Main regulatory documents in the field of innovation activities:

1. Orders of Rosatom State Corporation:

• № 1/1219-P dated 12/17/2012 "On the pricing of contracts for R&D";
• № 1/353-P dated 04/05/2013 "On organizing work on the state record-keeping of results of research, experimental design and technological civil operations performed at the expense of the federal budget, and other results of scientific and technical activities created to the order of Rosatom State Corporation";
• № 1/606-P dated 06/12/2013 "On functional management of the operations as part of the industry function "Innovation Activities Management" in organizations of Rosatom State Corporation";
• № 1/1486-P dated 12/31/2013 "On approval of the Standard Industry Procedure for Handling Scientific and Technical Documentation Created During R&D to the order of Rosatom State Corporation";
• № 1/5-P dated 01/14/2014 "On approval of the Standard Industry Procedure for Identification of Intellectual Property";

2. Orders of OJSC Atomenergomash:

• «On approval of Terms of Reference for the Scientific and Technical Council of OJSC Atomenergomash»;
• «On approval of members of the Scientific and Technical Council of OJSC Atomenergomash».

The process of identifying and prioritizing stakeholders is based on interviewing executives of the Company, on a comparative analysis of international, national and industry practices as well as a review of international standards. A map of stakeholders is annually submitted for voting within the framework of public dialogues.

In the reporting year, the format of the stakeholder map was revised. This was, first of all, due to the fact that the dependence or influence of the Company is not a direct source of a problem, i.e. these may not lead to a confrontation of interests. In this regard, the third parameter was introduced for the purposes of assessment – the attitude of a stakeholder to the Company and its activities (from full support to confrontation).

On November 28, 2013, representatives of the Company submitted the results of the 2012/2013 reporting campaign and presented the 2013 Report Concept.

As part of the dialogue, the Strategy Director of OJSC Atomenergomash, Konstantin Tulupov, presented a paper on the results of the 2013 reporting campaign. The Chief Specialist of the Strategic Development Department, Igor Radovskiy, provided information on the concept of the integrated annual report of OJSC Atomenergomash for 2013. As part of the concept, the central topic and structure of the report were presented. It was stated that OJSC Atomenergomash is one of the first in Russia to switch to the new version of the GRI G4 Manual; plans for implementation of the International Integrated Reporting Framework that is being prepared for issue were presented as well. The dialogue participants made their suggestions regarding disclosure of information in the public report.

On March 12, 2014, two dialogues were held regarding the central topics of the Report: "Creating a sustainable development strategy of OJSC Atomenergomash until 2020" and "Building Comprehensive Risk Management System at OJSC Atomenergomash".

On March 12, 2014, OJSC Atomenergomash held public dialogues with stakeholders to discuss the central topics of the Company's Integrated Annual Report for 2013. Following the tradition, the dialogues were held on the same day. The dialogue, in addition to the representatives of OJSC Atomenergomash, was attended by representatives of Rosatom State Corporation, those of industry partners, SASC, trade union, customers, universities, environmental and expert organizations, and media. It should be noted that for the first time in 4 years representatives of competitors (Public Joint-Stock Company “The Taganrog Boiler-Making Works "Krasny Kotelshchik") attended the public dialogues and actively participated in the discussion.

During the first dialogue, Konstantin Tulupov, Strategy Director of OJSC Atomenergomash, presented his report. He explained what preceded the creation of the draft Sustainable Development Strategy of OJSC Atomenergomash until 2020, what work was done to create it, and outlined the main areas of development, in which development projects are implemented and medium- and long-term plans are formed. Representatives of stakeholders asked many clarifying questions, including those regarding energy conservation and efficiency projects and projects for interaction with universities and innovation activities. Also, there were suggestions, including disclosure of the Holding's business model, numbers of personnel with a breakdown by specialties, and plans to arrange high-performance workplaces.

