RELIABILITY SUSTAINABILITY SAFETY

Transcription

1 RELIABILITY SUSTAINABILITY SAFETY ANNUAL REPORT TENEX 2014

2 TENEX Annual Report 2014 Approved by the resolution of the Sole Shareholder Preliminary approved by the resolution of the Board of Directors General Director L. M. Zalimskaya

3 2 TENEX Annual Report Stakeholder Public Assurance* G4-33 Batov, D. I. Baumstein, S. V. Devos, Ludovic Efremov, G. V. Vice President for International Cooperation of JSC Uranium One Group Acting Deputy Director General for Economics and Finance of SC Ural Electrochemical Integrated Plant Regional Vice President of AREVA, Russia, Ukraine & CIS Commercial Director of JSC International Uranium Enrichment Centre Kurbatova, T. G. Linyaev, O. I. Mamiy, E. A. Muraviov, D. E. Chief Specialist of International Business Department, the State Atomic Energy Corporation Rosatom Head of the Unit of the NFC Lifecycle Projects Department, the State Atomic Energy Corporation Rosatom Advisor to Communications Department, the State Atomic Energy Corporation Rosatom Managing Director of TENEX-Korea Со. Ltd. Emelianova, Yu. V. Emets, P. E. Fokina, T. A. Deputy Director General of Nexia Pacioli LLC Senior Advisor of the Department for Coordination, Development and Regulation of External Economic Activity of the Ministry of Economic Development of Russia Project Director, the State Atomic Energy Corporation Rosatom Plyamina, O. V. Ryzhenko, N. S. Samoshin, Yu. V. Executive Director of Interregional Ecological Non-government Organisation GREENLIFE Director of TRADEWILL LIMITED Deputy Head of International Business Department, Chief of International Operations Planning and Coordination Department, the State Atomic Energy Corporation Rosatom Irgang, Michael Karasyov, A. V. Khlopkov, A. V. Kislov, A. I. Director of Business Development, Russia, CIFAL Director of the International Cooperation Department, JSC Rusatom Overseas Director of the Centre for Energy and Security Studies, Editor-in-Chief of Nuclear Club Journal Senior Expert of the Department for Safety Regulation of Nuclear Fuel Cycle Facilities, Nuclear Power Installations of Vessels and Radiation Hazardous Facilities, the Federal Environmental, Industrial and Nuclear Supervision Service Shishkin, A. P. Sinyov, A. N. Starodumov, V. V. Director of JSC SPb IZOTOP Director of Moscow Representative Office, NAC International Inc. Head of Unit for Commercial and External Economic Activity, Deputy Head of Public Reporting Committee of JSC Siberian Chemical Combine Titov, V. P. Central Europe Vice President of Rusatom International Network Tulupov, K. V. Director for Strategic Development of JSC Uranium One Group Kondratenkov, M. Yu. Chief Advisor of the Nonproliferation and Arms Control Department, the Ministry for Foreign Affairs of Russia Usoltcev, A. V. Director of the International Cooperation Department, the State Atomic Energy Corporation Rosatom Koryakin, K. I. Krukov, A. N. Kuchinov, V. P. Expert of the NFC Lifecycle Projects Department, the State Atomic Energy Corporation Rosatom Manager of the NFC Lifecycle Projects Department, the State Atomic Energy Corporation Rosatom General Director s Advisor, the State Atomic Energy Corporation Rosatom Vandyshev, V. I. Yanko, L.T. Zakharov, S. A. Zulkharneev, A. F. Acting Director General of SC Angarsk Electrolysis Chemical Complex Director of the Market Development Department of JSC TVEL Deputy Head of Department, Federal Service for Technical and Export Control of Russia Director of PIR Center * Public Assurance Statement is provided in Appendix No. 4.

4 4 TENEX Annual Report 2014 Table of Contents 5 Table of Contents Key Performance Indicators of TENEX (the Company) in Highlights of the Reporting Period 7 Address from the Chairman of the Board 8 Address from the General Director 10 Address from the Chairman of the Public Reporting Committee 11 I. General Information II. Strategy 1.1. Mission and Basic Principles of Business Core Businesses Structure Corporate Governance and Control System General Shareholders Meeting Board of Directors General Director Top Management Audit Commission Information about the Company Historical Background The Company in the Global Uranium Market Market Situation and Competitive Environment Position of the Company The Company in the Nuclear Industry Strategic and Mid-term Planning Factors Influencing Formation of Business Strategy Key Tools of Achievement of Strategic Goals 37 III. Outcomes of the Core Business 3.1. Contracting and Sales Transportation and Logistics Diversification of Shipping Points Building an Own Equipment Fleet Internal Programme of Export Control, Licensing and Customs Support Financial and Economic Results Main Financial Indicators Key Financial Standing Indicators Dividends Payments to Budgetary and Extra-budgetary Funds Investments 52 IV. Performance Management 4.1. Key Performance Indicators Risk-management and Development of Compliance System Finance Management Cost Management Procurement Management Management Systems Quality Management Environmental Management Supply Chain Security Management Human Resources Management Description of Personnel Remuneration Recruitment, Training and Advancement of Personnel Internal Control and Audit Nuclear Material Control and Accounting Economic Security and Anticorruption 79 V. Environmental Impact 5.1. Environmental Policy Radiation Safety of Shipments Use of Energy Resources and Water 86 VI. Social Policy 6.1. Labour Protection Social Programmes Development of Corporate Culture Charity Development of Communications 96 VII. Appendices Appendix No. 1. Information about the Report and its Preparation Information on Previous Reports Description of the Report The Report Preparation and Engagement of Stakeholders The Report Boundaries and Information Disclosure Disclaimer Validation of the Reported Information and Conformity to Standards 104 Appendix No. 2. Accounting Table of Stakeholder Recommendations and Requests, Received during the Report Drafting Process 105 Appendix No. 3. Table of Elements and Indicators of Public Reporting Disclosures 109 Appendix No. 4. Public Assurance Statement on the Report 116 Appendix No. 5. Statement on Results of Independent Assurance of Public Annual Report of TENEX for Appendix No. 6. Membership in Professional Organisations and Associations 125 Appendix No. 7. Response to Key Strategic and Financial Risks 127 Appendix No. 8. Accounting (Financial) Statements 129 Appendix No. 9. Auditors Conclusion on the Accounting (Financial) Statements 141 Appendix No. 10. Issues Reviewed by the Board of Directors in Appendix No. 11. Conclusion of the Internal Control and Audit Service on results of the internal audit of the public reporting preparation process 144 Appendix No. 12. Glossary, List of Abbreviations 145

5 6 TENEX Annual Report 2014 Highlights of the Reporting Period 7 Key Performance Indicators of TENEX (the Company) in 2014 Highlights of the Reporting Period G4-9 Uranium product export, US $ billion ~ 2.2 Long-term export contract portfolio, US $ billion in comparable prices ~ 23.0 Increment in long-term export contracts portfolio against 2011, % 117 Proceeds, RUR mln 93, transactions for uranium products deliveries totalling US $0.8 billion were concluded. 51 deliveries of uranium products to customers in 17 countries were completed. According to the results of the year, the total long-term order portfolio was approximately US $23 billion in the comparable prices. 1 G4-9 Earnings before interest, taxes, depreciation, and amortisation (EBITDA), RUR mln 31,733 Net profit, RUR mln 11,947 Number of customer-companies for delivered uranium products 37 Number of country-recipients of the products 17 Share of world NPP operators supported by the Company s deliveries, % 44 Share of NPPs with reactors of western design supported by the Company s deliveries, % 50 Number of deliveries 51 Violations of contractual terms 0 Number of employees (average, persons) 326 Free (targeted) charity funding of programmes and projects, RUR billion ~ 1.8 Personnel engagement rate, % 93 MARCH All payments were settled under the contracts concluded in pursuance of the Agreement between the Government of the Russian Federation and the Government of the United States of America Concerning the Disposition of Highly-Enriched Uranium Extracted from Nuclear Weapons of (HEU Agreement). A delegation of TENEX led by the General Director took part in the III Nuclear Industry Summit. APRIL Four long-term contracts with a large U.S. utility were concluded. A delegation of TENEX led by the General Director took part in the annual conference of the Japan Atomic Industry Forum (JAIF). Nordea Bank AB opened TENEX a credit line with a limit of US $264 million for three years. JUNE In New York, on the side-lines of the World Nuclear Fuel Market conference, the Material Account Agreement was signed with the South Korean KEPCO Nuclear Fuel (KEPCO NF). A delegation of TENEX led by the General Director took part in the VI International Forum ATOMEXPO JULY The statement was signed regarding the completion of the main equipment warranty operation of the 4th stage of the gas centrifuge plant (GCP) for uranium enrichment with a production capacity of 500,000 SWU/year. The TENEX s commitment under the contract 2 with the China Nuclear Energy Industry Corporation for technical assistance in construction of the 4th stage of the GCP in China was accomplished in full. The Material Account Agreement was concluded with ConverDyn, one of the world s largest suppliers of natural uranium conversion services. SEPTEMBER A delegation of TENEX led by General Director took part in the 39th Symposium of the World Nuclear Association (WNA). General Director of TENEX L. M. Zalimskaya was elected to the Board of Management of the WNA. OCTOBER A delegation of TENEX led by General Director took part in the first World Nuclear Exhibition in Le Bourget, France. On the side-lines of the exhibition in Le Bourget, a Memorandum of Understanding on deepening cooperation in the field of logistics was signed with the French holding company DAHER. NOVEMBER The trial of the new route for shipping uranium product to APR countries was completed: the fifth over the last two years shipment of enriched uranium from Vostochny Seaport in Maritime Territory of Russia to the South Korea was completed. In the framework of participation in ROSATOM s strategic project on the promotion of services of the nuclear fuel cycle (NFC) back-end in the market, the Company held a two-day Russian-Japanese science and technology seminar, where Russia s leading specialists presented the delegation of the Japan Atomic Energy Agency (JAEA) with detailed information regarding the current state and development perspectives of the Russian NFC. DECEMBER Nine contracts with utilities from APR countries were signed. Following the results of the regular certification audit of the TENEX integrated management system, carried out by Intercertifica-TÜV jointly with TÜV THÜRINGEN e.v. (Germany), the system conformance to the requirements of the international standards DIN EN ISO 9001:2008 and DIN EN ISO 14001:2009 was confirmed. 1 In the prices of 2011, the year that preceded three-year period The contract was concluded in furtherance of the Supplementary Protocol of to the Russian-Chinese Intergovernmental Agreement on Cooperation in Construction of GCP for Enrichment of Uranium for Nuclear Power in the Territory of the PRC of

6 8 TENEX Annual Report 2014 Address from the Chairman of the Board of Directors 9 Address from the Chairman of the Board of Directors G4-1 The Public Annual Report of TENEX for 2014, prepared in accordance with the new version of the Global Reporting Initiative (GRI, version G4), is addressed to a broad circle of stakeholders and contains detailed information about the Company s performance in 2014 in a context of the activity s material aspects. The sustainability of the business and the Company s standing in the global market, financial and economic results are among the aspects that the Company s stakeholders recognise as material ones. There is a reason behind that: for decades, TENEX has brought up to half of the total currency earnings from foreign operations to ROSATOM. This reporting year was no exception. In a rather uneasy political and economic situation, the Company managed not only to exceed the 2013 indicators in terms of commercial export and proceeds in the global market, but also signed more than twenty new deals for the supply of uranium products. The total amount of the long-term order portfolio was about US $23 billion in comparable prices based on the results of the year. In 2014, TENEX successfully completed payments under contracts concluded in pursuance of the Agreement between the Government of the Russian Federation and the Government of the United States of America Concerning the Disposition of Highly-Enriched Uranium Extracted from Nuclear Weapons of The total currency proceeds from the implementation of this unprecedented project, in terms of scale, complexity and duration, were over US $13 billion. TENEX fulfilled in full scope its obligations under the contract with the China Nuclear Energy Industry Corporation (CNEIC) on the technical assistance in construction of the 4th stage of the gas centrifuge plant (GCP) for uranium enrichment of 500,000 SWU/year capacity in China: on , the statement of completion of the warranty operation period of the GCP essential equipment was signed. Development of the transport and logistics infrastructure is one of the material aspects of TENEX s activity. In 2014, the pilot trying out the shortest transportation route for uranium products to customers in the APR countries via a Russian Far East seaport successfully ended. In 2015, this new route will be used regularly. The near-term plans include testing out import operations through Vostochny Seaport. This aims to achieve, among other things, higher reliability and shortening the term of empty transportation equipment for enriched uranium. As usual, the Company has been focused on human resource management issues. It is the main capital of the Company, professionalism and competence whom, allows TENEX to achieve success from year to year, not only in the promotion of the Russian uranium product to the global market, but also in solving other tasks of various complexity set by ROSATOM. I hope that the TENEX team retains and increases its accumulated potential for the sake and in the best interest of Russia s nuclear industry. Kirill Komarov

7 10 TENEX Annual Report 2014 Address from the Chairman of the Public Reporting Committee 11 Address from the General Director Address from the Chairman of the Public Reporting Committee G4-1 Building up the export potential and generation strategic backlog for the future on a par with traditionally impeccable fulfilment of contractual obligations, was the leitmotif of TENEX work in The Company not only achieved all of its key performance indicators set by ROSATOM, but also exceeded the most important of them proceeds in the global market and the portfolio of foreign orders for ten years. In 2014, TENEX concluded new deals for the supply of products and services of Russian NFC totalling US $0.8 billion. Strictly according to the schedule, over fifty shipments of products to the customers were completed, including three to South Korea via the new transportation route from Vostochny Seaport in the Maritime Territory of Russia. Today, under TENEX s belt, there are not only long-term contracts for the supply of uranium products to foreign companies from countries of Europe, Asia, America and Africa, but also a whole set of new projects aimed at strengthening the Russian nuclear industry s competitiveness. The Company is developing its marketing and logistics tools: in the reporting year, the material account agreements were done with the South Korean KEPCO NF and the U.S. ConverDyn, which allowed for the optimising of interaction with partners and increased flexibility of work with the common customers. In the framework of the Material Account Agreement with Westinghouse Electric Sweden AB, the delivery of enriched uranium product (EUP) from Russia to Sweden was carried out for the first time with aim to subsequent assignment by book-transfer to TVO of Finland. In 2015, the Company plans to further broaden its fleet of transportation equipment. TENEX is actively participating in ROSATOM s strategic project to promote Russian NFC back-end services to the global market. As such, in 2014, it took the first practical steps by fixing a number of arrangements on the reprocessing in Russia of regenerated uranium owned by foreign customers. The development of key competences of personnel has been and remains one of the top priorities of the social policy of TENEX. The Company provides its employees with the broadest possible opportunities for professional education and development of managerial competences. Traditionally, the personnel engagement rate is one of the highest in the sector; in 2014, it was 93%. I express my sincere gratitude to the Russian and foreign partners for the many years of structural interaction and to the Company s team for one more year of honest and effective work. Liudmila Zalimskaya Over five years of participation in the pilot project of ROSATOM to develop a corporate system of public reporting, TENEX, as one of the key participants, has not only mastered the laws of the new for us genre of communicating with a broad circle of stakeholders, but going creatively has introduced a number of approaches that relate to specifics of the Company s activities. This allowed for the optimisation of interaction with the distinguished stakeholders and facilitated a more open, informative and prompt dialogue. By establishing and developing the system of TENEX s public reporting according to the best international standards and practices, we have tried to make it as effective and as inexpensive as possible, keeping in mind the inclusion of the active usage of correspondence formats of communication with a broad circle of stakeholders via electronics, which in the era of the Internet appears absolutely logical, when writing the annual reports of the Company. During previous campaigns, we proposed the discussions of the draft concept of the report by stakeholders through correspondence, via questionnaires. This approach was tested now at the final stage of preparation of the Public Annual Report of TENEX for 2014: its draft was forwarded in advance to the stakeholders via to obtain substantial recommendations and comments. This allowed for a more precise consideration of the demands and expectations of the stakeholders and, no doubt, an improvement in the quality of the document. The effectiveness of the chosen approach was confirmed many times by awards received by the Company at authoritative Russian and international contests of public reports. In 2014, for the first time in the history of the industry, TENEX s report for the past year was awarded the highest, platinum prize in the Energy: Equipment and Services category of the prestigious annual international competition held by the League of American Communications Professionals. It received 99 points out of 100 and ranked 12th in the world raking for the top 50 companies with the best reports. I would like to express my sincere gratitude to the Russian and foreign stakeholders for their constructive cooperation, including in the preparation of this report. Valery Govorukhin

8 GENERAL INFORMATION *.txt* 1. General Information 1.1. Mission and Basic Principles of Business 1.2. Core Businesses 1.3. Structure 1.4. Corporate Governance and Control System 1.5. Information about the Company 1.6. Historical Background 1.7. The Company in the Global Uranium Market 1.8. The Company in the Nuclear Industry File format *.txt * The most common format of text data storage and transfer. It is universal, i.e. compatible to any operating system. It is stable, i.e. each word and character is self-reliant and in case of damage can be restored without harm of processing of the rest of content. It is simple, i.e. it can be changed using a text processor, which is part of any operating system Supported by all modern devices

9 14 TENEX Annual Report 2014 General Information Mission and Basic Principles of Business Mission: TENEX operates in the interests of the Russian nuclear industry while making the best possible use of its export potential and competitive advantages in strict compliance with the applicable law and quality standards, security and social responsibility. 1.3 Structure An aggregative of the functional diagram of the Company is given in the figure below. Basic Principles of Activity: G4-56 Fair competition, observance of ethical standards of business, strict fulfilment of obligations and a tailored approach to each customer, Strengthening of public confidence in nuclear power and industry, transparency of activity and openness to a dialogue with partners, Assistance to sustainable development through economic efficiency, social fairness and environmental safety, Orientation to high professional standards and assistance in the professional advancement of employees. Export of Nuclear Fuel Cycle Products and Services Transport and Logistics Corporate Law Support Strategy and Marketing Internal Control and Audit 1.2 Core Businesses Economics and Finance Risk Management G4-4 G4-8 Joint Stock Company TENEX (the trademark TENEX) is one of the world s largest suppliers of NFC products, which over the past forty years has covered the notable part of uranium enrichment requirements of western design reactors. In the reporting year, the Company s core businesses were: foreign supplies of Russian NFC companies products (for details, see Section 3.1.); Information Policy and Communications Procurement and Management Systems improvement of transportation and logistic support (for details, see Section 3.2.). Assets and Data Protection Information Technologies Human Resources and Administration Support Upcoming Projects

10 16 TENEX Annual Report 2014 General Information Corporate Governance and Control System TENEX persistently improves the corporate governance system by following the best Russian and international practices and standards, as well as actively participating in the programmes and projects to increase the effectiveness increase of corporate governance of the nuclear industry companies implemented by ROSATOM. In the reporting year, the Company: has updated standards for procedures of corporate governance, including the procedure for the preparation and agreement of draft decisions of the Board of Directors and Sole Shareholder of the Company, as well as the procedure for the corporate information exchange with ROSATOM; has developed and approved a new revision of the Articles of Association with the aim of bringing them into compliance with the regulations of Chapter 4 of the Civil Code of the Russia Federation (in the revision of the Federal Law No. 99-FL). 3 In 2014, the corporate procedures were fulfilled in full compliance with the requirements of the existing Russian legislation and constituent documents of TENEX. Certain principles and recommendations of the Code of Corporate Governance 4 are reflected in a number of local regulatory acts and are used by the Company in practice. This is being done according to the features associated with TENEX being the Sole Shareholder and the features of the legal standing of ROSATOM, as fixed in the legal regulatory acts of the Russian Federation, which provide for unity in the governance of nuclear industry organisations. Such actions are also motivated by the fact that the Company s securities are not subject to listing. According to the Articles of Association of TENEX, the governance and control bodies of the Company are: General Shareholders Meeting (in the person of the Sole Shareholder); Board of Directors; General Director (the Sole Executive Body); G Board of Directors As per the Articles of Association, the Board of Directors of TENEX includes five persons. The Chairman of the Board is not concurrently the sole executive body of TENEX. The commissions and boards within the Board of Directors have not been set up. Members of the Board do not hold Company shares. In 2014, members of the Board were not paid remuneration; no transactions took place related to the acquisition or carve-out of the Company s shares by members of the Board. G4-41 There are no independent directors in the Board of Directors of the Company all its members are representatives of ROSATOM and its organisations. In the reporting year, the Board of Directors of TENEX held 12 meetings. Information on the issues reviewed by the Board of Directors in 2014 is given in Appendix No. 10. From until , the Board of Directors (as elected on ) consisted of: By the resolution of the Sole Shareholder of TENEX on the elected the Board of Directors in a new composition (biographical data of the Board members are provided below): Kirill Komarov, Chairman of the Board, Nikolay Drozdov, Liudmila Zalimskaya, Vladislav Korogodin, Yuri Olenin. In 2014, the Board of Directors and the Sole Shareholder of TENEX, by their resolution, did not approve significant transactions and related party transactions acknowledged as such, in accordance with the Federal Law On Joint Stock Companies. G4-39 Audit Commission. Kirill Komarov, Chairman of the Board, Vadim Zhivov, General Shareholders Meeting Liudmila Zalimskaya, The highest governance body of TENEX is the General Shareholders Meeting, in the person of the Sole Shareholder, JSC Atomenergoprom. The jurisdiction of the Sole Shareholder is to decide on key aspects of the Company s activities. In the reporting year, the Sole Shareholder: approved the annual report and annual financial statements for 2013; made decisions on paying dividends to the shareholder; G4-38 Vladislav Korogodin, Yuri Olenin. shaped the Board of Directors and the Audit Commission of the Company; approved the new revision of the Articles of Association. 3 Among others, the firm-name of the Company has been changed and the dividend payment provision has been updated. 4 Recommended to application by a letter of the Central Bank of the Russian Federation No /2463 of

11 18 TENEX Annual Report 2014 General Information 19 Kirill Borisovich KOMAROV Liudmila Mikhailovna ZALIMSKAYA Biographical data Biographical data Date of birth 29 December 1973 Career (employers, positions, temporary activities at said employers) Date of birth 31 July 1956 Language skills English, German, and Dutch Place of birth Leningrad Education and specialty, academic degree (if any) Higher education, jurisprudence Ph.D. in law Graduated from, year of graduation The Urals State Law Academy, 1997 Language skills English JSC Atomenergoprom (Deputy Director, CEO, Director, 2007 present) ROSATOM (Executive Director for Nuclear Energy Directorate, Deputy Director Director for Corporate Development and International Business unit, First Deputy General Director Director for Corporate Development and International Business unit; 2010 present) Period of stay in the Board of Directors of the Company Since 2010, since 2012 Chairman of the Board Place of birth Moscow Education and specialty, academic degree (if any) Higher education, international economic relations Graduated from, year of graduation Moscow State Institute of International Relations of the Ministry for Foreign Affairs of the USSR, 1978 State Educational Establishment for Higher Professional Education State University of Management, 2009 Career (employers, positions, temporary activities at said employers) TENEX (1978 present) Period of stay in the Board of Directors of the Company Since 2013

