Knowledge
manages

Power
operates

О компании

Atmosphere radio sounding system “Polyus”

Designed not only to acquire meteorological information about free atmosphere parameters, such as temperature, humidity, pressure, but also to measure special parameters, such as radiation, industrial gas emissions, aerosols, etc.

Знание
управляет

Сила
работает

О компании

Atmosphere radio sounding «system “Polyus”»

Designed not only to acquire meteorological information about free atmosphere parameters, such as temperature, humidity, pressure, but also to measure special parameters, such as radiation, industrial gas emissions, aerosols, etc.

7
Corporate governance

7.1 Principles of corporate governance

Since 100% of shares in KRET JSC are held by the sole shareholder, Rostec State Corporation, none of KRET JSC’s securities are listed on any stock exchange and so the recommendations of the Bank of Russia to apply the Code of Corporate Governance do not formally apply to KRET JSC.

However, KRET JSC complies with the main principles and recommendations of the Code of Corporate Governance (subject to the specifics arising out of the structure of the share capital) (see Exhibit 3).

Key regulations of the Concern:
  1. KRET JSC Articles of Association,
  2. Regulations on KRET JSC Board of Directors,
  3. Regulations on KRET JSC Revision Committee,
  4. Regulations on Rewards and Remunerations to Members of KRET JSC Board of Directors and Revision Committee,
  5. Regulations on KRET JSC Board of Directors’ Audit Committee,
  6. Regulations on KRET JSC Board of Directors’ HR and Compensation Committee,
  7. Regulations on KRET JSC Board of Directors’ Budget Committee,
  8. Regulations on KRET JSC Board of Directors’ Strategy Committee,
  9. Regulations on Dividend Policy of KRET JSC, Parent Holding Company of Integrated Structures.

7.2 Corporate governance system

The corporate governance in KRET JSC is effected by the governing and control bodies: sole shareholder, Board of Directors, General Director and Revision Committee.

The supreme management body of KRET JSC is its Sole Shareholder. The Board of Directors is in charge of strategic management of KRET JSC, determines new principles and approaches to organizing the risk management and internal control systems in the Concern, exercises control over operations of KRET JSC’s executive bodies. The General Director is the sole executive body and is responsible for managing dayto-day operations of KRET JSC.

7.3 Corporate governance bodies

KRET JSC executive body

KRET JSC General Director is elected for a period of three years. No collective executive body exists in KRET JSC.

General Director:

  1. directs day-to-day operations of KRET JSC within the authority of a sole executive body as provid
  2. ensures implementation of resolutions of KRET JSC General Shareholders Meeting and Board of Directors.

Since 19 February 2009, Nikolay Aleksandrovich Kolesov is KRET JSC General Director.

Rostec State Corporation –sole shareholder of KRET JSC Revision Committee Russian GAAP Auditor Board of Directors Strategy Committee Audit Committee General Director IFRS Auditor HR and Compensation Committee Budget Committee

For the purpose to assess the level of efficiency, identify advantages and disadvantages in operations of the Board of Directors and to determine the areas for improvement, a procedure of performance self-assessment was approved for KRET JSC Board of Directors.

Board of Directors

In 2015, Rostec State Corporation transited to a new system of corporate governance. The boards of directors of all Corporation’s holdings, including the Concern, are now formed on a new principle.

The Concern’s new Board of Directors will have a larger number of members who represent major businesses and the research society. According to the new rules, the maximum number of members of a board of directors shall be seven.

1

Alexey
Vladislavovich
Alyoshin

Date of birth24.05.1959.

Background Kemerovo State University (1981), Military Academy of the General Staff of the Armed Forces of the Russian Federation (2002).
LLM.

Professional
track record

1996–1999: Deputy General Director at Goszagransobstvennost GUP.

1999–2000: Deputy General Director at Promexport FGUP.

2000–2007: Deputy General Director at Rosoboronexport FGUP.

2007–2014: First Deputy General Director at Rostec State Corporation.

2014 until present: Head of the Federal Service for Environmental, Technological and Nuclear Oversight.

Since 14 May 2015: Chairman of KRET JSC Board of Directors.

2

Nikolay
Aleksandrovich
Kolesov

Date of birth:17.12.1956.