During the second dialogue, a report was made by the Chief Specialist of the Strategic Development Department, Igor Radovskiy. He spoke on the prerequisites for building the Corporate Risk Management System (CRMS) of OJSC Atomenergomash, aims and objectives of the CRMS, the work done in 2013 in this area as well as the plans for CRMS development. Stakeholder representatives asked several clarifying questions regarding the methodology and organizational aspects of risk management. It was proposed to disclose information on the risks which occurred in 2013, relevant response measures the Integrated Annual Report of OJSC Atomenergomash for 2013 as well as to update the risk map due to the events in Ukraine.

3. On April 22, 2014, public consultations were held to present the draft 2013 Report.

A joint report on the results of the year was made by the Strategy Director of OJSC Atomenergomash, Konstantin Tulupov, the Deputy CEO – Economics and Finance Director, Vadim Pesochinsky, and the Deputy CEO – Director, Human Resources and Organizational Development, Ksenia Sukhotina. Konstantin Tulupov spoke on the key events in three areas: strategic, innovative and operating activities. Strategic plans of Atomenergomash and current results of their implementation were announced. Vadim Pesochinsky spoke on the financial indicators and the dynamics and structure of revenue, noting the existing problems and ways to resolve them. The report made by Ksenia Sukhotina was devoted to the projects for development of the engineering division enterprises of Rosatom State Corporation, skill pool, personnel costs and the achieved effect. Representatives of stakeholders asked several clarifying questions, including those regarding development projects, established business activity areas, as well as regarding the strategic objectives of OJSC Atomenergomash. During the dialogue, proposals were made to disclose certain information in the Report, including showing individual indicators with breakdown by SASC.

The second report was made by the Chief Specialist of the Strategic Development Department, Igor Radovskiy. In his report he spoke on implementation of the 2013-2014 reporting campaign plans, including compliance with schedules, updates to the regulatory framework for preparation of the Annual Report, innovations, including changes in the structure and content of the Report. In addition, it was said that during preparation of the Report the Company noted the comments of stakeholders they made during the previous and current reporting campaign. Stakeholders highly praised the improvements to the quality of information disclosure in the Report as compared to previous years, and made a number of long-range proposals, including analysis of the Company's compliance with ISO 26000 Social Responsibility and considering new format of stakeholder engagement. The participants in the public consultation thanked the Company, having noted that none of the recommendations was unnoticed, and that many of them were implemented already in the 2013 Report.

Stage 1

Commissioning of production capacities in 2016.

Launching production of the following licensed products:

— At LLC ALSTOM Atomenergomash: guide vanes, diaphragms, assembly of turbine cylinders and generator stators.

— At OJSC Atomenergomash enterprises: turbine cylinder shells and generator stator shells.

Stage 2

Commissioning of production capacities in 2017.

Launching production of the following licensed products:

— At LLC ALSTOM Atomenergomash: rotor blades, complete machining and assembly of turbine and generator rotors.

Stage 3

Commissioning of production capacities in 2018.

Launching production of the following licensed products:

— At LLC ALSTOM Atomenergomash: welding of rotor, fabrication of stator winding and core.

Simultaneously with the staged expansion of the licensed products manufacture at the Division's enterprises, production of other components for turbine islands is being developed, including heat exchangers, pumps, pipelines and other auxiliary equipment.

The Company's cooperation with Customers is primarily governed by the following regulatory documents:

• Orders of OJSC Atomenergomash, including:
  — "On introduction of the Quality Assurance Program for Supply of products for Nuclear Facilities";
  — "On Centralized Sales";
  — "On approval of the OJSC Atomenergomash Contracting Regulation";
  — "On approval of the OJSC Atomenergomash Contracting Business Process Regulation";
• GOST R 15.201-2000 System of product development and launching into manufacture. Products of industrial and technical designation. Procedure of product development and launching into manufacture;
• GOST R 15.309-98 System of product development and launching into manufacture. Tests and acceptance of produced goods. Principal positions;
• GOST 15.005-86 System of products development and launching into manufacture. Development of single and small-scale production units assembled at the place of use.

