Committed to global best practice

In March 2014, Sergey Chemezov joined the Board and was elected as Chairman.

From 1996 to 1999 Mr. Chemezov was the Head of Foreign Economic Relations in the Administration of the President of the Russian Federation.

From 1999 until 2007, he held various senior posts in state-owned enterprises such as Promexport and ROSOBORONEXPORT. Since 2007, Mr. Chemezov has been CEO of Rostec, the state corporation for promoting the development, production and export of high-tech industrial products.

Mr. Chemezov currently serves on the Boards of Directors of several Russian companies.

Corporate Governance structure

The new Board of Directors was elected in March 2014; and it remains committed to delivering transparent stewardship and long term sustainable value creation for all shareholders.

The Board of Directors’ Corporate Governance Report

The Company and Board place great emphasis on the establishment and maintenance of leading global standards in Corporate Governance. We continue to apply global best practice in all our activities whilst, at a minimum, seeking to comply with the requirements of the Moscow and London Stock Exchanges, together with all applicable laws and regulations. We continuously develop, adopt and update Company policies and procedures to secure this objective. We seek to be a transparent organisation and give special attention to the quality and timeliness of information disclosure.

Composition of the Board of Directors

The current Board was elected by the extraordinary general meeting of shareholders held on 24 March 2014. Pursuant to the Company’s Charter, it has nine directors. As of now, the Board has three independent directors as defined in the UK Corporate Governance Code; five directors are non-executive directors, and one is an executive director. Dmitry Osipov is also the Chief Executive Officer of Uralkali.

Changes in the Board’s composition

In 2013, the composition of the Board of Directors changed on two occasions: following an annual general meeting held in June 2013 and following an extraordinary general meeting held on 29th November 2013.

Two directors resigned from the Board in 2013 — Alexander Mosionzhik and Alexander Malakh — who were elected in September 2010. They had both been directors and Board committee chairmen (Mr Mosionzhik was the Chairman of the Appointments and Remuneration Committee, while Mr Malakh was the Chairman of the Investment and Development Committee).

2013 governance highlights

  • The Company issued its first Integrated Annual Report, supplementing financing information with non-financial indicators in line with GRI standards. This received several awards, including the Best Annual Report Award from the Moscow Exchange for the third year running;
  • The Company implemented policies, procedures and compliance processes and reporting of covering anti-trust, fraud and corruption and updated a wide range of other procedures and regulations;
  • Three of our Independent Directors were included on the listing of “Russia’s best Independent Directors” as part of the Director of the Year Awards.

From June to November 2013, Vladislav Mamulkin was a member of the Board and was also a member of the Audit Committee.

In November 2013, Pavel Grachev rejoined the Board as a director (following his first term from 2010 to 2012).

Vladislav Baumgertner was re-elected to the Board twice in 2013 but was replaced in November 2013 by Victor Belyakov, the Chief Financial Officer of Uralkali, who was acting CEO. He was replaced as CEO by Dmitry Osipov, on 23 December 2013.

In late December 2013, the shareholding structure of Uralkali changed significantly. Substantial shareholdings were acquired by URALCHEM and ONEXIM Group and, before the end of the year, one of the new shareholders requested an EGM, which was held on 24 March 2014. The EGM re-elected the Board of Directors and, at the meeting the two incumbent independent directors were elected: Sir Robert Margetts and Paul Ostling. The new directors of the Company are: Dmitry Konyaev, Dmitry Mazepin, Dmitry Razumov, Valery Senko, Chen Jian, new independent director Sergey Chemezov and CEO Dmitry Osipov.

The first meeting of the new Board took place on 26 March 2014. Sergey Chemezov was unanimously elected Chairman, with Sir Robert Margetts and Dmitry Mazepin as his deputies. This Board determined the composition of the Management Board and committees of the Board of Directors.

Balanced composition of the Board of Directors

The Board has three fully independent directors, which is in line with international standards, and includes experts in all vital areas such as mining, finance, audit, management, investments, HR, safety and corporate social responsibility. Independent and non-executive directors sit on all Board committees.