Background Kuybyshev Kazan Finance and Economics Institute (1987).
Doctor of Economics, Active Member of the Russian Academy of Natural Sciences, Honorable Academician of the International Academy of Quality and Marketing, Active Member of the Academy of Military Science.

Professional
track record

1975–1977: Radio Wireman at Kazan Computer Plant.

1977–1995: Controller, Deputy Head, Head of the Machine Assembly Shop, Head of Procurement Department, Kazan Optical and Mechanical Plant.

1995–1997: General Director of Sandi LLC.

1997: General Director of Dolomite LLC.

1997–2007: General Director of Elekon Plant JSC.

2007–2008: Governor of Amur Region.

2009 until present: General Director of KRET JSC.

Yury
Nikolaevich
Koptev

Date of birth13.03.1940.

Background Bauman Moscow Higher Technical School (1965).
Doctor of Engineering, Professor.

Professional
track record

1957–1960: service in Armed Forces of the USSR.

1964–1967: Technician and Engineer at Enterprise P.O. Box 577.

1967–1969: Engineer, Design Engineer and Head of Design Group, Enterprise P.O. Box 577

1969–1991: Senior Engineer, Chief Engineer, Head of Chief Administration, Deputy Minister of General Engineering of the USSR.

1991: Vice President of Rosobschemash Russian Corporation of General Engineering, 1992–2004: General Director of the Russian Space Agency, Russian Aviation and Space Agency.

2004–2008: Director of the Defense Industry Department, Russian Ministry of Industry and Energy.

2008–2009: Head of the Advisory Group, Russian Technologies State Corporation.

2009 until present: Chairman of the Board of Acad

Alla
Sergeevna
Laletina

Date of birth12.05.1976.

Background Moscow State Institute of International Relations (University), Russian Ministry of Foreign Affairs (1999). LLD, Professor, Associate Member of the Academy of Military Science. Authored 9 monographs and 56 research papers.

Professional
track record

1997–2001: Legal Advisor and General Counsel at AGROS.

2000–2004: Lecturer at the Chair of International Private and Civil Law, MGIMO.

2003–2005: Deputy General Director for Legal Matters at Tsentrprof2000.

2005–2007: Project Manager at the Hydrocarbon Directorate, SIBUR.

2007–2010: Director of the In-house Legal Department, SIBUR-Holding JSC.

2009–2013: Deputy General Director for Corporate and Legal Matters, Tobolsk Polymer (SIBUR-Holding JSC).

2013 until present: Chair of the Arbitration Court, Rostec State Corporation.

2013-2014: Head of the Corporate Legal Department, Rostec State Corporation.

2015 until present: Legal and Corporate Governance Director of Rostec State Corporation.

Anatoly
Eduardovich
Serdyukov

Date of birth08.01.1962.

Background Saint Petersburg State University, Saint Petersburg State University of Trade and Economics.

Professional
l track record

Industrial Director. Aviation Industry, Rostec State Corporation.

Chairman of KRET JSC Board of Directors’ Strategy Committee, Chairman of KRET JSC Board of Directors’ HR and Compensation Committee.

Sergei
Vladimirovich
Khokhlov

Date of birth17.09.1974.

Background Bauman MSTU (1998). North-western academy of civil service (2001) Class rank: 2nd Class Actual Counselor of State of the Russian Federation.

Professional
track record

2002–2004: Chief Specialist, Russian Agency for Conventional Weapons.

2004–2008: Chief Specialist, Deputy Head, Conventional Weapons Production Directorate, Advisor to the Head of the Federal Industry Agency.

2008–2011: Leading Advisor, Radio Electronics Department, Russian Ministry of Industry and Trade.

2011–2012: Assistant to the Administrative Group of First Deputy Chairman of the Military Industry Committee, Government of the Russian Federation.

2012–2013: Assistant to the Deputy Minister of the Russian Minister of Defense, Ministry of Defense of the Russian Federation.

2013 until present: Deputy Director, Director of the Radio Electronics Department, Russian Ministry of Industry and Trade.

2008–2011 Leading Advisor, Department of Electronic Industry, Ministry of Industry and Trade of the Russian Federation.

Yulia
Dmitrievna
Tsvetkova

Date of birth04.08.1986

Background Moscow State Institute of International Relations (University), Russian Ministry of Foreign Affairs (2008), Lomonosov Moscow State University, MBA “Economics and Management” (2010).

