Energia s. P. Korolev Rocket and Space Corporation Energia

Directive of the Russian Federation Government dated 17.05.2014 No. 2942p-P13

Hold pre-annual meeting of the Board of Directors

To execute FPMA’s orders, the agenda of the general stockholders’ meeting included items proposed by FPMA. The major events took place within periods specified by legislation.

The information needed to be published within the framework of preparations for and holding of AGSM was posted on the ID Portal in a timely manner.

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  review at the BOD the issue of advisability of developing an innovative development program;
  
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  if advisable, charge the Strategy Committee with developing a concept of an innovative development program;
  
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  approve the Innovative Development Program at the BOD;
  
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  review the issue of tying the program fulfillment to the KPI of the JSC;
  
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  review the issue of raising special-purpose science and technology funds;
  
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  the program can be extended to SAC.
  

The Corporation Board was charged with assuring that the Program would be carried out taking into account recommendations of the Working Group for the development of public-private partnership in sphere of innovation under the auspices of the Government commission on high technology and innovations.

RF Ministry of Economic Development reviewed the report on implementing RSC Energia Innovative Development Program by the 2011 performance and in its Letter No.2114-OF/D19 of 11.02.2013 the Ministry informed the Corporation that RSC Energia on the whole had put into effect the measures in all fields foreseen in IDP; the target figures were achieved by most of the key performance indicators, except for those determining R&D financing.

In order to carry out the order issued by the Chairman of the Interdepartmental Committee on Technological Development of Presidium at the RF President’s Council on Economic Modernization and Innovative Development of Russia (Letter from the RF Ministry of Economic Development No.5854-АК/D19 of 29.03.2013), the Corporation took part at the interdepartmental Committee meeting on 04.04.2013 and delivered the report on progress in implementing Innovative Development Program at RSC Energia.

At the Board of Directors’ meeting (Minutes No.11 of 29.04.2013):

- it was noted that some of the indicators set in the Innovative Development Program, including proceeds and net profit indicators had not been achieved by the 2012 performance;

- medium-term plan for 2013-1015 under the Innovative Development Program at RSC Energia was approved;

- proposals to update RSC Energia’s IDP for 2013-2020 were approved.

Corporation took note of FPMA Procedural Materials for medium-term plan for implementing Innovative Development Program for 2013-2015. (MERT Fax message No 7884-OF/D19i of 22.04.2013).

At the meeting of the Board of Directors, Committee on Strategic Planning, Modernization and Innovative Development held with participation of the Board of Directors’ Committee on Personnel Remuneration consideration was given to KPI indicators proposed to be included in the Corporation Work Program for 2014 and Innovative Development Program. It was resolved to recommend the Committee on Personnel to submit for repeated consideration the issue on KPI, including problems of changing specific weight of financial and production indicators (such as quality, state defense order execution indicators) towards increased share of the latter.

The Report on the results of carrying out the Corporation Innovative Development Program (IDP) for 2013 was submitted for review and approved at the Board of Directors of the Corporation held on 29.04.14 (Minutes No 10). Instructions were also given:

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  to bring to the notice of the Corporate management the need to update IDP to take into account the Corporation’s manufacturing program and approve such an update by the Board of Directors of the Corporation.
  
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  for the Corporation management to refine proposals on updating the IDP and submit it with a draft Corporate Strategy for review at a meeting of the Committee for strategic planning, modernization and innovation development of the Board of Directors in May 2014 for further review at a meeting of the Corporation’s Board of Directors.
  

Directive of the Russian Federation Government dated 24.03.2011 No. 1221p-P13

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  Investment Program – during the 1^st half of 2014;
  
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  Long-term Development Programs - before 01.10.2014.
  

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  the list of KPI and their target values
  
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  Provision on remuneration of the executive body, BOD
  
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  The JSC investment and financial policy
  
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  Interactive financial model
  
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  Regulations for scientific and technical funds
  
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  prediction of scientific and technological development, modernization and optimization of the used technologies
  
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  Energy Saving and energy Efficiency Program
  

Develop strategic aims of the company development (taking into account the provided list) Develop the list of specific measures:

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  manufacturing,
  
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  investment and financial,
  
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  managerial,
  
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  personnel,
  
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  to organize the corporate structure
  

Board of Directors (Minutes No.9 of 22.04.2011) approved the concepts of the Corporation Development Strategy for short-term, medium-term and long term periods.