The main objective of the Strategic Partnership Agreement with Bauman Moscow State Technical University is training of qualified specialists for core areas of the Division's enterprises as well as conducting joint research in the field of technologies for energy and special nuclear reactors and plants. To ensure efficient training and conversion training, the Agreement provides for joint approval by the parties of educational programs and formation of an annual order for specialists. In particular, OJSC Atomenergomash will provide necessary training for students and graduate students of the university at the Division's enterprises as well as engagement of leading employees from the Division's enterprises in the training process. The University also guarantees provision of educational services for conversion training and advanced training of managerial and engineering and technical personnel of OJSC Atomenergomash.

The main partner of the University from OJSC Atomenergomash will be OJSC OKB Gidropress. Pursuant to the signed agreement, a department of the University will be created at the facilities of the enterprise for additional targeted training of engineering staff specializing in "nuclear reactors and materials".

In addition, in February 2013, Ganz EEM signed an agreement with Budapest University of Technology and Economics to provide consultations to the students and involve them in resolving technical problems. OJSC Energomashspetsstal, with the objective of advanced training of employees in 2012-2013, concluded ten contracts with eight universities of Russia and Ukraine.

In accordance with the provisions of the Federal Law No.223-FZ, the official website zakupki.gov.ru provides information both on competitive (tenders, auctions, requests for proposals, requests for quotations, competitive negotiations) and non-competitive (single source procurement, simplified procurement) procurement to amounts exceeding 500 thousand rubles including VAT. In addition, in accordance with the codes, information on procurement (notices, procurement documentation, protocols of commissions) is published in the "Procurement" section on the Rosatom State Corporation website at  http://zakupki.rosatom.ru.

Most (about 99%) of the public competitive procurement of OJSC Atomenergomash and the Division's enterprises are effected electronically. The main trading sites are The Competitive Auction House (at  http://www.a-k-d.ru) and The Fabrikant (at  www.fabrikant.ru).

Procurement documentation is prepared in accordance with legal requirements, the Unified industry standard for procurements, the guidelines of Rosatom State Corporation regarding formation of the initial maximum price, and requirements to participants and assessment of applications received. Where necessary, the participants, except those specified by the federal law, can submit to the supervisory bodies of both Rosatom State Corporation and OJSC Atomenergomash complaints regarding actions/failure to act by OJSC Atomenergomash and other enterprises of the Division.

The annual procurement program of OJSC Atomenergomash enterprises is published on the Rosatom State Corporation website.

OJSC Atomenergomash, as a nuclear industry enterprise, participates in industry activities under the program for expansion of access of small and medium businesses which are developed based on the Order of the Government of the Russian Federation No.867-r dated 05/29/2013.

The policy of the state and industry in the field of procurement aimed at forming market-based prices, development of fair competition and prevention of corruption, does not allow the approaches to supply chain management adopted abroad. For each separate quantity of products or services, suppliers are selected each time through competitive procurement procedures (except for cases specified in the Standard). Accordingly, no long-term relations are established with the suppliers. In addition, there are no specific requirements specified for the participants of the procurement procedures that would not be justified by the needs of the customer and which could entail restriction of the number of participants in the procurement and violation of the antimonopoly laws of the Russian Federation.

In addition to the direct requirements related to the quality of services and competence of the contractor, it is mandatory for the procurement procedure participants to:

• be registered as a legal entity or individual entrepreneur;
• be registered as a person of civil law and have all the necessary permits to perform activities in accordance with the law;
• possess necessary licenses or certificates permitting to supply of goods, perform work or services;
• not be in the process of winding-up or be recognized insolvent (bankrupt) by an arbitration court;
• not be an organization the property of which is arrested by a court, an administrative body as needed for performance of the contract and/or economic activity of which is suspended;
• not to be in arrears for payment of taxes, fees, fines and penalties the size of which exceeds twenty five percent of the book value of its assets;
• as part of the application to participate in the request for proposals, disclose information regarding the entire chain of owners, including beneficiaries (including final beneficiaries);
• not to be listed in the registers of unfair suppliers.