Professional
track record

2007–2009: Leading and Chief Specialist, Assistant to the President of Bank of Moscow (JSC).

2009–2012: Director for State and Municipal Programs, Bank of Moscow (JSC).

2012–2013: Advisor to Deputy General Director, Rostec State Corporation.

2013–2014: Deputy Head of Finance and Economic Department, Rostec State Corporation.

2014–2015: Deputy Head of Department of Financial and Economic Policy, Rostec State Corporation.

2015 until present: Head of Budgeting, Free Management Reporting and Social Programs, Rostec State Corporation.

Т20.Committees of KRET JSC Board of Directors

Committee Regulation Members Objectives and tasks
Strategy Committee Regulation on KRET JSC Board of Directors’ Strategy Committee Anatoly Eduardovich Serdyukov (Chairman), Alexander Sergeevich Bratkovsky, Yury Nikolaevich Koptev, Alexander Anatolievich Kuzhekin, Igor Georgievich Nasenkov, Sergei Vladimirovich Khokhlov. Assist to effective performance by the Board of Directors of its functions in the sphere of strategic management and control by previewing the matters relating to:
  1. top-priority lines of business for KRET JSC and Key Organizations, mid-term and longterm development strategy for KRET JSC and Key Organizations;
  2. business plans and programs of financial and business activities of KRET JSC and Key Organizations;
  3. investment activities of KRET JSC and Key Organizations of the Holding Company
Budget Committee Regulation on KRET JSC Board of Directors’ Budget Committee Kirill Valeryevich Fedorov (Chairman), Zoya Vladimirovna Kuzmich, Yulia Igorevna Derbeneva, Alla Viktorovna Odintsova, Igor Georgievich Nasenkov, Yury Anatolievich Sementsov. Preview matters relating to planning of financial and business operations of KRET JSC and Key Organizations and exercise control over such operations.
The key tasks are:
  1. financial, economic and budget management in KRET JSC and Key Organizations;
  2. budget, finance and lending policies of KRET JSC and Key Organizations;
  3. corporate resolutions having substantial effect of the financial position of KRET JSC and Key Organizations.
Audit Committee Regulation on KRET JSC Board of Directors’ Audit Committee Natalia Ivanovna Smirnova (Chairman), Alexander Georgievich Vetvitsky, Galina Viktorovna Kuzmina Preview matters related to control over financial and business operations of KRET JSC and Key Organizations.
The key tasks are:
  1. to exercise oversight over internal controls, audit and risk management;
  2. to ensure regulatory compliance and report any irregularities to the sole executive body;
  3. to exercise oversight over financial statements.
HR and Compensation
Committee
Regulation on KRET JSC Board of Directors’ HR and Compensation Committee Anatoly Eduardovich Serdyukov (Chairman), Vladimir Lvovich Zverev, Yury Nikoaevich Koptev, Igor Georgievich Nasenkov, Alexander Sergeevich Ruban, Kirill Valeryevich Fedorov. Facilitate effective performance by the Board of Directors of its functions by previewing the matters relating to:
  1. effectiveness of the Board of Directors and its committees, members of KRET JSC executive bodies, other key managers of KRET JSC the list of which is approved by resolution of the Board of Directors;
  2. formation of effective and transparent system of remuneration to members of the Board of Directors, members of executive bodies and other key managers of KRET JSC;
  3. HR policies of KRET JSC and Key Organizations of the Holding Company (Integrated Structure) (the Key Organizations), leveling up professional qualifications and improving the succession planning system for members of the management bodies, members of the executive bodies and other key managers of KRET JSC.

