The Report was prepared taking into account the following regulatory documents:
- Federal Law 208-FZ “On Joint Stock Companies” of 26 December 1995;
- Federal Law 408-FZ “On Accounting” of 6 December 2012;
- Regulation of the Central Bank of Russia 454-P of 30 December 2014 “On Information Disclosure by Securities Issuers;
- Corporate Governance Code (recommended by Central Bank of Russia’s Letter 06-52/2463 of 10 April 2014);
- G4 Sustainability Reporting Guidelines (Global Reporting Initiative).
 The performance for 2015 and the targets for 2016 correspond to the scope of the 2014 Annual Report and are represented on the basis of the list of companies included into the Concern in 2013-2014, with the exception of the following organizations: Snezhet Plant JSC, Atlant Plant PJSC, Karachev Plant Elektrodetal JSC, Ulyanovsk Center for Microelectronics and Automatics JSC, Avionics and Communication Systems JSC, Tarasov Aviaavtomatika JSC, Sadko Television Plant JSC (TZ Sadko JSC), Kazan Research Institute of Computer Science and Technology JSC (KNITI VT JSC), Special Design Bureau of Timing Mechanisms OJSC (SKB ChM OJSC), Special Design Bureau of the Cable Industry OJSC (OKB KP OJSC), Aircraft Engineering Concern OJSC (Concern Aviapriborostroenie OJSC), Almaz-Phazotron Scientific and Production Center JSC.
About this Report
The purpose of this report is comprehensive disclosure of information on the results related to science and technology, production processes, finance and economics, as well as to human resources management, social policy, corporate governance and other major aspects of the Concern’s activities.
Concern Radio-Electronic Technologies (KRET) JSC has published its Annual Reports since 2009. This is the 7th Annual Report (hereinafter, “the Report”) of KRET JSC. The Report covers the activities of KRET JSC (hereinafter, “the Parent Company”) and its companies (hereinafter, “the Concern”) from 01 January 2015 to 31 December 2015.
The key operation results of the Concern are represented over a period of three years. The approved targets for the reporting period and for 2016 are also indicated where available.
The scope of this Report corresponds to the scope of management accounting and includes the data on the Concern’s four Divisions (See Concern’s Divisions”), KRET JSC (the Managing Company) and Radiopriborsnab JSC (the supplier of electronic component base). 
In addition to the actuals, the Report includes a description of future events that are probabilistic in nature, and an assessment of such events. Any assertions contained in this Report other than those stating plain facts, should be regarded as forecasts. Such assertions will be relevant only on the date of publication. The Concern (unless otherwise expressly required by the applicable legislation) does not assume any responsibility to review or update the said assertions, or take into account any new information. Actual performance may not match the targets.
The Concern would like to thank all the members of the team who have contributed to this Report. The Report is intended for industry experts, representatives of shareholders and other interested parties.
The Work Group for the preparation of this Report will be looking forward to your feedback, suggestions and ideas on the issues to be included in our next Annual Report. If you have any questions on the 2015 Annual Report, please contact Alexander Bratkovsky, Strategic Planning, Development Programs and Innovation Department (firstname.lastname@example.org).
Letter from the Chairman of the Board of Directors
Today, Concern Radio-Electronic Technologies JSC is one of the world’s leading companies, Russia’s key developer and manufacturer of avionics, electronic warfare equipment, systems and complexes, identification friend or foe equipment and systems, and measuring instruments. The Concern is one of the foremost holding companies within Rostec State Corporation, a major contributor to the implementation of the advanced technologies development strategy and to the achievement of Russia’s goal of taking a leadership role in the global economy.
The Concern’s companies supply 65% of all electronic warfare systems for the Armed Forces of the Russian Federation and have a 93% share of the domestic market of identification friend or foe systems. The Concern supplies 56% of avionics for Russia’s military aviation and 25% of avionics for civil aviation.
The Concern’s companies supply high-technology products under the state armaments program and the state defense order, as well as under international contracts in the sphere of military technical cooperation signed with more than 20 countries across the world.
