PJSC Tatneft. Annual report 2017
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PJSC Tatneft. Annual report 2017

Report of PJSC TATNEFT on compliance with principles and recommendations of the corporate governance code of the Bank of Russia

This Report was compiled in accordance with Chapter 70 of the Bank of Russia Regulation No. 454-P “On Disclosing Information by Issuers of Issuable Securities” dated December 30, 2014, and reflects the Company's compliance with the principles and recommendations of the Corporate Governance Code recommended by the Bank of Russia for use by joint-stock companies. admitted to organized trading.

As a methodology by which PJSC TATNEFT compliance with the principles of corporate governance was assessed, the recommendations set out in the letter of the Bank of Russia dated February 17, 2016 No. IN-06-52 / 8 “On the disclosure of the report on the public joint stock company compliance with the principles and recommendations of the Corporate Governance Code. ”

Information on compliance with the principles and recommendations of the Corporate Governance Code was reviewed by the Board of Directors of PJSC TATNEFT at a meeting of the Board of Directors on May 21, 2018 (Minutes No. 5-з dated May 21, 2017).

 

Corporate Governance Principle

Criteria for Assessing Compliance with the Principle of Governance

Status of Compliance with the Principle of the Corporate Governance

Explanations for Deviations from the Criteria for Assessing the Compliance with the Corporate Governance Principle

1.1.

The Company shall ensure equal and fair treatment of all shareholders in the exercise of their right to participate in the management of the Company.

1.1.1.

The Company shall create the best possible conditions for shareholders to participate in the general meeting and develop informed positions on issues on its agenda and to coordinate the Company’s actions, as well as an opportunity to express the opinions on the issues being discussed.

 1. The internal document of the Compqny approved by the General Meeting of the Shareholders and regulating the  procedures for holding the General Meeting, is publicly available.
2. The Joint Stock Company provides an affordable way of communicating with the Company, such as a hotline, e-mail, allowing the shareholders to express their opinion and forward questions regarding the agenda for the General Meeting in preparation. These actions used to be taken by the Company shortly before each General Meeting that took place in the reporting period.

complied with

partial compliance

no compliance

 
1.1.2.

The procedure for notification on
holding a General Meeting and
provision of materials for the General
Meeting gives shareholders the
opportunity to properly prepare
for participation in it the General Meeting.

1. The Company posted (published) a notice of holding the General Meeting of the Shareholders on the Internet website at least 30 days before the date of the General Meeting.
2. The communication on holding the meeting provides information on the meeting venue and documents required for admission to the premises.
3. The shareholders were provided with access to the information about who proposed the agenda and who nominated candidates to the Board of Directors and the Audit Commission of the Company.

complied with

partial compliance

no compliance

 
1.1.3.

During the preparation and holding of the General Meeting, the shareholders had the opportunity to receive information about the meeting and materials to it without hindrance and in a timely manner, to pose questions to the executive bodies and to communicate with each other.

1. During the reporting year, the shareholders were
offered the opportunity to pose questions to members
of the Company’s executive bodies and the Company’s Board of Board of Directors  members shortly before and during the
Annual General Meeting.
2. The Board of Directors’ position of (including dissenting opinions incorporated in the Minutes) for each agenda item of General Meetings held during the reporting period was included into the materials prepared for the General Meeting of the Shareholders.
3. The Company provided for the access of the shareholders to the list of persons entitled to participate in the General Meeting from the date of its receipt by the Company, in all cases of holding General Meetings in the reporting year.

complied with

partial compliance

no compliance

Notes to p. 2: The Board of Directors actually discusses the items of the agenda of the general meetings of the Company shareholders and approves the agenda of the meetings, in so doing stating the position of the Board of Directors. During the reporting period no dissenting opinions of the members of the Board of Directors were registered..
1.1.4. The exercise of the shareholder's right to demand convocation of the General Meeting, nominate candidates for the management bodies and carry proposals for inclusion in the agenda of the General Meeting shall not be accompanied by unjustified complexities

1. In the reporting period, the shareholders had the opportunity, for at least 60 days after the end of the relevant calendar year, to submit proposals for inclusion in the agenda of the annual General Meeting.
2. In the reporting period, the Company did not refuse to accept proposals on the agenda or nominees for the bodies of the Company due to misprints and other insignificant shortcomings in the shareholder's proposal.

complied with

partial compliance

no compliance

Explanation in paragraph 1: the Charter of PJSC TATNEFT provides for a period of 55 days after the end of the fiscal year in which shareholders have the right to make proposals for inclusion in the agenda of the annual general meeting of shareholders. The company in this period proceeds from the principle of sufficiency of this period, which does not contradict the Federal Law “On Joint-Stock Companies” No. 208-ФЗ dated December 26, 1995. (amended on March 7, 2018) defining the period: “... no later than 30 days after the end of the reporting year, unless a later date is set by the company's charter.” Following the recommendations of the Code, the Company will consider extending the period to 60 days in 2019 . Paragraph 2 fully complied with.
1.1.5.

Each shareholder had the opportunity to freely exercise the right to vote in the simplest and most convenient way for him.

1. The Company’s internal documents (internal policy) contain provisions according to which each participant of the General Meeting can request a copy of the ballot filled out by certified by the counting commission.

complied with

partial compliance

no compliance

 
1.1.6. Procedures for holding a General Meeting set by the Company shall provide an equal opportunity for all persons present at the general meeting to express their opinions and ask questions that might be of interest to them.

1. When holding a General Meeting of  the Shareholders in the form of a meeting (joint attendance of the shareholders) during the reporting period, sufficient time was provided for the reports on the agenda items and time for discussion of these issues.
2. The candidates for management and control bodies of the Company were available to answer questions from the shareholders at the meeting at which their nominees were put to a vote.
3. The Board of Directors, when making decisions related to the preparation and conduct of the General Meeting of the Shareholders, considered the issue of using telecommunications to provide remote access to the shareholders for participation in the General Meeting in the reporting period.

complied with

partial compliance

no compliance

 
1.2 The shareholders shall be given an equal and fair opportunity to participate in the Company's profits distribution through receiving dividends.
1.2.1

The Company has developed and implemented a transparent and understandable mechanism for determining the amount of dividends and their payment.

