4.3. ROSNEFT BOARD OF DIRECTORS (BoD)

Rosneft Board of Directors reports to the General Shareholders' Meeting. It is responsible for observance and protection of rights and legitimate interests of the Company shareholders, acts under the Rosneft Charter and Regulations on the Board of Directors, approved by the Annual General Shareholders Meeting as of June 271, 2014¹ and carries out the strategic management of the Company business, including:

9 MEMBERS

IN THE ROSNEFT BOARD OF DIRECTORS AS APPROVED BY THE CHARTER

THE PROCEDURE FOR THE ACTIVITIES OF THE BOARD OF DIRECTORS, INCLUDING PREPARING AND HOLDING MEETINGS, AND THE RIGHTS AND OBLIGATIONS OF BOD MEMBERS, IS STATED IN ROSNEFT REGULATION ON THE BOARD OF DIRECTORS

• approval of implementation and performance of material business projects and transactions;
• oversight of the Rosneft Group companies activities with regard to conducting corporate events and making transactions up to the amount exceeding the limit stated by the Company Charter.

The Company Board of Directors performs the above functions by making decisions within the competence determined by the Rosneft Charter.

Provisions of the Rosneft Charter and Regulations on the Board of Directors ensure transparency of the BoD members election, allowing the shareholders to get sufficient information to assess their personalities and professionalism.

Rosneft annual campaign provides for supplying the shareholders with all the relevant information on candidates nominated to the Board of Directors, as stated in the Corporate Governance Code of the Bank of Russia.

Assurance of the Board of Directors efficient performance, including interaction with the Company management and control bodies, lies with the Chairman of the Board of Directors elected at the first meeting upon the BoD membership approval. Powers of the BoD Chairman are stated in the Regulations on the Board of Directors.

The Board of Directors performs activities on a planned basis. The BoD meetings schedule, developed according to the resolution of the management bodies and proposals of members of the Board of Directors, the Management Board and the Audit Commission as well as the Chairman of the Management Board, the Auditor and the other Rosneft top managers, shall be approved by the Board of Directors every six months.

The format of the meetings is determined subject to the importance and significance to the Company of items submitted for review. However the Company Charter determines the list of items to be reviewed in physical presence only. In addition to the above items determined by the Rosneft Charter, approved in June 2015, the Corporate Governance Code also contains the list of items recommended to be reviewed in physical presence of the Board of Directors.

The activities of the Board of Directors and its Committees are supported by the Corporate Secretary, performing functions of the BoD Secretary and the GSM Secretary according to clause 15.6 of the Rosneft Charter.

The procedure for preparing and holding the Board of Directors meetings, stated in Rosneft Regulations on the Board of Directors, ensures that its members are duly prepared for such meetings and get the required information to make sound and substantiated decisions.

High professionalism of the Board's directors and the mechanisms stipulated by the Charter and internal regulatory documents of the Company offset the risk of a conflict of interest when performing their duties.

The Board of Directors members assess each agenda item under review from the perspective of a potential conflict of interest between them and the Company (including related to participation of particular BoD members in management bodies of other companies), in which case the director concerned shall immediately notify the Board of Directors of both the fact of a conflict of interest per se (its potential occurrence), and the ground for it.

With regard to related-party transactions which create a conflict of interest for a Board director and with regard to other issues which create a conflict of interest between a Board director and the Company, such director shall not participate in voting thereon, and, if necessary, shall not be present during the discussion of the said agenda items.

As recommended by the Corporate Governance Code of the Bank of Russia, Rosneft shall disclose information concerning the Board of Directors activities, including details on the Board members, meetings held, and the work of the Board Committees in the form of press-releases, communications on material facts, and in annual reports of the Company.

BOARD OF DIRECTORS MEMBERSHIP

(AS OF DECEMBER 31, 2015)

THE MAKEUP OF THE ROSNEFT BOARD OF DIRECTORS IS ADEQUATE TO THE SIZE OF THE COMPANY'S OPERATIONS AND ITS BUSINESS LINES, AND MAKES IT POSSIBLE TO EFFICIENTLY ORGANISE ITS ACTIVITIES, INCLUDING FORMATION OF THE BOARD COMMITTEES.