In 2015 the Concern fully and in due time fulfilled the state defense order. Most advanced military equipment was delivered to the Russian Armed Forces. The key procurement items include “Moskva-1” reconnaissance and control systems for electronic warfare units, “Krasukha-2” and “Krasukha-4” mobile electronic warfare systems, “Richag-AV” helicopter-mounted electronic warfare systems for collective protection and multi-purpose “Rtut-BM” jamming stations. The total value of the contracts executed under the state defense order stood at RUB 89.7 billion.
During the reporting year, the Concern continued to increase its presence in terms of military technical cooperation in the Asia-Pacific Region, the Middle East and North Africa. It held consultations with experts from Latin America. The total amount of exports was RUB 30 billion, a fact that suggests that the Concern’s products are highly competitive and are in great demand on the international market.
The Stockholm International Peace Research Institute (SIPRI) once again confirmed that the Concern had indeed grown very fast. In the final rating published by SIPRI in December 2015, the Concern moved up 9 points to number 45 among the world’s manufacturers of military equipment and dual-use technology. In addition, the Concern landed at number 93 in the “RBC 500: All Business in Russia” rating among Russia’s Top 500 companies.
The Board of Directors of KRET JSC is convinced that in 2016 the Concern will not only maintain its leadership, but will also achieve new impressive results in R&D and serial production of avionics, electronic warfare and jamming systems, identification friend or foe systems and non-military products.Alexey Alyoshin
Letter of KRET General Director
The Concern’s main strategic goal is to achieve a competitive level in avionics systems and complexes, electronic warfare and surveillance complexes and systems, identification friend or foe systems and equipment as compared to their foreign counterparts. Our objective is to ensure 20% revenue growth and increase the share of non-military products in our overall production to 50% by 2025. In 2015 the Concern proceeded on its regular development path aimed at achieving the said goals.
We closed the year 2015 with strong financial results, which suggests that we had chosen the right strategic development objectives. The Concern’s consolidated revenues increased to RUB 119.0 billion as compared to RUB 105.4 billion in 2014, which exceeds the target by RUB 7 billion. The Concern’s consolidated net profit increased to RUB 10.1 billion.
The implementation of an ambitious program for the technical re-equipment and reconstruction of enterprises alongside with the process optimization resulted in a significant increase in labor productivity at the Concern’s enterprises (25.5% increase vs 2014). Average salary in the Concern’s companies went up to RUB 37,700 which is 11.2% higher than the Russian average, thus making the Concern a more attractive employer.
The Concern has largely contributed to human resources development and has sought to help our employees unlock their potential. We have made every effort to train, retrain and attract young professionals. On behalf of the Concern, 52 educational programs are currently being implemented in 26 anchor universities. These programs enabled more than 6,000 of our employees to improve their qualifications in 2015.
The improved financial performance in 2015 made it possible for the Concern to enhance its investment in advanced development and to step up its efforts on the substitution of imported goods and components base.
Each year the Concern has increased its investment in research and development. In 2015 the Concern allocated 12.7 % of its revenue to R&D budget which put the Concern ahead of many other global avionics leaders in terms of R&D spending.
As to import substitution, the Concern and its companies have made major efforts in this respect, so even at this point it is safe to say that by mid-second quarter of 2016 the Concern’s companies will be totally independent of the products of the Ukrainian military industrial complex, and in 2017 we will successfully substitute the products from the NATO and EU countries.
One of the 2015 highlights was the completion of the development of a new highly-advanced helicopter-mounted electronic warfare system for collective protection that is unrivalled by anything the world has seen before. The Armed Forces will start to field the new systems as early as in 2018. In addition, the Concern has been simultaneously developing several new aircraft-, land- and ship-based electronic warfare systems.
In the reporting period, the Concern completed its R&D effort on the integrated avionics system based on modular avionics (IKBO IMA). If the R&D results are successfully implemented, the Concern will significantly increase its share in the Russian avionics market.
We have actively explored the export opportunities for the distribution of military goods and are planning to intensify the development of the non-military leg where we not only adjust the military solutions, but also carry out separate R&D projects in a whole number of areas, such civil aircraft equipment, transport, power industry and the production of medical equipment.
Today, the Concern faces very serious challenges related both to engineering capabilities and to organizational and even industry and technology issues. In particular, a major diversification of our products is in store for us, with a view to increase our share in the non-military goods markets.