12 20 TENEX Annual Report 2014 General Information 21 Nikolay Sergeevich DROZDOV Vladislav Igorevich KOROGODIN Biographical data Biographical data Date of birth 23 June 1972 Career (employers, positions, temporary activities at said employers) Date of birth 25 October 1969 Language skills English Place of birth Moscow JSC Atomenergomash (Project Manager, ) Place of birth Moscow Career (employers, positions, temporary activities at said employers) Education and specialty, academic degree (if any) Higher education, economics Graduated from, year of graduation Plekhanov Russian Academy of Economics, 1993 Language skills English JSC Alstom (Deputy General Director, ) JSC Rusatom Overseas (General Director s Advisor to CEO, 2013) ROSATOM (Head of Department, 2013 present) Period of stay in the Board of Directors of the Company Since 2014 Education and specialty, academic degree (if any) Higher education, applied mathematics and physics Graduated from, year of graduation Moscow Institute of Physics and Technology, 1992 Federal State-Funded Educational Institution of Higher Professional Education Russian Presidential Academy of National Economy and Public Administration, 2011 JSC Atomenergoprom (Head of Department of Marketing and Sales Market and Deputy Director, 2007 February 2010) ROSATOM (Deputy Director of the Nuclear Energy Directorate/Head of the Department for NFC and NPP Life Cycle Management, March 2010 present) Period of stay in the Board of Directors of the Company Over five years

13 22 TENEX Annual Report 2014 General Information General Director Yuri Alexandrovich OLENIN Biographical data Date of birth 13 November 1953 Career (employers, positions, temporary activities at said employers) Place of birth Kirovabad, Azerbaijan SSR Education and specialty, academic degree (if any) Higher education, radio engineering, jurisprudence, Ph.D. in engineering, professor Graduated from, year of graduation Karl Marks Yerevan Polytechnic Institute, 1976 Penza State Technical University, 1996 Manchester Business School: Programme for Top Management, 2000 Language skills Armenian and English R&D Research and Design Institute of Radio-Electronic Engineering (NIKIRET), State Unitary Enterprise Special Scientific and Production Enterprise Eleron in Zarechny, Penza Region (Director Chief Designer, ) Federal State Unitary Enterprise Production Association Start in Zarechny, Penza Region (General Director ) JSC TVEL (First Vice President, President, 2007 present) Period of stay in the Board of Directors of the Company Over five years Liudmila Zalimskaya was born in Moscow on 31 July In 1978, she graduated from the Moscow State Institute of International Relations under the USSR Foreign Ministry as an economist in international economic relations with a foreign language specialising in Economic International Relations. In 2009, she gained a Master s Degree in Business Administration from the State University of Management. Since 1978, Liudmila Zalimskaya has worked as foreign-language correspondence clerk, engineer, senior engineer, senior expert, Deputy Director and General Director at Uranservice, and Deputy General Director, head of the Uranium Products Directorate at TENEX. From 2007 until 2012 she held the position of TENEX s First Deputy General Director. From October 2012 until April 2013 Liudmila Zalimskaya served temporarily as Acting General Director of TENEX. Since April 2013 she has served as General Director of TENEX. Liudmila Zalimskaya has been awarded Medals of the Order of Merit for the Fatherland 1st and 2nd class, Badge Long-Service Employee of the Nuclear Energy Industry, Badge Academician I.V. Kurchatov 2nd and 3rd class, Anniversary Medal 65 Years of Russia s Nuclear Industry, and the Badge of Merit for the Nuclear Industry 1st class. The General Director holds no shares of the Company. During the reporting year, the General Director did not enter acquisition or transfer transactions related to the Company s shares. The General Director s cumulative remuneration is determined according to the provisions of the unified remuneration system and consists of a position salary and a monthly-integrated weighting 5, as well as an annual bonus. 6 5 It is determined as per the grade (level) of the position in the sectoral position hierarchy. 6 It is determined by a target and the achievement of key performance indicators.

14 24 TENEX Annual Report 2014 General Information Top Management 7 Full Name, Position Record of Service in the Company GOVORUKHIN Valery Nikolayevich, First Deputy General Director for Strategy and Communications Since 2004 GOROKHOVIK Alexey Vasilyevich, Deputy General Director for Security Since 2004 KOZIN Oleg Igorevich, Deputy General Director for Logistics Since 2007 LOSHAKOV Igor Vyacheslavovich, Deputy General Director for HR and Administration Since 1989 LYSOVA Galina Alexandrovna, Chief Accountant Since 2010 POLGORODNIK Sergey Igorevich, First Deputy General Director for Commerce Since Audit Commission In the reporting year, the Audit Commission controlled the financial and economic activities of the Company. This included an independent credibility evaluation of the financial data in both the annual report and the annual financial statements of the Company for As per the Sole Shareholder s resolution No. 36 of , the Company s Audit Commission elected as follows: Denis M. Vasiliev, an Advisor at the Accounting Methodology Unit of the Accounting Office at ROSATOM; Natalia V. Klishevich, a Project Manager at the Internal Control and Audit Service of TENEX; Ilya E. Nikolsky, Deputy Head of Operations Efficiency and Head of Project Office at ROSATOM. The Audit Commission held four meetings in The Audit Commission audited the financial and economic activities of the Company for 2013 and issued a conclusion on the credibility of the financial data contained in the Company s accounting (financial) statement and Public Annual Report for 2013 in any material respect. No violations of the accounting procedure and financial reporting established by the regulations of the Russian Federation, or violations of legal acts of the Russian Federation, which would have substantially affected the credibility of the Company s reporting data, were revealed in the financial and economic activity in question. As per the Sole Shareholder resolution No. 38 of , the Audit Commission was reelected as follows: Denis M. Vasiliev, an Advisor at the Accounting Methodology Unit of the Finance Management at ROSATOM; Ilya E. Nikolsky, Head of Operations Efficiency Office at ROSATOM; Anna V. Fomenkova, a Chief Methodologist of Methodology and Control Unit of Department for Accounting and Taxation at TENEX. In 2014, the Sole Shareholder did not request that the Audit Commission 8 of the Company conduct additional audits. TOVSTENKO Andrey Vladimirovich, Deputy General Director for Strategy and Marketing Since Information about the Company ULYANIN Yuri Alexandrovich, Deputy General Director for Economics, Finance and IT Since 2002 Name of the Company in Russian Акционерное общество «Техснабэкспорт» Name of the Company in English Joint Stock Company TENEX Location and mailing address: 28, bld. 3, Ozerkovskaya naberezhnaya, Moscow, , Russia Corporate website: Corporate tenex@tenex.ru Contact phone number: +7 (499) , +7 (495) G4-7 G4-5 G4-3 7 Detailed biographies are given on the website of the Company at: G As per the Sole Shareholder of TENEX resolution No. 41 of , the Audit Commission of the Company was abolished and authorities of its members were terminated early, due to the state registration of the new Articles of Association of the Company. In 2014, financial and economic activities of the Company were not audited.

15 26 TENEX Annual Report 2014 General Information 27 G4-9 G4-6 Fax: +7 (495) Primary State Registration Number: , registered on with the Department of the Ministry of Taxes and Levies of Russia for Moscow Licence for Handling Nuclear Materials during Transportation: No. GN of Branches and representative offices: Auditor As of , the Company s authorised capital was 638,118,652 roubles. The Company placed 26,636 registered ordinary shares at a par value of 23,957 roubles each. The Company has no preferred shares. The Sole Shareholder of TENEX is the Joint Stock Company Atomic Energy Power Corporation (JSC Atomenergoprom). The Russian Federation has no special right ( golden share ) to manage TENEX. Details of the Auditor and Registrar are given in the Table below. TIN (Taxpayer Identification Number): PSRN (Primary State Registration Number): Location: 44/1 Myasnitskaya St., Moscow , Russia Phone: +7 (495) Fax: +7 (495) Information on subsidiaries as of None In June 2014, the Sole Shareholder of TENEX resolved to approve the Financial and Accounting Consultants Limited Liability Company as the Auditor of the Company for 2014 (Resolution No. 38 of ). The Register of the Company s shareholders is maintained by the open JSC Registrator R.O.S.T. 9 Registrar TIN (Taxpayer Identification Number): PSRN (Primary State Registration Number): Location: 18 Stromynka St., Moscow , Russia Phone: + 7 (495) Fax: + 7 (495) Russian subsidiaries of TENEX Share (%) 1. JSC SPb IZOTOP JSC SPC Khimpromengineering CJSC TENEX-Logistics LLC Kraun Foreign subsidiaries of TENEX Share (%) 1. INTERNEXCO GmbH, Germany TENEX-Korea Co., Ltd., Republic of Korea TENEX-Japan Co., Japan TRADEWILL LIMITED, United Kingdom TENAM Corporation, USA Historical Background 1963 According to the resolution of the Council of Ministers of the USSR No rs of the All-Union Bureau Techsnabexport was established based on V/O Mashinoexport, tasked with carrying out export-import operations involving rare-earth, rare, and refractory metals, radioactive and stable isotopes, ionising radiation sources, control and measuring instruments, accelerator and X-ray equipment Conclusion of the first contract for the supply of uranium enrichment services with the Atomic Energy Commission of France Reorganisation of the All-Union Bureau Techsnabexport in All-Union Association Techsnabexport (A/A Techsnabexport) of the Ministry of Foreign Trade of the USSR. Start of large-scale uranium product export to Western Europe First delivery of uranium enrichment services to the USA Transfer of A/A Techsnabexport from the authority of the Ministry for Foreign Trade of the USSR to that of the Ministry of Medium Machine Engineering of the USSR (later the Ministry of Atomic Power and Industry of the USSR, now the State Atomic Energy Corporation Rosatom). Conclusion of the first longterm contract for the enriched uranium deliveries to the Republic of Korea Start of natural uranium deliveries to the USA and EU countries Conclusion of the first contract with the PRC for uranium product delivery in the framework of the Agreement between the Government of the Russian Federation and the Government of the People s Republic of China on Cooperation in Construction of GCP for Enrichment of Uranium for Nuclear Power in the Territory of the PRC of Conclusion of the contract with USEC Inc. for the delivery of lowenriched uranium (LEU) produced as a result of reprocessing of highly enriched uranium (HEU) extracted from dismantled nuclear warheads for further use as fuel at the US NPPs in pursuance of the Agreement between the Government of the Russian Federation and the Government of the United States of America Concerning the Disposition of HEU Extracted from Nuclear Weapons of (HEU Agreement) Broadening of export geography: start of deliveries of LEU to the RSA under a contract with ESKOM, which is the operator of the only NPP on the African continent Conclusion of the contracts with the Group of Western Companies (CAMECO, Canada; Cogema/AREVA, France; Nukem, Germany/ USA) for selling part of the feed component of low-enriched uranium (FC LEU) being returned under HEU Agreement. Conclusion of the first contract for uranium product delivery to the Japanese utility TEPCO. 9 Since , it is JSC Registrator R.O.S.T.

16 28 TENEX Annual Report 2014 General Information Obtained the licence from Gosatomnadzor of Russia the licence for handling nuclear material: the transition from mediatory functions in trading nuclear and radiation materials to full-scale manufacture of and trade in of NFC goods and services The state accreditation of the Company as an organisation that created an company internal export control system 2003 Start of uranium product deliveries to Mexico Acquisition and consolidation of assets in uranium mining, machine engineering and chemical industries in the interests of ROSATOM Inclusion of TENEX in the list of Russian legal entities that entitled to own nuclear material and nuclear installations according to the Decree of the President of the Russian Federation On Restructuring of Nuclear Power Industry Complex of the Russian Federation No. 556 of Conclusion of the contracts between TENEX and China Nuclear Energy Industry Corporation (CNEIC) related to rendering technical assistance in construction of the 4th stage of the GCP in China and the delivery of uranium products for Chinese NPPs from The quality management system certification to the international standard ISO 9001: Conclusion of the first six direct contracts with US utilities in the framework of the Amendment to the US-Russia Agreement Suspending the Antidumping Investigation on Uranium Products from the Russian Federation of 2008, prepared in direct participation with the Company, which created the legal conditions to resume commercial deliveries of the Russian uranium products to the US market Acquisition of 100% of shares of JSC SPb IZOTOP to improve transportation and logistics infrastructure. The environmental management system of TENEX certification to the international standard DIN EN ISO 14001: Conclusion of the large-scale contract with USEC Inc. for delivery of uranium enrichment services in Conclusion of the long-term contract for the delivery of enriched uranium product (EUP) with Emirates Nuclear Energy Corporation (ENEC) for Barakah NPP, the first example of this in the Arab world. The pilot delivery of EUP to Japan through the Russian seaport Vostochny in Maritime Territory. The certification of the supply chain security system to the international standard ISO 28000:2007, the first in the Russian nuclear industry th anniversary of the Company: TENEX team awarding a Diploma of the Government of the Russian Federation. Successful completion of the LEU delivery programme in the framework of implementation of the HEU Agreement. Shipping of the two batches of EUP to the Republic of Korea through Vostochny Seaport in Maritime Territory as a trial of the new transportation route. 1.7 The Company in the Global Uranium Market Market Situation and Competitive Environment In the reporting year, the conjuncture in the front-end NFC product and service market (natural uranium, conversion and enrichment services) could be described as unfavourable: decline of demand with excessive supply, inventory pressure on the market, not the best pricing situation for uranium suppliers and strengthening of the competition of nuclear power with other types of electricity generation, primarily with fossil energy sources. To a great extent, this was due to the remaining negative impact of the Fukushima-Daiichi NPP accident s consequences on the global nuclear power and uranium market. In the natural uranium segment, the worsening of the market conditions was partially due to more pressure on the market from the secondary feed sources, but this did not lead to a notable drop of supply from the primary sources (production): 59,000 tonnes of natural uranium were mined in 2013 and about 56,000 tonnes in Spot price indicators despite large fluctuations during the year (from US $28.25 up to US $40 per pound) in December 2014 came up to the January price of the same year and were US $35.5 per pound. 10 At the same time, as compared to natural uranium prices of preceding years, in the reporting year, the level of prices, including long-term ones, 11 may be described as quite low. 10 From this point on the quotes published by Ux Consulting Company LLC are given. The general situation where supply exceeds demand has led to the ultimate termination of Westinghouse s conversion plant in Springfield s Fuels Ltd in the United Kingdom. During 2014, spot prices of conversion dropped from US $8.25 to US $7.25 per kgu and from US $8.75 to US $7.5 per kgu in the North American and European markets, respectively. Longterm conversion price indicators remained the same, i.e., US $16 per kgu and US $17 per kgu for the North American and European markets, respectively. In the most significant segment of the market for TENEX, namely the uranium enrichment market, the situation in 2014 was determined by the competitive environment, which qualitatively changed due to the ultimate transition of the world s enrichment industry to gas centrifuge technology. Over the course of the year, price indicators for uranium enrichment notably declined, i.e., the spot indicators dropped from US $99 per SWU to US $88 per SWU and the long-term from US $114 per SWU to US $90 per SWU. At the same time, in spite of some slowing down in rate as compared to the previous years, a build-up of capacities of new URENCO gas centrifuge plants in the USA and AREVA in France was noted. The USA continued implementing projects associated with new uranium enrichment technologies ( American Centrifuge, SILEX). In September 2014, the USEC, Inc. one of the traditional uranium enrichment suppliers was reformed into Centrus Energy. 11 As of December 2014, US $49 per pound.

17 30 TENEX Annual Report 2014 General Information 31 The main competitors of TENEX are still URENCO (UK, Germany and the Netherlands) and AREVA (France). Competitive pressure is also growing on the part of the Chinese uranium enrichment supplier CNEIC Position of the Company Despite the unfavourable market situation and completion of the HEU Agreement in 2013, TENEX has retained its position as the leading uranium enrichment services supplier to the world market, providing uranium enrichment services for nearly a quarter of the needs of western design reactors. The Company supplies products to 50% of NPP operators of western design reactors (or 44% of all world NPP operators). 12 G4-8 The chart below shows the Company s export structure (2012, 2013 without taking into account supplies under the HEU Agreement) by regions. 24% 71% 15% 15% 65% 48% Restraints on the supplies of Russian uranium products to the USA and EU still remain in place, owing to Euroatom s policy on the diversification of sources supply and limits on deliveries of Russian uranium products to the USA remaining effective until 2020, as per the Amendment to Suspension Agreement of This is the result of the consistent work to implement the business strategy and is evidence of the efficiency of the marketing approaches being used (for details, see Chapter II. Strategy). In the reporting year, the Company supplied its products to 17 countries: 14 customers from North America, 10 European, and 13 from the APR, Middle East and Africa. APR, Middle East and Africa Europe North America 1.8 G4-DMA The Company in the Nuclear Industry With 100% of its shares held by the nuclear industry holding company JSC Atomenergoprom, TENEX is managed by ROSATOM s Corporative Development and International Business unit. TENEX has led the charge to promote of uranium conversion and enrichment services, as well as enriched uranium for power and research reactors in the global market. In doing so, it carries out global marketing and deliveries of products to utilities operating NPP of western design reactors in Europe, the Americas, Asia, and Africa. G4-EC8 The Company s activities substantially influence the financial and economic performance of the industry. The proceeds from the export of NFC products carried out by TENEX account for nearly half of the total proceeds of ROSATOM obtained from foreign operations and are an important resource for the development of the Russian nuclear industry. The Company sends nearly all net profit to ROSATOM for financing the common industry-wide development and modernisation projects. G4-4 G4-8 The Company also acts as an integrator of business proposals for large customers and attracts foreign loans on beneficial terms in the interests of nuclear industry enterprises. A number of projects of strategic importance undertaken by the Company enable the possibility of making direct foreign investments in transportation and logistics infrastructure and enterprises of the Russian nuclear industry. TENEX has built up a multibillion-rouble portfolio of long-term export contracts for the delivery of Russian NFC products and services until 2030, supporting over 10,000 jobs in ROSATOM S Separationsublimation complex (SSC) enterprises, most of which are hosted by so-called closed (restricted access) cities and forming a company town. The Company interacts with suppliers of uranium feed and its conversion and enrichment services on the basis of long-term contracts. Resources needed to fulfil the contractual commitments of the Company generally come from long-term delivery contracts for uranium feed signed with companies of ROSATOM s Mining Division, including United Uranium Enterprises LLC, and uranium feed deliveries from the customers. 6% 20% 37% The calculations were done using the data of the World Association of Nuclear Operators ( and the IAEA

18 32 TENEX Annual Report 2014 General Information 33 G4-12 Uranium conversion services are provided by JSC TVEL under a long-term contract. Enriched uranium product is produced under long-term contracts with JSC TVEL and CJSC UEC at production capacities of SC UEIP, JSC PA ECP, and JSC SCC. Export orders of TENEX provide up to half the workload of the enrichment capacities of JSC TVEL, proven by decades of experience and reliable Company partners. A detailed business model is given in the scheme below. Changes in the volumes of supply of services and goods in 2014 against 2013 are not significant. On the whole, the long-term contracting of product deliveries implemented by the Company is in line with global practices and creates objective prerequisites for the advanced planning of the operations of vendors and participants of the transportation and logistics chain, while also ensuring employment at these companies and their host regions, which is secured by the available orders. G4-13 Within its jurisdiction, the Company actively participates in ROSATOM s work to improve the existing legislation and legal basis of international cooperation, primarily on issues that relate to foreign economic interests of the industry. In the reporting year, as a result of joint work with ROSATOM concerning the formation of the legal regulatory basis needed for foreign deliveries of HEU to make fuel for research nuclear reactors, on the , the Decree of the President of the Russian Federation No. 37 On Amendment of the Decree of the President of the Russian Federation No. 556 of On Restructuring of the Nuclear Power and Industry Complex of the Russian Federation was adopted. In the reporting year, TENEX traditionally rendered expert support to ROSATOM related to working out the interagencyconcerted position of Russia on issues within the jurisdiction of the Nuclear Suppliers Group, 13 including the process of updating existing export control lists. Specialists of the Company are regularly involved as experts in the development of sectoral and professional standards. The draft professional standard Specialist of Internal Control (Internal Controller) 14 approved by the National Council under the President of the Russian Federation for Professional Qualifications (Record of Meeting No. 7 of ) was developed with their active participation. Enriched UF 6 Foreign Customers U 3 O 8 / natural UF 6 Enriched UF 6 Other Customers freight forwarding services isotope products deliveries deliveries of medical equipment and instruments In September 2014, the Russian- German intergovernmental agreement for cooperation in operation of research reactors was signed. The agreement was prepared with participation of the Company s specialists. Subsidiaries abroad Subsidiaries JSC SPb IZOTOP freight forwarding services Other suppliers of uranium feed Enriched UF 6 U 3 O 8 / natural UF 6 TENEX freight forwarding services JSC TVEL United Uranium Enterprises U 3 O 8 Dividends Credits / loans, interest rates Enriched UF 6 U 3 O 8 / natural UF 6 Conversion and enrichment enterprises of JSC TVEL U 3 O 8 U 3 O 8 JSC ARMZ Uranium One Holding JSC Atomenergoprom Commercial Banks Mining enterprises (U 3 O 8 production) Mining enterprises (U 3 O 8 production) 13 The Nuclear Suppliers Group that unites 48 states is an international mechanism of nuclear export control. 14 It was sent to the Ministry of Justice of the Russian Federation for coordination, and subsequent approval by the Ministry of Labour and Social Protection of the Russian Federation.

