Committees Under the Board of Directors

To ensure preliminary consideration of key issues and prepare relevant recommendations for the Board of Directors, there were three Committees in 2018:

  • Audit Committee (AC)
  • Human Resources and Remuneration Committee (HRRC)
  • Strategy, Investments and Innovations Committee (SIIC)

The Committees contribute to the effectiveness of the decisions taken by the Board of Directors. A Committee’s chairman has the right to invite employees of the Company, experts and third parties to participate in the meetings of the Committee without the right to vote. In 2018, the Committees held 34 meetings to consider various issues and prepare detailed recommendations and proposals for the Board of Directors.

Issues considered by the Committees in 2018
Meetings of the Committees in 2016–2018

Audit Committee

The Audit Committee provides the Board of Directors with preliminary study of matters related to supervising the Company’s financial and operational activities and on other matters delegated to the Committee by the Board of Directors. The Committee’s activities are governed by the Regulations on the Audit Committee under the Board of DirectorsApproved by Board of Directors of Transneft on 19 January 2017 (Minutes No. 1)..

The composition of the Audit Committee did not change during the reporting periodAccording to Order of the Federal Agency for State Property Management No. 1013-r dated 29 December 2017, the powers of the members of the Board of Directors were prematurely terminated, and a new Board of Directors was elected. Thus, new members of the Committees were not elected as of 9 February 2018. As of the end of 2018, it was composed entirely of independent directors. The Committee was composed ofElected in accordance with decisions of the Board of Directors, see Minutes No. 1 dated 9 February 2018, Minutes No. 13 dated 1 August 2018.:

  • I. Klebanov (Chairman of the Committee, Independent Director)
  • A. Korsik (Independent Director)
  • G. Shmal (Independent Director).

In 2018, the Audit Committee held 13 meetings Dates of the Audit Committee’s meetings and numbers of the corresponding minutes: 13 February 2018 No. 1; 5 April 2018 No. 2; 12 April 2018 No. 3; 8 May 2018 No. 4; 28 May 2018 No. 5; 20 June 2018 No. 6; 13 August 2018 No. 7; 13 September 2018 No. 8; 13 November 2018 No. 9; 26 November 2018 No. 10; 7 December 2018 No. 11; 12 December 2018 No. 12; 21 December 2018 No. 13. (there were 5 in-person meetings and 8 in-absentia meetings). Key issues on which recommendations were prepared:

  • On Transneft’s Risk Management Report in 2017
  • On approval of the key parameters of Transneft’s Risk Management System
  • On the preliminary approval of Transneft’s annual accounting (financial) statements, inclusive of the financial results statement
  • On the auditor of Transneft for 2018
  • On preliminary distribution of Transneft’s profits for 2017
  • On the amount, form and procedure of payment of annual dividends for all types of Transneft’s shares
  • On the report on currency and interest rate risk management in Transneft for 2017
  • On quarterly reports of Transneft’s executive body on the financial and economic performance of Transneft and Transneft Group for Q1 2018, 1H 2018 and 9 months of 2018
  • On the expected implementation of the budget of Transneft and the consolidated budget of Transneft Group for 2018
  • On the budget of Transneft and the consolidated budget of Transneft Group for 2019
  • On reviewing the Annual Report of Transneft for 2017
  • On approval of the list of critical risks of Transneft for 2019
  • On approval of the Regulations on the Procedure of Access to Insider Information of Transneft, Rules for Protecting its Confidentiality and Controlling the Observation of the Redrafted Laws on Insider Information
The most important issues regarding external and internal audit that were considered
External Audit
  • The Regulations on Holding an Open Tender to Select an Auditor for the Mandatory Annual Audit of Transneft for 2018 and Reviewing the Interim Consolidated Financial Statements for Q1 of 2019
  • Composition of the tender commission to select an auditor for the mandatory annual audit of Transneft
  • Scope and plans for the audit of the annual reports for 2018 by the external auditor
  • Transneft’s Report on the Remarks of the Auditor for 9 Months of 2017 and Remedial Actions
  • On the offered initial (maximum) price for the open tender for the auditor selection for the mandatory annual audit of Transneft for 2019 and reviewing the interim consolidated financial statements for Q1 2020
  • On the conclusion of Transneft's auditor on the results of the audit of Transneft's financial and operational activities for 2017 and the assessment of the auditor's report, that is to be provided to persons entitled to participate in the annual general meeting of Transneft shareholders
Internal Audit
  • Consideration of the report on the results of the activities of Transneft's internal audit unit for 2017, including the independence and objectivity of the internal audit function, as well as its effectiveness
  • Consideration of the general areas (planning) for internal audit in Transneft for 2019

The audit report on the financial statements of Transneft for 2017 was provided by KPMG. The report was reviewed by the Audit Committee and recognised as complying with the requirements established by the International auditing standards in force in the Russian Federation.

Human Resources and Remuneration Committee

The Human Resources and Remuneration Committee provides preliminary study of issues and prepares recommendations to the Board of Directors on issues of human resources and social policies as well as remuneration policy. The Committee’s operations are governed by the Regulations on the Human resources and Remuneration Committee under the Board of DirectorsApproved by the Transneft Board of Directors on 19 January 2017 (Minutes No. 1)..