1. The Company has developed, approved by the Board of Directors and made publicly available the dividend policy.
2. If the dividend policy of a company uses the company's reporting indicators to determine the amount of dividends, then the relevant provisions of the dividend policy take into account the consolidated financial statements

complied with

partial compliance

no compliance

 
1.2.2

The Company shall not decide on the payment of dividends, unless such decision, formally not violating the restrictions established by law, is economically unjustified and can lead to the formation of false perceptions about the Company's activities.

1. The Company's dividend policy contains clear indications of financial/economic circumstances in which a Company should not pay dividends.

complied with

partial compliance

no compliance

 
1.2.3

The Company shall not allow deterioration of the existing shareholders’ dividend rights.

1. In the year under review, the Company did not take any actions leading to a deterioration in the dividend rights of the existing shareholders.
2. The history of dividend payments reflects the Company's consistency in ensuring a high level of the dividend yield, while maintaining the balance of short-term (receiving the income in the form of dividend payments) and long-term (investing in the development of the Company).

complied with

partial compliance

no compliance

 
1.2.4 The Company shall strive to exclude the use by the shareholders of any other ways of generating profit (income) from the Company in addition to dividends and the Company’s liquidation value distribution. 1. In order to exclude any other ways of the shareholders generating profit (income) from the Company in addition to the dividends and the liquidation value distribution, internal documents of the Company establish control mechanisms that ensure the timely identification and the procedure for approving transactions with persons affiliated with material shareholders having the right to dispose of votes falling on voting shares), in cases where the law does not formally recognize such transactions as related party transactions.

complied with

partial compliance

no compliance

 
1.3 The system and practice of the Corporate governance ensure equal terms and conditions for all shareholders owing shares of the same category (type), including minority (small) and foreign shareholders, and equal treatment of them by the Company.
1.3.1.

The Company shall create the conditions for fair treatment of each shareholder by the Company's management bodies and supervisory persons, in particular, ruling out the abuse possibility of minority shareholders by major shareholders.

1. During the reporting period, the procedures for managing potential conflicts of interest of the essential shareholders were effective, and the Board of Directors paid due attention to the conflicts between shareholders, if any. . G4 -41

complied with

partial compliance

no compliance

 
1.3.2. The Company shall not perform any actions, which will or might result in artificial reallocation of the corporate control. 1. There were no quasie-treasury shares or they did not participate in the voting during the reporting period.

соблюдается

partial compliance

no compliance

The Company shall not perform any actions, which will or might result in artificial reallocation of the corporate control. The structure of the equity capital is such that 61% of the voting shares are in free circulation among minority shareholders. The aggregate quasi-treasury block of shares of the Company makes the minimum 3.19% of the voting shares, so that voting by these shares can have no significant impact on the voting results. The voting for the candidates to the management and control bodies is performed on a proportional basis for each candidate, which gives no unfair preference to any of them. The voluntary nature of this approach is equal to voluntary waiver of voting by the quasi-treasury block of shares in principle. Proceeding from the above, the Company believes that it fully abides by the concept of the requirement to perform no actions which will or might result in artificial reallocation of the corporate control.
1.4 The shareholders shall be provided with reliable and effective ways of recording the rights to the shares, as well as the possibility of unhindered and easy disposal of their shares.
1.4.1.

The shareholders shall be provided with reliable and effective ways of recording rights to the shares, as well as the possibility of free and easy disposal thereof.

1. The quality and reliability of activities carried out by the Company's Registrar in maintaining the register of securities’ owners correspond to the needs of the Company and its shareholders.

complied with

partial compliance

no compliance

 
2.1 The Board of Directors shall carry out the strategic management of the Company, define major principles and approaches to the organizing of the Company’s risk and internal control management system, monitor the activities of the Company’s executive bodies, and also exercise other key functions.
2.1.1. The Board of Directors shall be responsible for making decisions related to the appointment and dismissal of the executive bodies, including due to their improper performance of their duties. The Board of Directors shall also ensure that the Company's executive bodies act in accordance with the approved development strategy and the main lines of the Company’s business.

1. The Board of Directors has the authority stipulated in the Articles of Association to appoint, discharge from office and determine the terms of contracts with respect to members of the executive bodies.
2. The Board of Directors considered the report of the sole executive body and members of the collegial executive body on the implementation of the Company's strategy.

complied with

partial compliance

no compliance

 
2.1.2.

The Board of Directors shall set the
basic long-term targets for the
Company’s activities, and shall assess
and approve its key performance indicators and principal business goals, as well as its strategy and business plans with regard to the Company’s principal areas of operations.

1. During the reporting period, the Board of Directors considered the issues related to the implementation and actualization of the strategy, approval of the Company's financial and economic plan (budget), as well as considered the criteria and indicators (including interim ones) of implementing the strategy and business plans.

complied with

partial compliance

no compliance

 
2.1.3.

The Board of Directors shall define the principles and approaches to the organization of the risk and internal control management system in the Company

1. The Board of Directors defined the principles and approaches to the organization of the risk and internal control management system in the Company.
2. The Board of Directors performed the assessment of the Company's risk and internal control management system during the reporting period.

complied with

partial compliance

no compliance

 
2.1.4.

The Board of Directors shall define the Company's policy of remuneration and (or) reimbursement of expenses (compensations) to the Board of Directors’ members, executive bodies and other key executives of the Company.

1. The Company has developed and implemented a policy (policies) approved by the Board of Directors for the compensation and reimbursement of the Board of Directors’ members, the executive bodies of the Company and other key executives of the Company.
2. During the reporting period, the meetings of the Board of Directors considered issues related to this policy (policies).

complied with

partial compliance

no compliance

 
2.1.5.

The Board of Directors shall play a key role in preventing, identifying and resolving internal conflicts among the Company’s bodies, and the shareholders of the Company and employees of the Company.