19 * STRATEGIC VISION 2. Strategy *Graphic drawing of the rouble as a sign represents a Cyrillic capital letter P added with a horizontal arrow in its lower part; two parallel lines symbolize translational movement to the intended targets Strategic and Mid-term Planning 2.2. Factors Influencing Formation of Business Strategy 2.3. Key Tools of Achievement of Strategic Goals Well thought-out forward motion

20 36 TENEX Annual Report 2014 Strategy Strategic and Mid-term Planning The strategy of ROSATOM until 2030 (hereinafter referred to as the Strategy ) was adopted in 2010 and updated in 2014; it acts as the fundamental document in the field of strategic planning, which sets a generic vector of development for the Russian nuclear sector over the long term. The Strategy defines a list of the most important in terms of achievement of the ROSATOM s purpose-oriented positioning as a global technological leadership strategic goals, the implementation of which within the next 20 years should result in a significant growth of its main financial and economic indicators. Build-up the business strategy, TENEX is primarily guided by said Strategy, accounting for strategies of Fuel and Mining Divisions, as well as updated regional action plans developing by the Development and International Business unit of ROSATOM relating to large geographic segments of the world market. Changes to the market and foreignpolicy situation in 2014 have made it necessary to update TENEX s strategic plans: the mid-term goals and objectives of the Company have been specified, financial and economic landmarks have been updated and the array of the market tools in use has been broadened, although the general course of activity has remained unchanged. According to the instructions of ROSATOM and aiming at operationalization of the strategy, in the reporting year, TENEX worked out a mid-term business plan of the Company for , which considers several possible scenarios of the market situation development. the possibility of offering customers competitive prices and other attractive commercial parameters of contracts; the flexibility of delivery terms, including the use of foreign material accounts; the readiness to take, within due reasonable limits, market and currency risks; the capability to ensure the minimum time from receipt of feed (in places convenient for the client) to delivery of the end product; guarantees of uninterruptible supplies owing to warehouse stock; the possibility of offering NFC products and services both as separate components and as package supplies; the availability of the modern international legal framework for cooperation in the field of the peaceful use of atomic energy. When updating the business strategy, the Company undoubtedly considers external factors such as: the dynamic nuclear power development in the APR countries geographically close to Russia; the growing interest of utilities in the packaged procurement of the front-end and back-end of NFC; the completion of the technological re-equipment in the world s enrichment industry. 2.2 Factors Influencing Formation of the Business Strategy 2.3 Key Tools for Achieving Strategic Goals The Company forms its business strategy proceeding from a positive assessment of long-term prospects of world nuclear power development. According to the forecasts of the authoritative international organisations (IAEA, World Nuclear Association), the growth of installed nuclear capacities in the world will exceed 50% by the end of the next decade. This expected growth is based on objective factors, including a higher construction rate of NPPs and the building up of the reactor fleet in a number of countries that already have nuclear power, as well as the emergence of countries with an energy policy providing for nuclear sources in their energy balance. The business strategy of the Company is designed in consideration of the following most important factors that ensure competitiveness of the Company s market offer: access to the highly efficient production base: four large enrichment plants in Russia that use gas centrifuge technology; the longstanding and impeccable history of deliveries of uranium products to dozens of customers in different regions of the world; effective sales networks in the key target markets; Achieving the strategic goals by the Company requires continuous improvement of marketing and sales tools, including: the development of a system of the material accounts abroad (Section 3.1.); the improvement of the transportation and logistics infrastructure (Section 3.2.); the development of the risk management system (Section 4.2.); the expenses management (Section 4.4.), the improvement of the corporate management systems (Section 4.6.). The use of these tools envisages: taking into account of regional markets and the priorities of customers; accent on direct relations with utilities and the signing of long-term contracts (for ten years and more); the promotion of maximum added value products in the market. The strategic positioning of TENEX and ROSATOM in the global market is facilitated by their membership in the authoritative international and regional specialised associations, such as WNA, NEI, JAIF, KAIF, WNFM, and WNTI (Appendix No. 6).

21 3. Outcomes of the Core Business STABLE Σ* RESULT *The sign of sum is the Greek letter sigma. A special character to denote a sum was first introduced by Leonhard Euler in The sum Σ is the RESULT of addition of values (figures, functions, vectors, matrices etc.). The Latin word summa is translated as the main point, essence, sum Contracting and Sales 3.2. Transportation and Logistics 3.3. Financial and Economic Results Stable work stable result

22 40 TENEX Annual Report 2014 Outcomes of the Core Business Contracting and Sales G4-8 In spite of the unfavourable market conditions and aggravated political and economic situation for Russia in 2014 due to events in Ukraine that especially impacted contracting US customers, the Company signed 19 new contracts for uranium product deliveries and three addendums to the existing contracts The export portfolio dynamic 15 in three-year hindsight Increment in long-term export contracts portfolio against 2011, % In the reporting year, the Company traditionally met all Contractual Obligations in due time and on a full scale. The evidence that the Company retains a sound foothold in the global uranium market is not only the solid long-term order portfolio and absence of failures in providing uranium enrichment services to the considerable part of needs of the western design reactors, but also the signing of new material account agreements with foreign fabricators and converters. In June 2014, TENEX signed its first such Material Account Agreement with an APR company, the South Korean nuclear fuel fabricator KEPCO NF. The agreement defined terms of physical deliveries of the Russian enriched uranium to the Republic of Korea and subsequent book transfer operations with it. This would optimise the interaction of the Company with KEPCO NF, and raise the flexibility in its work with the common customers. The enriched uranium delivery by the book transfer was carried out already to the South Korean fuel fabricator in November of the reporting year. for an increase in deliveries. The total cost of the signed deals was about US $0.8 billion. According to the results of the reporting year, the long-term export contract portfolio in comparable prices was approximately US $23 billion % 112% 117% In July 2014, a Material Account Agreement was signed with ConverDyn, one of the world s largest suppliers of natural uranium conversion services. Thereby TENEX has under its belt material account agreements with all of the world s key nuclear fuel fabricators (three companies in the USA and four companies in Europe) and conversion plants (in the USA and Canada). According to the results of the reporting year, exports were about US $2.2 billion. Approximately 37% of the total deliveries were made by book transfers. In 2014, in the framework of its core business, TENEX was not subjected to fines for non-observance of legislative and regulatory requirements related to provision and use of the products. The results of the key business activities for the reporting period under review by regions are given below. G4-9 G4-PR9 G4-PR4 North America Europe In complex political conditions both packaged EUP and uranium conversion and enrichment services were additionally contracted in this region: six new contracts with US companies, including the selling transaction 16 of the inventory stored at the fuel fabricator GNF-A, were secured. As of December 2014, the total limits for uranium product deliveries to the US market, as agreed upon under the Suspension Agreement Amendment for , were covered by 85%. Deliveries under 15 existing contracts with utilities and TENAM Corp., as well as under the contract with USEC Inc., were made within schedule and on the full scale. Over 70% of the total deliveries were made The European region is traditionally the largest target market of TENEX. In 2014, uranium products totalling over US $1 billion (about 48% of the total exports) were delivered to customers in Belgium, Finland, France, Germany, Spain, Sweden, Switzerland and the United Kingdom. Some 13% of the total deliveries were by book transfers at the fuel fabrication plants. Asia-Pacific Region, Middle East and Africa Customers from the APR and Middle East were delivered of products totalling roughly US $0.3 billion (approximately 11% of the total exports); of these, over 17% were under the terms of book transfer. Retaining the relatively small volume of deliveries is primarily due to the termination of the operation of all nuclear reactors in Japan. At the same time, approval in 2014 by the national regulator (Nuclear Regulation Authority) as book transfers at the fuel fabrication plants (Westinghouse Columbia, South Carolina; GNF-A Wilmington, North Carolina; and AREVA NP Richland, Washington). In 2014, part of the feed component received by the Company from US utilities under the uranium enrichment contracts was sold. The feed component that was unsold in the external market will be returned to Russia in 2015 for further use in the export programme. The value of the uranium product delivered to US customers in the reporting year was about US $0.9 billion (nearly 41% of the total exports). As of the end of the reporting year, TENEX s export portfolio included long-term and midterm contracts with ten European utilities for Russian NFC products and service delivery until In 2014, three new contracts were signed for the delivery of uranium products and one addendum to an existing contract was made. for the restart of Kyushu Electric s Sendai-1 and Sendai-2 reactors gives grounds for optimistic forecasts regarding the resumption of nuclear generation in Japan in In 2014, ten new contracts and two addendums to the existing contracts for raising uranium product delivery volumes were signed with utilities of APR countries. 15 In the comparable prices. 16 With participation of TENAM Corp.

23 42 TENEX Annual Report 2014 Outcomes of the Core Business Transportation and Logistics Diversification of Shipping Points On the Russian side, the project participants were TENEX subsidiaries: JSC SPb IZOTOP and ТENEX-Korea Co. Ltd., as well as JSC Concern ASPOL- Baltic, SPb Emergency Technical Centre, and a number of other entities. Thus, the pilot phase of the project was completed. Commencing in 2015, the Far East transport corridor will be used for regular commercial shipments of the Russian nuclear industry s hightechnology products to APR countries. TENEX completed its trial of uranium product shipments through the Russian Far East (TLC East Project) under the project of diversification of shipping points. In 2014, three planned shipments of enriched uranium designated as fuel for South Korean and UAE NPPs were made from Vostochny Seaport in Maritime Territory, Russia, to the Republic of Korea. The near-term plans include trying out import operations via Vostochny Seaport, including with the aim to improve reliability and reduce time for the delivery of empty transportation equipment for enriched uranium. In October 2014, under the TLC West Project, the plot of land for building the interim storage facility (ISF) of 5,000 m 2 was formalised by the signing of a land lease contract with the Territorial Department of Federal Agency for State Property Management in the Leningrad Region. The prepared project documentation was submitted in order to obtain a statement from FAA Glavgosexprtiza of Russia in accordance with the established procedure. TENEX carries out its activities in the field of nuclear energy use related to the handling of nuclear material during their transportation under Rostechnadzor s licence No. GN , granted on The Company focuses on minimising the delivery time of products to customer, the improvement of delivery reliability, and transportation cost reduction. TENEX, with engaged foreign freight forwarding companies (FFFCs) that had all of the required permits for nuclear material shipment, as well as licensed sea carriers, successfully fulfilled the 2014 export-import deliveries programme. In the reporting year, 46 EUP deliveries were carried out under contracts with FFFCs. This number included five merged shipments of two batches each that saved several hundred thousand US dollars. The transhipment of the freight at the terminal of the Vostochnaya Stevedoring Company LLC, which has a long history of arranging container shipments and is the largest supplier of these services in the Far East of Russia, was carried out within the shortest possible time in accordance with all safety requirements. In 2015, the plan is to start developing the necessary working documentation for ISF to move to the storage construction phase. In the reporting year, given the positive experience in uranium product shipments without intermediate storage at ISF via Far East of Russia, work began to organise a pilot shipment using the same scheme: SSC s company Ust Luga Commercial Seaport providing the transportation on flat racks by rail.

24 44 TENEX Annual Report 2014 Sheremetyevo customs Building up an Own Equipment Fleet The Company has built up and effectively used its own fleet of transportation equipment, which, as of the end reporting year, included 354 items of 30B containers made by CIMC (PRC) and 344 items of Columbiana Hi Tech LLC s UX-30 overpacks. In 2014, the share of use of 30B containers for uranium product deliveries was 29%, while that of UX-30 overpacks was 56%. The 2015 plans include expanding the fleet of 30B containers by 200 items. licence to FSTEC of Russia and the Ministry of Justice of Russia. In the reporting year, the Company was granted 19 single licences for the export/import of nuclear material under the Company s contracts. Declaring regional customs in 2014 According to the approved declaring schedule, over 320 customs documents were formalised in Sheremetyevo, the Moscow Region, Yekaterinburg, Krasnoyarsk, Baltic and Pulkovo customs, a total that is up 20% from the same indicator of Sheremetyevo customs Moscow Region customs The in-house fleet of 48Y containers has also started to develop: 99 containers made by CIMC were purchased in 2014 and further expansion of the in-house fleet of such containers is planned in The Company monitors Russian and international certificates of the foreignmade containers to ensure that nuclear Internal Programme of Export Control, Licensing and Customs Support In 2001, TENEX became one of the first Russian companies to be granted a state accreditation certificate for an organisation that has set up an internal 17 export control programme. Given the impeccable observance by the Company of the requirements of the Russian Federation legislation in the area of export control, the validity period of the accreditation has been prolonged many times in accordance with the procedure established by law. 18 material is moved in strict compliance with the national regulatory requirements. Using the Company s own transport equipment has helped to minimise the costs of leasing the equipment from FFFC under contracts whereby the Company is responsible for providing transportation packaging. By the directive of the Government of the Russian Federation, TENEX obtains general licences for the export of uranium products for the accreditation validity period that substantially shortens the formalisation period for deliveries. Under the existing general export licence, deliveries of uranium products were made to China, France, Germany, the Republic of Korea, the United Kingdom and the USA. The Company sends quarterly reports on the implementation of the general The customs clearance process is managed with the use of the database, which allows for real-time monitoring of declaring the export/import freights of the Company, as well as prompt control over the observance of terms and due dates prescribed by customs regulations and procedures of temporary export/ import. In 2014, the number of tracked containers and overpacks owned by the Company subject to cross the customs border of the Customs Union increased by 80 items in 2013 to a total of 598 items. Yekaterinburg customs Krasnoyarsk customs Baltic customs Pulkovo customs Temporary exported containers and overpacks Increase of 65% Increase of 80,4% The TENEX General Director s order introduced the Interaction Procedure for preparing information for ROSATOM in the framework of the information exchange with the Federal Customs Service. 17 In the version of of the Federal Law No. 183-FL of On Export Control, it is called internal export control programme. 18 At the present time, until 2016.

25 46 TENEX Annual Report 2014 Sheremetyevo customs Financial and Economic Results The volume of uranium product export expressed in monetary terms is one of the key financial and economic performance indicators of the Company. In the reporting year, total exports slipped by 29% due to the completion of deliveries under the HEU Agreement in The table below gives data on export dynamics in three-year hindsight. The volume of commercial export of uranium production of the Company in 2014 grew by 5.8% as compared to 2013, namely at the expense of building up sales in the US market, and amounted to ~ US $2.2 million. Indicator Export, total, including 3,219 3,046 2, HEU Agreement 1,033 1,002 0 commercial deliveries of uranium products 2,186 2,044 2, US $ mln/% 2014 against 2013 in % The growth of sea freight costs due to an increase in deliveries to the USA caused a 2.8% growth of the commercial expenses as compared to The twofold growth of EBITDA in 2014, as compared to 2013, was mainly due to the higher sales volume and the positive impact of the rouble devaluation on the currency structure of the revenues and expenditures of the Company. At the same time, the positive influence of said factors on the Company s net profit was offset by the growth of an adverse balance on other revenues and expenditures, which was mainly caused by the re-evaluation of the Company s currency portfolio in roubles. 19 As a result, the net profit growth was 28.2%. 40,000 30,000 20,000 10, ,553 15,580 31,733 11,290 9,315 11, EBITDA, RUR mln Net profit, RUR mln Main Financial Indicators The main income of the Company in 2014 was received from the sales of uranium production that comprised 99,8% of total revenue. In the currency structure of revenue, contracts in USD and EUR are prevailing, share of other currencies is immaterial. The revenue from uranium product sales in 2014 compared to 2013 grew by 41.2% and was cumulatively influenced by the impact of the following factors: devaluation of rouble (average weighted rate of US $ by actual shipments of 2013 was RUR 31.9/US $1, in 2014 RUR 41.8/ US $1); growth of sales volume (particularly in the USA, as well as additional option and spot sales). The main constituent of other proceeds is the revenue from deliveries of foreignmade equipment to Russian customers. In 2014, the prime cost grew by 25% compared to 2013 due to the following factors: changes in the physical volumes of purchased products, given the export programme update (growing expenditures of higher sales volume) growth of prices for conversion and enrichment services growth of feed prices due to changes in currency rates The reduction of other expenditures within the cost in 2014 compared to 2013, was mainly caused by the reduction of insurance expenditures included to the cost as a result of the optimisation of insurance tariffs in the insurance programme of the Company for The table below shows the main financial indicators in a three-year hindsight. RUR mln/% Indicator against 2013 in % Revenue, total, 69,578 66,159 93, including: revenue from uranium product sales 69,539 65,948 93, other revenue Cost of sales, total, 50,411 47,067 58, including: cost related to the uranium business (expenses for uranium 49,327 46,431 58, feed, conversion and enrichment services) other expenses within cost (cost of goods for resale, 1, insurance, delivery, storage of feed, etc.) Gross profit 19,168 19,091 34, Selling expenses, total, 1,772 1,581 1, including: insurance of EUP delivery of EUP other selling expenses (insurance of business risks, export customs duties, storage of EUP, intermediary services, etc.) Administrative expenses, total, 1,848 1,853 1, including: HR expenses 1,336 1,326 1, expenses for maintenance of buildings, premises, equipment, cars, communications, IT, etc. consulting and other services (excluding general corporate expenses) G For information: In 2014, the rouble exchange rate to the US dollar, as set by the Central Bank of Russia, decreased by 72.3%.

26 48 TENEX Annual Report 2014 Sheremetyevo customs 49 Indicator Results from operating activities 15,547 15,657 31, Other income and expenses 128 3,194 15, Interest expenses Profit before income tax 14,494 11,660 14, Income tax, including DTA and DTL 3,197 2,674 3, Other payments from profit 6 330* 471* Net profit 11,290 9,315 11, against 2013 in % Current ratio Quick ratio For information: The earnings before interest, taxes, depreciation, and amortisation (EBITDA) 15,553 15,580 31, G4-EC Including the redistribution of the profit tax within the consolidated taxpayer group (see Section Finance Management ) Key Financial Standing Indicators On the whole, in 2014, no substantial changes in the financial stability indicators occurred, as compared to Profitability, liquidity and financial stability indicators dynamics are under the control of the Company and ROSATOM. Profitability indices, % In the reporting year, the Company did not receive financial assistance from the State. The growth of return on assets and return on equity, in 2014 was due to the growth of the net profit with a relatively stable average annual asset value and, equity as compared to Financial stability indicators Indicator Debt-to-equity ratio* Net Working Capital to Current Assets Ratio (excluding long-term loans)** Net assets at the year-end, RUR mln** 25,465 20,596 22,927 Assets at the year-end, RUR mln 76,805 84,042 73,241 The share of net assets in total assets, % * Values of indicators calculated on the annual average basis ** The indicator was calculated as per the Procedure for Pricing of Net Assets of Joint Stock Companies approved by the Ministry of Finance of the Russian Federation No. 84n of Indicator Gross profit margin Profit margin before interest, taxes, depreciation, and amortisation (EBITDA) Net profit margin Return on assets* Return on equity * * Values of indicators calculated on the annual average basis. The liquidity ratio maintained by the Company is satisfactory ,000 80,000 60,000 40,000 20, ,805 84,042 73,241 25,465 20,596 22, Liquidity indicators* Debt-to-equity ratio Net Working Capital to Current Assets Ratio Net assets, RUR mln Assets, RUR mln Indicator Current ratio Quick ratio * Values of indicators calculated on the annual average basis

27 50 TENEX Annual Report 2014 Sheremetyevo customs Dividends In , the dividends, including interim ones, were accrued and paid as per the resolution of the Sole Shareholder, JSC Atomenergoprom. The dividends were paid as a cash dividend. As of the 2014 year-end, the Company had a planned debts for interim dividends for nine months of 2014, to be paid to the shareholder, amounting to RUR 1,851 million. 20 At the time of this report, the Company s governing bodies had not made a decision on paying dividends for Indicator For information: net profit for the period 11,290 9,315 4,051 ** Dividends accrued on the results for the reporting year * amount 11,290 9,284 4,051 ** RUR mln/% share of net profit for the period 100% 99.7% 100% ** Dividends accrued during the period, including: 4,942 14,183 9, Payments to Budgets and Extra-budgetary Funds The Company is the largest payer of taxes and duties. The table below contains data on the accrued and paid taxes to the budgets of all levels and extrabudgetary funds by TENEX throughout Indicator Accrued Paid Taxes, total including: regional budget (Moscow), total including: 7,672 9,699 7,672 8,082 income tax 0 0 property tax 7,672 8,082 federal budget, total including: 0 1,617 income tax 0 1,617 Income tax within CTG (paid to the Responsible Participant, JSC Atomenergoprom) 3,161,481 3,177,889 Extra-budgetary funds (insurance premiums) 168, ,091 thousand roubles dividends for the preceding year 2,942 9,290 5,566 interim dividends for the reporting year 2,000 3,719 4,051 dividends for 2007 *** 1,174 Dividends paid during the period, including: 7,788 12,464 9,484 dividends for the preceding year 5,788 9,290 7,284 interim dividends for the reporting year 2,000 2,000 2,200 dividends for 2007 *** 1,174 * The data is given to compare the dividends and net profit (factual accruals and payments are made in different reporting periods, including in the year that follows the reporting year) and reflect the dividend policy of the Sole Shareholder, JSC Atomenergoprom. ** The data for nine months of 2014 (interim dividends by the results of nine months of 2014, as per the resolution of the Sole Shareholder, were paid in December 2014 (RUR 2,200 million) and January 2015 (RUR 1,851 million)). *** By the resolution of the Sole Shareholder, the dividends were paid from the 2007 net profit, which had been allocated for financing investments, but were not used. Since 2013, the Company has not been party to the agreement concerning the the creation consolidated taxpayer group (CTG) aimed at paying the profit tax in accordance with Federal Law On Amendment of the First and Second Parts of the Tax Code of the Russian Federation in Connection to the Creation of the Consolidated Taxpayer Group No. 321-FL of The CTG-participating organisations unite to calculate and pay the profit tax, considering the cumulative financial result of their economic activities. The profit tax is paid to the responsible participant of CTG, i.e., JSC Atomenergoprom. The CTG participants are the companies within ROSATOM s control. In 2014, participation in CTG allowed the Company to reduce payments of the profit tax by RUR 458 million in response to the outcomes of the cumulative financial result of the CTG participants economic activities. 20 Fully paid in January 2015.

