Internal Control

Internal control at TMK is a system of procedures implemented by the Board of Directors, executive and supervisory bodies, officers and employees of the Company, which aim to ensure the efficiency of operations and investments across TMK, the reliability of all types of reporting, compliance with laws and internal regulations.

Control over financial and business activities is exercised by the Board of Directors, the Audit Committee, the Revision Committee, the Internal Audit Department, and the independent auditor of the Company.

In 2012, the Revision Commission held four meetings.

Members of the Revision CommissionYear of BirthYear of Election to the Revision Commission
Maximenko, A.V. (Chairman)19552005
Vorobyev, A.P.19572005
Pozdnyakova, N.V.19792009
Members of the Revision CommissionYear of BirthYear of Election to the Revision Commission
Maximenko, A.V. (Chairman)19552005
Vorobyev, A.P.19572005
Pozdnyakova, N.V.19792009

On 26 June 2012, TMK’s Annual General Meeting of Shareholders resolved to appoint Ernst & Young, a member of the Russian Chamber of Auditors Non-Profit Partnership, as the Company’s Auditor for 2012. While selecting an auditor and assessing its performance, we adhere to the Policy on Selection of the Group External Auditor of the Consolidated Financial Statements (www.tmk-group.com) as approved by the Board of Directors.

In order to reduce the effects of long-term relationships on the external auditor’s independence, members of audit teams and the lead partner responsible for the audit are rotated

In 2012, the auditor’s remuneration for auditing the annual accounts and reviewing interim accounts (including audit of local accounts at some TMK plants) was USD 3.28m, for other auditrelated services – USD 0.02m, and for non-audit services – USD 0.35m.

The Internal Audit Department operates on the basis of the Regulations approved by the Board of Directors (www.tmk-group.ru). The Company has a two-tier centralised internal audit function – at the holding company and regionally – using a single planning and reporting system. The Internal Audit Department also controls compliance by the governing bodies, officers and employees of the Company with insider information laws and regulations and regularly reports to the Audit Committee.

Internal Control Structure

In 2012, we proceeded with further integration of the compliance function in the overall system of risk management and internal control as well as corporate governance and corporate security. This process is coordinated by the CEO’s Committee on Regulating Compliance Risks established in 2011 and its regional subcommittees at TMK plants.

Our employees and counterparties may also use our Hotline information system to report corrupt practices and violations.

Internal control over financial reporting

TMK’s management is responsible for implementing and maintaining adequate internal control over financial reporting to provide reasonable assurance as regards the reliability of financial reporting and its conformity with IFRS.

The Company’s internal control over financial reporting includes policies and procedures governing the maintenance of records that reflect transactions and available assets accurately, fairly and in reasonable detail; provide reasonable assurance that transactions are properly recorded to permit the preparation of financial statements in accordance with IFRS and provide reasonable assurance regarding prevention or timely detection of unauthorised acquisition, use, or disposal of the Company’s assets that could have a material effect on our financial statements.

Throughout 2012 and to date, the Company has had an operational system of internal control which provides reasonable assurance as regards the efficiency of operations covering all controls, including financial and operational controls, as well as compliance with laws and regulations.

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