1. The Board of Directors plays a key role in preventing, identifying and resolving internal conflicts.
2. The Company has created a system for identifying transactions related to conflicts of interest and a system of measures aimed at resolving such conflicts. G4 -41

complied with

partial compliance

no compliance

 
2.1.6.

The Board of Directors shall play a key role in ensuring the transparency of the Company, the timeliness and completeness of the Company’s information the disclosure and easy access of the shareholders to the documents of the Company.

 

1. The Board of Directors has approved a Regulation on the information policy.
2. There were the persons responsible for the implementation of the information policy determined in the Company.

complied with

partial compliance

no compliance

 
2.1.7.

The Board of Directors shall exercise control over the practice of the corporate governance in the Company and shall plays a key role in the material corporate events of the Company.

1. During the reporting period, the Board of Directors considered the issue of the corporate governance practices in the Company.

complied with

partial compliance

no compliance

 
2.2

The Board of Directors shall be accountable to the Company’s shareholders.

2.2.1.

The information on the work of the Board of Directors shall be disclosed and provided to the shareholders.

1. The annual report of the Company for the reporting period includes the information on the attendance of meetings of the Board of Directors and the Committees by individual directors.
2. The annual report contains the information on the main results of evaluating the operation of the Board of Directors carried out in the reporting period.

complied with

partial compliance

no compliance

 
2.2.2. Chairman of the Board of Directors shall be available to communicate with the shareholders of the Company.   1. There is a transparent procedure implemented in the Company that provides shareholders with the opportunity to send questions to the Chairman of the Board of Directors and express their position.

complied with

partial compliance

no compliance

 
2.3

The Board of Directors shall be an effective and professional management body of the Company, capable of making objective independent judgments and making decisions that are in the best interests of the Company and its shareholders.

2.3.1.

Only persons with an impeccable business and personal reputation and possessing the knowledge, skills and experience necessary to make decisions within the competence of the Board of Directors, which are required for the effective performance of its functions, may be elected as the Board of Directors’ members.

1. The accepted in the Company procedure for evaluating the performance of the Board of Directors includes, among other things, assessing the professional qualifications of the Board of Directors’ members.

2. In the reporting period, the Board of Directors (or its nominations committee) evaluated the candidates to the Board of Directors in terms of their having necessary experience, knowledge, business reputation, lack of conflict of interest, etc. G4 -41

complied with

partial compliance

no compliance

 
2.3.2.

Members of the Company’s Board of Directors shall be elected through a transparent procedure that allows the shareholders to obtain information about the candidates sufficient to form an idea about ​​their personal and professional qualities.

1. In all cases of the holding of the General Meeting of the Shareholders in the reporting period, which agenda  included the items about electing of the Board of Directors, the Company provided the shareholders with biographical data of all candidates for membership in the Board of Directors, results of the evaluation of such candidates made by the Board of Directors (or its nominations committee), as well as information on the candidate's compliance with the independence criteria, in accordance with recommendations 102 - 107 of the Code and the written consent of the candidates for election to the Board of Directors.

complied with

partial compliance

no compliance

 
2.3.3.

The composition of the Board of Directors shall be balanced in terms of its members’ qualifications, their experience, knowledge and business qualities, and the Board shall enjoy confidence of the shareholders.

1. As part of the procedure for evaluating the Board of Directors’ work  in the reporting period, the Board of Directors analyzed the own needs in terms of professional qualifications, experience and business skills.

complied with

partial compliance

no compliance

 
2.3.4.

The quantitative composition of the Board of Directors shall enable to organize the activities of the Board of Directors in the most efficient manner, including the possibility of forming committees of the Board of Directors, and assures that the substantial minority shareholders of the Company may elect to the Board of Directors a candidate, who they vote for.

1. As part of the evaluation procedure for the Board of Directors in the reporting period, the Board of Directors considered the issue of the quantitative composition of the Board of Directors compliance with the needs of the Company and the interests of the shareholders.

complied with

partial compliance

no compliance

 
2.4

The Board of Directors shall include a sufficient number of independent directors.

2.4.1.

 An independent director shall be a person who has sufficient professionalism, experience and independence to form his own position, is able to make objective and conscientious judgments that are independent of the Company's executive bodies’ influence, of certain groups of the shareholders or other parties concerned. However, it should be noted that, under normal circumstances, a candidate (elected director) cannot be regarded as independent if he is connected with the Company, a substantial shareholder, a material trading partner or a competitor, or connected with the Government.

1. During the reporting period, all independent members of the Board of Directors met all the independence criteria specified in recommendations 102-107 of the Code, or were deemed independent by the decision of the Board of Directors.

complied with

partial compliance

no compliance

 
2.4.2.

An assessment shall be made of the candidates for the Board of Directors’ membership compliance with independence criteria, and a regular analysis of the independence of the independent Board of Directors members shall be carried out. In the performance of such an assessment, the content should prevail over the form.

1. In the reporting period, the Board of Directors (or the committee on nominations to the Board of Directors) formed an opinion on the independence of each candidate to the Board of Directors and presented the relevant conclusion to the shareholders.
2. During the reporting period, the Board of Directors (or the Board of Directors nomination committee) at least once examined the independence of the current members of the Board of Directors, whom the Company indicates as independent directors in its annual report.
3. The Company has developed procedures that determine the necessary actions of a member of the Board of Directors in the event that it ceases to be independent, including the obligation to promptly inform the Board of Director.

complied with

partial compliance

no compliance

 
2.4.3. The independent directors shall account for at least one-third of all directors elected to the Board. 1. The independent directors account for at least one-third of all directors elected to the Board. G4 -41

complied with

partial compliance

no compliance

There are three independent directors in the composition of the Board of Directors. The Company believes that the composition of the Board of Directors is optimal for ensuring the interests of all groups of the Company’s shareholders.
2.4.4.

The independent directors shall play a key role in preventing internal conflicts in the Company and in its performance of material corporate actions.