The Committee on Strategic Planning, Modernization and Innovative Development of the Board of Directors (Minutes No.1 of 23.12.2013) took note of the main directions of the Corporation Strategy and approved the principles of prioritizing in development of the Corporation projects, as well as availability of the proposals in long-term perspective. At the Committee meeting it was decided to charge the Committee on strategy together with the Corporation management to update the submitted materials.

Board of Directors (Minutes No.5 of 23.12.2013) considered and took note of Draft Strategy of the Corporation and also put the Corporation management in charge of updating and giving further consideration to Draft Strategy of the Corporation emphasizing at that:

- baseline projects (baseline option) with economic estimates up to 2020 and for a longer perspective;

- proactive (ambitious) projects – justification of these projects progress, enlarged economic estimate;

- «critical» products (articles) – justification of the need for their manufacture at RSC Energia; unique character/significance, economic calculations;

- analysis of prospects for the Sea Launch Project implementation with the required economic justification.

Strategic Planning, Modernization and Innovative Development Committee of the Board of Directors on 19.02.14 (Minutes of the Meeting No.2) reviewed basic provisions of the Corporate Strategy and made the decision:

1.1. Approve the approaches to forming the draft Strategy in so far as its ideology is concerned. Update the draft strategy to take into account the criticisms:

- develop the strategy structure for major units (ideology, key projects and areas of activities, production development, economic parameters, international cooperation, social component;

- include into the draft Strategy a text part, which contains the rationale for the most important components of the Strategy (covering, among other things, the projects geared to the government programs; development and upgrade of production facilities to reduce labor input/consumption of materials, improvement of labor productivity; proposals for deep-space exploration; the need to attract budget investment and other areas of Corporation development).

1.2. If needed, when finalizing the draft Strategy, use the service of consultants/experts; hold working discussions with individual members of the Committee, send them intermediate revisions of the draft Strategy and/or its sections (attachments).

On 29.04.2014 the Corporation Board of Directors (Minutes of the Meeting No.10) instructed the Corporation management to refine proposals on updating the IDP and submit it with a draft Corporate Strategy for review at a meeting of the Committee for strategic planning, modernization and innovation development of the Board of Directors for further review at a meeting of the Corporation’s Board of Directors.

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  are to make sure that JSC develops and approves a long-term development program;
  
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  are to make that LDP implementation is audited and a standard for conducting such an audit is approved;
  
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  are to make sure that changes are introduced into provisions on the remuneration of the JSC single-member executive body.
  

The parameters must be analyzed as of the year, which follows the year when the first block of shares was contributed to the charter capital of the holding per RF President's Decree, but there no increases in the RSC Energia’s charter capital made by the above method.

Order of the RF Government of 31.01.2012 No.VS-P8-501

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  the need to conduct the analysis of advisability of using the mechanism of co-investment in venture capital funds;
  
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  the need to approve the procedure for participating in venture capital funds in case a decision is made that it is advisable to co-invest in them , which must be implemented either through a competitive tender, or through the use of public offering;
  
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  The possibility of involving specialized development institutions to provide consultative support to the Organizations;
  
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  The higher priority of participation in venture capital funds established within the Russian jurisdiction;
  
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  existence of requirements for mechanisms of transferring the technology of the venture capital fund portfolio companies to the Russian Federation territory in the interests of the Organizations.
  

On 18.03.2013 (Minutes of the Meeting No.8) the Corporate Board of Directors made the following decision: to consider it advisable for the Corporation to continue its contacts with venture capital funds in order to identify mutually beneficial areas of cooperation.

During inspection of power facilities the following documents were developed, agreed upon, approved and made available to the Corporation:

- Report on mandatory inspection of RSC Energia power facilities which covers energy-saving recommendations and technical solution with estimated costs required to implement the scheduled actions and possible payback periods;

- RSC Energia Energy passport registered with SRO NP Energo Prof Audit (Reg. No.E-015/048-13 of 27.02.2013) is forwarded to the Russian Federation Ministry of Power Engineering according to the Regulations. Energy passport is drawn up in accordance with the Requirements set forth in the Order No.182 of 19.04.2010 issued by the RF Ministry of Power Engineering.