Review of the Board’s performance

A review was conducted in 2013. This evidenced the progress made over the previous year and the effective implementation of the actions identified and agreed from the previous review in 2012. This review identified further needs for director education, adjustments to the risk management system and the inclusion of further information to be supplied to the Board of Directors. These actions are in hand. Following the major changes in Board membership, it has been decided to postpone the next Board review until the new Board has been in operation for a sufficient period.

Distribution of functions within the Board

The new Board maintained its approach in distributing functions among its members in line with the best corporate governance practice; as follows:

  • The roles of the Chairman of the Board and the Chief Executive Officer are split, so that the Board’s Chairman is responsible for leading the Board and ensuring it effectively handles all aspects of the Company’s activities, while the CEO is involved in day-to-day management of the Company;
  • The Senior Independent Director interacts with shareholders on behalf of the Board and conveys shareholders’ views to the Board to make sure that the Board understands the interests of shareholders. Where necessary, he also arranges contact between the Board and the Company’s shareholders;
  • The Corporate Secretary arranges the work of the Board and its committees, interacts with the management, and participates in the arrangement of general meetings of shareholders.

Objectives for 2014

  • Focus on updating the Company’s long-term and functional strategies;
  • Further improve incentive schemes for employees;
  • Continue optimisation of systems and processes for preparation of financial information of the Company;
  • Enhance the risk management and internal control system.

Induction and training of directors

In our previous Annual Report we noted that the Company had developed an induction procedure for new directors, which includes a briefing on strategic and operational issues, personal meetings with the management team, a visit to our production sites in Berezniki and Solikamsk, review of key documents, and a briefing on directors’ legal, regulatory and other rights, duties and obligations. In 2013, we continued the practice of signing Appointment Letters with directors, which stipulate the directors' rights and obligations, as well as the Company’s expectations of the members of the Board of Directors.

In 2012, Uralkali started developing a system of training sessions for directors. Since that time, the Board has selected the best training approach: 1) ad hoc sessions to deal with significant changes in applicable laws; and 2) annual visits to the main production sites, including site walkabouts and personal meetings with members of the management team. This approach was successfully used in 2013.

Planning and scheduling of the Board’s work

The work plan of the Board and its committees for the 2014 calendar year was approved by the Board in December 2013. However, this planning process typically begins as early as April. The Company continued the practice of scheduling meetings of the Board and some or all of its committees into a period of two to three days to make the most effective use of the directors’ time. As in previous years, the dates for these sessions are determined by the timing of Board decisions related to legal or corporate requirements, such as approval of an annual budget, financial statements or public reports, or to convene a general meeting. A session’s duration depends on the agenda, but typically the sessions are very intense. In 2013, we managed to follow the original schedule of the meetings with very few deviations.

Board activities in 2013

In line with best international practice, one of the main functions of the Board is to set strategic goals for the Company and to adopt, follow-up and review important decisions. The Board is a crucial component of our corporate governance system, and provision of precise and accurate information about the Company’s activities is critical. In 2013, the Board of Directors worked in accordance with a plan developed in December 2012.

Within the prescribed timeframe, the Board approved the 2013 IFRS statements and the H1 2013 consolidated condensed financial information; gave preliminary approval of the Annual Report; convened an annual general meeting, which was held on 4 June 2013, and three extraordinary general meetings:

  • An EGM held on 22 October 2013 to approve major transactions to raise financing from VTB Bank and Sberbank of Russia (or their affiliates);
  • An EGM held on 29 November 2013 to terminate early the powers of every director and re-elect the Board;
  • An EGM held on 18 December 2013 to approve, inter alia, the payment of interim dividends in accordance with the Company’s dividend policy.

Other key matters considered by the Board in 2013 included the following:

  • The Company’s first ever Integrated Annual Report was approved, which combined traditional financial information and a sustainability report that reflects Uralkali’s efforts to run a socially responsible business;
  • Decisions were made to adjust the Company’s approach to export markets;
  • Key principles of its Global Anti-Monopoly Policy and the Anti-Corruption Policy were adopted;
  • The Company’s 2014 Budget was approved;
  • The updated Regulations on the Information Policy of Uralkali were adopted, which reflected an improved approach to insider information;
  • The powers of the Chief Executive Officer, Vladislav Baumgertner, were terminated early, and the new CEO, Dmitry Osipov, was appointed;
  • A decision was made to convene an extraordinary general meeting (held on 24 March 2014) to elect the new Board.