28 52 TENEX Annual Report 2014 Sheremetyevo customs Investments TENEX invest activities are in line with the Unified Sectoral Investment Policy of ROSATOM and its entities. The Investment Committee of the Company is empowered to decide on the investment planning, management of investment projects, sub-programmes and financial investments of the Company. The investment programme is described in the business plan of the Company. The plan is updated annually with the aim to integrate investment, midterm and strategic planning processes; it is approved by the Strategic Board of ROSATOM. Management of the composition and content of investment projects and measures in the project portfolio of the Company and its subsidiaries is aimed at the secure implementation of the investment programme with the approved control parameters being observed. The integrated approach to investment solutions assumes a comprehensive analysis of financial, economic, technical, organisational, environmental and other aspects of each investment project, the results of which are formalised as an investment project certificate. In 2014, the Company continued its work to improve the investment activity management system. A technical and economic audit of investment projects was carried out to optimise investment volume. Its outcomes revealed windows of opportunities for investment expenditure reduction. A great deal of attention was paid to improving the methodological basis that regulates the processes of investment management activities: updated requirements for the generation of financial and economic models of investment projects in the framework of the certification were introduced along with the Unified Sectoral Policy of Management of Capital Investments, the new revision of the Unified Sectoral Procedure for Planning and Reporting on Capital Investment Projects, and Unified Sectoral Methodological Guidance for Preparation of Projects for Investment Decision-making. In the reporting year, the Information System for Project Portfolio Management (ISPPM) was commissioned for the pilot commercial operation. The processes of the project portfolio build-up and analysis of the investment programme implementation (ISPPM-Monitoring), diary and network scheduling, control of project implementation by milestones and outcomes (ISPPM-Primavera) have been automated to improve the level of investment planning, as well as control over the effective and targeted use of investment resources. In 2014, the investments comprised financial investments in the subsidiaries to develop the sectoral transportation infrastructure and capital investments to: purchase 30B and 48Y containers for uranium product shipments related Investments to the transportation and logistics complex development programme; enhance hardware and software information protection (stage two); and upgrade the data processing centre equipment. RUR mln (VAT exclusive) Indicator Investments, total including: main assets non-tangible assets long-term financial investments (acquisition of shares, interest in companies)

29 EFFECTIVE MANAGEMENT OK * *A key of control consoles of modern gadgets used everywhere. Allows the user to select the next operation and confirm correctness of selection. 4. Performance Management 4.1. Key Performance Indicators 4.2. Risk-management and Development of Compliance System 4.3. Finance Management 4.4. Cost Management 4.5. Procurement Management 4.6. Management Systems 4.7. Human Resources Management 4.8. Internal Control and Audit 4.9. Nuclear Material Control and Accounting Economic Security and Anticorruption Fine tuning

30 56 TENEX Annual Report 2014 Performance Management Key Performance Indicators A modern tool of performance management the key performance indicators (KPI) system was implemented at TENEX in The basic principle of the KPI system functioning is the decomposition of ROSATOM s strategic goals to financial, economic, and production performance indicators of organisation and individual targets/projects of their respective leaders over the course of a year. 4.2 G4-2 In the framework of cross-functional sectoral projects realization and based on the uniform methodology, ROSATOM includes into the KPI report cards of the heads of the functional arms of the entities (economics and finance, accounting, corporate legal activities, human resources management, procurement, information support, etc.) unified sectoral function indicators. Starting in 2013, the KPI was extended to all employees of TENEX, its subsidiaries in Russia, and the heads of its subsidiaries abroad. In 2014, the KPI set by ROSATOM for TENEX General Director were accomplished 100% and more: adjusted free cash flow (AFCF), RUR billion; proceeds in the global market, USD billion; ten-year orders portfolio, USD billion; revenues from EUP sales (including fuel assemblies, pellets) on the whole of NFC, RUR billion; reduction of uranium-containing inventory on the whole of t the front-end of NFC, RUR billion; reduction of order fulfilment and logistics time (in the framework of implementation of the ROSATOM Production Programme); and fulfilment of key events of new businesses (projects Regenerate, Promotion of Back-end Services, Development of System of Material Accounts ). Risk Management and Development of Compliance System Since 2010, the Company has set up and operated a risk management system (RMS) that is harmonised with the ROSATOM s risk management system 21 The goals of the RMS are fixed in the Company s Standard The Policy and Basics of the Risk Management Organisation and Methodology of TENEX. The Company s RMS includes the organisational, methodological, and instrumental platforms based on best practices; the periodic processes of detection, prioritization, assessment, and monitoring of risks, drawing out and implementing measures to manage these risks, and the communication of riskrelated information. In the reporting year, in the framework of RMS development, work was done to solve the following main tasks: increased provision of key business processes (strategic planning, contracting of uranium products and sales, management of credit risk, protection of assets) with RMS regulations and methodological documents, including risk analysis procedures; 21 Detailed information is given in the public annual reports of the Company for 2012 and 2013 posted on the website of the Company at: drafting the key risk management programmes of the Company intended to conform to the risk preparedness boundaries set up by ROSATOM. Key risks of the Company, risk responses, and risk management measures Remaining long-term negative consequences of the Fukushima-Daiichi NPP accident aggravated the downward trend of uranium enrichment price indicators (for details, see Subsection ) and the volatility of price indicators for NFC products and services in the world market due to: uncertainty of restarting the Japanese NPPs; revision of nuclear development programmes by a number of countries; accumulation of substantial inventories; weakening of competitiveness of nuclear power caused, on the one hand, by the necessity of additional investments in the safety of the operating NPPs due to more stringent requirements after the accident at Fukushima-Daiichi NPP and, on the other hand, low prices for hydrocarbon fuel that led to early shutdowns of some operating units and delays/abandonment of construction of new NPP reactors. Deterioration of the general political and economic situation due to events in Ukraine and the introduction of sanctions against Russia by the USA and EU in 2014 has led, particularly, to an assessment by the risk management of several utilities that the level of reliability of Russian uranium product delivery is insufficiently high, which could certainly negatively affect the perspectives of growth of the Company s export portfolio. In the meantime, many foreign partners consider the imposition of sanctions on Russian uranium products/companysuppliers or sanctions on the financial sector that prevent payments for supplied products unlikely. Much more complex correlational relationships between the risks of the market environment has required more diligent evaluation, in the course of the Company s strategy development, of values at risk (VaR), of expected market share, sales volume, proceeds, and free cash flow, in its strategy elaborations. Seeking an improvement of the assessment methodology for these values at risk, in 2014, work done jointly with NRNU MEPhI was completed to format the quantitative assessment model of strategic market risks with the use of the forecasting of demand, offer and market prices, simulation of scenarios of competitive activities over market demand to determine values for market share, sale and proceeds volumes at risk. Results of the work allow to specify the assumptions adopted when formulating the Company s business strategy (Chapter II) and will be used in the next cycle of strategic planning. In the reporting year, work was done to enhance operational efficiency through the building up and application of inhouse methodologies for the estimation of the fair insurance premium in insuring of counterparties default (the risk of the failure to meet their obligations to pay for supplied uranium product) and the risk of accidental destruction or damage to the uranium product in the process of manufacturing. Elaborated methodologies were applied in the evaluation of the initial maximum price of insurance policies for 2015.

31 58 TENEX Annual Report 2014 Performance Management 59 Regarding the management of key operational risks, failures of business processes through the performance of concluded contracts are primary. In the reporting year, the 1st stage of the computer-based Situation Risk Prompt Response System (SRPRS) was put into operation as a measure to shift from post-factum information processing of such risks to proactive response before a loss appears. This software pack displays every document, event, and milestone in retrospect of its handling and, when risks emerge there is the possibility of sending automatically or manually an alarm signal to stimulate a prompt response to minimise those risks. In the reporting period, a practice of the Company s risk prioritisation through inquiries of the risk owners 22 was continued. The inquiry objective is to create a list of the 15 (Top-15 risks) most significant risks out of the general register of identified risks of the Company over three time periods, i.e., in the coming year, mid-term, and in the strategic planning horizon. A relative risk value of the Top-15 measured against the 2013 values is given on the risk radars below. The risk radar on the left (A) shows the relative significance of risks in the short-term (2015), mid-term ( ), and strategic (until 2030) time intervals. The risk radar on the right (B) shows the risk level dynamics as estimated in the IV quarter of 2014, as compared to the estimates made in the IV quarter of 2013 (for the purpose of comparison, are shown the risks estimated on the business planning horizon are shown). B. Change of risk significance following the inquiry in 2014 as compared to 2013 The Company partners business process failure risks The Company s business process failure risks Investment risks Liquidity risk Impossibility to get required loans Interest risk Managerial decision risks in relation to the Company Perception risk ( reputation risk ) Resource supply risks Planned deal cancellation risk Market capacity change risk Competitive environment risks Commodity risks (price and volume) А. Significance of risks at different planning horizons Currency risk Macroeconomic risks Political risks Coming year The Company partners business process failure risks Investment risks Tax risk Credit risks Liquidity risk Impossibility to get required loans Mid-term (5 years) Strategic horizon Interest risk Currency risk Managerial decision risks in relation to the Company 22 Top and middle managers of the Company responsible for identification, initial assessment of the risks they are assigned to, as well as for development and execution of measures to manage such risks, at the same time are owners of the Company s business processes Macroeconomic risks Perception risk ( reputation risk ) Regulatory risks Resource supply risks Planned deal cancellation risk Market capacity change risk Competitive environment risks Commodity risks (price and volume) Political risks In comparison with 2013, the most considerable upward changes in the estimation of significance have occurred with respect to the following classes of risk: political risks due to the increased uncertainty of future conditions of the Company s activities in the context of international political and economic situation development; reputation risks due to the aggravated political and economic situation could reduce, in spite of the Company s impeccable reputation in the past, reduce the trust of customers in the security of the Company s deliveries due to a threat of sanctions and higher risks of trade constraints perceived by them; macroeconomic risks because of the worsened economic situation in Russia as a result of the world energy price drop and the sanction policies of the USA and EU; risks of the impossibility of getting required loans due to both the worsening of the liquidity situation (especially currency) in the Russian bank sector and the growth of loan interest rates in the Russian market and the growth of uncertainty regarding the accessibility of foreign loans if financial sectoral sanctions are strengthened. The greatest decreasing change in the significance estimation from 2013 is seen in terms of: risk of failure of business processes because of the further development of the quality management and supply chain security systems in the Company, as well as commissioning of 1st stage of SRPRS; resource supply risks due to the diversification of feed purchase sources.

32 60 TENEX Annual Report 2014 Performance Management 61 The VaR quantitative assessment is carried out in the Company in terms of certain financial and some strategic risks that are caused by the uncertainty (volatility) of future market price indicators for natural uranium, conversion and enrichment services, macroeconomic parameters, i.e., inflation indices, interest rates, and some other market uncertainties. 100% 80% 60% 40% 20% 0% The VaR measure of risk was assessed by various indicators, such as proceeds, EBITDA and AFCF. A. Proceeds at risk B. EBITDA at risk The results of the VaR assessment made in 2014 for a business-planning horizon ( ), with regard to risks that are estimated quantitatively, show that a relative level of factor of the currency risk to proceeds and EBITDA is 40 50% (Diagrams A and B below, correspondingly). The remaining share falls with the commodity price and volume risks, as well as the risk of the Company s inability to implement strategic projects The Company s risks insured in the reporting year Civil liability for nuclear and radiation damage Risk of loss and damage of the Company s goods (both package and packaging during transportation) Risk of loss and damage to material assets of the Company during the production process Credit risk relative to the partners who are customers of the Company s products (the business risk), i.e., the probability of the Company s partners to improperly meet their cash commitments to the Company Mandatory insurance 23 The Company takes this risk under all contracts to the uranium products delivery point of customers as per its business practices. The ratio of this risk value (a product of probability and potential loss) and the insurance premium demonstrate the expediency of its insurance. The Company uses its own feed while manufacturing the products to be delivered at the industry enterprises. In spite of the high level of production standards and low probability of such risk, the Company has come to the conclusion that an extremely high value of potential damage can entail a breach of continuity and sustainable development of economic activity; in this connection, the decision to insure this risk was made. Since 2009, the Company has annually insured the credit risk relative to the partners who are customers of the uranium products. The Fukushima-Daiichi NPP events and strengthening macroeconomic turbulence also raised its probability by negatively affecting the ability of some partners of the Company to pay. For insurance purposes, the Company estimates the probability of inappropriate meeting by a partner of its cash commitments by one delivery based on an analysis of the financial conditions and qualitative characteristics of the partner s business sustainability, as well as by considering the credit ratings of the partner or its parent company. The maximum insurance premium level that is acceptable for the Company is calculated in compliance with the obtained estimation of such probability, as well as risk cost. The insurance companies are selected on a competitive basis through bids out of those recommended by ROSATOM; their solvency is treated as a weighty non-monetary criterion. Strategic projects Commodity volume risk (options) Commodity price risk (inflation in the USA and EU) Commodity price risk (conversion) The most significant risks of the Company (including from the aforementioned list of Top-15) and methods of responses to them are described in Appendix No. 7. Risk Management and Insurance TENEX uses insurance as a one of its risk management measures consisted in its transfer. Insurance is applied by the Company for low-probability, poorly managed risks, the consequences of which may be significant for the Company, as well as in cases stipulated by legislation. Commodity price risk (SWU) Commodity price risk (U 3 O 8 ) Currency risk Insurance is chosen through competition with preliminary justification of the riskto-insurance premium values, including the influence of potential damage to the continuity, stability and sustainable development of the Company activity. Development of the Compliance System The compliance system is the Company s first line of defence against risks arising in the process of its external communications with governmental bodies, including regulatory agencies, as well as partners, as a result of nonobservance of the law and international standards of doing business that may lead to fines, reputational losses, and consequent systemic difficulties in the implementation of the Company s projects. Exercise of the compliance function consists in the continuous updating of the local regulatory base in accordance with the changing requirements of national and applicable international law, as well as revealing and eliminating inconsistencies between TENEX s business practices and the requirements of a recommendatory nature, customs, and best business practices, which can constrain the Company s activities or negatively affect its competitiveness. 23 As per the Unified Sectoral Methodological Guide on Organisation of Insurance of Civil Liability for Nuclear Damage introduced in the Company by order of General Director No. 006/27-P of

33 62 TENEX Annual Report 2014 Performance Management 63 Management of the first constituent of the compliance function (compliance with legal acts) implements within the framework RMS. 24 For example, whether an electronic declaration is filled out correctly before submission to the customs is checked automatically by the special software Avtokontrol; also, procurement reporting is partially automatised. 25 Not revealed. To effectively manage the second constituent of the compliance function (compliance with the accepted routine of business), an analysis of requirements set forth by foreign partners and national regulators to the Company and products it delivers, an assessment of the Company s ability to meet these requirements and consideration of this ability in the decision-making on the project implementation (close a deal) is carried out on a regular basis. As per the compliance function development plan for , an analysis of measures for the management of compliance risks was carried out in Finance Management The Company s financial policy complies with the requirements of financial policy, corporate standards, and regulations of ROSATOM, and is aimed at the timely fulfilment of cash commitments owed to creditors, raising the financial stability of the Company, and the effective use of financial resources. The following main processes are regulated in the Company to implement the financial policy: the procedure for purchasing financial services, including competition-based fund rising; The questioning of the risk owners resulted in: compiled lists of the Companysignificant fields of compliance, compliance function regulators and the nature of their activities, as well as regulatory acts for compliance function management; identified formats of corporate reporting, lists of the Russian and foreign third parties who assess the compliance system or its separate elements, as well as compliance functions, the fulfilment of which is partially or fully computeraided; 24 analysed consequences of implementation of the compliance risks in the Company s activities and the probability of their emergence in 2014 and on the horizon of 2017, the necessity of amending 25 the functionality of the structural subdivisions in terms of compliance, as well as the regulations of ROSATOM in specific areas of compliance. the procedure and criteria for selection of partner-banks; the debt portfolio management; management of intra-group financing and placement of free cash resources; carrying out operations to hedge currency risks. Financing of the Company s activities is largely achieved through loans. The main volume of loans is attracted in US dollars and euro. In 2014, the TENEX credit portfolio in roubles grew by 13% to reach RUB 39.1 billion at the year-end due to revaluation due to depreciation of the rouble. In US dollars, the credit portfolio volume slipped by 36% over that period and totalled US $694.7 million at the year-end, including Financial covenants* under the syndicated loan Indicator 26 Based on the Bank of Russia statistics. Acceptable value US $166.6 million that constituted the principal amount of debt on the longterm syndicated loan given by a group of international banks headed by Deutsche Bank AG in Under the syndicated loan terms, the Company maintains the level of financial covenants requested by the lenders, whose factual values dynamics are evidence of the Company s financial stability Debt/EBITDA not more than EBITDA/Interest cost ratio not less than Owner s equity, RUR billion not less than * The covenants are calculated as per the loan agreement methodology. In 2014, the Company provided a high diversification of lenders and a lower cost of loans, as compared to 2013, in spite of the worsened situation in the corporate loan market due to sanctions against Russia imposed in the second half of the year. As the average annual credit portfolio in US dollars slipped by 2.8% against 2013, in the reporting year, its average weighted value dropped by 5.68% to reach 2.55%, with the average effective interest on TENEX s loans being twice as low as the interest rates on loans provided by the Russian banks to non-financial organisations for the same time period. 26 The Company continuously improves its mechanisms of financial control and budget planning. To ensure reasonable assurance of external and internal users in the credibility of financial reports, TENEX applies the system of internal controls of financial reporting (hereinafter referred to as SIC FR). The internal control of accounting and accounting (financial) reporting is carried out in accordance with this system. A set of measures to improve SIC FR, including the development and introduction of control procedures regarding new accounting processes, as well as performance assessment of control procedures by key processes, is done in the framework of the existing SIC FR regulations. Being part of the overall budget process of ROSATOM, the Company s budget processes are designed in accordance with sectoral planning and budgeting regulations and standards, including the planning methodology, budget reporting, and duration of measures.

34 64 TENEX Annual Report 2014 Performance Management 65 The budget process is one of the key elements of the Company and its subsidiaries activity management system, which allows for the correlation of operational results with mid-term and strategic financial plans. 4.4 In the Company, there is the permanent Budget Committee, which reviews and makes decisions on the annual budgets and mid-term plans of the Company and its subsidiaries. The Company s budgets are reviewed by the Budget Committee of ROSATOM and approved by the Board of Directors. Cost Management Since 2014, TENEX has implemented the Cost Management Programme (hereinafter the Programme). The Programme s goal is the systemic optimisation of business and management processes by revealing potential additional reserves in cost reduction. The Programme that covers includes measures that do not require massive investments, while ensuring a substantial economic effect, the total amount of which is estimated at RUR 2.3 billion. TENEX s budget control system not only allows control over the targeted use of its funds, but also operatively assesses how changing conditions of business dealing affect the Company s performance, which, in turn, ensures the timely development and implementation of measures needed to achieve the pre-set target levels for the financial indicators. The priority cost reduction areas are transportation infrastructure and transportation services, financial activities, administrative-economic activities, and the management of subsidiary companies. New areas of cost reduction are assumed to emerge. The Programme implementation and, as a consequence, improvement in efficiency of managerial and business processes is viewed as one of the tools that ensures the Company s competitiveness. The competitive procurement procedures are run by TENEX on three Russian electronic trading platforms: Fabrikant: Auction Tender House (AKD) Uniform Electronic Trading Platform (Roseltorg) In the reporting year, the total procurement of TENEX was over RUR 3.4 billion. The substantial difference in the 2014 procurement from the similar 2013 indicator (RUR 34.4 billion) was caused by the change in the calculation methodology for the indicator: apart from product purchases from sectoral manufacturing plants, which are the sole suppliers in line with the List of Special Goods, Works and Services for Nuclear Industry Needs, valid under USPS, when purchasing of financial services there are considered in APP according to para of USPS as a planned value not the total amounts of attracted loans but only the sums of expenses for acquiring and servicing them i.e. credit interest. Economy of the budget funds is one of the most important criteria for the assessment of procurement efficiency. In 2014, the Company to achieve a saving rate of RUR 90.3 million when conducting procurement procedures. The relative decrease in procurement efficiency compared to the level is mainly due to the strengthening of controls over the initial maximum price calculations in 2014, including announcing the competitive procurement procedures with their prices corresponding to the minimum market levels and, in cases where the prices are restrained by budget limits, below the market levels. The average value of the competitive procurement economic efficiency of the Company was 3.5%. 40% of all procurements were carried out with an efficiency of over 10%. The maximum value of this indicator was 80% in All procurement KPIs established by ROSATOM were fulfilled by TENEX, and the indicator Share of Open Procurement Procedures exceeded the upper level (97%) and, more precisely, was 98.53%. In the reporting period, no claims concerning violation of procedures of tender were filed. 4.5 Procurement Management TENEX procurement activity is in accordance with the Federal Law No. 223-FL of On Procurement of Goods, Works and Services by Certain Types of Legal Entities and the Unified Sectoral Procurement Standard (hereinafter referred to as USPS). To improve the transparency of procurement for potential Russian and foreign suppliers, the Annual Procurement Programme of the Company (hereinafter referred to as APP) is posted on the official governmental website and sectoral website Management Systems Introduction, certification and development of the management systems complying with international requirements and standards create an opportunity for further business expansion while ensuring the required level of security and safety of product deliveries. TENEX has implemented and continuously improved the corporate management systems that were certified according to the standards DIN EN ISO 9001:2008 the quality management system (QMS), DIN EN ISO 14001:2009 the environmental management system (EMS), and ISO 28000:2007 the supply chain security management system (SCSMS). G4-DMA

35 66 TENEX Annual Report 2014 Performance Management 67 Since most European utilities conduct a corporate social responsibility policy, which obliges them to cooperate only with suppliers who act in observance of certain international standards (DIN EN ISO 9001:2008, DIN EN ISO 14001:2009, etc.), the Company not only fully meets these requirements, but demands the same of its suppliers-providers of NFC goods and services. In the reporting year, TENEX continued the meetings with European utilities to inform the customers on the state and development of quality management system and the environmental management system in the Company and ROSATOM. Audits are carried out along with the monitoring of the conformance to the stated international standards of export-import NFC product delivery management business processes, including contracting, sales planning programme and its resources, customs clearance and licensing, transportation and warehouse logistics, and sales of the products. G4-DMA In the framework of the certified management systems, the monitoring is carried out through: In December 2014, the Company received an audit of the integrated management system (second recertification audit) for compliance with requirements of the standards EN ISO 9001:2008 and EN ISO 14001:2004/DIN EN ISO 14001:2009. This audit resulted in the prolongation of validity of certificates 27 No. TIC and No. TIC until the end of G4-PR4 In the reporting year, the certification and monitoring audits revealed fewer issues as compared to the preceding periods, as shown in the chart below: SCSMS EMS QMS compliance with the Russian and foreign legislative and regulatory requirements; nuclear and radiation safety of shipments; degree of the Company s customer satisfaction; Quality Management environmental aspects and risks, as well as risks in the supply chain; other aspects and parameters. In 2014, the certified management systems cost RUR 465,600, including RUR 163,300 for EMS. G4-EN In 2014, one of the European customers of the Company carried out a documentary audit of the certified management systems; it resulted in a positive statement, since non-compliances were not revealed. G4-DMA The QMS of TENEX the basis of the corporate management system has been certified by the German Certification Body TÜV THÜRINGEN in 2008 as being compliant with requirements of the international standard ISO 9001:2000 in organisation and execution of export-import operations with NFC products. An annual questionnaire poll of foreign customer-companies is held in the framework of QMS to determine the degree of customer satisfaction, which is a key indicator of the Company s performance. As per the inquiry held in the reporting year, (29 questionnaires were processed), the overall Company s customer satisfaction index was 100%, which corresponded to the set quality targets for this indicator for 2014 (not less than 95%). 27 Valid since

36 68 TENEX Annual Report 2014 Performance Management 69 G4-PR5 Dynamics of changes in overall satisfaction index in % 98% 96% 94% Satisfaction Index (factual) Target Satisfaction Index Dynamics of distribution of feedback questionnaires in Europe the Americas Asia and Africa Environmental Management G4-PR4 In 2010, TENEX was granted a certificate of EMS compliance with the requirements of the international standard DIN EN ISO 14001:2009, which evidenced that the Company was using an integrated approach to solving environmental safety issues (ensuring nuclear and radiation safety during transportation, compliance with Russian and international legal and regulatory requirements, managing environmental issues, etc.), as well as confirming the implementation of a mechanism for the analysis and assessment of environmental aspects. In the reporting year, an EMS the second certification audit regarding compliance with requirements of the standard DIN EN ISO 14001:2009 was carried out Supply Chain Security Management In 2012, for the first time in Russian nuclear industry, the Company was granted by the TÜV THÜRINGEN e.v a certificate of compliance of its SCSMS to the International Standard ISO 28000:2007. The main objective of SCSMS is the improvement of the reliability and security of product deliveries through the creation of a system of risk management regarding the security of export-import supplies of NFC products in the Company. 4.7 G4-DMA G4-LA4 G4-LA2 The SCSMS certification signifies an international acknowledgement of the Company s competencies in security management at all stages of the logistics Human Resources Management Being guided by the legislation of the Russian Federation, the Agreement of the All-Russia Employers Organisation Union of Employers of Nuclear Industry, Power and Science of Russia, sectoral and local regulations, the Company observes labour relationship norms in the area of remuneration, labour conditions and protection, work and rest schedules, employment, social security, benefits, and compensation for employees. 28 The Company notifies employees about upcoming material changes in the regulation of social and labour relations two months prior to their effect. The Provisions on Social Benefits and Incentives of TENEX Employees due to Awarding establishes a unified procedure of rendering financial support, as well as types, sizes, and rendering terms of such support, additional payment for sick leave, and benefits for employees if they are given state awards from the Russian Federation. supply chain of nuclear products, which is an important element in increasing the Company s competitiveness in the world market. In 2014, the second monitoring audit was carried out regarding the SCSMS, which resulted in three issues being raised and no non-compliances reported. Sections of the supply chains vulnerable to significant threats and risks were identified for the development and improvement of the SCSMS. Furthermore, measures were worked out to reduce supply chain risks and consequently enhance the reliability of contractual obligations performance towards customers. The Provisions covers all employees who have signed labour contracts with the Company, excluding those in the initial trial period or in secondary employment as well as those contracted for up to one year. Priority areas of the Company s activities in human resources management in 2014 were (for details, see Subsection ): the updating of the professional competencies model and shaping their multilevel development system; the selection of key managers/employees and forming the modular programme of their managerial competences and personal effectiveness development; the preparing and promoting managers/ employees in the sectoral personnel reserve In the reporting year, there were no claims for labour relations practices. G4-LA16 G Collective Bargaining Agreement in TENEX is not concluded.

