Rostec

History

On November 23, 2007, President Vladimir Putin endorsed the federal law to establish Rostekhnologii, a state corporation, passed by the State Duma on November 9. The state contributed 443 entities to the corporation’s capital. Their total loss was RUR630 billion; 30% of such enterprises were in pre-crisis and crisis condition, 28 entities in bankruptcy proceedings, 17 had no business operations, and 27 had lost part of their assets or faced a material risk of such loss. Executives of some companies included in Rostec were in conflict with each other. At the time Rosoboronprom, a company eventually merged with Rostechnologii, acquired the controlling interest in VSMPO-AVISMA in 2006, the on-going conflict between the shareholders exposed it to crisis. In October 2005, the Federal Financial Market Service (FFMS) suspended trades in common shares on the RTS Exchange and MICEX.

Clusters

Main holding companies compose 3 clusters.

Aircraft:

Russian Helicopters

United Engine Corporation

KRET (Concern “Radioelectronic Technologies”)

Technodinamica (Aviation Equipment Holding until 2015)

Electronics:

Ruselectronics

Shvabe (Optical Systems and Technologies until October 26, 2012)

United Instrument Manufacturing Corporation

Concern “Avtomatika”

Armament:

Concern “Tecmash”

Vysokotochnye Kompleksy (High-precision Systems)

RT-Chemcomposite

Concern “Kalashnikov”

NPO SPLAV

TSNIITOCHMASH

Other companies:

Rosoboronexport

VSMPO-AVISMA

RT-Business Development

National Immunobiological company

KAMAZ

AVTOVAZ

Russian Helicopters

Rostec created the Russian Helicopters which stands on the first place in the world for sales volume of fighting shock helicopters left behind Sikorsky, Bell and Eurocopter.

Over 8,500 Russian helicopters are used in over 100 countries of the world

Russian Helicopters boasts a 85% share of the national and 14% of international markets

Firm orders portfolio totals 396.1 billion rub helicopters (808 helicopters)

In 2011 Russian Helicopters and the italian company Agustawestland agreed to establish helivert joint company in order to start production in Russia of the AW139 twin-engine multipurpose helicopter. The production plant is located in Tomilino, Moscow Region

In 2017 The Russian Direct Investment Fund (RDIF) has formed a consortium comprising leading Middle Eastern funds and finalized a deal to acquire a minority stake in Russian Helicopters (part of the Rostec State Corporation). Russian Helicopters valuation was estimated at $2.35 billion.

The transaction consists of two stages. The first stage involves the sale of a 12% stake and an investment of $300 million, as well as an agreed-upon subsequent potential increase in investment to $600 million. The deal will increase the authorized capital of the holding company. This will accumulate a significant amount of funds within the Company. These funds are necessary for the implementation of the Company’s strategy and business plan, including the development of new types of helicopters. In addition, these funds will help implement the investment program of the holding company, as well as finance possible M&A activities aimed at increasing the holding’s value and finance capital programs.

United Engine Corporation

The Corporate Group is responsible for production of engines for military and civil aviation and space exploration programs. It manufactures power turbines for electricity and heat generation, gascompressor units and marine gas-turbine units.

UEC has created a new version of the PD-14 aviation engine for the next-generation MS-21 aircraft as well as a next-generation military engine for the 5th generation fighter jet, helicopter engines etc. The company has also engineered and introduced to the market new gas-turbine units with a capacity of 60-110 mw.

KRET (Concern “Radioelectronic Technologies”)

KRET develops and manufactures military spec radio-electronic, state identification, aviation and radio-electronic equipment, multi-purpose measuring devices, detachable electrical connectors and a variety of civil products. The Corporate Group has developed one of the two existing state radiolocation identification systems. The company’s ambition is to enter the global market of detachable connectors for the world’s biggest companies.

Technodinamica (Aviation Equipment Holding until 2015)

Leading Russian developer and manufacturer of aircraft equipment, including chassis, fuel systems, flight control systems and auxiliary power units.