On November 18, 2013, Volgodonsk hosted a regional Forum of Nuclear Industry Suppliers "ATOMEX" organized by OJSC Atomenergomash. The forum was held to attract new suppliers to the nuclear industry, to improve quality of equipment procurement and services and to ensure transparency of the procurement procedures.

The Forum was attended by representatives of more than 20 Russian enterprises, suppliers of the Division, including: LLC Metallinvest, OMZ-Special Steels LLC, CJSC Schneider Electric, “Metallurgical Plant "Electrostal" JSC, etc.

The Forum's round table was attended by directors and experts of Rosatom State Corporation, OJSC Atomenergomash and the Division's enterprises. Their reports were devoted to the issues of organizing and controlling procurement activities, qualification of potential suppliers, and conditions for placement of orders. Representatives of the companies announced development plans and needs of the main production sites of the Division. Special attention was paid to the program for expansion of access of small and medium businesses to procurement performed by companies with state shares.

Program participants:

Program 1: Government + Employee + Company

Program 2: Employee + Company

Terms and conditions:

Program 1: If an employee participates in the program for the government’s co-financing of pension savings (Federal Law No. 56-FZ), the employer pays equal contributions to the pension fund, which should not exceed RUB 12,000 per annum per employee.

Program 2: If an employee makes contributions within the framework of the additional pension plan, the employer makes contributions to the pension fund that are proportionate to the employee’s contributions (using the adjustment factor, which takes into account the number of years spent by the employee with the Company, age, etc.). The maximum monthly contribution of the employer shall not exceed RUB 4,000 per employee, provided the employee participates in Program 1 or both Programs.

Proportion of salary contributed by the employee and employer:

• The proportion of salary contributed by the employee: 0.8-2.2%;
• The proportion of salary contributed by the employer: 1-6,6%.

In 2013, according to the research conducted by the rating agency Expert RA, OJSC Atomenergomash was rated as A.hr - High level of employer attractiveness". Such decision was made based on the analysis of data regarding the level of wages, social programs of the Company, training and motivation of employees, and setting criteria for career growth of the employees. Positive influence on the final rating was produced by the high average salary level in the Company, the balanced system of financial and non-financial incentives, the clear specification of the criteria for career growth, the high level of financial stability, the availability of training and development programs, and various social and cultural projects organized by the Company, a part of which are unique.

OJSC Afrikantov OKBM was included in category of the most environmentally and energy efficient enterprises in Russia. The rating was made by the Environmental and Energy Rating Agency Interfax-ERA. OJSC Afrikantov OKBM got the 35th place among 4239 Russian companies for its production and environmental performance in 2012. The Company's rating was determined by the total score for the four indicators: environmental and energy efficiency of production, technological efficiency of the equipment used, dynamics of the efficiency, and transparency of the environmental and energy reporting.

OJSC Atomenergomash has approved the following regulatory documents governing the activities in this area:

• Order "On the approval of the Regulation on the establishment and organization of the activities of communications divisions at the SASC of OJSC Atomenergomash";
• Order "On information planning";
• Order "On Approval of the Regulation on information exchange between OJSC Atomenergomash with its SASC in the sphere of mass and internal communications";
• Order "On the development and introduction of a corporate identity at the SASC of OJSC Atomenergomash";
• Order "On the organization of the conference and exhibition activities of OJSC Atomenergomash".