37 70 TENEX Annual Report 2014 Performance Management Description of Personnel The highly skilled personnel of TENEX, whose efficient work has ensured the successful achievement of performance targets over many years, has been and remains the key strategic resource and core value of the Company. In 2014, the Company s employees were given ROSATOM s and TENEX s awards for striking results, as well as for productive and efficient work: The table below shows data on changes in the personnel number of the Company in three-year hindsight. Number of employees Staff number, persons Average staff number, persons G4-LA1 Education level of the personnel persons % Awards and commendations from ROSATOM, in total including: Badge of Merit for the Nuclear Industry 3rd Class 19 2 Actual payroll staff number, persons Newly hired, persons Share* of newly hired, % * Of the Actual payroll number. Number of employees with academic degree Number of employees with MBA More than 90% of the Company s employees have core education, including in foreign economic activities, logistics, finance, law, and human resources management. Certificate of Honour 9 Letter of Gratitude 8 Awards and commendations from TENEX, in total including: Certificate of Honour 18 Letter of Gratitude G4-10 All employees of TENEX (361 persons) are regular and full-time employees. As of the end of 2014, of the 361 employees (actual payroll number) of the Company, there were 39.9% (144 persons) men and 60.1% (217 persons) women. The share of employees who had worked more than five years in the Company is 65%. Number and share of newly hired in 2014 by gender and age persons % Newly hired, total 29 8 of them: G4-DMA G4-LA11 The results of the regular annual appraisal RECORD (given in the table below) in 2014 confirmed the high performance level of all employees of TENEX. Distribution of final evaluations employees, % А Exceptionally high level of efficiency 3 В High level of efficiency 20 С Standard level of efficiency 75 D Below standard level of efficiency 2 E Unsatisfactory level of efficiency 0 Number of employees As a result of the optimisation carried out by ROSATOM s decision, the Company s staff number decreased by 1.6% and consisted of 362 persons as of the end of The average staff number decreased as compared to 2013 primarily due to the release of employees after completion of the contract for technical assistance in building of the 4th stage of the GCP in China and consisted of 326 persons. The actual payroll staff number decreased 29 by 2.7% as compared to 2013 and was composed of 361 persons who are employees of over 40 structural subdivisions of the Company at the department/unit level. G4-9 Actual payroll staff number by the type of employment contract and gender*, persons Employed under openend contracts, total of them: women 199 men 137 Employed under terminal contracts, total of them: women 18 men 7 * Released for first time. Women Men of them in the age of: under 30 years old years old over 50 years old Information on the staff turnover in the reporting year by gender and age is given in the table below. Staff turnover by gender and age groups persons % Discharged, total of them: Women men of them in the age of: under 30 years old G4-LA years old 20 8 over 50 years old At the expense of ten persons dismissed from Of them, 10 persons resigned (2.8%)

38 72 TENEX Annual Report 2014 Performance Management 73 In the reporting period, 23 persons had the right to go on parental leave, consisting of 17 women and 6 men 31. G4-LA3 The table below shows the data on the personnel movements due to maternity leave and the parental leave in three-year hindsight. As of the end of 2014, 33 women (9.1% of the staff schedule of the Company and 15.2% of working women) were on parental leave for up to three years Left on maternity leave and paternity leave, persons Returned after parental leave, persons Resigned after return from parental leave, persons Share of those who remained with the Company after maternity leave (after 12 months expired 32 ), persons Remuneration G4-DMA According to the Provisions for Labour Remuneration and Incentive of TENEX s Employees, an employee s wage consists of a fixed official salary, an integrated incentive weighting set up according to the level of qualification and performance, and an annual bonus dependent on meeting the established KPIs. In 2014, the total wage fund amounted to RUR 1.14 billion; the overall personnel expenses were RUR 1.16 billion. The minimum wage level of TENEX employees in the reporting year was RUR 50,000, which exceeds the minimum wage level in Moscow 37 by 3.6 times. The average wage at TENEX in 2014 grew as compared to 2013 by 5% and was RUR 202,000, which is over three times the same indicator in Moscow. 38 TENEX observes the principle of gender equality and non-discrimination; the basic salary for men and women within the same grade are equal. G4-EC5 G4-LA13 Return ratio, 33 % Retention ratio, 34 % 85.7 G4-LA6 The absentee rate due to incapability to work 35 in 2014 was 1.8% (women 2.3%; men 1.1%). Age and gender characteristics of the personnel Personnel by gender, % Men Women Personnel by age groups, % under 30 years old years old over 50 years old The share of employees under 35 years old practically remained at the level of 2013 and was 45.7%. Average age of employees, years Managers Specialists Main categories of the personnel by gender and age groups, % Managers Men Women In the age of: under 30 years old years old Specialists G4-LA Recruitment, Training and Advancement of Personnel Recruitment In the recruitment, advancement and assessment of the personnel, the Company uses the professional competency model (PCM), which was developed and introduced by TENEX in Specialists are recruited on a competitive basis after an interview and testing procedure. The main screening criterion is a candidate s conformance to the position requirements, which is determined with the use of professional competency models. As in previous years, TENEX continued its cooperation with leading Moscow-based universities, primarily with NRNU MEPhI, to attract young specialists. Traditionally Company specialists deliver lectures to the students and post-graduates of NRNU MEPhI, which is a leader in the training of human resources for the nuclear industry, and take part in the ROSATOM Career Days held at NRNU MEPhI. over 50 years old No men used the right for parental leave 32 Released for the first time. 33 Number of those who returned after parental leave to those hwo had to return. 34 Number of those who remained with the Company after 12 months following parental leave to those returned after parental leave in the preceding reporting period 35 Not associated with an occupational injury or occupational illness. 36 From the unit head up. G4-DMA 37 The minimum wage level is set by taking socioeconomic conditions and cost of living of the able-bodied population in Moscow into account and cannot be less than the minimum wage level in the Russian Federation. An agreement on the minimum wage in the city of Moscow for 2014 between the Government of Moscow, Moscow s unions and Moscow s associations of employers. System GARANT: statistics/wages/

39 74 TENEX Annual Report 2014 Performance Management 75 The well-proven practice of the recruitment of candidates for employment in the Company through the organisation of training for nuclear-related university students continued: in 2014, nine students of NRNU MEPhI did job training and pre-graduation practice; one of them was employed by the Company. Personnel recruitment information in the reporting year is given in the table below: of employees. It takes into account both highly specialised and full-range (allied or end-to-end) areas of expertise. The new PCM of the Company will help to optimise the personnel recruiting process: more specific professional requirements provide an opportunity for minimising the involvement of managers in the evaluation of potential candidates for filling vacant positions. G4-LA9 Average annual training hours by employee categories and gender in the reporting year were: hours/persons Average annual training hours 2014 by categories: managers 79 specialists 40 by gender: men 55 women 46 A cycle of trainings to advance business qualities, professional competencies, and skills was developed and conducted jointly with the Corporate Academy of ROSATOM for the Company specialists on: activity planning and organisation; application of systemic thinking skills; control of conflicts, professional assurance; G4-DMA G4-LA10 Total number of filled vacancies persons 30 Recruitment of the personnel from the external labour market Recruitment of the personnel from the nuclear industry In 2014, the Company introduced a new organisational and functional structure. This was accompanied by updating PCM, which is aimed, primarily, at the unification of the professional competencies structure. G4-DMA persons 21 persons 9 The new format for PCM has already allowed the formation of a multilevel, minimally three-year programme in 2014, for the education and career development Personnel Education In 2014, 70% employees of the Company participated in training and advanced training programmes. The total time of internal and external training amounted to 16,344 hours in 2014, (of which 6,431 hours were for managers and 9,931 hours were for specialists), i.e. to more than 50 hours per employee (based on average staff numbers). With the aim of retaining the continuity of personnel the Company set up a mentoring system in a manner and under terms stipulated in the internal regulations. The table below gives information on training expenses in three-year hindsight. Indicators Total training expenses, RUR thousands Average staff number, persons Training expenses per employee, RUR thousands Training time per employee, hours 9,094 9,669 9, In 2014, four managers of the Company did the compulsory training that was necessary to obtain Rostechnadzor s permit to work in the field using atomic energy (total time of that training was 288 hours). Four employees of the Company s Accounting and Taxation Department did their training and were successfully qualified under ROSATOM s evaluation of professional and technical knowledge and skills of accountants occupying managerial positions in sectoral organisations (Order No. 1/687-P of ). According to the Provisions of Training for Specialist in Preparedness Activity and Mobilisation of ROSATOM (Order No. 1/800-P-dsp of as revised in Order No. 1/1466-P-dsp of ), six managers of TENEX did their training in ROSATOM CICE&T in In the reporting year, 40 employees of TENEX who process documents in foreign languages and/or take part in negotiations with foreign partners participated in English language courses. effective communication; activity efficiency management; effective presentation skills, visualisation standards; negotiations; time management. During the period from July to October 2014 in TENEX, a cycle of lectures on the key issues of the nuclear fuel cycle back-end was given by Russian specialists and experts. Top Company managers and specialists were given an opportunity to receive updated systematic information that is necessary for the successful implementation of a strategic project or for the promotion of services in this area in markets where TENEX has a presence.

40 76 TENEX Annual Report 2014 Performance Management 77 To advance the technical qualification level, 14 specialists of TENEX did their study course in SC Urals Electrochemical Integrated Plant in Novouralsk, the world s largest uranium enrichment plant. In 2014, the Company moved to a new organisational structure. With that, over 30% of managers and specialists of the Company from the sectoral personnel reserve were promoted or moved horizontally: two of them occupied managerial positions in TENEX, two others were in the other sectoral companies. The share of positions that were filled as a result of the sectoral personnel reserve was 100%. G4-LA10 Build-up and Development of the Personnel reserve To ensure continuity and the timely training of managerial staff, in 2014, the key specialists under 35 years old (57 persons) were screened out on the basis of the developed criteria to fill the managerial positions. A succession plan for filling managerial positions in the Company and its subsidiaries (27 persons) was formulated and agreed upon with the top managers. Three programmes of development were worked out for the said employees: The first training workshops started at the end of The business simulations Effective Strategic Thinking and Delta. Team of Professionals were run for Programmes (2) and (3), respectively. The programmes implemented by ROSATOM consisting of four to eight topical education modules. They are aimed at the development of managerial skills and business qualities, as well as professional and corporate competences. In 2014, nineteen employees of the Company successfully completed the sectoral modular programme Global Professionals. This will give them the advantage in filling vacant positions in the foreign subsidiaries companies. The table below contains information on the participation of TENEX s employees in career development programmes: Sectoral personnel reserve, persons 27 Sectoral personnel reserve, %* 7.4 Intracorporate career development programmes, persons Intracorporate career development programmes, %* * Of the staff number (1) I-Team-Business support of expertise in business management; participants nine managers of the Company who did ROSATOM s Capital training programme; (2) I-Team development of expertise in management; participants 28 persons who did training in advancement of key employees of the Company in ; and (3) I development of personal efficiency and horizontal interaction; participants 47 persons of under 35 years old who previously did not participate in corporate programmes concerning key employee advancement. In addition to corporate programmes working with key managers and specialists of the Company, in 2014, work continued to form the Company s personnel reserve and its advancement in the sectoral development programmes: ROSATOM s Asset (personnel reserve to fill the positions of sectoral top management) four persons; ROSATOM s Capital (personnel reserve to fill the positions of line managers) nine persons; ROSATOM s Talents (personnel reserve to fill the positions of sectoral low-level managers/heads of project teams) two persons. 4.8 Internal Control and Audit The internal control system of the Company is built in line with the basic principles of the Internal Control Policy of ROSATOM and is directed at the enhancement of activity efficiency as well as at guaranteeing achievement of the goal, while strictly observing legislation norms. The internal control system subjects are the governing bodies of the Company, the audit commissions of the Company and its subsidiaries, the Internal Control and Audit Service (hereinafter referred to as ICAS), the owners of processes, and the Company employees. In the Company, there is a system of regulatory documents that establish the control procedures execution order should be implemented over the course of business processes and also stipulate responsibility for their inappropriate execution. In addition to the control procedures built into the business processes of the Company, in 2014, ICAS exercised control and audit activity and internal audits of processes in accordance with approved plans. Based on the results of six audits of financial and economic activities of the Company and organisations it manages, as well as audits of three

41 78 TENEX Annual Report 2014 Performance Management business processes, no substantial violations, including terms of contracts, were revealed. Heads of the audited objects and owners of the processes developed and approved action plans for the optimisation of processes, the elimination of revealed aberrations, and their prevention. Plan executions are controlled by ICAS. In the Company, significant attention is paid to the development of the internal financial reporting control system: during audits, the assessment of the internal financial reporting control system is conducted. Nuclear Material Control and Accounting TENEX, under the state system for nuclear material control and accounting, carries out total continuous documentary accounting of all business and process operations with nuclear material that the Company owns. This includes maintaining the register based on collection, registering, systematisations, generalisation, archiving and analysis of the information about the amount and movements of nuclear material, including their exports and imports. In April 2014, by order of the General Director, the regulation on the interaction of structural subdivisions of TENEX (STO ) was put into force to control and account for nuclear material subject to the Agreement between the Government of the Russian Federation and the Government of Australia on Cooperation in the Use of Nuclear Energy for Peaceful Purposes. In 2014, specialists of ICAS as members of audit commissions took part in seven inspections of the Company s subsidiaries, and in inspections of separate issues of financial and economic activities of the nuclear industry organisations as members of working groups of the Internal Control and Audit Service of ROSATOM. ICAS did not inspect conformance to regulatory requirements or voluntary codes related to information about and markings on the characteristics of products and services in the reporting year. The nuclear material inventory-taking was conducted jointly with JSC TVEL, CJSC UEC, and contractor-enterprises, by order of TENEX General Director No. 006/352-P of , and revealed no issues. As a part of measures aimed at controlling the flow of nuclear materials, in 2014, 16 notices on the transfers of nuclear material owned by TENEX and four reports on movements of special raw materials and fissile materials by categories, as well as the results of inspections conducted by controlling and regulatory bodies on handling nuclear material, were prepared and submitted to ROSATOM G4-DMA Economic Security and Anticorruption Within the Company, revealing and preventing corrupt practices is the responsibility of the Assets and Data Protection Department and ICAS. In 2014, with the aim of improving the existing system of corruption prevention to supplement previously adopted local regulations, 39 the Company developed the Register of Corruption Risks in TENEX and its subsidiaries (hereinafter referred to as the Register ). Based on the Register, the Action Plan on Substantial Corruption Risks Handling in TENEX and its subsidiaries for (hereinafter referred to as the Plan ) was prepared and accepted for execution. In the process of the Register and the Plan drafting, the activities of all, with no exceptions, structural subdivisions of the Company were studied in terms of the risks associated with corruption. Areas of activities of the Company that were susceptible to potential bribery and corruption were identified. G4-SO3 The Company participates actively in the ROSATOM s programme of combating theft and fraud. TENEX and its subsidiaries have adopted the ROSATOM s Anti-corruption Plan for and the new revision of the Unified Sectoral Procedure for the verification of information on corruption and other offences received via the hotline and other channels, as approved by order of the General Director of ROSATOM No. 1/1159-P of The TENEX s official website hosts updated information pertaining to anti-corruption activities of the Company, as well as anticorruption policies and procedures that are currently in use. In the framework of activities to exclude cases of conflicts of interests and corrupt practices, 1,119 contracts of the Company with partners were studied and analysed, 81 procurement procedures were evaluated, as well as the legitimacy of 58 potential partners and 817 end-users (physical persons and legal entities) for the monetary amounts that TENEX allocates as charity was checked. In 2014, no corrupt schemes or fraudulent actions on the part of the Company s employees or contractors in the course of contractual work, as well as procurement activity, were revealed. In the reporting year, training in corruption prevention was not conducted. G4-SO4 39 The Bribery and Corrupt Practices Prevention Policy in TENEX and the Regulation for Work with Partners of TENEX.

42 ENVIROMENTAL SAFETY * 5. Environmental Impact * Ecological signs are adopted internationally and nationally. Own signs used by companies. Marking, i.e. special graphic characters or text that confirms a safety of goods or services for the environment and consumer, relates to ecological signs. Eco-labelling can be applied on an item, package or in-line documentation. The governmental structures or ecological organisations check for compliance to standards Environmental Policy 5.2. Radiation Safety of Shipments 5.3. Use of Energy Resources and Water Facing nature

43 82 TENEX Annual Report 2014 Environmental Impact Environmental Policy G4-DMA The Environmental Policy that is implemented by Company is aimed at creating safe conditions while organising and carrying out export-import deliveries of NFC products in the Russian Federation territory and abroad to prevent any adverse impacts on the environment. TENEX Environmental Policy has been shaped in accordance with the provisions of the ROSATOM Environmental Policy and is based on the following principles: integrated solution to ecological safety issues in the field of NFC, considering multifaceted safety factors at the local, regional, federal, and international levels based on the current risk analysis and management concepts; transparency of TENEX activities and informing NFC product manufacturer and transportation and logistics service providers of significant environmental aspects; monitoring of NFC product manufacturer and transportation and logistics service providers activities associated with significant environmental aspects of the NFC product supply chain delivery management; ensuring strict observance of norms and requirements in the field of nuclear and radiation safety and environmental protection as a whole; placing priority on preventative measures to reduce the risk of adverse environmental impacts; maintaining a high level of preparedness for the elimination of emergency consequences, which may result in adverse impacts on the environment; continuous interaction with state regulatory authorities and nongovernmental ecological organisations. The Company s Environmental Policy provides for the following main activities: a comprehensive analysis of environmental aspects of the activities associated with the deliveries of NFC products; the reduction of risks of adverse impacts on the environment while organising export-import NFC product deliveries; the enhancement of EMS as per the standard DIN EN ISO 14001:2009; the improvement of the ecological knowledge and ecological culture of the staff of TENEX and its subsidiaries; interaction with non-governmental ecological organisations, including the charitable support of environmental programmes and projects. In the framework of the Environmental Policy, the Company has developed a system of goals, objectives, and indicators for , aimed at minimising the risks of environmental impacts during nuclear material transportation, as well as a programme for the monitoring of threats, risks, and environmental aspects, including legislation requirements conformance analysis, a fragment of which is provided in the table below. G4-14 Monitoring object Monitoring system function Monitoring content (scope) Monitored parameters Monitoring frequency Products: technical condition of packaging Products: packaging radiation level Absence of packaging damage on the route foreign contractor JSC SPb IZOTOP Absence of packaging damage on the route JSC SPb IZOTOP combine combine JSC SPb IZOTOP) Exceeding of packaging radiation level on the route combine JSC SPb IZOTOP Visual examination. Comparison with producers standards and recommendations Visual examination. Comparison with producers standards and recommendations Radiation control. Dosimetric and radiation monitoring of package with EUP at SSC plants In the reporting year, no fines or nonfinancial sanctions for a failure to observe Presence of damage Presence of damage Presence of increased radiation level Each shipment of NFC products Each shipment of NFC products Each shipment of NFC products Condition indicators (safety criteria) Absence of damage prohibiting operation of packaging and conformance with requirements of producers standards and recommendations Absence of damage prohibiting operation of packaging and conformance with requirements of producers standards and recommendations Absence of radiation level exceeding at the surface of package with EUP environmental laws were imposed on TENEX. G4-EN29

44 84 TENEX Annual Report 2014 Environmental Impact Radiation Safety of Shipments G4-DMA G4-EN30 TENEX s radiation safety activities are carried out in accordance with the requirements of international and Russian legislation and local regulations, as well as licence conditions granted by Rostechnadzor (GN of ) for nuclear material handling during their transportation. The conditions of the referred above licence provide the Company the right to transport packages containing the nuclear materials listed below: natural uranium oxide; natural uranium tetrafluoride; natural uranium hexafluoride; depleted uranium hexafluoride; According to the stated Rostechnadzor s licence conditions, TENEX transports nuclear material packages on the territory of the Russian Federation only if there is a documented financial provision of the civil liability for losses and damage caused to legal entities and physical persons, as well as human health, by radiation impact. Distribution of loss and damage risk caused to third parties when transporting nuclear material between the Company and partners is fixed in corresponding contracts. In 2014, insurance of the civil liability was under third-party insurance of the civil liability General agreements for the transportation of radioactive substances, nuclear materials and products thereof: uranium hexafluoride enriched up to 5.0% U-235; uranium dioxide enriched up to 5.0% U-235; metallic uranium with content of U-235 equal %; regenerated uranium oxide; uranium concentrate enriched not greater than 0.72% U-235. TENEX as an operator in the field of nuclear energy use in accordance with Federal Law No. 170-FL of On the Use of Atomic Energy (as revised No. 159-FL of ), bears civil liability for losses and damage caused to legal entities and physical persons by any radiation impact when transporting nuclear material, being in the possession of the Company No. 13NL0039 // /268 of under terms of co-insurance and joint security with insurance organisations JSC SOGAZ, CJSC MAKS, ROSGOSSTRAKN LLC, and VSK Insurance House; No. 14NL0077 // /2312 of with insurance organisations JSC SOGAZ, ROSGOSSTRAKH LLC, VSK Insurance House, IC Soglasie LLC, and IC VTB Insurance LLC. Based on the stated agreements, the Company has Third-Party Open Cover Insurance Policies for the transportation of radioactive substances, nuclear materials and products thereof in and , respectively. TENEX also gets a one-time third party liability insurance policy for each shipment of radioactive materials via Russian Federation territory, including territorial water and air space of the Russian Federation, storage in transit, and loading/unloading operations under contractor s agreement. Insurance policies confirm the financial provisions of liability for losses and damage caused by a potential radiation impact. Validity times of the insurance documents correspond to the completion schedules of works indicated therein. The radiation safety procedure for the transportation of nuclear material, including shipment, interim storage in transit, and loading/unloading operations, is regulated by the Company s standards. The quality assurance and radiation safety programmes in handling nuclear material during transportation of NFC products have been worked out and put in place to maintain the security of the supply chain.

