REPORT OF THE AUDIT AND RISK COMMITTEE

The Audit and Risk Committee is a consultative and advisory body of the Board of Directors, whose resolutions are of an advisory nature. The Audit and Risk Committee is a consultative and advisory body of the Board of Directors, whose resolutions are of an advisory nature.

Alla Saltykova

Key items discussed by the Committee

• On the Committee’s initiative, the Board of Directors reviewed and supported the need to set up the internal audit function; appropriate re-organisational measures and tendering procedures to select the Head of the Internal Audit Unit were initiated and completed in 2017. In 2018, the Internal Audit Unit functionally reporting to the Board of Directors began its operation.
• As instructed by the Committee, an external consultant assessed the status and maturity of the risk management system, and provided recommendations on its further enhancement. On the Committee’s initiative, a number of measures were taken to set up reviewing and decision-making mechanisms within the risk management system, and the package of documents to enhance the risk management system was finalised.
• The Committee reviewed regulatory changes and their impact on the Company, as well as amendments to JSC FPC’s Accounting Policy for accounting under the Russian Accounting Standards, the International Financial Reporting Standards, and for tax purposes.
• The Committee reviewed the audit results of FPC’s accounting (financial) statements, FPC’s consolidated financial statements for 2016, and interim statements for 6M 2017. The Committee held a number of meetings attended by the external auditor (to review the auditor’s reports, audit planning matters, key risks, the external auditor’s recommendations, as well as the implementation of the external auditor’s recommendations).
• The Committee reviewed forecasts and the draft budget, including investments, as well as JSC FPC’s Budget adjustments for 2017.
• The Committee reviewed plans and reports on the functioning of the system for combating malpractice by employees or third parties, including the results of the hotline complains handling.
• On a quarterly basis, the Committee reviewed the reports on the operation of FPC’s Internal Audit Centre (Control and Audit Centre) in relevant periods. The Committee provided recommendations on controls to ensure implementation of the Centre’s recommendations.

On 7 February 2017 (Minutes No. 15), the Board of Directors approved changes in the Committee membership – due to the termination of employment at Russian Railways, Andrey Derin was removed from office before the expiration of his term, and Fyodor Kuzin was elected.

On 21 July 2017 (Minutes No. 1), the Board of Directors resolved to elect a new Committee. On 19 September 2017 (Minutes No. 4), the Board of Directors resolved to change the name of the Audit Committee of FPC’s Board of Directors to the Audit and Risk Committee of FPC’s Board of Directors, as well as to expand and approve the Committee’s membership of eight members.

The Committee is led by Alla Saltykova as an independent director.

The Audit Committee acting from January to 7 February 2017 held one meeting in person.

No in-absentia meetings were held.

The Audit Committee acting from 7 February to 21 July 2017 held six meetings in person and one meeting in absentia.

The Audit Committee acting from 21 July to 19 September 2017 held two meetings in person. No in-absentia meetings were held.

The Audit and Risk Committee acting from 19 September to December 2017 held three meetings in person and one meeting in absentia.

In 2017, the remuneration (including annual remuneration) paid to members of the Committee totalled RUB 5,496,982.

Events after the reporting date

On 5 March 2018, FPC’s Board of Directors:

• determined the membership of the Audit and Risk Committee of FPC’s Board of Directors at nine members
• resolved to elect the following persons to the Audit and Risk Committee of FPC’s Board of Directors:
  • Alla Saltykova, Independent Director, FPC
  • Alexander Ananyev, Deputy Head of the Department of Economics, Russian Railways
  • Mikhail Beskhmelnitsyn, Head of the Control and Analytical Service of the CEO – Chairman of the Management Board, Russian Railways
  • Fyodor Kuzin, Head of Unit at the Subsidiaries and Affiliates Management Department, Russian Railways
  • Gleb Zaznov, Head of the Risk Management Development and Outsourcing Centre, a business unit of Russian Railways
  • Elena Filatova, Advisor to the Economics and Finance Director, Russian Railways
  • Elena Chamortseva, Deputy Head of Zheldorkontrol Internal Control Centre, a business unit of Russian Railways
  • Olesya Chernysheva, Head of the Accounting Department, Russian Railways
  • Alexander Muslovets, Deputy General Director, FPC
• unanimously elected Alla Saltykova, FPC’s Independent Director, the Chair of the Audit and Risk Committee of FPC’s Board of Directors.