1. The independent directors (who have no conflict of interest) preliminarily assess the essential corporate actions associated with a possible conflict of interests, and the results of such an assessment are submitted to the Board of Directors G4 -41

complied with

partial compliance

no compliance

 
2.5 Chairman of the Board of Directors shall contribute to the most efficient implementation of the functions assigned to the Board of Directors.
2.5.1. An independent director shall be elected as a Chairman of the Board of Directors, or a senior independent director out of the independent directors number shall be appointed to coordinate the  independent directors work  and interact with the Chairman of the Board of Directors

1. The Chairman of the Board of Directors is an independent director, or a senior independent director is defined among the independent directors.
2. The role, rights and duties of the Chairman of the Board of Directors (and the senior independent director, if applicable) are duly determined in the internal documents of the Company.

complied with

partial compliance

no compliance

Explanation in paragraph 1: The Chairman of the Board of Directors is a non-executive director, was elected unanimously by all members of the Board of Directors, as the most authoritative member of the Board of Directors, possessing professionalism and knowledge, considerable experience in senior positions, impeccable business and personal reputation. There is no senior independent director among independent directors. Moreover, all independent directors have equal rights to interact with the Chairman of the Board of Directors. In the 2018-2019 corporate year, independent directors will be invited to elect a senior independent director. In part 2: The functions of the Chairman of the Board of Directors are fixed by the Charter and the Regulations on the Board of Directors.

2.5.2.

The Chairman of the Board of Directors shall provide for a constructive atmosphere for holding meetings, free discussion of issues on the agenda of the meeting, monitoring the implementation of decisions taken by the Board of Directors.

1. The efficiency of the Chairman of the Board of Directors was evaluated in the framework of the procedure for assessing the effectiveness of the Board of Directors in the reporting period.

complied with

partial compliance

no compliance

 
2.5.3.

The Chairman of the Board of Directors shall take the necessary measures for the timely provision to the Board of Directors of the information necessary for making decisions on the agenda items.

1. The duty of the Chairman of the Board of Directors to take measures to ensure the timely provision of materials to the Board of Directors members on the agenda of the Board of Directors is fixed in the documents of the Company.

complied with

partial compliance

no compliance

 
2.6

The Board of Directors’ members shall act in good faith and reasonably in the interests of the Company and its shareholders on the basis of sufficient knowledge and with due of care and diligence.

2.6.1. The Board of Directors’ members shall make decisions taking into account all available information, in the absence of a conflict of interest, taking into account the equal treatment of the Company's shareholders, in the normal course of business risk.

1. The Company's internal documents establish that a member of the Board of Directors must notify the Board of Directors if it has a conflict of interest with respect to any item on the agenda of the meeting of the Board of Directors or before the Board of Directors begins discussion on the corresponding agenda item.
2. The Company's internal documents provide that a member of the Board of Directors must refrain from voting on any issue in which he has a conflict of interest.
3. The Company has established a procedure that allows the Board of Directors to receive professional advice on matters within its competence, at the expense of the Company. . G4 -41

complied with

partial compliance

no compliance

 
2.6.2. The rights and duties of the Board of Directors’ members shall be clearly articulated and secured in the internal documents of the Company. 1. The Company adopted and published an internal document clearly defining the rights and duties of members of the Board of Directors.

complied with

partial compliance

no compliance

 
2.6.3. The Board of Directors’ members shall have enough time to fulfill their duties.

1. The individual attendance of the meetings of the Board of Directors and its committees, as well as the time devoted to preparing for participation in the meetings, was taken into account in the evaluation procedure of the Board of Directors in the reporting period.
2. In accordance with the internal documents of the Company, members of the Board of Directors are obliged to notify the Board of Directors of their intention to become members of the management bodies of other organizations (other than the controlled and dependent organizations of the Company), as well as the fact of such appointment.

complied with

partial compliance

no compliance

 
2.6.4. All the Board of Directors’ members shall have equal access to the Company's documents and information. Sufficient information about the Company and the work of the Board of Directors shall be provided to the newly elected members of the Board of Directors as soon as possible.

1. In accordance with the internal documents of the Company, members of the Board of Directors have the right to access documents and make inquiries concerning the Company and its controlled entities, and the Company's executive bodies are required to provide relevant information and documents.
2.  There is a formalized program in the Company of familiarization activities for newly elected members

complied with

partial compliance

no compliance

 
2.7 Meetings of the Board of Directors, preparation for and participation in them of the Board of Directors’ members ensure the effective functioning of the Board of Directors.
2.7.1. Meetings of the Board of Directors shall be held as necessary, taking into account the scale of the activities and the Company's tasks in a certain period. 1. The Board of Directors held at least six meetings in the reporting year.

complied with

partial compliance

no compliance

 
2.7.2. The procedure for preparing and holding meetings of the Board of Directors shall be stipulated in the Company's internal documents, which provide for the Board of Directors members to properly prepare for the meeting. 1. The Company has approved an internal document that defines the procedure for preparing and holding meetings of the Board of Directors, which also stipulates that a notice of the meeting should be made, as a rule, at least 5 days before the date of the meeting holding.

complied with

partial compliance

no compliance

 
2.7.3. The form of the meeting of the Board of Directors shall be determined taking into account the importance of the issues on the agenda. The most important issues shall be resolved at physical meetings. 1. The Company's Articles or internal documents stipulate that the most important issues (according to the list given in Recommendation 168 of the Code) should be considered at the physical  meetings of the Board.

complied with

partial compliance

no compliance

 
2.7.4. Decisions on the most important issues of the Company shall be taken at the meeting of the Board of Directors by a qualified majority or a majority of all elected members the Board of Directors.

1. The Company's Articles stipulate that decisions on the most important issues set out in the Recommendation 170 of the Code should be taken at a meeting of the Board of Directors by a qualified majority of not less than three-quarters of the votes, or by a majority of all elected members of the Board Of Directors.

complied with

partial compliance

no compliance

Complied with, in fact, on the basis of the conscious responsibility of members of the Board of Directors for decisions made. Formalization of the principle is planned for 2019.
2.8

The Board of Directors shall establishes Committees for preliminary consideration of the most important issues of the Company’s business.