Specializes in development and production of:

engine control systems and units

life support systems, rescue and emergency systems

control systems and execution units

hydraulic systems and fuel systems

power supply systems and switchgear

auxiliary power units

runway equipment

Ruselectronics

Ruselectronics has consolidated electronic industry companies specializing in development and production of electronic components, electronic devices and equipment, microwave equipment and semi-conductor devices.

Shvabe Holding

Shvabe is responsible for development and production of high-tech optical-electronic systems both for military and civil purposes, manufacturing of optical, medical and energy-saving equipment.

Established in 2008, the company was known as JSC NPK Optical Systems and Technologies until October 26, 2012. Its companies manufacture electrooptical equipment, devices and defence systems and hi-tech civil products, such as systems for surveillance, aerospace monitoring and remote sensing, laser systems and facilities, distance gauges, target finders, photolithographic systems, precision elements and nanounits, medical equipment, surveying instruments, lighting equipment and much more. Shvabe manufactures about 6,000 product units supplied to 83 countries.

The holding company includes NPO Astrofisica, JSC NPO Alfa, JSC Vologodsky Optical and Mechanical Plant, JSC NPO State Institute for Applied Optics, JSC Vavilov State Optics Institute, JSC OCB Granat, JSC Zagorsky Optical and Mechanical Plant, JSC Krasnogorsk Plant, JSC Lytkarino Optical Glass Plant, JSC Material Engineering Research Institute at Vavilov Optics Institute, JSC Novosibirsky Instrument Engineering Plant, JSC Optica, FGUP NPO Orion, JSC MZ Sapfir, JSC Precision Instrument Engineering Construction Bureau, JSC Foton, and JSC Urals Optical and Mechanical Plant. Since 2011, the holding company is registered in Yekaterinburg.

According to Rostec’s plans, Shvabe will launch an IPO within four or five years.

United Instrument Manufacturing Corporation

Establishment of high-tech manufacturing of competitive products in the field of communications tools and systems, automated control systems, electronic security and robotic systems that meet modern requirements, as well as competitive civilian and dual-purposed products with high export potential

Concern “Avtomatika”

“Concern "Avtomatika” is the largest enterprise of the Russian Federation concerned with problems of information security, with development and production of secrecy communication equipment and systems, protected information and tele-communication systems and also special automated control systems.

Concern “Tecmash”

Concern "Techmash" specializes in the development and production of ammunition supplies for the combat capabilities of the main strike forces of the Armed Forces.

The structure of the holding company JSC "SPC" Techmash "currently includes 48 organizations of industry of munitions and special chemicals, 47 companies belong to the military-industrial complex and included in the consolidated register of organizations of military-industrial complex of the Russian Federation. Many enterprises and research institutions that are included in the holding company, have a history that spans several decades. The organization of the holding company are located in 15 regions of the Russian Federation.

Vysokotochnye Kompleksy (High-precision Systems)

Vysokotochnye Kompleksy is part of the defence-industry complex focused on high-precision systems and weapons for the combat tactical zone. It implements the full production cycle of weapons and defence equipment, from generating ideas to product distribution.

RT-Chemcomposite

The Corporate Group specializes in innovative research and development in the field of polymer composite materials and integrated products for space exploration, aviation, arms and military equipment, ground and water transport, power utilities and other industries.

Kalashnikov Concern

On 13 August 2013, Izhmash and Izhevsk Mechanical Plant have been merged and formally renamed Kalashnikov Concern. Kalashnikov Concern holding 51% of Rostec shares and 49% retained by private investors.^[39] Kalashnikov Concern is also now Russia’s largest and most important manufacturer of combat automatic and sniper’s weapons, guided projectiles and a wide range of civil products, including shotguns, sporting rifles, machines and tools.^[40]

In 2017 the sale of the Kalashnikov Group shares to Andrey Bokarev and Alexey Krivoruchko was put forward to the consideration of the Supervisory Board with the approval of the Management Board of the State Corporation Rostec.

It is noted that the quantity of the securities to be sold is 26% minus one share.

