basis of profitable operations

Responsible action and its continuous de- For Patria, good partnership means that: • ethical conduct goes beyond compliance velopment are important in all business • collaboration benefits and satisfies with laws and encompasses the preven- operations. This is particularly marked in the both parties; tion, detection and inspection of identifi- defence materiel industry, where procure- • collaboration with customers, subcon- able industry risks; ments are public. Responsible operations tractors, suppliers, and other stakehold- • ethical conduct has been adopted are a competitive advantage in all sectors, ers is close and planned for the long term; throughout the organisation; both domestically and internationally. • Patria provides, requires, and develops • indicators of ethical conduct are regularly Patria’s profitable operations are based cost-effective operations together with monitored by the top management and on good partnerships. The group aims to be its partners; affect the company’s conscious decisions. a good partner by being a good employer • Patria operates in a professional, reliable, and an ethical player in its sector. open, and transparent manner, and ex- For Patria, being a good employer means pects its partners to do the same. that the Group: • respects cooperation with employees Good partner Ethical conduct is a prerequisite for success. and engages in transparent practices in Ethical industry At Patria, this means that: this respect; Good employer player • a clear ethical code of conduct is provided • takes care of employee well-being; and compliance with it is monitored; • values and systematically develops com- Profitable operations form • ethics are embedded in everyday work, begin petence and experience; the basis of business continuity with the individual, and apply to everyone; • treats all employees fairly and equally.

Responsible operations are a competitive advantage in all sectors, both domestically and internationally.

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Corporate responsibility goals for 2015

2013 Focus areas in 2014 Goal for 2015

Partnership

Internal operational development Determining key performance Operational actions based on KPIs Cost-effective and indicators competitive operations

Cooperation with Planning transfer of functions Transferring functions Adaptation of operations to the Finnish Defence Forces changes caused by the reform of the Finnish Defence Forces

Cooperation with stakeholders Participating in meetings with Taking an active role in partnerships Increasing transparency various NGOs of operations Analysing supply chain management Supplier cooperation

Ethical conduct

Anti-corruption activities Determining resources Increasing and improving Category C in Transparency 18-month rolling plan public information International’s Anti-Corruption Updating guidelines Training strategic partners Index Analysing feedback and Training suppliers regular reporting Extranet Attending TI event Taking an active role within the industry Setting ethical criteria for choice of suppliers

Training on ethical conduct Online training for all personnel Online training: Process in place for annually (91.8%) Millog and Arlanda training all personnel Additional face-to-face training New training in the autumn for chosen groups

Good employer

External image as employer 31st place (25th, 2012) Review of causes of worsened ran- Ideal Employer (Universum, technology king and corrective actions students) ranking above 20th place

Occupational well-being 3.9% Personnel job satisfaction survey Sickness absence rate below the (sickness absences) Confederation of Finnish Industries average, which is 5%

Performance appraisals 88% Focus on quality of performance All personnel are covered by regular, appraisals (management training) satisfactory performance appraisals

Turnover 2.9% Turnover 3%

Good results were achieved in 2013 in the development of internal operations, according to the ALERT programme, and in enhancing ethical conduct. Challenges remain in the area of being a good employer.

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Ethical operator

Patria has chosen business ethics as a central focal point of its corporate responsibility. Its actions in this respect are preventive, focusing on de- veloping internal training, instructions and processes. The company also makes efforts in identifying, investigating and reporting unethical opera- tions, and improving interaction with external stakeholders.

Business ethics is developed and enhanced The Ethical Code of Conduct as well as COLLABORATION WITH STAKEHOLDERS in accordance with an 18-month rolling ac- guidelines for stakeholder relations, spon- Constructive dialogue was conducted with tion plan adopted in 2013. Patria’s partially sorship, and donations, were updated, and non-governmental organisations, and Patria owned subsidiary Nammo AS is in charge of new Guidelines on Related Parties’ Transac- gave presentations on anti-corruption activ- its own corporate responsibility. Through its tions were adopted. ities as part of commercial training sessions Board participation, Patria supervises Nam- The content of internal audit reports and in its work with NGOs (PIA). mo’s operations to ensure a sufficient level is was revised with the business units and a Patria attended Transparency Interna- met. The majority-owned subsidiary Millog separate system was implemented for mon- tional’s Raising the Bar event and a discus- has group-level guidelines for ethical busi- itoring the activities required by the reports. sion event on export control held by the ness operations, as well as a whistleblowing The system will be implemented during Peace Union of Finland. In Sweden, Patria channel for reporting unethical activity. internal audits. The outcomes of internal au- attended an event related to anti-corruption dits are reported to the Audit Committee of efforts in defence industry companies, held the Board of Directors. For more information by Folk och Försvar (Society and Defence). TRANSMITTING on internal audits and control, see p. 34. Patria signed the United Nations Global THE MANAGEMENT MESSAGE Concerning procurement chain manage- Compact Initiative, through which, within During 2013, Patria’s management clearly ment, operating models were examined and a their own spheres of influence, companies indicated a policy of zero tolerance towards plan was drawn up for further development of commit to adopting, supporting, and imple- corruption and all other unethical activi- ethical operation. Efforts continued in 2013 to menting the basic values related to human ty. A letter from the President and CEO was ensure the ethical nature of suppliers’ and sub- rights, working life principles, the environ- published on the company’s website, on the contractors’ operations. As a part of this, Patria ment, and the fight against corruption. At intranet, and in the personnel magazine. Ad- worked on an extended and specified due dil- the start of 2014, Patria joined the Global ditionally, a video message by the Chairman igence process, which involves, among other Compact’s Nordic network and the FIBS Cor- of the Board was published on the intranet things, checking the activities of potential new porate Responsibility Network in Finland. and the website. partners, for example in relation to ethics.