I have no doubt that a solid foundation that we have managed to build in the recent years – in terms of technology, finance and personnel – will enable the Concern to achieve its objectives.Nikolay Kolesov
Revenue, million RUB
Gross tax payments, million RUB
EBITDA, million RUB.
Net profit, million RUB
Number of employees, persons
Labor productivity, thousand RUB
2015 in Review
- V.I. Shimko Radioelectronics Scientific and Production Association JSC started the production of small-size airborne identification friend or foe equipment to be installed on unmanned aerial vehicles.
- A joint decision was signed between Irkut Corporation PJSC and KRET JSC stipulating the use of R&D results on the integrated avionics system based on modular avionics and the transfer of part of the manufactured pilot items to Irkut Corporation PJSC for adjustment, integration, tests and certification (qualification) as part of the MS-21 aircraft test systems.
- The Concern took part in the polar expedition as part of the Arctica 2015 Project to commemorate the 70th anniversary of Victory in the Great Patriotic War.
- In line with the decision of the Military-Industrial Commission of the Russian Federation (Protocol 2 of 17 April 2015) approved by President Vladimir Putin, KRET Deputy General Director Yuri Maevsky was appointed General Designer for EW systems. A total of around 20 General Designers will be appointed in Russia to facilitate the development of new highly technical types of weapons, military and special equipment that are strategically important in terms of ensuring national defense and state security.
- At the meeting on the development of military industrial complex, KRET General Director Nikolay Kolesov reported to the President of Russia on the progress on state defense order in terms of substitution of imports, as well as on key innovation technologies and the Concern’s growth prospects.
- The Concern took part in the HeliRussia-2015 exhibition where it presented the most recent domestic technologies in helicopter-mounted airborne equipment
- The Concern participated in the Army- 2015 International Military-Technical Forum where it received an honorary diploma in the nomination “Electronic Warfare and Intelligence Systems”.
- Deputy Defense Minister of Russia Yury Borisov attended the opening ceremony at a new plant of Research and Production Association KVANT JSC (NPO KVANT JSC) for the production of class 5 and 6 printed-circuit boards
- The Concern took part in the 12th International Aviation and Space Salon MAKS-2015 where its “Richag-AV” helicopter-mounted EW system received awards in two nominations of the Golden Wings MAKS-2015 Contest: Innovation and Presentation Integrity and MAKS-2015 Premiere. Product.
- The qualification of airborne equipment system for the Ka-226T helicopter was completed. The contracting authority (the Federal Protective Service) received three Salon Ka-226T helicopters equipped with KBO-226TS airborne avionics system.
- The additional ground testing and flight qualification testing were completed for the Be-200ChS amphibious aircraft equipped with modernized versions of flight control and navigation equipment.
- electronics: New challenges and perspectives” Industry Science and Technology Conference in Kazan.
- V.I. Shimko Radioelectronics Scientific and Production Association JSC completed the justification of the specifications for an advanced identification friend or foe system.
- The flight control tests were completed for the first ‘polar-optimized’ helicopter Mi-8AMTSh-VA. The first aircraft was delivered to the contracting authority – the Russian Ministry of Defense.
- The first prototype of the retrofittable airborne equipment system for the Mi-28NM helicopter was manufactured and tested in flight.
- The certification of the equipment of the Mi-38 transport multi-purpose helicopter was completed (BSK-38 airborne control system, IKVSP-38 altitude and airspeed information system, integrated system of back-up devices ISRP-4-1, SAS-4-M warning indication system and lighting equipment).
- The state tests of the “Porubshchik” EW aircraft system were successfully completed.
- The state tests were successfully completed for the “Charodeika” ship-based system that has no alternatives of a foreign make in terms of technical characteristics. The system will be installed on the frigates of the Russian Navy.
- The Concern took part in the Dubai Airshow-2015 in the United Arab Emirates.
- Basing on the results of the Russian aerospace forces’ military operation in the conflict in Syria which involved the use of Su-24, Su-25, Su-30, Su-34 and Su-35 aircraft equipped with avionics developed by KRET JSC, Deputy Prime Minister Dmitry Rogozin and Commander-in-Chief of the Russian Aerospace Forces Viktor Bondarev made special reference of the Concern’s companies, noting the effectiveness and reliability of their weapon systems.