“In case the process is approved, the share of private investors in the Kalashnikov Group share capital will increase to 75% minus one share. The State Corporation will reserve a blocking stake of 25% plus one share”, said the CEO of the State Corporation Rostec Sergey Chemezov.

According to the representatives of the State Corporation, the Rostec development strategy 2025 envisages that the private investors will be attracted to various assets. The State Corporation currently owns 51% of the Kalashnikov shares. Bokarev and the Kalashnikov Group CEO Krivoruchko retain 49% of shares bought in 2014 for 1.3 billion rubles.

Kalashnikov is Russia’s largest manufacturer of combat weapons, guided rockets and a wide range of products for civil markets: shotguns, sporting rifles, machine-tools and toolware.It accounts for 90% of automatic guns production in russia and 95% of sniper guns.

NPO SPLAV

Splav Holding is one of the leading global companies developing and manufacturing multiple launch rocket systems (MLRS) and one of the key companies providing Russian arms for the global market in the segment under consideration. This is the only holding in Russia which designs and develops multiple launch rocket systems (MLRS) and cartridges.

TSNIITOCHMASH

TSNIITOCHMASH is a major designer and producer of weapons for the Russian military and MVD Internal Troops.

TSNIITOCHMASH determines the development of and develops small arms and simulators for them, individual field equipment, conducts R&D on control systems for precision-guided munitions (as well as protection against them), field artillery systems and new materials.

Rosoboronexport

Rosoboronexport is the only state intermediary for export and import of full range of military and dual purpose products, technologies and services.

A core Rostec’s pursuit is enhancing military and technical business cooperation with foreign states. The 2011 volume of military supplies to foreign customers made by Rosoboronexport was US$10.7 billion considering the expected US$9.19 billion. A continuous increase in sales (US$2 billion in 2011) makes Russia the second largest exporter of military products after the USA. In 2012, the export revenues from Russian-made weapons was US$15.2 billion, and the order portfolio for Russian military products reached US$46.3 billion.

For Rosoboronexport is 85% of russian military goods export.

The company’s order portfolio amounts to US $45 billion.

It exports military goods to over 70 countries.

Arms export by Rosoboronexport amounts to $13.8 billion (2015).

VSMPO-AVISMA

Produces 30% of the world’s titanium. In cooperation with Boeing the company has developed new titanium technologies, which helped reduce aircraft weight and ensure considerable fuel savings. Today VSMPO-AVISMA exports 70% of its produce.

The Corporation accounts for 40% of Boeing‘s demand for titanium, 60% of Airbus’s and 100% of Embraer’s. Net profit of VSMPO-AVISMA increased more than 80 times from 173 million rubles in 2009 to 14 billion rubles (350 USD million) in 2015.

RT-Business Development

RT-Business Development LLC is charged with implementing the Rostec strategy aiming to increase capitalization of projects in the sectors of commercial advanced technologies, raw materials and associated infrastructure.

National Immunobiological company

Pharmaceutical holding for research and development of immune biological remedies.

KAMAZ

KAMAZ is the leading Russian manufacturer of trucks and diesel engines.

52% of Russian truck market share

ranked 14th among international truck producers

ranked 8th among international diesel engine producers

established strategic partnership with Daimler Group

KAMAZ MASTER team has won the most prestigious Dakar endurance rally 13 times.

AVTOVAZ

Renault-Nissan-AVTOVAZ alliance is the 4th largest car manufacturer in the world.

The Alliance brands hold a 30% share of Russia’s auto market.

By 2020 the Togliatti plant will produce over 1 million cars per year, making it the largest car plant in Europe. The Alliance will invest over US$742 million in production modernization and is already developing innovative technologies. A new modern production line with a capacity of up to 350.000 cars per year has been launched. The new manufacturing lines for 5 models of 3 different brands — Lada, Renault and Nissan. In 2015 the company launched two brand new models — Lada XRay and Lada Vesta.