Т21.Most significant resolutions of KRET JSC Board of Directors in 2015

Date of meeting Resolution
17.02.2015 Establishment of KRET JSC Board of Directors’ Strategy Committee
24.03.2015 Approval of the list of KRET JSC Key Organizations.
01.04.2015 Approval of KRET JSC Corporate Code of Conduct.
01.04.2015 Approval of KRET JSC Anti-corruption Policy
01.04.2015 Pursuant to the Resolution of Rostec State Corporation’s Management Board, KRET JSC approved and adopted Rostec State Corporation’s Housing Program
14.04.2015 Approval of the new version of the Regulation on Litigation in KRET JSC.
04.09.2015 Approval of the Regulation on Remuneration and Financial Incentives to the General Director of KRET JSC
11.09.2015 Approval of KRET JSC Investment Program.
10.11.2015 Approval of adjusted consolidated budget of KRET JSC’s holding company and adjusted budget of KRET JSC for 2015.
04.12.2015 Establishment of KRET JSC Board of Directors’ Audit Committee.
23.12.2015 Approval of unplanned adjustment to KRET JSC investment program.
28.12.2015 Establishment of KRET JSC Board of Directors’ Budget Committee.

KRET JSC strives to meet the best international practices of corporate governance and maintain the gender balance in the Board of Directors. In terms of this indicator, KRET JSC meets the international level (73% of S&P500-ranked companies have two and more women in their boards of directors) and outstrip most of Russian companies (only 39% of Russian companies have in their boards at least one woman).

7.4 Revision committee

Members of KRET JSC Revision Committee:

  1. Galina Viktorovna Kuzmina,
  2. Viktor Aleksandrovich Nikonov,
  3. Denis Mikhaylovich Saraev.

Results of 2015

The Revision Committee audited financial and business activities of KRET JSC for 2015 using random check methods. The audit was conducted on the basis of accounting and tax records and registers and interviews with the management of KRET JSC, assessing the Concern’s accounting principles and methods, and assessing the rules for preparation of financial statements and annual report in KRET JSC.

The Revision Committee reviewed how information about the Concern’s financial and business operations is disclosed and reflected in its financial statements, assessed the Concern’s accounting principles and methods, and assessed the rules for preparation of financial statements and annual report in KRET JSC. On the basis of the results of audit of the financial and business activities of the Concern, the Revision Commission made its conclusion on reliability of the details contained in the annual financial statements of KRET JSC.

On the basis of the results of audit of the financial and business activities of the Concern, the Revision Commission made its conclusion on reliability of the details contained in the annual financial statements of KRET JSC.

The Concern took measures to remove all irregularities the Revision Commission identified during its 2014 audit:

  1. tightened control over accounting, all comments and defects relating to the accounting were timely removed during the revision audit;
  2. the transaction approval process was put in place as required by KRET JSC Articles of Association;
  3. stricter control over the budgetary discipline, each request for payment and each contract for approval specifies that it meets the budgetary limit;
  4. the Board of Directors developed and approved internal regulations governing the incentive payments (bonus regulations).

7.5 Key risks of the Concern

An important factor for achieving the Concern’s strategic goals is the risk management system.

KRET JSC’s risk management system implies a well-balanced approach to the decision-making process, whereas the potential risks are analyzed subject to the chosen controls.