FROM JANUARY 01, 2015 THROUGH JUNE 17, 2015 THE POWERS OF THE COMPANY BOARD OF DIRECTORS WERE EXERCISED BY MEMBERS ELECTED BY THE ANNUAL GENERAL SHAREHOLDERS MEETING held ON JUNE 27, 2014.

ON JUNE 17, 2015 THE ANNUAL GENERAL SHAREHOLDERS MEETING ELECTED THE NEW BOARD OF DIRECTORS WITH THE FOLLOWING MEMBERS:

ANDREY BELOUSOV
Chairman of the Board of Directors (since 2015)

Born in 1959.

Graduated from Lomonosov Moscow State University in 1981. Doctor of Economics, Honored Economist of the Russian Federation in 2007, Order of Honor (Russia) in 2009.

Member of the Rosneft Board of Directors since 2015.

Director of Economics and Finance Department in the Russian Prime Minister's office from 2008 until 2012, Minister of Economic Development of the Russian Federation from 2012 until 2013, Assistant to the President of the Russian Federation from 2013 to date.

Has vast experience in economy and finance in terms of managing strategic enterprises of the Russian Federation.

Holds no shares of Rosneft.

IGOR SECHIN
Deputy Chairman
of the Board of Directors

Born in 1960.

Graduated from Leningrad State University in 1984. PhD in Economics. Chairman of the Board of Directors of Rosneft from 2004 until 2011.

In November 2012, reelected to the Board of Directors of Rosneft, since June 2013 – Vice-Chairman of Board of Directors of Rosneft.

Deputy Head of the Executive Office of the President of the Russian Federation from 2000 until 2004, Deputy Head of the Executive Office of the President of the Russian Federation from 2000 until 2004, Deputy Prime Minister of the Russian Federation from 2008 until 2012.

Has unique experience and expertise in management and government regulation of energy enterprises.

Holds 13,489,350 shares in Rosneft (0.1273 % of the share capital).

MATTHIAS WARNIG
Deputy Chairman
of the Board of Directors
Chairman of the HR and Remuneration Committee, Member of the Audit Committee

Born in 1955.

In 1981 graduated from the Bruno Leuschner Higher School of Economics (Berlin). Member of the Rosneft Board of Directors since 2011, Deputy Chairman of the Board of Directors since 2014.

Managing Director of Nord-Stream AG since 2006; held executive positions in the Dresdner Bank Group from 1990 until 2006).

Has vast practical experience in delivering transnational investment projects, and banking experience.

Holds 92,633 shares in Rosneft (0.0009 % of the share capital).

ANDREY AKIMOV
Member of the Board of Directors
Member of the HR and Remuneration Committee, Member of the Strategic Planning Committee

Born in 1953.

Graduated from the Moscow Financial Institute in 1975.

Member of the Rosneft Board of Directors since 2014.

Chairman of the Management Board of JSC Gazprombank since 2003, held executive positions in the Vneshtorgbank system from 1974 until 1987.

Has vast banking experience, specifically in working with large energy companies, as well as in raising investments and non-financial risks management, business ethics, corruption prevention and HR management.

Holds no shares of Rosneft.

OLEG VIYUGIN
Chairman of the Strategic Planning Committee, Member of the Audit Committee

Born in 1952.

Graduated from Lomonosov Moscow State University in 1974. PhD in physics and mathematics.

Member of the Rosneft Board of Directors since 2015.

Professor at the Finance Department of the State University Higher School of Economics from 2007, Chief Advisor for Russia and CIS to Morgan Stanley Bank LLC from 2013 until 2015 (under civil contract).

Wrote over 20 scientific works and publications on probability theories and macroeconomic model building.

Holds no shares of Rosneft.

ROBERT DUDLEY
Member of the Board of Directors
Member of the Strategic Planning Committee

Born in 1955.

Graduated from Illinois University in 1977 and Thunderbird School of Global Management in 1979.