LEGAL PROCEEDINGS PREVENTIVE ACTION CHANNELS FOR IDENTIFYING The Helsinki District Court dismissed all Internal training applicable to all personnel UNETHICAL OPERATIONS charges related to a training aircraft acci- was conducted online for the first time, in Feedback coming in through diverse chan- dent that occurred in 2008. addition to which classroom training was of- nels was analysed and reported to the Au- In June, the Court of Appeal of Turku con- fered to specified groups such as marketing, dit Committee of the Board. Feedback was firmed the dismissal of bribery charges by the sales, procurement, and the ones facing cus- received both via reporting channels and Pirkanmaa District Court, related to the Egyp- tomers and stakeholders. The online training directly by the General Counsel. Patria has tian export project concluded during 1998– was completed by 92% of personnel working a direct email address for this purpose, as 2004 by a former Patria Group company then in Finland, including 100% of managers. well as a whistleblowing channel for report- known as Patria Vammas Oy. All charges of Ethics training was included in the Manager’s ing unethical activity – anonymously if the bribery were dismissed in the judgement, and Passport training given to new managers, reporter so chooses. No serious miscon- the State was obligated to compensate Patria as well as in the orientation events arranged duct was reported in the feedback. Most for the legal costs incurred in the District three times a year for new employees. All questions concerned the giving or receiving Court and Court of Appeal. Three former em- new Patria employees learn about ethical op- of birthday and other gifts, participation in ployees of Patria were convicted of account- erations during their orientation period. events, and inappropriate conduct. ing offences or of abetting such offences. In

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the case of one person, charges of abetting Kanta-Häme District Court in relation to the • Taking part in Transparency International’s accounting offences were dismissed and the Slovenian vehicle project ended in the dismiss- Defence Companies Anti-Corruption Index. State was obligated to compensate the ac- al of all bribery charges, in a decision published • Development of supplier chain management cused for the legal costs incurred in the Dis- in January 2014. During the proceedings, the and training of strategic partners will continue. trict Court and Court of Appeal. Because the State Prosecutor withdrew the charge of in- • A risk assessment concerning serious Supreme Court did not grant leave to appeal, dustrial espionage. The State Prosecutor has misconduct. the decision of the Court of Appeal was final. appealed against the decision of the District In June, the Finnish Prosecution Service Court and consideration of the case will con- concluded its consideration of charges in rela- tinue in the Court of Appeal of Turku. tion to Patria’s Croatian vehicle project, based Further information on the pre-trial investigations initiated by Fin- land’s National Bureau of Investigation in 2008. FOCUS AREAS IN 2014 www.patria.fi/EN/ > About Patria > According to the Finnish Prosecution Service, • Communications on ethical conduct will Corporate responsibility > Ethical conduct three former Patria employees will face charges continue internally and externally. The of aggravated bribery, suspected to have taken personnel of Arlanda and Millog will re- Patria’s certifications place in 2005–2008. In addition, the prosecu- ceive training in early 2014.  Export licence procedure from the tion has demanded that a corporate fine be im- • Taking an active part in the FIBS network defence industry’s perspective posed on Patria Land Services Oy. In the course and the Global Compact Nordic Network. of the pre-trial investigation, all suspects denied • An active collaboration with NGOs related the accusations made against them. Further- to the industry. more, a decision not to prosecute was taken in • Corporate social responsibility reporting, the case of a former President and CEO of Patria. as well as Global Compact Communication In the autumn, legal proceedings at the on Progress.

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Good employer

Patria is a major employer in Finland and its personnel has grown steadily. During 2013, Patria recruited 90 new employees. Additionally, the com- pany employed 165 interns, summer trainees, and thesis researchers. Patria is a reliable partner for its personnel, and bears daily responsibility for its employees’ occupational well-being.