Т23.Key risks of the Concern

Risk Like-
lihood
Potential implications Mitigation efforts Action plan in case of risk occurrence
1. External risks
1.1. Macroeconomic risk
1.1.1. Deterioration of the macroeconomic situation in the country and appropriate cutting of budgetary spending 50% 1) Budgetary costs cut, including for federal target programs, defense industry complex and state defense order.
2) Lowering sales of non-military products, including medical product sales which are substantially impacted by the level of budgetary financing to healthcare institutions
Expand the existing and explore new sales markets.
Expand involvement in import substitution programs
Promptly correct and optimize the investment program
1.2. Political risk
1.2.1. Increasing political tension and associated measures affecting the business activities (border closure, prohibition to export certain types of products, military actions in the country etc.) 30% Disruptions of supply of purchased component parts, growing need to create the reserve stock and, as a consequence, growth of working capital demand.
Lowering export sales of nonmilitary products
Expand the existing and explore new sales markets.
Attract new suppliers, optimize the structure of suppliers, implement import substitution programs
Develop new products and approach new sales markets
1.3. Social and economic risk
1.3.1. Erosion of consumer purchasing power 50% Lowering sales of non-military products Further diversify the product range Diversify the product range, cost cutting
1.4. Market risk
1.4.1. Tightening competition on the external markets 40% Lowering export sales Maintain the quality of the Concern’s products at a high level, develop after-sale services Explore new sales markets, diversify the product range
1.4.2. Tightening competition on the domestic market, emergence of new market players 20% Lowering product sales Maintain the quality of the Concern’s products at a high level, develop after-sale services Explore new sales markets, diversify the product range
2. Internal risks
2.1.1. Failure to attain the target production volumes as a result of heavy wear of the production equipment 20% Delay in performance of obligations under contracts with external suppliers. Continue the upgrade program.
Streamline the production cooperation within the Concern.
Timely renegotiate deadlines under contracts.
2.2. HR risks
2.2.1. Losing competences as a result of high average age of employees 40% Slowdown in performance of obligations under the state defense order, federal target programs and military technical cooperation as a result of lacking competences. Further expand cooperation with universities, deliver social (including housing) programs and take other actions to make the Concern an employer of choice. Further expand cooperation with universities, deliver social (including housing) programs and take other actions to make the Concern an employer of choice.
2.2.2 Losing talents as a result of non-competitive level of the compensation package, specifically due to lacking productivity of labor compared to the global industry leaders. 30% Slowdown in performance of obligations under the state defense order, federal target programs and military technical cooperation, fewer number of innovative products launched into the market
Loss of quality of offered products and services
Increase in the number of work accidents.
Proactively finance the upgrade efforts to introduce cutting-edge production technologies.
Streamline the investment program, production cooperation and management structure.
Proactively finance the upgrade efforts to introduce cutting-edge production technologies.
Streamline the investment program, production cooperation and management structure.
2.3. Financial risks
2.3.1. More expensive foreign financing, including for the purposes of the state defense order and federal target programs. 40% Failure to take a number of steps planned under the state defense order and federal target programs Streamline the intragroup cash flow management, including the management of free cash at bank as part of the efforts to establish the Treasury Timely renegotiate deadlines under contracts, look for alternative sources of financing.
2.3.2. Decrease in operating cash flows, including due to the pricing and payment processes under the state defense order. 70% Cash shortages, delay in performing the state defense order, military technical cooperation and federal target programs.
Slowdown in developing and marketing innovative products and production upgrade.
Streamline the intragroup cash flow management, including the management of free cash at bank as part of the efforts to establish the Treasury. Timely renegotiate deadlines under contracts, look for alternative sources of financing.
2.4 Environmental risks
2.4.1. Excess of normal values in terms of the allowable impact on the environment as a result of heavy wear of the infrastructure in a number of Concern’s companies. 50% Liability to pay fines and penalties as provided by the effective laws, administrative liability for general directors. Continue the upgrade in accordance with the planned schedule. In accordance with the effective laws.
2 184
million RUB in dividends paid in 2015

7.6 Dividend policy

As of 31 December 2015, KRET JSC’s charter share capital was RUB 1,505,935,000 representing 1,505,935 registered shares with the nominal value of RUB 1,000 each.

KRET JSC continues the share issue procedure. By resolution of the sole shareholder (Rostec State Corporation) the period of issue of ordinary registered book-entry shares was extended until 20 March 2017.

The function to account for the rights to shares was delegated to Status JSC, a leading keeper of securities registers.

As of 31 December 2015, KRET JSC additionally issued 186,145 ordinary registered book-entry shares. In 2016, KRET JSC plans to register its share issue report and increase its charter share capital.

Р63. Dividends paid by KRET JSC, million RUB

2013 2014 2015 2,500 2,000 0 1,000 500 1,500 966 1,624 2,184

The Concern approved the Regulation on KRET JSC Dividend Policy. The Regulation on Dividend Policy was developed in strict compliance with Federal Law 208-FZ of 26 December 1995 “On Joint Stock Companies”.

The dividends payable by the Concern’s companies are determined depending on the types of business, financial position and involvement in investment projects.

The Concern and its companies do not resolve to declare or pay dividends:

  1. if there are any circumstances contemplated by Federal Law 208-FZ of 26 December 1995 “On Joint Stock Companies” and Federal Law 14-FZ of 08 February 1998 “On Limited Liability Companies”;
  2. if there are duly executed resolutions of the competent governmental authorities to provide governmental anti-crisis support and/ or subsidies in order to prevent bankruptcy of the Concern or its companies;
  3. if the Concern or its companies are put in the financial rehabilitation procedure with the approval of the Corporation.