Business

In late 2016, Rostec includes about 700 organizations. Core business areas cover the following sectors:

helicopters manufacturing;

aviation equipment, avionics and aviation engines;

arms, military and special equipment (ammunition, high-precision weapons, battlefield and tactical missile complexes, special arms complexes, radio-electronic combat equipment, state identification systems);

radio-electronic equipment and electronic components;

optical and optical-electronic devices;

Information technology and Telecommunications;

medical equipment;

composite materials;

biotechnologies;

automotive and engineering machinery construction.

According to the Federal Law on State Corporation Rostechnologii, the main goal of the corporation is to “promote development, manufacture and export of hi-tech industrial products by providing support to Russian-based organizations on the domestic and foreign markets, in particular, to developers and manufacturers of hi-tech products and any organizations where Rostechnologii may influence the decision-making process due to its controlling interest in their equity capital or under any agreements concluded with them, as well as raising investment in organizations operating in different industrial sectors, including the defence-industry complex”.

Core business operations of the corporation include the following:

Support organizations in various industries, including the defence-industry complex, in development and production of hi-tech industrial products, advanced research and technological development;

Promote and distribute hi-tech industrial products and any related goods and intellectual property on the domestic and foreign markets;

Pursue government policy in military and technical cooperation of the Russian Federation and foreign states and state-run arms program and implement the state-run arms program, the state defence order and mobilization program, the long-term target programs, the federal programs and the military and technical cooperation in accordance with the laws of the Russian Federation;

Raise investment in organizations operating in various industrial sectors, including the defence-industry complex, in particular, to promote development of competitive hi-tech industrial and military products;

Make advertising and marketing efforts, organize and hold exhibitions (shows) of sample products of civil, defence and double purpose for the benefit of organizations operating in various industrial sectors, including the defence-industry complex, within and outside of the Russian Federation;

Assist organizations operating in various industrial sectors, including the defence-industry complex, in applied research in advanced areas of science and technology and implement sophisticated technologies in production to promote and expand domestic developments in hi-tech industrial products and cut the cost and period of their design;

Assist a government agency organization in foreign distribution of defence products.

Strategic objectives

Rostec main goals are to facilitate development, manufacturing and export of high-tech industrial products by supporting Russian companies on domestic and foreign markets and attract investments into various industry sectors, including military-industrial complex.

gain leading position in high-tech engineering products markets;

increase its organization’s business value and capitalization;

manufacture high quality military equipment superior to its foreign analogues;

maintain and advance Russia’s positions on the international arms and military equipment market.

Mission

facilitate the fulfillment of state policy of Russian economy innovative development;

develop high standards industrial technologies and create high-tech product.

Supervisory board

Manturov Denis Valentinovich, Minister of Trade and Industry of the Russian Federation, Chairman of the Supervisory Board;

Chemezov Sergey Viktorovich, CEO at Rostec;

Borisov Yury Ivanovich, Deputy Defence Minister of the Russian Federation;

Brycheva Larisa Igorevna, Assistant to the President of Russia; Head of the State Legal Directorate in the Presidential Executive Office;

Igor Levitin, Aide to the President of the Russian Federation;

Levitskaya Alexandra Yurievna, First Deputy Government Chief of Staff of the Russian Federation;

Siluanov Anton, Minister of Finance of the Russian Federation;

Ostrovenko Vladimir, Deputy Chief of President’s Administration;

Ushakov Yury Viktorivich, Aide to the President of the Russian Federation;

Fomin Alexander Vasiliyevich, Deputy Defence Secretary of the Russian Federation.

Growth strategy

In December 2015, Rostec Corporation’s supervisory board approved its development strategy through 2025. The main objective of the strategy is to change the Russian economic model by diversifying the economy and increasing the share of high-tech civilian products and non-oil exports.

By 2025, Rostec’s revenue streams will change significantly. The share of arms sales will decrease from 20% in 2014 to 13% by 2025, with the proportion of aircraft components and software similarly decreasing from 19% to 12%. Rostec, however, has no plans to downsize its production capacity for the supply of weapons, aircraft components, and software. Rather, the reductions should occur due to the proportional growth of other fields, primarily electronics. The share of telecom equipment in Rostec’s revenue should increase from 4% to 12% by 2025.