During the year, Patria took part in a personnel SICKNESS ABSENCES optimal level of renewal in the organisation. management comparison in which some as- The amount of sickness absences is a good The earlier higher figures are considered to pects of personnel management at Patria were indicator of the work ability and occupation- be a consequence of reorganisations and compared with Finnish industry in general. The al well-being of the personnel. The number geographical moves of functions taking comparison showed that Patria’s strengths in- of absences stayed on the same level as the place at the time. 2013 was a time of stabili- clude well-defined management systems and previous year 3.9%. The health-care insur- sation, and there was no need for personnel HR processes, a good level of first-line manage- ance and early intervention model adopted adjustments. The number of employees has ment, salaries and remuneration, personnel and in late 2012 are not expected to have an im- been growing slowly for years. competence development, and a high education pact until the longer term. The health-care Due to the defence reform, some aircraft index. Most of these areas were ones to which insurance may even raise the level on the maintenance functions will be moved to Pirk- Patria has paid particular attention in recent years. first years. There were significant differenc- kala and Tikkakoski. This reorganisation was According to the comparison, Patria has es between business units, and that is why planned together with the personnel, and a room for improvement in the quality and actions to enhance work ability are being mutually satisfactory solution was achieved. quantity of performance appraisals, reduc- considered on a unit-by-unit basis. ing sickness absences, recruitment efficien- cy, age structure, training expenditure, and FUTURE TALENT monitoring the impact of training. PERFORMANCE APPRAISALS A new initiative was a long-term programme Performance appraisal discussions apply intended to identify and nurture future tal- to all personnel, but attendance was below ent to take on business unit and group-level EMPLOYER IMAGE 90%. There is also room for improvement in management tasks. A total of 120 applicants The development of Patria’s image as an em- the quality of the discussions. showed an interest in the development pro- ployer has not been optimal. Among technology gramme, and 16 of them were chosen for the students, Patria’s ranking in terms of employer development group. The group’s progress will image fell from 25th place to 31st during 2013. PERSONNEL TURNOVER be supported through actions such as inten- Similarly, among those employed in the tech- Personnel turnover fell to 2.9%. The target sified training and internal career mobility. nology sector, it fell from 29th to 52nd place. level is a turnover of 3%, which enables an The search will be repeated every two years.

“The thesis provides a wonderful opportunity to claim a place in the work community and to find one’s way to permanent employment.”

JYRI HALONEN Project Engineer, Aviation

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EQUALITY formance appraisals. Leadership training Each business unit’s equality plan was up- programmes will be revised. Further information dated in 2013, and based on these, action • In relation to sick leave, a working plans were drawn up for 2014–2016. group was set up in early 2014 to con- www.patria.fi/EN/ > About Patria > sider the reasons behind the high level Corporate responsibility > Good employer of absences, and to plan corrective FOCUS AREAS IN 2014 measures, for example within health Competence development and training • In performance management, the em- management. Bonus and profit-sharing scheme phasis will be on coaching first-line man- • Patria Day (a training day for all Finn- agers to ensure that daily operations are ish personnel) will be held in Novem- managed as effectively as possible, ac- ber, with the theme of occupational cording to targets, and that personnel are well-being. involved in defining tasks. Particular at- • Occupational well-being and Patria’s im- tention will be paid to target discussions age as an employer among the personnel in groups, which precede individual per- will be analysed with the help of a survey.

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Good partner

Patria is a trusted partner for its customers, personnel, subcontractors, suppliers, and other stakeholders. Patria operates in a professional, reliable, cost-efficient, and transparent manner, and expects its partners to do the same.

Patria is a major employer in Finland, par- COST-EFFECTIVE Denel in relation to the South African vehicle ticularly in certain geographical areas. With In order to be as cost-effective and competi- project deepened with a new vehicle order. its operations, the company generates tive a partner as possible, Patria develops its Similarly, the long partnership with the Pol- direct and indirect tax revenue for the gov- operations in line with an internal develop- ish operator WZM was extended with a new ernment, including through the tax paid by ment programme called ALERT. In connection licence agreement. its employees. Additionally, Patria generates of the programme operational key perfor- dividends for its shareholders. Patria’s per- mance indicators, including capacity utilisa- formance bonus and profit-sharing scheme tion rate and value addition were defined. The CAREFULLY CHOSEN SUPPLIERS covers all of its personnel. KPIs are used as monitoring tools by the Group Patria continued centralising its procure- For more information on the figures management, the Board of Management, and ment. A new management model was adopt- for 2013 and on Patria’s tax footprint, see the management of the business units. ed for indirect purchases. Patria has worked the Financial Statements for 2013 and visit to reduce the number of suppliers in order www.patria.fi. to improve its supply chain management. In CLOSE TO THE CUSTOMER 2013, the number of suppliers was reduced Work continued to deepen the maintenance by over 10%, through centralisation and RELIABLE partnerships between the Defence Forces group-level agreements. Patria Land Systems Oy and Patria Land and Millog. Possibilities for partnering with Property maintenance subcontracting Services Oy are the first defence industry the Navy were investigated, and Patria also was opened to tender, in collaboration with companies to be certified according to the looked at new forms of Nordic solutions for Patria’s property maintenance partner YIT, new Act on the Export and Transit of De- defence logistics. and business-unit-level agreements were fence Materiel by the Ministry of Defence. With regard to Air Force equipment, the replaced by group-level ones. This certificate simplifies the licensing pro- defence reform had an impact on Patria’s cedures for the transfer of defence-related operations in Halli, Kauhava, Tikkakoski, and products within the EU and makes it easier Pirkkala. Actions related to the reform will CUSTOMER SATISFACTION for the certified company to obtain materiel. continue in 2014. As in previous years, customer satisfaction Patria reports biannually to the Ministry of Smooth collaboration related to the up- was measured at various levels and by busi- Defence on the transfer of products within grade of the Rauma Class Fast Attack Craft ness units. Constructive, mostly positive the EU. For additional information, please continued with Nordic partners, includ- feedback was also received in the follow-up visit: www.certider.com ing Saab and Kongsberg. Cooperation with meetings for various projects.