45 86 TENEX Annual Report 2014 Environmental Impact 87 The suppliers within the supply chain observe regulatory requirements using similar programmes: according to terms of the contracts TENEX signed with its partners, nuclear and radiation safety assurance in transportation and transit storage of nuclear material is placed with partners of the Company and carried out on the basis of the existing federal law, as well as federal and sectoral rules and regulations. Besides, partners also work to prevent (including drafting plans of elimination of emergency consequences) and eliminate consequences of emergencies in the handling of nuclear materials. The Company ships products in special packages that fully meet transportation safety requirements. All packages are granted Russian certificatepermissions for the package design and transport, as well as national certificates from the destination countries. 5.3 G4-DMA TENEX tracks the validity and relevance of the content of certificate-permissions Use of Energy Resources and Water In pursuance of Federal Law No. 261-FL 40 of and ROSATOM s order No. 1/676-P of , TENEX approved a programme on energy saving and improvement of the energy efficiency. The programme s key objective is to reduce the costs of indirect energy sources 41 and the optimisation of their use. of packages that are used by the Company for the product deliveries, the availability of Rostechnadzor s licences for activities in the field using atomic energy for the Russian nuclear material suppliers, as well as plans to eliminate consequences of potential transportation accidents. Upon the Company s requests, consignors (consignees) provide copies of radiation monitoring records of packages and conveyances, dosimetric control records of the personnel who take part in shipments and inform TENEX on all cases where reference levels and limiting dose burdens to the personnel, residents of nearby territories, and environment have been exceeded. Nuclear and radiation safety monitoring measures were not carried out in Neither violations of nuclear and radiation safety for the transportation of nuclear material owned by TENEX nor significant impacts on the environment from shipments were revealed in In 2014, the total consumed energy by TENEX was 4.44 MJ, water 3,118 m 3 G4-EN30 G4-EN3 G4-EN8 G4-EN3 G4-EN6 Data on energy consumption 42 and its reduction, as well as expenditures in three-year hindsight are given in the table below. Kind of Energy Unit of measure (baseline) Thermal energy Gcal Reduction of thermal energy consumption to 2009 level mln MJ RUR 470, , ,730 Gcal mln MJ RUR 92,230 6, ,440 Electricity kwh 888, , , ,100 Reduction of electricity consumption to 2009 level mln MJ RUR 2,192,600 1,933,400 1,978,560 kwh 140, , ,220 mln MJ RUR 410, , ,900 Energy consumption, total mln MJ Reduction of energy consumption to 2009 level In the reporting year, the low-cost organisational measures reduced energy consumption by 23.5% to the 2009 level. G4-EN8 Data on consumed water from the municipal water supply systems 44 is given in the table below. RUR 503, , ,340 mln MJ RUR 485, , ,360 Total expenses of TENEX for energy and water payments (in 2009 prices) were reduced by RUR 772,360 as compared to the baseline period and totalled RUR 2,518,470. Amount of Consumed water Unit of measure in comparable conditions m 3 3,435 4,093 3,676 3,118 actual 4,257 4,264 3, Federal Law On Energy Saving and on Increasing Energy Efficiency and on Amendment of Certain Legal Acts of the Russian Federation No. 261-FL of TENEX does not use direct energy sources such as coal and natural gas. 42 Calculated in accordance with the methodology approved for TENEX and its subsidiaries in Approved as the baseline in calculations of energy efficiency indicators by ROSATOM s order No. 1/676-P of Calculated in accordance with the methodology approved for TENEX and its subsidiaries in 2011.

46 { }* SOCIAL RESPONSIBILITY 6. Social Policy * Exclamation mark as a symbol of a human being, i.e. embodiment of the highest stage of development of life, personality, a rightful and free member of society, active subject of social relations Labour Protection 6.2. Social Programmes 6.3. Development of Corporate Culture 6.4. Charity 6.5. Development of Communications The human being as the supreme value

47 90 TENEX Annual Report 2014 Social Policy 91 Being a socially responsible company, TENEX pays unceasing attention to such aspects as labour protection, maintaining the staff potential quality, implementation of social programmes and charity, development of corporate culture and communications. 6.1 G4-DMA G4-LA6 Labour Protection Labour protection of TENEX employees is arranged in accordance with the Labour Code of the Russian Federation and other sectoral and local regulations, including the Standard Provision of Organisation of Labour Protection Work in TENEX, which was adopted in In 2014, the training 45 of managers and specialists of TENEX related to labour protection in a specialised organisation, as well as the medical examinations of certain categories of employees 46 of the Company in a specialised medical centre, were not conducted. The Company s social policy is conducted through social benefit programmes in various areas in the framework of the common policy approved by ROSATOM, including: voluntary medical insurance; non-state pension provision; accident and health insurance; financial support of employees. Voluntary medical insurance In 2014, the total amount spent for social benefits programmes 47 was RUR million or RUR 30,831 per employee, as recalculated based on the actual payroll staff number (361 persons). The primary trade union organisation of ROSATOM implements the corporate social programme of support and financial help for pensioners who contributed significantly in the sector development. All necessary labour protection briefings in 2014 were held as scheduled; no occupational injuries and accidents, diseases, or fatalities associated with work were recorded. The lost time injury frequency rate (LTIFR) equalled zero. In 2014, the state labour protection control and supervision authorities did not inspect TENEX. The state statistical reports for 2014 on labour protection were submitted in a timely fashion to the territorial authority of the Federal State Statistics Service and superior organisations. Voluntary medical insurance is provided for the Company s employees in accordance with the sectoral Standard of Voluntary Medical Insurance. The Company s medical insurance programmes are intended to render qualified medical aid in Moscow hospitals and are called upon to keep employees capable of working and remaining healthy. The total expenditures for the voluntary medical insurance of the Company s employees were over RUR 6.5 million in The VMIA programmes include services as follows: 6.2 Social Programmes In December 2013, TENEX signed a Voluntary Medical Insurance Agreement (VMIA) with SOGAZ Insurance Company. The Agreement is valid until outpatient-and-polyclinic care; first aid and emergency medical service; dental service in specialised clinics; hospital service. G4-15 In 2012, the Company joined the Social Charter of the Russian Union of Industrialists and Entrepreneurs (RSPP), thereby confirming its adherence to the stated fundamental principles that it stipulates: to treat human life as a supreme value; to treat labour safety and the health of employees as a key priority; to recognise the labour rights of employees as an intrinsic part of human rights; to recognise employees as the Company s most important asset; to observe any human rights related to the Company s activities. Non-state pension provision G4-DMA G4-EC3 As per the decision of ROSATOM s management, the corporate pension programme is managed by the sectoral Nonstate Pension Fund (NPF) Atomgarant, which was established on , Certificate No. 1489, issued by the Moscow Registration Chamber. Under the Company s corporate pension programme and according to the Pension Rules of NPF, all TENEX employees who take part in the programme are benefiting from the pension scheme called Defined contribution. Personalized. With pension payments made during several years. The payments are made 45 It is given once in three years; the last time was in In accordance with order of the Ministry of Public Health and Social Wellbeing of the Russian Federation No. 302n of , it is carried out once every two years; the last time was in The voluntary medical insurance, accident and health insurance, non-state pension provision, purchase of vouchers to recreational institutions, travel expenses of employees to get to/from office, expenses for the organisation of public cultural and sports events, bonuses on anniversary and festive occasions, and financial support of the Company s employees and pensioners.

48 92 TENEX Annual Report 2014 Social Policy 93 over 15 years. The corporate pension programme is co-financed: the employee transfers up to 50% of the assessed contribution to the registered pension account and the employer pays up to 100%. At the time of joining the programme, the length of service in the Company should not be less than one year; furthermore, the right to receive the pension arises after seven years of service in the Company. As of , the corporate pension programme covered 131 persons. In the reporting year, pension contributions of approximately RUR 3.0 million were paid to their pension accounts. Injury and illness insurance All employees of the Company are insured against injuries and illnesses. The insurance premium paid by the Company to SOGAZ Insurance Company s account is RUR 230,332. In 2014, no situations of the insured being entailed to payments were recorded. 6.3 Development of Corporate Culture In 2014, an employee engagement study measuring employee readiness to continue working in the Company, share corporate values, and achieve high performance was conducted by ROSATOM and showed this indicator, which was one of the highest in the sector, to be at 93%. (The poll covered 270 employees, including top management.) Corporate actions to host free blood donation events were one of the most important aspects of the corporate culture development. Since 2012, employees of the Company have voluntarily donated blood on a regular basis to help patients of the Federal Research Centre of Paediatric Haematology, Oncology, and Immunology, named after Dmitry Rogachev, through donor actions that are jointly organised with the charity foundation Gift of Life. In the reporting year, 39 employees of the Company donated blood to children suffering serious diseases. In 2014, TENEX conducted two outdoor corporate voluntary blood donation actions for patients of Botkin City Hospital, which is one of the largest multisectoral medical centres in Moscow. More than 80 persons stated their readiness to take part in the action; 66 employees passed the preliminary medical examination and became donors. About 30 litres of whole blood were collected. 6.4 Head Doctor of Botkin City Hospital A. B. Shabunin, Doctor of Medical Science, professor, and Head of Blood Transfusion Unit A. I Kostin, Candidate of Medical Science, thanked TENEX s employees, noting that regular voluntary corporate donor programmes were some of the best ways of solving the problem of donor shortage; for example, donors meets the 5 7-day blood component needs of the hospital s Oncology and Haematology In-patient Department. Charity The Company s charitable initiatives are approved by the ROSATOM Charity Committee. In 2014, the funds directed as free-of-charge (targeted) financing for support of charity programmes and projects totalled approximately RUR 1.8 billion. Under the agreement terms, the beneficiary submits reports to the Company on the target use of the funds, indicating measures implemented and outcomes gained. This type of mechanism for forming and implementing charity initiatives will continue in the next reporting period. The support of ecological programmes and projects is a traditional area of the Company s charity activities. G4-26

49 94 TENEX Annual Report 2014 Social Policy 95 the project Identification and mapping of habitats important for maintaining populations of rare marine mammals and white bears in the Frantz Josef Land Archipelago ( Russian Arctic national park); the project Study of the Beluga whale and white bear in the Russian Arctic (Marine Mammal Council); the project Study and population monitoring of the Far East leopard (Federal Wildlife Biosphere Resort Kedrovaya Pad, Leopards Land National Park); The Company s ecology charity initiatives expenditure s dynamic, , RUR million the project Outfitting and maintenance of the leopard rehabilitation centre (Wildlife Resort Ussurijskiy of Far Eastern branch of the Russian Academy of Sciences ); the XII International Children s Environmental Forum Green Planet 2014 ; All-Russia Community Clean-up Day Green Spring 2014 ; Funds were provided to the following recipientorganisations: All-Russia Non-governmental Organisation Russian Geographical Society ; Autonomous Non-profit Organisation Eurasian Centre of Study, Saving and Renewal of Population of Far Eastern Leopards ; the international festival Ecological Culture: Peace and Concurrence ; Interregional Ecological Nongovernment Organisation GREENLIFE ; In 2014, TENEX financially supported: assistance in environment and fauna protection activities; the programme on the preservation and study of animals in The Red Book and other particularly important representatives of fauna within the Russian Federation; the project Rare and declining species of large mammals: study and preservation strategy (Federal Wildlife Resort Khakasskiy); the project Beluga: the white whale of Gulf of Anadyr of the Bering Sea (Pacific Research Fisheries Centre); the project Preservation of the manul cat in Transbaikalia (Federal Wildlife Resort Daurskiy); the project Model project of recruitment of the snow leopard population in Western Sayan (Federal Wildlife Biosphere Resort Sayano-Shushenskiy); the XX International Conference Environmental education for sustainable development ; Concluding conference on environmental and safety culture in the framework of the Year of Culture in the Russian Federation; Ecological festival Planet of Children TENEX s total spending to support environmental programmes and projects was approximately RUR 177 million in Regional Non-government Organisation Public Association of Affected by Radiation Incidents Chernobyl- Atom ; Non-government Organisation Moscow Nature Restoration and Protection Society ; Autonomous Non-profit Organisation Centre for Support to Territorial Development of the Nuclear Industry ; Autonomous Non-profit Organisation Nuclear Industry Information Centre.

50 96 TENEX Annual Report 2014 Social Policy Development of Communications TENEX pays continual attention to the build-up of a communication environment that is favourable for business development, promotion of the Company s brand, creation of the positive reputation and appearance of the Company in the international nuclear community and mass media. Key areas of these activities include communication support for implementation of the Company s business strategy, interaction with target audiences and stakeholders, and information support regarding the dayto-day work. In 2014, the Company continued the practice of General Director meetings with the team in the framework of Awareness Days. To ensure effective external communications, TENEX strives to inform the stakeholders in a timely manner on all material aspects of activities and to respond promptly to mass media requests. The Company bases its information activities on the principles of regularity, completeness, credibility, and information availability, as well as keen observation of the rational balance between Company openness and the protection of its commercial interests. Besides strict observance of the national law requirements in terms of the disclosure of mandatory information, TENEX seeks to provide additional information to ensure that the Company s activities are transparent. A number of publications in related specialised periodicals were prepared, including an interview with the General Director of TENEX for the leading Russian information and analytical web-portal of the nuclear industry, Nuclear.Ru. In the reporting year, the mass media published more than 300 reports on the Company s activities; of them, 78% are of a neutral nature and 18% are positive. Of all the reports, 76% were published by the federal mass media, 14% in foreign mass media, and regional and sectoral mass media claimed 5% each. Advertising and image-building policy The Company is a regular participant in specialised exhibitions held both in Russia and abroad, using the provided platforms for active promotion of the TENEX brand. In 2014, advertising and information about TENEX activities, as part of ROSATOM s common sectoral exhibition, were presented at the World Nuclear Association s (WNA s) Symposium in September and at the first World Nuclear Exhibition (WNE) held in October 2014 in France (Le Bourget). The Company is a regular participant in the annual international forum ATOMEXPO, organised by ROSATOM. It is one of the world s largest specialised exhibition and business platforms, which provides an opportunity for discussing issues topical to nuclear power and the industry at large. In the picture is an exhibition booth of TENEX at the VI International Forum ATOMEXPO 2014 held in Moscow on June 9 11, 2014, which traditionally attracted the attention of many guests. Information resources The Company s website is the main channel for external communications. In 2014, the structure and content of the website were updated: the rubrication section was modified; text information, pictures and videos were fully renewed; the design of the homepage was changed. The number of news items (press releases) on the most significant events in the Company s life posted on the website of TENEX has doubled as compared to the previous year. The Company considers the development of internal communications as an efficient tool to build the common corporate culture and to increase the personnel engagement level. The corporate portal (intranet) has been developed and is actively used in the Company to provide access for the Company s employees to various internal information sources, including the database of local regulations, capabilities for the prompt informing of the employees on events and measures, as well as finding out their opinions and the collection of proposals on different topical issues. The 2015 plans include a full-scale effort to optimise the structure and content of the intranet portal of the Company. Regularly, advertisements for the Company are placed in specialised Russian (Nuclear Club and SECURITY INDEX) and foreign (Nuclear Engineering International) periodicals. The preparation and production of corporate booklets, including those on topical subjects, 48 is one of the Company s promotional tools for its brand and briefly raises awareness among the broad circle of stakeholders regarding information about the main directions of the Company s business, implemented projects, the Company s position in the Russian nuclear industry, and the global uranium market. In the reporting year, the Company issued an updated bilingual corporate booklet of TENEX designed in an approved uniform stylistic concept. The Company set up the Image Policy Commission upon the order of the General Director No. 006/74-P of The main result of the Commission s activity in the reporting year was the development of new approaches to the creation on uniform concept corporate souvenirs and gifts, as well as the optimisation of corporate procedures for the treatment of these products. 48 In 2013, the Company prepared two topical booklets: on the 50th anniversary of the Company and on the occasion of completion of the HEU-LEU Programme. They are posted on the Company s website:

51 98 TENEX Annual Report 2014 Appendix No Appendix No. 1. Information on the Report and its Preparation 1.1. Information on Previous Reports G4-30 Pursuant to Federal Law No. 208-FL of On Joint-Stock Companies, which binds joint stock companies to publish annual reports and annual financial statements, since 1996, TENEX has issued 18 reports. The ten most recent reports are published on the Company s official website ( wcm/connect/tenex/site/disclosure_of_ information/annualreports). The Company s public annual reports have been prize-winners multiple times and special nominees in a number of Russian and nuclear industry-wide contests. The public annual report of the Company for 2013 received a record number of awards. TENEX s report, for the first time in the sector, received the highest award, Platinum, in the category of Energy: Equipment & Services in a prestigious Since 2009, TENEX has prepared annual reports in a format that provides, in a combined manner, information on the production, finances and the economic results of the Company s activities in the context of sustainable development in accordance with Russian law and the recommendations of the Sustainability Reporting Guidelines of the international organisation the Global Reporting Initiative (GRI). international competition The 2013/14 Vision Awards Annual Report Competition, which is run each year by the League of American Communications Professionals LLC. (LACP). The report received 99 points out of 100 and won 12th place in the world rating of the 50 best reports from winning companies. The competition included a large number of participants representing over 6,000 companies from more than twenty countries. Additionally, the Company s report for 2013 was awarded second place in the category of The Best Annual Report of Sector Industry at the XI Open Contest of Annual Reports of Joint Stock Companies organised by the Department for Financial and Securities Market of Krasnodar Territory in the framework of the XIII International Investment Forum, Sochi TENEX s annual report for 2013 was among the top ten nominees (short-listed) in the category The Best Annual Report of a Nonpublic Company in the XVII Annual Competition of Annual Reports organised by the Moscow Exchange Group and RCB Media Group. TENEX won the All-Russia Contest Leader of Russian Business; Dynamics and Responsibility 2014, which is run by the Russian Union of Industrialists and Entrepreneurs (RSPP), after receiving the most points out of the 16 contenders in the special category For Information Openness. The Public Annual Report of TENEX for 2013 has been entered: in the National Register of Corporate Non-financial Reports of RSPP ( in the database of information disclosures in sustainable development of the GRI ( reports/view/22732). The Company has prepared its IFRS reports since The scope of consolidation includes TENEX and its subsidiaries. The 2014 IFRS report and an auditor s report are posted on the Company s official website ( connect/tenex/site/resources/879c8e dbaf86a2d62edc232834/MSFO_2014. pdf ). G Description of the Report TENEX s Public Annual Report for 2014 (hereinafter referred to as the Report ) was prepared in accordance with the applicable legislation, ROSATOM s public reporting policy, the Sustainability Reporting Guidelines of the Global Reporting Initiative (GRI, version G4, Core option), and the Public Reporting Standard of TENEX. The Report discloses, in an integrated manner, information on production as well as financial and economic results of the Company s activities in the context of sustainable development over the period. In 2014, there were no material changes in the aspect boundaries or reformulation of indicators as compared with previous G4-28 G4-22 G4-23

52 100 TENEX Annual Report 2014 Appendix No G4-25 reports. The coverage of disclosed aspects is based on the materiality analysis (for details, see Section 1.4 of Appendix No. 1); as compared to 2013, new aspects are disclosed: Water, General Information (ecology), while non-material aspects are not disclosed: Prevention of Non-discrimination, State Policy and Compliance (society). Financial reporting is given in accordance with the RAS (Appendix No. 8) The Report Preparation and Engagement of Stakeholders The First Deputy General Director for Strategy and Communications is responsible for the functioning of the public reporting system of TENEX. The Department of Strategic Communications of the Company 49 is responsible for preparing and issuing the Company s public reports (in the printed and interactive versions) and organising interactions with the stakeholders. The draft of the Report concept was agreed upon with the Public Reporting Committee of the Company (Record of Meeting No /7-Pr of ) and the Public Reporting Committee of ROSATOM (Record of Meeting No. 4 of ). The Report preparation schedule, its concept and the table of responsibility distribution among the members of the Public Reporting Committee The disclosure level in the Report corresponds to the requirements of GRI G4 Guidelines (Core option). A list of elements and indicators of public reporting disclosed in the Report in accordance with the Public Reporting Standard of TENEX can be found in Appendix No. 3. The Report is issued in both the Russian and English languages. An interactive (electronic) version of the Report is posted on the Company s website: ru/wps/wcm/connect/tenex/site/disclosure_ of_information/annualreports/. of the Company for information provision were approved by orders of the General Director of TENEX (No. 006/325- P of and No. 006/392-P of , respectively). G4-26 G4-24 The Report was prepared in accordance with the Regulation for Public Reporting of TENEX STO (hereinafter referred to as the Regulation ), as updated by the orders of the General Director No. 006/285- P of and No. 006/394-P of While preparing the reporting campaign and with the aim of strengthening the personal responsibility of the Company s top managers for the quality and timeliness of any materials provided on the competence of the structural divisions that they manage, TENEX s Public Reporting Committee contacted top managers in the Company (order No. 006/209-P of ); updated local regulations, including the stated Regulation and the Public Reporting Standard STO ; and provided information on the Stakeholders Commission and its composition (order No. 006/394-P of ). The stakeholders were involved in the preparation of the Report at all key stages: starting from the formulation of the Report concept through to the discussion of its final revision, and had an opportunity to present their expectations and recommendations. G4-29 G4-25 To improve the quality and interaction technologies with the stakeholders, as well as further reduce the costs of public reporting, as per the ROSATOM decisions, the Company in the framework of the reporting campaign of has moved to a correspondence format of communication with stakeholders, which had proved its efficiency in previous reporting campaigns. 50 In the period, the dialogue by communication was carried out with the stakeholders; they were sent a questionnaire on the Report concept. Sixty responses were received from the following groups of stakeholders: ROSATOM and its organisations (including JSC Atomenergomash, JSC Rusatom Overseas); federal executive bodies (FSTEC of Russia, Rostechnadzor, The Ministry of Economic Development of Russia); the Company s subsidiaries (JSC SPb IZOTOP, TRADEWILL Ltd., TENEX-Japan Co.); suppliers (SC AECC, SC UEIP, JSC PA ECP, JSC SCC, JSC TVEL, Uranium One Holding, JSC Atomredmetzoloto, Columbiana Hi Tech LLC); customers/clients (USEC, AREVA, CIFAL, Eskom, ENEC, Mitsui & Co. Ltd, KEPCO NF, CNEIC, NUKEM Inc., Axpo Power AG, ENUSA); shipping companies (CJSC BALTIC MERCUR, Nuclear Cargo + Service GmbH, TLI); ecological organisations (GREENLIFE); international organisations of the nuclear sector (IAEA, JSC IUEC); expert community (Energy and Safety Centre, NAC International); management and personnel of TENEX; mass media (Nuclear.Ru, WIA Russia Today). Representatives of the stakeholders agreed in principle with the Report concept and parameters. They expressed their opinion on the influence of the stakeholder groups they represented on the Company and the degree of influence of the Company s activities on each of these groups. As per the requirements of the stakeholder involvement standard AA 1000 SES, the ranking map of stakeholders, the composition of which had been identified during the preparation of previous annual reports of the Company and did not change much, was updated. Public consultations on the final draft of the Report were held in correspondence format for the first time on the date established in the preparation schedule, before The draft Report was presented in advance to the representatives of the broad circle of stakeholders to receive objective recommendations and comments on its content. Recommendations and requests from the stakeholders that were received during the reporting campaign have been systematised and taken into account during the preparation phase of the final revision of the Report (Appendix No. 2). As per the Regulation, an internal audit of compliance of the Report formulating process with the requirements of ROSATOM s Policy and local regulations on public reporting was carried out, with the concluding statement given in Appendix No. 11. G For public reporting contacts: manilovskayag@tenex.ru. 50 The questionnaires sent to the stakeholders on the Report concept, which were tested by the Company, have been widely used in organisations within the sector.