REPORT OF THE HUMAN RESOURCES, REMUNERATION, AND CORPORATE GOVERNANCE COMMITTEE

The Human Resources, Remuneration, and Corporate Governance Committee is a consultative and advisory body of the Board of Directors, whose resolutions are of an advisory nature. The Committee’s main goal – to assist the Board of Directors’ efficient operation in developing corporate governance, efficient HR planning, and effective and transparent remuneration practice in the Company – is achieved through addressing the following tasks.

Sergey Zemlyansky

Key items discussed by the Committee

• Approved nominee heads of FPC’s branches.
• Approved the Regulations on the Corporate Secretary of JSC FPC.
• Reviewed FPC’s proposals on aggregating FPC’s branches.
• Approved the amendments to the terms of the employment contract with FPC’s General Director.
• Reviewed proposed changes to the organisational structure of the Company’s administration.
• Reviewed FPC’s General Director’s quarterly reports on the Company’s social and HR policy and the implementation of the resolutions of FPC’s Board of Directors.
• Provided recommendations on the incentives for FPC’s General Director.

The Committee was set up by resolution of FPC’s Board of Directors to assist the Board’s efficient operation in:

• developing and improving the corporate governance system and practice
• managing relationships between the Company’s shareholders, the Board of Directors, and executive bodies
• interaction with the Company’s subsidiaries
• HR planning professional composition and efficiency of the Board of Directors
• establishing effective and transparent remuneration practice in the Company.

Members of the Committee are appointed by resolution of the Company’s Board of Directors based on the Directors’ proposals.

In July 2017, FPC’s Board of Directors resolved to form the Committee of six members.

The Committee is led by Sergey Zemlyansky as an independent director.

In 2017, the remuneration (including annual remuneration) paid to the members of the Committee totalled RUB 3,187,276.

Events after the reporting date

On 5 March 2018, FPC’s Board of Directors:

• determined the membership of the Human Resources, Remuneration, and Corporate Governance Committee of FPC’s Board of Directors at six members
• resolved to elect the following persons to the Human Resources, Remuneration, and Corporate Governance Committee of FPC’s Board of Directors:
  • Nikolay Zakharov, First Deputy Head of the Personnel Management Department, Russian Railways
  • Lyudmila Levina, Head of the Unit for Relations with Subsidiaries’ and Affiliates’ Governing and Control Bodies at the Subsidiaries and Affiliates Management Department, Russian Railways
  • Andrey Tikhomirov, First Deputy Head of the Employment, Remuneration, and Motivation Department, Russian Railways
  • Vladimir Gaponko, Head of the Economics Department, Russian Railways
  • Lyudmila Paristaya, Deputy General Director, FPC
• elected Sergey Zemlyansky, FPC’s Independent Director, the Chairman of the Human Resources, Remuneration, and Corporate Governance Committee of FPC’s Board of Directors.

REPORT OF THE STRATEGIC PLANNING COMMITTEE

The Strategic Planning Committee is a consultative and advisory body of the Board of Directors, set up to enable the Board of Directors to increase the Company’s long-term performance, whose resolutions are of an advisory nature.

Dmitry Pegov

Key items discussed by the Committee

• Reviewed JSC FPC’s 2030 Development Strategy and the Company’s development priorities.
• Reviewed the Stabilisation and Development Plan for JSC FPC-Logistics for 2017–2018.
• Reviewed the Progress Report on FPC’s Strategy implementation in 2016 and 1H 2017.
• Reviewed the Company’s proposals on aggregating FPC’s branches.
• Reviewed FPC’s Annual Report for 2016 and proposals on the payout (declaration) of the full year dividend for 2016.

The Committee’s membership in 2017

In July 2017, FPC’s Board of Directors determined the membership of the Strategic Planning Committee of FPC’s Board of Directors at seven members.

In 2017, the remuneration (including annual remuneration) paid to the members of the Committee totalled RUB 2,597,039.

Events after the reporting date

On 5 March 2018, FPC’s Board of Directors:

• determined the membership of the Strategic Planning Committee of FPC’s Board of Directors at eight members
• resolved to elect the following persons to the Strategic Planning Committee of FPC’s Board of Directors:
  • Dmitry Pegov, Passenger Transportation Director, Russian Railway
  • Pavel Burtsev, Head of the Passenger Services Management Department, Russian Railways
  • Vladimir Gaponko, Head of the Economics Department, Russian Railways
  • Vladimir Maksimushkin, First Deputy Head of the Economic Environment and Strategic Development Department, Russian Railways
  • Elena Vilchinskaya – Advisor to the Head of Moscow Metro on Legal Matters
  • Petr Ivanov, General Director, FPC
• Unanimously elected Dmitry Pegov, Passenger Transportation Director at Russian Railways, the Chairman of the Strategic Planning Committee of FPC’s Board of Directors.