Member of the Rosneft Board of Directors since 2013.

President of BP Group p.l.c. (since 2010), President of TNK-BP Management (2003–2008).

Has experience in managing Russian and international oil companies as well as professional skills in strategic planning.

Holds no shares of Rosneft.

GUILLERMO QUINTERO
Member of the Board of Directors
Member of the HR and Remuneration Committee

Born in 1957.

Graduated from the University of Southern California in 1979.

Member of the Rosneft Board of Directors since 2015.

SPUL (President) Middle East and Pakistan (BP p.l.c. group) from 2009 until 2010. Regional President Brazil, Uruguay, Venezuela and Colombia (BP Energy do Brasil and BP Brasil Ltda) from 2010 until 2015.

Has unique practical experience in exploration and field development under international projects.

Holds no shares of Rosneft.

ALEXANDER NOVAK
Member of the Board of Directors
Member of the Strategic Planning Committee

Born in 1971.

Graduated from Norilsk Industrial Institute in 1993 and from Lomonosov Moscow State University in 2009. Member of the Rosneft Board of Directors since 2015.

Deputy Minister of Finance of the Russian Federation from 2008 until 2012, Minister of Energy of the Russian Federation from 2012.

Experienced in achieving targets in fuel and power industry of the Russian Federation.

Holds no shares of Rosneft.

DONALD HUMPHREYS
Independent Director
Chairman of the Audit Committee

Born in 1948.

Graduated from Oklahoma State University in 1971 and the Wharton School, University of Pennsylvania in 1976. Member of the Rosneft Board of Directors since 2013.

Managed financial operations of ExxonMobil Corporation from 2006 until 2013.

Has experience and expertise in financial management of international oil companies.

Holds 160,000 GDRs of Rosneft (0.0015 % of the share capital).

Attendance by the Board of Directors members of the BoD and the BoD Committees meetings in 2015

BOARD OF DIRECTORS				Audit Committee	HR and Remuneration Committee	Strategic Planning Committee
Member of the Board of Directors	Executive Director	Independent Director	Attendance
PERSONS WHO WERE THE BOARD OF DIRECTORS MEMBERS THROUGHOUT 2015
Andrey Akimov			29 / 30		15 / 15	3 / 3
Matthias Warnig			251 / 30	18 / 18	15 / 15
Robert Dudley			271 / 30			6 / 6
Igor Sechin			242 / 30
Donald Humphreys			291 / 30	18 / 18	8 / 8
PERSONS WHO LEFT THE BOARD OF DIRECTORS ON JUNE 17, 2015
Andrey Bokarev			19 / 19	12 / 12
Nikolay Laverov			19 / 19	12 / 12		3 / 3
Alexander Nekipelov			19 / 19		8 / 8	3 / 3
Artur Chilingarov			19 / 19			3 / 3
PERSONS WHO JOINED THE BOARD OF DIRECTORS ON JUNE 17, 2015
Andrey Belousov			11 / 11
Oleg Viyugin			11 / 11	6 / 6		3 / 3
Guillermo Quintero			11 / 11		7 / 7
Alexander Novak			11 / 11			3 / 3

Note: the first figure shows the total number of meetings the director attended; the second one shows the total number of meetings the director could attend in 2015.

1. The BoD members, M. Warnig, R. Dudley and D. Humphreys did not take part in the meetings if the items on the agenda contained any potential legal and (or) commercial conflict of interests.

2. Deputy Chairman of the Board of Directors, I. Sechin did not take part in the BoD meetings if the items on the agenda contained the approvals of relatedparty transactions as his voice could not be taken into account according to Art. 83 of the Federal Law On Joint-Stock Companies.