7.7 Internal controls

The objective of the Internal Control Department is to improve the performance of the Concern and its companies, including by way of finding the internal reserves.

Functions of the Internal Audit Department:

  1. constant liaison with the Concern’s companies on the issues arising in the course of the day-to-day financial and business operations;
  2. involvement in improving internal audit and control procedures for the Concern’s companies;
  3. random control over whether the financial and business transactions carried on by a Concern’s company meet the interests of such company and its shareholders;
  4. involvement in preliminary appraisal of any transactions not included in the budget of a Concern’s company;
  5. involvement in the work of bidding committees to select audit firms to conduct annual audit of the financial statements of a Concern’s company;
  6. liaison with the external auditors of the Concern’s companies to improve the quality of audit services.

Р64.Scheme of cooperation between KRET JSC and Concern’s companies

KRET JSC Audit and InternalControl Department Concern’s companies Internal regulationsand recommendations Compliancereport Compliancecontrol
74
internal audits of financial and business activities of the Concern’s companies held in 2014

The Department’s employees exercise constant control over timely and full removal by the Concern’s companies of any irregularities identified by inspections held by regulatory or supervisory authorities, as well as audits conducted by the Department.

Results of 2015

In order to complete the ongoing tasks, the Internal Audit Department’s employees held six comprehensive audits of the Concern’s financial and business activities for the three recent reporting years, as well as 74 internal audits of financial and business activities of the Concern’s companies for 2014. In the course of such audits, the Department:

  1. inspected the reliability, fullness, objectivity and timely presentation of the Russian GAAP financial statements by the Concern’s companies, compliance with the reporting procedures and effective laws;
  2. analyzed the findings of audits in the Concern’s companies;
  3. exercised control over compliance of the financial and business transactions made by the Concern’s companies with the interests of their shareholders;
  4. exercised control over the financial discipline and implementation of resolutions of the management bodies and officers in the Concern’s companies;
  5. assessed the efficiency of internal audit and corporate governance in the Concern’s companies;
  6. identified and assessed the key risks inherent to the financial and business operations of the Concern’s companies.

The Department audited the integrity of the assets on a test basis and analyzed the effectiveness of their use in five companies, and, additionally, in six companies as part of the comprehensive audits.

Further to the conducted audits, the Department’s employees developed recommendations to remove all irregularities and mitigate all identified risks, and the Concern’s companies developed the compliance plans.

7.9 Anti-corruption policy

The Concern developed and approved KRET JSC Anti-corruption Policy and the Concern’s Code of Conduct.

The Concern’s Anti-corruption Policy is a fundamental document in the area of countering corruption and contains a complex of interrelated principles and procedures contemplated by Article 13.3 of Federal Law 273-FZ of 25 December 2008 “On Countering Corruption”, as well as specific steps provided by the Guidelines of the Russian Ministry of Labor and Social Protection.

In 2015, these documents, as well as the Concern’s Anti-corruption Plan and the Procedure for Notification by an Employee of Facts of Inducement of Concern’s Employees to Corruption”, were enacted and made known to all Concern’s employees.

The officer responsible for prevention of corruption and other offences is KRET JSC Deputy General Director for Security.

identify and remove the causes of corruption (corruption prevention); identify, prevent and suppress corruption and other offences;

The Concern’s Anti-corruption Policy was developed on the basis of:

  1. Constitution of the Russian Federation of 12 December 1993;
  2. international legal standards (UN Convention against Corruption adopted by Resolution 58/4 of the UN General Assembly of 31 October 2003, Criminal Law Convention on Corruption (ETS No. 173) of 27 October 2003, ratified by the Russian Federation on 14 July 2006 etc.);
  3. Federal Law 273-FZ of 25 December 2008 “On Countering Corruption”;
  4. 2014-2015 National Anti-corruption Plan approved by Decree 266 of the Russian President of 11 April 2014;
  5. Guidelines for Development and Adoption by Companies of Corruption Prevention and Counteraction Measures, developed by the Russian Ministry of Labor and Social Protection of 08 November 2013 (as amended on 16 April 2014);
  6. other corruption prevention and counteraction regulations;
  7. KRET JSC Articles of Association and internal regulations.
No incidents of corruption were identified in the Concern’s companies in 2015.