“We are enhancing the efficiency of our operations to be a competitive partner.”

PAULA ROSSI LEAN-manager, Aerostructures

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INFLUENCING THE DEFENCE land concerning the content of an arms export FOCUS AREAS IN 2014 MATERIEL INDUSTRY report that was in progress. The report was later • Development of internal operations ac- The President and CEO of Patria continued in considered at an export control event organised cording to the ALERT programme will his role as Chairman of the Finnish Defence by the Peace Union of Finland. In Sweden, Patria continue, in order to enhance competi- and Aviation Industry Association (PIA ry). attended an event related to anti-corruption tiveness and efficiency. Several Patria representatives are also active efforts in defence industry companies, held by • Development of procurement chain man- in the association’s subgroups. Patria assumes Folk och Försvar (Society and Defence). agement will continue, in order to ensure a significant role in PIA in order, among other the ethical nature of supplier operations, things, to communicate the importance of eth- among other things. ical practices to all the member companies. SPONSORSHIP AND DONATIONS • In interaction with NGOs, the aim is to Patria is also involved in the Aerospace and In 2013, Patria directed its Christmas gift create a practice of regular meetings. Defence Industries Association of Europe (ASD) funds towards a donation to the SOS Chil- • The openness of corporate communica- and, through it, works persistently to bring dren’s Village Association. The charity was tions and stakeholder dialogue will be shared international practices into the sector. chosen by the Patria Consultative Committee. enhanced. Through PIA, Patria takes an active part in Patria takes part in the United Nations NORDEFCO, which improves Nordic defence Global Compact and supports its operations cooperation. In 2013, PIA chaired the collabo- through voluntary donations. ration between defence industry associations. A three-year project period with the Finn- Further information ish Military Sport Federation ended in 2013. The project supported leisure-time fitness www.patria.fi/EN/ > About Patria > CONTACTS WITH NGOS activities among conscripts, in order to uphold Corporate responsibility Meetings with non-governmental organisations their physical and psychological well-being. mostly took place as needed, but always with Patria’s sponsorship of the Finnish Biath- the aim of forming a practice of regular meet- lon Association was extended for the period ings. Patria attended Transparency Internation- 2013–2014. Patria’s CEO is the Deputy Chair- al’s Raising the Bar event in London, which dis- man of the Biathlon Association and has cussed anti-corruption activities. Constructive excluded himself from any decision-making dialogue was carried out with Saferglobe Fin- concerning the sponsorship.

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Environment

Patria abides by the environmental legislation and regulations related to its operations, and reports on these to the appropriate parties. The main environmental challenges related to Patria’s operations concern energy consumption in its facilities, waste management, and the use of certain dangerous chemicals.

Patria has local environmental organisa- REDUCTION OF CARBON facility adopted the use of nickel-free phos- tions that work actively to identify and re- DIOXIDE EMISSIONS phate chemicals in order to reduce nickel and duce environmental risks. Good results were Patria now has 16 meeting rooms with video- zinc content in waste water. achieved in the main focus areas in 2013. conferencing equipment, and Millog is in the process of adopting a similar system, having already created one videoconferencing room. EXPLOSION PROTECTION DOCUMENTS ENERGY EFFICIENCY The use of videoconferences saves both The explosion protection documents of

Patria outsourced the servicing and mainte- working hours and the environment. The CO2 Patria’s Halli, Linnavuori, Hämeenlinna, and nance of its production facilities to YIT Kiin- saving made in 2013, thanks to the reduction Sastamala sites were updated. teistötekniikka Oy at the end of 2012. YIT is in driving time, was around 110,000 kg. responsible for maintaining and improving The possible effects on CO2 and fine par- the energy-efficiency of 175,000 square ticle emissions of installing exhaust filters in FIRING TEST EXERCISES metres of property. In 2013, investments vehicles in conjunction with engine mainte- Patria conducted firing exercises under its aimed at energy savings were carried out in nance are being examined. own name in Reila and Vattajaniemi (Lohtaja). Halli, Hämeenlinna, Tikkakoski, Linnavuori, The exercises in Reila will conclude at the end and Utti. The total cost of the projects was of 2014. The Lohtaja firing range has been in around EUR 100,000, and they related to WASTE MANAGEMENT use by the Army for decades, and no environ- adjustments to building automation, includ- Waste-related instructions and procedures mental ill-effects from the firing have been ing revisions of air-conditioning operation were specified at the Hämeenlinna and Sas- detected. In its tests, Patria directs the firing times, sensor additions, and upgrades of tamala sites. sectors in a way that minimises noise pollu- some AC machines to include heat recovery. tion. The safety zones are clearly larger than In early 2013, most operations from required to maximise safety. Firing is mostly the Sastamala site were moved to the CHEMICALS done outside holiday periods, and using blind Tampere Naulakatu and Hämeenlinna sites. A possible replacement has been found for shells of the smallest possible size. Firing is Some buildings were left empty in Sasta­ the trichloroethylene used in aircraft mainte- only done on weekdays and mostly between 9 mala, and their energy consumption was nance. The review of its possibilities contin- am and 4 pm. The cartridges are made of steel reduced by turning down the heating and ues in the form of cost and other calculations. and aluminium and contain no hazardous ma- air conditioning. The Sastamala ammunition-painting terials. A preliminary duration of 12 weeks is

The ecological strain of test shootings is minimized.

