7.5.Committees of the
Board of Directors

The Board of Directors has three standing committees: Audit Committee, Nomination and Remuneration Committee and Strategy Committee.

The committees have been formed in compliance with the Corporate Governance Code of PAO TMK, which specifically requires that the Audit Committee and the Nomination and Remuneration Committee include independent directors only or, if reasonably impossible, independent directors and non-executive directors only.

In 2015, the composition of the Strategy Committee changed as Anatoly Chubais was elected its member and Alexander Shiryaev stepped down. The composition of other committees remained unchanged.

Participation of Board members in the Board and committee meetings in 2015

	Board of Directors	Audit Committee	Nomination and Remuneration Committee	Strategy Committee
	(40 meetings)	(7 + 1 joint meetings)	(5 meetings)	(3 + 1 joint meetings)
D. Pumpyanskiy (Chairman)	40
M. Alekseev	40	6	5
A. Kaplunov	40
Peter O’Brien	40	8
S. Papin	40		5
E. Blagova	16(17)*
R. Foresman	40		4
I. Khmelevskiy	40	8
A. Chubais	21(23)*			—
A. Shiryaev	40			2 (2)*
A. Shokhin	40			3
O. Schegolev	40			4

Audit Committee

Peter O’Brien	Chairman of the Audit Committee, independent director
Mikhail Alekseev	Member of the Audit Committee and Chairman of the Nomination and Remuneration Committee, independent director
Igor Khmelevskiy	Member of the Audit Committee, non-executive director

The Audit Committee’s principal activities included the following:

• Review of completeness, accuracy and reliability of consolidated and separate accounting (financial) statements of PAO TMK
• Assessment of the Company’s external auditors for independence, objectivity and absence of a conflict of interest; oversight of external audit and its quality
• Control of reliability and effectiveness of the risk management and internal control system
• Safeguarding the independence and objectivity of internal audits of the Company, internal control issues, and performance assessment of the internal audit function
• Monitoring the effectiveness of the management information system used to report irregularities in the Company.

All functions of the Committee are listed in the Regulations on the Audit Committee of PAO TMK. The full text is available on the Company’s website athttps://www.tmk-group.ru/media_ru/files/51/pol_kom_aud2015.pdf.

Each Committee member has knowledge and experience required to perform their duties. Peter O’Brien, Chairman of the Audit Committee, and Mikhail Alekseev, Member of the Audit Committee, comply with the Russian Corporate Governance Code recommendations for the reporting review and assessment competencies.

Assessment

Performance of the Committee was assessed as part of a broader assessment of the Board of Directors by an independent external auditor. According to the auditor’s opinion, the Committee’s performance has improved over the past few years, and key priorities on the annual agenda are properly addressed.

Meetings

Ten meetings were held in 2015 and between 1 January 2016 and 31 March 2016, including one joint meeting with the Strategy Committee. Members of the Committee also had several meetings with the head of the Internal Audit Department and the leader of the external audit team, held without participation of the Company’s executives.

Principal activities

In 2015 and between 1 January 2015 and 31 March 2015, the Audit Committee’s principal activities included the following:

• Analysis of the accounting policies and review of completeness, accuracy and reliability of the Company’s accounting (financial) statements
• Presentation of recommendations to the Board of Directors in respect of the Internal Audit Policy and revisions of the Regulations on the Audit Committee and Regulations on the Internal Audit Department
• Review of the plans and reports of the Internal Audit Department, assessment of the Department’s performance
• Cooperation with the Revision Committee
• Review of the audit plan and scope, active discussions with the external auditor of matters arising out of the audit
• Performance assessment of the risk management and internal control systems.

The Committee heard reports of the chairmen of the Revision Committee, Internal Audit Department, Risk Management Committee and Committee on Regulating Compliance Risks reporting to the CEO.