At present time, the Corporation has developed and implements the Plan for carrying out the proposals of the commission, established by the Order of the senior vice president No. 487/O dated 03.10.2014 to eliminate functional redundancies and optimize the costs of providing power to the manufacturing facilities of the Corporation.

In order to counteract corruption, posted on the Corporate web site is information about the income, expenses, assets and liabilities provided by the employees filling senior positions in the organization established for fulfilling the tasks given to the Government of the Russian Federation for the financial year from January 1, 2013 to December 31, 2013.

Information about the results of 2014 will be provided within the time established by law.

Chapter VIII of the order of FSFR of Russia No. 11- 46/pz-n dated October 4, 2011 «On the approval of regulations for the disclosure of information by the issuers of equity securities»

Order of the Russian Federation Ministry of Economic Development

No.208 of May 11, 2011 «On approval of procedure for disclosing information by Public Joint-Stock Companies whose shares are in state or municipal ownership, and by state (municipal) unitary enterprises».

Disclose information by JSC included in the privatization forecast plan.

The Corporation is not included in the privatization forecast plan.

Corporate documents were posted in the personal cabinet of the Corporation on the FPMA ID Portal (copies of the minutes of general stockholder meetings, meetings of the board of directors, specialized committees and commissions).

Orders of the Russian Federation Government dated 27.01.2012 No. VP-P13-459 and 07.12.2012 No. ISh-P13-7501

The single-member executive body is included in the list of positions the information about the incomes of which is posted on the Corporate web site.

Order of the RF Government dated 06.04.2009 No.VP-P13-1823, dated 20.04.2009 No.VP-P13-2099, dated 28.07.2009 No.V3-P13-4252

Review at the BOD the issue of developing a KPI system for the JSC

Develop Provisions on the Payments to Managers of JSC, to BOD members, tie them in with the KPI system.

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  cost effectiveness in terms of net profit
  
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  liabilities / profit on sales
  
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  quarterly earnings history
  
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  quarterly net profit history
  

Disclose information on the size of remunerations on the web page of the JSC

Presented in the personal cabinet of the Corporation on the FPMA ID Portal is information about payments (remuneration) to the Corporation’s managerial personnel (single-member executive body/chairman of collective execute body, managers of structural subdivisions, members of the Board of Directors (Supervisory Board) who are entitled to get remuneration (RF Government Order No ISh-P13-2232 of 08.04.2010; FPMA’s Letter No YuM-13/10638 of 27.04.2010; FPMA’s Fax message No 81 of 05.07.2010; No 93 of 04.08.2010).

Ad Hoc Committees attached to RSC Energia Board of Directors are set up and have been operating since December 2009. The Corporate Board of Directors’ meeting held on 08.12.2009 (Minutes No 4) approved provisions governing the activities of these committees: Provisions on the Strategic Planning Committee, the Personnel and Remuneration Committee, the Committee on Audit.

RSC Energia’s Provision on the Committee on Audit sets forth the concepts recommended by FPMA (Letter No 11/53825 of 19.11.2013) and defines the list of the Committee’s powers, including auditing financial-business activities of the organization, management and financial statements (including reports on the management progress in achievement of the established KPIs).

In accordance with the Directive of FPMA No GN-15/9084 of 27.03.2012, the Corporation Board of Directors on 21.11.2012 (Minutes No 3) considered the issue of setting up the Committee on Modernization and Innovative Development. It was resolved that it was inexpedient to establish it. By its resolution the Board of Directors broadened the objectives and functions of the Committee on Strategic Planning, adding innovative development objectives to the list of the existing ones and changing the name of the Committee appropriately. The Board of Directors approved the Provision on the Committee on Strategic Planning, Modernization and Innovative Development.

Personal cabinet of the Corporation at FPMA’s ID-portal presents information about available Ad hoc Committees at the Corporation Board of Directors, copies of the Provisions on Ad Hoc Committees approved, as well as information about the Committees’ meetings (agenda, voting results, Minutes of the Committees’ meetings).

