Taking success to new heights ANNUAL REPORT 2017 STRUCTUREСТРУКТУРА OFОТЧЕ THEТА REPORT About the Corporation 3 Letter from Chairman of the Board of Directors of PJSC UAC 19 Letter from President, Chairman of the Management Board of PJSC 20 UAC Section 1. Strategy 22 1.1. UAC’s market position 23 1.2. Strategy and business model 30 1.3. Investment programme 35 1.4. Aircraft projects 38 1.5. Innovation, research and development 41 Section 2. Sustainable development 47 2.1. Human resources management 48 2.2. Environmental safety 54 2.3. CSR and charity 55 Section 3. Corporate governance 57 3.1. UAC’s corporate governance system 58 3.2. Securities 73 Annexes 78 Annex 1. Risk management 79 Annex 2. Abbreviations and glossary 84 Annex 3. Disclaimer 85 Contacts 86 About the Strategy Sustainable Corporate Annexes Contacts Corporation development governance ABOUT THE CORPORATION 3 ABOUT THE CORPORATION The United Aircraft The Corporation was established in 2006 transport and special-purpose aircraft, as well to support and develop the research and as the modernisation, repair and recycling Corporation manufacturing potential of the Russian aircraft of aircraft, training and enhanced training of is a global leader industry, enhance national security and aircrews. in the civil and defence capability and pool the intellectual, production and financial resources to The UAC member companies manufacture military aircraft implement long-term aircraft engineering their products under globally renowned market. programmes. brands, including Sukhoi, MiG, Ilyushin, Tupolev, Yakovlev, MC-21, Superjet 100 and In 2007 the UAC was included in the list Beriev. of strategic enterprises of the Russian Federation. The Corporation is also one of The Corporation’s majority shareholder the integrated structures that make up the is the Russian Federation represented country’s military-industrial complex. by the Federal Agency for State Property Management, with an equity holding of more The Corporation’s main areas of activity than 90%. The shares of PJSC UAC are traded are the development, manufacturing, sales on the Moscow Exchange under the ticker and aftersales maintenance of civil, military, symbol UNAC. Aircraft deliveries by year units Category 2013 2014 2015 2016 2017 Military aircraft 79 124 124 103 94 Domestic market 54 102 90 72 56 Exports 25 22 34 31 38 Civil aircraft 32 35 30 37 36 Domestic market 18 26 25 26 34 133 Exports 14 9 5 11 2 Transport and special-purpose aircraft — — 2 1 3 aircraft were delivered by the Corporation Domestic market — — 2 1 3 in 2017 Exports — — — — — Total 111 159 156 141 133 About the Strategy Sustainable Corporate Annexes Contacts Corporation development governance ABOUT THE CORPORATION 4 Geography Headquarters of PJSC UAC 14 18 16 24 1 5 10 11 3 2 12 4 23 6 15 20 8 7 13 22 21 9 17 3 25 19 1 2 100,000+ 20+ 4 jobs regions of Russia countries of presence Companies in Russia Joint-venture companies abroad About the Strategy Sustainable Corporate Annexes Contacts Corporation development governance ABOUT THE CORPORATION 5 Geography City Company Comment Companies in Russia 1. Moscow Headquarters of PJSC UAC PJSC Company Sukhoi JSC Sukhoi Civil Aircraft — managing company PJSC Irkut Corporation — experimental design bureau PJSC A. S. Yakovlev Design Bureau — plant JSC OAK-TS PJSC Tupolev PJSC IL LLC UAC-Purchases JSC Aerocomposit LLC UAC-Integration Centre JSC RSK MiG LLC UAC-Capital LLC UAC-Development JSC Ilyushin Finance Co 2. Zhukovsky OJSC Myasishchev Design Bureau Moscow Region JSC M. M. Gromov Flight Research Institute 3. Kubinka JSC 121 ARZ Moscow Region 4. Lukhovitsy Voronin Lukhovitsy Aircraft Plant—branch of JSC RSK Moscow Region MiG 5. Lyubertsy JSC Aviaremont Moscow Region 6. Kazan Gorbunov Kazan Aviation Plant—branch of PJSC Rep. of Tatarstan Tupolev JSC KAPO-Composit 7. Ulyanovsk JSC Aviastar-SP Ulyanovsk Region AeroComposit Ulyanovsk 8. Voronezh PJSC VASO Voronezh Region 9. Taganrog PJSC TANTK Imeni G.M. Berieva Rostov Region OJSC 325 ARZ About the Strategy Sustainable Corporate Annexes Contacts Corporation development governance ABOUT THE CORPORATION 6 Geography City Company Comment Companies in Russia 10. Nizhny Novgorod Nizhny Novgorod Aircraft Plant Sokol—branch of RSK Nizhny Novgorod MiG Region OJSC 170 RZ SOP 11. Novosibirsk Chkalov Novosibirsk Aircraft Plant—branch of PJSC — managing company Novosibirsk Region Company Sukhoi — experimental design bureau 12. Irkutsk Irkutsk Aviation Plant—branch of PJSC Irkut Corporation — plant Irkutsk Region 13. Komsomolsk- Yuri Gagarin Komsomolsk-on-Amur Aircraft Plant— on-Amur branch of PJSC Company Sukhoi Khabarovsk Territory 14. Pushkin OJSC 20 ARZ Leningrad Region 15. Belogorsk OJSC 680 ARZ Amur Region Joint venture companies 16. Staraya Russa JSC 123 ARZ abroad Novgorod Region 17. Krasnodar OJSC 275 ARZ Krasnodar Territory 18. Ivanovo OJSC 308 ARZ Ivanovo Region Shanghai 19. Vozdvizhenka OJSC 322 ARZ (China) Primorye Territory 20. Roslavl OJSC 720 RZ SOP Smolensk Region 21. Volgograd OJSC VZRTO Volgograd Region 22. Novocherkassk OJSC 31 ZATO Rostov Region 23. Ryazan JSC 360 ARZ Bangalore Ryazan Region (India) 24. Rzhev JSC 514 ARZ Tver Region 25. Spassk Dalniy OJSC 32 RZ SOP Primorye Region Joint-venture companies abroad Venice (Italy) 1. Shanghai (China) China-Russia Commercial Aircraft International Corporation Co., Ltd 2. Bangalore (India) Mutilrole Transport Aircraft Limited 3. Venice (Italy) SuperJet International S.p.A. About the Strategy Sustainable Corporate Annexes Contacts Corporation development governance ABOUT THE CORPORATION 7 Civil aircraft Civil aircraft model range MC-21 Medium-haul narrow-body Status: prototype production Seating capacity of 163 aircraft to 211 passengers Il-114-300 Superjet 100 CR929 Il-96-400-M Turboprop aircraft for local routes, Short-to-medium-haul narrow-body Long-haul wide-body aircraft with Long-haul wide-body aircraft with with a seating capacity of 52 to 64 aircraft with a seating capacity a seating capacity of 210 to 350 a seating capacity of 305 to 370 passengers of 87 to 103 passengers passengers passengers Status: modernisation and re-launch Status: serial production Status: initiation (negotiations with Status: modernisation and re-launch suppliers) State special- State special-purpose aircraft model range purpose aircraft Аn-148 Tu-204/214/ Il-96 Aircraft designed for regional routes, Long-haul wide-body aircraft with with a seating capacity of 68 to 80 204CM a seating capacity of 257 to 289 passengers Medium-haul narrow-body aircraft passengers Status: serial production with a seating capacity of 210 Status: serial production passengers Status: serial production About the Strategy Sustainable Corporate Annexes Contacts Corporation development governance ABOUT THE CORPORATION 8 Military aircraft Military aircraft model range Su-57 Fifth-generation multifunction Status: prototype fighter aircraft production MiG-29 Su-30 Su-34 Generation 4+ multifunction frontline Generation 4+ multifunction fighter aircraft Generation 4+ frontline fighter bomber fighter aircraft Maximum payload: 8 t Maximum payload: 8 t Maximum payload: 4.5 t Status: serial production Status: serial production Status: serial production MiG-35 Su-35 Tu-160 Generation 4++ multifunction fighter aircraft Generation 4++ multifunction fighter aircraft Strategic missile-carrying bomber Maximum payload: 4.5 t Maximum payload: 8 t Status: modernisation and re-launch Engineering and testing Status: serial production PAK DA Yak-130 Yak-152 Strategic missile-carrying bomber Combat training aircraft Training aircraft Status: engineering Maximum payload: 3 t Status: production roll-out Status: serial production About the Strategy Sustainable Corporate Annexes Contacts Corporation development governance ABOUT THE CORPORATION 9 Transport and Transport and special-purpose aircraft model range special-purpose aircraft Il-76MD-90A т Heavy military transport Status: serial production Maximum payload: 60 t aircraft Il-112V SVTS Bе-200 Light military transport aircraft Medium-lift military transport aircraft Multifunction amphibious aircraft Maximum payload: 5 t Maximum payload: 20 t Maximum payload: 12 t Status: first prototypes assembly Status: engineering Status: serial production About the Strategy Sustainable Corporate Annexes Contacts Corporation development governance ABOUT THE CORPORATION 10 Maiden flight of One of UAC’s key projects, MC-21 is a new- The second stage of MC-21-300 in-plant generation passenger liner that targets the development tests commenced in September MC-21 largest aviation segment. MC-21 took off 2017. The main objective of the second stage on its maiden flight on 28 May 2017 from was to extend the flight performance range the airfield of the Irkutsk Aviation Plant. The in terms of mass, centring, speed and altitude. 30-minute flight was performed at an altitude During the test-flights, the improved systems of 1,000 metres with a speed of 300 km/h. operated without failure. The aircraft was operated by a crew consisting of test-pilot Oleg Kononenko, Hero of the A number of the UAC member companies Russian Federation, and test-pilot Roman have been working on MC-21, including Taskaev, Hero of the Russian Federation. The PJSC Irkut Corporation, JSC Aeroсomposit, prototype was successfully tested for stability, JSC Aviastar-SP, PJSC VASO and LLC UAC- handling and engine controllability: all the Integration Centre. The aircraft featuring systems operated without glitches, the engine advanced technical solutions ensures that its characteristics and operational modes were passengers have a comfortable travel and confirmed. presents an economically attractive offer to airlines. About the Strategy Sustainable Corporate Annexes Contacts Corporation development governance ABOUT THE CORPORATION 11 It was not just a flight of a new aircraft; it was the birth to bring in more light. In addition, it will of a new product that will be shaping the Russian air- have a more comfortable cabin pressure and improved cabin climate. An innovative craft building industry in the next 50 years. We expect ergonomic air crew cabin was designed for a global demand for around 15,000 new aircraft in the the pilots of MC-21.