ENTERPRISE OF THE STATE ATOMIC ENERGY CORPORATION ROSATOM jsc "TechsnabexporT" annual report 2011 Contents 1.6.2. Factors influencing the business strategy of INFORMATION ABOUT THE RePORT JSC "TECHSNABEXPORT" 26 AND ITS PREPARATION 4 1.6.3. Key instruments for achieving the strategic objectives of STATEMENT FROM JSC "TECHSNABEXPORT" JSC "TECHSNABEXPORT" 27 TOP MANAGEMENT 6 1.7. ANALYTICAL SUPPORT OF THE STATE ATOMIC ENERGY JSC "TECHSNABEXPORT" KEY CORPORATION ROSATOM PROJECTS 28 PERFORMANCE INDICATORS 7 1.7.1. Development of international cooperation 28 KeY EVENTS OF THE rEPORTING PERIOD 8 1.7.2. Improving legislation and formation of modern international legal framework of cooperation 29 1. General information 10 1.7.3. Participation in international nuclear industry organisations 31 " " 1.1. INFORMATION ON 2. jSC TechsnabexporT management system 32 JSC "TECHSNABEXPORT" 12 1.1.1. Information on charter capital 12 2.1. ORGANISATIONAL STRUCTURE 34 1.1.2. Information on shareholders 12 2.2. CORPORATE MANAGEMENT 36 1.1.3. Information on the auditor and registrar 12 2.2.1. Description of the corporate management system 36 1.1.4. Information on subsidiaries and affiliates as 2.2.2. Documents regulating the corporate management system 36 of 31 December 2011 13 2.2.3. Dividends 37 1.1.5. JSC "TECHSNABEXPORT" membership 2.2.4. Members of the Board of Directors 37 in professional organisations 2.2.5. Functions of the Board of Directors 40 and associations 13 2.2.6. Audit Commission members 40 1.1.6. Background 14 2.2.7. Functions of the Audit Commission and the Internal control and audit department 41 1.2. DESCRIPTION OF JSC "TECHSNAB- 2.2.8. Improving the corporate management system EXPORT" CORE BUSINESS 16 and plans for development 41 1.3. SOCIALLY IMPORTANt aSPECTS OF JSC "TECHSNABEXPORT" BUSINESS 18 3. results of activities in the reporting period 42 1.4. JSC "TECHSNABEXPORT" POSITION IN THE nUCLEAR INDUSTRY 20 3.1. CORE BUSINESS PERFORMANCE 44 1.5. JSC "TECHSNABEXPORT" POSITION IN 3.1.1. NFC products and services supplies 44 THE wORLD MARKET 21 3.1.2. Contraction and sales 44 1.5.1. Situation in the world nuclear energy 3.1.3. Fulfilling obligations under the HEU-LEU Agreement 48 industry 21 3.1.4. Implementation of engineering projects 49 1.5.2. Situation in the world market for NFC 3.2. FINANCIAL AND ECONOMIC PERFORMANCE 50 products and services 22 1.5.3. Specific features of competition in 3.2.1. Turnover 50 the global enrichment market 23 3.2.2. Income by core business activities 51 3.2.3. Expenses 52 1.6. STRATEGY 25 3.2.4. Key financial performance indicators 53 1.6.1. Business strategy of JSC "TECHSNAB- 3.2.5. Payments to capital providers 55 EXPORT" in the context of the State Atomic Energy Corporation ROSATOM strategy 25 ANNUAL REPORT 2011 2 WWW.TENEX.RU 4. performance management 56 6. stakeholder engagement 98 4.1. KeY PERFORMANCE INDICATORS SYSTEM 58 6.1. STAKEHOLDER ENGAGEMENT EVENTS 100 4.2. INNOVATION ACTIVITIES 59 6.2. STAKEHOLDERS' PROPOSALS 4.3. TRANSPORT AND LOGISTICS SUPPORT 60 ACCOUNTING 103 4.3.1. Developing the Company's own base of transport equipment 61 6.3. CONCLUSION ON THE PUBLIC 4.3.2. Diversification of shipping points 62 VERIFICATION OF THE RePORT 103 4.3.3. Licensing and customs support, internal export control programme 63 appendix 107 4.4. RISK MANAGEMENT 64 Appendix № 1. 4.4.1. Risk management organisation 65 Accounting Statements 108 4.4.2. Risk management system 65 Appendix № 2. 4.4.3. Risk classification, evaluation and management methods 66 Auditor's conclusion on the Accounting 4.4.4. Company's key risks, means of addressing them and risk Statements 113 management measures 68 Appendix № 3. 4.4.5. Correlation between risk management and insurance 71 Board of Directors Report on JSC "TECHSNAB- 4.4.6. Company's risk management system development plan for 2012 71 EXPORT" performance in 2011 114 4.5. QUALITY MANAGEMENT 72 Appendix № 4. Conclusion of the Audit Commission of 4.6. SUPPLY CHAIN SECURITY MANAGEMENT 74 JSC "TECHSNABEXPORT" 115 4.7. FINANCE MANAGEMENT 75 Appendix № 5. 4.8. INVESTMENT MANAGEMENT 77 Conclusion of the Internal control and audit department of JSC "TECHSNABEXPORT" 116 4.9. PROCUREMENT MANAGEMENT 78 Appendix № 6. 4.10. INTERNAL CONTROL AND AUDIT 79 Information on compliance with the Corporate 4.10.1. Preventing cases of corruption 79 Code of Conduct 117 Appendix № 7. 5. sustainable development activities 80 Table of remarks and recommendations suggested by the Company's stakeholders in the course of the Report preparation 122 5.1. ECONOMIC IMPACT 82 Appendix № 8. 5.2. ENVIRONMENTAL IMPACT AND ENVIRONMENTAL Table of disclosure of standard reporting SAFETY 83 elements, the State Atomic Energy Corporation 5.2.1. Environmental policy 83 ROSATOM public reporting indicators and GRI 5.2.2. Ensuring radiation security during transportation 85 performance indicators 124 5.2.3. Accounting and control over movement of nuclear materials 86 Appendix № 9. 