The objective of the Anti-corruption Policy is to create a uniform approach to developing and taking measures to prevent and counter corruption practices:

  1. identify and remove the causes of corruption (corruption prevention); identify, prevent and suppress corruption and other offences;
  2. minimize and/or liquidate consequences of corruption and other offences, including those contemplated by Article 19.28 of the Russian Code of Administrative Offences.

Tasks of the Anti-corruption Policy:

  1. implement Article 13.3 of Federal Law 273-FZ of 25 December 2008 “On Countering Corruption”;
  2. create an effective legal mechanism to prevent and counter corruption practices;
  3. improve the regulatory anti-corruption framework and liaise with the governmental authorities in charge of the corruption prevention;
  4. prevent corruption and other offences; impose liability for corruption and other offences;
  5. make all of the shareholders, contractors, members of the governing and control bodies and employees aware of the Concern’s position on zero tolerance to corruption in any its forms and manifestations;
  6. minimize the risk of Concern’s involvement in corruption practices;
  7. build anti-corruption corporate awareness.

Anti-corruption principles:

  1. the Anti-corruption Policy must be in accordance with the effective laws and generally accepted standards;
  2. the management shall show a personal example to form the culture of corruption zero tolerance and to create the in-house system to prevent and counter corruption;
  3. involvement of employees: the employees must be aware of the anti-corruption laws and be actively involved in generating and implementing anti-corruption standards and procedures;
  4. the anti-corruption procedures must be adequate to leverage the corruption risk subject to the corruption risks existing in the area of Concern’s business;
  5. the anti-corruption procedures must be effective: take anti-corruption efforts which are easy to realize in practice and yield significant outcome;
  6. liability and inevitability of punishment for all employees regardless of the office they may hold, length of service and other circumstances, in the event that they commit a corruption offence in the course of performance of their job duties;
  7. transparency of doing business: all of the contractors, partners and community must be made aware of the anti-corruption standards of doing business the Concern has adopted;
  8. constant control and regular monitoring over the effectiveness of the enacted anti-corruption standards and practices, as well as compliance control.

Corruption prevention and counteraction measures:

  1. appoint business units (officers) responsible for prevention of corruption and other offences;
  2. cooperate with the law enforcement authorities in the area of corruption counteraction;
  3. develop and reduce to practice new standards and procedures towards compliance with the good faith principle;
  4. enact the corporate code of conduct;
  5. prevent and resolve any conflict of interest;
  6. avoid any off-the-books records and any forged documents.

The Anti-corruption Policy applies to all Concern’s employees regardless of the office they may hold and the functions they may perform, as well as to all contractors by virtue of mutual obligations between such contractors and the Concern.

Т23.Concern’s anti-corruption efforts

Area Effort
Regulatory framework, code of conduct and memorandum of intent Develop and enact the Concern’s Corporate Code of Conduct
Develop and implement the Concern’s Anti-corruption Plan
Developing and implementing special anti-corruption procedures Set up the procedure of notification by employees of the business unit (officer) responsible for prevention and countering corruption, of any events of inducement to corruption offences and procedure for review of such communications, specifically, create easily available communication channels (feedback mechanisms, hot line etc.)
Set up the procedure of notification of the business unit (officer) responsible for prevention and countering corruption, of any corruption offence committed by other employees, contractors or other persons, of which an employee has become aware, and procedure for review of such communications, specifically, create easily available communication channels (feedback mechanisms, hot line etc.)
Set up the procedure of notification by employees of the business unit (officer) responsible for prevention and countering corruption, of any conflict of interest and procedure to resolve any such identified conflict of interest.
From time to time assess corruption risks for the purpose to identify the areas of company’s business that are most vulnerable to such risks, and develop the appropriate anti-corruption measures
Training and raising awareness of employees Make employees aware, against their signature, with the anti-corruption regulations
Provide individual advice to employees on application of or compliance with the anti-corruption standards and procedures
Aligning the internal control and audit system with the anti-corruption policy Exercise regular control over compliance with the internal procedures
Exercise regular control over the accounting records, availability and reliability of primary accounting documents
Engaging experts Conduct the external audit
Assessing the results of the anti-corruption efforts and reporting Regular assessment of anti-corruption efforts
Prepare and distribute anti-corruption reports on the work progress and results