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estimated for firing exercises in 2014. collaboration with the Defence Forces and Millog carries out field artillery tests on . Changes caused by the defence Further information its own site in Lievestuore. reform will be discussed between the par- ties towards the beginning of the year. www.patria.fi/EN/ > About Patria > • Similarly, monitoring of waste water re- Corporate responsibility > FOCUS AREAS IN 2014 leased into sewers will continue. Environmental responsibility • The emergency rescue plans for the • The Linnavuori site will make an applica- Environmental statistics Hämeen­linna and Sastamala sites will be tion for a review of environmental permit Patria AMV eco balance updated during the year. Efforts will con- requirements by the end of 2014. tinue in Sastamala’s ammunition-paint- • The assessment of the environmental risks ing facility to develop operations accord- and impacts related to the operational ing to the environmental permit. changes caused by the defence reform will • At the Halli site, monitoring of the condi- continue, as Patria’s operations are expand- tion of groundwater areas will continue in ed in Tikkakoski and initiated in Pirkkala.

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Risk management and internal control

Risk management and internal control are an important part of Patria’s management system and control system. Risk management and internal control also help to ensure that operational and profitability targets can be achieved and loss of resources prevented. Furthermore, risk man- agement and internal control help to ensure appropriate reporting, compliance with laws and regulations, as well as avoid damage to Patria’s reputation.

Patria has a Risk management and internal tation of risk management processes. several years. Moreover, the contents of de- control policy, approved by the Board of Risks are classified into strategic, oper- liveries and the forms of industrial co-oper- Directors, that specifies the tasks, objec- ations, and financial risks, caused either by ation implemented together with partners tives, components, responsibilities and external conditions and events or activities can be complex in nature. The risks and authorities. within the Group. Risk identification and as- uncertainties involved in such agreements The primary responsibility for risk sessment, as well as the planning and moni- and projects are typically versatile and sig- management and internal control lies with toring of risk treatment activities, are part of nificant, requiring thorough assessment and the business units and support functions Patria’s annual business operations planning management. performing the day-to-day control. Patria’s and an integral part of the daily operations The effects and control of risks related support functions provide guidelines for of the business units and support functions. to Patria’s major projects are assessed with risk management and internal control, and Twice a year, Patria’s business units and regularity by the Risk and Revenue Recog- perform monitoring on different levels. The support functions report their major risks nition Board and the Board of Management, Internal Audit Function and the Auditors, se- and the related treatment actions to Group and thereafter reported to the Board of curity and quality auditors, as well as custom- management. New, significant risks are re- Directors. ers, monitor and evaluate the effectiveness ported to Group management without delay, Patria’s values and the Code of Conduct of risk management and internal control. immediately after they have been identi- accepted by the Board, policies and guide- The Board provides the ultimate over- fied. The most significant risks faced by the lines accepted by the Board and manage- sight and direction for risk management and Group, together with the related risk treat- ment, as well as the completing guidance internal control. The Audit Committee of ment activities, are reported to the Board of given by the Group or Business Units provide the Board monitors the effectiveness of risk Directors and the Audit Committee. the basis for internal control. Internal control management and internal control. The CEO Due to the nature of Patria’s business includes also the organization structure of is responsible for the proper functioning and operations, individual sales agreements can the Group and the authorities and respon- monitoring of the Group’s risk management be very large in relation to the Group’s annu- sibilities. Internal control is part of everyday and internal control. Patria also has a risk al turnover. They may include product devel- work and the tasks of internal control are management steering group that supports opment, require extensive subcontracting implemented in the business processes. In- the Group and business unit management in and other co-operation with third parties, ternal control activities are carried out at all the planning, development, and implemen- and result in deliveries that take place over levels and functions of the Group.

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35 PATRIA ANNUAL REVIEW 2013