“Implementing Rostec’s development strategy will change the structure of the Russian economy,” said Rostec CEO Sergey Chemezov. “According to our plans, by 2035 we should reach the level of global competitors such as GE and Samsung. Becoming a developed industrial power and industry leader will enable Russia to move away from an economic model based on the export of raw materials.”

Rostec brings together some of the most important enterprises of Russian industry. In order to create an effective model for managing these assets, the decision was made to completely restructure Rostec Corporation and all of its holdings. The main imperative of the strategy is the growth of revenue in rubles, including through the introduction of “smart” civilian products to international markets. Such markets are developing more than twice as fast as the traditional markets in which Rostec operates.

"Rostec’s new strategy, which predicts an annual growth of 17 percent, sets for itself a very ambitious task that requires tremendous efforts on the part of corporation leadership. Nevertheless, I believe that our projections are feasible, as Rostec is the main actor in Russian industry and has the capacity to achieve these goals. One of the main areas for Rostec Corporation’s new strategy will be the development of high-tech technologies,” said Denis Manturov, Russia’s Minister of Industry and Trade.

Rostec is one of the world's ten largest industrial corporations. The Corporation has determined the key areas for development: a 17% annual increase in revenue and a dramatic growth of the share of civil products – to 50% by 2025.

The new strategy includes five key elements:

Aggressive growth,

Getting into new markets,

Operational efficiency,

Partnership with the key market players,

Distribution channel.

Getting into fast-growing high-tech markets such as electronics, IT, automation, management systems, robotics, novel materials, etc., is a priority.

Rebranding

Corporate rebranding was announced December 21, 2012. The corporation changed its name, logo and slogan. Rostechnologii was renamed Rostec. A new logo features an open square symbolizing a window to the world and a focus frame. It reflects philosophy of the corporate slogan “Partner in Development”. The corporation also launched a new website in six languages (Russian, English, German, French, Spanish, Arabic and Chinese). The languages were selected with a view to those countries and regions which emerge as the corporation’s largest customers. Rostec runs an official YouTube channel and accounts in the social networks, such as Facebook, Twitter, Instagram, and VKontakte. “Communications and brand management increasingly affect the value-added of products,” Sergey Chemezov, Rostec’s CEO, said. “We need the international brand to commit global technology and financial leaders, successfully pursue corporate strategy and enhance corporation’s capitalization”. According to The Wall Street Journal, rebranding is designed to make the corporation more open. The corporate rebranding project was implemented by Apostle, a strategic communications center, and Ilya Oskolkov- Tsentsiper, founder and co-owner of Winter, a UK agency. Graphic design was developed under supervision of Hazel Macmillan (British Airways is among her latest projects.) The website was developed by SomeOneElse, a UK-based agency which projects include HSBC, Land Rover and BBC. The corporation spent $1.5 million for rebranding.

According to an assessment carried out by the Swiss consulting company Assessa, Rostec’s corporate brand has a value of RUB 31.2 billion.

The corporate brand, which was launched in late 2012, is currently one of Russia’s 15 most valuable brands and has a value similar to that of major companies such as Rosneft and Rostelecom.

Rostec was the one of first Russian state corporations to use the full potential of modern communication technologies. The policy of information openness allowed the creation of a new image for the state company.

Financial performance

The preliminary financial performance for 2012 show that the overall revenue of Rostec exceeded RUR960 billion compared with RUR817 billion a year earlier. Revenues from export to 70 countries globally exceeded RUR240 billion. Rostec’s net profit in 2012 was almost RUR40 billion. Corporation’s companies paid over RUR120 billion in 2012 tax. Investments in modernization and production growth exceeded RUR112 billion. The average monthly payroll went up to RUR26,200 from RUR23,700 a year earlier.