Strategic session

Among the highlights of the Board’s work in 2013 was a strategic session, which was held for the second year running in Berezniki on 5-6 June 2013. Directors consider it important to visit the main production facilities and the head office of Uralkali, and to talk to management and employees. During the two-day session, members of the Board continued their discussions of the Company’s long-term strategy and several functional strategies, including the IT, social responsibility and production strategies. The Board’s plan for 2014 will continue this practice.

Shareholder relations

Maintaining effective relations with the shareholders in 2013 was and remains a priority for the Company and its Board. Last year, we continued the practice of meetings between independent directors and the investors, shareholders and media. It is important to note that the independent directors, including the Board’s Chairman, took part in a conference call with investors and analysts to present the Company’s IFRS half-year statements. The support which was and is being provided by the members of the Board through their communications with the investor community and the media has proved invaluable in a challenging year.

Board committees

In 2013, all four committees of the Board were fully involved in the Company’s activities. The Board has the following committees: the Audit Committee, the Appointments and Remuneration Committee, the Investment and Development Committee, and the Corporate Social Responsibility Committee.

The composition of the committees changed twice in 2013, at a Board meeting held on 5 June 2013 following an AGM and on 29 November 2013 following an EGM, although these changes were not significant.

In total, there were 25 committee meetings in 2013. Just as in 2012, the meetings could be attended by non-member directors to ensure the opportunity for all directors to contribute on important issues.

Total number of meetings of the Board and its committees in 2013. Attendance rate“Attendance” means participation of directors in meetings by way of physical presence (for meetings held in presentia), voting by ballot (for meetings held in absentia), and submission of a written opinion in relation to agenda items if physical presence is impossible.
Name The Board of Directors
(16Five out of twelve meetings of the Board of Directors were held in absentia.)
The Audit Committee
The Appointments and
Remuneration Committee
The Investment and
Development Committee
The Corporate Social
Responsibility Committee
Anton Averin All“All” refers to the number of Board/Committee meetings where a director had to be present either before the termination of the director’s term of office or following his/her election to the Board/Committee. All All
Vladislav Baumgertner 8 of 16 2 of 4
Viktor Belyakov All All
Alexander Voloshin All
Pavel Grachev All All All
Anna Kolonchina All All All All
Alexander Malakh 7 of 12Although in compliance with the legislation Mr. Malakh remained a member of the Board of Directors of OJSC Uralkali until 29 November 2013, he did not participate in Board meetings
having submitted a letter of resignation
from the Board of Directors on 26 July 2013.
All All
Vladislav Mamulkin All All All
Robert John Margetts All All All All All
Alexander Mosionzhik All
Paul James Ostling All All All All All
Gordon Holden Sage All All All All All

Directors’ remuneration

Independent members of the Board of Directors receive remuneration in line with the Regulations on directors’ remuneration and compensation. The current wording of the Regulations was approved by the general meeting of shareholders on 4 June 2013 and encompasses all amendments that have previously been approved as separate documents by several general meetings starting from June 2011. A director’s remuneration consists of base remuneration in the amount of US$ 170,000 per annum and remuneration for additional duties as a committee member or chairperson or as the deputy chairperson/Senior Independent Director of the Board of Directors. The Chairman of the Board of Directors is paid US$ 1 million per year. The remuneration is paid on a monthly basis in equal amounts. Pursuant to the Regulations on directors’ remuneration and compensation, directors were paid the following amounts in 2013:

Remuneration paidIncluding personal income tax
Name In RUB In USDUsing the exchange rate on 31 December 2013 (32.7292 RUB/US$)
Alexander Voloshin 36,521,241 1,115,861
Sir Robert Margetts 21,651,434 661,533
Paul Ostling 14,243,029 435,178
Gordon Sage 12,844,787 392,456
Alexander Malakh
(from 4 June till 26 July 2013)
1,497,340 45,780
Total 86,757,830 2,650,778
In RUB In USDUsing the exchange rate on 31 December 2013 (32.7292 RUB/US$)
Total 3,314,323 101,265

Independent Assurance Report to the Directors of Uralkali Group

The Directors of Open Joint Stock Company Uralkali engaged us to provide limited assurance on the information described below and set out in the Integrated Report of Open Joint Stock Company Uralkali and its subsidiaries (“Uralkali”) for the year ended 31 December 2013 and GRI Tables 2013 publication.