The composition of the Human resources and Remuneration Committee did not change during the reporting periodAccording to Order of the Federal Agency for State Property Management No. 1013-r dated 29 December 2017, the powers of the members of the Board of Directors were prematurely terminated, and a new Board of Directors was elected. Thus, new members of the Committees were not elected as of 9 February 2018. . As of the end of 2018, it was composed entirely of independent directors. The Committee was composed ofElected in accordance with decisions of the Board of Directors, see Minutes No. 1 dated 9 February 2018, Minutes No. 13 dated 1 August 2018. :

  • A. Korsik (Chairman of the Committee, Independent Director)
  • I. Klebanov (Independent Director)
  • G. Shmal (Independent Director)

In 2018, the Human Resources and Remuneration Committee held 10 meetings Dates of the Human Resources and Remuneration Committee’s meetings and numbers of the minutes: 30 March 2018 No.1; 5 April 2018 No. 2; 13 April 2018 No. 3; 21 May 2018 No. 4; 22 June 2018 No. 5; 13 August 2018 No. 6, 10 September 2018 No. 7; 3 October 2018 No. 8, 14 November 2018 No. No. 9; 21 December 2018 No. 10. (there were 3 in-person meetings and 7 in-absentia meetings). Key issues on which recommendations were prepared:

  • On approval of the new edition of the remuneration system based on the performance of Transneft and Transneft subsidiaries' managers and employees for the year
  • On the concurrence of positions in governing bodies of other organisations by the President of Transneft and members of the Transneft Management Board
  • On recommendations for the payment of remuneration to members of the Board of Directors of Transneft
  • On recommendations for the payment of remuneration to the sole executive body
  • On the payment of remuneration to managers and employees of Transneft and Transneft subsidiaries, as well as members of the Revision Commission
  • On the adjustment of the Plan for Introduction of Professional Standards in Transneft and Transneft Subsidiaries in 2016 -2020
  • On the implementation of the Plan for Introduction of Professional Standards in Transneft and Transneft Subsidiaries in 2016 -2020
  • On the proposed candidates for Transneft’s Board of Directors and Revision Commission for 2019 -2020
  • On evaluation of the performance of Transneft’s Board of Directors
  • On the basic principles of remuneration for members of collective management bodies and employees of Transneft
  • On approval of the Regulations on the Long-Term Incentive Programme of Transneft.

Strategy, Investments and Innovations Committee

The Strategy, Investments and Innovations Committee provides the Board of Directors with preliminary study of issues regarding the development of the Company’s long-term strategy and its investment, innovation and dividend policy as well as improving Transneft’s performance. The Committee’s operations are governed by the Regulations on the Strategy, Investments and Innovations Committee under the Board of DirectorsApproved by the Board of Directors of Transneft on 19 January 2017 (Minutes No. 1).

2018 saw two lists of memebrs included in the Strategy, Investments and Innovations CommitteeAccording to Order of the Federal Agency for State Property Management No. 1013-r dated 29 December 2017, the powers of the members of the Board of Directors were prematurely terminated, and a new Board of Directors was elected. Thus, new members of the Committees were not elected as of 9 February 2018.
Members approved by the Board of Directors on 9 February 2018Minutes No. 1 dated 9 February 2018. This Strategy, Investments and Innovations Committee operated until 30 June 2018. Members approved by the Board of Directors on 1 August 2018Minutes No. 13 dated 1 August 2018.
  • К. Dmitriev (Chairman of the Committee);
  • D. Vasilevskaya;
  • M. Warnig;
  • N. Tokarev;
  • V. Shantsev;
  • G. Shmal (Independent Director, Representative of the Transneft Consumer Council)
  • K. Dmitriev (Chairman of the Committee);
  • M. Warnig;
  • M. Sokolov;
  • N. Tokarev;
  • V. Shantsev;
  • G. Shmal (Independent Director, Representative of the Transneft Consumer Council)

The composition of the Strategy, Investments and Innovations Committee changed once during the reporting period Dates of the Strategy, Investments and Innovations Committee’s meetings and numbers of the minutes: 10 April 2018 No. 1; 20 April 2018 No. 2; 30 May 2018 No. 3; 22 June 2018 No. 4, 10 August 2018 No. 5; 19 September 2018 No. 6, 19 October 2018 No. 7, 6 November 2018 No. 8; 5 December 2018 No. 9, 7 December 2018 No. 10; 21 December 2018 No. 11. :

  • Report on implementation of Transneft’s Programme for Operational Efficiency Improvement and Cost Cutting up to 2022
  • On the implementation of key performance indicators of Transneft’s operational activities for 2017
  • On the auditor’s opinion regarding the implementation of the Transneft Long-Term Development Programme for 2017
  • On the implementation of the Transneft Innovation Development Programme in 2017
  • On consideration of the Terms of Reference for comparison of the level of technological development and current key performance indicators of Transneft’s innovations with the level of development and indicators of leading comparable foreign companies
  • On consideration of Transneft’s procurement report form
  • On adjustment of Transneft’s LDP
  • On the specifications for auditing Transneft’s LDP for 2018
  • On consideration of Transneft’s Programme for Operational Efficiency Improvement and Cost Cutting up to 2023
  • On the target key performance indicators of Transneft’s operational activities for 2019
  • On approval of the Comprehensive Programme to Increase Transneft’s Capitalisation and Investment Appeal.

Corporate Secretary

The functions of Transneft’s Corporate Secretary are carried out by a special business unit — the Corporate Governance Department (CGD). As stipulated by the CGC recommendations, the Board of Directors approved the Regulations on the Corporate Governance Department and agreed on the head of this business unitMinutes No. 1 dated 19 January 2017..