Corporate governance

APPLICABLE LEGAL PROVISIONS pany is engaged in, either in Finland or interna- cial statement and any interim reports. Further- Administration of Patria is subject to the tionally. The Consultative Committee consists more, the Board decides on major investments provisions of the Finnish Companies Act and of a chairman, a vice-chairman, and a maximum and confirms the ethical values and operational other legislation relevant to its operations. In of ten other members. During the financial pe- principles of the Group, as well as monitoring addition, Patria follows other guidelines and riod under review, the committee had 11 mem- adherence to these values. The Board also ap- recommendations as applicable to the han- bers. As a general rule, the Consultative Com- proves the broad outline of the Group’s organ- dling of good corporate governance in compa- mittee has convened four times a year. In 2013, isational and functional structure. The Board nies in which the Finnish state is the majority the Consultative Committee convened three of Directors has set up an Appointment and shareholder. The shareholders of the Patria times. The average attendance of the members Compensation Committee as well as an Audit Group – the Finnish state and Airbus Group – of the Consultative Committee was 91%. Committee. The Appointment and Compensa- have also signed a shareholders’ agreement tion Committee consists of three members. It that contains provisions applicable to the ad- prepares the Group’s and the management’s ministration of the company. COMPOSITION OF THE BOARD OF DIRECTORS payroll structures, as well as any bonus and in- AND THE ELECTION PROCEDURE centive systems. It also approves key appoint- According to the Articles of Association as cur- ments. The Audit Committee also consists of GROUP ORGANISATION rently in force, the Board of Directors of Patria three members. Its task is to follow and monitor, AND ADMINISTRATIVE SYSTEM Oyj consists of a chairman, a vice-chairman, among other operations, the implementation of Patria is operationally divided into business and a minimum of three and a maximum of the Group’s internal control, risk management units. Patria Group consists of the parent seven other members. In the financial period and financial reporting and compliance and eth- company, Patria Oyj, and its wholly owned under review, the Board had six members. The ics. No other particular distribution of tasks has subsidiaries. In addition to wholly owned sub- General Meeting of Shareholders elects the been agreed upon among Board members. sidiaries, Patria owns 61.8% of Millog Oy and chairman, the vice-chairman, and other Board 50% of Nammo AS, a Norwegian company. members, and decides on their remuneration. The statutory organs of Patria Oyj – the Gen- The Board members are elected for one year THE COMPANY’S PRESIDENT AND CEO eral Meeting of Shareholders, the Board of Direc- at a time, their terms of office ending at the AND THE GROUP MANAGEMENT tors, and the President and CEO – are responsible close of the first Annual General Meeting held Patria Oyj’s president and CEO is responsible for for the company’s administration and operations. subsequent to their election. The Board of Di- managing the company’s and the Patria Group’s The Group’s operating activities are managed by rectors meets at least eight times a year. business activities and administration, in ac- the President and CEO, assisted by the the Board The Board convened nine times in 2013.The cordance with the provisions of the Companies of Management. Each business unit has a man- average attendance of Board members was 98%. Act and any guidelines or rules issued by the agement group of its own. The statutory boards Board of Directors. The President and CEO is of wholly owned Group companies other than assisted in Group management by the Board the parent company are only responsible for the PRINCIPAL DUTIES OF THE BOARD OF of Management, which convenes monthly. In statutory minimum duties specified in the rele- DIRECTORS AND DISTRIBUTION OF TASKS addition, the Group management meets as and vant legislation. The Consultative Committee of The Board of Directors is responsible for the when necessary for management purposes. Patria Oyj is an advisory organ serving the Board management of Patria and the appropriate or- Patria has an Administrative Management of Directors and does not have statutory duties. ganisation of its operations, in accordance with Group chaired by the Chief Administration Of- legislation, the Articles of Association and any ficer. The purpose of the Administrative Man- instructions issued by the General Meeting of agement Group is to develop and rationalize CONSULTATIVE COMMITTEE Shareholders. In addition to its statutory duties, Patria’s administration and to ensure the quality According to the Articles of Association, Patria the Board’s principal duty is to make decisions and efficiency of administrative services -re Oyj must have a Consultative Committee on the Group’s strategic policy, as well as to quired by Patria’s business operations. The Ad- appointed by the General Meeting of Share- monitor and control the Group’s business opera- ministrative Management Group members are holders. The Articles of Association further tions, to ensure that the Group follows the legal heads of Patria’s HR, Finance, ICT, Procurement, state that the Board of Directors shall consult provisions relevant to its operation in a com- Legal, Compliance and Ethics, and Risk Manage- the Consultative Committee on matters that mercially appropriate manner, providing added ment as well as Communications functions. concern any marked curtailment or expansion value to its owners. The Board also makes de- In Patria corporate responsibility working of operations or any vital changes to the com- cisions on the Group’s key operating principles, and reporting is steered by Patria’s Corporate Re- pany’s organisation, or which are otherwise of approving annually the Group’s financial targets sponsibility Steering Group. The Steering Group great importance to the industry that the com- and operational objectives, as well as its finan- is chaired by Patria’s General Counsel and the

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Developers of responsible operations at Patria Chief Compliance Officer. Patria’s Ethics Officer participates in the steering groups meetings and supports the work of the Steering Group. Gener- Board of Directors,Board of Directors’ Audit Committee, al counsel in the capacity of the Chief Compli- Group Board of Management ance Officer reports to the audit committee.

Overseeing and directing operations to ensure compliance with regulations and ethical principles COMPENSATION The information of the compensation system is available in the attachment of the Financial Statement, see chapter 7. Personnel expenses. Chief Compliance Officer, Compliance Officer