5.2.4. Ensuring radiation safety of the personnel 86 Conclusion on the external audit 5.2.5. Labour protection 87 of non-financial information in the Report 131 5.2.6. Support of environmental programmes and projects 88 Appendix № 10. 5.2.7. Energy efficiency 89 Glossary, list of abbreviations 135 Appendix № 11. 5.3. SOCIAL POLICY AND HUMAn rESOURCES MANAGEMENT 90 Feedback Questionnaire 137 5.3.1. JSC "TECHSNABEXPORT" personnel description 90 5.3.2. Age and gender characteristics of employees 91 5.3.3. Remuneration of labour and non-financial incentive 92 5.3.4. Company's social policy 93 5.3.5. Human resources management 94 Annual Report is approved by the resolution of the sole shareholder 29.06.2012 WWW.TENEX.RU 3 ANNUAL REPORT 2011 information about the report and its preparation prepared in accordance with the current legislation, the State Atom- INFORMATION ABOUT PREVIOUS ic Energy Corporation ROSATOM Policy on public reporting, RePORTS Sustainability reporting Guidelines of the Global reporting Initiative (GRI, G3.1 edition), AA1000 Stakeholder Engagement Standards of In accordance with the Federal law "On joint the Institute of Social and Ethical Accountability, as well as the re- stock companies" of 26 December quirements of the JSC "TECHSNABEXPORT" public reporting 1995 № 208-FZ, which obliges open joint standard. stock companies to publish an annual report The Report has been published in Russian and in English. and annual financial reporting, the Open An interactive electronic version of the Report is published on Joint Stock Company "TECHSNABEXPORT" the Company's website for the sake of convenience. (hereafter – JSC "TECHSNABEXPORT" or the Company) introduced public reporting. Fifteen Reports have been published since INFORMATION DISCLOSURE IN THE RePORT 1996, the last four of which have been made available on the official website of the Com- In the course of preparation of this Report special attention has been pany (www.tenex.ru). paid to the disclosure of the information on "New challenges – new Since 2009 JSC "TECHSNABEXPORT", being solutions", a topic to which the management and stakeholders of one of the key organisations of the State Atomic the Company assigned the highest priority. It reflects the results of Energy Corporation ROSATOM, has been taking the Company's activities and plans following the Fukushima accident part in the pilot project aimed at establishing and the shift in the world nuclear energy industry with an emphasis on an industry-wide system of public reporting. a client-oriented approach and reliability of supply. The 2010 annual public Report of the Company Recommendations suggested by the Company's stakeholders in won the second place in the nomination "Best the course of the Report preparation have been taken into account integrated Report" at the III industrial competition (Appendix № 7). of public Reports, and the third place in the nomi- Financial reporting has been adjusted for RAS (Appendix № 1). nations "Best level of disclosure" and "Best quality The level of information disclosure in the Report corresponds to of public reporting system". It also received B+ Application level of the GRI G3.1 Guidelines. The list of indicators of a special prize "Breakthrough of the year" for the State Atomic Energy Corporation ROSATOM reporting, GRI a considerable improvement in the quality of standard disclosures and indicators disclosed in the Report is provided the Report compared with the year 2009. in Appendix № 8. The Company has been preparing IFRS reporting since 2003. Consolidated financial Reports include Reports on the holding company SCOPE OF THE RePORT and its subsidiaries, as well as the key perfor- mance indicators of its affiliates. IFRS reporting is The Report contains detailed information on the performance of prepared by 31 July of the year following JSC "TECHSNABEXPORT". The Report does not contain consolidated the reporting year and provided to the stake- financial indicators of the Company's Russian and foreign subsidiaries holders on request. and affiliates. In cases when certain aspects of subsidiaries and affiliates' performance were deemed crucial in terms of sustainable development, they were included into the present Report and DeSCRIPTION OF THE COMPANY'S 2011 specially marked (JSC "SPb "IZOTOP"1). PUBLIC ANNUAL REPORT The 2011 public annual report of the Com- pany (hereafter – the Report), prepared in 1 Joint Stock Company "St. Petersburg "IZOTOP" (JSC "SPb "IZOTOP") is an operating organisation the integrated format, covers both financial within the nuclear energy sector offering freight forwarding services to nuclear fuel cycle and non-financial aspects of the Company's enterprises and delivery of uranium and radioisotope products, appliances, equipment and protective equipment for handling radioactive materials. In order to make its operations possible, performance. The Report has been the Company owns railroad bases, specialised warehouses and vehicles.