The Corporate Board of Directors (Minutes of the Meeting No. 15 of 10.04.2015) discussed the list of key Corporation performance indicators, their target values for 2015 and made the decision to include in the KPI list the following new indicators:

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  Cost effectiveness of investment capital, cost effectiveness in terms of net profit, net profit, labor productivity, completion of the subject plan within the framework of state programs;
  
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  size of dividends;
  
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  Quality Management System performance.
  

Order of the RF Government of 27.03.2014 No.ISh-P13-2043

FPMA letter dated 26.06.2014 No. OD -11/22160

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  Approval of provisions on the KPI of the company activities.
  
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  Approval of the KPI for the management performance, which must be taken into account when making decisions on labor compensation and personnel decisions.
  
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  Make sure that the KPI are approved, and that KPI performance is linked to the size of remuneration of the JSC management taking into account the attached guidelines
  

- liability insurance for the members of the RSC Energia governing bodies against negative consequences caused by their actions (inaction) during performance of their duties is currently not advisable.

Anticorruption policy of RSC Energia has been developed

2. Section «Equity Capital Structure» covers information on a monthly basis about the shareholders whose share in the Charter (contributed) capital exceeds 2%.

3. Section «Control and Managerial Bodies» addresses information about membership of the Joint Stock Company managerial bodies (Board of Directors, Collegiate Executive Body (Management), Single-member executive body (Corporation President), Auditing Committee, Committees at the Board of Directors), as well as their competence.

4. Section «Corporate Events» presented current information about RSC Energia corporate events (general shareholders’ meetings, Board of Directors meetings, meetings of ad hoc Committees at the Board of Directors). In so doing, the Corporation via ID-portal reported topical information about participation of members of the Corporation managerial bodies in its meetings as well as placed corporate documents of RSC Energia (copies of the Minutes drawn up at the general shareholders’ meeting held, Board of Directors meetings, ad hoc Committees and commissions meetings held).

6. ID-Portal Section «Orders» placed information about progress in execution of the orders at regular intervals.

7. ID-portal Section «Documents» in addition to the earlier placed in-house documents of the Corporation regulating its activity (constituent, incorporation documents; Provisions on the Joint-Stock Company managerial bodies; Provisions on Ad Hoc Committees; Dividend Policy Provisions; Investment Fund Provision; Non-Core Assets Alienation Program; Procurement Policy; Provision on Information Interface between RSC Energia and other ID-portal users relative to exchange of data and legally significant documents; Provisions on Remuneration and Compensations paid to the Board of Directors’ and Auditing Committee’s members; Provision on Key Performance Indicators System at RSC Energia; Code of Corporate Conduct; Procurement Activity Provision; Provision on organizing the Corporation executive body activity on information interface via ID-portal; etc.), presents organization-order documents approved by the Corporation in 2014 (new revisions of the Corporate Charter, Provisions on General Meetings of Corporation Stockholders, Provisions on the Corporate Board of Directors, Provisions on the Corporate Executive Board, Provisions on the Corporate Internal Audit Commission, Report on financial-business activity, etc.).

Post on ID Portal information regarding taking the corporate actions.

- take note of the information about implementation in the Corporation of measures to manage intellectual property rights;

- charge the corporate management with development and approval of basic provisions for managing intellectual property rights.

Information about the Board of Directors’ meeting is posted on the ID Portal.

The issue of reviewing the basic provisions for managing intellectual property rights is included into the plan of activities of the Board of Directors for 2015.

- take note of the information about the absence in first half of 2014 of complaints to the Corporation from the Government customers as to the quality of military hardware systems and products caused by non-compliance with the customer requirements.

The Corporate Board of Directors held on 25.02.2015 (Minutes No.13) reviewed and took note of the information about the absence in first half of 2014 of complaints to the Corporation from the Government customers as to the quality of military hardware systems and products caused by non-compliance with the customer requirements.

The report is based upon information about participation of the Russian Federation interests representative in corporate events to be placed on ID-portal by the Corporation. For correct generation of the above reports the Corporation (as corporate events are convened) is placing in «personal cabinet» data on the Russian Federation interests representative incorporated into the Board of Directors (Supervisory Board); as well as information about the representative of the interests taking part in RSC Energia corporate events being held.