Developing and reporting on operations that are in compliance with SYSTEM OF SUPERVISION regulations and ethical principles In accordance with the Companies Act, the Board of Directors must ensure that the super- vision of accounts and financial management has been organised appropriately. The presi- The Group’s and Shop steward The Group’s and Managers dent and CEO shall ensure that the company’s the business organisations the business Developing accounting complies with legislation and that units’ responsi- units’ HR ser- Developing and and reporting the financial administration is reliably organised. ble organisations vices reporting on on ­operations Patria’s management is responsible for (environment, ­operations Developing and ensuring that the Group’s day-to-day oper- ­finances, marketing, reporting on ations comply with all of the relevant legal purchasing, etc.)­ ­operations provisions and Board resolutions, and that Developing and Group risk management has been organised reporting on in an appropriate manner. ­operations The Group’s division into business units makes management work more effective and well defined, and facilitates the organisation of effective supervision. An operational reporting system has been set up for the Group’s financial Patria Group employees supervision. It produces versatile information on the Group’s financial standing and development on a monthly basis. The Group has a clearly de- fined decision-making hierarchy for investments. Patria has an independent outsourced Inter- nal Audit function, which evaluates and provides assurance on the effectiveness and efficiency of risk management and internal control, the reli- ability of the financial reporting and the compli- ance of the operations, and reports to the Audit Committee. The internal audit is executed by an The Audit Committee is independent outside actor, who complies with the International Standards for the Profession- responsible for monitoring al Practice of Internal Auditing. Internal Audit reports on its activities and findings to the Audit Committee and Patria’s management. The Audit of ethics and compliance Committee confirms the auditing plans annually. The company’s auditors report their observa- matters, which are followed tions at least once a year to the relevant business units and to the Group’s financial management, and reported regularily. as well as to the Board of Directors and the Audit Committee. The auditors also submit a statutory auditors’ report to the company’s shareholders.

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Group management

Patria Group’s president and CEO is assisted in Group management by the Board of Management, which convenes monthly. Operational transparency and responsible operations form part of the management system and provide the basis for the strategic planning of operations from the outset.

Heikki Allonen Jukka Holkeri Sirpa-Helena Sormunen Ville Jaakonsalo b. 1954 b. 1962 b. 1959 b. 1971 President and CEO Chief Strategy Officer General Counsel Chief Administration Officer Master of Science (Eng.) Deputy to the President Chief Compliance Officer (CAO) Employed by Patria since 2008 and CEO Master of Laws LL.M./MBA Master of Science (Eng.) Employed by Patria since 2012 Employed by Patria since 2010 Employed by Patria since 1988

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Pasi Niinikoski Lassi Matikainen Seppo Seppälä Mika Kari b. 1961 b. 1961 b. 1950 b. 1969 President, Systems President, Aviation President, Land President, Land Doctor of Science (Techn.) Master of Science (Eng.) Master of Science (Eng.) Master of Science (Eng.) Employed by Patria since 2006 Employed by Patria since 2008 Joined Patria in 2000 Employed by Patria as of Retired at the end of 2013 1 November 2013 Juridical and business responsibilities were transfered to Mika Kari on 1 January 2014.

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Board of Directors

The Board of Directors is responsible for the management of Patria Group and the appropriate organisation of its operations, in accordance with legislation, the Arti- cles of Association and any instructions issued by the General Meeting of Sharehold- ers. The Board’s principal duty is to make decisions on the Group’s strategic policy, as well as to guide and monitor the Group’s business operations. During the 2013 accounting period, the Board met 9 times.

Christer Granskog Kirsi Komi Maximilian Thomasius Chairman Vice Chairman Head of Participation Management Master of Science (Eng.) Master of Laws Cassidian, EADS Board member since 2010 Board member since 2011 Board Member since 2013 Chairman of the Audit Committee

Arto Honkaniemi Kari Rimpi Jussi Itävuori Senior Financial Counsellor Lieutenant General (Ret.) Senior Partner Prime Minister’s Office, Ownership Steering Department Board member since 2012 RJI Partners Limited Board member since 2009 Board Member since 2003

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Consultative committee

Patria Holding Oyj has a Consultative Com- mittee, annually appointed by the General Meeting of Shareholders, to which, in addi- tion to employee representatives, represent- atives of Parliament, Ministry of Employ- ment and Economy and the Finnish Defence The Board of Directors is Forces are appointed. Among other matters, the Board of Directors consults the Consul- responsible for the management tative Committee on matters that concern of Patria Group and the appropriate any marked curtailment or expansion of op- erations or any vital changes to the compa- organisation of its operations ny’s organisation, or which are otherwise of major importance to the industry in which and consults the Consultative the company is engaged, either in Finland or internationally. The Consultative Committee Committee as required. does not have statutory duties. It consists of a chairman, a vice-chairman, and a maximum of ten other members. During the period un- der review, the Consultative Committee had 11 members. As a general rule, the Consulta- tive Committee convenes four times a year.

Consultative committee

Raimo Vistbacka Juha Kuusi Petri Pitkänen Chairman System Specialist, Patria Workshop Manager, Patria Master of Laws Member since 2011 Member since 2013 Member since 2012 Seppo Kääriäinen Juha Rannikko Thomas Blomqvist Member of Parliament Vice Admiral, Chief of Vice Chairman Member since 2012 Defence Command Finland Member of Parliament Member since 2011 Member since 2012 Petri Peltonen Director General, Department of Kari Tolvanen Ilkka Jokioja Enterprice and Innovation, Minis- Member of Parliament Laboratory Chief Engineer, Patria try of Employment and Economy Member since 2012 Member since 2012 Member since 2012

Jussi Karimäki Tuula Peltonen Equipment Assembler, Patria Member of Parliament Member since 2009 Member since 2012

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GRI Index

REPORTING AND The data for the report was gathered from CALCULATION PRINCIPLES Patria Group’s internal data systems. Financial This is Patria’s third Corporate Responsibil- figures were aggregated using the Hyperion ity Report. This report covers the progress system, after first acquiring each business during the period from 1 January to 31 De- unit’s figures from their own ERP systems. Per- cember 2013. The report covers all subsidi- sonnel figures were obtained from the Group’s aries of which Patria owns more than 50%. ARC HR information system. Accident statis- These are described in the Annual Report. tics came from insurance company Pohjo- Nammo (50% ownership) publishes its own la’s data system and pension-related figures reports. The financial statement figures from pension insurance company Ilmarinen’s and the total number of employees include system. Environmental figures were acquired 50% of Nammo’s figures. from location-specific environmental reports.