2.8.1. Для предварительного It is recommended to establish an Audit Committee consisting of independent directors for the preliminary consideration of issues related to the control over the financial and economic activities of the Company.

1. The Board of Directors established an Audit Committee consisting entirely of independent directors.
2. The Company's internal documents define the tasks set out before the Audit Committee, including the tasks contained in Recommendation 172 of the Code.
3. At least one member of the Audit Committee, who is an independent director, has experience and knowledge in the preparation, analysis, assessment and audit of the accounting (financial) statements.
4. Meetings of the Audit Committee were held at least once a quarter during the reporting period.

complied with

partial compliance

no compliance

Explanation in paragraph 1: The Committee for Audit of the Board of Directors of PJSC TATNEFT includes three independent directors, one of whom has experience and knowledge in the field of preparing, analyzing, evaluating and auditing accounting (financial) statements (Yu.L. Levin, Chairman of the Committee). The Board of Directors decided to increase the composition of the Committee, including an additional one non-executive director, who also has experience and knowledge in the preparation, analysis, evaluation and audit of the accounting (financial) statements (R.R.Gaizatullin).

2.8.2. It is recommended to establish a Remuneration Committee consisting of independent directors and headed by an independent director who is not the Chairman of the Board of Directors for the preliminary consideration of issues related to the formation of an effective and transparent remuneration practice.

1. The Board of Directors established the Remuneration Committee, which consists of independent directors only.
2. The Chairman of the Remuneration Committee is an independent director who is not the Chairman of the Board of Directors.
3. The tasks of the Remuneration Committee are defined in the internal documents of the Company, including the tasks contained in Recommendation 186 of the Code.

complied with

partial compliance

no compliance

Explanation in paragraph 1: The Human Resources (HR) and Remuneration Committee of the Board of Directors of PJSC TATNEFT includes three independent directors, the Chairman of the Committee is an independent director (René Steiner). The Board of Directors decided to increase the composition of the Committee to include an additional one non-executive director (R.K. Sabirov). The increase in membership is due to the fact that the Committee combines the tasks of the Committee on nominations (appointments, personnel).

2.8.3. It is recommended to establish a Nomination Committee (appointments, cadres) for the preliminary consideration of issues related to the HR planning (succession planning), professional composition and efficiency of work of the Board of Directors, with the majority of members presenting independent directors.

1.  The Board of Directors established the Nomination Committee (or its tasks specified in Recommendation 186 Code are implemented within the framework of another Committee) with the majority of members being independent directors.
2. In the internal documents of the Company, the tasks of the Nomination Committee (or the corresponding Committee with a combined functionality) are defined, including tasks specified

complied with

partial compliance

no compliance

The tasks of the Nominations Committee are combined with the functions of the Human Resources (HR) and Remuneration Committee.
2.8.4. Given the scale of the activities and the level of risk, the Company’s Board of Directors  shall make sure that the composition of its Committees fully meets the objectives of the Company. Additional Committees either had to be established or were not deemed necessary (Strategy Committee, Corporate Management Committee, Ethics Committee, Risk Management Committee, Budget Committee, Health, Safety and Environment Committee, etc.)..

1. In the reporting period, the Board of Directors of the Company considered the issue of the consistency of its Committees with the tasks of the Board of Directors and the objectives of the Company.  The additional committees had either  been established, or they were not deemed necessary.

 

complied with

partial compliance

no compliance

 
2.8.5. The Committees‘ composition should have been defined in a way allowing for a comprehensive preliminary discussion of the issues to be considered, taking into account different opinions.

1. The committees of the Board of Directors are headed by independent directors.
2. The Company's internal documents (policies) include the provisions according to which persons, who are not members of the Audit Committee, the Nomination Committee and the Remuneration Committee, may attend the meetings of the Committees upon the invitation of the Chairman only.

complied with

partial compliance

no compliance

 
2.8.6. Chairmen of the Committees shall on the regular basis inform the Board of Directors and its Chairman about the work of their Committees. 1. During the reporting period, the Chairmen of the Committees regularly reported on the work of the Committees to the Board of Directors.

complied with

partial compliance

no compliance

 
2.9

The Board of Directors provides for the assessment of the Board of Directors, its Committees and the Board of Directors’ members work.

2.9.1. The performance evaluation of the Board of Directors shall be aimed at determining the degree of effectiveness of the Board of Directors, the Committees and the Board of Directors’ members, their relevance to the development needs of the Company, the revitalization of the Board of Directors and the identification of areas in which their activities improved.

1. The self-assessment or the external evaluation of the Board of Directors operation in the reporting period included the work evaluation of the Committees, individual members of the Board of Directors and the Board of Directors as a whole.
2. The results of the self-assessment or the external evaluation of the Board of Directors conducted during the reporting period were considered at the physical meeting of the Board of Directors.

complied with

partial compliance

no compliance

 
2.9.2. The work evaluation of the Board of Directors, Committees and the Board of Directors’ members shall be carried out on a regular basis at least once a year. The independent external organization (consultant) shall be invited for assessing the work quality of the of the Board of Directors at least once every three years. 1. The Company invited the independent external organization (consultant) to evaluate the work quality of the Board of Directors, at least once during the last three reporting periods).

complied with

partial compliance

no compliance

The work of the Board of Directors is assessed regularly once a year based on a formalized self-assessment system, followed by review by the Audit Committee and the Corporate Governance Committee with the participation of independent directors. The self-assessment system is built on a methodology comparable to the method of RAEX (Expert RA), used from 01.06.2014. The results of self-assessment are disclosed in the annual report and are available to shareholders and all interested parties. Over the past three years, the Company has not engaged an external organization to evaluate the work of the Board of Directors, based on reasonable arguments related to the current qualitative changes in the Company (development, approval and implementation of a long-term Strategy), positive financial and production results of the Company. In addition, this would entail additional financial costs.
3.1 The Company’s Corporate Secretary shall carry out effective current interaction with shareholders, and coordinate the actions of the Company to protect the rights and interests of the shareholders, supporting the effective operation of the Board of Directors.
3.1.1. The Corporate Secretary shall have the knowledge, experience and qualifications that are sufficient to fulfill the duties assigned to him, an impeccable reputation and shall enjoy the confidence of the shareholders.