Main financial indicators, 2015 ($1 = 60,96 RUB):

Consolidated revenue, $18.7 bln

Consolidated net income, $1.62 bln

Export revenues, $5.0 bln

Total investments, $2.1 bln

Exports of innovative products, $1.81 bln

Past projects

In 2008, Pirelli and Rostechnologii signed the Memorandum on the principal conditions of establishing a JV to manufacture tyres for motorcars and trucks. Initially, the parties intended to commence construction of a special-purpose plant in Togliatti; however, the initial plan was revised. In 2011, it was decided to launch production at the facilities of Sibur Holding from which the partners purchased Kirovsky and Voronezhsky Tyre Plants. Total value of the transferred assets was €222 million. Currently, the parties are upgrading the production facilities. In January 2013, Voronezhsky Tyre Plant launched a new production line. By 2015, the joint venture will manufacture 10.5 motocar and light truck tyres, with the production volume reaching €500 million.

In February 2008, JSC AvtoVAZ and French vehicle manufacturer Renault with an extensive input from Rostec signed an agreement on strategic partnership. The agreement launched a full-scale restructuration of the domestic vehicle manufacturer: Renault representatives were included in the top-management bodies of AvtoVAZ and its shares were distributed among the members of the consortium. The French company acquired a blocking stake in AvtoVAZ of 25% plus one share. In 2009, Renault and AvtoVAZ signed an additional agreement under which Renault made an asset contribution, including the transfer of technologies, production equipment and expertise valued at €240 million. The funds were allocated to modernization of AvtoVAZ’s production line and its upgrading to manufacture Renault and Nissan cars and new Lada models developed on the basis of foreign innovative technologies. This will allow AvtoVAZ to recover profitability and maintain the leading positions of Lada, Renault and Nissan brands on the Russian market. Since 2011, Renault-Nissan were negotiating buyout of the majority stake in AvtoVAZ with company’s co-owners Rostec and Troika Dialog. In May 2012, the parties reached a preliminary agreement to set up a joint venture to hold 74.5% shares in AvtoVAZ. They also agreed that Renault-Nissan Alliance would own 67.13% of shares. Their arrangements were legally executed in December 2012.

Thus, Renault-Nissan and Rostec will contribute their interests in the plant (28%, 98% and 25%) to the joint venture which will further acquire 24.14% of shares owned by Troika Dialog. The actual stake of Renault-Nissan in AvtoVAZ will be 50.1% and Rostec’s stake 24.5% which is a blocking stake for the plant (according to historical distribution of AvtoVAZ share capital, only 94% of shares are actual voting shares, rather than 100%).

In 2006, VSMPO-AVISMA agreed with Boeing to set up a joint venture for machine processing of forgings for Boeing 787 Dreamliner and Russian-made aircraft. The parties signed the relevant agreement in 2007. It took two years to put up a new plant, employ and train personnel and install production equipment. In 2009, the new enterprise was launched as world’s most sophisticated production plant set up by Rostec and Ural Boeing Manufacturing. In October 2012, VSMPO-AVISMA and Boeing signed a memorandum to expand production capacity of Ural Boeing Manufacturing. The joint venture purchased four new machines which are scheduled to be installed in 2013. US$12 million will be additionally invested in the development. The partners develop new titanium alloys and technologies for aircraft engineering, in particular, «Ti5553» designed to reduce the aircraft weight.

In July 2008, Rostec signed an agreement with Metalloinvest to set up a joint venture to develop the Udokan copper reserve in the Chita Oblast, which resources are evaluated at 20 million tons of copper and 1.3 billion tons of ore or 30% of total Russia’s known reserves. In September 2008, Mikhailovsky Mining and Processing Enterprise, a part of Metalloinvest, won the tender for reserve development. A of mid-2012, the parties were performing preliminary work to commence the reserve development in Udokan. Copper production is scheduled to begin no later than June 2014.

November 11, 2008, Rostec acquired 25.1% of shares in WiMAX Holding Ltd, a major shareholder of Scartel, a WiMAX-Yota operator.