The Board of Directors Activities in 2015

In 2015 the Board of Directors held 30 meetings (5 – in presentia, 25 – in absentia) and made resolutions on the most significant matters of the Company business as follows:

• passed a number of resolutions following directives by the President and the Government of the Russian Federation on:
  • approving the action plan (road map) to implement provisions of the Corporate Governance Code in the Company activities, accepting local regulations (policies) to follow the approved road map;
  • reviewing the analyzed Company policies in terms of their conformance to the Methodical Recommendations of the Russian Government in performance of the Directive Pr-3013, and approving policies obligatory for implementation;
  • approving the analysis of Rosneft Non-Core Assets Disposal Program implementation as of the beginning of 2015;
  • approving strategies for and improving efficiency and transparency of Rosneft activities, operating costs reduction and import substitution;
  • reviewing the Company Sponsorship and Charity Report and further developing and implementing the respective internal regulations on sponsorship and charity;
• approved Disputes Settlement Agreement with Yukos Finance B.V., Yukos Capital sarl, Stichting Administratiekantoor Yukos International, Stichting Administratiekantoor Financial Performance Holdings, Consolidated Nile, LP, General Nile, LLC, Yukos International (UK) B.V., Luxtona Limited, Financial Performance Holdings B.V., Yukos Hydrocarbons Investments Limited, CN & GN (PTC) Ltd. and individuals controlling the above companies;
• reviewed the audit results of 2014 Rosneft Long-Term Development Program performance and recommendations of the independent auditor upon results of limited review of the report on 2014 Rosneft Long-Term Development Program performance;
• reviewed preliminary results of the Long-Term Development Program performance implementation;
• approved the Long-Term Development Program updated in line with the Company activities in 2014, the results of its performance audit in 2014 and recommendations of the independent auditor upon results of limited review of the report on its performance in 2014, previously approved strategies and labor productivity development efforts;
• approved the core principles for oil and petroleum products procurement by Rosneft from external suppliers;
• amended the Company 2015 Business Plan, reviewed the preliminary results of its performance and approved the Company 2016-2017 Business Plan;
• approved the results of KPI delivery by the Rosneft top managers and the general directors of key subsidiaries of the Group and the amounts of their 2014 annual performance-based remuneration, approved performance indicators for the Rosneft top managers and the general directors of key subsidiaries of the Group for 2015 annual bonus payment;
• agreed on performing self-assessment of the Board of Directors activities and reviewed the relevant results;
• made a number of decisions concerning the Rosneft Management Board membership1;
• approved the report on 2014 Rosneft Innovative Development Program implementation;
• reviewed the reports on the Company internal audit activities;
• passed a number of corporate resolutions as follows:
  • on election of the Chairman and Deputy Chairmen of the Board of Directors;
  • on establishment of the Board of Directors Committees;
  • on approval of the Board of Directors meetings schedule;
  • on arrangement and preparation for holding the Annual General Shareholders Meeting on June 17, 2015;
  • on combining the positions in management bodies of the other companies by the Rosneft Management Board members;
• approved a number of the Company internal documents;
• endorsed the report on the Rosneft 2014-2018 Energy Saving Program implementation in 2014, including the results of the Rosneft Energy Performance Commission activities in 2014, approved the Rosneft 2016-2020 Energy Saving Program;
• endorsed a number of transactions at the St. Petersburg International Economic Forum and passed a number of resolutions on material business projects and transactions;
• endorsed over 1600 related party transactions.

ROSNEFT BOARD OF DIRECTORS COMMITTEES

In order to have a preliminary review of the most important issues within the Rosneft Board of Directors’ responsibility, three Board Committees were established. The Committees operating as of December 31, 2015 were established by the Board of Directors on June 17, 2015.

INFORMATION ON MOST SIGNIFICANT MATTERS IS DISCLOSED BY THE COMPANY ON A REGULAR BASIS IN THE FORM OF PRESS RELEASES1 AND IN THE FORM OF COMMUNICATIONS ON MATERIAL FACTS².

Audit Committee³

Responsible for the oversight of the completeness and accuracy of the Company financial and other statements, reliability and efficiency of the internal control and risk management system, compliance, corporate governance practices and assurance of independence and objectiveness of the internal and external audit functions.