1. The internal document has been adopted and disclosed in the Company: the Regulation on the Corporate Secretary.
2. The biographical information on the Corporate Secretary with the same level of detail as for the members of the Board of Directors and the executive management of the Company has been placed on the Company's website and in the Company’s Annual Report.

complied with

partial compliance

no compliance

 
3.1.2.

The Corporate Secretary shall be sufficiently independent from the executive bodies of the Company and shall have the necessary powers and resources to carry out the tasks assigned to him.

1. The Board of Directors approves appointment, removal from office and additional remuneration of the Corporate Secretary.

complied with

partial compliance

no compliance

 
4.1

The level of remuneration paid by the Company shall be sufficient to attract, motivate and retain individuals, who are qualified and competent for the Company. The remuneration to the members of the Board of Directors, executive bodies and other key executives of the Company shall be paid in accordance with the Company's remuneration policy.

4.1.1. The level of remuneration provided by the Company to the Board of Directors members, executive bodies and other key executives shall create sufficient motivation for their effective work, allowing the Company to attract and retain competent and qualified specialists. However, the Company shall avoid setting the compensation level any higher than necessary as well as an unjustifiably large gap between the remuneration levels of these individuals and employees of the Company. 1. The Company has adopted an internal document (policy) for the remuneration of members of the Board of Directors, executive bodies and other key management personnel, which clearly outlines the approaches to the remuneration for these individuals.

complied with

partial compliance

no compliance

 
4.1.2.

The Company's compensation policy has been devised by the Remuneration Committee and approved by the Company’s Board of Directors. The Board of Directors, with the support of the Remuneration Committee, shall oversee the implementation the remuneration policy in Company, and, if necessary, shall revise and correct it.

1. During the reporting period, the Remuneration Committee reviewed the remuneration policy (policies) and practices of its (their) implementation and, if necessary, submitted appropriate recommendations to the Board of Directors.

complied with

partial compliance

no compliance

 
4.1.3.

The Company's remuneration policy shall contain transparent mechanisms for determining the remuneration of the Board of Directors’ members, executive bodies and other key executives of the Company, as well as regulate all types of payments, benefits and privileges granted to these persons.

1. The Company's remuneration policy contains transparent mechanisms for determining the remuneration of members of the Board of Directors, executive bodies and other key executives of the Company, and also regulates all types of payments, benefits and privileges granted to these persons.

complied with

partial compliance

no compliance

 
4.1.4.

The Company shall define a policy of expenses reimbursement (compensation), which shall specify the list of expenses to be reimbursed, and the level of service that the Board of Directors’ members, executive bodies and other key executives of the Company can claim. Such a policy can be an integral part of the Company's remuneration policy.

1. The remuneration policy (policies) or other internal documents of the Company set the rules for compensating the expenses of the members of the Board of Directors, executive bodies and other key executives of the Company.

complied with

partial compliance

no compliance

 
4.2

Remuneration system of the Board of Directors members shall ensure that the financial interests of the directors shall be in line with the long-term financial interests of the shareholders.

4.2.1.

The Company shall pay a fixed annual fee to the Board of Directors members.
The Company shall not pay remuneration for participation in the individual meetings of the Board or the committees of the Board of Directors.
The Company shall not apply forms of short-term motivation and any additional material incentives to the Board of Directors’ members.

1. The fixed annual remuneration was the only monetary form of remuneration for members of the Board of Directors for their work on the Board of Directors during the reporting period.

complied with

partial compliance

no compliance

 
4.2.2.

The long-term ownership of the Company’s shares shall be the most conducive to convergence of the financial interests of the Board of Directors’ members with long-term interests of shareholders. At the same time, the Company shall not stipulate the rights to sell shares by achieving certain performance indicators, and the Board of Directors’ members shall not participate in option programs.

1. If an internal document (documents): the Company’s policy (policies) provide for the provision of the Company’s shares to the Board of Directors members, clear rules for the ownership of shares by members of the Board of Directors should be provided and disclosed, aimed at encouraging the long-term ownership of such shares.

complied with

partial compliance

no compliance

 
4.2.3. The Company shall not provide for any additional payments or compensation in the event of early powers termination of the Board of Directors’ members in connection with the transfer of control over the Company or due to other circumstances. 1. The Company does not provide for any additional payments or compensation in the event of early termination of the powers of members of the Board of Directors in connection with the transfer of control over the Company or other circumstances.

complied with

partial compliance

no compliance

 
4.3

The remuneration system of members of the executive bodies and other key executives of the Company shall provide for the dependence of the reward on the results of the Company’s operation and their personal contribution to achieving this result.

4.3.1. Remuneration of members of the executive bodies and other key executives of the Company shall be determined in such a way as to ensure a reasonable and justified ratio of the fixed part of the remuneration and the variable part of the remuneration depending on the results of work of the Company and the personal (individual) contribution of the employee to the final results. 1. During the reporting period, the annual performance indicators approved by the Board of Directors were used to determine the amount of variable compensation for members of the executive bodies and other key management personnel of the Company.
2. In the course of the latest evaluation of the remuneration system for members of the executive bodies and other key management personnel, the Company, the Board of Directors, ascertained that an effective ratio of the fixed part of the remuneration and the variable part of the remuneration are applied in the Company.
3. There is a procedure existing at the Company ensuring the return to the Company of bonus payments illegally received by the members of the executive bodies and other key management personnel of the Company.

complied with

partial compliance

no compliance

 
4.3.2. The Company has implemented a program of the long-term motivation of the members of the executive bodies and other key executives of the Company using the Company’s shares (options or other derivative financial instruments, which underlying assets are the Company’s shares).