53 102 TENEX Annual Report 2014 Appendix No The Report Boundaries and Information Disclosure G4-18 G4-19 When preparing the concept of the Report with due consideration of the stakeholders opinions, which were revealed by questionnaires, the Public Reporting Committee identified and ranked material aspects of the Company as per the GRI G4 Guidelines. These aspects reflect Business sustainability Position in the global market Ensuring safety during transportation Financial performance Compliance with the requirements of national law Development of the transportation and logistics infrastructure Economic performance Corruption prevention Compliance with environmental legislation requirements Effectiveness of governance mechanisms Training and education of personnel Human capital management Study of customer satisfaction Consumer health and safety Workplace health and safety Overview of employment and engagement General information about environmental protection expenditures and investments Ensuring information transparency Indirect economic impacts Observance of human rights Non-discrimination Diversity and equal opportunities for personnel Relationship between employees and management Equal remuneration for men and women Labour practices grievance mechanisms the material (materiality index is 1) economic, environmental, and social impacts of an organisation or those producing material impacts on assessments and the resolutions of stakeholders (shown in the chart below) Also, the reporting boundaries of material aspects were identified during the dialogue with stakeholders about the concept of the Report. G4-20 G4-21 The Report contains information on the results of TENEX activities. The Report does not consolidate the financial indicators and sustainable development results of the Company s 51 Russia-based and overseas subsidiary companies. Information on the environmental and social aspects of the activities of the Company s largest subsidiary JSC SPb IZOTOP 52 is disclosed in the subsidiary s annual report, which has been prepared with consideration of GRI G4 Guidelines and published on its website ( information/). The safety assurance during transportation aspect is material beyond the Company; approaches to management are disclosed in Sections 4.6. and 5.2. The aspect Business Sustainability and the associated aspects Position in the global market and Financial and economic performance (Sections 1.7., 1.8., 3.1., 3.3., and Chapter IV) are the key aspects for TENEX, which is the oldest Russian foreign trade organisation and has been operating in the world market for more than forty years, providing nearly 50% of ROSATOM currency earnings acquired from overseas operations. Development of the transportation and logistics infrastructure, Safety assurance during transportation, Compliance with the environmental legislation requirements, and Study of customer s satisfaction degree (Sections 3.2., 5.1., 4.6., and 5.2.) are the aspects containing the most important constituents of the Company associated with security of supplies, minimising delivery time, and cost reduction for the shipment of uranium product to dozens of customers in different regions of the world. Human capital management and Training and education of personnel (Section 4.7. and Chapter VI) are the activities associated with retaining and ensuring consistency in the development of the most important strategic resource and the main value of the Company, i.e., the highly qualified staff of TENEX whose work has helped the Company successfully solve its set challenges for many years. The Report not only contains detailed information on the activity results of TENEX as per aspects recognised as material, but also discloses information on managerial approaches, i.e., how the Company manages its economic, environmental and social impacts. Energy consumption Water consumption 51 Information on subsidiares is disclosed in the aspect Corruption prevention. 52 JSC SPb IZOTOP is a nuclear operator that provides freight-forwarding services for nuclear fuel cycle companies and delivers uranium and radioisotope products, instrumentation, equipment, and means of protection in handling radioactive materials.

54 104 TENEX Annual Report 2014 Appendix No Disclaimer The Report has been produced in line with legislation on the protection of state and commercial secrets using the information available to TENEX Validation of the Reported Information and Conformity to Standards G4-33 The reporting period is limited to Any past and future periods are mentioned in this Report in the context of the Company s strategy, comparison of material factors, indicators and performance, as well as in forecasts and risk assessments. This Report, apart from factual data, encompasses possible future events, The credibility of financial statements was confirmed by a financial auditor, Financial and Accounting Consultants LLC (Appendix No. 9). The conformance check of the Report to the requirements of the GRI G4 Guidelines (Core option), the Public Reporting Standard of TENEX, national law on annual reports of joint stock companies regarding information disclosure, as well as the nature and degree of conformance with the Standard AA1000 APS 2008, was conducted by an independent auditor. The related statement is provided in Appendix No. 5. having a probabilistic nature, as well as their assessment. In addition to factual data, the Report contains descriptions of events that are possible in the future and their assessment. Any statements in this Report that are not statements of facts shall be considered as forward-looking statements. As such, they are topical only at the point in time when they are made public. TENEX (excluding cases directly provided by the law) does not undertake any obligation to revise or update statements, thereby taking into account any effects of newly published information. The selection of an independent auditor was carried out through a tender held in accordance with USPS within the time established in the Report preparation schedule, approved by the order of the General Director of the Company. The level and quality of stakeholder engagement were confirmed by the stakeholders representatives, who participated in the public consultations related to the drafting of the Report. Their opinions and recommendations are provided in the Public assurance statement on the Report (Appendix No. 4). Appendix No. 2. Accounting Table of Stakeholder Recommendations and Requests, Received during the Report Drafting Process 53 Recommendations/ Requests ROSATOM and its organisations (JSC Atomenergomash) 1. Justify an approach on absence of information about the performance of subsidiaries. Accounting of recommendations/ Requests Traditionally, the Report contains information only about the production, finances, and economic performance of TENEX in the context of sustainable development. The financial results of ТENEX group activity (including Russian and foreign subsidiaries) are consolidated in the IFRS reporting system posted on the website ( connect/tenex/site/disclosure_of_information/ FinancialAccountingReports/). Information on the environmental and social aspects of activity from the largest subsidiary of the Company JSC SPb IZOTOP is disclosed in the annual report of the latter, prepared with due account of the requirements of the GRI G4 Guidelines and posted on its website. 2. Make a brief review of subsidiaries of the Company. Brief information on subsidiaries as of is presented in Section 1.5. Information about the Company. 3. Non-inclusion of data on environmental and social issues of JSC SPb IZOTOP in the Report will become acceptable if all the necessary information is presented in the annual report of JSC SPb IZOTOP. 4. Is information about declared volumes in the regional customs excessive for the Report? 5. It was proposed to change the places of factors that account for the growth of proceeds from uranium product sales in 2014: first goes the growth of sales volume and then the rouble devaluation (Subsection Main Financial Indicators ). 6. What is the purpose of the phrase stating that in the reporting year, the Company did not receive financial assistance from the state in Subsection Main Financial Indicators? 7. Is it necessary to show an average wage in TENEX in 2014 or is it sufficient to provide information that the average wage grew by about 5% against 2013? The Report of JSC SPb IZOTOP, in terms of environmental and social aspects of activity, includes disclosures as per the GRI (version G4). The report is available on the website of JSC SPb IZOTOP. Disclosure of the indicator is provided by the Public Reporting Standard of TENEX. This is inexpedient because the increment in 2014 proceeds in roubles was 76% provided by the rouble exchange rate. Disclosure of indicator G4-EC4 from the GRI G4 Guidelines. Disclosure of the indicator is provided by the Public Reporting Standard of TENEX. G It is proposed to delete the phrase that especially impacted the contracting the US customers from the preamble of Section 3.1. Contracting and Sales 9. It is proposed to partly reword the first sentence of Section 3.1. Contracting and Sales (North America): In spite of especially unfavourable impact on contracting process of the threat of sanction risks in this particular region It is recommended for visualisation that in the materiality chart (Section 1.4. of Appendix No. 1) to delineate aspects, which are < 1 either by colour or by line. This is inexpedient in terms of stating contracting terms in the reporting year. Taken into account. Taken into account. 53 Coloured recommendations and requests of the stakeholders were received in the course of discussions on the Report concept.

55 106 TENEX Annual Report 2014 Appendix No Recommendations/ Requests 11. It is proposed to explain why compliance with not actual any more Code of Corporate Conduct is disclosed instead of the Code of Corporate Governance. Accounting of recommendations/ Requests Taken into account: information on observance of the Code of Corporate Conduct has been deleted from the Report. Federal executive bodies (Ministry of Economic Development of Russia, FSTEK of Russia) 12. It is proposed to make the theme Observance of the national law requirements (including nuclear material control and accounting, customs and licensing export support, nuclear and radiation safety) a priority. 13. It is proposed to add at least one subparagraph in the Section Position of the Company in the Nuclear Industry. 14. In the footnote to Subsection Internal Programme of Export Control, Licensing and Customs Support, there is a suggestion to replace No. 372-FL of with No. 183-FL of (revision of ). 15. To explain briefly in Section 4.2 Risk Management and Development of Compliance System (Risk Management and Insurance) what methodology is used in insuring civil liability for nuclear and radiation damage, since it is a socially significant issue. Management and personnel of the Company 16. Delete detailed information about the Company s organisational structure. 17. Delete the section Payments to capital providers as it duplicates information from other sections. 18. The section Strategy should be described briefly in the other section, The Company s mission Don t break into subsections the sections Contracting and Sales and Transportation and Logistics Support. The GRI G4 Guidelines do not assume singling out any priority topic, but rather require disclosing information on the results of activity in the context of material aspects. The topic of fulfilment of the national law requirements in the given areas is disclosed in relevant sections of the Report, including Section 4.9. Nuclear material control and accounting, Subsection Internal Programme of Export Control, Licensing and Customs Support, and Section 5.2. Radiation Safety of Shipments. The wording of the subparagraph title was not proposed; the Company reserved the right to define the optimal structure and content of the Report. Taken into account. Taken into account. Taken into account: the Company s structure is enlarged as functional blocks. Taken into account. Recognised as inexpedient. 20. Reduce the Report s volume. Taken into account. Taken into account as relates to the section Contracting and Sales. 21. Reduce the number of copies. As compared to the edition of the Report for 2013 (300 copies), the edition of the Report for 2014 was reduced by 100 copies (200 copies). 22. Add to the Report information on the dismissal of Audit Commission and early termination of authorities of its members to explain the absence of the Audit Commission s statements supplemented to previous reports. Taken into account. Recommendations/ Requests Customers/clients (AREVA Russia & CIS, Eskom, Axpo Power AG) 23. It is proposed to include in the Report the consolidated financial information and indicators; it will facilitate making more substantiated decisions. 24. It is proposed to disclose the aspect Transparency and control over activities of suppliers in the context of sustainable development. 25. Recommended to issue a separate report on sustainable development. 26. It is recommended to explain the positive changes in the export portfolio volume with a threeyear hindsight (table in the preamble of Section 3.1 Contracting and Sales ) if the total value of the portfolio dropped in 2014 against It is proposed to detail by components the information about the volume of the products sold (feed, EUP, conversion and/or enrichment services) by the Company. Suppliers (JSC UEIP, JSC SCC, SC AECC, JSC ARMZ) 28. Provide a summary of what activities from the parent company have yielded results instead of only simply including references to subsidiary company recourses. Accounting of recommendations/ Requests See comment above (No. 1). Taken into account in Section 4.6. Management Systems. This is not envisaged by ROSATOM s Policy in the field of public reporting and by the Public Reporting Standard of the Company. Taken into account: an explanation is given that the export portfolio volume data is calculated (by ROSATOM s methodology) to the value of the year preceding the three-year period of , i.e., to 2011 and prices are compared in terms of 2011 figures. Not taken into account due to the commercial sensitivity of the information. Not foreseen by the Report s format; see the comment above (No. 1). 29. Disclose information about subsidiary companies. See the comment above (Nos. 1, 2, 3). 30. It is proposed to single out priority themes. See the comment above (No. 12). 31. It is proposed to prepare the Report in accordance with the IIRC Standard. 32. In Section 1.8 Position in the Nuclear Industry, give more details of the role of enrichment facilities of JSC TVEL in securing supplies of the product to the external market. 33. Supplement graphic information about liquidity indicators in Subsection by a description of changes in indicators during with an explanation of reasons. 34. In Section 4.2. Risk Management and Development of Compliance System, specify legends on risk radars. 35. In the presented version of the Report, there are no references to disclosed GRI indicators over the text of the Report, which complicates its perception. Subsidiary companies (TRADEWILL Ltd.) 36. It is proposed to number the contents with the use of hyperlinks; this will make viewing the text of the Report more convenient. The Company does not assume use of the IIRC Standard, as it does not correspond to the Company s activity profile. Taken into account. This is inexpedient in terms of the unification of financial indicators included in the Report: the limited format does not allow for providing detailed comments on all the indicators and random comments disrupt narrative harmony. Taken into account. Taken into account in the final version of the Report. This will be taken into account in the interactive version of the Report.

56 108 TENEX Annual Report 2014 Appendix No Appendix No. 3. Table of Elements and Indicators of Public Reporting Disclosures G4-32 Recommendations/ Requests 37. It is proposed to include data on the financial and economic results of the Company s activities as denominated in one of the world currencies of IFRS. Accounting of recommendations/ Requests Inexpedient: financial and economic results are presented as per RAS requirements. There is a reference to the website of TENEX where IFRS reporting is posted, which is prepared in parallel with the Report. Expert community (Centre for Energy and Security Studies, Moscow Office of NAC International Inc., Nexia Pacioli Consulting LLC) 38. It is proposed to make the priority theme TENEX is a multi-year leader in exports of the Russian nuclear industry products (the goal is to demonstrate the multi-year central role of the Company in total export volume of ROSATOM). 39. It is proposed to specify the names of utilities with which contracts were signed in April and December (Section Highlights of the Reporting Period ). 40. It is proposed to disclose in Chapter II Strategy the strategy of the Company s pricing in the conditions of rouble devaluation. 41. It is expedient to retain the way of representing the information on maintaining jobs at the sectoral enterprises as was done in the Report for It is recommended to represent a chart showing the export structure by regions with three-year hindsight without HEU Agreement supplies (2012, 2013). 43. It is recommended to specify the data for 2014 in the table Personnel by age groups, % (Subsection Description of Personnel ). 44. It is recommended to explain the term in comparable prices. 45. It is recommended to explain that the contract for technical assistance in the construction of the 4th stage of GCP in the PRC was fulfilled under the Supplemental Protocol of to the Russian Chinese intergovernmental agreement of It is proposed that the theme, TENEX is the largest exporter of Russian nuclear industry products over an extended period, be the prevailing theme of the next report. 47. It was recommended to consider the possibility of giving, in future reports, brief information on how the Company introduces a paper-saving culture, energy saving at the work places, and how the practice of volunteers is developing (have in mind something else beyond free blood donations). See comment above (No. 12). Not taken into account due to the commercial sensitivity of the information. Not taken into account due to the commercial sensitivity of the information. Taken into account. Taken into account. Taken into account. Taken into account. Taken into account. A similar theme was the main one when the Report was prepared on the 50th anniversary of the Company. In regard with the Company transitioned to preparing reports in accordance with the GRI G4 Guidelines the approaches to formating reports has changed: from priority themes to material aspects, with the understanding that the security of supplies has been and remains the leitmotif of the Company s work. This will be taken into account in future reporting campaigns. General Standard Disclosures of GRI G4 reporting Page of the Report G4-1 Statement from the most senior decision-maker G4-2 Description of key impacts, risks, and opportunities 56 61, G4-3 Name of the organisation 25 + G4-4 Primary brands, products, and services 14, 31 + G4-5 Location of the organisation s headquarters 25 + G4-6 Number of countries where the organisation operates 26 + G4-7 Nature of ownership and legal form 25 + G4-8 Markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries) G4-9 Scale of the organisation, including total number of employees, total number of operations, net revenues, quantity of products or services provided G4-10 Total number of the Company s employees by employment contract (terminal and open-end) and gender. Total number of permanent Company employees by employment type (full-time and part-time) and gender. Total workforce by employees and supervised workers and by gender. G4-11 Percentage of employees covered by collective bargaining agreements Auditors assurance + 14, 30, 31, , 26, 40, 47, G4-12 Description of the organisation s supply chain 32 + G4-13 Any significant changes regarding scales, structure or ownership of organisation or its supply chain during the reporting period G4-14 Information on whether and how the precautionary principle is used by the organisation G4-15 Externally developed economic, environmental and social charters, principles, or other initiatives to which the organisation subscribes or which it endorses G4-16 Memberships of associations and/or national and international advocacy organisations, in which the organisation holds a position on the governance body, participates in projects or committees, provides substantive funding beyond routine membership dues, views membership as strategic G4-17 List of all entities included in the organisation s consolidated financial statements or equivalent documents G4-18 Methodology of defining the report content and the Aspect Boundaries. Reporting principles for defining report content G4-19 List all the material Aspects identified in the process for defining report content G4-20 Aspect Boundary within the organisation for each material Aspect G4-21 Aspect Boundary outside the organisation for each material Aspect 25, ,

57 110 TENEX Annual Report 2014 Appendix No General Standard Disclosures of GRI G4 reporting G4-22 Effect of any restatements of indicators provided in previous reports, and the reasons for such restatements G4-23 Significant changes from previous reporting periods in the Scope and Aspect Boundaries Page of the Report G4-24 List of stakeholder groups engaged by the organisation G4-25 Principles of identification and selection of stakeholders for engagement G4-26 Organisation s approach to stakeholder engagement 93 95, G4-27 Key topics and concerns that have been raised through stakeholder engagement, with indication of stakeholder s groups, raised each of these topics or expressed each of these concerns. Response of organisation for these key topics and concerns, including by the report preparation G4-28 Reporting period for information provided 99 + G4-29 Date of previous sustainability reporting G4-30 Reporting cycle 98 + G4-31 Contact point for questions regarding the report or its contents G4-32 The in accordance option the organisation has chosen. GRI Content Index for the chosen option. The reference to the External Assurance Report, if the report has been externally assured G4-33 The organisation s policy and current practice with regard to seeking external assurance for the report , ,104, G4-34 The governance structure of the organisation 16 + G4-38 The composition of the highest governance body and its committees G4-39 Whether the Chair of the highest governance body is also an executive officer G4-41 The processes for the highest governance body to ensure conflicts of interest are avoided and managed G4-56 The organisation s values, principles, standards and norms of behaviour, such as codes of conduct and codes of ethics 1.1. Position in the global market Reporting indicators , Export volume, USD billion 6, 40, Export structure by regions, % Total cost of long-term export contracts (export portfolio), USD billion (in comparable prices) Export portfolio dynamic with three-year hindsight (in comparable prices) in the reporting year (to the value of the first year preceding the three-year period), % Auditors assurance Page of the Report 6, 8, Number of customers by regions 6, Availability of material accounts abroad 7, 10, Share of book transfer deliveries in the total deliveries, % Reporting indicators 1.2. Financial stability Net assets at year-end, RUR million Risk management 1.4. Financial and economic performance 1.5. Data on accrued and paid dividends, interest expenses 1.6. Payments to budgets and extrabudgetary funds Assets at year-end, RUR million Net assets share in total assets, % Debt-to-equity ratio Networking capital to current assets ratio Current ratio Quick ratio Risk management system Page of the Report Key risks and responses 57 60, Risk management measures Insurance of the Company s risks Revenue, RUR million 6, Administrative expenses, RUR million Selling expenses, RUR million Gross profit, RUR million Earnings Before Interest, Taxes, Depreciation, and Amortisation (EBITDA), RUR million 6, Net profit, RUR million 6, Gross profit margin, % Profit margin before interest, taxes, depreciation, and amortisation (EBITDA), % Net profit margin, % Return on assets (ROA), % Return on equity (ROE), % Сost related to the uranium business, RUR million Other expenses within cost, RUR million Investments, total, RUR million Structure of investment, RUR million Interest expenses, RUR million Dividends paid to the shareholder, RUR million Accrued dividends, RUR million Taxes accrued and paid, total, RUR million Taxes accrued and paid to the regional and federal budgets, RUR million Taxes accrued and paid, by types of taxes, RUR million Payments to extra-budgetary funds, RUR million

58 112 TENEX Annual Report 2014 Appendix No Development of production base 2.2. Internal programme of export control, licensing and customs support Reporting indicators Share of own transportation equipment in use for uranium product delivery Programmes of diversification of uranium product shipment points 43 Page of the Report Availability of general licences for export of uranium product 26, 42, 44, Number of completed single licences for export Number of completed customs documents Volume of declaring at regional customs, % Radiation safety Control measures System of key performance indicators (KPIs) 3.2. Development of management systems 3.3. Procurement management 3.4. Finance management 3.5. Corporate governance 3.6. Internal control and audit, prevention of corruption 3.7. Fulfilment of the national legislation Number of material violations revealed by control activities Set KPIs Set KPI accomplishment level Implemented international management standards Results of audits confirming compliance of management systems with the international standards Audits of producers by foreign customers Overall index of customer satisfaction, % Tools used to improve openness and transparency of procurement Amount of saved funds due to open competitive procurements procedures (in % and in roubles) Volume of credit portfolio, RUR billion Average weighted value of credit portfolio, % Average effective interest on attracted loans, % Projects of improvement of the governance system Observance of the Code of Corporate Conduct Information on equity capital Information on shareholders Information on the auditor and registrar Information on subsidiaries Number of Board of Directors meetings Information about decisions made by the Board of Directors Number and results of audits, including those conducted by the Internal Control and Audit Service 44 7, 66, 67, 68, Violations of contractual terms 6, 78, Nuclear material control and accounting Labour protection Provision of qualified staff 4.2. Building up and use of succession pools 4.3. Share of specialists up to 35 years of age 4.4. Average age of employees Reporting indicators Number of students who completed an internship Number of students taken on by results of internship Share of employees with core education Number of employees with academic degree Number of employees with an MBA Share of employees who have worked in the Company more than five years Human resources management projects Number of employees in personnel reserve Number and share of employees appointed to vacant positions from the personnel reserve Share of employees under 35 years old Average age of employees (by category) Remuneration Total amount of wage fund Non-state pensions 4.7. Total expenses for personnel 4.8. Expenditures for social programmes for employees 4.9. Labour protection Average wage as compared to average wage in Moscow Minimum wage as compared to minimum wage in Moscow Number of employees benefiting from non-state pensions Expenditures for non-state pensions Overall personnel expenses, RUR Personnel training expenses, total, RUR Personnel training expenses per employee of average staff number, RUR Total expenditures for social benefits programmes Expenditures for social benefits programmes per employee of the actual payroll staff number Expenditures for veterans support Expenditures for voluntary medical insurance Expenditures for insurance against injuries and illnesses Lost Time Injury Frequency Rate (LTIFR) Number of employees trained in labour protection in a specialised organisation Number of employees who passed medical examination Number of violations revealed by oversight bodies Charity Expenditures for ecology charity initiatives Personnel involvement in charity actions Page of the Report Not disclosed due to recommendations of the Central Bank of the Russian Federation No /2463 of on application of the Code of Corporate Governance.