What we are assuring (“Selected Information”)

The qualitative and quantitative information disclosed in the ‘Sustainable Development’ section of the Integrated Report for the year ended 31 December 2013 and GRI Tables 2013. The scope of our work was restricted to the Selected Information for the year ended 31 December 2013 and does not extend to information in respect of earlier periods or to any other information in the Integrated Report.

How the information is assessed (“Reporting Criteria”)

We assessed the Selected Information using Uralkali’s Reporting Criteria as set out in the Integrated Report and the Global Reporting Initiative (“GRI”) Sustainability Reporting Framework, including version 3.1 of the Sustainability Reporting Guidelines and GRI Mining and Metals Sector Supplement (collectively, “GRI G3.1”). We believe that these criteria are appropriate given the purpose of our assurance engagement.

Professional standards applied and Level of assurance 1

We have used ISAE3000 (limited level of assurance) and we have complied with the IASB Code of Ethics.

Understanding reporting and measurement methodologies

There are no globally recognised and established practices for evaluating and measuring the Selected Information. The range of different, but acceptable, techniques can result in materially different reporting outcomes that may affect comparability with other organisations. The Reporting Criteria used as a basis of Uralkali’s reporting should therefore be read in conjunction with the Selected Information and associated statements reported on Uralkali’s website.

Work done

Considering the risk of material misstatement of the Selected Information, we:

  • made enquiries of Uralkali’s management through interviews of personnel responsible for sustainability reporting and data collection. Interviews were held in Berezniki, Perm region, and Moscow;
  • analyzed the relevant policies and basic reporting principles and evaluated the design of the key structures, systems, processes and controls for managing, recording and reporting the Selected Information;
  • performed limited substantive testing on a selective basis of the Selected Information to verify that data had been appropriately measured, recorded, collated and reported; and
  • assessed the presentation of the Selected Information and compliance of the disclosures with the requirements of GRI G3.1.

Uralkali’s responsibilities

The Directors of Uralkali are responsible for:

  • designing, implementing and maintaining internal controls over information relevant to the preparation of the Selected Information that is free from material misstatement, whether due to fraud or error;
  • establishing objective Reporting Criteria for preparing the Selected Information;
  • measuring Uralkali’s performance based on the Reporting Criteria; and
  • the content of the Integrated Report and GRI Tables 2013.

Our responsibilities

We are responsible for:

  • planning and performing the engagement to obtain limited assurance about whether the Selected Information is free from material misstatement, whether due to fraud or error;
  • forming an independent conclusion, based on the procedures we have performed and the evidence we have obtained; and
  • reporting our conclusion to the Directors of Uralkali.

Our conclusions

As a result of our procedures nothing has come to our attention that indicates the Selected Information for the year ended 31 December 2013 has not been prepared, in all material respects, in accordance with the Reporting Criteria.

This report, including our conclusions, has been prepared solely for the Directors of Uralkali as a body in accordance with the agreement between us, to assist the Directors in reporting Uralkali corporate responsibility performance and activities. We permit this report to be disclosed in the Integrated Report for the year ended 31 December 2013, to enable the Directors to show they have addressed their governance responsibilities by obtaining an independent assurance report in connection with the Selected Information. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Directors as a body and Uralkali for our work or this report except where terms are expressly agreed between us in writing.

ZAO “PricewaterhouseCoopers Audit”, Moscow, Russia

23 April 2014

1 Assurance, defined by the International Auditing and Assurance Standards Board (IAASB), gives the user confidence about the subject matter assessed against the reporting criteria. Reasonable assurance gives more confidence than limited assurance, as a limited assurance engagement is substantially less in scope in relation to both the assessment of risks of material misstatement and the procedures performed in response to the assessed risks. The term “assurance” hereafter is not used as defined in Federal Law № 307-FZ of 30.12.2008 “On Auditing Activities” (edition of 28.12.2010).

2 The maintenance and integrity of Uralkali’s website is the responsibility of the Directors; the work carried out by us does not involve consideration of these matters and, accordingly, we accept no responsibility for any changes that may have occurred to the reported Selected Information or Reporting Criteria when presented on Uralkali’s website.