1. The Company introduced a long-term motivation program for members of the executive bodies and other key executives of the Company using the shares of the Company (financial instruments based on the shares of the Company).
2. The program of the long-term motivation of the members of executive bodies and other key executives of the Company provides that the right to sell shares and other financial instruments used in such a program shall start only after three years from the date of their provision. At the same time, the right to sell them is conditioned by the achievement of certain performance indicators of the Company.

complied with

partial compliance

no compliance

 
4.3.3.

The amount of compensation (“golden parachute”) paid by the Company in case of early termination of powers to members of executive bodies or key executives on the initiative of the Company and in the absence of unfair acts on their part shall not exceed twice the value of the fixed portion of the annual remuneration.

1. The amount of compensation (“golden parachute”) paid by the Company in the event of early termination of powers to members of the executive bodies or key executives on the initiative of the Company and in the absence of unfair acts on their part did not exceed twice the fixed part of the annual remuneration in the reporting period.

complied with

partial compliance

no compliance

 
5.1

The Company shall establish an efficient risk and internal control management system aimed at ensuring reasonable confidence in achieving the goals set for the Company.

5.1.1.

The Company’s Board of Directors shall define the principles and approaches to the organization of the risk and internal control management system in the Company.

1. The functions of various management bodies and divisions of the Company in the system of risk and internal control management are clearly defined in the internal documents/corresponding policies of the Company, approved by the Board of Directors.

complied with

partial compliance

no compliance

 
5.1.2. The Company's executive bodies shall ensure the creation and maintenance of the effective risk management and internal control system in the Company.

1. The Company's executive bodies ensured distribution of functions and authorities with regard to the risk management and the internal control among the subordinate managers (heads) of departments and divisions accountable to them.

complied with

partial compliance

no compliance

 
5.1.3.

The system of risk and internal control management in the Company shall ensure an objective, fair and clear picture of the current state and prospects of the Company, the Company's integrity and transparency of reporting, as well as the soundness and acceptability of the Company's accepted risks.

1. The Company has adopted a policy on combatting corruption.
2. There is an accessible way established in the Company to inform the Board of Directors or the Audit Committee of the Board of Directors of violations of law, internal procedures, the Code of Ethics of the Company.

complied with

partial compliance

no compliance

 
5.1.4.

The Company’s Board of Directors shall take the necessary steps to ensure that the current risk and internal control management system complies with the Board of Directors’ principles and approaches to its organization and functions effectively.

1. During the reporting period, the Board of Directors or the Audit Committee of the Board of Directors conducted an evaluation of the effectiveness of the Company's risk and internal control management system. The information on the main results of such an assessment is included in the annual report of the Company.

complied with

partial compliance

no compliance

 
5.2

The Company shall organize the internal audit for a regular independent evaluation of the reliability and effectiveness of the risk and internal control management system, and the Corporate Governance practice.

5.2.1. It is recommended that internal audits be performed by a separate structural division (internal audit department) to be established by the Company or by retaining an independent outside body. The functional and administrative accountability of the internal audit division shall be differentiated. The internal audit division shall be functionally accountable to the Board of Directors. 1. A separate structural division for conducting the internal audit functions has been established in the Company, which is functionally accountable to the Board of Directors or the Audit Committee, or an independent external organization with the same principle of accountability has been invited.

complied with

partial compliance

no compliance

 
5.2.2.

The Internal Audit Division shall perform effectiveness evaluation of the internal control system, as well as effectiveness evaluation of the risk management system, and the corporate governance system.
The Company shall apply generally accepted activity standards in the area of the internal audit.

1. The effectiveness of the internal control and risk management system was assessed during the reporting period within the framework of the internal audit.
2. The Company applies commonly accepted approaches.

complied with

partial compliance

no compliance

 
6.1

The Company and its activities shall be transparent to the shareholders, investors and other interested parties.

6.1.1. The Company shall develop and implement an information policy ensuring the efficient exchange of information by the Company, its shareholders, investors, and other interested parties. . 1. The Board of Directors of the Company has approved the information policy of the Company, developed in accordance with the recommendations of the Code.
2. The Board of Directors (or one of its Committees) has considered issues related to the Company's compliance with its information policy at least once during the reporting period.

complied with

partial compliance

no compliance

 
6.1.2. The Company shall disclose the information on the corporate governance system and practice, including detailed information on the compliance with the principles and recommendations of the Code. .

1. The Company discloses the information on the Company’s corporate governance system and the general principles of the corporate governance applied in the Company, including the information disclosed on the Company's Internet website.
2. The Company discloses the information on the composition of the executive bodies and the Board of Directors, the independence of the members of the Board and their membership in the Committees of the Board of Directors (as defined by the Code).
3. In the event that there is a person controlling the Company, Company publishes a memorandum of supervisory authority regarding the plans of such a person with respect to corporate governance in the Company.

complied with

partial compliance

no compliance

 
6.2

The Company shall timely disclose full, up-to-date and reliable information about the Company to ensure the possibility of making informed decisions by the Company’s shareholders and investors.

6.2.1.

The Company shall disclose the information in accordance with the principles of regularity, consistency and efficiency, as well as availability, reliability, completeness and comparability of the disclosed data.

1. The Company's information policy identifies approaches and criteria for identifying the information that can have a significant impact on the Company's valuation and the value of its securities and procedures that ensure the timely disclosure of such information.
2. In the event that the Company's securities are circulated in foreign organized markets, the disclosure of material information in the Russian Federation and in such markets is carried out synchronously and is equivalent during the reporting year.
3. If foreign shareholders own a significant number of the Company’s shares, then during the reporting year, the information is disclosed not only in Russian, but also in one of the most common foreign languages.

complied with

partial compliance

no compliance

 
6.2.2.

The Company shall avoid a formal approach in disclosing the information and shall disclose significant information about its activities, even if the law does not provide for the disclosure of such information.

1. During the reporting period, the Company was disclosing the annual and semi-annual financial statements prepared in accordance with IFRS. The annual report of the Company for the reporting period includes annual financial statements prepared in accordance with IFRS, together with an audit report.
2. The Company discloses full information on the Company’s capital structure in accordance with Recommendation 290 of the Code in the annual report and on the Company's Internet website.

complied with

partial compliance

no compliance

 
6.2.3. The Company’s annual report, as one of the most important tools of the Company's information exchange with shareholders and other interested parties, shall contain information making it possible to assess the Company’s performance results for the year.