Composition of the Audit Committee:

1. Donald Humphreys - Chairman (Independent Director);

2. Matthias Waring;

3. Oleg Viyugin (Independent Director).

Key functions of the Audit Committee:

• oversight of completeness and accuracy of the Company accounts (financial statements);
• assurance of independence and objectiveness of the external audit;
• oversight of efficiency and reliability of the internal control and risk management system;
• monitoring of the Company corporate management system, assessment of corporate management practices, development of recommendations on improvement of the Company corporate management system;
• regular interaction with the Audit Commission;
• oversight of the efficiency of the system of communicating instances of fraudulent or unfair actions (including unfair use of insider and confidential information) by the Company employees and third parties and other non-compliant actions in the Company activities;
• assurance of the Board of Directors’ regular engagement with the Company’s executive bodies and structural subdivisions responsible for internal audit, internal control and risk management, and with the Audit Commission by having working meetings and joint sessions on matters within the Committee’s remit.

HR and Remuneration Committee⁴

Assesses effectiveness of the HR policy and continuity policy, systems of candidate appointment to the positions and remuneration, assessing performance of the Company Board of Directors, executive bodies and top managers.

Composition of the HR and Remuneration Committee:

1. Matthias Warnig - Chairman;

2. Andrey Akimov;

3. Guillermo Quintero.

Key functions of the HR and Remuneration Committee:

• assurance that highly qualified professionals are hired to manage the Company and creating necessary incentives for their successful performance;
• estimation of conformance of candidates to the criteria of selection to the Company Board of Directors, conformance of independent directors (with account of information submitted by them) to the criteria of independence, issuing opinions on independence of candidates (members of the Board of Directors) and reporting such opinions to the Board of Directors, including informing of circumstances when a BoD member loses independence;
• assessment of the management bodies’ performance;
• continuous monitoring of HR and social policies of the Company, and of the incentive, evaluation and remuneration systems for compliance with the Company strategy, financial situation, and labor market environment;
• assurance of the Board of Directors’ regular interaction with the Company executive bodies and HR function by having working meetings and joint sessions on matters within the Committee’s remit;
• oversight over disclosing information on remuneration policy and practices as well as on the Company shares holding by members of the Board of Directors, executive bodies and other top managers;
• development of self-assessment criteria and proposals for selecting independent adviser to assess activities of the Board of Directors, annual detailed assessment (self-assessment/external assessment) of efficiency of the Board of Directors activities and analysis of the results, including issuing proposals for the Board of Directors activities and procedures improvement, definition of priorities for the Board of Directors membership increase.

Strategic Planning Committee⁵

Oversees strategic development of the Company.

Composition of the Strategic Planning Committee:

1. Oleg Viyugin - Chairman (Independent Director);

2. Andrey Akimov;

3. Robert Dudley;

4. Alexander Novak.

Key functions of the Strategic Planning Committee:

• assisting the Board of Directors in the following areas within its remit:
  • setting strategic goals and guidelines for the Company development;
  • assessing the Company performance in the long term;
  • developing strategic and business planning;
• participating in identifying the Company business priorities, assessing the top managers’ strategic initiatives with regard to development and oversight of the delivery of the Company overall strategy and individual business stream strategies;
• analyzing the main trends in the economic policy pursued by the Russian Federation in what concerns the Company business, and communication of relevant information thereon to the Board of Directors;
• participating in overseeing delivery of the Company approved business plans;
• assessing efficiency of investor and shareholder relations.

The work of the Board Committees is regulated by the respective regulations on each of the Board Committees and the Rosneft Regulation on the Procedure for Formation and Opertaion of Rosneft Board of Directors Committees. According to the Regulation:

• Rosneft Board Committees were established at the first meeting of the newly elected Board of Directors -17.06.2015;
• personal composition of the committees was approved with regard to professional experience and knowledge of the BoD members in the relevant field, which allows efficient solution of challenges set to the committees.
• Each Board Committee is composed of at least three members, provided that one member of the Company Board of Directors shall not be a member of more than two committees.