Main regulatory documents governing the activities of the Division's enterprises in the field of environmental protection:

• Land Code of the Russian Federation
• Town Planning Code of the Russian Federation
• Water Code of the Russian Federation
• Forest Code of the Russian Federation
• Federal Law "On Subsoil"
• Federal Law "On Specially Protected Natural Areas"
• Federal Law "On Production and Consumption Waste"
• Federal Law "On Air Protection"
• Federal Law "On Environmental Protection"
• Federal Law "On Nuclear Energy Utilization"
• GOST "Environmental Management"
• ISO 14001

. Full-time employees are offered an additional comprehensive package of the following social payments and benefits approved by the applicable regulatory documents:

• medical insurance;
• pension programs;
• housing programs;
• health resort treatment and vacation for employees and their children;
• holding sports and cultural events;
• catering for employees;
• financial aid;
• corporate discounts on subscriptions to sports and health facilities;
• support to veterans and retirees of the industry.

The program sets priorities in addressing the objectives of OJSC Atomenergomash in development and utilization of the innovations as well as in optimizing utilization of the resources allocated. The additional objectives of the OJSC Atomenergomash IAP are:

• to reduce (optimize) the product cost while maintaining reasonable safety criteria;
• to increase labor productivity;
• to save energy and material resources;
• to improve consumer qualities (to meet customer's requirements) of products;
• to increase environmental friendliness of production and comply with the customer's environmental requirements.

The function of managing the innovation activity of the Company is assigned to the Director of the Engineering Department, Yu.P. Arkhipov. To ensure effective implementation of management processes, an Engineering Processes Group was created.

To ensure efficiency of innovation management, the personnel was assigned KPIs, such as "Number of contracts signed with universities for R&D in the reporting period", "Planned increase in the number of copyrightable intellectual property items, including know-how and applications for registration in the national and international patent authorities", "Increasing the number of intellectual property items used, including license agreements", "Relative increase in revenue from sales of innovative products developed in the last 5 years",  "Implementation of the approved Innovative Activities Program".

Responsibility for the financial performance is provided for in the motivation system of OJSC Atomenergomash, in particular, as part of the key performance indicators of the CEO and Deputies CEO for areas of activity who demonstrated the team result focused on improving the performance. Implementation of the Division's enterprises budgets is controlled by the Economics and Finance Directorate. For the midlevel managers, the key performance indicators include, for example, Adjusted free cash flow, Productivity, and Reduction of permanent expenses.

For introduction of the RPS, the main regulatory documents are the Charter of the "Comprehensive optimization of production at nuclear industry enterprises" Project, RPS Guidelines developed by Rosatom State Corporation, Terms of Reference for Units, and Provisions on the Motivation developed by SASC.

Responsibility for implementation of the RPS at the enterprises is assigned to Chief Executive Officers, and to the Deputy CEO, Business Operations Director, V.P. Razin, at the Division.

• Development and implementation of a standard project of optimized and computerized power unit with VVER technology
• Expansion of nuclear power capacity range based on commercialized technologies
• Increasing the installed capacity utilization factor (ICUF)
• Modernization of the experimental facilities of SASC
• Technology and management system computerization projects
• Creating new technologies for energy markets
• Development of a new technology platform for nuclear power industry based on a closed nuclear fuel cycle using the VVER technology
• Expansion of nuclear power capacity range based on new technologies
• Creating an experimental base for verification of design codes

• "Standard Water Treatment Plant" project
• "Standard Special Building" project
• "Equipment and services related to fabrication of MOX fuel" project
• "Technology for closing the NFC" project
• "BREAKTHROUGH key technology" project

• "Development of a competitive domestic RUMCS" project
• "Specialized testing ground for comprehensive inspection and metrological support of RUMCS and instrumentation" project
• "Development of a new generation automated radiation monitoring system" project

• Project for "Creation of a high-tech optimized MCPU for the AES-2006 and VVER-TOI projects"

  Report 1

  Report 2

  Report 3

  Report 4

Responsibility for all matters related to personnel management is assigned to the Deputy CEO – Director, Human Resources and Organizational Development, K.A. Sukhotina.

As part of HR management, SAP HR based software is used.