In November 2009, Rostec and Thales signed a memorandum on partnership and cooperation in electronic systems for the defence and airspace industries. The document regulates cooperation of two companies to share and use hi-tech developments in both defence and civil sectors. In 2010, the parties agreed to expand their joint efforts and signed an additional cooperation agreement which contemplated establishment of a joint venture for development, manufacturing and post-sales support in air traffic management and integrated modular avionics for civil aviation. This joint venture was set up at the premises of Vologda Optical and Mechanical Plant focused on licensed production of thermal imagers Catherine FC and Catherine XP and long-range multi-function binoculars Sophie-MF.

In 2010, Russian Helicopters, a part of Rostechnologii, reached an agreement with AgustaWestland, a part of Finmeccanica, to set up JV JSC HeliVert to assemble AW139 helicopters at a new plant located in the village of Tomilino, Moscow Region. Russian-made AW139 made its first flight on December 19. In 2012, the parties also decided to expand their cooperation and signed a preliminary framework agreement on joint development, manufacture and distribution of a 2.5 ton state-of-the-art one-engine helicopter.

Rostec is pursuing joint work with other foreign partners and Russia’s largest transport and energy companies, industrial groups, government agencies, local and regional bodies and constituents of the Russian Federation.

The corporation has signed cooperation agreements with such organizations as UAC, USC, RZhD, Aeroflot, Lukoil, Gazprom and others.

The main communication mechanism with executive authorities involves cooperation agreements in various business areas, including promotion of development, manufacture and export of hi-tech industrial products for civil, double and defence purposes. As of September 2012, the corporation has entered into agreements with 31 regions and opened its representative offices in 26 constituents of the Russian Federation.

Social policy

The companies controlled by Rostec employ about 450,000 people. A special focus of corporation’s responsibility involves 21 dominant employers which are part of Rostec. As a good example of corporate activity aimed at stabilization of social environment in one-company towns mass media covered Rostec’s policy pursued in relation to AvtoVAZ, a dominant employer at Togliatti during the 2008-2009 economic crisis. Despite large-scale layoffs, public unrest was prevented by a special employment program for dismissed workers. The unemployment rate in Verkhnyaya Salda, Sverdlovsk Region, a company town of a VSMPO-AVISMA enterprise, is less than 1%.

Health National Project

In order to implement its Health National Program, the corporation has set up nine centers for high medical technologies. Five centers for cardiovascular surgery (Khabarovsk, Krasnoyarsk, Chelyabinsk, Perm and Kaliningrad), two centers for neurosurgery (Tyumen and Novosibirsk) and to centers for traumatic surgery, orthopedics and endoprosthesis replacement (Smolensk and Barnaul).

Perinatal center development program

Rostec is a participant in the Perinatal center development program along with the Ministry of Health of the Russian Federation, the Federal Compulsory Medical Insurance Fund and federal member state authorities.

The program has plans to establish hi-tech health-care institutions in Russian regions to render affordable and qualitative medical aid for mothers and children (including early nursing periods). The Program will help facilitate a considerable decrease in infant and mother mortality rates, and increase the survival rate for children who have low and extremely low body mass during the early stages of pregnancy.

In March 2017 сompany builds and equips perinatal centers in 15 member states of the Russian Federation:

6 republics: Bashkortostan, Buryatia, Dagestan, Ingushetia, Karelia and Sakha (Yakutia);

9 regions: Archangelsk, Briansk, Leningrad, Orenburg, Penza, Pskov, Smolensk, Tambov and Ulianovsk.

Housing program for Corporation employees

In 2015, the Rostec State Corporation Housing Program was approved, which aimed to attract and retain qualified specialists, employees for which the Corporation incurs a personnel deficit, as well as young specialists who graduated universities and secondary level (special) education institutions that are core for the Corporation.

In accordance with the Program, corporate support of the Corporation and its companies' employees is carried out in three areas:

compensation or subsidy of interest or initial real estate loan payment;

compensation or subsidy of rental and utility payments;

administrative, methodological and financial support of housing associations among the Corporation's companies' employees in the defense industry complex.