ACTIVITIES OF THE BOARD COMMITTEES IN 2015

In 2015 the Audit Committee held 18 meetings, and performed the activities as follows:

• assessed candidates for the Company auditors to perform audit of financial statements of Rosneft and its subsidiaries, recommended LLC Ernst and Young for the General Shareholders Meeting Approval and offered the recommended remuneration of the auditor's services in 2015;
• reviewed the candidacy of the external auditor proposed by the Company top management to audit implementation of Rosneft Long-Term Development Program in 2014 and the amount of its services remuneration;
• on a quarterly basis, reviewed the Company preliminary and final financial statements and the findings of their audit;
• within the year-round campaign made a preliminary review (jointly with the Audit Commission) of opinion of the Audit Commission on the 2014 audit findings with regard to Rosneft business activities;
• assessed the Rosneft auditor’s findings on the Company 2014 financial statements (accounts) (including subdivisions and subsidiaries);
• reviewed the draft 2014 Rosneft Annual Report within the Committee's remit;
• preliminary reviewed the Internal Audit Provisions and submitted it to the Board of Directors, approved the Internal Audit Department Provisions;
• reviewed and submitted for approval the Company internal audit report and approved internal audit plan for 2015;
• reviewed and approved candidates for the positions of the Head of Rosneft Internal Audit and control Service and the heads of independent structural divisions of Rosneft Internal Audit Service;
• recommended the following internal policies for the Board of Directors approval: Dividends Policy, Regulation on Insider Information, Corporate Governance Code, Risks Management and Internal Control Policy;
• submitted recommendations to the Board of Directors for issuing proposals to the General Shareholders Meeting in terms of the Company profit distribution, amount of dividends upon results of 2014 and their payment procedure;
• reviewed the tender results in terms of signing an agreement or audit services rendering to the Company and assessment of candidates for the Company auditors when performing procurements.

Besides three conference calls featuring the Committee members, the  ompany top management and the external auditor's representatives were arranged in 2015 to discuss the draft details of the Company financial statements indicators and the results of its audit. Comments and recommendations of the Committee members were taken into account when finalizing the documents to be submitted to the Committee as a body under the Board of Directors.

During the reporting year the Committee also held meetings (conference calls) with the Head of the Company Internal Audit Service, representatives of the external auditor and the Audit Commission.

In 2015 the HR and Remuneration Committee held 15 meetings, and performed the activities as follows:

• according to the Company effective standards, made a preliminary review of reports of KPI achieved in 2014 by the Rosneft key employees and the general directors of the Group key companies, and the amount of the respective remuneration, and submitted them to the Board of Directors;
• reviewed the proposals of the Company HR Service related to estimating KPIs for 2015 by the Company key employees and the general directors of the Group key companies, thereafter approved by the Board of Directors as recommended by the Committee;
• issued recommendations to the Board of Directors in terms of quantity and personal composition of the Company Management Board;
• reviewed and recommended the following internal policies for the Board of Directors' approval:
  • Regulation on the procedure for performance indicators standardizing when making analysis and assessment of the Company top management activities for the reporting period for annual bonus calculation;
  • Regulation on remuneration and costs compensation of the Rosneft Board of Directors and Audit Commission members;
  • Regulation on instatement of the Rosneft BoD members;
  • Rosneft Code of Business Ethics and Corporate Conduct;
  • Rosneft Regulation on the Corporate Secretary.
• provided performance of self-assessment of Rosneft Board of Directors activities in the composition of the 2014-2015 fiscal year, including issuing questionnaires to be filled-in by BoD members, summarizing assessment results and submitting them to the Board of Directors;
• approved 2014 Rosneft Sustainability Report (posted on the Company official website http://www.rosneft.ru/Development/reports/).

In 2015 the Strategic Planning Committee held 6 meetings, made preliminary reviews of and prepared for the Board of Directors recommendations on the items as follows:

• approval of, adjustments to and acceptance of provisional results of the Company Business Plan performance in 2015;
• review of provisional results of Rosneft Long-Term Development Program performance in 2015;
• approval of updated Rosneft Long-Term Development Program;
• approval of the Company internal HSE regulations;
• acceptance of internal regulations on operating and investment efficiency following directives by the President and the Government of the Russian Federation;
• approval of the report on 2014 Rosneft Innovative Development Program implementation.