59 114 TENEX Annual Report 2014 Appendix No G Corporate culture Aspect 6. Information openness 6.1. Development of communications 6.2. Public reporting system Reporting indicators Personnel engagement rate, % 6, 10, Mechanisms by means of which employees could influence decision-making, including Awareness Days Information resources Advertising and image-building policy Improvement of reporting system 100 Page of the Report Interaction with stakeholders during preparation of public reports , Specific standard disclosures Aspect: Economic performance DMA, G4-EC3 96 Page of the Report Coverage of the organisation s defined benefit plan obligations G4-EC4 Financial assistance received from government 48 + Aspect: Market presence DMA, G4-EC5 Ratios of standard entry-level wage by gender compared to local minimum wage at significant locations of operation Aspect: Indirect Economic Impacts DMA, G4-EC8 Aspect: Energy 73 + Significant indirect economic impacts, including the extent of impacts DMA 84 + G4-EN3 Energy consumption within the organisation 86, 87 + G4-EN6 Reduction of energy consumption 87 + Aspect: Water G4-EN8 Total water withdrawal by source 86 + Aspect: Compliance DMA G4-EN29 Aspect: Transport DMA G4-EN30 Aspect: Overall DMA G4-EN31 Aspect: Employment Monetary value of significant fines and total number of nonmonetary sanctions for non-compliance with environmental laws and regulations Significant environmental impacts of transporting products and other goods and materials for the organisation s operations, and transporting members of the workforce Total environmental protection expenditures and investments by type , 84, DMA 69 + G4-LA1 Total number and rates of new employee hires and employee turnover by age group, gender, and region 71 + Auditors assurance G4-LA2 Specific standard disclosures Benefits provided to full-time employees that are not provided to temporary or part-time employees, by significant locations of operation Page of the Report 69 + G4-LA3 Return to work and retention rates after parental leave, by gender 72 + Aspect: Labour/Management Relations G4-LA4 Minimum notice periods regarding operational changes, including whether these are specified in collective agreements Aspect: Occupational Health and Safety DMA G4-LA6 Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities, by region and by gender Aspect: Training and Education , 90 + DMA 75 + G4-LA9 G4-LA10 DMA G4-LA11 Average hours of training per year per employee by gender, and by employee category Programmes for skills management and lifelong learning that support the continued employability of employees and assist them in managing career endings Percentage of employees receiving regular performance and career development reviews, by gender and by employee category Aspect: Diversity and Equal Opportunity G4-LA12 Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership, and other indicators of diversity Aspect: Equal Remuneration for Women and Men DMA G4-LA13 55 Ratio of basic salary and remuneration of women to men by employee category, by significant locations of operation Aspect: Labour Practices Grievance Mechanisms G4-LA16 Number of grievances about labour practices filed, addressed, and resolved through formal grievance mechanisms Aspect: Anti-corruption DMA 79 + G4-SO3 G4-SO4 Total number and percentage of operations assessed for risks related to corruption and the significant risks identified Communication and training on anti-corruption policies and procedures Aspect: Product and Service Labelling G4-PR4 DMA G4 -PR5 Aspect: Compliance G4-PR9 Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service information and labelling, by type of outcomes , 66, Results of surveys measuring customer satisfaction Monetary value of significant fines for non-compliance with laws and regulations concerning the provision and use of products and services 40 + Auditors assurance 55 It is disclosed partially, since remuneration of the employees does not depend on gender, but is instead defined in accordance with provisions of the uniform sectoral remuneration systems and consists of the wage and monthly-integrated incentive, as well as an annual bonus.

60 116 TENEX Annual Report 2014 Appendix No G4-33 Appendix No. 4. Public Assurance Statement on the Report Background The management of TENEX (hereinafter referred to as the Company ) suggested that we verify the 2014 Public Annual Report of the Company (hereinafter referred to as the Report ) in terms of the completeness and materiality of the information it discloses as well as the effectiveness of the management reaction to the stakeholders recommendations. For this purpose, we were given an opportunity to take part (in correspondence format) in the discussion of the Report Concept (October November 2014), the draft Report (public consultations, ) and the final version of the Report ( ), and to freely express our opinion on the issues discussed. Traditionally, we would like to especially mark the Company s work on involvement in the Report drafting process, and primarily in the concept discussion stage a broad range of stakeholders, including partners of the Company from the largest foreign companies. As in the previous reporting campaign, Materiality of the information we use this criterion to single out the Company among other nuclear industry organisations. Based on the analysis conducted, we have reached the following conclusions. Draft Report assessment procedure Our statement is based on the review of two revisions of the Report which were sent to us in advance via the draft Report and its final version. Our statement is also based on the analysis of the information included in the Accounting Table of Stakeholder Recommendations and Requests. The verification of the credibility of the factual data provided in the Report is not subject to public assurance. Assessments, comments, and recommendations We take into account and acknowledge as a merit that the Report has been prepared in accordance with the Core option on new version of G4 Guidelines of sustainability reporting (Global Reporting Initiative, GRI). At the same time, verification of a degree of conformance of the Report to reporting standards is not the task of this statement. We are unanimous in our positive assessment of the Report. The Company has written an informative and wellstructured document that meets our expectations. A doubtless merit of the Report is its considerably renovated structure and compactness of providing information not at the expense of content. Deserves attention the address from the Chairman of the Public Reporting Committee to the readers, which was published here for the first time, to describe the Company s approaches to building up public reports and Our work results are formatted as this Public Assurance Statement, which contains judgments that we unanimously agreed upon. We observe the ethical requirements of independence and the objectivity of assessments and express our personal expert opinion, not the opinion of organisations we represent. We did not receive any reward for our effort or time spent on this work. the optimisation of interaction with the stakeholders. The Report presents in detail the outcomes of the core business in 2014 in the context of sustainable development, analyses impacts of the changed political and economic situation on contracting and sales processes, as well as financial results of the Company s activity, and describes in detail the competitive environment and position of the Company in the Russian nuclear industry. Indicators are given predominantly in a three-year hindsight format. We deem it necessary to underline the creative approach demonstrated by the Company s management to organise interaction with stakeholders, which is based on the seek to reduce time and effort of both the Companys specialists and stakeholders during the Report drafting process. The Report covers all revealed in the course of stakeholders questionnaire essential for the stakeholders topics both in key activities and the social, economic, and environmental aspects of sustainable development. The assessment methodology of material aspects based on the requirements of GRI G4, proposed by the Company, allowed to accommodate Company and stakeholders opinions. In our view, Completeness of the information In our view, the information in the Report is provided in the scope necessary for the stakeholders to gain deep insight into the current state and development prospects of the Company. The engagement there are no reasons for doubts in credibility and topicality of results of these aspects ranking. The sections of the report which are of particular interest are those that disclose aspects of business stability, position of the Company on the global market, financial and economic effectiveness, development of the transportation and logistics infrastructure, and human resource management. of an independent auditor to assure the declared information disclosure level (GRI, version G4, Core option) and its credibility meets with approval. The Company s response to stakeholder recommendations The Company fixed of stakeholder recommendations, analysed them, and took account of them in the final version of the Report. Amendments were made to some Report sections, such as Section 1.4. Corporate Governance and Control System, Section 1.7. The Company in the Global Uranium Market, Section 1.8. The Company in the Nuclear Industry, Section 3.1. Contracting and Sales, and Section 4.2. Risk management and Development of Compliance System. Therefore, the Company demonstrated a constructive attitude to stakeholder recommendations. Noting the traditionally high quality of the Company s interaction with the stakeholders, we would like to express our hope that the experience gained will be used to the full extent in future activities in the field of communications, the enhancement of management tools, and the development of the corporate culture.

61 118 TENEX Annual Report 2014 Appendix No G4-33 Appendix No. 5 STATEMENT on Results of Independent Assurance of Public Annual Report of TENEX for 2014 NP CONSULT CONSULTING AND AUDIT GROUP 2 Introduction The subject of assurance is the Public Annual Report of TENEX (hereinafter referred to as the Report ) for the period from 01 January until 31 December This statement is intended for the management and stakeholders of TENEX (hereinafter referred to as the Company ). Responsibilities of the Parties The management of TENEX shall bear full responsibility for the compilation and credibility of the said Report. We shall be responsible for outcomes of the Report assurance activity only to TENEX in the scope of the task order agreed with the Company and do not assume any responsibility to any third party. Assurance scope, criteria, and level The Report was assessed against the following criteria: manner and level of observance by TENEX of the principles of the AA1000 Accountability Principle Standard 2008, i.e., inclusivity (engagement), materiality, and responsiveness; compliance of the Report with requirements of the Sustainability Reporting Guidelines Global Reporting Initiative (Core option in accordance with GRI G4 Guidelines); compliance with the requirements of the Russian Federation legislation to Joint Stock Companies annual reports with regard to information to be disclosed; compliance with TENEX regulations in the field of public reporting. Our check was planned and conducted in accordance with the AA1000 Assurance Standard 2008 and International Standard ISAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information. The assurance corresponds to Type 2, as per the АА1000 Assurance Standard 2008 definition given the limitations indicated in the Assurance Boundaries section of this statement. In rendering the services, we observed the following assurance level requirements: moderate, as per AA1000 AS 2008, limited, as per ISAE 3000 Assurance Engagements Other than Audits or Reviews of Historical Financial Information. A random verification of the Report information we carried out in terms of the abovementioned assurance levels shall not pretend to ensure a high level of assurance guarantee. Our assurance effort was based on the supporting information provided by the Company management and employees, data from accessible sources, and analytical verification methods. Regarding the quantitative information contained in the Report, the work done cannot be considered sufficient for finding all possible errors and distortions. Nevertheless the evidence we collected is sufficient to formulate our opinion in accordance with the abovementioned assurance levels. Moscow

62 120 TENEX Annual Report 2014 Appendix No Assurance methodology During the work we implemented the following procedures: studying and randomly testing systems and processes implemented by TENEX with the aim to ensure and analyse compliance of its activity with principles of AA1000 APS 2008, as well as sustainability performance management; holding interviews with representatives of the top management of TENEX, as well as management representatives engaged in the Report preparation process; collecting evidence supporting the practical implementation of systemic processes realising principles of AA1000 APS 2008; holding interviews with the Company employees and reviews of documents and statements made by the management to obtain evidence of the Company s activity compliance with principles of AA1000 APS 2008; studying Public Assurance Statement on the Report; studying information on activities in the sustainability context posted on TENEX s website; studying published third parties statements on economic, environmental, and social aspects of the Company s activities to verify the validity of statements made in the Report; conducting a comparative analysis of the Company s Report against reports of foreign companies within a similar market segment; analysing internal audit processes of non-financial reporting employed by the Company; randomly studying documents and data on the performance of Company s management systems of the economic, environmental, and social aspects of sustainable development; studying existing processes of collection, processing, documenting, transfer, analysis, and selection of data to be included in the Report; checking the adequacy of assertions, statements, and data included in the Report; analysing the Report information for its compliance with the criteria above. Assurance boundaries The assurance is limited by the time frames of the reporting period ( ). In regard to quantitative performance indicators is conducted the conformance assessment of data of the audited financial statements, as well as external and internal reports on other production and economic, environmental, and social aspects of activity, with which we were kindly provided. The assurance was not carried out with respect to neither statements of a forwardlooking nature, nor statements expressing the views, opinions and intentions of TENEX to take any future actions. The assurance was not carried out with regards to statements that are indicated in the Report as expert judgments. The in-field audit procedures were limited to visits to TENEX. The assurance was carried out only based on the Report revision provided in the Russian language in MS Word format. We were unable to verify the fact of the Report publication in its final revision on the corporate website of TENEX, because the date of signing this statement came earlier than the date of the planned publication of the Report on the Company s website. Similarly, we cannot confirm the fact of publication of the Annual Report of JSC SPb IZOTOP for 2014 on its website. 4 Conclusions The conclusions below are based on our assurance engagement done within the scope and boundaries described above. 1. On the whole, the Report adequately reflects the implemented management mechanisms and performance indicators of TENEX regarding activities on economic, social, and environmental aspects of the sustainable development. 2. As a result and within the boundaries of the work we performed, we did not find any material misstatements related to the Report information disclosing TENEX s sustainable development activities and their results. Manner and level of observance of principles of AA1000 APS 2008 As a result and within the boundaries of the work we performed, we did not find any material non-compliance with criteria of AA1000 APS 2008 relating to observance of its principles (inclusivity, materiality, and responsiveness). Compliance of the Report with requirements of the Sustainability Reporting Guidelines (Core option of preparing the Report in compliance with GRI G4 Guidelines) To formulate our opinion on this issue, we analysed the Report s compliance with the GRI G4 Guidelines, requirements in regard to the principles and standard disclosure elements for the Report to be prepared in compliance. Principles for defining the Report content Materiality The materiality assessment of aspects disclosed in the Report is based on questionnaires of representatives of external and internal stakeholders of TENEX. The Report information covers topics and performance indicators that reflect material impacts of TENEX on the economy, environment, and society, or those that may significantly influence the assessments and decisions of stakeholders. The Report addresses main topics raised in reports from similar profile foreign companies. Stakeholder inclusiveness Within the Report, TENEX provided information on stakeholders and mechanisms of taking into account their interests when defining the content of the Report. Representatives of a broad circle of stakeholders, including the Company s foreign partners, took part in the discussion of the Report Concept and public consultations on the draft Report.

63 122 TENEX Annual Report 2014 Appendix No Sustainability context The Report presents TENEX activities results in a broad sustainability context that considers various aspects of productive and economic, social, and environmental nature. Completeness Within the declared boundaries, the Report covers the information of activities of TENEX with a sufficient degree of completeness. Information on the environmental and social impact of JSC SPb IZOTOP (which is the most material TENEX s subsidiary in terms of the stated aspects of activities) presented in the annual report of JSC SPb IZOTOP for 2014; the electronic version is referenced in the report. Principles ensuring the Report quality 5 6 Balance The Report is well balanced and reflects both activity results and outstanding issues. Comparability The comparability of the Report with the non-financial reports of other organisations is ensured by the use of GRI G4 Guidelines as the basis for the disclosure of performance indicators in the sustainability context. The comparability of the financial information with regard to the reports of other companies is not fully ensured due to the use of requirements from the Russian accountability legislation (rather than international accounting standards) for the disclosure of financial information. Most of the numerical indicators are given in three-year dynamics which allows the analysis of trends of the Company s business development. Accuracy The accuracy of factual information presented in the Report is sufficient to enable stakeholders to assess the results of TENEX s activities in the sustainability context. The performance indicators calculation is based on methodologies approved in the GRI G4 recommendations and the Public Reporting Standard of TENEX, which is based on the methodology of ROSATOM. Timeliness The Report was prepared in order to be submitted to the Annual Shareholders Meeting. Clarity On the whole, the information presented in the Report is clear and understandable for different groups of stakeholders. The Report includes a Glossary and a List of Abbreviations, which make it easier for users to understand the Report s information. Reliability The performance information presented in the Report is based on internal reporting documents, as well as reports submitted to the controlling bodies. The issues of the inspection s efficiency and of the procedure for writing non-financial accounting reports are in the jurisdiction of the Internal Control and Audit Service. Over the course of the check, we were kindly provided with the conclusion on findings of the audit conducted on the processes of compilation of the Report for We did not find any facts questioning the reliability of the Report information. General standard disclosures Disclosure of general standard elements was provided, on the whole, with compliance to the requirements of GRI G4 declared option of the Report preparation in compliance. Specific standard disclosures Information on management approaches The Report mainly reflects the information on management approaches to material aspects of economic, social, and environmental areas. Indicators All indicators necessary to fulfil the requirements to the Core option of the Report preparation in compliance with G4 Guidelines are given in the Report in observance of the indicators of GRI G4. Also, other indicators are disclosed in the Report, including indicators with excluded information described in the Table of Elements and Indicators of Public Reporting Disclosures. Overall assessment of the Report As a result and within the boundaries of the work done, we have not found material deviations from the requirements to the Core option of the Report preparation in compliance with GRI G4 Guidelines. Observance of requirements of the Russian Federation legislation to annual reports of joint stock companies regarding disclosed information Based on the work done, we have not found material inconsistencies of the Report to the requirements of Provision on the information disclosure by issuers of emissive securities (approved by the Bank of Russia, No. 454-P of ) as regards the disclosure of information in the annual report of a joint stock company. Observance of requirements of the public reporting regulations of TENEX Based on the work done, we have not found material inconsistencies of the Report to the requirements of the Public Reporting Standard of TENEX. Recommendations 1. The disclosure of GRI indicators is reasonable to exercise with a link to the target values as well as future plans.

64 124 TENEX Annual Report 2014 Appendix No G4-15 Appendix No. 6. Membership in Professional Organisations and Associations 7 2. To increase the disclosure level of indicators, for which GRI protocols are not fully considered (partial disclosure). 3. To take account of comments contained in the above sections of this statement. Competence and independence statement CJSC NP Consult is an independent audit organisation that professionally renders assurance services. CJSC NP Consult is a member of the self-regulatory organisation of auditors, the Institute of Professional Auditors, and acts in accordance with the Code of Ethics for Professional Accountants IFAC. The company employs the audit service quality control system that includes the control of observance of ethical norms. CJSC NP Consult officially states that this Statement represents an assessment made by an independent auditor. Neither CJSC NP Consult nor its employees have relations with TENEX, or its subsidiaries, which could lead to a conflict of interests while rendering the Report s assurance services. CJSC NP Consult is an organisational stakeholder of GRI, a licensed provider of assurance services as per the AA1000 AS. The team that renders sustainability reporting assurance services includes CJSC NP Consult specialists who have the necessary expertise in rendering audit services, writing reports in accordance with GRI, as well as GRI G4 certificates. The project manager performed his training in the assurance of sustainability reporting in the Accountability Training Centre and has a LCSAP Certificate. G4-16 Organisation/ association 1. World Nuclear Association (WNA) 2. Nuclear Energy Institute (NEI) Description of organisation/ association The most representative international association that unites manufacturers and consumers of NFC products and services, engineering, reactor building, and shipping companies operating in the nuclear area. The association annually holds international symposia and conferences, issues analytical reviews and long-term forecasts on the development of the global nuclear power and uranium market. The largest US association of nuclear power and industry organisations. Established in 1994 with the aim to represent the collective interests of the nuclear community s in interactions with government authorities and international organisations. The NEI membership includes both main US nuclear market participants and a majority of foreign companies represented in the global NFC market. TENEX involvement Membership since Accession to WNS means that one agrees with its Charter of Ethics, which defines its values, basic principles, and institutional and legal bases of activities, as well as key challenges of the nuclear industry: About-WNA/Charter-of-Ethics/ Membership since 2008 G4-56 General Director of CJSC NP Consult V. Yu. Skobarev 3. International Organisation of the World Nuclear Fuel Market (WNFM) An international association of consumers, producers, and suppliers of NFC products and services, established in 1974 with the aim to facilitate the development of trade in nuclear materials for the nuclear power and industry needs. WNFM members include 93 companies from 20 countries. Membership since 2001 Moscow May 8, Japan Atomic Industrial Forum (JAIF) 5. Korea Atomic Industrial Forum (KAIF) A non-profit, non-governmental association of Japanese utilities, nuclear industrial equipment producers, construction firms, research and scientific laboratories. It annually holds representative conferences, gathering more than 1,000 nuclear power experts, including permanent members of JAIF and representatives of international organisations, as well as state and local authorities of Japan. An international non-profit association, whose members include approximately 90 Republic of Korea and foreign nuclear organisations. It publishes information and analytical bulletins, holds a number of annual training sessions on the nuclear technology development issues; jointly with the Republic of Korea Nuclear Society, it holds annually an international conference, which is the platform that the world NFC market participants use to identify and discuss promising areas of cooperation. Associated membership since 1998 Associated membership since 2004