4.6. REMUNERATION OF ROSNEFT MANAGEMENT

Rosneft developed and is successfully implementing an incentive system for its top managers. The core principles of the incentive system state that:

  • incentive system for the top managers provides for the balance of the Rosneft shareholders' interests and the top managers' commitment to achieve the Company long-term strategic goals;
  • The size of top managers' remuneration directly depends on the results of the Company operations, major projects implementation and their personal contribution to the said results achievement, which is shown by the Company KPI system.

The procedure for KPI determination and achievement includes:

  • determination of KPI according to the Company Development Strategy, Long-Term Development Program, directives of the Federal Executive Authorities, Business Plan and the Company goals in the reporting year;
  • approval by the Board of Directors of the collective KPI for operations of the Company and its business segments, as well as individual KPI for the top managers;
  • calculation of the collective and individual KPI performance according to the audited consolidated accounting statements and management accounting upon results of the reporting period;
  • approval by the Board of Directors of the size of the top managers' bonuses.

KPI structure and its connection to the Company Strategy and Long-Term Development Program is specified in section 2.5, KPI system definition and assessment of KPI achievement, hereof.

In April 20151 the Rosneft Board of Directors approved the Rosneft standard on payments and compensations to top managers setting the key principles of payroll and bonus systems, compensations and social benefits to Rosneft President, Vice-Presidents and officers in the rank of Rosneft Vice-President (the document is posted on the Company official website: http://www.rosneft.ru/Investors/corpgov/).

The standard sets the ceiling amount of the official salary of the Rosneft President, interest connection of the top managers' official salary to the one of the Rosneft President, list of the core paymens and compensations to the Rosneft top managers and the key principles and standard size of bonuses to the Rosneft top managers.

The document provides for all possible payments to the Company managers, calculation procedure and payment conditions.

Short-term remuneration to the Management Board members, with account of management team rotation, including salary and bonuses (VAT included) made RUB 2 884 and 2 799 million in 2015 and 2014 YOY (the non-profit social insurance contributions of the Management Board members, paid to the budget of the Russian Federation as required by law made RUB 376 and 260 YOY, the growth is due to the amended calculation of insurance contributions in 2015). The short-term remuneration does not include one-off bonuses paid in 2015 for major projects implementation in 2014 (Karsk oil-and-gas province opening, first commercial production at the world-largest Berkut drilling platform in the Okhotsk Sea, APR major projects performance), bonuses paid according to the resolution of the President of the Russian Federation on granting the state awards for achievements in 2014, and a part of remuneration for 2014. Payment of post-employment benefits, dismissal compensations or share-based payments was not effected. Salary indexation was not performed in 2015.