Education

Thanks to the Corporation's education program, conditions for the sustainable development of personnel resources are created, which helps management personnel quality conform to current requirements and international standards in the company's innovation activity management.

Rostec cooperates with 312 supporting universities that entered into agreements with the Corporation's companies for the target training of specialists, the development of cooperation as part of scientific and technology, and the performance of joint research, design and technology works.

The number of the holding companies' and Corporation companies' base departments in universities is 294. There have been 165 innovation projects implemented in cooperation with universities in 2015. The volume of research, design and technology works financing as part of these projects was RUB 2.8 bln.

The corporation established the department for management in the military and technical cooperation area at the Moscow State Institute of International Relations (MGIMO) which educated and provided employment with the corporation over 80 students. Rostec pursues cooperation with other leading higher educational institutions, including, among others, Bauman Moscow State Technical University, and the Plekhanov Russian University of Economics.

Sponsorship

Rostec renders charitable assistance and sponsors education, and arts and cultural sector; it supports major events significant for the country's cultural and public life.

Rostec also supports Russian sports and socially significant competitions, educational institutions and personnel training for the Corporation's companies.

On November 27, 2007, Rostec became general sponsor of FC Krylia Sovetov Samara; however, in 2011 the corporation decided to suspend its support of the team.

In 2010 and 2011, Rostec sponsored Vitaly Petrov, Formula One racing driver. In 2012, Russian Helicopters partnered with Caterham F1Team for which Petrov drives.

In May 2015, Rostec became a strategic partner of PFC Arsenal Tula. The agreement is a comprehensive document aimed at support and development of mass sports in Tula on the basis of PFC Arsenal. Rostec became a founder and the main partner of international festival of fireworks, for many years supported the Spasskaya Tower Festival.

The Spasskaya Tower International Military Music Festival is held annually under the auspices of Rostec. The best Russian and foreign military bands, playing folk and pop music, and the honor guards units of the heads of states demonstrate their skills on Red Square in Moscow. Rostec held the first-ever International Fireworks Festival in Russia. Top pyrotechnicians from Europe, Asia, Latin America, and Russia performed at the fireworks and music event on Sparrow Hills in Moscow.

In 2015, Rostec supported the Russian team in an international sporting event for people with intellectual disabilities, the Special Olympics World Games, in Los Angeles. 248 athletes and coaches from 25 Russian regions participated in the 2015 Special Olympics World Summer Games The athletes participated in 24 sports, including track and field, swimming, judo, powerlifting, handball, volleyball, football, basketball, rhytmic and artistic gymnastics, badminton and others. The Russian team won 119 gold, 50 silver, and 42 bronze medals. According to the results of the Special Olympics Games, the Russian team won 26 gold medals and took first place by a landslide, beating the US, Canada and five Chinese teams.

In association with the Russian Engineering Union, Rostec held the School Olympics for engineering professions titled "Stars: Talent in Defense and Safety", the largest-scale Russian Academic Olympics for school students. Participation in the Olympics encourages the interest of school students in scientific research, and enhances the inflow of talented young people to regional universities.

The Corporation is co-organizer for the Engineers of the Future International Youth Industrial Forum. The forum is recognized as a unique platform for the exchange of professional experience between Russian and foreign young scientists and industrial company specialists. In five years over 5000 young specialists, scientists, university students and postgraduates from more than 40 countries have participated in the event.

In 2015, with support from Rostec Corporation the III International Student Digital Olympics on scientific, technical and natural disciplines was held. The intellectual competition was held digitally in three rounds and covered an audience of thousands of students from all over Russia and other countries. The Olympics final round's prize pool equaled RUB 3 mln.

Improving professional training of the employees, Rostec cooperates with the WorldSkills movement. In 2015 the Corporation and WorldSkills Russia concluded a cooperation agreement which is aimed mainly at the joint work on training specialists for high-tech industries. State Corporation Rostec is a general partner of WorldSkills Russia in accordance with a three-year agreement.