Section of the GRI guidelines Notes/comments Standard disclosures 1. Strategy and analysis

1.1 Review by the President and CEO Reported 8–9

1.2 Description of essential impacts, risks, and possibilities Reported 8–9, 24–25

2. Organisation profile

2.1–2.10 Basic information on Patria Reported 4–7

3. Report parameters

3.1–3.4 Report profile Reported 3, 44

3.5–3.11 Report scope and boundary Reported 42 www.patria.fi/EN/ > About Patria >Corporate responsibility > Essentiality chart

3.12 GRI content index Reported 42–43

3.13 Assurance Reported Quality and accuracy of the data is internally monitored. Data is no externally verified.

4. Governance, commitments, and engagement

Governance

4.1–4.10 Governance Reported 36-37 Board of Directors’ Report

Commitments to external initiatives

4.11 Precautionary principle Reported 34

4.12 External principles or initiatives Patria endorses Reported 8–9, 11

4.13 Membership in associations and organisations Reported 8–9, 26–27

Stakeholder engagement

4.14–4.17 Stakeholder groups engaged by Patria Reported 26, 30–31

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Section of the GRI guidelines Notes/comments Performance indicators

Economic responsibility

Disclosure on the management approach Reported 36–37

EC1 Direct economic value generated and distributed Reported 7

Note to the Consolidated Financial Statements EC3 Retirement obligations Reported 7. Personnel expenses

Environmental responsibility

Disclosure on the management approach Reported 32–33

EN4 Indirect energy consumption Reported www.patria.fi/EN/ > About Patria >Corporate respon- sibility > Environmental responsibility > Statistics

EN7 Initiatives to reduce indirect energy consumption Reported www.patria.fi/EN/ > About Patria >Corporate respon- sibility > Environmental responsibility > Statistics

EN18 Initiatives to reduce greenhouse gas emissions Reported 32 www.patria.fi/EN/ > About Patria >Corporate respon- sibility > Environmental responsibility > Statistics

EN20 Other significant air emissions Reported www.patria.fi/EN/ > About Patria >Corporate respon- sibility > Environmental responsibility > Statistics

EN21 Total water discharge Reported www.patria.fi/EN/ > About Patria >Corporate respon- sibility > Environmental responsibility > Statistics

EN22 Waste Reported www.patria.fi/EN/ > About Patria >Corporate respon- sibility > Environmental responsibility > Statistics

Social responsibility

Disclosure on the management approach Reported 24–29

Practices applying to personnel and working conditions

LA1 Personnel by employment type, contract type, and gender Reported 7

LA2 Personnel turnover Reported 28

LA4 Percentage of employees coverd by collective Reported All except the top management and certain expert bargaining agreements positions

LA7 Injuries and absenteeism Reported 7,28

LA11 Programmes for skills management Reported www.patria.fi/EN/ > About Patria >Corporate and lifelong learning responsibility > Good employer > Competence development and training

LA12 Performance reviews Reported 28

LA13 Composition and diversity of governance bodies Reported 7 and ­employee categories

Human rights

HR3 Human-rights training given to employees Reported 25–26 Training in Ethical Code of Conduct

Social impacts

SO2 Corruption risk assessment Reported 26–27

SO3 Training in anti-corruption policies Reported 25–26 Training in Ethical Code of Conduct

SO4 Actions taken in response to incidents of corruption Reported 8, 26–27 Board of Directors’ Report

SO5 Participation in public policy and lobbying Reported 10–11,31

SO6 Contributions to political parties Reported According to its Ethical Code of Conduct Patria does not give gifts or make donations to political parties, nor does it participate in party-political activities.

SO8 Sanctions for non-compliance with law and regulations Reported 26–27 None in 2013

Product responsibility

PR5 Customer satisfaction Reported 30

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Contact information

Patria Oyj Kaivokatu 10 A FI-00100 Helsinki, Finland [email protected]

Patria’s Annual Review 2013

Editor in Chief Birgitta Selonen, [email protected]

Patria’s Communications Team Vice President, Corporate Communications Birgitta Selonen Information Officer Juha Jäppinen Web Communications Manager Ilona Kauppinen Communications Manager Raili Saarinen Marketing Manager Päivi Sipiläinen

Editing and layout Miltton Oy

Print Libris Oy

Paper cover Galerie Art Silk 200 g, inside pages Galerie Art Silk 150 g

Photos The The Finnish Navy Nammo Patria p. 9, 38–40 Pentti Hokkanen p. 21 Studio Sami Helenius

Feedback, request for information and subscriptions [email protected]

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45 PATRIA ANNUAL REVIEW 2013