Remuneration for members of the Board of Directors

Shareholders decided at the Annual General Meeting in 2014 to pay remuneration to the Board of Directors for the period from 8 November 2013 to 30 June 2014 in the amount and manner prescribed by the Regulation on Remuneration and Compensation Paid to Members of the Russian Railways Board of Directors (approved by the decision of the Russian Railways Board of Directors on 19 April 2011).

Under the Regulation developed in accordance with the recommendations of the Russian Federal Property Management Agency, remuneration is calculated using a formula based on the main component of remuneration, which is equal to RUB 1,000,000 and depends on the participation of members of the Board of Directors in Board meetings, and a variable component that depends on the fulfilment of key corporate performance indicators (net profit and the work cited) for the fiscal reporting year.

In addition to the main component of remuneration, the following bonuses are paid:

30% — to the chairman of the Board of Directors

20% — to the chairman of committees of the Board of Directors

10% — for membership on committees of the Board of Directors.

The Regulation does not apply to members of the Board of Directors who are members of the executive bodies of Russian Railways or who are restricted or prohibited from receiving any payments from commercial organisations by the legislation of the Russian Federation.

According to the decision of the Russian Railways Annual General Meeting of Shareholders, a total of RUB 40.33 mln were spent on remuneration paid to members of the Russian Railways Board of Directors in 2014 (5.45% of annual net profit).

In order to ensure a high level of participation in achieving the Company’s strategic goals by members of the Board of Directors, involve them in the management decision-making process and motivate them to achieve the maximum possible production and financial results, work was conducted in 2014 to update the Company’s policy for remuneration to members of the Board of Directors based on which the Board reviewed and tentatively approved the draft Regulation on Remuneration and Compensation Paid to Members of the Russian Railways Board of Directors (new version). The Board plans to approve the draft in the second quarter of 2015.