1. The annual report of the Company contains information on the key aspects of the Company's operations and its financial results.
2. The Company's annual report contains information on the environmental and social aspects of the Company’s activities.

complied with

partial compliance

no compliance

 
6.3

The Company shall provide information and documents at the requests of the shareholders in accordance with the principles of equal and unhindered accessibility

6.3.1. The Company shall provide the information and documents at the request of the shareholders in accordance with the principles of fairness and ease.

1. The Information Policy of the Company defines an easy procedure for providing the shareholders with access to the information, including the information on entities controlled by the Company, at the request of  the shareholders.

complied with

partial compliance

no compliance

 
6.3.2.

It is recommended that when providing the information to the shareholders the Company shall maintain a reasonable balance between the interests of individual shareholders and the Company’s interests, which is interested in preserving the confidentiality of important commercial information that may have a significant impact on the Company’s competitiveness.

1. During the reporting period, the Company did not refuse to satisfy the shareholders' requests for the information, or such refusals were justified.
2. In cases determined by the Information Policy of the Company, the shareholders are warned about the confidential nature of the information and assume the responsibility for maintaining its confidentiality.

complied with

partial compliance

no compliance

 
7.1

Actions that shall or may materially affect the structure of the Company's share capital and financial position and, accordingly, the shareholders' position (material corporate actions) shall be carried out on fair terms ensuring compliance with the rights and interests of the shareholders as well as other parties concerned.

7.1.1.

Material corporate actions shall be deemed to include reorganization of the Company, acquisition of 30 per cent or more of the Company’s voting shares (takeover), making major transactions, increasing or reducing the Company’s share capital, listing and delisting of the Company’s shares, as well as other actions, which might result in material changes in the rights of the shareholders or infringement of their interests. It is recommended that the Company’s Articles of Association shall define a list (criteria) of transactions or other actions, deemed to be material corporate actions, and refer the consideration of such actions to the competence of the Company’s Board of Directors.

1. The Company's Articles determined a list of transactions or other actions that are material corporate actions and the criteria for their determination. Decisions on the material corporate actions are within the competence of the Board of Directors. In cases where the implementation of these corporate actions is directly attributed by law to the competence of the General Meeting of the Shareholders, the Board of Directors provides appropriate recommendations to the shareholders.
2. As a minimum, the Company's Articles consider the following events as essential corporate actions: reorganization of the Company, acquisition of 30 percent or more of the voting Company’s shares (takeover), fulfillment of substantial transactions by the Company, increase or decrease in the capital of the Company, listing and delisting of the Company’s shares.

complied with

partial compliance

no compliance

Сomplied in practice. The list of significant corporate actions is determined by the Company in Chapter 9 of the Corporate Governance Code, approved by the Board of Directors on March 20, 2017. The Company's Charter makes decisions on matters related to material corporate actions attributed to the competence of the Board of Directors. The Сompany plans to determine the list of transactions or other actions in the Charter in 2019, as well as to form and approve by the Board of Directors the Procedure for concluding significant transactions of PJSC TATNEFT in 2018.
7.1.2.

The Board of Directors shall play a key role in making decisions or making recommendations for material corporate actions. The Board of Directors shall base its position on the opinion of the Company‘s independent directors.

1. The Company provides for a procedure whereby the independent directors declare their position on the material corporate actions prior to their approval.

complied with

partial compliance

no compliance

Complied with in practice. There were no material corporate actions during the reporting period. It is planned to have this procedure formalized by an internal document of the Company in 2019.
7.1.3.

When taking material corporate actions, which would affect rights or legitimate interests of the shareholders, it is recommended that equal terms and conditions be guaranteed for all shareholders; if the statutory machinery designed to protect the shareholders' rights proves insufficient, then additional measures shall be introduced  to protect their rights and legitimate interests. In such instances, the Company shall comply with formal requirements of the law and with the corporate governance principles set out in this Code.

1. The Company's Articles, taking into account the specifics of its activities, set at a lower level than the statutory minimum criteria for classifying the Company's transactions as material corporate actions.
2. During the reporting period, all material corporate actions went through the approval procedure prior to their implementation.

complied with

partial compliance

no compliance

Actually complied with. Pursuant to Chapter 9 of the Corporate Governance Code approved by the Board of Directors on 20.03.2017, material corporate actions of the Company mean the actions that shall or may materially affect the structure of the Company’s share capital and financial position and, accordingly, the shareholders’ position, and consequently they shall be carried out on fair terms ensuring compliance with the rights and interests of the shareholders as well as other parties concerned. There were no material corporate actions during the reporting period. It is planned to have this procedure formalized by an internal document of the Company in 2019.
7.2

The Company shall provide a procedure for taking material corporate actions that enables its shareholders to receive full information about such actions in due time and influence them, and also guarantee that the shareholder rights are observed and duly protected when such actions are taken.

7.2.1.

The information on the performance of the material corporate actions shall be disclosed with an explanation of the reasons, conditions and consequences of committing such actions.

1. During the reporting period, the Company disclosed in a timely manner and in detail the information on the material corporate actions of the Company, including the grounds and timing of such actions.

complied with

partial compliance

no compliance

 
7.2.2. The rules and procedures related to the Company's performance of material corporate actions shall be formulated in the Company's internal documents.

1. The internal documents of the Company provide for the procedure for attracting an independent appraiser to determine the value of property disposed of or acquired by a major transaction or an related party transaction.
2. The internal documents of the Company provide for the procedure for engaging an independent appraiser to estimate the cost of acquiring and repurchasing the shares of the Company.
3. The internal documents of the Company provide for an expanded list of grounds, on which the members of the Board of Directors of the Company and other persons provided for by the law are recognized as interested in the transactions of the Company.

complied with

partial compliance

no compliance