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Activities of the Board committees

Members
As of 24 March, 2014
Matters considered Targets for 2013: Targets for 2014:

Audit Committee
Paul Ostling (Chairman)
Sir Robert Margetts
Gordon Sage
Anna Kolonchina

  • continue monitoring of risk minimisation plans;
  • development of recommendations to approve the IFRS annual and semi-annual reports and the annual report;
  • review of the risk matrix;
  • monitoring of the quality of corporate governance;

Achieved

  • continue monitoring of risk minimisation plans;
  • development of recommendations to approve the IFRS annual and semi-annual reports and the annual report;
  • update of the risk matrix;
  • monitoring of the quality of corporate governance;
  • monitoring of the compliance system.

Corporate Social
Responsibility Committee

Sir Robert Margetts (Chairman)
Paul Ostling
Gordon Sage
Viktor Belyakov
Anton Averin

  • development of recommendations to issue the Sustainability Report
  • monitoring of the Company’s HSE performance in 2013;
  • monitoring of stakeholder engagement in regions where Company operates;
  • monitoring of HSE activities in 2013;

Achieved

  • consideration of issues related to production waste management;
  • review of the Company’s HSE activities and performance;
  • monitoring of stakeholder engagement in regions where Company operates;
  • review and monitoring of the energy saving programme;
  • consideration of issues related to mine safety.

Appointments and
Remuneration Committee

Pavel Grachev (Chairman)
Paul Ostling
Sir Robert Margetts
Gordon Sage
Anna Kolonchina

  • assessment of management’s 2012 performance charts;
  • consideration of the succession plan;
  • consideration of headcount issues related to labour productivity;
  • review of the labour market and salary levels in the Company;
  • development of recommendations on key appointments to management bodies of the Company.

Achieved

  • assessment of management’s 2014 performance charts;
  • consideration of issues related to the talent pool and the succession plan;
  • development of a long-term incentive plan for management;
  • monitoring of headcount issues;
  • development of recommendations on key appointments to management bodies of the Company.

Investment and
Development Committee

Anton Averin (Chairman)
Paul Ostling
Sir Robert Margetts
Gordon Sage
Anna Kolonchina
Pavel Grachev

  • consideration of specific functional strategies and the current long-term strategy of the Company;
  • follow-up of the project to optimise the repair and maintenance system;
  • monitoring of investment projects’ efficiency;
  • monitoring of the budgeting process;
  • consideration of strategic initiatives and proposals on new investment projects.

Achieved

  • consideration of specific functional strategies and the current long-term strategy of the Company;
  • monitoring of the project to optimise the repair and maintenance system;
  • monitoring of investment projects’ efficiency and the budgeting process;
  • consideration of strategic initiatives and proposals on new investment projects;
  • consideration of marketing projects and distribution development plans.

The Audit Committee’s report for 2013

The Audit Committee is a consultative body of the Board of Directors, which was created to consider matters falling under its competence pursuant to the Regulations on the competence of the Audit Committee. The Audit Committee’s activities are governed by recommendations and requirements of the Russian financial market regulator, requirements of the Moscow and London Stock Exchanges, the Charter of the Company, resolutions of the Board of Directors, and the Regulations on the Audit Committee of the Board of Directors.

The Audit Committee acts under the Regulations on the Audit Committee of the Board of Directors, which were approved in their current wording on 19 December 2013.

The Committee’s area of competence mainly covers public reports, internal and external audit, risk management and internal controls, corporate governance and legal and regulatory compliance.

As of 1 January 2013 and 31 December 2013, the Audit Committee had the following members:

  • Paul Ostling (Chairman of the Committee, independent director, expert in finance);
  • Sir Robert Margetts (senior independent director);
  • Anna Kolonchina (non-executive director);
  • Gordon Sage (independent director).

Following the AGM held in June 2013, Anna Kolonchina was replaced on a temporary basis by Vladislav Mamulkin.

The Audit Committee held seven meetings in 2013. In addition to these regular meetings, the Chairman of the Committee held a number of meetings with the Company’s financial and risk management officers, as well as with external consultants to discuss various issues.

Throughout 2013, the Committee has been monitoring the development and implementation of an enhanced compliance system. It also looked at internal audit issues. In particular, Uralkali engaged Deloitte under a co-sourcing arrangement.

As part of this work, the Audit Committee focused on the preparation of recommendations for minimising potential adverse consequences to the Company arising from the termination of its cooperation with JSC Belaruskali through BPC and the subsequent arrest of the former CEO of the Company, and conducted a comprehensive review of these developments with the input of external advisers.

The Audit Committee recommended to the Board commissioning of ZAO PricewaterhouseCoopers Audit to conduct the audit of the 2013 corporate financial statements. This was subsequently approved by the Board at the AGM held on 4 June 2013.