The Committee reviewed the following key matters regarding the preparation and audit of TMK’s FY 2015 and interim consolidated and separate accounting (financial) statements:

• Development of the audit plan for the consolidated financial statements of PAO TMK and its subsidiaries prepared in accordance with the International Financial Reporting Standards (IFRS)
• External auditor’s opinion on PAO TMK’s accounting (financial) statements prepared under the Russian law and on PAO TMK’s IFRS consolidated financial statements
• Review of the letter from the external auditor regarding internal control issues, based on the results of the annual audit, assessment of the Company’s existing controls for the preparation of accounting (financial) statements
• Assessment of the external auditor’s performance and quality of services.

Following the review of external audit results, the Audit Committee concluded that the audit had been carried out to professional standards.

The Audit Committee gave a positive assessment of the current risk management and internal control framework.

The Audit Committee reviewed PAO TMK’s financial statements prepared under the Russian accounting (financial reporting) standards together with the auditor’s opinion and recommended that the Board of Directors submit the annual accounting (financial) statements for approval at the Annual General Meeting of Shareholders.

Nomination and Remuneration Committee

Mikhail Alekseev	Chairman of the Nomination and Remuneration Committee and member of the Audit Committee, independent director
Sergey Papin	Member of the Nomination and Remuneration Committee, non-executive director
Robert Mark Foresman	Member of the Nomination and Remuneration Committee, independent director

The Nomination and Remuneration Committee seeks to create a favourable environment for the engagement of qualified personnel in the Company’s governance and incentives for their efficient performance, as well as to streamline the corporate governance system and align it with international best practices.

During the reporting period, the Committee reviewed and presented to the Board of Directors recommendations that included:

• Management efficiency improvements, and streamlining the organisational structure and optimising headcount of executives, officers and employees in TMK’s Russian division
• Organisational and staff matters in the operation of TMK’s American and Middle East divisions and TMK Oilfield Services of the Russian division in 2015
• Remuneration to the Company’s managers for 2014, key performance indicators and remuneration arrangements in 2015
• Harmonisation of remuneration practices across the Russian division’s pipe plants
• Proposals to incorporate indicators related to TMK’s market capitalisation into incentives for top managers
• Results of the performance assessment of PAO TMK’s Board of Directors
• Remuneration to the members of the Board of Directors
• Key headcount and payroll indicators for TMK’s 2016 budget
• Development of the corporate governance practice; report on compliance with the principles and recommendations set out in TMK’s Corporate Governance Code
• New revision of the Regulations on the Nomination and Remuneration Committee
• Draft Regulation on the Corporate Secretary of PAO TMK¹
• Report on activities of the Nomination and Remuneration Committee in the corporate year.

Additionally, the Committee presented to the Board of Directors recommendations on electing the Chairman and members of the Board and its Committees for the 2015/2016 corporate year, as well as on the affirmation of the CEO’s authority for a new period and on electing the members of the Management Board.

The Committee carried out comprehensive assessment of the corporate governance framework and outlined its development objectives. The Committee’s recommendations aided the Board of Directors in making well-balanced decisions supported by effective implementation and control tools.

In the reporting period, the Committee followed the approved Regulations on the Nomination and Remuneration Committee and the Action Plan, which was duly amended on an as-needed basis to match the Company’s priorities.

The Committee meetings were regularly attended by TMK’s top executives and top managers, which facilitated efficient communication and resulted in more thought-out and constructive recommendations.

Strategy Committee

Alexander Shokhin	Chairman of the Strategy Committee, independent director
Oleg Schegolev	Member of the Strategy Committee, independent director
Anatoly Chubais	Member of the Strategy Committee, non-executive director

The Strategy Committee’s duties are to develop recommendations on the Company’s business priorities and its growth strategy and present these to the Board of Directors.

In 2015, the Committee reviewed and presented to the Board of Directors recommendations on the following key matters:

• Consolidated budget for 2016
• Investment programme for 2016
• Market situation and sales programme for 2016
• TMK Group’s target organisational structure for 2016
• Adjustments to the business plan for 2015–2020
• Dividend payout recommendations based on the Company’s dividend policy.