On 4 June 2013, the Board of Directors determined the fees of ZAO PricewaterhouseCoopers Audit for the audit and review of the Company’s 2013 IFRS accounts in the amount of RUB 32, 800,000 excluding VAT and including overheads.

The actual amount paid in 2013 to ZAO PricewaterhouseCoopers Audit and its affiliates was RUB 54,598,443, including:

Company Payments for audit services, RUB Payments for consulting services, RUB
ZAO PriceWaterhouseCoopers Audit 37,512,200 16,584,226
PriceWaterhouseCoopers Russia B.V. 0 502,016
Total 37,512,200 17,086,243

The Committee concluded that the ratio between fees for the audit and consulting services (69% to 31% respectively) did not compromise the impartiality and independence of the auditor of the Company’s financial statements.

Risk management and internal control

The risk management and internal control system adopted by the Company is based on principles incorporated in ERM, the Enterprise Risk Management system, developed by COSO. ERM:

  • Is a continuous process that covers all of the Company and is implemented by its employees at every level;
  • Is used in the development of the Company’s strategy;
  • Is applied in the whole organisation and includes a corporate-level review of the risk portfolio;
  • Aims to identify events, that may affect the organisation and actions to mitigate impact;
  • Provides management and the Board of Directors with a reasonable confidence in achieving the goals.

In September 2012, the Board of Directors approved the Risk Management and Internal Control Policy, set the basic requirements and key principles of risk management and internal control development and maintenance, and specified the respective responsibilities and roles of Uralkali’s management bodies and employees as follows:

Board of Directors

  • Is responsible for the efficiency of the risk management process and for the development and maintenance of the corporate Risk Management and Internal Control System (RMICS);
  • Considers the most material risks and monitors risk response measures.

Audit Committee

  • Is an expert authority of the Board of Directors and makes recommendations regarding the effectiveness of the RMICS;
  • Considers the most material risks and corresponding management techniques applied by the Company’s executive bodies.

CEO

  • Provides overall guidance of the risk management process; approves general regulating documents and the strategy of the RMICS.

Management Board

  • Is an expert authority of the CEO for risk management and internal control;
  • Monitors management of specific risks as instructed by the CEO.

Executive Directors

On their own or by delegating authorities:

  • Ensure regulation of business processes within their area of activity; identify the processes’ objectives and assess key risks of failure to meet such objectives; assess identified risks within their area of activity;
  • Ensure identification of control procedures that cover identified risks.

Risk Manager

Coordinates the risk management process in terms of:

  • Development of a methodology and programmes for risk management, fraud prevention and response and internal control;
  • Identification of risks and opportunities and their consideration by management in making managerial decisions;
  • Assessment of risks by heads of subdivisions;
  • Identification and assessment of control procedures that cover identified risks;
  • Development of missing control procedures and corrective action plans where necessary;
  • Ensuring timely performance of duties by the process participants;
  • Exercising day-to-day control of the efficiency of risk management and fraud prevention and response processes and of the development and operation of the internal control system;
  • Development of consolidated information about the RMICS at all levels for the Audit Committee, the Board of Directors, the CEO and the Management Board.

Internal Audit Department

Is responsible for providing assurance, identifying areas of potential improvement, and consultations on corrective measures related to the:

  • Internal Control System;
  • Corporate Governance System;
  • Risk Management System.

Also monitors compliance with the procedures of the internal control system and informs the Audit Committee about identified violations.

Employees

  • Perform duties assigned to them by the RMICS; inform management about risks identified during current activities or about facts that indicate realisation of risk events; perform a primary assessment of identified risks; and carry out actions specified in risk response action plans.

Use of the RMICS in the development of financial statements

Transparency and reliability of financial reporting is one of the crucial principles of corporate governance, and ensuring the proper quality of financial statements is a key function of the Board of Directors, and so this process is given special attention. Uralkali has a number of control procedures aimed at ensuring the adequacy and reliability of collected and processed data.

The process of preparing financial statements involves employees, officers, management bodies and external auditors of the Company, who have the following roles:

Chief Financial Officer

Ensures:

  • Availability and reliability of information in the enterprise resource management system;
  • Interaction with auditors;
  • Inventory count of property.

Revision Commission

Assures:

  • Data in Uralkali’s annual reports;
  • Periodic annual accounting statements;
  • Reports sent to statistical and government authorities and assessment of the internal control system.

Audit Committee

Preliminarily considers:

  • Uralkali’s financial statements;
  • Draft reports of the external auditor;

Monitors:

  • Completeness and integrity of financial statements;

Recommends:

  • External auditor candidates to the Board of Directors for subsequent proposal at the general meeting.

External Auditors

Audit:

  • RAS accounting statements;
  • IFRS annual consolidated financial statements;
  • IFRS consolidated interim condensed financial information.

Board of Directors

Approves financial statements taking into account recommendations made by the Audit Committee.